Front Row Seat

Healthcare delivery fascinates Michael Regier. Now, with a pivotal Supreme Court decision months away, he’s reminded why.

Michael Regier has been attracted to healthcare delivery ever since working for a law firm in Chicago with a large healthcare practice. To him, healthcare delivery “is where all the circles of the Venn Diagram come together,” that is, where clinical, ethical, technological, financial and other issues converge.

But never has he been more fascinated by healthcare delivery than today. And with good reason. After all, at press time, the U.S. Supreme Court was preparing to hear arguments about the constitutionality of the Patient Protection and Affordable Care Act (ACA) of 2010 – the healthcare reform law. And then there are the upcoming congressional and presidential elections.

Regardless of how the Supreme Court rules, or who wins the elections, a series of events is about to unfold that will test the mettle of lawmakers and the public as they continue to reshape the healthcare delivery system. And Regier will have a front row seat.

Regier is senior vice president of legal and corporate affairs, general counsel and compliance officer for VHA Inc. In this position, he is responsible for the company’s public policy office, which is based in Washington, D.C. He also oversees legal services, public relations and corporate communications, risk management and office services, as well as VHA’s business ethics and compliance program.

Prior to joining VHA in June 2007, he served as senior vice president, legal affairs and general counsel for the Seton Family of Hospitals in Austin, Texas, since 1995. Before joining Seton, he practiced law in Chicago for 10 years.

Since September 2010, Regier has hosted “Focus on Reform,” a bimonthly broadcast from Washington, D.C., that aims to help VHA members and others understand and prepare for the impact of healthcare reform.

Never a more important decision
“I’ll never say ‘never,’ but it is hard for me to imagine that there will be a Supreme Court decision in my career that will be more important than this one,” he says. The Court has a lot on its plate, as it will explore three primary issues related to the healthcare reform law:

  • The so-called “individual mandate,” which requires most citizens and legal residents to maintain health insurance or pay a financial penalty, beginning in 2014. (Those who fail to meet certain minimum income levels will qualify for federal subsidies.) The federal government maintains it has the authority to require U.S. citizens to purchase health insurance or pay a penalty, under the Constitution’s “commerce clause.” But challengers (which, in the Supreme Court case, is a consortium of 26 states) argue that the government lacks the constitutional authority to require citizens to buy a product from a private entity. If the Court rules that the individual mandate is unconstitutional, it will then determine whether the rest of the ACA must be overturned, or whether it can stand without the mandate.
  • The expansion of the Medicaid program to all citizens and certain legal residents with incomes up to 133 percent of the poverty level. The Court has been asked to decide whether the law’s Medicaid expansion is constitutional, and whether the federal government has the right to cut off state funding for non-compliance.
  • The potential application of the Anti-Injunction Act, a federal statute dating from 1867, which generally provides that statutes that impose penalties may be challenged in litigation only when the penalties are actually imposed. At least one federal appeals court relied on this Act in declining to rule on the constitutionality of the individual mandate at this time. Should the Court conclude that the Anti-Injunction Act applies, any claims involving the constitutionality of the mandate could be delayed until 2015, when the first penalties are scheduled to kick in.

“I don’t see any good set of consequences coming out either way,” says Regier, referring to the Court case. “Let’s say the Court strikes the law in its entirety. We still have the light at the end of the tunnel – which is a train, that is, the rate of increase in healthcare spending. We as a society are still going to have to do something to address that.”

If the law is struck down…
Should the Court strike down the law, it would unleash a chain of events that could unravel many programs already underway, says Regier. Some examples:
Value-based purchasing. Under this program, hospitals that perform well on quality measures relating to clinical processes of care and to patient experience of care, or those making improvements in their performance on those measures, would receive higher payments. The program would apply to payments for discharges occurring on or after Oct. 1, 2012. The financial incentives would be funded by a reduction in the base operating DRG payments for each discharge, which will be 1 percent in FY 2013, rising to 2 percent by FY 2017. The Deficit Reduction Act of 2005, signed by President Bush, set the wheels in motion for value-based purchasing, notes Regier. Although CMS proposed a value-based purchasing system in a report delivered to Congress in 2007, CMS needed separate statutory authority to implement the system – which it got, in the Affordable Care Act. Were the law to be struck down, however, progress toward value-based purchasing might stop.

Accountable care organizations. The Affordable Care Act created the Medicare Shared Savings Program, under which ACOs would allow providers to share in savings achieved by coordinating patient care across all sites of care, inpatient and outpatient, and by providing higher quality care. In December 2011, the Department of Health and Human Services announced that 32 healthcare organizations would participate in a Pioneer Accountable Care Organization initiative. A decision striking down the Affordable Care Act would also strike the statutory authority for both the Pioneer ACO program and the Medicare Shared Savings Program.

The Center for Medicare and Medicaid Innovation, a new organization at the center of many key initiatives currently undertaken by CMS, could itself be a casualty of a Supreme Court decision striking down the Affordable Care Act, says Regier. The Innovation Center’s current initiatives include the Partnership for Patients and the Health Care Innovation Challenge grant program.

“The implications are tremendous,” says Regier. “Providers have had a real struggle just to keep pace with implementation [of the Affordable Care Act] and the uncertainty associated with it. But if there’s a giant red ‘do-over’ button with the Supreme Court decision, it could be tremendously difficult for providers from a planning perspective.”

If the law is upheld…
Even if the court upholds the constitutionality of the law, complications will ensue, says Regier. For example, the Affordable Care Act requires states to certify that they can run health insurance exchanges, but a number of states are not ready to do so, and some have refused to participate. (As of March 2012, 13 states had established exchanges and five more had signaled their plans to do so, according to the Kaiser Family Foundation. But six states had shown no significant planning activity, and two states – Louisiana and Arkansas – had announced plans to stop pursuing a state-based exchange.)

“We may have a major catch-up by some states,” says Regier. “Still, that’s probably a better scenario for providers. Personally, I think it would be better for the industry and the country if the Court upholds the statute, because I have more confidence in our ability as a nation to improve legislation that is imperfect than to start from scratch.”

Regardless of what the Supreme Court decides, there’s still a lot of action to be played out in the court of public opinion. And that begins with Congress. On this score, Regier has some serious questions.

Hyper partisan atmosphere
“There seems to be a hyper partisan atmosphere now, in which the objective seems to be preventing the other guy from accomplishing anything, rather than seeing if we can influence what the other guy is thinking in order to get to a place that we both want,” he says. “We need that latter type of thinking if we want to meet the challenges our country is facing.”

One casualty of the hyper partisanship might have been former temporary CMS Administrator Donald Berwick, who stepped down in December 2011 after 17 months on the job. Partisan wrangling meant he never received a Senate confirmation hearing.

“I personally think it’s a crying shame when someone who has the professional expertise and the passion of Don Berwick is unable to be confirmed to lead an organization like CMS,” says Regier. “If you sat down and looked over the last 10 to 15 years in healthcare and said, ‘Name the five individuals who have done the most to improve quality and safety,’ Don Berwick as leader of [the Institute for Healthcare Improvement] would have been near the top of everyone’s list.”

At CMS, Berwick revitalized the agency and rebuilt a sense of pride and esprit de corps, he says. “Dr. Berwick was someone the career staff saw as not only caring about patients and providers, but also about the work the agency did and the people who did it.”

The irony of the partisan wrangling is that on many issues, Republicans and Democrats are not that far apart. In fact, points out Regier, many of the provisions that the Republicans decry were, in fact, originally proposed on that side of the aisle. The current Medicare Acute Care Episode (ACE) bundled payment demonstration, for example, was launched by the Bush Administration. The concept of value-based purchasing was championed by HHS Secretary Michael Leavitt, also in the Bush Administration. State-based insurance exchanges and the ability to purchase insurance across state lines were part of John McCain’s platform when he ran for president in 2008. And in 2006, as governor of Massachusetts, Mitt Romney signed into law a health reform bill that required almost everyone to buy insurance – that is, an individual mandate.

“A lot of the tools in the Affordable Care Act that are aimed at the delivery system came out of the Republican side of the aisle,” says Regier. “Whether the Republicans would embrace some of those elements again if the statute were to be struck down, I don’t know.”

Regardless of what happens on the Republican side of the aisle, developments on the Democratic side could unravel at least some provisions of the healthcare reform law, should the Supreme Court uphold its constitutionality, says Regier. In fact, some unraveling has already taken place.

In October 2012, for example, HHS Secretary Kathleen Sebelius announced that the CLASS Act would be scrapped, because it wasn’t financially feasible. The Community Living Assistance Services and Supports program (CLASS Act) was a voluntary insurance program that would have provided benefits for community living services for people who became functionally disabled and required long-term services and supports, so long as they had been paying premiums for at least five years.

Another casualty might be the Independent Payment Advisory Board, points out Regier. The IPAB was to be a group appointed by the Comptroller General, charged with making coverage decisions and determinations of Medicare and Medicaid. If certain federal spending targets were projected to be exceeded, the board was to have to ordered mandatory spending reductions in Medicare.

“It’s this provision that was largely vilified, with people talking about death panels,” he says. “It has become extremely controversial.” So controversial, in fact, that the Obama Administration itself has eased off the pedal. (In early March, the House Energy and Commerce Committee supported legislation to repeal the IPAB, a decision applauded by the American Medical Association, among others.) This despite the fact that former Office of Management and Budget Director Peter Orszag once had called the IPAB one of most important elements of the Affordable Care Act.

What happens after the election?
Regier is curious – and perhaps a little apprehensive – about what will happen following the November elections, and before the next presidential term begins in January. “We will have gone through a brutal Republican primary, an incredibly aggressive and probably – for the electorate – unpleasant presidential campaign. And then a lame duck session.”

For healthcare providers, that lame duck session represents a particular period of risk, for a number of reasons, he says.

First, the Bush tax cuts are scheduled to expire at the end of the year. “A lot of people don’t want that to happen, and even the Administration is willing to consider an extension of the cuts for the middle class,” he says. The federal government may turn around and seek ways to recoup those lost revenues – perhaps through Medicare and Medicaid reimbursement cuts.

Second, the failure last fall of the bipartisan Congressional Joint Select Committee to find more than a trillion dollars in deficit reductions means that automatic spending cuts will go into effect in 2013. Some of that money will come out of defense, but much will come out of domestic programs, including Medicare and Medicaid.

“I think for providers, a lot of the action may end up happening in the lame duck session after the presidential election,” says Regier.
Then, come January, when the next presidential term begins, more surprises might unfold, says Regier. “I think the real dramatic change could come in a scenario where the president wins re-election; the Senate shifts to Republican hands, though not by a large enough margin to override a presidential veto; and the House remains in Republican hands.”

President Obama has already indicated some willingness to work with Republicans, as witnessed by his discussions with House Speaker John Boehner last summer, when the two came close to an agreement on how to deal with the debt crisis and raise the debt ceiling. The talks – which would have cut spending by as much as $3.5 trillion – broke down. But as a lame duck president, Obama might feel freer to work with Republicans without fear of reprisal from his own party or the electorate, says Regier.

“So I actually see a scenario for more significant change in the nearer term if the president wins reelection.”

One more piece of the puzzle remains to be fit – the medical device excise tax. The Affordable Care Act gave the Internal Revenue Service the authority to impose a 2.3 percent excise tax on the sale of any taxable medical device by a manufacturer, producer or importer, beginning in January 2013. The tax is projected to generate $20 billion over 10 years, and is intended to be the medical manufacturing community’s “contribution” to healthcare reform.

“There’s no question it’s one of the more important funding sources for the Affordable Care Act,” says Regier. “That’s the political dilemma for those who would seek to repeal it – doing so would add to the deficit. If you’re going to do that, where will the money come from that would have been raised through that excise tax? There are no easy answers to that.”

It seems healthcare delivery defies easy answers. But maybe that’s what makes it so interesting.

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