• Trustees report that health reform will extend Medicare solvency by 12 years

• Nevada issues response to federal government's motion to dismiss health care lawsuit
• Missouri voters become the first to reject key federal health reform provisions
• State Health Care Reform Update—Week of August 2

• EBRI ups estimates of dependent coverage under health reform
• Most seniors unaware of key provisions of Affordable Care Act
• Federal government does not have right to implement universal health care -- attorney

Trustees report that health reform will extend Medicare solvency by 12 years

The financial outlook for both major trust funds supporting Medicare has substantially improved as a result of the Patient Protection and Affordable Care Act (P.L. 111-148), the Medicare Board of Trustees announced in their annual report. The Trustees reported that Medicare’s Part A Hospital Insurance (HI) Trust Fund is now projected to remain solvent until 2029, 12 years longer than reported last year. In addition, the HI long-range actuarial deficit has been reduced to 0.66% of taxable payroll, which is one-sixth of its projected amount prior to the Affordable Care Act. Although HI costs are estimated to continue to exceed trust fund income for the next few years, as they have since 2008, the savings under the new health reform act are expected to result in fund surpluses during 2014-22.

The primary source of savings for the Medicare program as a result of the Affordable Care Act are reductions in annual increases in the prices Medicare pays for services by hospitals, skilled nursing facilities, home health agencies, and most other medical providers, as well as in payments to Part C Medicare Advantage (private health plans that contract with Medicare to provide Parts A and B, and sometimes D, health services), the Trustees noted. Also contributing to Medicare’s improved financial outlook is the additional payroll tax of 0.9% of earnings above $200,000 for single taxpayers or $250,000 for married couples filing joint returns which directly benefits the Part A HI Trust Fund. Since these earnings thresholds are not indexed, an increasing proportion of workers over time will be affected by this additional HI payroll tax.

The portion of program costs financed by general revenues (principally HI payroll taxes, some income taxes on Social Security benefits, beneficiary premiums, and special state payments to Part D) is projected to exceed 45% in 2010. Consequently, this is the fifth consecutive year that the Trustees reached a determination of “excess general revenue Medicare funding,” and once again triggered a Medicare funding warning. “The funding warning indicates that the level of federal general revenues required to finance Medicare is an important concern, but it does not signify that program benefits cannot be paid,” the Centers for Medicare and Medicaid Services (CMS) commented.

For more information, visit http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2010.pdf. The Chief Actuary’s projections are available at http://www.cms.gov/ActuarialStudies/Downloads/2010TRAlternativeScenario.pdf.

Missouri voters become the first to reject key federal health reform provisions

On the heels of the first district court ruling validating legal challenges to the Patient Protection and Affordable Care Act, (PPACA), Missouri’s primary election on Tuesday drew nearly 939,000 votes on Proposition C, a ballot initiative relating to federal health care reform. The measure, which was approved by over 71 percent of votes cast (http://www.sos.mo.gov/enrweb/ballotissueresults.asp?eid=283) read:

"Shall the Missouri Statutes be amended to:

• Deny the government authority to penalize citizens for refusing to purchase private health insurance or infringe upon the right to offer or accept direct payment for lawful healthcare services?
• Modify laws regarding the liquidation of certain domestic insurance companies?"

The initiative conflicts with key provisions of the new PPACA which requires individuals to obtain health insurance or pay fines by 2014.

The ballot issue stems from the state’s “health care freedom” law (H. 1764), passed on May 11, 2010. Among its provisions, the law provides that:

• laws or rules may not compel individuals, employers or health care providers to participate in a health care system;
• individuals and employers may pay directly for lawful health care services, and providers may accept direct payment for such services without penalty or fine;
• subject to reasonable and necessary rules that do not substantially limit an individual’s options, the purchase or sale of health insurance in private health care systems may not be prohibited by law or rule.

The effective date of the freedom law was contingent on voter approval of the measure, which it has now overwhelmingly received. Missouri is the first of four states to put this issue to its voters — Arizona, Florida and Oklahoma will conduct similar referendums in November. While the votes are symbolic of public opinion, it is the courts that will likely determine the fate of the federal health care reform law.

Nevada issues response to federal government's motion to dismiss health care lawsuit

Nevada Governor Jim Gibbons issued a press release on August 6 announcing that a response has been filed to the federal government's motion to dismiss Nevada's lawsuit against Obamacare. Lawyers for Nevada, along with state attorneys general and governors of 19 other states have filed a response to the Department of Justice's motion to dismiss in the lawsuit challenging the constitutionality of the federal health care reform act. This filing also includes the National Federation of Independent Business (NFIB) as a co-plaintiff on behalf of its members nationwide, as well as two individual citizens (State of Nevada Governor Jim Gibbons Press Release, August 6, 2010 http://www.gov.state.nv.us/PressReleases/2010/2010-08-06_ObamacareResponseFiling.htm).

The lawsuit alleges that the new law infringes upon the constitutional rights of Nevada residents and residents of the other states by mandating all persons have qualifying health care insurance or pay a penalty. By imposing such a mandate, the law exceeds the powers of the United States under Article I of the Constitution, including the "Commerce Clause," which has never been applied to allow Congress to compel people to buy unwanted goods or services. Additionally, the penalty enforcing the mandate constitutes an unlawful direct tax in violation of Article I, sections 2 and 9 of the Constitution.

The lawsuit further claims the health care reform law infringes on the sovereignty of the states and Tenth Amendment to the U.S. Constitution by imposing onerous new operating rules that Nevada must follow, as well as requiring the state to spend billions of additional dollars. This burden comes at a time when Nevada faces severe budget cuts to offset shortfalls in an already-strained budget.

The Department of Justice filed a motion to dismiss the case in June, claiming the individual mandate fell under Congress' "taxing and spending" authority.

The motion to dismiss claimed the timing of the lawsuit was too early, but the states responded today that resources are already being spent on planning and operational activities they must undertake to meet the federal requirements of the law. The states argued that they have standing to bring the lawsuit because the federal health care law negatively affects state sovereignty and provides additional stress on already lean state budgets. Under the new law, Florida will be forced to vastly broaden its Medicaid eligibility standards to accommodate upwards of 50 percent more enrollees. Nevada's Medicaid program currently consumes about 17% of the State's total financial outlays.

The lawsuit was originally filed in federal court in the Northern District of Florida on March 23, minutes after the health care reform act was signed into law by President Obama. The hearing on issues raised by the motion to dismiss will be held on September 14 in Pensacola before Judge Roger Vinson. Earlier this week, a judge in a similar lawsuit in Virginia ruled against the Department of Justice's motion to dismiss, allowing Virginia's lawsuit to move forward. A copy of response to the motion to dismiss will be available online at http://www.healthcarelawsuit.us.

State Health Care Reform Update—Week of August 2

Connecticut. A provision in the Patient Protection and Affordable Care Act allows states to start covering low-income, childless adults in Medicaid right away and to start receiving federal funds. Connecticut was the first state to move 45,000 low-income adults from a state-funded program to Medicaid, saving the state an estimated $53 million through July 2011 with federal dollars. For more information, visit http://www.ct.gov/dss/site/default.asp.

District of Columbia. The District of Columbia has enacted a new temporary measure on extended dependent coverage. The law continues provisions previously enacted in April on an emergency basis, which were set to expire on July 28, 2010. The previously enacted provisions require that group health plans, individual health plans, and health insurers offering health insurance for dependent children make that coverage available to an insured’s child who is younger than 26 years of age, is unmarried, has no dependents of his own, is a resident or full-time college student, and is not eligible for coverage under another group or individual plan (or Medicare/Medicaid) at the time coverage begins. Coverage for dependent children must be the same as that available to other covered dependents, and at the same rate or premium. For more information, visit http://www.dccouncil.washington.dc.us/.

Kansas. A new nonprofit corporation will oversee the exchange of electronic health information in the state, and it will be governed by a 17-member board of directors. The American Recovery and Reinvestment Act (ARRA) included $34 billion in incentives for medical providers to maintain and use electronic health records for their patients. ARRA also called for the creation of state or regional health information exchanges so the records can be transferred easily from one provider or treatment location to the next. For more information, visit http://www.kslegislature.org.

Louisiana. While the number of individuals enrolling in the state’s Medicaid program is still increasing, the program will have $280 million less in this year’s budget to cover the cost of care for patients. The Medicaid budget for this fiscal year is $6.5 billion, down from $6.78 billion for the last fiscal year. The budget reduction will require reduced payments to physicians, hospitals, and other providers of health care for the 1.28 million residents enrolled in Medicaid. Rate reductions went into effect on August 1. For more information, visit http://www.lamedicaid.com/provweb1/default.htm.

Ohio. On July 1, Ohio’s new dependent law, which allows young adults to stay on their parents’ health insurance until they turn 28, went into effect. The law makes Ohio one of the few states to exceed the extension to age 26 mandated by the Affordable Care Act. Experts predict that 20,000 young adults between 26 and 28 years old will be able to sign up for health insurance due to this law. However, the new law does not affect employers with self-insured health plans, and advocates for the uninsured estimate that approximately 3 million state residents have insurance coverage from employers who self-insure. For more information, visit http://www.legislature.state.oh.us/.

Utah. The state has released the Utah’s All-Payer Database, which contains information on all medical and pharmacy insurance claims filed statewide. The database will provide doctors and consumers with a large source of information about state residents’ health, the cost of care, and the best treatments. For more information, visit http://health.utah.gov/hda/.

EBRI ups estimates of dependent coverage under health reform

The Patient Protection and Affordable Care Act provision that requires group health plans and insurers to make dependent coverage available for children until they attain the age of 26 will increase employment-based coverage by estimates ranging from 680,000 to 2.12 million individuals, according to recently released regulations.

However, a study published by the nonpartisan Employee Benefit Research Institute (EBRI) notes there is reason to believe that estimates of the dependent-child mandate understate the size of the population that might enroll in their parents’; employment-based coverage. In addition, the costs of the mandate are expected to increase health insurance premiums about 0.7% in 2011, 1% in 2012, and 1% in 2013, says the study, published in the August 2010 EBRI Notes.

For instance, the EBRI report identifies several shortcomings in regulatory assumptions that the 2.6 million 19-25-year-olds in states that already allow them to enroll in extended coverage are unlikely to enroll under PPACA; it is largely impossible to factor in parents’ decisions when it comes to enrolling their children; contrary to regulatory assumptions, about 3 million of the 7.5 million 25-year-olds with some other form of coverage (such as Medicaid or Tricare) will be eligible to enroll in the PPACA program; and more adult children are likely to become eligible as they gain employment.

When compared with the population of workers with employment-based health coverage, the uninsured population age 19-25 is more likely to be male, older, Hispanic, and less physically and mentally healthy, the study says. It was also determined that the uninsured population is less likely than the population with employment-based health coverage to use preventive health services, to exercise, and to be of normal weight. The uninsured are more likely to smoke and more likely to have asthma.

“It is critical that group plans and insurers understand the size and characteristics of the 19-25-yearold population that might be eligible for their parents’ health coverage in order to determine the impact that this provision of PPACA may have on enrollment and costs of employment-based coverage” Paul Fronstin, director of the EBRI health research and education program, writes in the conclusion of the study.

For more information, go to http://www.ebri.org.

Most seniors unaware of key provisions of Affordable Care Act

The majority of the nation’s seniors do not understand the Patient Protection and Affordable Care Act, according to a recent poll from the National Council on Aging (NCOA). The survey found that only 17% of survey respondents could correctly answer half of the 12 questions asked about key provisions of the law. Furthermore, none of the 636 respondents answered all 12 questions correctly.

NCOA found that only 22% of seniors understood that the Affordable Care Act would not cut their basic Medicare benefits. Almost twice as many seniors (42%) held the incorrect view that the law would cut their basic Medicare benefits, while 37% said they did not know. Even among the older adults who said they considered themselves “very familiar” (9%) or “familiar” (12%) with the new law, 65% still got less than half of the answers right, according to the survey.

The Kaiser Family Foundation (KFF) found similar results in their July Health Tracking Poll. According to KFF, 52% of seniors were aware that the new law will result in premium increases for some higher income Medicare beneficiaries, and 50% knew that the new law will gradually close Medicare’s “doughnut hole.” However, only 33% are aware that the Affordable Care Act will eliminate Medicare’s copayments and deductibles for some preventive services.

On the other hand, KFF found that large shares of seniors mistakenly believe the law includes provisions that cut some previously universal Medicare benefits and creates “death panels.” Half of seniors said that the law will cut benefits that were previously provided to all people on Medicare, and 36% incorrectly believe the law will “allow a government panel to make decisions about end-of-life care for people on Medicare.”

For more information, visit http://www.kff.org or http://www.ncoa.org.

Federal government does not have right to implement universal health care -- attorney

Congress is relying on circular reasoning in its attempt to require all Americans to obtain health insurance, and the constitutionality of the Patient Protection and Affordable Care Act (PPACA) is questionable, according to attorney Jonathan W. Emord, principal of Emord & Associates, Washington, DC. The following is an excerpt from a two-part interview conducted by CCH with Mr. Emord. The interview will appear in the two August editions of CCH's Employee Benefits Management Directions newsletter.

In response to CCH's question regarding whether or not various states that have filed suit against the federal government in an attempt to have the PPACA declared unconstitutional have a legitimate claim, Mr. Emord responded, "The States have a case. The Commerce Clause gives the Federal Government power to 'regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.' The Founding Fathers limited the powers of the Federal Government to preserve a system of dual federalism, creating a substantive separation in power and jurisdiction between state and federal governments. The concept of dual federalism was an essential safeguard against an overly powerful centralized federal government. Since the 1930s, Congress has attempted to expand the definition of 'commerce.' The more expansive the definition, the greater the federal government's reach."

"The Supreme Court has held that the Commerce Clause permits three broad categories of congressional regulation: (1) the channels of interstate commerce ( e.g., roadways, railways); (2) the instrumentalities of interstate commerce ( e.g., trucks passing on those roadways); and (3) activities 'having a substantial relation to interstate commerce' ( e.g., activities that substantially affect interstate commerce). See United States v. Lopez, 514 U.S. 549, 558-59 (1995)."

"Central to all of the Supreme Court's Commerce Clause decisions is a determination of whether there exists an act by the prospective regulatee that is tied to Commerce. In the PPACA, the Federal Government attempts for the very first time to regulate "inactivity." Congress believes the PPACA requirement fits within Commerce Clause jurisprudence because it equates a citizens lack of health insurance with an affirmative decision not to purchase health insurance. Thus, according to Congress, a decision not to purchase insurance is an "activity" regulable under the Commerce Clause."

"Congress's interpretation, however, is a fiction and is novel. Under Congress's reasoning, the Commerce Clause would be limitless because the Federal Government could reach any "inactivity" by simply defining the absence of conduct as having some, albeit attenuated, effect on commerce. For example, Congress could compel every citizen to purchase an electric automobile because the decision not to purchase such a car would affect public policy in favor of non-combustible fueled modes of transportation. Such regulation would never have seemed possible before PPACA."

"The decision not to buy health insurance is one that divorces the individual from the stream of commerce involving interstate sale of health insurance. To presume otherwise causes the Commerce Clause to be limitless. Here Congress depends on circular reasoning: Congress wants all Americans insured, thus if any are not insured they adversely affect achievement of the congressional goal. That, however, is inconsistent with historic Commerce Clause analysis. Congress may want all Americans insured but it may only compel individuals to be insured if they have a substantial effect on the market for interstate health insurance. Those who do not have health insurance presently and do not want to obtain it have no effect on the existing market for health insurance and will have no effect in future."

"The constitutionality of the law is thus questionable. And the result depends on how the current Supreme Court interprets the substantial effects test. Indeed, in a July 2009 report by the Congressional Research Service, CRS found that "[w]hether such a requirement would be constitutional under the Commerce Clause is perhaps the most challenging question posed by such a proposal, and it is a novel issue whether Congress may use this clause to require an individual to purchase a good or service." The question is a novel issue of law for the courts, and the Federal Government's position appears to conflict with established Commerce Clause precedent. Therefore, on the law the States have a strong case."

Source: Interview with Jonathan W. Emord, Emord & Associates, emord.com.