Updated on: July 3, 2012

ACA Constitutional Supreme Courts Rules June 28, 2012

By Jennifer Colagiovanni, Esq. and Chuck Buck
Original story posted on: June 28, 2012

WASHINGTON---In a 5-4 decision, the U.S. Supreme Court upheld the individual mandate provision of the Affordable Care Act, which requires most Americans to maintain “minimum essential” health insurance coverage. 

The Court concluded that while the individual mandate was not a valid exercise of Congress’ power under the Commerce Clause, the mandate could be construed as a tax under Congress’ taxing power.  Viewing the “shared responsibility payment” under the Taxing Clause, the Court determined that the payment imposed on individuals who do not buy health insurance could be construed as a tax for constitutional purposes. 

“Simply put, Congress may tax and spend," Chief Justice John Roberts wrote in the majority opinion. "This grant gives the federal government considerable influence even in areas where it cannot directly regulate."

"The question is not whether that is the most natural interpretation of the mandate, but only whether it is a 'fairly possible' one,” Roberts wrote. "The government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the constitution. Granting the act the full measure of deference owed to federal statutes, it can be so read."

Medicaid Expansion

The Court’s decision also addressed the constitutionality of the Affordable Care Act’s Medicaid expansion.  The Act increased federal funding in order to cover the costs associated with expanded Medicaid coverage, but if a state chose not to comply with the new expanded coverage provisions, the state would stand to lose not only federal funding for the expansion requirements, but all federal Medicaid funds.

The Court concluded that threatening States with the loss of all existing Medicaid funding if they failed to comply with the Act’s expansion requirements violates the Constitution.  While deemed unconstitutional, the Court held that the constitutional violation was remedied by precluding withdraw of federal Medicaid funds for a state’s failure to comply with the expansion requirements, leaving the rest of the Act to stand.

Issues for Providers

While most of the public debate centered on the contentious issue of the individual mandate, requiring almost all Americans to obtain health insurance, the more arcane issues that would directly impact the nation’s hospitals and health systems largely went unreported except in professional publications.

“The Supreme Court decision today to uphold the ACA on its face is a major victory for the Obama administration,” said Paul Weygandt, MD, JD, MPH, MBA, CPE, vice president of physician education for J.A. Thomas & Associates, in a written statement to RACmonitor. “The decision, upholding the most controversial component of the legislation, the individual mandate, was based on a broad interpretation of the commerce clause and recognition of Congress’ authority to tax.”

Among the more noteworthy provisions of the Affordable Care Act (“the act”) ranged from establishing the Medicaid RACs to provisions dealing with overpayment and the use of predictive modeling to crack down on waste, fraud and abuse.

Under the Affordable Care Act, the government began enhanced screenings and enrollment requirements. It also increased data sharing across government agencies, expanded overpayment recovery efforts, and provided greater oversight of private payers abuses. The act authorized new rules to help the Department of Health and Human Services (HHS) to prevent and fight fraud, waste and abuse in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). The act also granted authority to HHS to suspend payments when a credible allegation of fraud is being investigated.  

Medicaid RACs

Chief among the provisions of the act was the mandated expansion of the RAC program to Medicaid and Medicare Parts C and D. By no later than December 31, 2010­ — a deadline which was ultimately delayed  — states were to have established programs to contract with one or more recovery audit contractors for the purpose of identifying underpayments and overpayments. Payments would be made to contractors based only on amounts recovered and would be issued on a contingency fee basis. Individual states could specify the contractor contingency fees for overpayments and underpayments, with a capped percentage rate set by federal regulation.  Any portion of a state’s contingency fee beyond the federal cap is to be paid with state-only funds. 

The act also mandated that each state must have an appeal process in place and coordinate audit efforts with “other contractors or entities performing audits,” plus federal and state law enforcement agencies. 

On Sept. 16, 2011, HHS issued its final rule on the Medicaid RAC program. Among a number of provisions was one that gave the Secretary discretionary authority to grant exemptions from Medicaid RAC program requirements upon a state’s written justification for the request through the State Plan Amendment process. CMS, which had earlier extended the implementation date to April 1, 2011, established January 2012 as the new date for compliance.

Today, with the exception of Wyoming, Ohio, Virginia and the District of Columbia, all states have an approved Medicaid State Plan Amendment as required by the ACA, that addresses important elements of their RAC program.

“To date, we only know of Medicaid RAC activity occurring in three states — Connecticut, Kansas and New Jersey,” said J. Paul Spencer, CPC, CPC-H, the compliance officer for Fi-Med Management, Inc.  “In addition, at last count, we have 25 states that have not identified a contractor. This is in spite of the fact that the implementation date was January 1, 2012.”


 

Overpayments

The ACA also ushered in changes to the Social Security Act by addressing the False Claims Act (FCA).  Failure by entities to report and return overpayments from Medicare by no later than 60 days from the date the overpayment was identified creates an “obligation” as defined by the FCA. The act further sets in motion potential violation of the FCA by extending liability to anyone who would conceal or make false statements or who would “knowingly” cause or avoid the return of overpayments. The operative word, “knowingly,” transcends what under the original language of the Fraud Enforcement and Recovery Act of 2009 (FERA) that was to actually conceal the overpayment.

Hospital Acquired Conditions

In June 2011, CMS published a final rule to implement the ACA by requiring Medicaid adjustments for hospital acquired conditions (HACs) as well as healthcare-acquired conditions (HCACs). State Medicaid programs could now identity HCAC claims for nonpayment. Additionally, the final rule set forth requirements for providers to self-report HCACs in the claims.

“For hospitals and physicians the message has perhaps become more clear,” said Weygandt. “We must understand the impetus for and direction of health reform legislation, including payment for quality, increased risk being transferred to providers, and the elimination of waste from the healthcare system.”

Officers and Directors Accountable

The act also expanded the Office of Inspector (OIG) permissive exclusionary authority to pursue and crack down on not only corporate entities suspected of fraud but also on individual officers and directors

Use of Predictive Modeling

The ACA also provided new anti-fraud tools and resources to proactively prevent fraud and abuse. On July 1, 2011, CMS announced that it would begin using innovative predictive modeling technology to fight Medicare fraud. Noting a similarity to technology used by credit card companies, CMS said predictive modeling would help identify potentially fraudulent Medicare claims on a nationwide basis, and help stop fraudulent claims before they were paid.

Political Implications

Today’s decision by the Supreme Court is expected to ignite a political firestorm. Already Republican are calling for the repeal of the act and said they would vote on a law to repeal the act when they return from the July Fourth recess.

Speaking at a briefing at the White House President Barack Obama said, “today’s decision was a victory for people all over this country whose lives will be more secure because of this law and the court’s decision.”

Republican presidential candidate Mitt Romney said, “Obamacare was bad policy yesterday, it’s bad policy today.”

“Americans who need access to health coverage. The promise of coverage can now become a reality,” said Richard Umbdenstock, president and CEO for the American Hospital Association. “The decision means that hospitals now have much-needed clarity to continue on their path toward transformation. But transforming the delivery of health care will take much more than the strike of a gavel or stroke of a pen. It calls for the entire health care community to continue to work together, along with patients and purchasers, to implement better coordinated, high- quality care.”

About the Authors

Jennifer Colagiovanni is an attorney at Wachler & Associates, P.C.  Ms. Colagiovanni graduated with Distinction from the University of Michigan and Cum Laude from Wayne State University Law School.  Upon graduation, Ms. Colagiovanni was nominated to the Order of the Coif. Ms. Colagiovanni devotes a substantial portion of her practice to defending Medicare and other third party payer audits on behalf of providers and suppliers.  She is a member of the State Bar of Michigan Health Care Law Section.

Chuck Buck is publisher of RACmonitor.

Contact the Authors

jcolagiovanni@wachler.com

cbuck@racmonitor.com

To comment on this article please go to editor@racmonitor.com

Read the Supreme Court's decision:
http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf