KAISER HEALTH TRACKING POLL Public Opinion on Health Care Is€¦ · Roughly half of Americans (52 percent) accurately report that the ACA is still the law of the land. Meanwhile,

KAISER HEALTH TRACKING POLL

Public Opinion on Health Care Issues February 2011

In the wake of the health reform repeal vote in the U.S. House and the ongoing legal challenges over the individual mandate, nearly half the country either believes that the Patient Protection and Affordable Care Act (ACA) has been repealed and is no longer law (22 percent) or doesn’t know enough to say whether it is still law (26 percent). Roughly half of Americans (52 percent) accurately report that the ACA is still the law of the land. Meanwhile, views on repeal continue to be very mixed: with four in ten backing repeal (and half of those hoping the law will be replaced with a Republican alternative), three in ten backing an expansion of the law, and two in ten hoping to see it implemented as is. And most Americans continue to report they want to keep many of the key provisions of the law. There is more agreement when it comes to the strategy of using the legislative budgeting process to stop implementation of the law: six in ten continue to oppose the idea (the main reason given: it’s “not the way our government should work”). Overall opinion on the law is largely unchanged from January, with the public roughly divided and partisans on opposite sides of the issue, though negative views having risen among senior citizens in recent months, returning to earlier levels of opposition. PUBLIC STILL DIVIDED ON REFORM LAW Public opinion on health reform remains dug in this month, with the public roughly divided on the new law and partisans holding opposite views, a pattern that has been in place since passage last March. Overall, 48 percent of Americans have an unfavorable opinion of the law and 43 percent hold favorable views.

Overall, 66 percent of Democrats have a favorable view of the law, while an even larger proportion of Republicans (84 percent) have an unfavorable view, a proportion that has crept upwards in recent months. Independents are divided, 43 percent favorable, 47 percent unfavorable. Republicans are also twice as likely as Democrats to feel strongly on the issue, with 58 percent describing their views as “very unfavorable”, compared to 30 percent of Democrats who say they are “very favorable”.

Views on Health Reform Remain Divided

40%

44%

41%

35%

45%

40%

44%

40% 41%

50% 48%

14% 14%

10%

14%12% 11%

15%18% 18%

9% 8%

46%

41%

48%50%

43%

49%

42%

42% 42%

41%43%

0%

20%

40%

60%

80%

Apr May Jun Jul Aug Sep Oct Nov Dec Jan11 Feb11

Favorable Unfavorable Don’t know/Refused

As you may know, a health reform bill was signed into law early last year. Given what you know about the health reform law, do you have a generally favorable or generally unfavorable opinion of it?

2010

Source: Kaiser Family Foundation Health Tracking Polls

MIXED VIEWS ON ‘WHAT NEXT’ FOR REFORM LAW As was true last month, there is a real splintering of opinion when it comes to what the public hopes to see Congress do with the reform law. Three in ten say they want Congress to expand the law, not something high on the legislature’s agenda at the moment. And two in ten vote for the status quo – leaving the law to be implemented as enacted. On the other hand, four in ten want to see the law repealed – with half of those (19 percent) hoping to see it replaced with a “Republican‐sponsored alternative” and the other half (20 percent) wanting no further action. While most Republicans (74 percent) agree that the reform law should be repealed, they divide on what’s next: 40 percent want to see a Republican version of health reform put into place, while nearly as many (34 percent) want Congress to drop the issue entirely and move on.

Even as there are ongoing legislative discussions as to whether implementation of the law can be effectively stalled by funding cuts inserted into this year’s budget process, most Americans (61 percent) – including majorities of Democrats and Independents – continue to oppose using the budget process in this fashion. Most Republicans (59 percent) meanwhile, favor the idea. The most commonly chosen explanation for opposition to defunding health reform is that it doesn’t seem like “the way our government should work,” (named as a major reason by 59 percent in this group), followed by having concerns about the

way funding cuts might impact the law’s performance (51 percent) and support for the law in general (47 percent). Few say that issue fatigue is their main reason for opposing defunding efforts.

Still Divided as to ‘What Next’ for Health Reform

5%

21%

32%

20%

12%

31%

43%

30%

40%

20%

4%

19%

34%

15%

14%

20%

What would you like to see Congress do when it comes to the health care law?

EXPAND law KEEP law as isREPEAL law and REPLACE with Republican‐sponsored alternative

REPEAL law and NOT REPLACE it

Total

Democrats

Independents

Republicans

Note: Don’t know/Refused answers not shown. Source: Kaiser Family Foundation Health Tracking Poll (conducted February 8‐13, 2011)

28%

47%

51%

59%

Whether or not you like the health reform law, would you say you approve or disapprove of cutting off funding as a way to stop some or all of health reform from being put into place?

Among the 61% who disapprove of cutting off funding: Percent who say each is a MAJOR reason why they disapprove of using the budget process to stop health reform from being implemented.

61%

5%

34%

Major Reasons For Opposing Health Reform Defunding

Don’t know/Refused

Source: Kaiser Family Foundation Health Tracking Poll (conducted February 8‐13, 2011)

Approve of cutting off funding Disapprove of

cutting off funding

The health reform law will be a good thing for the country and

should be implemented as written

The appropriate way to stop a law is by voting to repeal it. Using the

budget process to stop a law is just not the way our government should work

We’ve heard enough about health reform and it’s time to move on to

something else

Without full funding the law will be crippled and won’t work as

planned, which is not good for its supporters or opponents

2

BUT REPEAL WHAT? As has been true since early in the debate, individual provisions of the new law are more popular than the law itself, complicating the debate over repeal. So while the public in general is divided over whether to keep or repeal the legislation, if they could pick and choose, the large majority (roughly eight in ten Americans) would keep the provisions providing tax credits to small business, and upwards of seven in ten would keep the provisions that close the Medicare doughnut hole, provide coverage subsidies to those of low and moderate income, institute the new voluntary long term care insurance program known as the CLASS Act, and prohibit insurance companies from denying coverage based on pre‐existing conditions. Even among those who want to repeal the law, most say they would like to keep five of the seven provisions queried. The one provision that the public remains happy to repeal: the individual mandate, which 67 percent would be happy to strip from the law, even as many experts say that without it the system may not work as intended.

Among those who want to REPEAL health reform law

Among those who want to KEEP health reform law Democrats Independents Republicans

Keep Repeal Keep Repeal Keep Repeal Keep Repeal Keep Repeal

Tax credits to small business 70 26 93 7 91 7 84 14 69 27

Gradually close the Medicare “doughnut hole”

60 35 87 10 88 10 73 22 61 33

Financial help for low and moderate income Americans in need of coverage

52 41 91 7 88 10 73 23 54 39

CLASS act (voluntary long‐term care insurance program)

58 36 87 9 85 11 75 19 57 36

Guaranteed Issue 56 38 84 15 82 16 72 25 56 40

Increase Medicare payroll tax on wealthy

40 56 75 19 76 20 61 32 40 57

Individual mandate 11 85 42 52 44 51 27 69 9 86

ONE IN FIVE THINK LAW HAS ALREADY BEEN REPEALED Meanwhile, the successful House repeal vote, the ongoing effort to bring a repeal vote to the Senate floor and the ongoing developments in federal court over the legality of the individual mandate have set up an environment where confusion over the status of the reform law can thrive. In fact, half of Americans say they are confused about the law. And while about half the country (52 percent) is aware the health reform law is still the law of the land, just over one in five Americans (22 percent) think

52%

26%

22%

It is still the law of the land

Don’t know/Refused

One in Five Think the Health Law Has Been Repealed, Another Quarter Not Sure

As far as you know, which comes closest to describing the current status of the health reform law that was passed last year:

It has been repealed and is no

longer law

48%


3

health reform has been repealed and is no longer the law and another quarter (26 percent) aren’t sure either way. College graduates and those living in higher income households are more likely to be aware of the actual status of the law. More Americans seem to be familiar with the pace of reform’s implementation. Asked how many of the reform law’s provisions have been implemented thus far, 62 percent correctly chose “some” as the closest appropriate answer. Meanwhile 17 percent thought none had been implemented, and 10 percent are under the impression that “most” or “all” have been put into place. GETTING CONCRETE: ESTIMATES OF PERSONAL BENEFIT AND HARM In the February survey, Americans were asked whether they and their family “have personally benefited from the health reform law”, and whether they had “been negatively affected” by the same. Overall, 14 percent say they have benefited in some way thus far, with the most commonly offered experiences being improved access to care or coverage, the ability to keep grown children on the family insurance plan, and reduced costs. At the same time, 17 percent say they have been negatively affected. Increased costs were by far the most commonly cited issue, followed by reduced benefits or choices and an inability to get or keep insurance. As is clear from the direct quotes below, however, it is difficult to determine which effects were caused by the law and which are due to changes in the marketplace that the public merely attributes to the law. To the extent that Americans have difficulty distinguishing between the two, public perceptions of the law will likely be based on some misunderstanding.

IN THEIR OWN WORDS… BENEFITS AND HARM

Among the 14% who say they have personally benefited from the health reform law: In what ways would you say you have benefited from the health reform law?

Among the 17% who say they have been negatively affected by the health reform law: In what ways would you say you have been negatively affected by the health reform law?

“I’m not worried about being bumped off [down] the road because of some major illness…And as I get older toward qualifying for Medicare, I am more comfortable because the prescription drugs will be less.”

“My health insurance doubled since the health care law, and I pay for my own because I run my own business.”

“My son, 23, works two jobs that do not have health insurance, and he can stay under my health insurance.”

“My personal health insurance went up, and I am sure it will continue. I am afraid it is going to break the country economically.”

“I got health coverage when I needed it.” “My mother had to pay more money for medication.”

“My husband fell into the doughnut hole and received $250.”

“Financially the middle class will not be able to afford the insurance.”

“If we need to purchase new health care coverage, nobody can turn us down.”

“It is going to cost the taxpayers more money. It was passed…and people didn’t get a chance to read it.”

“We have children with disabilities. The new reform law has really helped us. Since we have children with pre‐existing conditions, we get coverage.

“Because of our income, we are being strangled with paying for everyone else. Middle America will not exist under these conditions.”

“It makes our health insurance more inexpensive.” “I don’t like someone telling me I have to do this.”

“It has allowed my husband to have all his medical treatments for his illness.”

“Whenever the government controls anything, people get affected negatively. Government should stay out of it and not have control over it.”

4

WHO DOES THE PUBLIC THINK WILL BENEFIT Broadly speaking, a slim majority of the public (51 percent) sees the law as improving the health care situation of lower income Americans, but beyond that there is significantly less optimism. For all the remaining groups asked about, at least as many if not more say they expect things will be worse off under health reform than expect them to be better off. In no case, however, does a majority agree that each would be worse off.

SENIORS After the nation’s economy, Americans are most likely to say that seniors will be worse off under the health reform law (42 percent say so, compared to 31 percent who say seniors will be better off.) And seniors agree: 48 percent say the elderly will be worse off, twice as many as say they will benefit (22 percent). Seniors as a group have been consistently less likely to support health reform since passage than younger Americans. Recent months, however, have seen a rise in unfavorable views among seniors to 59 percent. This level of opposition represents a 19

percentage point increase from the low point of 40 percent in December, and returns unfavorable views to roughly the level they were at immediately after passage last March.

Which Groups Benefit?

Do you think each of the following will be better off or worse off under the health reform law, or don’t you think it will make much difference?

24%

28%

28%

31%

32%

37%

51%

29%

38%

21%

22%

24%

19%

18%

35%

31%

45%

42%

40%

39%

29%

12%

3%

5%

5%

5%

5%

3%

Better off No difference Worse off Don’t know/Refused

You and your family

The country as a whole

Seniors, that is those ages 65 and older

The Medicare program

Middle class Americans

The nation’s economy

Lower income Americans


56%

51% 51%

46%

53%

49%52%

46%

40%

50%

59%

12%14%

18% 17%

13% 13%16% 16%

26%

10% 9%

32%35%

31% 38%

34%

38%

32%

38% 34%40%

32%

0%

20%

40%

60%

80%

Apr May Jun Jul Aug Sep Oct Nov Dec Jan11 Feb11

Unfavorable Views Up Among Seniors, Rivaling Views After Passage

AMONG SENIORS (age 65 and older)

Source: Kaiser Family Foundation Health Tracking Polls

2010

Favorable Unfavorable Don’t know/Refused

As you may know, a health reform bill was signed into law early last year. Given what you know about the health reform law, do you have a generally favorable or generally unfavorable opinion of it?

5

The Henry J. Kaiser Family Foundation: Headquarters 2400 Sand Hill Road, Menlo Park, CA 94025 Phone: 650.854.9400 Fax: 650.854.4800Washington O�ces and Barbara Jordan Conference Center: 1330 G Street N.W., Washington, DC 20005 Phone: 202.347.5270 Fax: 202.347.5274 www.k�.orgThe Kaiser Family Foundation is a non-pro�t private operating foundation, based in Menlo Park, California, dedicated to producing and communicating the best possible analysis andinformation on health issues.

Additional copies of this publication (#8156-F) are available on the Kaiser Family Foundation’s website at www.k�.org.

ONLY LIMITED EVIDENCE OF “HEALTH REFORM FATIGUE” When it comes to early evaluations of how the 112th Congress is spending its time, most Americans say there has been too little focus on the economy (71 percent), the deficit (63 percent) and immigration (57 percent). But it’s not necessarily the case that they are blaming health reform for hogging the spotlight. In fact, 39 percent say Congress is paying too little attention and another 27 percent say it’s getting about the right amount, meaning most Americans don’t seem to be tired of the topic despite the fact that the debate has stretched out into a new session. Nearly three in ten (28 percent) do, however, think Congress is devoting too much time to health reform this year.

Methodology

This Kaiser Health Tracking Poll was designed and analyzed by public opinion researchers at the Kaiser Family Foundation led by Mollyann Brodie, Ph.D., including Claudia Deane, Sarah Cho, and Theresa Boston. The survey was conducted February 8 through February 13, 2011, among a nationally representative random sample of 1,202 adults ages 18 and older. Telephone interviews conducted by landline (801) and cell phone (401, including 205 who had no landline telephone) were carried out in English and Spanish by Princeton Survey Research Associates. Two additional items (as noted on the full topline) were fielded on a separate survey conducted by landline and cell phone February 3 through 6, 2011 among a nationally representative random sample of 1,001 adults ages 18 and older. The survey was carried out in English by Princeton Survey Research Associates. The margin of sampling error is plus or minus 3 percentage points for the main survey and plus or minus 4 percentage points for the smaller survey. For results based on other subgroups, the margin of sampling error may be higher. Note that sampling error is only one of many potential sources of error in this or any other public opinion poll. The full question wording, results, charts and a brief on the poll can be viewed online at http://www.kff.org/kaiserpolls/8156.cfm.

As I read you some different issues, please tell me if you think the new Congress is paying too much attention, too little attention, or about the right amount of attention to each one.

Note: Don’t know/Refused answers not shown. Source: Kaiser Family Foundation Health Tracking Poll (conducted February 8‐13, 2011)

37%

39%

47%

52%

57%

63%

71%

34%

27%

29%

30%

19%

20%

22%

23%

28%

20%

10%

19%

12%

4%

Energy policy

The war in Afghanistan

The budget deficit

The economy and jobs

The health care reform law passed last year

Taxes

Immigration

Too little attention Too much attentionAbout the right amount

Congress Paying Too Little Attention to Economy and Deficit

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Forget Math and Science, Teach Civics (Or Why We Need To Bring Back "School House Rock")

I am seldom surprised by our poll findings, but this month’s tracking poll produced a doozy. Twenty-two percent of the American people think the Affordable Care Act has been repealed, and another 26 percent aren't sure. Those are surprisingly large numbers even with the 52 percent who still know it is the law of the land.

How could a repeal "vote" in the House -- however dramatic but still, only symbolic -- be misunderstood as an actual repeal by so many Americans?

First, people are very busy just getting through the day and they don't have a lot of time to sort through news reports about the policymaking process. They see the word "repeal" in the local paper or hear it on TV and think the law has been repealed. Second, there may be some partisan wishful thinking going on; 30 percent of Republicans think the law has been

repealed while only 12 percent of Democrats do. But overall, it is obvious that the knowledge of basic civics is pretty low. Maybe it's because "Schoolhouse Rock" is no longer airing on Saturday morning TV explaining how government works. (Coincidentally, a district court judge in Florida ruled at about the same time that the individual requirement to buy insurance

in the health reform law is unconstitutional. One other district judge has ruled similarly on the individual requirement, while two others have now upheld the law at the time of our survey. The legal questions are a long way from being settled. We did not ask the public whether they believe the law has been overturned in the courts and is now void.)

People who follow politics every day know that the U.S. Senate and the President will block any attempts to repeal the health law, and that the legal process will take a long and winding road to a conclusion. But they were not the audience for the House repeal vote. Opponents of the health law succeeded in capturing public attention with the repeal vote, just as they did

during the town hall meetings in the summer of 2009 when the terms “government takeover” and “death panels” rose to prominence. With the repeal vote behind them, congressional Republicans face some choices. Do they continue their assault, pushing for

repeal and defunding? This would appeal to their political base and sow doubt about the law but probably not achieve big changes in the legislation or win over many new voters for 2012. (Remember, while those of us in health policy live the issue day-to-day, health has almost never been a voting issue). Or, do they aim for smaller changes to the law, potentially with some crossover Democratic votes?

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Health reform proponents face strategic and tactical decisions as well. Do they engage in a continuing war on health reform

by responding forcefully to Republican attacks on the law, touting its popular benefits but keeping the assault on health reform in the news? Or, are they better off changing the subject to more central public concerns such as jobs and the economy, allowing implementation to proceed in a less confrontational environment?

No matter how this plays out, we might need a new installment of "Schoolhouse Rock" to explain the legislative process a little better to the public. As a part time pollster I should not be too surprised by these results, but as someone who once taught a course called "The Policymaking Process" in a political science department at a major university, it is a little jarring to learn that almost half the American people do not know the difference between a symbolic repeal vote in the House and the

actual repeal of the law.

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Publish Date: 2011-02-24

Keywords

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February 28, 2011

Obama Backs Easing State Health Law MandatesBy SHERYL GAY STOLBERG and KEVIN SACK

WASHINGTON — President Obama, who has stood by his landmark health care law through

court attacks and legislative efforts to repeal it, told the nation’s governors on Monday that

he was willing to amend the measure to give states the ability to opt out of its most

controversial requirements right from the start, including the mandate that most people buy

insurance.

In remarks to the National Governors Association, Mr. Obama said he supported legislation

that would allow states to obtain waivers from the mandate as soon as it took effect in 2014,

as long as they could find another way to expand coverage without driving up health care

costs. Under the current law, states must wait until 2017 to obtain waivers.

The announcement is the first time Mr. Obama has called for altering a central component of

his signature health care law, although he has backed removing a specific tax provision that

both parties regard as onerous on business.

But the prospects for the proposal appear dim. Congress would have to approve the change

through legislation, and House Republican leaders said Monday that they were committed to

repealing the law, not amending it. Even if the change were approved, it could be difficult for

states to meet the federal requirements for the waivers.

The White House described the proposal, based on a bipartisan bill recently introduced in

the Senate, as a common-sense date change that would give states the freedom to innovate

and act as laboratories. Mr. Obama called it “a reasonable proposal,” telling the governors,

“It will give you flexibility more quickly while still guaranteeing the American people

reform.”

Political calculations, as much as policy ones, were at work in the president’s announcement.

The shift comes as the health care law — and the mandate in particular — is under fierce

attack in the courts, where federal judges have issued conflicting opinions on its

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constitutionality. The mandate is also a rallying cry for conservatives and Tea Party

supporters, who regard it as a prime example of overreaching by the federal government.

Mr. Obama has been trying to reposition himself in the political center on some issues in the

wake of the drubbing his party took in the November midterm elections; dropping his

insistence on the mandate is one way to do that. And with governors pressing the

administration to allow them to cut Medicaid rolls to ease their fiscal distress — a step Mr.

Obama does not want to take — the president is trying to look flexible in other ways.

But Mr. Obama’s flexibility goes only so far. “I am not open to refighting the battles of the

last two years,” he said, “or undoing the progress that we’ve made.”

Mr. Obama’s announcement did not appear to appease his Republican critics. The House

majority leader, Representative Eric Cantor of Virginia, told reporters that the health law

was “an impediment to job growth” and that Republicans remained committed to its repeal.

And while some Republican governors praised Mr. Obama for reaching out, they said the

move did not address their underlying discomfort with the law or the major structural flaws

facing state budgets. In meeting with the governors, Mr. Obama also asked them to come up

with a bipartisan group to find ways to reduce Medicaid costs.

“I was disappointed,” said Gov. Rick Perry of Texas, chairman of the Republican Governors

Association. “Pretty much all he did was to reset the clock on what many of us consider a

ticking time bomb that is absolutely going to crush our state budgets. The states need more

than that.”

Some Democrats also reacted warily. Many are convinced that it is not possible to expand

health care coverage and achieve deficit reductions without the federal mandate, and they

worry that amending the law would be tantamount to weakening it.

Senator Max Baucus, a Montana Democrat who as chairman of the Senate Finance

Committee wrote a bill that included an idea similar to the one Mr. Obama proposed, issued

a tepid statement saying he would consider it.

“We want to give states as much flexibility as possible,” Mr. Baucus said, “but that flexibility

shouldn’t fail to ensure that Americans in every state have access to quality, affordable

health care.”

The White House said the proposal was unrelated to the challenges to the constitutionality of

the mandate. But encouraging states to pursue alternative ways of expanding coverage could

prove useful should the Supreme Court ultimately rule that the mandate is unconstitutional.



At the same time, the mandate, and the health care law more generally, is sure to be an issue

in the president’s 2012 re-election campaign, which may be a reason he is offering the

proposal now.

“It’s to his advantage to show that he wants to be more moderate on this,” said Dan

Mendelson, a health policy expert who worked in the Clinton administration, “because the

mandate is terribly unpopular politically and he doesn’t want to be saddled with that going

into the next election.”

The bipartisan legislation that Mr. Obama is now embracing was first proposed in

November, eight months after the enactment of the Affordable Care Act, by Senators Ron

Wyden, Democrat of Oregon, and Scott Brown, Republican of Massachusetts. Senator Mary

L. Landrieu of Louisiana, a Democrat, is now a co-sponsor.

The legislation would allow states to opt out earlier from a range of requirements, including

the mandate, if they could demonstrate that other methods would allow them to cover as

many people, with insurance that is as comprehensive and affordable, as provided by the

new law. The changes must also not increase the federal deficit.

If states can meet those standards, they can ask to circumvent minimum benefit levels,

structural requirements for insurance exchanges and the mandates that most individuals

obtain coverage and that employers provide it. Washington would then help finance a state’s

individualized health care system with federal money that would otherwise be spent there on

insurance subsidies and tax credits.

Representative Peter Welch, Democrat of Vermont, has proposed similar legislation in the

House, but he said in an interview Monday that his bill had no Republican co-sponsors,

making its prospects for passage uncertain at best. Still, Mr. Welch called Mr. Obama’s

announcement “extremely significant,” adding that the waivers were “an act of

empowerment for the states.”

In Vermont, Gov. Peter Shumlin, a Democrat, is exploring the idea of using a waiver to

create a so-called single-payer system, a government-run health care plan.

Such a plan, dubbed the public option in last year’s health care debate, would never have

passed Congress. But Mr. Welch said he saw no reason Vermont should not get a waiver to

establish one.

“My Republican friends argue that you should drive power and responsibility for

implementation to the local level, and they’re right,” Mr. Welch said.



Health economists have mixed views on how difficult it would be to expand coverage and

hold down costs in the absence of a mandate.

Jon Gruber of M.I.T. published a recent analysis arguing that eliminating the mandate

would “significantly erode the gains in public health and insurance affordability” made

possible by the health care law. But David Cutler of Harvard said that “given the uncertainty

generated by the mandate, it was reasonable” to let states experiment with other ways to

achieve the law’s broad goals “and let the evidence decide” if the mandate is necessary.

When the health measure was moving through Congress last year, its authors set 2017 as the

date that such experimentation could begin, based on an analysis by the Congressional

Budget Office, which said it would take three years of experience to determine how much a

state should receive in unrestricted block grants if it opted out of aspects of the law.

Otherwise, the budget analysts advised last year, the legislation’s 10-year cost estimate

would be about $4 billion higher because Washington would probably have to make higher

than needed payments to states. Senior administration officials said they had not discussed

where to find the additional $4 billion, but described it as “not a lot of money” compared

with the estimated $1 trillion, 10-year cost of the law.

Sheryl Gay Stolberg reported from Washington, and Kevin Sack from Atlanta. Jeff Zeleny

contributed reporting from Washington.



Perspective

The Wyden–Brown Bill — Short on State FlexibilityStuart Butler, Ph.D.

N Engl J Med 2011; 364:397-399 February 3, 2011

The results of the November election guarantee a protracted struggle in Congress over the Patient Protection and Affordable

Care Act (ACA), with House Republicans seeking to repeal the legislation and Democrats trying to protect its core elements. But

another threat to the ACA is coming from the states, where a sharp turn to the Republicans has prompted efforts to block or avoid

key parts of the legislation.

Senators Ron Wyden (D-OR) and Scott Brown (R-MA) recently introduced a two-page bill (S.3958) that seeks to defuse this state

pressure without torpedoing the ACA itself. The bill would do so by simply advancing, from 2017 to 2014, the date when a key

provision (Section 1332) of the ACA takes effect. The provision permits states to establish alternatives to parts of the ACA by

applying to the secretary of health and human services (HHS) for a waiver. If successful, a state could then receive all the federal

money that would otherwise go to premium and copayment subsidies for plans in the new health insurance exchanges as well as

tax credits for small businesses — but use that money instead to help finance their own approach to reaching the coverage

objectives of the ACA. The state would have to convince the secretary that the coverage was at least as good as that required

under the ACA and as affordable for individuals. At least as many people would have to be covered, and the state proposal would

have to be budget-neutral for the federal government.

With a waiver, the state could also receive exemptions from several controversial features of the law. These could include the

individual mandate to obtain insurance, penalties on employers that do not provide coverage, the requirement to establish a

health insurance exchange, and the detailed standards for a basic health insurance policy.

At first glance, the Wyden–Brown measure makes a lot of sense. Many critics of the ACA argued that states should have broad

latitude to reach the generally accepted goal of wider and more affordable coverage. The inclusion of Section 1332 reflected that

state-led view. By advancing to 2014 the date when the provision would become applicable, Wyden–Brown would seem to make

it far more likely that states would actually make use of it. Indeed, by delaying its application to 2017 in the ACA, lawmakers who

favored more centralized control won an 11th-hour victory. The 2017 date meant that a state would still have to comply with all

the provisions of the ACA, which would entail significant costs and reorganization. Then, if it wanted to use Section 1332, it would

have to change the structure it had just put in place, incurring additional costs and necessitating further reorganization. Moreover,

there would be no guarantee of receiving a waiver. Few states were expected to choose to incur such a double disruption. By

advancing the date to 2014, Wyden–Brown would permit states to apply for the waiver at essentially the start of the

implementation process, avoiding a costly and complicated two-step.

But there are many problems with Wyden–Brown, which is why it has received a lukewarm reception from many advocates of

state flexibility. One is that it still locks the states into guaranteeing a generous and costly level of benefits. True, a state could

propose alternative benefit requirements if they had the same actuarial value as those in the ACA. But the requirements go well

beyond basic coverage, and the HHS secretary is the one who defines “at least as comprehensive” benefits.

Even more problematic to proponents of state flexibility on both the left and the right is that states would not be able to fold other

health programs into their waiver request. Liberal skeptics at the Physicians for a National Health Program, for instance, point out

that provisions of Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), Taft–Hartley plans, and other

programs could not be waived, leaving large obstacles in the path of a potential single-payer system.1 And on the other hand, by

Article

Page 1 of 3NEJM —

3/3/2011http://www.nejm.org/doi/full/10.1056/NEJMp1013277?viewType=Print&viewClass=Print

1 McCanne D. Will the Wyden/Brown state waiver enable single payer? Chicago: Physicians

for a National Health Program, November 19, 2010. (http://pnhp.org/blog/2010/11/19/will-the

-wydenbrown-state-waiver-enable-single-payer/.)

2 Kaiser Health News. Wyden: states will drive support for pre-emption bill. December 16,

2010. (http://www.kaiserhealthnews.org/checking-in-with/wyden-qa.aspx?)

3

leaving Medicaid intact, including the required expansion of the program under the ACA, Wyden–Brown does little to comfort

conservatives who envision a privatized voucher approach.

Another major problem with the bill is that since ultimate waiver authority rests with the HHS secretary, the waivers granted would

probably reflect the administration's preferences. Senator Wyden claims that his legislation would allow conservative states to opt

out of much of the ACA and implement consumer-driven coverage. But he admits that the secretary, not the state, has the final

word over what is permitted.2 That was also true of the SCHIP legislation enacted in 1996: it permitted a wide array of state

options with federal approval, but the Clinton administration quietly made it clear that designs of which it disapproved would never

receive a waiver. If President Barack Obama is reelected in 2012, it is hard to imagine HHS approving waivers in 2014 that would

permit states essentially to gut his health care reform. If a Republican is elected, liberals who envision Wyden–Brown as a step

toward a single-payer system are going to be very disappointed.

The Wyden–Brown legislation is thus much less than meets the eye. In practice, it will not grant the states, especially

conservative ones, the degree of flexibility that Wyden claims, nor will it defuse state resistance to major parts of the ACA.

To trigger real state flexibility that will encourage the development of alternative and truly creative ways of reaching accepted

national goals for coverage and affordability, a waiver approach must include two crucial elements. First, it must allow states to

include major programs such as Medicaid and SCHIP within the proposal. That would require Congress to grant a legislative

waiver — that is, an exemption from specific statutory provisions of existing programs — for a state plan including such things as

Medicaid changes. And second, to give states and lawmakers of both parties the confidence that a wide range of state

approaches would be permitted regardless of who occupied the White House, the HHS secretary could not have the final say

over waivers.

Brookings Institution scholar Henry Aaron and I proposed a method for granting such waivers before the ACA was passed.3,4 Our

proposal involves setting up a bipartisan waiver commission, which would include members selected by Congress, the

administration, and the states. The commission would invite proposals from states and, by a supermajority, select a balanced

slate of state proposals — reflecting the political spectrum and including ones requiring legislated changes in existing programs.

The slate would then be presented to Congress for an up-or-down vote without amendment. In this way, Congress could agree to

fold customized program changes into a state proposal, and an HHS secretary could not unilaterally thwart a well-developed

plan. The Aaron–Butler proposal was subsequently turned into bipartisan legislation (HR.5864) in 2006 by Representatives

Tammy Baldwin (D-WI) and Tom Price (R-GA), and a companion bill (S.2772) was offered in the Senate by George Voinovich (R

-OH).

An inherent defect of the ACA is that it does not unleash the potential of states to redesign the health care system to achieve the

goals that Americans agree on and at a cost we can afford. The Wyden–Brown bill recognizes this defect but merely advances

the effective date of the legislation's limited and flawed flexibility provision. Only legislation more sweeping than Wyden–Brown

can achieve the full potential of state flexibility and reduce state opposition to the ACA.

This article (10.1056/NEJMp1013277) was published on January 19, 2011, at NEJM.org.

Disclosure forms provided by the author are available with the full text of this article at NEJM.org.

From the Center for Policy Innovation, Heritage Foundation, Washington, DC.

References

Page 2 of 3NEJM —


Aaron HJ, Butler SM. How federalism could spur bipartisan action on the uninsured. Health

Aff (Millwood)2004;W4-168

Medline

4 Aaron HJ, Butler SM. A federalist approach to health reform: the worst way, except for all the

others. Health Aff (Millwood) 2008;27:725-735

CrossRef | Web of Science | Medline

Page 3 of 3NEJM —


Perspective

Risking Big Changes with Small ReformsStuart M. Butler, Ph.D.

N Engl J Med 2010; 362:673-675 February 25, 2010

As the prospects for health care reform ebb and flow by the day, one school of thought holds that making modest adjustments

rather than enacting large-scale reform could help to avert controversy and command more broad support. Perhaps — but

seemingly modest changes could also unleash huge pressures that would profoundly alter the system's future structure and

function. Since perceptive lawmakers and congressional staff members recognize this fact, there may well be bitter debate over

the enactment of certain apparently modest elements of a smaller reform package submitted to Congress.

History shows that changing even seemingly minor features of legislation or administrative decision making with regard to health

care can have major — and sometimes unintended — consequences for the system's evolution. For instance, when President

Lyndon Johnson made an apparently minor concession to the American Medical Association in 1965 by allowing “usual and

customary charges” to become the basis of Medicare payments, he essentially permitted doctors to set their own fees simply by

adding a charge on top of the costs they incurred. This triggered powerful inflationary pressure that has impeded spending

control and frustrated payment reform for many years. Similarly, rulings exempting fringe benefits from taxation after World War II

created a strong incentive for employers to expand tax-free health insurance relative to taxable cash compensation for their

employees. Economists broadly agree that this move boosted employer-sponsored insurance in the United States and,

unfortunately, blunted patients' incentives to seek out cost-effective health care. The current goal of “bending the cost curve”

emerged largely in response to this unintended dynamic.

Design decisions in a pared-down proposal or reconstituted Senate bill are also likely to create dynamics that will reshape the

system in ways unforeseen by many lawmakers. Consider two possible design elements that might be particularly influential. One

is the alternative to a public option in which the government would offer a menu of nationwide private insurance plans to be

overseen by the federal Office of Personnel Management (OPM). The shift to this approach was seen as a major setback for

supporters of a public option during the Senate–House negotiations, particularly for those who saw a public option as a crucial

step toward a single-payer system. But proponents of the public option might not be so disappointed in the long run if this

alternative becomes part of a smaller bill.

The OPM currently administers several nationwide private plans and hundreds of local plans that are available to about 8 million

federal employees and retirees and their dependents. The cultures in various government agencies are often quite different, and

this can affect the ways in which the agencies operate; whereas the culture at the Centers for Medicare and Medicaid Services

(CMS) might best be described as adversarial, with a strong focus on rule making and rate setting, the attitude at the OPM is

more similar to that of a large private employer that negotiates benefits with private insurers. OPM officials conduct these

negotiations with private plans in an atmosphere of cordial cooperation in an effort to provide employees with economical, high-

quality benefits. The OPM actually has considerable latitude and powers to set prices and demand specific benefit designs. But in

practice, it chooses not to fully utilize these powers.

Now imagine that reform legislation is enacted requiring the OPM to administer a set of private plans designed to achieve what

many key leaders in Congress really believe can be obtained only through a strong public option or a single-payer system. The

Senate legislation contains strong directives to the OPM, requiring it to negotiate medical-loss ratios (the percentage of premiums

that insurers actually spend on medical care for enrollees), minimum benefits, profit margins, premiums, and “such other terms

and conditions of coverage as are in the interests of enrollees in such plans.” Crucially, the legislation also specifies that the OPM

Article

Page 1 of 3NEJM —


1 Senate-passed Patient Protection and Affordability Act (H.R. 3590) § 1334(a) and (c) (2009).

2

-administered plans would automatically be deemed to meet all the requirements for plans to be offered through the health

exchanges created by the legislation.1 This means that OPM-administered plans could in practice operate free of many of the

financial regulations that exchanges might impose on other plans, allowing the plans to operate under their own OPM-designed

regulations.

How might the health care system evolve if this OPM feature were implemented as part of a modest reform package? Congress

rarely gives an agency powers that it does not intend to be used. It also seems reasonable to assume that the people appointed

to administer the new bureau within the OPM will be more likely to embrace the adversarial and regulatory philosophy of the

leading congressional reformers and the CMS than the traditional “hands-off” culture of the OPM. Managed by such a

transformed agency, the private plans that were part of an OPM alternative would probably come, over time, to look more and

more like third-party administrators of a federally designed competitor plan, operating under rules significantly different from those

governing competing private plans. The result in a few years could be functionally indistinguishable from a public option.

Now consider another design element that might be particularly influential — the broadly supported idea of health insurance

exchanges. The critical design issues are whether the exchanges would be primarily national or state-based and what the

relationship would be between an exchange and the regulation of insurance. The House legislation would create a national

exchange modeled on the federal employees' system, whereas the Senate has opted for a more state-centered approach. This is

not a small distinction. Legislation calling for state exchanges could still set broad national guidelines, such as general criteria for

the provision of consumer information or basic requirements for enrollment procedures. But a permissive state-led exchange

system would trigger significant variation in the design of exchanges meeting the federal guidelines. This flexibility would make it

easier to incorporate existing exchanges, such as the Health Connector in Massachusetts or the more recently created Utah

Health Exchange. But more important, the state-centered approach would make it easier for states to be innovators in exchange

design and to link their exchanges more closely with state reforms in insurance regulation and coverage innovations. Such an

approach would therefore improve the likelihood that we would see both state diversity and continuous evolution in the U.S.

health care system, at least in the private sector.

A national exchange, on the other hand, would increase the probability of evolution toward a public-utility model of private

insurance. A national exchange would reflect the more regulatory culture of the Department of Health and Human Services and

congressional committees and would thus be more likely to be used in combination with federal insurance regulation to reshape

the private market. As the Commonwealth Fund observes in its recent analysis of the health care reform bills, the House

version's national exchange would have stronger regulatory and market power to control insurance premiums and companies,

thanks to the federal government's ability to negotiate directly with insurers.2 These features would open up the possibility, if not

probability, of a high degree of price regulation, especially if they were combined with greater standardization of benefits,

restrictions on plan–provider relations, set minimums for medical-loss ratios, and federal review of premium rates. With these

federal powers in place within a national exchange, insurance would essentially become a regulated utility. Although many

people might applaud that result, it would be very different from the probable result of establishing state-based exchanges.

Examination of these two “minor” design features — OPM-administered private plans and the choice of national or state-based

exchanges — underscores the complex nature of health care policymaking. Taking even small steps to improve coverage, it

turns out, involves decisions that could have profound effects on the future of the U.S. health care system. Thus, it would be

unwise to try to rush through a scaled-back bill on the assumption that minor changes do not require careful scrutiny. It is

important to take the time to think through the implications of any new legislation.

This article (10.1056/NEJMp1001054) was published on February 3, 2010, at NEJM.org.

Financial and other disclosures provided by the author are available with the full text of this article at

NEJM.org.

From the Heritage Foundation, Washington, DC.

References

Page 2 of 3NEJM —


Collins SR, Davis K, Nicholson JL, Rustgi SD, Nuzum R. The health insurance provisions of

the 2009 congressional health reform bills: implications for coverage, affordability, and costs.

New York: Commonwealth Fund, January 2010. (Accessed February 2, 2010, at

http://www.commonwealthfund.org/Content/Publications/Fund-Reports/2010/Jan/Health-

Insurance-Provisions.aspx.)

Page 3 of 3NEJM —


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HHS Home > ASPA > Newsroom

News Release

FOR IMMEDIATE RELEASE

Friday, February 25, 2011

Contact: HHS Press Office

(202) 690-6343

New Report Details Affordable Care Act Resources and Flexibility for States

Affordable Care Act Has Made $2.8 Billion Available to States in Implementing Affordable Care Act

The U.S. Department of Health and Human Services (HHS) today released a new report showing that the Affordable Care Act

provides states with significant flexibility and resources to improve health care benefits and protect consumers. Already, the

law has provided or offered $2.8 billion in funding to states. This is a fraction of the total funding available under the law to

help states implement new consumer protections, expand health coverage, and improve health care quality.

“The Affordable Care Act is built on the foundation of providing states with the resources and flexibility they need to build a

better, more affordable health care system,” said HHS Secretary Kathleen Sebelius. “This report shows that states have what

they need to continue putting comprehensive health insurance reforms in place.”

Prior to the enactment of the Affordable Care Act, the fractured health care system placed tremendous financial burdens on

states. In 2008, for example, states spent $17.2 billion on uncompensated care due to the large number of Americans

without health insurance. Rising health care costs have also had a significant impact on state budgets.

The Affordable Care Act builds on ongoing state efforts to reform health care, and provides states with new tools, flexibility,

and resources to provide their residents with health care benefits and consumer protections at an affordable price. At a time

when states are struggling with budget deficits, these resources are providing governors, state legislators and regulators, and

the people they serve, with vital assistance to improve lives and reduce costs.

The law also empowers states to choose a variety of implementation strategies to reflect their different insurance markets,

provider networks, and the needs of their residents. Under the law, states receive substantial flexibility and financial support

to cover the cost of creating new competitive insurance marketplaces and extending coverage to more Americans.

The report can be found at www.HealthCare.gov/center/reports/states02252011a.pdf.

###

Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

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Page 1 of 1New Report Details Affordable Care Act Resources and Flexibility for States

3/3/2011http://www.hhs.gov/news/press/2011pres/02/20110225a.html

States and the Affordable Care Act: More Funding, More Flexibility February 25, 2011

Prior to the enactment of the Affordable Care Act, the fractured health care system placed tremendous financial burdens on States. In 2008, for example, States spent $17.2 billion on uncompensated care due to the large number of Americans without health insurance. And rising health care costs have had a significant impact on State budgets.

The Affordable Care Act builds on ongoing State efforts to reform health care, and provides States with new tools, flexibility, and resources to provide their residents the health care benefits and consumer protections they need and deserve at an affordable price. At a time when States are struggling with budget deficits caused, in large part, by the economic recession, these resources are providing Governors, State legislators and regulators, and the people they serve with vital assistance needed to improve lives and reduce costs.

The law empowers States to implement the Affordable Care Act to reflect their insurance markets, provider networks, and the needs of their residents. The law grants States substantial flexibility and financial support to cover the cost of creating new competitive insurance marketplaces and extending coverage to more Americans.

The Affordable Care Act already has provided or offered $2.8 billion in funding to States, which is only a fraction of the funds available under the law to build insurance Exchanges, expand Medicaid eligibility, and expand and improve prevention efforts, as well as additional grants and funds available to States in 2011 and future years. Moreover, independent experts have estimated that by expanding the number of Americans with insurance and reducing the amount States spend to care for the uninsured, the health reform law will save State and local governments between $70 billion and $80 billion from 2014 to 2019.1

This report includes information on the resources that have been and will be made available to States under the Affordable Care Act and important details about States’ discretion to implement the law in a manner that works best for their residents.

Billions of Dollars in Support for States

The Affordable Care Act includes substantial resources for State governments. Thus far, States have received or can access nearly $2.8 billion from the law and will receive billions more in 2011 and subsequent years. For example, a new round of insurance Exchange grants has just been announced, additional funding from the $15 billion Prevention and Public Health Fund will become available, and higher Federal matching payments for Medicaid long-term care will come on line this year and into the future.

Resources Allocated to State Governments from the Affordable Care Act As Of February 24, 2011

Program Spending in Millions Premium Rate Review Grants:

First Round $50 * Second Round $200 *

National Background Check Program $19 Early Retiree Reinsurance Program Funds to States $209 * Exchange Grants:

Planning Grants $55 * Early Innovator IT Systems Grants $241 Establishment Grants TBD *

Consumer Assistance Grants $29 Prevention and Wellness:

Medicaid Chronic Disease Prevention Grants $100 * Community and Clinical Prevention ** $503 Home Visitation Grants $87 Pregnancy Assistance, Personal Responsibility and Education Programs $102

Long-Term Care: Money Follows the Person Grants $621 Innovation Center Dual Eligible Demonstration $15 Navigation of Long-Term Care Options $60

Infrastructure and Capacity: State Health Workforce Needs $6 Public Health Training ** $294 Public Health Infrastructure ** $173

TOTAL $2,763

Includes Territories

* Funding announcement has been issued; some of all of the awards have not yet been made.

** Includes funds that would be issues to entities within States; for some programs, funding allocation is announced but announcements have not yet been issued.

To date, the health law has given States substantial new resources to deliver the benefits of reform to their residents in the form of lower premiums, greater insurance company accountability, and improved health care delivery. This includes:

Help to Keep Premiums Low: The law provides $250 million to help States and territories improve oversight of proposals by private health insurance companies to raise their rates for small businesses and individuals and families. Since enactment, $45 million has been distributed to 44 States and the District of Columbia and $205 million is now available to States, the District of Columbia and territories to continue those efforts. Early results have shown increased scrutiny of rate increases has helped reduce growth and save consumers and small employers billions of dollars in insurance costs.

2

Resources and Tools to Crack Down on Fraud: Nine States have received $19 million in grants to support their development of criminal background checks to safeguard nursing home residents and improve the quality of care. In addition, the Affordable Care Act provides States with new authority to help keep problematic providers from enrolling in Medicaid. The Medicaid Integrity Institute provides free training to State Medicaid agency staff—it conducted 38 courses last year and has trained 1,900 staff since February 2008. HHS is planning a special series of web-based trainings for State Medicaid agencies to share best practices and inform States about new provisions of the law aimed at preventing fraud.

Reduced Costs for Early Retirees: In 2010, States received a total of $209 million to offset some of their costs of insurance coverage of early retirees and their families. Additional support has already been provided to States this year from the Early Retiree Reinsurance Program (ERRP). This program provides temporary relief for employers and plan sponsors to sustain this coverage until new affordable health insurance choices are available to early retirees and their families in 2014.

Exchange Grants: More than $296 million worth of grants has been made available to States and territories to start planning for the creation of health insurance Exchanges that will provide affordable private insurance to individuals and small businesses beginning in 2014, and educate residents about their health insurance options. This funding includes “Early Innovator” awards to support six States and a consortium of States in developing an array of models for Exchanges’ information technology systems.

Support for Consumer Assistance Efforts: Almost $30 million has been awarded to 35 States to support their efforts to establish or strengthen consumer assistance programs that provide consumers with the information they need to pick from a range of health coverage options as well as to provide assistance with enrollment; educate consumers about their rights and obligations; help them appeal decisions when a plan denies coverage; and generally track consumer problems.

Prevention and Wellness Incentives: States have received grants to improve their community-based wellness programs, to reduce chronic illness, and to tackle problems like smoking. They can now apply for $100 million in grants to create incentives for people in Medicaid to adopt healthy behaviors. And all 50 States have received a portion of the $100 million dedicated to promoting the health of pregnant women and newborns.

Long-Term Care Support: With additional funding from the Affordable Care Act, all States have now received support for this program to help individuals with disabilities live independently outside of institutions. This month, $621 million in new grants were awarded to 13 States through 2016 for the Money Follows the Person program, joining 29 States that already operate these programs. In addition, one of the first demonstrations launched by the CMS Innovation Center, created by the Act, will promote improved care coordination for people eligible for both Medicaid and Medicare. The law also supports

3

States in providing seniors and individuals with disabilities more options for their health and long-term care services.

State Capacity: Recognizing that States are on the front-lines in public health response, the Affordable Care Act has already provided over $173 million to improve States’ ability to respond. It also gave grants for State workforce development.

Flexibility to Make Reform Work

The law recognizes that the condition of insurance markets, coverage, and health care systems in general differ in every State. That’s why the Affordable Care Act provides States ample flexibility and options as they implement the key provisions of the Act.

Flexibility / Options Already Taken by States from the Affordable Care Act

Option # States Opted to enforce new consumer protections 50 + DC Taken action on planning for Exchange 49 + DC Operate the Pre-existing Condition Insurance Plan in their State * 27 Applied for adjustments of the medical loss ratio threshold in the law 4 Applied for / received waivers of the restricted annual limit policy** 4 Take advantage of new Medicaid option to cover childless adults 2 + DC

As of February 24, 2011 * In other States, there is a Federally-run Pre-existing Condition Insurance Plan ** States applied on behalf of individual market issues in their States given exising State laws.

Under the Affordable Care Act, States have substantial authority to enforce important new consumer protections and benefits. If States choose not to enforce these protections for their residents, HHS will conduct enforcement. To date, every State is currently enforcing the law’s new consumer protections and benefits, since they have the best understanding of their health insurance markets. Some of the new protections and benefits include:

o Banning insurance companies from imposing lifetime limits on the dollar amount they will spend on health benefits, so that people living with chronic conditions and diseases like cancer and diabetes can get the quality care they need;

o Banning insurance companies from dropping coverage just because an individual gets sick;

o Allowing young adults without job-based coverage of their own to stay on their parent’s plan until they turn 26. So far, 2.4 million young adults, including up to 1.8 million of whom are uninsured, and nearly 600,000 of whom purchase coverage in the individual market, are expected to gain coverage;

4

o Requiring insurers to spend at least 80 percent of premiums in the individual market and 85 percent of premiums in the large group market on health care, rather than executive salaries and administrative costs, to ensure that consumers get value for their premium dollars;

o Banning insurance companies from refusing coverage to children who have a pre-existing health condition, helping up to 72,000 uninsured children gain coverage, and in 2014 banning insurance companies from denying coverage to anyone, regardless of their health status;

o Providing individuals in new health plans with a new right to an independent reviewer of insurance company decisions;

o Eliminating lifetime limits on benefits for millions of Americans and phasing out the use of annual limits for all Americans by 2014; and

o Requiring new health plans to cover recommended preventive services – like mammograms, colonoscopies, and immunizations – without charging a deductible, copayment or coinsurance.

Health Insurance Exchanges: States have tremendous flexibility to dictate the design and operation of the new competitive marketplaces – health insurance Exchanges – that will provide affordable private insurance to individuals and small businesses beginning in 2014. For example, States can:

o Choose to operate an Exchange or to allow the Federal government to create one for their State;

o Choose whether to allow all companies to offer insurance in the Exchange or to select only plans that improve the quality and affordability of the choices; and

o Decide the type of plans that can be offered in the Exchanges, including high-deductible plans and plans associated with Health Savings Accounts (HSAs).

Pre-existing Condition Insurance Plan: The law provides $5 billion to create the Pre-existing Condition Insurance Plan (PCIP) to provide coverage to uninsured Americans who have been excluded from the private insurance market because of a pre-existing condition. States can choose to operate their own PCIP, paid for with Federal funding, or have the Federal government operate a plan for them. Twenty-seven States are operating their own PCIP; 23 States opted for the federally-administered plan.

Protecting Consumers’ Premiums: States may apply for adjustments to the medical loss ratio (MLR) standard in the individual market, which requires insurers to spend at least 80 percent of premium dollars on health care benefits and activities that improve the quality of care, as opposed to such administrative costs as overhead, salaries and advertising. If a State believes that the new MLR rules will, in the short-run, destabilize

5

its individual insurance market and cause coverage to be less accessible to consumers, it can apply for an adjustment to the MLR requirement to fit the needs of its market. Such adjustments will be available through 2014. To date, four States have applied for this adjustment. In addition, States that required individual market issuers to offer policies with annual limits below those set forth in the new regulations can apply on behalf of those issuers for a temporary waiver of the new minimum annual limits. Four States have been approved for these waivers on behalf of their issuers.

Taking Advantage of New Medicaid Options: The Affordable Care Act provides new options for States, several of which are accompanied by higher Federal matching payments such as the Health Home option that supports care coordination activity for people with chronic illness and the Community First Choice program that supports community-based health and long-term care for individuals with disabilities. It also allows States to expand coverage to low-income citizens up to 133 percent of the Federal poverty line. So far, two States and the District of Columbia have taken this option. This builds on existing Medicaid flexibility to:

o Modify Benefits: While some benefits, such as hospital and physician services, are required to be provided by State Medicaid programs, many services, such as prescription drugs, dental services, and speech therapy, are optional. States can generally change optional benefits or limit their amount, duration or scope through an amendment to their State plan, provided that each service remains sufficient to reasonably achieve its purpose. In addition, States may add or increase cost sharing for services within limits.

o Manage Care for High-Cost Enrollees More Effectively: Just one percent of all Medicaid beneficiaries account for 25 percent of all expenditures. Initiatives that integrate acute and long-term care, strengthen systems for providing long-term care to people in the community, provide better primary care for children with significant health care needs, and lower the incidence of low-birth weight babies are among the ways that States have improved care and lowered costs.

o Purchase Drugs More Efficiently. In 2009, States spent $7 billion to help Medicaid beneficiaries afford prescription drugs. States have broad flexibility to set their pharmacy pricing.

o Assuring Program Integrity. According to the Department’s 2010 Financial Agency Report, the three-year weighted average national error rate for Medicaid is 9.4 percent, meaning that $33.7 billion in combined Federal and State funds were paid inappropriately. The Federal government and States have a strong, shared interest in assuring integrity in every aspect of the program, and there are new options and tools available to States.

6

The Price of Repeal

The Affordable Care Act creates a powerful partnership between States and the Federal government that is already strengthening our health care system and helping to ensure millions of Americans have access to quality, affordable health care choices. Still, some want to repeal or “de-fund” the law and return to the days when insurance companies, not patients and doctors, were in control of the health care system. Such action would take away precious resources from States at a time of fiscal challenge and leave their citizens with fewer choices, higher costs, and less protection.

1 John Holahan, Stan Dorn, What is the Impact of the Patient Protections and Affordable Care Act on the States? Urban Institute, June 2010.

7

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News Release

FOR IMMEDIATE RELEASE

Thursday, February 24, 2011

Contact: HHS Press Office

(202) 690-6343

States Can Apply for Nearly $200 Million to Help Fight Health Premium Increases

Second round of HHS grants will continue to help support and incentivize States in developing effective premium

rate review programs

Today, the U.S. Department of Health and Human Services (HHS) announced that nearly $200 million in new grant funds are

now available to help States develop programs that will make health insurance premiums more transparent. The new funds

would also give States the power to stop unreasonable premium increases from taking effect.

This funding opportunity builds on the $46 million awarded in August of 2010 to help 45 States and the District of Columbia

crack down on unreasonable premium hikes. It also complements new rules proposed in December of 2010 to require

insurance companies to publicly justify unreasonable premium rate increases.

“For too long, families and small business owners have struggled to pay ever increasing health insurance premiums,” said

Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight, which administers the rate review

grants. “The Affordable Care Act provides States new resources and tools to curb those rising costs, as well as to help make

sure that consumers and businesses are getting value for their premium dollars.”

The new funding will help States create or enhance their premium rate review programs by ensuring proposed rate hikes are

comprehensively reviewed and by bringing greater transparency and openness to the rating process. Of the total funding,

$149 million is available to States for baseline grants to achieve these goals.

Approximately $50 million in additional grant funds are available to qualifying States in two different ways:

“Workload” grants totaling $22.5 million will be distributed to States with larger populations and more health insurers. •

“Performance” incentives totaling $27.5 million will be awarded to States that have – or enact – the authority to approve

or disapprove rate increases.

•

“Enhancing States’ ability to crack down on unreasonable premium increases is just one of the ways the Affordable Care Act

is helping to protect consumers from the worst insurance industry abuses,” said Larsen.

The Affordable Care Act includes a wide variety of provisions designed to promote accountability, affordability, quality and

accessibility in the health care system for all Americans, and to make the health insurance market more consumer-friendly

and transparent. For example, insurers are generally required to meet a medical loss ratio standard to spend at least 80

percent of premium dollars on health care and quality-improvement activities as opposed to overhead, marketing, CEO

salaries, and profits.

This grant solicitation can be found at Grants.gov by searching for CFDA 93.511. Read the fact sheet at

www.HealthCare.gov/news/factsheets/ratereview02242011a.html.

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Page 1 of 1States Can Apply for Nearly $200 Million to Help Fight Health Premium Increases

3/11/2011http://www.hhs.gov/news/press/2011pres/02/20110224a.html

Statement

on

Essential Health Benefits

America’s Health Insurance Plans

601 Pennsylvania Avenue, NW

South Building, Suite 500

Washington, DC 20004

Submitted to the

Institute of Medicine

Committee on the Determination of Essential Health Benefits

January 13, 2011

1

I. Introduction

I am Carmella Bocchino, Executive Vice President of Clinical Affairs and Strategic Planning for

America’s Health Insurance Plans (AHIP), which is the national association representing

approximately 1,300 health insurance plans that provide coverage to more than 200 million

Americans. Our members offer a broad range of health insurance products in the commercial

marketplace and have demonstrated a strong commitment to participation in public programs.

They also have been actively engaged in the health reform debates over the past several years.

We appreciate this opportunity to appear before the Committee today. The Committee’s work

relates to one of the foundational provisions of the Patient Protection and Affordable Care Act

(ACA) – Section 1302, to create an “Essential Health Benefits Package.” The structure of this

provision illuminates the challenges of health care reform and the importance of focusing

implementation on the goal of making a range of high quality, affordable health care coverage

choices available to consumers.

My remarks today focus on the following areas:

• Determining essential health benefits;

• Establishing a framework that reflects balance between comprehensive benefits,

affordability and choice;

• The distinction between the process for determining essential health benefits and the

process for determining coverage or medical necessity; and

• The potential unintended consequences of including state mandates in the essential health

benefits package.

II. Legislative Requirements

Section 1302 of ACA requires the Secretary to define the essential health benefits to be included

in a benefits package in the individual and small group markets both inside and outside of the

Exchanges. The statute specifies ten general categories of items and services that should be

included in the benefits package. Additionally, the Secretary is directed to ensure that the scope

of the essential health benefits is equal to the scope of benefits provided under a “typical”

2

employer plan. The Department of Labor is required to conduct a survey of employer-sponsored

coverage to help inform the Secretary’s determination.

Finally, the statute allows for different levels of coverage (bronze, silver, gold and platinum)

based on different actuarial values of benefits, and places annual limits on both cost-sharing for

the individual and small group market and limits on annual deductibles for employer-sponsored

plans in the small group market.

Overall, it appears that Congress has adopted a framework that requires the consideration and

balance of several factors:

(1) Scope: The statute lays out broad categories of benefits, and requires the Secretary to

ensure that the scope of the benefits is equal to the scope of benefits provided under a

“typical employer plan”.

(2) Affordability and Choice: The statute provides for limitations on: (1) cost-sharing for

the individual and small group markets; and (2) annual deductibles for employer-

sponsored plans in the small group market ($2,000 for a plan covering a single person

and $4,000 for other plans). These provisions, together with provisions that eliminate

annual and lifetime limits and establish consumer out-of-pocket maximums, indicate that

Congress intended to ensure a level of coverage that, at a minimum, would cover most

catastrophic health events. Also, by addressing only these cost-sharing requirements,

Congress indicated its intention to not have the essential benefit package itself dictate

levels of cost-sharing and deductibles and to provide flexibility to allow for consumer

choice.

(3) Value: The statute provides that any health benefit plan provide at least a “bronze” level

of coverage reflecting an actuarial value of 60% - an important indicator of the

percentage of total health benefit expenditures paid. Additionally, the MLR rebate

requires 80% of premium dollar expenditures to be devoted to clinical services and

quality improvement.

The balance of these three factors is the prism by which the IOM should frame its

recommendations to the Secretary on the criteria and methods for determining and updating the

essential health benefits package. Our testimony is designed to discuss the critical issues through

this framework.

3

III. Critical Issues that the Committee Should Consider

We believe that the IOM should address the following issues in its recommendations to the

Secretary.

A. Determining Essential Health Benefits

The essential health benefits should be based on credible and appropriate scientific evidence.

This will best ensure that consumers receive appropriate items or services that improve their

health or health status. Ensuring that individuals receive treatments that are safe and effective

will become increasingly important as the introduction of new and expensive technologies and

treatments accelerates.

In designing a health benefits package in the commercial market, an employer or health plan

determines which benefits or the level of benefits will be offered to its members, the degree to

which members will be expected to share the costs of such benefits, and how a member can

access medical care through the health plan. Through this process, an employer or plan defines

categories of services that will be covered and any exclusions or limitations that will apply, sets

requirements for deductibles or co-payments, and defines where services may be obtained (i.e.,

in-network or out-of-network) and the level at which those services will be covered by the plan.

Benefit designs evolve as customer and employer needs change.

The ten general categories listed in the legislation are consistent with the categories of items or

services that are included in the typical benefit packages designed by employers and health plans

in the current marketplace. Thus, we believe that Congress has already specified an appropriate

set of “essential” items or services that should be included in the essential health benefits

package, and there should be no further defining of specific service elements of the benefit

package, such as the number and frequency of services that should be covered. Other programs,

such as the Federal Employee Health Benefits Program and the Massachusetts Exchange,

generally use a consistent model in which the benefit package only specifies general categories

of items or services and does not indicate number and frequency of services that should be

covered.

4

These benefits should be periodically reviewed to evaluate the appropriateness of adding or

modifying benefits based on new information/breakthroughs that is supported by evidence and

demonstrate increased value, and remove benefits that are no longer supported by evidence. The

frequency of reviews should be balanced with the time and resources that will need to be spent

on updating codes, modifying payer contracts, and performing other administrative tasks that

would be required if benefit packages are modified. Both the process for identifying benefits to

be included in the essential benefit package and the process for updating the package should be

transparent.

B. Congress has established a framework that reflects a balance between several factors --

comprehensive benefits, affordability, and choice.

As previously stated, ensuring that consumers have access to comprehensive services, that

consumers have a range of coverage choices, and that care is affordable are all key goals of

ACA. To ensure that each of these goals can be achieved, they need to be “balanced”; in other

words, the “richness” of the benefit package needs to weighed against keeping care affordable

and giving consumers a choice of benefit designs that meet their individual needs or desires.

The statute sets out several specific criteria for benefit design. Employers and health plans apply

the same practices when offering benefits in existing markets. They include establishing:

• Actuarial value and more specific cost sharing limits for small businesses;

• Consumer out-of-pocket maximums;

• Dollar restrictions on annual and lifetime limits;

• Policies for accessing out-of-network emergency care; and

• Rules to prevent potential discriminatory practices.

The design of the benefits package should not have the effect of forcing individuals and small

employers to purchase a richer scope of benefits than is currently available today. The

imposition of a richer benefits package will have the effect of raising small group employers’

premiums with less flexibility to manage those costs through higher cost-sharing. This has the

effect of requiring the small group employer to “buy up” coverage. Any requirement that small

employers “buy-up” to essential benefits packages that are too costly may have the undesired

effect of pricing these employers out of the marketplace. Likewise, some individuals

5

(particularly younger individuals) are likely to see premium increases as a result of the

compressed age rating bands, causing them to be even more sensitive to requirements that they

purchase coverage that is more costly than currently available coverage.

Broadening the scope of the essential health benefit package could have the unintended

consequence of making products unaffordable and thereby limit access and consumer choice.

For example, expanding the package further would prevent employers or plans from offering an

individual a more limited coverage option which is less expensive. Given the restrictions on

cost-sharing and lifetime and annual benefit limits, there is an even greater need for carefully

considering how comprehensive the benefit package can be to ensure that the benefits are

affordable. As noted, Congress recognized this by stating explicitly that consumers have the

right to purchase a benefits package with coverage that exceeds the requirements set forth in

Section 1302, and in so doing made clear that it did not intend for the essential health benefits

package to include all possible benefits or to limit choices for consumers.

In assessing some of these issues, it is important to keep in mind that there are differences today

in premiums and cost-sharing (deductibles and coinsurance) between the typical small employer

plan and large employer plan. A typical small group employer may see the same or only slightly

lower premiums with higher cost-sharing amounts to the employee as compared to large group.

In the most recent AHIP survey of the small group market, it was found that in 2008, premiums

were slightly lower than those reported in the 2008 Kaiser Family Foundation (KFF) survey that

mostly represents larger employers. Premiums in the KFF survey for all firms with three or

more employees averaged $392 per month ($4,704 annually) for single coverage, and $1,057 per

month ($12,684 per year) for family coverage in 2008. However, employee cost-sharing tends to

be higher among small group plans than in larger group plans. For example, the average annual

deductible for preferred provider organization (PPO) plans reported by the KFF survey of large

employers in 2008 was $413, while the average deductible for single coverage in the small group

market (50 or fewer employees) in AHIP’s 2008 survey was $1,059.1

Defining a “typical employer plan” accurately by market segment is vital for maintaining

balance in terms of affordability and choices and ultimately, ensuring the viability for small

1 http://www.ahipresearch.org/pdfs/smallgroupsurvey.pdf

6

businesses to be able to continue offering coverage, for individuals to continue to purchase

coverage, and for states to finance coverage under the Medicaid program.

Other benefit design models support the approach of allowing employers and plans to have the

flexibility to innovate and promote consumer choice. In the state of Massachusetts, for example,

standards for minimal creditable coverage using broad categories of coverage and actuarial

values have been defined. The categories of coverage include items such as ambulatory patient

services, diagnostic imaging and screening procedures, emergency services, hospitalization,

maternity and newborn care, medical/surgical care including preventive and primary care, mental

health and substance abuse services, prescription drugs, radiation therapy and chemotherapy.

The Massachusetts regulations allow for health benefit plans to impose different benefit levels

for network versus non-network providers. Plans also may vary levels of co-payments,

deductibles and coinsurance within each benefit category. Finally, the state has recognized the

importance in utilizing value-based tools to facilitate the delivery of high quality, affordable

care. The IOM, in its recommendations, should allow for a similar level of flexibility to provide

consumer choice and market competition.

Moreover, there should be sufficient flexibility to allow health plans to continue to use critical

tools that improve quality and promote greater value and affordability. Through their efforts to

promote innovation and improvements to the delivery system, health plans have developed these

tools and created key infrastructures to accelerate, and successfully achieve, meaningful change

in the system. The value of these various health plan tools is supported by recent research which

suggests that plans can impact quality of care through disease management, provider education

efforts, patient education efforts, the development of reminder systems, and the use of financial

incentives and other activities.2

Congress, the Administration, and health researchers and experts also have recognized the

importance and value of these tools. For example:

• Under the ACA, in order to be certified as a qualified health plan, a plan must implement

a quality improvement strategy, which is generally defined under Section 1311(g) as a

payment structure that provides increased reimbursement or other incentives for

improved outcomes through the implementation of: wellness and health promotion

2 Laurence C. Baker and David S.P. Hopkins, International Journal for Quality in Health Care, “The Contribution of health plans and provider organizations to variations in measured plan quality,” (March 18, 2010).

7

activities; activities to improve patient safety and reduce medical errors through

evidence-based medicine; the appropriate use of best clinical practices and health

information technology; activities that prevent hospital readmissions; quality reporting;

case and disease management; care coordination; and medication and care compliance

initiatives.

• The Administration recently issued a Request for Information (RFI) soliciting

information on specific examples and best practices of value-based insurance design

(VBID) for recommended preventive services, as well as data used to support and inform

VBID benefit design, measurement, and evaluation in the context of recommended

preventive services. In the RFI, the Administration recognized the important role that

VBID can play in promoting the use of appropriate preventive services.

• Several articles recently have been published on the value of VBID to improve health

care quality and efficiency by reducing cost sharing for services that have strong

evidence of clinical benefit and the potential value of expanding the use of VBID.3

C. The process for determining coverage or medical necessity is not part of the process for

defining essential health benefits.

We strongly urge the IOM and the Secretary to not consider processes for determining coverage

and medical necessity in the context of designing an essential health benefit package. The

process for designing benefits and the process for making coverage decisions are very distinct

and should not be conflated.

Coverage determinations are made by a payer as a specific individual accesses care in the

system. Under this process, a payer will make a determination that it is appropriate for a

particular service or intervention to be covered for a particular individual if it is “medically

necessary.”

The medical necessity process is critical for ensuring, among other things, that:

• Individuals receive care that is effective (supported by scientific literature that suggests

the treatment will result in a benefit to the patient);

3 A. M. Fendrick, “Applying Value-Based Insurance Design to Low-Value Health Services,” Health Affairs, 29, no. 11 (2010): 2017-2021; J. Robinson, “Applying Value-Based Insurance Design to High-Cost Health Services,” Health Affairs, 29, no. 11 (2010): 2009-2016.

8

• Individuals receive care that is provided or ordered by an appropriately licensed health

care practitioner;

• Care is appropriate for the individual (likely to be effective for this particular patient,

given that patient’s clinical indications); and

• Resources are not expended on care that is unnecessary or even harmful to patients.4

If individuals disagree with a coverage determination, they have access to internal and external

appeals and grievances procedures. Health plans fully support a fair and timely process for

consumers to appeal benefit denials through external review administered by independent third-

party review organizations. Our community also believes that patients should be involved in any

decision-making process for care received to ensure they fully understand the benefits and risks

associated with certain services.

Conflating the process for designing benefits and the process for making coverage decisions will

undermine payers’ abilities to ensure both affordability and that patients receive the right care at

the right time and reduce the potential for harm. It also will result in a one-size-fits-all approach

to care that fails to recognize the unique needs and circumstances of particular individuals.

D. Including State Mandates in the Essential Health Benefits Package May Have the

Unintended Consequence of Reducing Consumer Choice and Affordability.

We do not believe that mandates should be considered as part of the essential health benefits

package. Currently, there exist more than 2,000 state mandates. It would be impossible to

include this large number of existing mandates in a national essential benefit package while at

the same time providing affordable access to care for consumers. The Secretary would be faced

with the herculean task of trying to make judgments on the relative importance of different

conditions.

Even if the number of mandates based on categories of items or services included in essential

health benefits could be narrowed, mandates vary widely across states in terms of their scope and

application. This variation makes the process for determining which particular mandates are

appropriate for inclusion in the benefits package virtually impossible.

4 The current process for assessing medical necessity has been operationally tested and generally accepted even in

public programs, such as Medicare. According to the Medicare Benefit Policy Manual, “items and services which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member are not covered.” Medicare coverage determination policies also state that certain services may only be covered for patients with specific diagnoses as supported by the available medical evidence.

9

More critical, the inclusion of mandates in the essential health benefits package is likely to have

a significant impact on access to affordable coverage and limiting consumer choice. According

to a 2008 study, mandates have a direct impact on premium costs and increase the cost of basic

health coverage from 20% to 50% depending on the specific state and/or specific mandated

benefit.5

States have recognized the importance of evaluating benefit mandates based on both quality and

cost criteria to promote consumer choice, affordability and improved outcomes. California, for

example, established in 2002 the California Health Benefit Review Program. Under this

program, the University of California’s Office of the President supports a task force that assesses

legislation proposing to mandate a benefit or service, and prepares independent analyses of the

medical, financial, and public health impacts of proposed health insurance benefit mandates and

repeals. Among other things, each report summarizes sound scientific evidence relevant to the

proposed mandate.

Finally, the statutory language suggests that Congress never intended that all benefits deemed

necessary by the states should be included in the essential health benefits package. The statute

sets out several specific elements and limitations that the Secretary must include or consider

when defining the essential health benefits, including specific categories of services, the scope of

the benefits, and non-discrimination factors. It does not, however, explicitly require that the

Secretary evaluate state mandates for inclusion into the benefit package. Moreover, Section

1311(d)(3)(B) provides that a state may require that a qualified health plan offer benefits beyond

the essential health benefits if that state assumes associated costs that individuals may be subject

to.

IV. Conclusion

The Secretary’s task under the essential health benefits provision is much more complicated than

merely setting a list of benefits. The provision also links coverage of essential health benefits to

the creation of a benefit package which is subject to specific cost sharing requirements and the

creation of different benefit plan tiers defined by “actuarial value.” This makes the essential

benefits package provision a key component of the overall effort to make affordable high quality,

5 Health Insurance Mandates in the States 2008, Council for Affordable Health Insurance (CAHI), Victoria Craig Bunce, Director of Research and Policy, and JP Wieske, Director of State Affairs, 2008.

10

comprehensive, major medical coverage available to all Americans, including individuals and

small businesses.

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The NEW ENGLAND JOURNAL of MEDICINE

10.1056/nejmp1101240 nejm.org 1

controlled Senate. Although Re-publicans’ best chance to overturn the law won’t come until 2013 — and then only if they win a major-ity in both Congressional houses and the presidency in 2012 — they may meanwhile pursue tar-geted repeal of controversial pro-visions.

No provision is currently more beleaguered than the individual mandate to obtain health insur-ance or pay a penalty. Many ana-lysts view this mandate as crucial to ensuring that healthier people join state-based insurance ex-changes: since the law prohibits insurers from charging higher premiums to or turning away

people with preexisting condi-tions, exchanges would other-wise attract disproportionately sicker, costlier enrollees. That adverse selection would drive up premium costs and threaten ex-changes’ stability.

Reformers had hoped the man-date would also confer political advantages. Some Republicans, including former Massachusetts governor Mitt Romney, previously supported the policy. In a 2006 opinion piece, Romney defended Massachusetts’ decision to im-pose penalties on people who didn’t purchase insurance as a “personal responsibility principle. Some of my libertarian friends

balk at what looks like an indi-vidual mandate,” he wrote. “But remember, someone has to pay for the health care that must, by law, be provided: either the in-dividual pays or the taxpayers pay. A free ride on government is not libertarian.”1 The Massachu-setts mandate has in fact encour-aged healthy people to obtain coverage.2

But Massachusetts proved to be only an oasis of bipartisan-ship. Among Republicans in Washington, pro-mandate argu-ments about personal responsi-bility gave way to concerns over individual liberty and the political priority of handing the Obama administration a defeat.

The mandate now confronts a legal and political backlash. Flori-da’s Roger Vinson recently became the second federal judge to deem it unconstitutional, and the issue

Under Siege — The Individual Mandate for Health Insurance and Its AlternativesJonathan Oberlander, Ph.D.

The battle over the Patient Protection and Af-fordable Care Act (ACA) rages on: in January,

House Republicans passed legislation repealing the ACA, but the measure failed to clear the Democratic-

The New England Journal of Medicine Downloaded from nejm.org by MARK GORMAN on March 3, 2011. For personal use only. No other uses without permission.

From the NEJM Archive. Copyright (c) 2010 Massachusetts Medical Society. All rights reserved.

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10.1056/nejmp1101240 nejm.org2

appears headed for the Supreme Court. Some state legislatures are seeking to block the mandate’s implementation. A few Democrat-ic senators, including Claire Mc-Caskill (MO) and Ben Nelson (NE), who are up for reelection in 2012, say they’d like to find alterna-tives to the mandate. And while conservatives rail against the mandate and politically vulnera-ble moderates run away from it, many liberals support it reluctant-ly because of concerns that insur-ance remains unaffordable and that the requirement is a gift to the insurance industry.

Increasingly, Democrats may wonder whether the provision is an albatross that should be jetti-soned to save reform. Inasmuch as the health care reform debate is defined by the mandate, Demo-crats have a problem. The policy is highly unpopular — 76% of Americans view it unfavorably3 — and makes reform seem puni-tive. Although Democrats can highlight other consumer-friendly provisions that target health in-surers, in the mandate fight they are allied with the insurance in-dustry. Furthermore, President Barack Obama could in 2012 be in the uncomfortable position of defending a mandate that he ar-gued against in the 2008 Demo-cratic primary. (The mandate’s prominence also complicates Romney’s potential bid for the Republican presidential nomina-tion.)

Still, it’s not clear how much Democrats would gain politically by dumping the mandate. Many Republicans also oppose the ACA’s requirements that employers offer coverage or pay a penalty, the Medicaid expansion, increased government regulatory authority over the insurance industry, re-ductions in projected Medicare

savings, and the cost of the sub-sidies for the uninsured to pur-chase insurance. Opponents of health care reform are attacking the mandate because it’s the most politically vulnerable part of the law. Were it to fall, they would not endorse the ACA, but move on to attack other controversial provisions.

If the mandate cannot be sus-tained, alternatives exist. The country could adopt single-payer, tax-financed national health in-surance as a universal entitle-ment. There would be no need for penalties and no worries about adverse selection, since the gov-ernment would operate one risk pool. Enrollment would be much easier to administer and universal coverage would be assured. Yet single payer would require com-pulsory participation, new taxes, and the political transformation necessary to displace private in-surance. It remains infeasible.

Staying within the reform’s ex-isting boundaries, one alternative is to limit enrollment in the ex-changes to a fixed period each year and impose premium penal-ties for eligible people who choose to wait and buy coverage later — and to make the penalty apply not just the first time they pur-chase insurance, but across their lifetimes.4 This model is employed by the Medicare Part D program for prescription-drug coverage, which the Bush administration and many Congressional Repub-licans supported.

However, to induce healthy un-insured people to sign up, the late penalty might have to be substan-tial, in which case this arrange-ment would be operating similar-ly to the mandate. As the health care economist Len Nichols points out, if we don’t have the political will to impose a strong penalty

in conjunction with an individual mandate, we probably wouldn’t have the will to impose one as part of a fixed enrollment system. Furthermore, it’s not clear how a lifetime late penalty would work when people’s insurance coverage could shift over time among pri-vate plans in the exchange, pri-vate plans outside the exchange, Medicaid, employer-based cover-age, and eventually, Medicare.

Another alternative would be to automatically enroll people in health insurance plans, permit-ting them to opt out. Auto-enroll-ment would occur primarily at the workplace but could also happen at state offices such as the Divi-sion of Motor Vehicles. This mod-el could have bipartisan appeal: a 2009 health care reform bill co-sponsored by Republican Senators Richard Burr (NC) and Tom Co-burn (OK) and Republican Con-gressmen Paul Ryan (WI) and Devin Nunes (CA) relied on auto-enrollment.5 Auto-enrollment can be combined with a premium penalty for people who opt out but later decide to purchase cover-age. Medicare Part B, which pays for physicians’ services, works this way.

Once again, though, the late-enrollment penalty might have to be substantial for auto-enrollment to effectively induce healthier peo-ple to pay for insurance coverage. Inertia alone may not be a suffi-ciently strong force to get younger, healthier workers to stay insured, given high and rising insurance premiums. Auto-enrollment may also not work as well outside the workplace or for workers’ depen-dents.4

Substituting either of these al-ternatives for the mandate would, as economist Jonathan Gruber ar-gues, attenuate the ACA’s bene-fits, resulting in an increased

The Individual Mandate and Its Alternatives



10.1056/nejmp1101240 nejm.org

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3

number of uninsured Americans and higher premiums in the nongroup insurance market (as healthier people decline cover-age).4 Implementing the rest of the ACA without any substitute policy would similarly reduce cov-erage gains and destabilize insur-ance pools. The substantive case for the mandate is still strong, even if its political and legal foundations are shaken.

It’s also unclear whether past Republican support for alternative policies would be sustained or, as with the individual mandate, evap-orate in the heat of the political spotlight. Insofar as Republicans continue to support alternatives, they will be interested in them as part of a broader conservative health care reform package, not a means of bolstering the ACA. Republicans’ good chances of winning control of the Senate in 2012 further reduce their incen-tives to cooperate now on an alter-native plan.

What reformers may need even more than a policy alterna-tive to the mandate is an alter-native rationale, especially since any provision meant to ensure broad participation in insurance pools must include financial penalties. The mandate’s de-fenders could again invoke the rhetoric of personal responsibil-ity. Or they could emphasize that the mandate makes possi-ble the insurance reforms that guarantee the availability of cov-erage to sick people.3 Alterna-tively, reformers could appeal to the mandate’s communitarian foundations, arguing that there are some public programs — such as Social Security and Medicare — that produce in-valuable social benefits and that succeed because everyone par-ticipates in them. Ultimately, the furor over the mandate un-derscores the reality that soli-darity remains elusive in U.S. health policy.

Disclosure forms provided by the author are available with the full text of this arti-cle at NEJM.org.

From the University of North Carolina, Cha-pel Hill.


1. Romney M. Health care for everyone? We’ve found a way. Wall Street Journal. April 11, 2006.2. Chandra A, Gruber J, McKnight R. The im-portance of the individual mandate — evi-dence from Massachusetts. N Engl J Med 2011;364:293-5.3. Kaiser Family Foundation/Harvard School of Public Health. The public’s health care agenda for the 112th Congress. January 2011. (http://www.kff.org/kaiserpolls/upload/ 8134-F.pdf.)4. Gruber J. Health care reform without the individual mandate. Washington, DC: Center for American Progress, February 9, 2011. (http://www.americanprogress.org/issues/ 2011/02/gruber_mandate.html.)5. Coburn T. Individual auto-enrollment: an alternative to an individual mandate. (http://coburn.senate.gov/public/index.cfm?a=Files .Serve&File_id=e87f06bf-d429-4eac-8e7e-ade046b8b882.)Copyright © 2011 Massachusetts Medical Society.

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to enact one provision of the law that requires uninsured individ-uals who can afford health insur-ance to purchase it. Since that provision is the cornerstone of the entire edifice, Vinson opined, the rest of the law also must fall.

The states have broad author-ity to adopt laws that protect the public health and safety. But the powers of Congress are limited to those delegated by the Consti-tution. The federal government argued that the minimum cover-age requirement is supported by three delegated powers — the powers to tax, to regulate inter-state commerce, and to adopt laws that are “necessary and

proper” for effectuating other powers. Congress could have sim-ply imposed a tax on individuals who choose to be uninsured, but Vinson had earlier ruled that the exaction imposed on those who do not purchase insurance is a penalty, not a tax, and is not jus-tified under the taxation power.2

The requirement must there-fore stand or fall, in Vinson’s opinion, as an exercise of the commerce power (supplemented by the necessary and proper clause, which Vinson held adds nothing to the commerce power). Vinson concluded that the law must fall because Congress can regulate only “economic activity.” By re-

quiring individuals to purchase a product from a private seller, the law regulates “inactivity,” not activity. For Vinson, the crux boils down to a sound bite: If Con-gress can make you buy health insurance, it can make you buy broccoli.

This sound bite has played very well. One obvious problem for supporters of the ACA is that it is not easy to come up with an equally engaging sound bite jus-tifying the law.

In perhaps the earliest decision interpreting the commerce power, in 1824, Chief Justice John Mar-shall stated, “This power, like all others vested in Congress, is complete in itself, may be exer-cised to its utmost extent, and acknowledges no limitations, oth-er than are prescribed in the con-stitution. . . . the sovereignty of Congress, though limited to

Can Congress Regulate “Inactivity” (and Make Americans Buy Health Insurance)?Timothy Stoltzfus Jost, J.D.

On January 31, 2011, federal judge Roger Vin-son declared the entire Patient Protection and

Affordable Care Act (ACA) unconstitutional.1 Judge Vinson concluded that Congress had no authority


Copyright © 2011 Massachusetts Medical Society. All rights reserved.

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10.1056/nejmp1101400 nejm.orge17(2)

specified objects, is plenary as to those objects.”3

Since that time, however, op-ponents of federal authority have sought to cabin the commerce power. At various times during the late 19th and early 20th cen-turies, the Supreme Court attempt-ed to limit the commerce power through bright-line rules, claim-ing that Congress can regulate only trade, not manufacturing or production, or that it can regulate only those activities with direct, not indirect, effects on commerce. In a 1942 decision holding that Congress could regulate wheat grown for home consumption, however, the Court swept these constraints aside, holding that Congress could regulate anything that had a “substantial economic effect on interstate commerce.”4

In narrowly divided decisions in 1995 and 2000, then Chief Jus-tice William Rehnquist tried again to limit the commerce power, holding that it did not authorize Congress to regulate noneconom-ic, local, criminal activity. In 2005, however, with Rehnquist in dis-sent, the Court restated a broad reading of the commerce power, holding that Congress could pro-hibit the growing of a handful of marijuana plants for personal medical use. The Court clarified that the Rehnquist cases only limited the use of the commerce power for noneconomic matters.

Judge Vinson bridles at the proposition that the commerce power truly “acknowledges no limitations,” and he imposes a new limit of his own: Congress can regulate only “economic ac-tivity.” It is true that previous cases have mentioned “economic activity,” but the emphasis has always been on “economic” rath-er than “activity.” Vinson, however,

asks a fair question: If Congress can make you buy health insur-ance, are there any limits to its power? There are.

First, the Commerce Clause it-self imposes limits. It authorizes Congress only to regulate “com-merce.” It does not empower Congress to regulate activity — or inactivity — that is wholly dis-connected from the economy. Congress has concluded that the minimum coverage requirement is necessary to correct manifest failures in health insurance mar-kets. This is economic. It is hard to imagine a “broccoli mandate” as essential to the regulation of a commercial market.

Second, Congress is limited by other Constitutional restrictions. A law requiring individuals to eat certain foods or to accept spe-cific medical treatments would, absent compelling justification, be struck down as an unconsti-tutional restraint on fundamen-tal rights to personal liberty and bodily integrity. The Court has long distinguished, however, be-tween fundamental rights and economic interests, and as Judge Vinson recognized in an earlier ruling, there is no fundamental right to not purchase health in-surance.

Third, Congress must act ra-tionally. But courts may deter-mine only whether Congress act-ed rationally — not whether the court itself could have done bet-ter in Congress’s position. As the Supreme Court stated in its most recent Commerce Clause opinion, “In assessing the scope of Con-gress’ authority under the Com-merce Clause, we stress that the task before us is a modest one. We need not determine whether respondents’ activities . . . sub-stantially affect interstate com-

merce in fact, but only whether a ‘rational basis’ exists for so concluding.”5

Congress in fact set out a ra-tional justification for the min-imum coverage requirement grounded in the particular char-acteristics of health insurance markets. Special characteristics of health insurance markets — the universal use of health care, its vital importance for life, le-gal requirements that care be provided in emergencies regard-less of ability to pay, the extraor-dinary costs health care can ran-domly impose, the problem of cost shifting that insurance ad-dresses, the need for healthy peo-ple to participate in health insur-ance markets to eliminate medical underwriting — make it unlike other products. Vinson offered no deference to the reasoning of Congress, instead substituting his own categorical rejection of the requirement. He noted that some of these characteristics can be found in other markets, specifi-cally the market for burial insur-ance. It is, however, difficult to conceive of another situation in which the argument for a man-dated purchase is as clear as it is with health insurance. There is no product other than health care, for example, that private vendors must provide regardless of wheth-er customers can pay for it. The question is not whether any other mandated purchase requirement would be rational but rather whether this one is.

Fourth, and most important, Congress itself must exercise its power responsibly. Chief Justice Marshall recognized that “The wisdom and the discretion of Congress, their identity with the people, and the influence which their constituents possess at elec-

Can Congress Make Americans Buy Health Insurance?



10.1056/nejmp1101400 nejm.org

PERSPECTIVE

e17(3)

tions, are . . . the sole restraints on which they have relied, to se-cure them from its abuse.”3

The states possess plenary po-lice power and can “regulate in-activity.” In fact, they require that their citizens be vaccinated, purchase auto liability insurance, and even, in Massachusetts, pur-chase health insurance. Such re-quirements have been routinely upheld against constitutional at-tack. But no state will ever re-quire its citizens to buy broccoli, and neither would Congress.

Many Americans believe that the federal government has too much power. They desire bright-

line rules to restrain it. Judge Vinson believes that the federal government is far too powerful and that he has discovered a limiting principle. But the line he draws is not grounded in, and ignores the reasoning of, governing Supreme Court prece-dent. Courts, like doctors, must make judgments on a case-by-case basis. In law, as in medical diagnosis and treatment, simple rules are often misleading and inappropriate. That does not mean that there are no rules. It simply means that the govern-ing rules are complicated and contextual.

Disclosure forms provided by the author are available with the full text of this arti-cle at NEJM.org.

From Washington and Lee University School of Law, Lexington, VA.


1. Jost TM. Analyzing Judge Vinson’s opin-ion invalidating the ACA. Health Affairs Blog. February 1, 2011. (http://healthaffairs.org/blog/2011/02/01/analyzing-judge-vinsons-opinion-invalidating-the-aca/#more-8960.)2. Hall MA. Clearing out the underbrush in constitutional challenges to health insurance reform. N Engl J Med 2011. DOI: 10.1056/NEJMp1101252.3. Gibbons v. Ogden, 22 U.S. 1, 196-197 (1824).4. Wickard v. Filburn, 317 U.S. 111, 125 (1942).5. Gonzales v. Raich, 545 U.S. 1, 22 (2005).Copyright © 2011 Massachusetts Medical Society.

Can Congress Make Americans Buy Health Insurance?



Perspective

Clearing Out the Underbrush in Constitutional Challenges to Health Insurance ReformMark A. Hall, J.D.

N Engl J Med 2011; 364:793-795 March 3, 2011

This week's decision by federal district Judge Roger Vinson in Pensacola, Florida, declaring the Affordable Care Act (ACA)

unconstitutional is far and away the most prominent decision issued to date in this ongoing litigation. Because this lawsuit

involves about half the states, it has received the most attention. But it is only one of about two dozen legal challenges across the

country. Two other federal judges (in Detroit and in Lynchburg, Virginia) have upheld the law, and one other (in Richmond,

Virginia) sided with Judge Vinson on the unconstitutionality of the individual mandate to obtain health insurance.1 Of the

remaining suits, more than half have been dismissed on procedural grounds, and the rest await an initial decision.

The four decisions on the merits have split two to two, in line with the political party of the President who appointed each judge.

As expected, Vinson agreed with the Richmond court's reasoning that being uninsured does not entail economic activity and that

therefore Congress cannot regulate this passive condition under the Constitution's Commerce Clause. Both judges rejected the

government's reasoning, which was accepted by the Detroit and Lynchburg courts, that being uninsured is an active decision that

affects how people pay for their health care. Vinson objected that this reasoning would also apply to the non-purchase of many

other goods or services, and so it fails to provide the limiting principle on federal power envisioned by the Constitution's

“Founding Fathers.” Alluding to the significance of the Boston Tea Party in modern political debates, the judge explained that it “is

difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India

Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the

power to force people to buy tea in the first place.”

Despite the Florida and Richmond courts' agreement on the basic law, they differed dramatically over the appropriate remedy for

the provision they deemed unconstitutional. Rather than severing and striking only the mandate, Vinson declared that Congress

would not have enacted the ACA without the mandate, and thus the entire Act is void. Although he did not order an immediate

halt to implementation work, he stated an expectation that the government “will adhere to the law as declared by the court.” Since

several courts have issued divergent decisions, further analysis will be required to determine the import of this exhortation, but it

is quite possible that the appellate court will suspend the legal force of Vinson's decision until an appeal can be decided.

Vinson based his “non-severability” conclusion on extensive discussion of the individual mandate's being “indisputably necessary

to the Act's insurance market reforms, which are, in turn, indisputably necessary to . . . what Congress was ultimately seeking to

accomplish.” This reasoning might appear to concede the government's position that the mandate is constitutionally necessary to

achieving the aims of vast portions of the ACA that admittedly are valid. Nevertheless, the judge ruled that the mandate does not

fall under Congress's express authority “to make all laws which shall be necessary and proper for carrying into execution” its

other powers, reasoning that this clause “is not an independent source of federal power” and so cannot expand Congressional

powers beyond what the Commerce Clause itself allows. As with the Richmond decision, this is the point in the judge's opinion

that is most open to legal disagreement based on existing law.2

Despite this sharp division of views on the most difficult issues, there is a fair degree of commonality among all these courts'

decisions on other important issues. No court so far has accepted the government's defense that the individual mandate is, in

essence, a tax imposed on people who elect not to purchase insurance. In health policy, there is a clear distinction between the

Article

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1 Hall MA. Health care reform -- what went wrong on the way to the courthouse. N Engl J Med

2011;364:295-297

Full Text | Web of Science | Medline

2 Idem. Commerce clause challenges to health care reform. Univ Penn Law Rev (in press).

“play or pay” option that the ACA presents to employers and the “mandate” imposed on individuals. Judges so far have ruled that

this distinction has constitutional significance.

If the ACA had framed individual responsibility merely as an option — by increasing general taxes and giving a credit to those

who choose to purchase insurance — it would be on sure constitutional footing. But that is not how the Act reads. Instead,

Congress called individual coverage a “requirement” and “imposed . . . a penalty” on people who fail to comply. Vinson and

others ruled that something that Congress calls an enforcement penalty is not an income or excise tax, even if it is codified in the

tax code under “miscellaneous excise taxes,” is collected through the income tax system, and is based in part on a percentage of

income.3

In the ACA's favor, there appears to be little realistic chance that the states' principal argument in the Florida lawsuit will succeed.

The states allege that the ACA coerces them to expand Medicaid and to implement insurance reforms, thereby violating their

sovereign rights. Vinson (along with the Lynchburg court) firmly rejected these claims, noting that the ACA gives states ample

prerogative to avoid establishing an insurance exchange. And if states wish, they can even withdraw from Medicaid. Although

refusing Medicaid funds would be very expensive and politically difficult, the judge ruled that these facts do not constitute

“coercion” or “commandeering” under the Constitution. These states' rights arguments have also found very little support among

constitutional scholars.4 Thus, we can expect appellate courts to easily dispose of them.

Finally, there is no momentum for challenges based on alleged violations of any individual rights, such as those protected by the

Due Process Clause of the Fifth Amendment. The main lawsuits have not pushed these issues, so most judges have not ruled on

them. But Judge Vinson did, rejecting as “long since . . . discarded” the “substantive due process” argument that the mandate

violates economic rights and liberties. Vinson correctly explained that since the New Deal era, legislation need only have a

rational basis, unless it implicates a “very limited and narrow class of rights that have been labeled as `fundamental,'” such as

rights to marital privacy, parental autonomy, or bodily integrity. Because having insurance does not require anyone to actually

seek care, there is no basis for claiming a fundamentally protected right to be uninsured. Also, there is no judicial sympathy so far

with the strained argument that a mandated purchase is a form of government “taking” of property which requires “just

compensation.” Generally speaking, cash is not regarded as “property” for this constitutional purpose, and ordinary regulations

are not regarded as “takings.”

As is to be expected, the progress of this litigation has pruned the branches of legal argument to sharpen focus on the only really

viable issue. Lower courts have disposed of the procedural challenges and peripheral issues and have avoided the need for

messy and lengthy factual trials. They have cleanly divided only on the most contentious issue: whether mandating insurance

exceeds the power given Congress to enact measures “necessary and proper” to the regulation of interstate commerce.2,5

As one litigant said, whichever side of that issue one happens to be on, these conflicting decisions nicely “tee up” the commerce

regulation question for resolution on appeal. Thus, we await the next round of the constitutional fight, scheduled for some time

this year, to learn which set of judges the federal appellate courts believe is correct on this key issue. Briefing and arguments are

already scheduled in the Fourth and Sixth Circuits (which oversee, respectively, the Virginia and Detroit courts), and the Florida

appeal will go to the Eleventh Circuit. Three-judge appellate panels might issue their initial decisions as early as this summer, but

a second round of appeal can be sought with the full slate of judges in each of these Circuits, possibly delaying Supreme Court

consideration well into 2012 or even until 2013. Meanwhile, the work of implementing the ACA proceeds apace.



From Wake Forest University School of Law, Winston-Salem, NC.

References

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3 Jensen EM. The individual mandate and the taxing power. North KY Law Rev (in press).

4 Rosenbaum S. A “customary and necessary” program -- Medicaid and health care reform. N

Engl J Med 2010;362:1952-1955


5 Mariner WK, Annas GJ, Glantz LH. Can Congress make you buy broccoli? And why that's a

hard question. N Engl J Med 2011;364:201-203


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POINTS OF VIEW

An Economic Perspective on the Individual Mandate's Severability from the ACABradley Herring, Ph.D.

February 23, 2011 (10.1056/NEJMpv1101519)

Four U.S. district court judges have now ruled on the constitutionality of the individual mandate of the Affordable Care Act (ACA),

which requires people to obtain health insurance coverage or pay a penalty through their federal income taxes. Two of these

judges, both nominated by a Democratic president, upheld the mandate; the other two, both appointed by Republican presidents,

rejected it. Given that party-line split and the similar one in Congress on both the passage of the ACA and the recent effort to

repeal it, many observers have speculated that the mandate's constitutionality will ultimately have to be decided by the Supreme

Court and, in particular, by the moderate Justice Anthony Kennedy — which makes its fate quite uncertain.1,2 What happens if

the Supreme Court rules the individual mandate unconstitutional?

A key difference between the rulings against the mandate, one by Virginia judge Henry Hudson and the other by Florida judge

Roger Vinson, relates to its severability from the remainder of the ACA. The legislative text did not include a commonly used

severability clause specifying that the remainder of the law would hold if part of it were deemed illegal, which leaves the

severability question open to judicial interpretation. Hudson ruled that the remainder of the ACA's provisions could remain intact,

whereas Vinson ruled that the entire ACA should be overturned because the mandate is “indisputably necessary” and

“indispensable” to the overall law. And hyperbole aside, there are underlying economic connections between the mandate and

other parts of the law.

The strongest such connection is with the ACA's prohibition against private insurers' using preexisting conditions to charge higher

premiums or deny coverage. Although they are politically popular, these community-rating and guaranteed-issue provisions can

reduce the stability of private health insurance markets, if people with chronic health conditions who gain insurance are

outnumbered by healthy people dropping their coverage.3 The primary purpose of the individual mandate is to mitigate this

adverse selection (which would bring an excess of unhealthy people into the new state-based health insurance exchanges), by

providing healthy people with incentives to obtain coverage rather than wait until they're sick. One could therefore conclude that if

the individual mandate is ruled unconstitutional, then the prohibition against discrimination based on preexisting conditions will

also be stricken. That outcome is uncertain, however, since a few states have already imposed community rating and guaranteed

issue in their individual insurance markets without an accompanying mandate.

But suppose that these two provisions are deemed inseverable from one another. These reforms also have a secondary

connection to the functioning of the new state-based exchanges. The general idea behind an insurance exchange is to establish

a larger purchasing group than is currently seen in the individual and small-group markets and create a more transparent

marketplace where insurers can post competitive premiums and consumers can compare different plans — similar to the way in

which Parts C and D of Medicare now operate.4 Although the ACA provision establishing exchanges might be severed from the

individual mandate and implemented as planned, the exchanges may lose much of their appeal to consumers if the premium

quotes that people obtain from an insurer on an exchange's Web site are conditional on their subsequently meeting the insurer's

medical underwriting criteria. One can imagine how the use of analogous travel-oriented Web sites would change if the airline

and hotel prices they cited were merely nonbinding estimates.

The individual mandate also has a strong economic connection to a second group of ACA provisions. These provisions seemed

politically possible because the health care industry was willing to make concessions on prices and fees in return for the large

increase in the number of people with insurance that was expected to occur under the ACA. Hospitals will receive relatively lower

Medicare payments in the future because of productivity adjustments to the annual “market-basket” updates, and drug

manufacturers will receive relatively lower payments for Medicare beneficiaries in Part D's “doughnut hole” after granting them

Article

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3/3/2011http://www.nejm.org/doi/full/10.1056/NEJMpv1101519?viewType=Print&viewClass=Print

1 Mariner WK, Annas GJ, Glantz LH. Can Congress make you buy broccoli? And why that's a

hard question. N Engl J Med 2011;364:201-203


2 Hall MA. Health care reform -- what went wrong on the way to the courthouse. N Engl J Med

2011;364:295-297


3 Pauly MV, Herring B. Risk pooling and regulation: public policy and reality in today's

individual health insurance market. Health Aff (Millwood) 2007;26:770-779


4 Kingsdale J. Health insurance exchanges -- key link in a better-value chain. N Engl J Med

2010;362:2147-2150


5 Herring B. The effect of the availability of charity care to the uninsured on the demand for

private health insurance. J Health Econ 2005;24:225-252


50% discounts on brand-name drugs. The ACA also begins to impose an annual fee on drug manufacturers equal to $2.5 billion

in 2011, a 2.3% excise tax on medical device manufacturers in 2013, and an annual fee of $8 billion on health insurers in 2014.

The quid pro quo for the health care industry's acceptance of these provisions appeared to be the increase in sales volume that it

could expect from the expansion of coverage — though this was an implicit rather than an explicit connection. And the anticipated

reduction in the number of uninsured Americans was strongly tied to the mandate. MIT economist Jonathan Gruber estimates

that the projected decrease of 32 million in the ranks of the uninsured (from a baseline of 54 million who would be uninsured

without the law) would shrink to only 8 million without the individual mandate. A large body of research suggests that the

consumption of health care services by Americans who are currently uninsured would increase if they gained insurance.

Moreover, the reduction in the number of uninsured people would probably curtail the amount of uncompensated care that must

be provided. Indeed, a second common justification given for the individual mandate (in addition to the need to offset the effects

of the prohibition on insurers' use of preexisting conditions) is that the ability to “free ride” on the system serves as a disincentive

to purchasing insurance.5

Thus, some ACA provisions may, in a practical sense, not be severable from the individual mandate, owing to a strong economic

connection. There are weaker connections between the mandate and other ACA provisions; and still other provisions — such as

the subsidies to cover the uninsured and various payment and delivery reforms — don't seem to rely on the mandate at all.

However, provisions that were deemed not to be severable in an unconstitutionality ruling might be salvaged through other

incentives aimed at mitigating adverse selection, such as limited open-enrollment periods and late-enrollment penalties like those

currently used in Medicare Parts B and D. A Supreme Court ruling against the individual mandate would therefore probably lead

to a new round of legislative efforts.

Bradley Herring, Ph.D.

From the Johns Hopkins University Bloomberg School of Public Health, Baltimore, MD.

This article (10.1056/NEJMpv1101519) was published on February 23, 2011, at NEJM.org.


References

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Documents

KAISER HEALTH TRACKING POLL Public Opinion on Health Care Is€¦ · Roughly half of Americans (52 percent) accurately report that the ACA is still the law of the land. Meanwhile,