TABLE OF CONTENTS
Introduction - Michael H. Schill and Anup Malani - Anup Malani, Michael H. Schill
DOI: 10.7208/chicago/9780226255002.003.0015
[Affordable Care Act, ACA, health care policy, Supreme Court jurisprudence, individual mandate, Medicare expansion]
The introduction to this multi-author volume describes the provisions of the Affordable Care Act, particularly Medicare expansion and the individual mandate. It describes the controversy over the statute and the outcome of the case NFIB v. Sebelius, which the United States Supreme Court took up in 2012 to address the question of whether the individual mandate violated Article I of the Constitution and whether the Medicaid expansion impermissibly coerced the states. A joint conference of the University of Chicago Law School and Medical School on health reform was convened to discuss the case, and the papers presented there form this book. The chapter outlines the five sections of the book and gives a brief synopsis of every chapter. (pages 1 - 10)
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Part 1. ACA and the Law
1. Postmortem on NFIB v. Sebelius: Early Reflections on the Decision That Kept the ACA Alive - Carter G. Phillips and Stephanie P. Hales - Carter G. Phillips, Stephanie P. Hales
DOI: 10.7208/chicago/9780226255002.003.0001
[individual mandate, health care reform, Affordable Care Act, commerce clause, taxing authority, coercion, Medicare]
This chapter discusses the Supreme Court's decision in NFIB v. Sebelius and its implications for health care reform and Congress's use of Commerce clause and taxing power authority. The chapter begins with an overview of the decision. It then discusses the three primary doctrinal areas of the Court's decision. It analyzes the Affordable Care Act's (ACA's) individual mandate under the Commerce Clause. The unexpected nature of the Court's decision is discussed as well as the implications of the Court's distinction between economic activity and inactivity. The chapter then examines the approval of the individual mandate under Congress's taxing authority and the opinion of the Court that Congress's taxing authority extends well beyond its Commerce Clause authority and that the individual mandate “penalty” falls squarely within it, as long as the tax in question is not too coercive. Finally, the chapter discusses the Court's ruling on ACA's Medicaid expansion provisions, which the Court struck down on the ground of excessive coercion. (pages 13 - 31)
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2. Federalism, Liberty, and Risk in NFIB v. Sebelius - Aziz Z. Huq - Aziz Z. Huq
DOI: 10.7208/chicago/9780226255002.003.0002
[health care reform, Affordable Care Act, minimum essential coverage, individual mandate, ObamaCare, federalism, conditional spending, risk regulation, Necessary and proper]
This chapter offers an account of how NFIB v. Sebelius fits into the constitutional tradition. The opinion rests on three central questions: (1) Is imposition of the individual mandate within Congress's Article I power to regulate commerce, or, (2) alternatively within its power to tax for the General Welfare? And (3) does the Medicaid expansion violate the constitutional principle of federalism in the Tenth Amendment to the Constitution? The chapter argues that the Court's reasoning takes root in profound first-order normative principles about the appropriate role of the federal government. The NFIB decision superficially turns on the relationship of the federal government to the states, but federalism explains very little of its outcome. Rather, a dyad of opposing values—liberty and risk—animates the Court's ruling, which is better glossed as a function of the justices' normative judgments about the permissible balance between risk and liberty that the federal government can strike. A constitutionalized view of normatively permissible risk-liberty trade-off best explains NFIB. (pages 32 - 49)
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3. The Future of Healthcare Reform Remains in Federal Court - Jonathan H. Adler - Jonathan H. Adler
DOI: 10.7208/chicago/9780226255002.003.0003
[health care reform, Affordable Care Act, minimum essential coverage, individual mandate, Independent Payment Advisory Board, IPAB, ObamaCare, insurance exchanges, cost-sharing subsidies, contraception mandate]
This chapter outlines how litigation in federal court will affect the implementation and viability of the Affordable Care Act (PPACA). The ACA's statutory language and administrative fixes complicate the implementation of health insurance exchanges. The requirement that group insurance plans include coverage for contraception also spurs litigation. Challenges to ACA provisions to control health care costs may create another battle over health care reform as the Independent Payment Advisory Board's unique structure and authority raise constitutional questions that may need to be resolved by federal courts. Finally, the Supreme Court's upholding of the imposition of a tax penalty on individuals who fail to obtain qualifying health insurance coverage under the individual mandate may have constrained the federal government's ability to use this penalty as a means of combating adverse selection in health insurance markets and exposed future reforms to the threat of further legal challenge. (pages 50 - 80)
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4. Essential Health Benefits and the Affordable Care Act: Law and Process - Nicholas Bagley and Helen Levy - Nicholas Bagley, Helen Levy
DOI: 10.7208/chicago/9780226255002.003.0004
[essential health benefits, notice and comment rulemaking, sub regulatory guidance, pre-rule, Affordable Care Act, ACA, health care reform, administrative procedure, benchmark approach]
This chapter explores the questions of whether the benchmark approach to determine essential health benefits under the Affordable Care Act (ACA) is a lawful exercise of the Department of Health and Human Services' (HHS's) authority under the ACA and whether HHS's announcement of the benchmark approach through an Internet bulletin allowed the agency to sidestep the very administrative procedures that typically serve to constrain the exercise of agency discretion. The authors conclude that the approach likely will be upheld in the event of a challenge, although HHS may have approached the limits of its discretionary authority, and that the agency's use of guidance documents instead resulted in a process that was more open to public scrutiny and external oversight than conventional rulemaking would have been. (pages 81 - 106)
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Part 2. ACA and the Federal Budget
5. The Fiscal Consequences of the Affordable Care Act - Charles Blahous - Charles Blahous
DOI: 10.7208/chicago/9780226255002.003.0005
[scorekeeping, Medicare, Affordable Care Act, federal deficit, health care reform]
This chapter discusses the enactment of the Affordable Care Act (ACA) in 2010 and how it worsened the federal fiscal outlook relative to previous law. Incomplete appreciation of the scorekeeping methods under which the Congressional Budget Office operates causes incomplete public understanding. The ACA would only reduce federal deficits relative to a scenario in which Medicare makes full scheduled benefit payments irrespective of limitations upon its financial resources and statutory authority. Overall, the new spending authorized by the ACA well exceeds the savings generated by its other provisions, so on balance it adds substantially to federal deficits. Unchanged, the ACA will add roughly $340 billion to federal deficits over the next ten years and approximately $1.2 trillion to net federal spending. Roughly two-thirds of federal subsidies for participation in the health exchanges would need to be eliminated to meet a minimum standard for fiscal improvement. (pages 109 - 134)
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6. Estimating the Impact of the Demand for Consumer-Driven Health Plans Following the 2012 Supreme Court Decision of the Constitutionality of the Patient Protection and Affordable Care Act - Stephen T. Parente - Stephen T. Parente
DOI: 10.7208/chicago/9780226255002.003.0006
[insurance, health reform, microsimulation, uninsured, health savings account, Patient Protection and Affordable Care Act, PPACA]
This chapter assesses which of the alternative proposals to the Affordable Care Act (ACA) may have the most impact in terms of cost per capita of covering the uninsured. Microsimulations estimate the impact of the ACA following the June 2012 Supreme Court decision to allow states to opt out of Medicaid expansion. The expansion of the private insurance market through state and federal insurance exchanges and the expansion of the Medicaid program for those with incomes less than 133% of the federal poverty line were modeled. The simulations predicted significant reductions in levels of uninsured depending on whether a state decides to accept or decline Medicaid expansion. Generally, states refusing coverage will have more uninsured and lower federal cost. At best the number of uninsured that would be reduced by the full implementation of ACA will be greater than 20 million, which would be the largest person-level coverage expansion in US history. (pages 135 - 158)
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Part 3. ACA and Healthcare Delivery
7. After the ACA: Freeing the Market for Healthcare - John H. Cochrane - John H. Cochrane
DOI: 10.7208/chicago/9780226255002.003.0007
[health care, health insurance, regulation, competition, markets, supply and demand, Affordable Care Act, ACA]
This chapter surveys the supply, demand, and market for health care and health insurance. It concludes that a much less regulated system is possible and necessary. Cost control and technology improvement must come from disruptive competition from new suppliers, as it has in airlines, retail, Internet, and other successful industries. People must direct their expenditures at the margin and feel the benefits and costs of their decisions. Individual, portable, guaranteed renewable insurance can then emerge, addressing the pathologies of today's insurance markets. Current law and regulations rather than fundamental market failures are the main reasons a healthy market does not emerge and why a regulatory approach must fail. The chapter concludes by addressing common objections to market-based health care and insurance. (pages 161 - 201)
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8. Obamacare and the Theory of the Firm - Einer Elhauge - Einer Elhauge
DOI: 10.7208/chicago/9780226255002.003.0008
[health care, Obamacare, Affordable Care Act, fragmentation, integration, health care reform, Medicare]
This chapter discusses the fragmented nature of the US health care system and how it raises costs and worsens health outcomes. Fragmentation occurs when there is a failure to coordinate among various health care providers. The economic theory of the firm suggests that allowing greater integration should improve these results. However, organizations adopt the permissible forms of integration that are the most profitable, and our payment system rewards fragmentation rather than medical efficiency. In addition, current law stands in the way. Regulatory laws restrict how hospitals and physicians can work together, while payment laws require disaggregated payments for specific services. Furthermore, hospitals cannot afford to organize themselves in a way that does not comply with Medicare. Obamacare contains a number of provisions that could lift legal obstacles to efficient health care integration: the creation of Accountable Care Organizations, the Center for Medicare and Medicaid Innovation, and the Independent Payment Advisory Board. This approach lowers health care costs, increases quality, has bipartisan appeal, and can be done through executive action. (pages 202 - 220)
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9. Can Federal Provider Payment Reform Produce Better, More Affordable Healthcare? - Meredith B. Rosenthal - Meredith B. Rosenthal
DOI: 10.7208/chicago/9780226255002.003.0009
[Medicare, health care reform, payment reform, Affordable Care Act, ACA, insurance, health care]
This chapter discusses whether and how payment policy can be an effective tool for improving health care delivery and whether past and present payment reforms will lead to better and more affordable health care. Focusing on Medicare, the chapter sketches out the theoretical framework that health economists use to examine provider payment and summarizes the empirical tests of this theory. It then summarizes the evolution of Medicare from cost-based to prospective reimbursement and its entry into value-based purchasing and assesses whether payment policy is making progress. The chapter concludes that on the whole, efforts to transform health care by mobilizing or redirecting competition through consumers are problematic owing to the limits of patient expertise and hidden information and actions by providers. Finally, addressing the question of whether it is possible to get payment “right,” the chapter concludes that as long as payment for physician services is based on a fee schedule and each provider is in its own silo, cost control will remain extremely difficult. (pages 221 - 246)
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Part 4. Healthcare Costs, Innovation, and ACA
10. The Role of Technology in Expenditure Growth in Healthcare - Amitabh Chandra and Jonathan Holmes - Amitabh Chandra, Jonathan Holmes
DOI: 10.7208/chicago/9780226255002.003.0010
[health care costs, medical technology, expenditure]
This chapter presents a summary of the 2012 article “Technology Growth and Expenditure Growth in Health Care” by Amitabh Chandra and Jonathan Skinner. It addresses the fact that most of the growth in US health expenditures remains unaccounted for. The authors present a typology of medical technologies based on their average cost effectiveness: category 1 “home run” technologies are highly productive and cost-effective for all patients, category 2 technologies are cost effective for some patients but not for others, and category 3 technologies have small or unknown benefits. In the United States, category 1 technologies explain a substantial portion of gains in longevity attributable to better medical care, whereas category 2 and 3 procedures make up the majority of health spending increases. Spending policy that acknowledges the heterogeneity of patients and technologies could achieve better lower cost health outcomes. To lower costs, the authors suggest allowing insurance companies to treat spending differently for each category, rewarding health outcomes and not quantity of procedures, and increased use of comparative effectiveness analysis. (pages 249 - 270)
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11. Economic Issues Associated with Incorporating Cost-Effectiveness Analysis into Public Coverage Decisions in the United States - Anupam B. Jena and Tomas J. Philipson - Anupam B. Jena, Tomas J. Philipson
DOI: 10.7208/chicago/9780226255002.003.0011
[cost effectiveness analysis, CEA, economic efficiency, health care spending, medical technology, innovation]
This chapter reviews the role of cost-effective analysis (CEA) in treatment coverage determinations in the United States and discusses two important shortcomings of CEA. First, CEA can fail to allocate scarce resources in a way that is economically efficient because treatments that are equally valuable to society may have similar prices and yet cost society very different amounts to produce. Treatments of equal effectiveness and price will appear equally cost effective to insurers and government payers, even if from the perspective of society they are not. Companies therefore respond to the CEA by charging prices that maximize their profits, and health care spending rises. Second, basing coverage decisions only on a treatment's CEA can stifle innovation. Coverage policies based on cost effectiveness closely resemble price controls, which reduce incentives for innovation. Case studies from HIV/AIDS and cancer illustrate this. The chapter concludes by emphasizing the important role that the United States plays in determining global innovation incentives. (pages 271 - 288)
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12. The Complex Relationship between Healthcare Reform and Innovation - Darius Lakdawalla, Anup Malani, and Julian Reif - Darius Lakdawalla, Anup Malani, Julian Reif
DOI: 10.7208/chicago/9780226255002.003.0012
[health care reform, medical innovation, insurance, health care expenditures, supply and demand, patents]
Health care expenditure in the United States has grown rapidly, exceeding the annual growth in GDP by 2.5% since 1960. This rise has strained budgets and is the focus of the current national debate over health reform. Conventional wisdom holds that the primary driver of cost growth is medical innovation. This chapter examines how the expansion of health insurance affects innovation. First, it examines how expansion of health insurance directly and indirectly affects the demand and supply of medical innovation. Second, it examines how health insurance can cure an unfortunate side effect of using patents to encourage medical innovation: high prices that make medical care unaffordable for many. Third, it examines how innovation both promotes health insurance and reduces demand for such insurance. The complexity and uncertainty of the relationship between insurance and innovation puts a premium on the ability to experiment with alternative forms of health care reform. (pages 289 - 310)
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Part 5. ACA and Health Insurance Markets
13. The Affordable Care Act and Commercial Health Insurance Markets: Fixing What's Broken? - James B. Rebitzer - James B. Rebitzer
DOI: 10.7208/chicago/9780226255002.003.0013
[Affordable Care Act, ACA, health insurance, market failure, search friction, health insurance markets, health care]
This chapter concerns the impact of the Affordable Care Act (ACA) on the market for commercial health insurance. The analysis is conventional in that it considers whether and how the ACA can address failures in the market for commercial health insurance. The analysis is unconventional, however, in two respects. First, it emphasizes important but often overlooked heterogeneity in commercial health insurance markets. Second, the focal insurance market failure is neither moral hazard nor adverse selection. Rather attention is focused on search frictions. Search friction–induced inefficiencies are primarily found in the small group and individual market segments, where the presence of moderate search frictions significantly increases insurer market power as well as insurance member turnover. The analysis suggests that various features of the ACA may improve efficiency by offsetting distortions arising from frictions. Specifically, there are potential gains from thinning out the right tail of the distribution of prices, simplifying search, limiting adverse selection, and encouraging investments in future health. (pages 313 - 328)
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14. A Cautionary Warning on Healthcare Exchanges: A Plea for Deregulation - Richard A. Epstein - Richard A. Epstein
DOI: 10.7208/chicago/9780226255002.003.0014
[insurance exchange, insurance markets, Affordable Care Act, ACA, deregulation, health care reform]
This chapter reviews regulation in the health care market under the Affordable Care Act (ACA). It begins with a description of the difficulties inherent in health care insurance markets. A review of the work of Rebitzer, Taylor, and Votruba follows, which is criticized on the whole for overstating the gains from regulation. Specifically, the chapter questions Rebitzer's claims of informational advantages that the insurer has over the insured, that a high turnover rate is evidence of latent market imperfection, that a public agency has the expertise to operate successfully in this market niche, and that the proliferation of consumer health care options poses an impediment to successful market operation. The chapter suggests that restrictions on entry, mandates for minimum essential benefits, privacy regulations, and the inability of private institutions to contract out of the standard-issue terms for medical practice be removed. The chapter then cites the ways in which the ACA deviates from standard insurance principles and concludes that the government's new marketplace metaphor downplays both the massive regulations and the subsidies built in to the ACA exchanges, which negate the benefits that ordinarily derive from organizing voluntary exchanges. (pages 329 - 352)
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List of Contributors
Index
