Prior to the election, on almost every cable channel and many newspaper opinion pieces had headlines that blared something like: ‘The Trump-infused Supreme Court will overturn the entire Affordable Care Act.’ ‘Tens of millions, no hundreds of millions of currently covered individuals who have pre-existing conditions will be denied coverage and medical bankruptcies will dramatically increase.’[i]
Even if a majority of justices find the individual mandate to be unconstitutional, no one expects the Supreme Court to overturn the entire Patient Protection and Affordable Care Act (PPACA).[ii] In 2012, the Supreme Court found the individual mandate was unconstitutional under the Commerce Clause – confirming that Congress could not mandate individuals enter into commerce. However, the individual mandate was saved when Chief Justice John Roberts opined that it was constitutional as an exercise of Congress’ power to tax - even though members of Congress specifically and repeatedly confirmed that the individual mandate was not a tax and even though the word “tax” was used hundreds of times elsewhere in the legislation but not in the individual mandate provisions themselves.[iii]
The question of severability first arose after Judge Vinson (USDC N-FL), struck down the entire law - finding the individual mandate necessary for the law to operate as intended. He concluded that where a “pillar” was removed, if the remaining provisions would not function in the way Congress intended, the entire law should be struck down. He noted that the Department of Health and Human Services (HHS) had consistently and repeatedly argued that the mandate (and other PPACA “pillars”) were core provisions and that they could not be severed. Further, Congress had specifically and intentionally removed the severability provision incorporated in the first draft of PPACA legislation. That seemed to be an explicit, clear statement of congressional intent regarding severability. On appeal, the 11th Circuit Court of Appeals agreed with Judge Vinson that the individual mandate was unconstitutional; however, it reversed on severability holding that the absence of a severability clause was insufficient to rebut the strong presumption in favor of severability.
Some forget that PPACA also mandated an expansion in Medicaid. States had a choice of the expanded Medicaid or no Medicaid at all. In the same 2012 litigation, seven Supreme Court justices did strike down this Medicaid mandate “pillar” as unconstitutional. Then five justices, again led by Chief Justice John Roberts, prevented the outright elimination of the mandated Medicaid expansion and reversal of the entire PPACA by fashioning a remedy that limited the federal government’s enforcement powers – allowing states to retain existing federal funding without expanding Medicaid coverage.
Today, five of those same justices who severed the Medicaid expansion mandate remain on the court (Roberts, Thomas, Breyer, Alito, and Kagan). They severed before and they can sever again. Yes, they can sever again.
Just as important, Congress clearly expressed its intent to retain the rest of PPACA without enforcement of the individual mandate – this was only the most recent provision to be excised or emasculated (see our October article). The PPACA residual continues to operate mostly unchanged without the tax revenue as it did in periods when the individual mandate generated revenue. So, should a majority of justices find the individual mandate unconstitutional as a tax because as it no longer raises revenue, they will likely find it severable since that is what Congress clearly intended in its most recent legislation and since, obviously, the individual mandate's "tax revenue" was never a “pillar” to begin with, never essential to PPACA operations.
Pre-Existing Condition Exclusions & Bankruptcy Prevalence
In the run up to and approval of PPACA, and continuing today, PPACA proponents wildly overstate the prevalence of individuals who would be excluded from coverage due to pre-existing conditions and individuals who suffer so-called “medical bankruptcies”.[iv]
To avoid pre-ex, individuals need only to maintain coverage – something that should be a priority for everyone. Most self-insured employer-sponsored plans had already removed or significantly curtailed pre-ex limits after HIPAA became law in 1996. Even where pre-ex continued to be applied prior to PPACA, HIPAA and state insurance law limits the application so that it only applies when there has been a 63+ day break in coverage. Just as important, pre-ex only applies to the specified condition and generally applies for a maximum of no more than one year. So, only those who would intentionally go without coverage will potentially subject themselves to pre-existing condition limitations - should PPACA be reversed, in total.
We know pre-ex is not an issue where individuals maintain coverage. When PPACA took effect in 2010, we had a three-year period (2011 - 2013), prior to the start of coverage in the public exchanges and the expansion in Medicaid, where the federal government implemented the Pre-existing Condition Insurance Program (PCIP). In 2011, HHS estimated that “129 Million People Could Be Denied Affordable Coverage” and “Up to one in five non-elderly Americans with a pre-existing condition – 25 million individuals – is uninsured.”[v] Apparently, those were ever so slight overestimates of the demand for coverage among individuals with pre-existing conditions as the PCIP only had less than 20,000 enrollees in the first few months of 2011, and enrollment never exceeded 115,000 in any month during the three-year period.[vi]
So, the pre-ex challenge was wildly overstated. Same for so-called “medical bankruptcies”.
A 2005 report studying 2001 bankruptcies was used to justify the claim that over half of all personal bankruptcies were prompted primarily by medical causes. That study asserted that a personal bankruptcy was deemed to have a medical cause for any of the following reasons – if:
So, the high percentage of “medical bankruptcies” in that study resulted from using a gerrymandered definition. In fact, there is no widespread “epidemic” of “medical bankruptcies.”[vii]
For example, a second study, in 2007, classified uncontrolled gambling, drug or alcohol addiction, and the birth or adoption of a child as “a medical cause.” The study’s central findings were that 54.5% of all bankruptcies have a “medical cause” and that 46.2% of all bankruptcies have a “major medical cause.” Even if this were true, bankruptcy law already provides adequate safeguards for the special problems posed by medical bankruptcies.
However, the authors failed to note that most of the debts discharged in bankruptcy were NOT due to medical expenses - the average discharged indebtedness for a medical bankruptcy was $44,622. Non-medical bankruptcies had average indebtedness of $37,650. Medical bankruptcies discharged an average of $4,988 of medical debts. Mindful that averages can be deceiving, ask yourself - would all of these individuals have avoided bankruptcy if they only had $39,634 ($44,622 – $4,988) of indebtedness with no medical debt? Conversely, how many would have declared bankruptcy if they only had $4,988 of dischargeable medical debts and no other debts?
Numerous studies have found the number of bankruptcies caused by medical debt to be dramatically lower than those gerrymandered efforts used to justify PPACA. Recently, the Executive Office of the United States Trustee studied 5,203 bankruptcy filers (about three times the number examined by Himmelstein and Warren). It found that 54% of filers listed no medical debt at all and that medical debt accounted for about 5.5% of the total general unsecured debt.
“Pre-ex” and “medical bankruptcies” are likely to remain in the headlines after the election (and after the Supreme Court issues its decision[viii] – especially now that 20+MM Americans are receiving various forms of unemployment compensation[ix].
[i] CNBC, The Supreme Court May Gut the Affordable Care Act, What’s Next. 9/25/20, Accessed 11/29/20 at: https://www.cnbc.com/2020/09/25/the-supreme-court-may-gut-the-affordable-care-act-whats-next.html See also: A. Shah, M. Gunia, E. Schneider, G. Aboulafia, S. Collins, Millions of Young Adults with COVID Infections Could Be Denied Health Coverage if the Affordable Care Act Is Overturned, 10/26/20, Accessed 11/29/20 at: https://www.commonwealthfund.org/blog/2020/millions-young-adults-covid-infections-could-be-denied-health-coverage-if-affordable-care See also: J. Biden, “There’s 100 million people that have pre-existing conditions.”, Presidential Debate, 9/29/20. Kaiser Family Foundation, Biden’s in the Ballpark on How Many People Have Preexisting Conditions, Accessed 11/29/20 at: https://khn.org/news/bidens-in-the-ballpark-on-how-many-people-have-preexisting-conditions/ See also: D. Himmelstein, S. Woolhandler, C. Fauke, New medical bankruptcy study: Two-thirds of filers cite illness and medical bills as contributors to financial ruin. Researchers found no evidence that the ACA reduced the proportion of bankruptcies driven by medical problems; insurance offered little protection to middle-class Americans. 2/7/19, Accessed 11/29/20 at: http://pnhp.org/news/new-medical-bankruptcy-study-two-thirds-of-filers-cite-illness-and-medical-bills-as-contributors-to-financial-ruin/ See also: D. Himmelstein, E. Warren, D. Thorne, S. Woolhandler, Illness And Injury As Contributors To Bankruptcy, Health Affairs, 2005, Accessed 11/29/20 at: http://content.healthaffairs.org/content/early/2005/02/02/hlthaff.w5.63.full.pdf+html
[ii] Patient Protection and Affordable Care Act of 2010, sometimes referred to as the Affordable Care Act, sometimes as Obamacare, Pub. L. 111-148, Signed by President Obama, 3/23/10.
[iii] National Federation of Independent Businesses v. Sebelius, 567 U.S. 519, 6/28/12.
[iv] CNBC, etc., Note 1, supra.
[v] Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans, 11/1/11, Accessed 11/30/20 at: https://aspe.hhs.gov/pdf-report/risk-pre-existing-conditions-could-affect-1-2-americans
[vi] CMS, Accessed 11/29/20 at: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/pcip-enrollment
[vii] Todd J. Zywicki, July 17, 2007 testimony, before the US House of Representatives, Committee on the Judiciary – Hearing on “Working Families in Financial Crisis: Medical Debt and Bankruptcy”, 7/17/07, Accessed 11/29/20 at: http://mercatus.org/publication/written-testimony-medical-debt-and-bankruptcy ; See also: Ning Zhu, “Household Consumption and Personal Bankruptcy”, 3/21/08, Accessed 11/29/20 at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=971134