SummaryTune into our fifth episode of the Avalere Health Essential Voice: 2020 Election series. In this segment, our experts discuss the evolving makeup of the Supreme Court and the outlook on California vs. Texas — the upcoming Supreme Court case regarding the constitutionality of the Affordable Care Act and, in particular, the individual mandate.
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Neil: Hello, and welcome to another episode in the Avalere Health Essential Voice Series focused on the 2020 election. In this episode, we will be covering the evolving makeup of the Supreme Court and the outlook on California versus Texas, the upcoming Supreme Court case regarding the constitutionality of the Affordable Care Act (ACA). My name is Neil Rosacker and I’m an Associate on the policy team here at Avalere Health. I am joined today by Dan Mendelson, the founder of Avalere and an expert on the ACA. I’m also joined by Matt Kazan, a Principal in the policy practice and an expert in the legislative and regulatory environment. Good to speak with you both. Thanks for joining us.
Dan: Nice to see you, Neil.
Neil: Matt, as the presidential debate continues to unfold, the ACA and the Supreme Court ruling, which begins November 10, remain a primary focal point of discussion. Following Justice Ginsburg’s passing in late September and President Trump’s nomination of Judge Amy Coney Barrett on September 26, it is considered likely that Barrett will be seated prior to November 10. What is the process for this nomination? Does her joining the court materially change the coverage debate around the ACA?
Matt: Thanks, Neil. I agree with you that we’re likely to see her seated prior to, if not the election, most certainly before the ACA oral arguments in California v. Texas.
Process-wise, the Judiciary Committee will hold a hearing on her nomination starting this week. We will see some opening statements from members of that committee made virtually. We’ll hear an opening statement from Judge Barrett. We will have several rounds of questions and answers from the members, and then there will be a vote in the Committee.
To have that vote, the Committee must have a quorum of its members present. Getting enough members of the Committee to the Capitol to have that vote is one potential challenge. I expect that, barring unforeseen circumstances, we will have that vote.
The Committee will advance her nomination and it will move to the Senate floor where, again, I think the only question is one of timing and whether enough senators are available to vote in the Capitol to pass that nomination. I expect that will based on public comments.
We feel there are 50 or 51 votes to support her nomination. In all likelihood, come the oral arguments, there will be 9 justices on the Court.
In terms of her nomination and the impact on the law and the legislative landscape thereafter, at a high level, we’re not likely to see big changes in the ACA via this court case. Maybe the probability is slightly higher because of her nomination. A potentially greater impact of this nomination is how Congress may run if Democrats do take over and remove the filibuster in retaliation to this nomination.
Dan: Also, with respect to timing, it’s quite remarkable that this nomination has become about the ACA and healthcare. Here we are 3 weeks from an election, and the nomination and the passing of Ruth Bader Ginsburg have driven the discussion inexorably back toward coverage, how Americans are going to get their coverage, and how they are protected with respect to preexisting conditions.
I don’t think it is what was intended with respect to this nomination. Remember, the majority needs this nomination to ensure that if the Supreme Court ends up calling the election, things are configured in a way that will be positive. It’s a historic situation. The fact that we’re driving everything back toward healthcare 3 weeks before the election certainly favors the Democratic nominee.
Neil: Dan, I think that takes us to our next point. The SCOTUS review of the ACA brings up several questions around severability, and by extension, the constitutionality of the ACA’s coverage, expansion, and insurance market reforms. What are the potential outcomes and at-risk provisions in the case? And how should stakeholders plan for these complex and uncertain disentanglement scenarios?
Dan: I would say a couple of things. First, I think all of us are very humble about predicting the outcome of Supreme Court cases. We just don’t know. It’s important for our clients and others who are thinking about this to acknowledge that uncertainty.
The Court has the full range of options. They can decide not to hear the case, they can throw the case back down, or they can decide that they’re going to overturn the entire law. That would really be chaotic since the ACA not only has the individual market, but also the authority for the Center for Medicare & Medicaid Innovation, a lot of changes in the Medicare Advantage payment systems, and a sizable expansion of Medicaid. There are about 23 million people who are getting insurance under the provisions of the ACA, so it would be quite a chaotic situation. I think that’s unlikely and I think most analysts think that’s unlikely, but it’s a possible outcome.
The portions that are most at-risk are those that are directly related to the constitutionality argument around the individual market. There are about 11 million people who have coverage under those markets. When thinking about risk profile, that is the part that is most problematic.
I would say, though, that coverage is important. It is likely that, even in the case where that provision was overturned, it would be in the best interest of a Republican majority to pass something more stable and put the issue to bed. This was not a good issue for the Republican Party in the 2018 election, and it doesn’t look like it’s a great issue for the Republican Party in the 2020 election. Putting it to sleep would really be wise for the Republican Party at this point.
Neil: Relatedly, several states have sought to enact protections to guard against the possibility of full or partial invalidation of the ACA. Dan, how effective would these protections be at maintaining affordable coverage under a repeal scenario? What could hinder states’ ability to maintain the coverage levels that they have today?
Dan: It depends. The ACA creates a national system where anyone can buy insurance without regard to preexisting conditions. If the governor of Texas says he wants to ensure a consistent individual market for consumers, which he promised back in 2018, it would first depend on what was available nationally. If the court deregulated these insurance markets and allowed them to proceed without the protections under the ACA, and the state of Texas set up a high-risk pool for individuals who had preexisting conditions, that that could conceivably be an available option, though it would look a lot different from the protections that are available under the ACA.
Matt: I would add that many states have looked to build on or make changes to the ACA. A big sticking point has been the financing of those plans. To the extent that the court rules in a way that removes federal tax credits or other types of federal spending toward states, it’s going to put states in a tough bind, even if they do try to make changes to their individual market rules. A lack of federal funds could present some extra challenges.
The other thing is the timing of this in relation to state policy thinking. The Supreme Court generally likes to rule on their most controversial cases at the end of their term, which will be June or July. We should assume that this is one of the more controversial cases that they’ll hear this term. So, to the extent that the court rules in June or July, maybe lower courts implement a potential decision, but how many of those states will have already met and convened a legislative session and adjourned? Will special sessions have to come back? What other actions will states have to take? So, I think the timing here is important, too.
Dan: One thing for sure is that this decision has put coverage in the primary seat in terms of policy change, not only before the election, but also for the next year. We’re going to be talking about this a lot. The issue isn’t going to go away because there are so many possible options.
Neil: Right. To that end, with an eye toward 2021, we have the oral arguments for California versus Texas shortly following our November 3 election. This decision is looming over a lot of the election discussion and could have significant impact on either administration’s health policy agenda in 2021 and beyond, including potential changes to the filibuster under a Democratic sweep scenario. Matt, how does the SCOTUS ruling affect the future administration’s policy platforms? What kind of expectations should we have for 2021 and beyond?
Matt: I think the effect is significant. If the Court rules in a way that makes major changes to the ACA, the future administration and the future Congress will have to act on coverage — no matter what the outcome of the election is. They will be forced to take action depending on the ruling. Even if there is a ruling that makes little to no change, or it’s, as Dan said, kicked down to the lower courts, there is a potential that this has a significant impact on 2021, especially if Democrats do take Congress and the White House.
Democrats have made it no secret that they object to the process of this filling this seat and some have called for a removal of the filibuster if they take control. I think that potentially has greater impact on 2021 policymaking than a potential court ruling in that it totally changes the types and number of pieces of legislation that Congress could consider. Normally, if Congress wants to pass something with a simple majority, they can do it once a year through what’s called reconciliation, which has rigid budgetary requirements that limit the types of policies that Congress can consider. Those policies must be paid for in the long term.
If Democrats remove the filibuster, all those rules and restrictions go away. Democrats would be able to pass every bill that’s considered with a simple majority. The types of policies that could be considered are greatly expanded, and there’s no longer a procedural requirement to pay for policies in the long term.
When we think of things like coverage expansion or Medicare eligibility expansion, those policies will inevitably cost the federal government a lot of money. It will now be a political question whether Democrats would want to pay for that, whether through taxes or changes to drug pricing policy or other areas.
So there is a world in which the court rules in a way that doesn’t affect the ACA all that much, but if Democrats remove the filibuster, that turns out to be the big story of how this court case changes how 2021 plays out.
Dan: I think it’s fair to say that for our clients, and for those who are watching this, there are a couple of gating events that will narrow down the uncertainty that we face. The first is the election. As Matt said, the outcome of the election is a major driver of what the possible outcomes are. Second is whether the Democrats are serious about eliminating the filibuster, which could have unintended consequences, and they’re very aware of that. So that’s being discussed but is certainly not an item of consensus.
That will likely narrow the range of possibilities to see whether this is going to be a partisan or bipartisan effort. As the discussion evolves, we’ll certainly have a lot more to say around what the different options are likely to be.
Neil: Excellent. Well, thank you, Dan and Matt. As always, this has been incredibly insightful. Thank you all for tuning in to the Avalere Health Essential Voice. Please stay tuned for more episodes in our Election 2020 series. If you’d like to learn more, please visit us at Avalare.com/2020-election. Thanks.
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