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The Supreme Court's Ruling on Healthcare Reform and What That Means for Healthcare Providers

By Neda M. Ryan / Jun 28, 2012

Talk of President Obama's healthcare reform law (the Patient Protection and Affordable Care Act) has been all the buzz for over two years since its enactment in March 2010.  Now, the buzz has exploded as the US Supreme Court has ruled on the constitutionality of the law.  Ruling that the law is constitutional in part and unconstitutional in part may leave some providers unsure of where they fall in the mix.  Below is a brief explanation of the main provisions at issue before the Supreme Court, how the Court ruled on the issues and what that decision means for providers.

1.  Individual Mandate Issue- CONSTITUTIONAL

The so-called Individual Mandate of the law requires that Americans maintain minimum essential health insurance coverage by 2014.  Those who fail to comply with this requirement must make a "shared responsibility payment" to the Internal Revenue Service.  In its analysis, the Court determined that the Individual Mandate may not be upheld pursuant to Congress's power under the Commerce Clause or the Necessary and Proper Clause of the US Constitution.  Briefly, the Commerce Clause allows Congress to regulate commerce and, historically, application of this constitutional provision has been very broad.  The Government argued that Congress may order individuals to buy health insurance because the failure to do so affects interstate commerce, but the Court rejected its position stating Congress may not regulate individuals because they are doing nothing.  The Necessary and Proper Clause allows Congress to make laws that allow it to exercise its constitutional powers.  The Court denied that the Individual Mandate could be upheld under the Necessary and Proper Clause because "[t]he individual mandate...vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power and draw within its regulatory scope those who would otherwise be outside of it."  However, the Court determined that Congress was permitted, under its authority to lay and collect taxes, to impose a tax on those who do not purchase health insurance.

At its core, upholding the Individual Mandate means providers can expect an influx of patients ( i.e. , consumers) into the system.  When patients have healthcare coverage, they are more apt to obtain healthcare services.  These once-non-paying-patients who did not seek healthcare services are now seeking healthcare services as "paying patients."  However, this greater demand for services will also result in a demand for higher quality services at lower prices.  Providers should look at this as an opportunity to construct creative ways of holding onto their bottom lines.  With the ever-increasing regulation on the healthcare industry, it would behoove providers to engage qualified counsel to assist in navigating the regulations to ensure increasing revenues.

2. Medicaid Expansion Issue - UNCONSTITUTIONAL

The Medicaid Expansion provision of the law offers States Federal funding to expand the threshold for Medicaid beneficiaries to cover adults who live at or below 133% of the federal poverty level.  Those States that choose not to expand their Medicaid programs would lose all of their Federal Medicaid funding, which could amount to over 10% of a State's total budget.  The Court held that providing States with an ultimatum to participate in this new program or lose all of their Medicaid funding was akin to putting a gun to the head.  Congress may exercise its powers under the Spending Clause (which grants Congress the power to condition Federal funds on States' participation in certain programs), but States must have a choice to participate in the programs.  The Court determined that States were not given a choice and application of the Spending Power to expand Medicaid in this way was overreaching and unconstitutional.  It is important to note that declaration that this provision is unconstitutional does not mean the provision disappears.  It means that states will now have the opportunity to decide if they want to participate, but may not lose their current funding if they do not.

Similar to the individual mandate, expansion of Medicaid will result in an influx of paying patients into the system, even if it is the Medicaid system.  True, the reimbursement for Medicaid for many services (except, for instance, behavioral health services) is below most private payors.  However, providers still have the opportunity to see another patient, and the provider will be reimbursed for the services provided.

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Regardless of whether you are in support of, or against, PPACA as a whole or parts of it, what is undeniable is that an influx of "paying patients" can be positive for providers everywhere.  From a behavioral health perspective, this is great news because, for the first time in the commercial payor market and in the Medicaid market, behavioral health services are mandated and paid for at the same rates as medical healthcare benefits.  Of course, good news often follows up with many questions: with the increased utilization of State and Federally-funded services, what will the government do to protect its limited funds? Increased regulation? Increased auditing? Most likely.  The government will most likely continue to issue stricter regulations on providers and continue to scrutinize reimbursement with increased audits both on the Medicare and Medicaid levels.