IN THIS ISSUE: Health Law Reporter Summer 2012

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Summer 2012 Health Law Reporter

David Sontag and Julia Hesse, Co-editors

The 2011-2012 United States Supreme Court term was one of the most momentous in history in terms of its impact on the healthcare industry.  In addition to the Court’s famous (or infamous, depending in your point of view) decision on the constitutionality of the Patient Protection and Affordable Care Act (PPACA), the Court also weighed in with important decisions in the field of intellectual property, HIV privacy, the power of states to overturn the Federal Arbitration Act in the nursing home context, and the Court’s decision to remand the much-anticipated Douglas Medicaid funding case to a lower court, among others.   A brief summarizing each of these cases is included in this issue.

Further, we asked leaders throughout the Boston healthcare community to comment on the impact of the Supreme Court’s decisions this term.  We gave all of the authors an open mandate to weigh in on any aspect of the Supreme Court’s decisions, individually or collectively, that were meaningful to them.   It is a comment on the breadth and complexity of these cases that the authors provided us with such diversity in their thoughts and opinions on the issues presented.  We thank them for their contributions to the Health Law Reporter, and hope that you will enjoy reading their perspectives as much as we did.

Opinion Pieces

Massachusetts and the ACA:  Cause and Effect
By: Eric J. Beyer, Tufts Medical Center

What’s Empathy Got to Do with It: Medicaid Expansion and Empathic Space
By: James Corbett, M.Div., J.D., Steward Healthcare

F.A.A. et al v. Cooper and the Coming Conflict between Privacy and Health Care
By: Denise McWilliams, Esq. and Richard Juang, Esq., AIDS Action Committee

Affordable Care Act will Restructure Health Care Market & Improve Access and Quality of Care
By: James Roosevelt Jr., Tufts Health Plan

Expanding Health Care Access to the Poor, ‘A Simple Case’?  Roberts: Not So Much
By: Matt Selig, Health Law Advocates

Affordable Care Act Continues to Create a Healthier America
By: Eva Marie Stahl, PhD, MPA, and Anna Dunbar-Hester, JD, MPP, Community Catalyst

Health Law Case Briefs

Coleman v. Court of Appeals of Maryland 
By: Margaretta Kroeger
Whether a state employer has sovereign immunity against a FMLA claim.

Douglas v. Independent Living Centers of Southern California, Inc.  
By: Tom Barker and Joel Goloskie
Whether a Medicaid provider or beneficiary has a right to sue a state Medicaid agency if that state enacts a law or regulation that is contrary to the “quality and access” provision of the federal Medicaid Act.

Federal Aviation Administration v. Cooper
By: Sarah Kitchell
Whether a plaintiff can recover only proven pecuniary damages, or other special/consequential damages, for a violation of the Privacy Act of 1974 related to disclosure of HIV status.

Marmet Health Care Center v. Clayton Brown, Clarksburg Nursing Home v. Marchio
By: Phillip Rakhunov
Whether state supreme court’s determination that enforcement of an arbitration clause is against public policy is preempted by the Federal Arbitration Act.  Specifically, whether the FAA preempts West Virginia Supreme Court’s determination that an arbitration provision in a contract for nursing home services is unenforceable in the context of a personal injury claim, where the claim post-dates the agreement.

Mayo Collaborative Services v. Prometheus Laboratories, Inc.
By: Kristyn Bunce DeFilipp
Whether a test that determines how a drug is metabolized is patentable, or instead is a “law of nature” that cannot be patented.

National Federation of Independent Business v. Sebelius
By:  James P. Dowden, Douglas H. Hallward-Driemeier, and Brendon O. Carrington
In a landmark ruling this summer, the Supreme Court upheld key provisions of the Patient Protection and Affordable Care Act (ACA), while at the same time stressing the limits of federal regulatory authority.

Massachusetts and the ACA: Cause and Effect

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By: Eric J. Beyer

The Supreme Court’s stunning 5-4 ruling upholding the 2010 Affordable Care Act means that the most comprehensive transformation of the US health care system since the creation of Medicaid and Medicare will remain largely intact. Since the ACA closely mirrored Massachusetts’ own groundbreaking health reform – and the Supreme Court decision would not have overturned our own law –   the logical question to be asked by Massachusetts residents and businesses is: What does the ACA’s preservation mean for us?

The answer: More than one might suspect.

To be sure, the ACA is structured around many of the features already in place in Massachusetts.  Individual health insurance mandate?  Check.  Health insurance exchanges to act as brokers for offering plans to businesses and individuals?  Check.  Financial penalties levied against residents who don’t buy coverage and businesses that don’t subsidize premiums? Check.

Despite the similarities, the federal act paves the way for significant changes in the Bay State, both in how the health insurance market will look in future years and how the flow of federal funds to the state will rise—and, significantly, fall—as many key facets of the ACA are phased in. Patients, employers and health care providers will all feel its effects – for better and worse. Combined with the health care cost controls passed by our state Legislature and signed by Gov. Patrick in July, the next several years could bring significant innovation and increased efficiency in our health care market, or we could see lower-cost hospitals being forced to close, resulting in higher prices for consumers and employers. Much will depend on how the changes set forth in the ACA and the state’s cost control law are actually executed.

I believe that one of the initiatives left intact by the ACA will have a significant positive impact on the health insurance marketplace in Massachusetts. A new insurance model established by the Act called Consumer Operated and Oriented Plans (CO-OPs), is designed to create lower-cost, high-quality health insurance plans governed by their members.  The federal government in August awarded an $88.5 million loan to help create Minuteman Health, Massachusetts’ first and only CO-OP.  Minuteman is sponsored by Tufts Medical Center, along with its 1,500-member New England Quality Care Alliance physicians’ group, and Nashville-based Vanguard Health Systems, which owns MetroWest Medical Center in Framingham and Natick and Saint Vincent Hospital in Worcester. These providers, and 17 others who wrote letters in support of Minuteman’s application, viewed this initiative – created by the ACA – as a terrific opportunity to introduce a plan that would enable doctors and hospitals, consumers and employers, and the insurer, to work more closely together than ever before to improve health and reduce costs. We anticipate that Minuteman will offer individuals and employers a streamlined administrative structure, significantly greater transparency about prices, and much more data sharing between the plan and physicians so that doctors can make better decisions about designing care around patients’ needs. Members will elect the board and ultimately decide how surpluses are reinvested – either to reduce premiums or increase benefits. The plan is expected to be up and running by January 2014.

CO-OPs were designed in the ACA to bring a lower-cost, more consumer-focused option into the health insurance market.  A health insurance model that puts hospitals and doctors at the heart of data collection, sharing and innovation can yield innovative benefits.  How will these plans operate differently? If you’re a patient, imagine getting a single bill regardless of the number of providers you see. If you’re a physician, imagine having ready access to useful data about your patients that wasn’t previously available to you, to help you design their care. If you’re an employer, imagine your health plan’s care coordinators working directly with you, your employees and their own primary care providers, to set up individualized programs addressing your employees’ specific health problems, improving their health and lowering premiums.

The Supreme Court decision on the ACA maintains Congress’s recognition that the healthcare market is not operating at its maximum potential – or at least not to its maximum potential for consumers.  The CO-OP program is among the elements of the ACA that seeks to shift the paradigm, creating change in the market by directly intervening to give the consumer more standing in the market, whether through new insurance options, guaranteed coverage in spite of pre-existing conditions, or greater investment of the premium dollar in their own healthcare instead of administrative overhead.

Minuteman will be sold through the state’s health insurance exchange, the MA Health Connector;  among other channels.  Another facet of the Affordable Care Act upheld by the Supreme Court decision, the creation of health insurance exchanges, is more recognition that the current system is not working for consumers. By creating an exchange in Massachusetts, and through the ACA spurring the development of exchanges throughout the country, we have provided consumers and small business with direct access to shop, compare and purchase insurance products that work for them.  Through the exchanges we have created new competition among insurers, a direct-to-consumer marketplace and transparency around cost and benefit design that hasn’t been seen before- in short, we are changing the old way of doing business.

In addition to the innovative features they will present to members, CO-OPs have the potential to drive improvements throughout the health insurance sector.  By introducing innovative medical services, efficient administrative functions and exceptional accountability measures, we hope Minuteman will not only offer great value to its members, but that the plan will influence other insurers to follow suit.  In the high tech industry, a company that creates a better microchip influences other manufacturers to improve their product.  Why should health care be any different? Had the Supreme Court decision struck down the ACA, Massachusetts may never have had the chance to participate in this innovative new model of health insurance.

While the upholding of the ACA confers many positive benefits on the Commonwealth, other aspects of the bill threaten to significantly harm health care. It is hard to see how any patients will benefit from the $5 billion reduction in Medicare payments hospitals had expected to receive between now and 2019.  The Medicare pull backs, being used to fund the ACA’s other initiatives, will deal an unquestioned blow to providers as more and more baby boomers reach the age where Medicare entitlements kick in.  The Medicare cuts will also present a disproportionately greater impact on lower-cost hospitals with less commercial revenue – the very providers who need support and who are a key part of the answer to our cost control issues.  In addition, the ACA empowers the Centers for Medicare and Medicaid Services (CMS) to levy fines against hospitals that exceed federally-set benchmarks for patient readmission rates. We can all agree that preventing patients from needing another hospitalization less than 30 days after their most recent admission is a worthy goal. But Medicare does not provide adequate funding for the community-based support that many of these patients need in order to stay out of the hospital. While it makes sense to hold providers responsible for factors they can control, I can see little benefit to penalizing hospitals for issues they can’t influence, and which are neglected by Medicare.  In withholding funding to hospitals around these issues, we may be unduly penalizing hospitals who need this funding to build the infrastructure and bridge the gaps in community care that are necessary to significantly reduce readmissions.

It isn’t just the ACA’s Medicare reductions that pose a threat to lower-cost hospitals.  The dominance wielded by some providers and insurers in the Massachusetts market – the primary reason for our escalating health costs – could get worse under some provisions of the ACA. Accountable Care Organizations, or ACOs, will group providers into various networks, ranging from loosely affiliated doctors groups to tightly controlled networks of caregivers. The purpose of forming these affiliations is to provide consumers with better coordinated, more effective and efficient healthcare, by aligning the incentives and responsibilities of providers through a coordinated payment stream.  While patients could benefit significantly from better coordination of their care, this approach is fraught with potential pitfalls when it comes to market power.  Large provider groups with significant clout in our market already obtain unjustifiably high prices for care that is no better and considerably less efficient than many smaller, lower-cost providers. Requiring groups of physicians to align and control the flow of patients within an organization could serve to create even stronger monopolies in the market, as physicians will likely gravitate to the organizations with the highest commercial health insurance rates.  Playing this scenario out over several years, the ACOs with the most patients and highest prices will demand even higher prices. As they attract greater patient volume with even more marketing muscle and the ability to invest in shiny new facilities, the lower cost providers with less clout could be starved out of the market, leaving all of us with a more concentrated, high cost market.  Ensuring this is not the automatic result of a well-intentioned policy will take continuous engagement in reforming the market and challenging the status quo of insurers and providers by addressing the fundamental market drivers. This would create an even playing field for the most qualified providers, not just the ones with the most clout.

The breadth and scope of the ACA touches every aspect of health care, and its possible outcomes are best understood in the context of impacts on various parts of the  system—lower-cost hospitals, large health care networks, providers with large Medicare and Medicaid demographics, and new entries into the insurance market.  It isn’t surprising that the new law is fueling market apprehension reminiscent of half a decade ago when the state adopted the ACA’s progenitor.  Now, as then, significant change is approaching, and its full impact is a diagnosis in waiting.

Eric J. Beyer is President and Chief Executive Officer of Tufts Medical Center and Floating Hospital for Children. Mr. Beyer is a seasoned health care executive who is well-known and respected for his ability to align the goals of hospitals and physicians so that they can provide high quality, cost effective care in a reform environment. 

Mr. Beyer assumed the CEO role from his position as President and Chief Executive Officer of the Tufts Medical Center Physicians Organization, Inc. (Tufts MCPO).  In that role, he was responsible for overseeing all aspects of the 550-physician faculty practice and the 415-bed academic medical center’s entire ambulatory operation. When Mr. Beyer began his tenure at Tufts MC, he was charged with merging its two separate physician groups into one highly-functioning physicians’ organization. He grew that organization nearly 20 percent in almost six years and has made Tufts Medical Center an employer of choice for talented and respected physicians from academic medical centers across the country.

To view Eric Beyer’s full biography, please click here.

What’s Empathy Got to Do with It: Medicaid Expansion and Empathic Space

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By James Corbett, M.Div., J.D.

I. Introduction

            Empathy, the ability to understand the thoughts and emotions of another person, is crucial in modern healthcare at a time when patients have become reliant on the specialized skills of strangers. A landmark study recently confirmed what many intuitively suspected: clinical empathy can improve health outcomes.[1] However, while clinical empathy is typically thought of as an individual transaction, the importance of creating empathic space in order to stimulate empathy through structural mechanisms is regularly overlooked. As the legal scholar Lawrence Rosen indicates, “Law creates culture,”[2]and legislation has the capacity to create empathic space. This article is a historical and structural analysis of Medicaid expansion and the likely impact of the Supreme Court’s ruling on the Medicaid provision of the Patient Protection and Affordable Care Act (hereinafter “ACA”) [3] in National Federation of Independent Business v. Sebelius (hereinafter “NFIB”).[4] If, as commonly is held, the test of the morality of a society is the treatment of its most vulnerable residents, then the ruling on the expansion of Medicaid may be the most significant aspect of the Supreme Court’s most recent term.

In 2010, in the midst of the greatest financial downturn since the Great Depression,[5] President Obama signed into law the ACA in an effort to improve the health of the Nation while at the same time reducing unsustainable health care costs.[6] One controversial aspect of the ACA was that the law expanded Medicaid and tied existing federal funding to the expansion of the program. Due to objections by twenty-six states, the Supreme Court ruled on the constitutionality of the Medicaid provision of the ACA in NFIB.[7]

The Supreme Court declared the withholding of a state’s entire Medicaid budget for non-compliance with the ACA to be unconstitutional.[8] However, the Court upheld the ACA’s Medicaid expansion by preserving the existing Medicaid program and interpreted the ACA expansion to be a new program rather than an amendment, which would expand the existing Medicaid program.[9] In the NFIB ruling, seven of the nine Justices voted to limit the power of the Federal Government to impose conditions on federal funding allocated to the states. However, five Justices upheld Medicaid expansion as a new program, distinct from existing Medicaid funding. The holding allows Congress to offer federal funds to states to expand Medicaid, and if states accept the funds, Congress may require states to comply with the terms of the new grant.[10] Nevertheless, declining the Medicaid expansion cannot cause pre-existing federal funds to be withdrawn. Thus, post-NFIB, a state’s practical considerations regarding Medicaid expansion will involve several issues, including how a state views its obligations to its most vulnerable residents, fiscal capacity, and, of course, political factors.

II. History of Medicaid Expansion

Medicaid has been successful in providing coverage to some of the Nation’s most vulnerable populations, and “enrollees have consistently received more regular medical care than the uninsured through that time.”[11] To appreciate the impact of the NFIB decision, it is necessary to understand the history of Medicaid and the goals of its expansion under the ACA.

In 1960, President Eisenhower signed into law the Kerr-Mills Act, which created a new grant program to fund states that provided medical assistance for certain elderly individuals.[12] In 1965, Congress expanded the Kerr-Mills Act, adopting a combination of approaches to improve access to health care for the elderly.[13] The Social Security Amendment Act of 1965 created a hospital insurance program to cover nearly all of the elderly (Medicare Part A) and a voluntary supplementary medical insurance program (Medicare Part B).[14] At the same time, Congress also decided to cover other vulnerable populations including families with children, the blind and the disabled through the creation of Medicaid,[15] an individual entitlement program with open-ended federal matching of funds.[16]

In order to respect state autonomy, Medicaid was originally envisioned as a voluntary program to provide the means for states to offer medical coverage to vulnerable populations. States had the option of opting into or declining to participate in Medicaid.[17] If a state chose to participate, it was required to provide coverage to all individuals who qualified for coverage under the federal government’s guidelines, although each participating state was free to add to the minimum federal requirements.[18] From the inception of the Medicaid program, Congress retained the ability to alter, recall, or replace it with a new law. Since 1965, Medicaid has been expanded on multiple occasions.[19]

The ACA expansion requires coverage for participating states to include adults under age 65 with incomes up to 133% of the federal poverty level.[20] This translates to an income of approximately “$14,800 for individuals and $25,400 for a family of three.”[21] The constitutionality of this mandated coverage, and the threat of the total withdrawal of Medicaid funds for a state choosing not to participate, spurred state protestation.

III. NFIB and Medicaid Expansion

            Twenty-six state plaintiffs claimed that by making the states’ existing Medicaid funding contingent on agreeing to participation in the expanded program, the ACA’s conditions were coercive, and a violation of principles of federalism.[22] Chief Justice Roberts’s controlling opinion posited that Congress could require the states to adhere to the ACA’s conditions in order to qualify for the ACA’s newfunding for Medicaid expansion, but Congress could not require the states to participate in the ACA’s “new program” by threatening the loss of existing Medicaid funds.[23]

Chief Justice Roberts began his Medicaid expansion opinion with the notion that under the Spending Clause, Congress may condition grants of funds in a way that might “encourage a State to regulate in a particular way, [and] influenc[e] a State’s policy choices.”[24] But, Chief Justice Roberts recognized that there are limits; he articulated that “when ‘pressure turns into compulsion,’ the legislation runs contrary to our system of federalism… [and] the Constitution simply does not give Congress the authority to require the States to regulate.”[25] Thus, as a federal grant of funds, Medicaid is subject to Spending Clause constitutional standards and by threatening the withholding of a state’s entire Medicaid budget, Congress forced the states’ hands.

Medicaid funding is a substantial portion of state budgets and on average comprises twenty percent of a state’s budget across the country.[26] As Chief Justice Roberts indicates, “[t]he threatened loss of over 10 percent of a State’s overall budget … is economic dragooning that leaves the States with no real option except to acquiesce to the Medicaid expansion.”[27] Chief Justice Roberts’s opinion expressed his belief that the original Medicaid legislation covered a relatively narrow population, only America’s most vulnerable,[28] whereas the ACA’s attempt to use Medicaid expansion to meet the health needs of the entire non-elderly population with income below 133 percent of the poverty level is a new program and “an element of a comprehensive national plan to provide universal health insurance coverage.”[29]

Thus, as a new program, funds that were previously committed under existing Medicaid grants could not be withdrawn for noncompliance with the new legislation. Despite what he considered to be a fundamental change in Medicaid, Chief Justice Roberts found that “[n]othing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availa­bility of health care, and requiring that States accepting such funds comply with the conditions on their use” as an independent program.[30] As a result, the Supreme Court found Medicaid expansion under the ACA to be a voluntary program, which states are free to enter as they choose, and the Secretary of Health and Human Services is free to condition entry and exit of the program within the parameters of the NFIB holding.

Notably, Chief Justice Roberts’ opinion has a broader impact regarding rights retained by the states. Under Chief Justice Roberts’s opinion, the Medicaid condition at issue would impermissibly coerce the states and therefore exceed Congress’s power to spend the federal fisc on behalf of the general welfare.[31] In attempting to differentiate between “pressure” and “compulsion,” the Court distinguished South Dakota v. Dole, a previous case on conditions of federal funding, on the grounds that the only funding at issue in Dole was five percent of a State’s federal highway funds, whereas in NFIB a substantial portion of the states’ budgets would be threatened.[32] The Court upheld the ACA by interpreting it as conditioning the receipt of new funds only on acquiescence to the Medicaid expansion as a new program, removing Congress’s ability to withhold existing Medicaid funding, and thereby preserving state autonomy. Thus, “less than half of one percent” of a state’s budget in Dole would be pressure, whereas a state’s entire Medicaid budget, often “20 percent of the average State’s total budget,” would be coercion, akin to “a gun to the head.”[33]

Essentially, the Court in NFIB affirmed that Congress cannot achieve indirectly through its spending clause power what it has no power to do directly.[34] Congress cannot “commandeer” state legislatures and force them to expand Medicaid, and thus Congress cannot achieve Medicaid expansion by offering the states a financial incentive that they cannot refuse.[35] The Court recognized the nature of political accountability inherent in our federal system, and the danger of allowing Congress to remove the choice from accepting federal programs, which may be unpopular, whereby the state legislators would bear the brunt of political backlash, rather than Congress.[36]

This is consistent with traditional notions of federalism. As Justice Brandeis noted, “It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”[37] NFIB upholds this concept by allowing Congress to provide the means to create state Medicaid expansion programs, while allowing the several states to create what would best suit individual state needs, but not allowing Congress to penalize states for choosing not to so experiment.

In a dissenting opinion, joined by Justice Sotomayor, Justice Ginsburg suggested that “the expansion [will not] exorbitantly increase state Medicaid spending [and] [t]he Congressional Budget Office projects that States will spend 0.8% more than they would have, absent the ACA” and was thus not unconstitutionally coercive.[38] However, this view fails to fully account for the financial crisis states face. Notably, any additional funding to health care would likely come at the expense of other state programs such as education, housing, employment, or other programs, and detracting from these programs may negatively impact other social determinants of health that can be of equal import to health outcomes. With the decision to expand Medicaid left to the states, the speculation of what states will do has intensified, but perhaps the answer to what this decision portends can best be discerned from the response to the creation of Medicaid, which was equally contentious.

IV. Empathic Space

            The passing of two signature pieces of federal legislations – the Civil Rights Act of 1964[39] and the Social Security Amendment Act of 1965[40] – had a positive impact on health outcomes, but not without controversy. The Civil Rights Act outlawed discrimination in voting and ended racial segregation in schools, the workplace, and public accommodations, which meant that blacks could no longer be barred from hospitals based on race. The Social Security Amendment Act established Medicare and Medicaid, which meant that many of America’s poorest residents garnered health insurance.[41] Notably, the receipt of both Medicaid and Medicare was conditioned on adherence to the Civil Rights Act.

More than 8,000 hospitals were subject to civil rights legislation set forth in Title VI of the Civil Rights Act and within two years of the enactment of the Social Security Amendment Act most hospitals were complying with desegregation laws.[42] Of the 8,000 hospitals approved for participation in Medicaid and Medicare, more than 3,000 had to revise their traditional practices in order to participate.[43] Although the receipt of federal funding for hospitals was an economic boon and led to increased revenue and hospital building booms throughout the country, 250 hospitals, predominantly in the South, refused to comply with Title VI and were barred from receiving Medicare and Medicaid funding.[44] Rejecting the federal funding was based on ideological rationales, as hospitals were initially resistant to desegregation, but by refusing federal dollars so as to not have to integrate their institutions, these hospitals lost revenue and prevented both blacks and whites alike from utilizing federal health insurance funding in their institutions, which negatively impacted health outcomes. Eventually, due to practical financial and medical rationales, these hospitals changed course and accepted the conditioned federal funding.[45]

As a result of the empathic space created by the Civil Rights Act and the Medicaid and Medicare Expansion Act, health outcomes dramatically improved for those who were previously uninsured.[46] For African Americans, the new regulations and capacity to receive better healthcare as a result of health insurance led to the greatest improvement in health disparities in the history of the country.[47] From 1965 to 1980 the overall age-adjusted death rates fell 25.2% for blacks and 21.1% for whites.[48]

The expansion of Medicaid authorized in the ACA has the similar potential to reduce the health disparities that are based on income, as it will allow individuals who previously could not afford health insurance coverage to receive care. Chief Justice Robert’s opinion highlights that allowing states to voluntarily accept federal funds to expand Medicaid when the state is financially ready recognizes that health is not determined by coverage alone, but is multifaceted and impacted by multiple state-funded programs. However, with the large amount of bad debt and charity care that hospitals in states with uninsured individuals encounter, it is likely that states will be under inordinate pressure to accept the Medicaid expansion funding, and like the hospitals who initially refused insurance funding in the 1960’s, it is expected that the states too will eventually accept Medicaid expansion funding.

To be sure, empathy can exist separate from health insurance, but health insurance does help create the empathic space where hospitals and providers who can expect reimbursement can diminish the practical fiscal obstructions that limit the care and empathic space for the uninsured.[49] In fact, if we look at outcomes alone, it is clear that those who have Medicaid have better health outcomes than those without health insurance.[50] The Institute of Medicine estimates that health insurance may reduce adult mortality by 25%.[51] Consequently, the states that refuse to accept the Medicaid funding, if otherwise financially able to expand, would be negatively impacting the health of some of their poorest residents.

V. Conclusion

            Chief Justice Roberts presented each state with a choice. On one hand, to expand Medicaid per Congress’s offering which would improve health and provide the tools to providers to create empathic space for the practice of medicine. On the other, refrain from expansion at a great cost to its most vulnerable citizens. Recent studies confirm that Medicaid insurance improves health outcomes.[52] Despite the clear public health rationale, for Medicaid expansion there remains the possibility that ideological or political factors, may, at least initially, prevent expansion. But sometimes the best political argument can be a financial one.

The federal government will pay 100% of the cost of the newly insured Medicaid beneficiaries through 2016 and 90% after 2020 instead of the 50% to 83% that it currently pays for eligible categories across the country.[53] Furthermore, Medicaid ACO demonstration projects in Oregon and payment reform in Massachusetts may lower the cost curve even further making the financial consequences of not accepting the funding too great for any state to resist.[54] A country that seized the opportunity to improve the health of its most vulnerable residents would be a repudiation of the misguided characterization of DH Lawrence who claimed, “The essential American soul is hard, isolate, stoic, … and has never yet melted.”[55] If a common test of the morality of a society is indeed its treatment of its most vulnerable residents, perhaps the empathic space created by health insurance expansion is more important to the country than we recognize.

James Corbett, M.Div., J.D. is the System Vice President of Community Health & Ethics at Steward Health Care System. James is also a Fellow at Harvard Medical School, Division of Medical Ethics. At Steward, James provides oversight to Community Health, Behavioral Health and Ethics. He received his BA in International Relations from Syracuse University, a Juris Doctor from Saint John’s Law School, and a Master of Divinity from Duke University. James has taught health care law and ethics courses at both the University of Maine Law School of law and New England School of Law. James presents on topics related to health, ethics and empathy internationally.

[1] Mohammadreza Hojat et al., Physicians’ Empathy and Clinical Outcomes for Diabetic Patients: Building the Evidence-Based Medicine, 86 Acad. Med. 359 (2011).

[2] Lawrence Rosen, Law as Culture: An Invitation 14 (2006).

[3] The Patient Protection and Affordable Care Act, Pub. L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, P.L. 111-152 (2010).

[4] National Federation of Independent Business v. Sebelius, 132 S.Ct. 2566 (2012).

[5] Phil Oliff, Chris Mai, & Vincent Palacios, States Continue to Feel Recession’s Impact, Center Budget & Pol. Priorities (updated June 27, 2012), http://www.cbpp.org/cms/ index.cfm?fa=view&id=711.

[6] Neil Irwin, It’s Official: The Great Recession Ended Last Summer, Wash. Post, Sept. 20, 2010, http://voices.washingtonpost.com/political-economy/2010/09/its_official _the_great_recessi.html. See also The Patient Protection and Affordable Care Act, Pub. L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, P.L. 111-152 (2010).

[7] See NFIB, 132 S.Ct. 2566 (2012).

[8] Id. at 2607.

[9] Id.

[10] Id.

[11] Eliot Fishman, Running in Place: How the Medicaid Model Falls Short, and What to do About it 2:9 (Century Foundation Press 2002).

[12] Judith D. Moore & David G. Smith, Legislating Medicaid: Considering Medicaid and Its Origins, 27 Health Care Financing Rev. 45, 45 (2006). See also Sidney Fine, The Kerr-Mills Act: Medical Care for the Indigent in Michigan, 1960-1965, 53 J. Hist. Med. Allied Sci. 285 (1998).

[13] Moore & Smith, supra note 12, at 46-50.

[14] Ctr. Medicare & Medicaid Serv., Tracing the History of CMS Programs: From President Theodore Roosevelt to President George W. Bush, CMS.gov 4 (last visited Aug. 25, 2012), http://www.cms.gov/About-CMS/Agency-Information/History/ Downloads/PresidentCMSMilestones.pdf.

[15] Id.

[16] The Social Security Amendments of 1965, Pub.L. 89-97, 79 Stat. 286 (1965). See also Ctr. Medicare & Medicaid Serv., supra note 14, at 46.

[17] Ctr. Medicare & Medicaid Serv., supra note 14.

[18] 42 U.S.C. §§1396a(a)(10)(A); 1396d(a)(1)-(5), (17), and (21).

[19] See Moore & Smith, supra note 12, at 45-48. See also Ctr. Medicare & Medicaid Serv., supra note 14.

[20] The Patient Protection and Affordable Care Act, Pub. L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, P.L. 111-152 (2010). The program previously required coverage for adults with incomes up to 100% of the poverty level.

[21] Jordan Rau, Medicaid Expansion Favored in General, Less so Near Home, Survey Finds, Capsules: Kaiser Health News (July 31, 2012), http://capsules. kaiserhealthnews.org/index.php/2012/07/medicaid-expansion-favored-in-general-less-so-near-home-survey-finds/.

[22] Brief of State Petitioners on Medicaid at 24–53, Florida v. U.S. Dept. of Health & Human Servs., No. 11–400 (S.Ct. Jan. 10, 2012).

[23] National Federation of Independent Business (NFIB) v. Sebelius, 132 S.Ct. 2566, 2607 (2012).

[24] Id.at 2602 (citing New York v. United States, 505 U.S. 144, 166 (1992)).

[25] Id.at 2602 (citing New York, 505 U. S., at 178).

[26] Timothy Stoltzfus Jost & Sara Rosenbaum, The Supreme Court and the Future of Medicaid, New Eng. J. Med., July 25, 2012, http://www.nejm.org/doi/pdf/10.1056/ NEJMp1208219.

[27] NFIB at 2604-05. Medicaid spending accounts for over 20 percent of the average State’s total budget, with federal funds covering 50 to 83 percent of those costs. See id. at 2604 (citing Nat. Assn. of State Budget Officers, Fiscal Year 2010 State Expenditure Report, p. 11,Table 5 (2011), and 42 U.S.C. § 1396d(b)).

[28] NFIB, 132 S.Ct. at 2605-06 (citing 42 U. S. C. §1396a(a)(10)) (“The original program was de­signed to cover medical services for four particular cat­egories of the needy: the disabled, the blind, the elderly, and needy families with dependent children.”).

[29] NFIB, 132 S.Ct. at 2606.

[30] Id. at 2607.

[31] Id. at 2604-06.

[32] Id. at 2604-05.

[33] Id. at 2604.

[34] Id.

[35] Id. at 2602.

[36] Id. at 2602-03.

[37] New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting).

[38] Id. at 2632.

[39] The Civil Rights Act of 1964, Pub.L. 88-352, 78 Stat. 241 (1964).

[40] The Social Security Amendments of 1965, Pub.L. 89-97, 79 Stat. 286 (1965). See also Moore & Smith, supra note 12, at 45.

[41] The Social Security Amendments of 1965, Pub.L. 89-97, 79 Stat. 286 (1965). See also Ctr. Medicare & Medicaid Serv., supra note 14.

[42] W. Michael Byrd & Linda A. Clayton, An American Health Dilemma: Race, Medicine and Health Care in the United States 1900-2000 and the Problem of Race 313 (2002).

[43] Id. at 313.

[44] See Jill Quadagno, Promoting Civil Rights through the Welfare State: How Medicare Integrated Southern Hospitals, 47 Social Problems 68 (2000). See also Paul Starr, The Social Transformation of American Medicine 358-62 (New York: Basic Books, 1982).

[45] See Quadagno, supra note 44, at 71.

[46] Benjamin D. Sommers, Katherine Baicker & Arnold M. Epstein, Mortality and Access to Care among Adults after State Medicaid Expansions, New Eng. J. Med., July 25, 2012, http://www.nejm.org/doi/full/10.1056/NEJMsa1202099#t=articleTop.

[47] See generally Manning Marable, Race, Reform, and Rebellion: The Second Reconstruction and Beyond in Black America, 1945-2006 (Univ. Press of Mississippi 2007).

[48] Id. at 387.

[49] It is important to recognize that for some procedures and services that Medicaid payment is far below the private insurer payment for the same procedure and therefore even if Medicaid coverage is expanded to insure certain populations, in some cases the lower funding can be an impediment to services. See Doug Trapp, Low Medicare, Medicaid Pay Rates Impact Private Costs, Am. Med. News, Jan. 5, 2009, http://www.ama-assn.org/amednews/2009/01/05/gvsb0105.htm. See also Avik Roy, New Study: Expanding Medicaid Reduces Access to Health Care, Forbes, Mar. 10, 2012, http://www.forbes.com/sites/aroy/2012/03/10/new-study-expanding-medicaid-reduces-access-to-health-care/.

[50] Jonathan Cohn, Are You Better Off With Medicaid Than No Insurance? A Landmark Study Says Yes, Kaiser Health News, Jul. 7, 2011, http://www.kaiserhealthnews.org/ Columns/2011/July/070711cohn.aspx.

[51] Id. (citing Inst. Of Med., Care Without Coverage: Too Little, Too Late (2002)).

[52] See Sommers, Baicker & Epstein, supra note 45.

[53] Wendy K. Mariner, Leonard H. Glantz & George J. Annas, Reframing Federalism – The Affordable Care Act (and Broccoli) in the Supreme Court, New Eng. J. Med., July 18, 2012, http://www.nejm.org/doi/full/10.1056/NEJMhle1208437.

[54] See Jennifer Lubell, Are ACOs the Answer for Medicaid?, Am. Med. News, July 2, 2012, http://www.ama-assn.org/amednews/2012/07/02/gvsa0702.htm. See also Thomas Lee, Massachusetts Health Care Reform: An Academic Provider’s Perspective, HealthAffairs, Aug. 13, 2012, http://healthaffairs.org/blog/2012/08/13/massachusetts-health-care-reform-an-academic-providers-perspective/.

[55] D.H. Lawrence, Studies in Classic American Literature 68 (Penguin Classics 1990) (“The essential American soul is hard, isolate, stoic, and a killer. It has never yet melted.”).

F.A.A. et al v. Cooper and the Coming Conflict between Privacy and Health Care

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By: Denise McWilliams, Esq. and Richard Juang, Esq.

       The majority decision in Federal Aviation Administration et al v Cooper, 566 U.S. ____  (2012) (No 10-1024 ) marks another step forward in the relentless national erosion of privacy protections. In Cooper,the Supreme Court held that, under the Privacy Act of 1974, a cornerstone of federal privacy protections, mental anguish and humiliation for individual plaintiffs were not “actual damages.”  Although the outcome was not unpredictable, Justice Alito’s decision is, nonetheless, starkly at odds with the long-standing principle that, fundamentally, the purpose of privacy protections is to prevent and redress “[t]he mental distress from having been exposed to public view.”[1]  Without recognition of that basic injury, privacy jurisprudence loses focus and purpose.

         The facts of Cooper remind us of how complicated things get when medical information intersects with non-medical interests, cultural realities around stigma, and institutional information-sharing. Stanmore Cooper, a licensed pilot since 1964, was diagnosed with HIV in 1985.  At that time, the Federal Aviation Administration would not issue a medical certificate, a prerequisite to obtaining a pilot’s license, for those with HIV.  Medical certificates are not cursory, but include information about the applicant’s illnesses, surgeries and medications and are renewable every two to three years depending on age. Rather than apply and be rejected, Cooper let his license lapse, effectively grounding himself.

         In 1995, Cooper’s health declined until he was no longer capable of working.  Cooper applied for and received Social Security Disability Income (SSDI).  Notably, 1995 also saw the first effective treatment for HIV.  Cooper then experienced a significant recovery of health, voluntarily requested termination of his SSDI benefits, and returned to work.

         In 1998, Cooper, investigating a return to flying, researched the FAA procedures for those with HIV.  At that time the FAA still had not established a protocol for applicants with HIV and agency responses to such applicants varied considerably. Cooper simply withheld all information about his HIV status when he applied and, as a result, received his medical certificate.  In subsequent renewals, Cooper continued to omit information regarding his HIV illness until his fraud was detected by Operation Safe Pilot in 2005.

         Operation Safe Pilot began in 2002 and involved the FAA and the Social Security Administration (SSA) exchanging and comparing their respective records in an attempt to detect fraudulent medical certificates.  Going well beyond a simple computer comparison, the exchange, at least in Cooper’s case, included a hard copy of Cooper’s complete disability file.  After a review of Cooper’s SSA file, the FAA revoked his medical certificate and indicted him on three counts of making false statements to a government agency. Cooper ultimately pled guilty to one count of making and delivering a false official writing in violation of 18 U.S.C. §1018. He was fined $1,000.00 and sentenced to two years probation.  (Cooper’s pilot license had since been reinstated.)

         Subsequently, Cooper filed suit against the FAA, SSA, and the Department of Transportation under the Privacy Act. Enacted in the aftermath of the Watergate conspiracy, the Act details the requirements for the management of confidential records held by federal agencies.  The Privacy Act requires agencies to establish mechanisms to avoid disclosure of confidential information which “[c]ould result in substantial harm, embarrassment, inconvenience, or unfairnesss to any individual on whom information is maintained.”[2]  In essence, federal agencies are permitted to exchange information only with the consent of the individual whose information is being held, or pursuant to a number of exceptions, none of which were relevant in Cooper’s case. The lower courts in Cooper consistently concluded that the agencies had wrongfully disclosed Cooper’s confidential information and had done so “in a manner which was intentional or willful.”[3] Under such circumstances, a wronged individual can recover the “actual damages sustained by the individual.”[4]

         Cooper, however, ran into a countervailing legal matter: the question of whether Congress, in waiving sovereign immunity, had also consented to suits alleging only emotional and mental distress, absent clear pecuniary damages. The Supreme Court majority, in ruling against Cooper relied, in large part, on United States v Nordic Village, Inc. 503 U.S. 30 (1991) which held that “plausible” interpretations of a statue are sufficient to defeat a claimed waiver of sovereign immunity. Looking therefore, only to the statutory phrase “actual damages,” Justice Alito analogized the phrase to libel per quod and slander, both of which require “special damages” or actual pecuniary loss, instead of “general damages” which are not necessarily pecuniary in nature.[5]  Because of this parallel the Court concluded that the required “unequivocal expression” did not exist.  The established and commonsensical principle that the “actual damage” inherent to a privacy violation is mental anguish was, then, defeated by a rigid and arguably unreachable requirement that damages be allowed only when there is an “unequivocal expression” of sovereign consent. In effect, Cooper demoted privacy from a fundamental individual interest to a statutory entitlement, to be conferred or revoked depending on the vagaries of statutory construction and fuzzy legislative compromises.

         The Court’s retreat from expansive privacy protections warns us that the traditional tort-based and fundamental rights approaches to privacy are no longer viable ways of protecting people’s confidential information. On the one hand, Cooper signals to holders of personal data that the mental distress and humiliation of public exposure is no longer a protected interest. On the other hand, Cooper further signals to the public that the sole means for individuals to protect their personal information is to refuse to disclose it. The Court’s sharp restriction on individual enforcement of privacy interests suggests that, going forward, withholding personal information may well be the only tool available when interacting with misbehaving federal agencies.

         At the same time, withholding information may no longer be an option for most individuals. The health care sector, both in Massachusetts and nationally, are decisively moving toward increasingly integrated database technologies. The main example (indeed the cornerstone) of this is the implementation of portable Electronic Medical Records (EMRs).

         EMRs promise more efficient and accurate delivery of medical services. It is widely accepted that successful implementation of EMRs depends on the public’s belief that the information contained therein will be protected from unauthorized disclosures:

“Privacy and security are the bedrock of building trust, a must-have component that is essential to achieving meaningful use and realizing the value of health IT. Patients and providers must feel confident that laws, policies, and processes are in place to keep their health information private and secure, and that they will be enforced when violations occur.”[6]

         However, the reality of EMRs is rather more complicated than the ideal of teams of medical professionals seamlessly exchanging information on a common patient. Many diverse parties, completely unrelated to the treatment needs of the person whose information is contained in an EMR, such as insurers, researchers, law enforcement personnel, among many others, want access to that information, preferably without the consent of the individual — indeed, sometimes without alerting that individual. Their interests are as varied as quality assurance, health outcomes and fraud detection to name but a few. The single unifying theme in the promotion of EMRs is that all of these players seek unconsented access to individuals’ health information for some “greater good.”

         Nonetheless, it is far from clear what, other than institutional restraint, will prevent or deter the misuse of individual information. Fear of misuse could easily drive people to withhold information, even when health and safety are at stake. Cooper should be read as a warning: we are, increasingly, legally unprepared for the growing conflicts between institutional power and individual privacy needs, which lay at the very heart of institutional changes in health care.

Denise McWilliams is General Counsel of AIDS Action Committee of Massachusetts, Inc., the Commonwealth’s largest AIDS service organization. She is a graduate of Northeastern University Law School.

Richard Juang is Assistant General Counsel of AIDS Action and a graduate of Northeastern University Law School.

[1] Times, Inc. v. Hill, 385 U.S. 374, 385, n. 9 (1967).

[2] 5 U.S.C. §552a(e)(10).

[3] 5 U.S.C. §552a(g)(4).

[4] 5 U.S.C. §a(g)(4)(A).

[5] Cooper at 10.

[6] Federal Health Information Technology Strategic Plan 2011-2015  Goal III Inspire Confidence and Trust in Health IT, p. 29.

Affordable Care Act will Restructure Health Care Market & Improve Access and Quality of Care

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By: James Roosevelt, Jr.

On June 28, 2012, a divided United States Supreme Court upheld most of the elements of the Patient Protection and Affordable Care Act (henceforth ACA).  This decision, which was one of the most anticipated of any ruling in recent Supreme Court history, clears the way, pending the outcome of the November 2012 Congressional and Presidential elections, for the full implementation of the law.

If the ACA does run the gauntlet of legal and legislative challenges, the impact of this law will be among the most far-reaching of any in American history.  In this regard, conservative critics of the law are right: the ACA represents a dramatic federal governmental restructuring of the health care market. Outside of Massachusetts and a few other states, the ACA will result in sweeping changes to the business practices of health insurers and a significant expansion of private and public health insurance coverage. The law also creates a framework for significant reform of the way health care is organized, delivered and paid for.  Even after the Supreme Court’s unexpected and unprecedented limitation of the Medicaid expansion process, the law envisions a significant expansion in Medicaid coverage.

Nonetheless, where these same critics are wrong is that the law does not represent a federal takeover of health care.  The ACA preserves the predominant role in the health care system for private providers and insurers and affords the states significant latitude over implementing many provisions of the law.

Ironically, the residents of Massachusetts, whose own 2006 health care reform law was the model for the ACA, had the least to lose of any state from a decision by the Court declaring the law unconstitutional. The experience of Massachusetts with health insurance has been dramatically different from the rest of the country. The state’s successful health care reform law already has resulted in extending health insurance coverage to more than 98 percent of its residents.  Still, even Massachusetts stands to benefit substantially from the ACA, particularly in terms of the quality and delivery of health care but also in alleviating state costs associated with expanded access to care.

After reviewing the Court’s ruling, this article will examine the effect of the Court’s decision on different provisions of the ACA and the potential impact of the law on four dimensions of health care and the health care market, both nationally and within Massachusetts:

  • Access to care
  • Quality of care
  • Delivery of care
  • Cost of health care

The Decision

The majority decision delivered by Chief Justice John Roberts in National Federation of Independent Business v. Sebelius seemed to catch almost all observers by surprise (including a number of news outlets which initially misreported the decision). The two key decisions issued by the Court were (1) to uphold the so-called individual mandate to purchase health insurance and (2) to strike down the law’s provision making all federal funding of a state’s Medicaid program conditional on the state’s agreeing to implement the significant expansion of Medicaid coverage contained in the ACA.

The Court ruled that Congress could not require individuals to purchase health insurance on the basis of its authority under the Commerce Clause, despite the strong argument that as a consequence of the sui generis nature of the health care market, individual decisions not to purchase health insurance effectively imposed higher costs on other consumers.  However, the Court upheld the mandate as an exercise of Congress’ taxing power, asserting that since the only consequence of an individual not maintaining health insurance (“minimum essential coverage”) is making an additional payment to the Internal Revenue Service, the mandate effectively amounted to a tax.

While this aspect of the decision caught many off guard, perhaps it should not have been unanticipated; historically even Supreme Court majorities that were inclined to reign in federal power have given broader latitude to Congress under its taxing authority than under the Commerce Clause.  For instance, the Court first initially upheld major New Deal enactments on the basis of Congress’ power to tax.

However, the Court’s decision on the Medicaid expansion was a radical departure from its own precedent. The ACA enlarges the population covered by Medicaid to include adults under age 65 (those over 65 would be covered by Medicare) earning up to 133 percent of the federal poverty level.  However, the Court by a 7-2 margin found that the provision by which Congress threatened to withhold existing Medicaid funds from states which refused to accept the Medicaid expansion was “impermissibly coercive.”  Thus, “for the first time ever,” asJustice Ginsburg points out in her dissent, the Court “finds an exercise of Congress’s spendingpowerunconstitutionally coercive.” Despite Chief Justice Roberts’ sharp break with the Court’s consistently upholding Congress’ authority to condition states’ use of federal funds, the Court did not, as Justices Alito, Scalia, Kennedy and Thomas had sought, invalidate the expansion of Medicaid under the ACA. Thus, practically speaking, the expansion of Medicaid was made optional not mandatory.

The Supreme Court & Access to Health Care

The primary purpose of the ACA is to extend health insurance coverage to a large portion of the 50 million Americans without it.  There are several aspects of the ACA that are designed to achieve that goal and, with the exception of the Medicaid expansion, the Supreme Court left all of these provisions intact.

Under the law, private insurers are prohibited from a range of all too common practices that have had the effect of restricting access to health insurance.  These practices, which have been eliminated by the ACA, include denying coverage or charging higher prices as a result of preexisting medical conditions, charging women higher premiums than men, retroactively terminating coverage for individuals who become sick, and imposing annual or lifetime caps on benefits.  In Massachusetts, we sometimes fail to appreciate the experience of many consumers in other states who have been denied or terminated from coverage or been hit with sharp premium increases. Take for example a case with which I am personally familiar of a 33-year old woman from California, who was rejected for health coverage by a well-known national insurer for an unspecified bone and joint abnormality.  As it turns out the woman, who was otherwise a picture of health with no known risk factors, had suffered a muscle pull five years earlier – or in insurance parlance a “bone and joint abnormality.”  These types of exclusionary practices are now banned.

The Supreme Court decision also leaves in place the most controversial aspect of the law: the individual mandate.  This provision was adopted to prevent people from “free riding” (not paying for insurance but still benefitting from guaranteed access to care and thus shifting costs onto other consumers) and to protect insurers and the market from consequences of “adverse selection” where individuals acquire insurance only when they get sick.  Prior state experience had shown that when states enacted reforms such as community pricing and guaranteed-issue absent an individual mandate, reform resulted, as Justice Ginsburg stated, in a “death spiral in the health insurance market” where insurers were forced to substantially raise health insurance premiums or exited the market.  It is ironic that conservatives have opposed the mandate, which was designed by the Heritage Foundation to allow health care markets to function more effectively and efficiently.

The Medicaid expansion is the cornerstone of the ACA’s goal of enhancing access to coverage and care.  It recognizes that an individual mandate alone cannot suffice when the majority of people without health insurance are unable to afford the premiums.  However, the impact of this aspect of the law has been thrown into question by the Supreme Court decision.

Prior to the ruling, the Kaiser Family Foundation had conservatively (absent aggressive federal and state enrollment campaigns) estimated that the expansion of Medicaid to all adults at or below 133 percent of FPL would increase Medicaid enrollment  by 16 million by 2019 and would result in a 45 percent reduction of uninsured adults under 133 percent of the poverty level. But those estimates were based on the assumption that all states would adopt the expansion.

Now that assumption has been thrown into question.  Several Republican-controlled states have expressed strong opposition to moving forward with any expansion.  I suspect that in the short-term this is driven largely by political grandstanding prior to the 2012 elections.  Let’s assume that the ACA survives any future legislative challenge and becomes firmly established as the law of the land; the question remains whether those same Republican governors would continue their opposition to the Medicaid expansion.

Many suspect they would not.  Although opponents of the ACA cited the burden on states that would be imposed by a Medicaid expansion, this appears to have little factual basis. The federal government will pay 100 percent of the costs for newly eligible adults between 2014 and 2016.  States will start contributing beginning in 2017, but their share would top out at 10 percent in 2020 and thereafter.  A recent study by The Urban Institute finds that in a worst-case scenario, states would in fact realize a net fiscal gain of 40.6 billion from 2014-2019 and more than 130 billion under optimistic assumption.  This gain results largely from replacing state and local spending on uncompensated care and mental health services.

Adding to the pressure will be new evidence that refutes claims of some critics who contend that Medicaid does not improve the health of recipients.  A July 2012 New England Journal of Medicine article finds that three states that substantially expanded Medicaid eligibility over the past decade experienced significant declines (6.1 percent) in mortality and increased rates of self-reported health status of “excellent” or “very good.” Further, elected leaders will likely face considerable pressure from hospitals and other providers to adopt the expansion if only to alleviate their financial burden associated with uncompensated care.

How this plays out could have a disproportionate effect on the success of the expansion, whose impact will vary considerably across states based on current levels of coverage.  In another twist of irony, it is precisely those states that are most likely to oppose expansion that have the most to gain.  For example, Alabama would realize a 53 percent reduction and Texas a 49 percent drop in uninsured adults with incomes at or less than 133 percent of FPL.

The final element of expanded access is the formation of state insurance exchanges, such as The Connector in Massachusetts, where consumers can purchase subsidized coverage that satisfies the individual mandate.   Those earning between 133 percent and 400 percent of FPL will be able to purchase insurance assisted by a sliding scale of federal subsidies.  On January 1, 2013, the Department of Health and Human Services will certify which states will be prepared to operate their own exchanges by January 1, 2014.  To date, 12 states and Washington, D.C. have enacted laws creating exchanges and nine others have such legislation pending.  We anticipate that many states are awaiting the outcome of the fall elections, but will ramp up their efforts to establish exchanges if it becomes clear that the ACA will survive. Still, it is very likely that the federal government will need to intervene and establish exchanges in several states that fail or refuse to implement the law.

The ACA was designed to provide a “continuum of coverage” from Medicaid to the Exchanges to employer-based plans.  With the Supreme Court decision, there is a possibility that gaps in coverage could emerge for individuals living in states that do not adopt the Medicaid expansion. Individuals who earn too much income to qualify for Medicaid but too little to receive subsidized coverage through the exchanges could face a new “doughnut hole” just as the old “doughnut hole” in Medicare coverage of prescription drugs is scheduled to be completely closed by the ACA by 2020. It is unclear how the federal government will respond to this situation but those individuals would at the very least be exempted from the mandate if they are unable to purchase minimum essential coverage on the open market for less than eight percent of their income.

Finally a word on Massachusetts.  It is quite possible that with less than two percent of the population remaining uninsured, we have hit the upper limits of coverage.  However, even in Massachusetts there are provisions of the ACA that should enhance access. Most notably the ACA allows children to be covered under their parents’ health insurance policies until the age of 26 and subsidizes the purchase of health insurance for people up to 400 percent of FPL versus 300 percent in Massachusetts.

Quality of Care

The Affordable Care Act contains numerous provisions designed to enhance quality of health care, which were left untouched by the Supreme Court decision.    In particular, the ACA contains measures which begin to (1) reorient the health care system towards a greater emphasis on prevention and keeping the population healthy; (2) reform the health care delivery system; and (3) focus on wellness and health outcomes.  In the long run, these provisions may be as significant as the expansion of access to health care in terms of improving the health of Americans.

The ACA implements key insurance reforms designed to improve access to preventive care,  including requiring that all insurers provide full coverage for clinical preventive services recommended by the US Preventive Services Task Force and that insurers not impose co-payments or deductibles for these services (in Massachusetts, this provision will eliminate co-payments on services such as pap smears and cholesterol tests).

Further the ACA provides up to $500 million for establishing a national public-private partnership  for a prevention and health promotion outreach and education campaign. The law also funds several demonstration projects promoting wellness programs in the workplace.

Finally, the ACA creates a Prevention and Public Health Fund, which could provide funding of up to $15 billion over the next ten years for public health initiatives, which would represent a substantial increase over the $10 billion annually the federal government currently spends on public health.

The ACA has been criticized by some public health advocates for its relatively paltry support for public health initiatives.  There is some justification for this criticism, but it often overlooks the changes the ACA initiates in the way we pay for and deliver health care, which will create market pressure for a stronger investment and emphasis on preventing and managing chronic diseases that now account for 75 percent of U.S. health care costs.

Delivery of Care

This brings us to changes the ACA facilitates in the health care delivery system.  Restructuring how health care is organized, delivered and paid for in this country is a monumental task, given that health care consumes nearly 20 percent of GDP.  The ACA cannot claim to restructure the health care market. However, it begins the process of moving the system towards one that better aligns cost and quality and integrates the delivery of health care.

The ACA creates a framework for the establishment of accountable care organizations (ACOs) in Medicare and establishes a shared savings program under which ACOs may earn additional payments by exceeding certain cost and quality benchmarks.  The law establishes several demonstration and pilot projects for supporting the shift away from fee-for-service payment methodologies to bundled payments (for episodes of care) and global payments (for defined populations over a given time period).  Finally, the ACA establishes a Center for Medicare and Medicaid Innovation to develop, test and disseminate innovative payment and care delivery models that emphasize care coordination and efficiency.

The ACA is subject to the criticism that it does not go far enough, fast enough in mandating these system-level changes.  However, as the experience in Massachusetts and in a number of health care systems across the country suggests, providers and payers are responding to strong market pressures to reduce costs by developing more integrated systems of care delivery and shifting to new reimbursement models. Even while the ACA was in a kind of legal suspension pending the outcome of the Supreme Court decision, the market was already adapting to the changes that the law is only beginning to set in motion.

Cost of Care

There has been no bigger myth than the claim that national health reform is a budget buster.  The best evidence for this comes from the experience of Massachusetts, which implemented its initial health reform law in 2006.  As the Massachusetts Taxpayers Foundation concluded in an April 2012 report, “Massachusetts has achieved near universal health coverage with only modest additional costs to state taxpayers.” During the five full fiscal years since it was implemented, the law has cost the state an additional $91 million a year after federal reimbursements — well within initial projections. The vast majority of the state’s increased spending has come from subsidies paid to low-income adults to cover the costs of private insurance, but that has been largely offset by decreases in state spending for uncompensated care and other supplemental payments made to safety net hospitals and Medicaid managed care plans.

Massachusetts has managed to pay for these reforms prior to the passage and implementation of the ACA, with its very generous federal subsidies. Massachusetts in fact stands to gain some $1.3 billion from 2014-2019 as a result of the increased federal support under national health reform.

And beyond direct state government costs, Massachusetts is making real gains in reducing its overall health care cost trend as it has begun to experiment with some of the innovative payment and care delivery models that are supported in the ACA. The annual rate of medical expense increase declined from 7.5 percent in 2007 to 1.5 percent in 2011.  As a result, the Massachusetts family health insurance premium declined 0.8 percent in 2010, as opposed to the national trend of a 6.5 percent increase.

The case of Massachusetts strongly supports the conclusion that the country can greatly expand access to health care without breaking the bank, and that the innovative health care quality provisions embodied in the ACA have great promise for significantly reducing the rate of growth in health care expenditures.

Conclusion

The Supreme Court decision removed the Constitutional threat to the ACA but ultimately left unresolved the political challenge to its very survival and complete implementation. The 2012 elections and politics in 50 state capitals will ultimately decide the fate of health care reform and whether the United States will finally join the ranks of almost every Western nation in guaranteeing full access to health care for all of its citizens.

Nonetheless, the ACA has set in motion transformative changes to the nation’s health care system that are unlikely to be reversed, including the ACA’s reforms that correct widespread abuses and inequities in the health insurance markets and the emerging shift towards new health care delivery and payment systems.  The ACA responds to two powerful currents in American society – the demand for equity in access to health care and the growing fiscal crisis brought on by unsustainable increases in the cost of health care.  The ACA’s future may remain in doubt, but no viable alternative has emerged for reconciling these two imperatives.

James Roosevelt, Jr. is president and CEO of Tufts Health Plan.

Expanding Health Care Access to the Poor, ‘A Simple Case’? Roberts: Not so much

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By: Matt Selig

About thirty employees from three non-profit organizations that advocate for increasing access to health care held their collective breath in an unadorned conference room on the morning of June 28th.  Several typed nervously on their cell phones while others chuckled through anxious small talk and a few seemed to meditate or perhaps pray.  None of them lost sight however of the large projected image on a pull-down screen of scotusblog.com’s innovative live coverage of that day’s United State Supreme Court session where the opinion in the constitutional challenge to the Affordable Care Act (ACA) (National Federal of Independent Business (NFIB) v. Sebelius) would be issued.  This, of course, was the reason they had gathered.

Finally came the blog post that quieted the room: “10:07 Amy Howe: We have health care opinion.”

All eyes in the room were now transfixed on the pull-down screen.

“10:08 Amy Howe: Parsing it asap.”

“10:08 Amy Howe: The individual mandate survives as a tax.”

Thunderous applause echoed off the conference room’s patterned linoleum floor and mini blinds.  The ACA’s requirement on individuals to maintain health insurance, one of the linchpins of the law’s expansion of health insurance coverage to tens of millions of uninsured U.S. residents, had been deemed constitutional by the Court as a valid exercise of Congress’s power to tax.

Moments later, another post, “10:10 Tom: So the mandate is constitutional. Chief Justice Roberts joins the left of the Court.”, drew various exclamations to the effect of “Wow!”, and spontaneous expressions of pure joy.

The assembled advocates had barely enough time to consummate a few hugs and high-fives by scotusblog’s next update: “10:11 Amy Howe: The Medicaid provision is limited but not invalidated.”

Quizzical and concerned looks flashed across the faces of those in the room.  Apparently this was not simply an up or down verdict on the ACA after all.  The lawyers and policy analysts among the advocates would have to do their own parsing of the opinion, asap.

In the weeks since the Court’s decision in the ACA case, many proponents of the law, particularly those concerned with health care access for the poor have simultaneously carried starkly divergent sentiments about the result reached.  A law, literally decades in the making, that was designed to expand health insurance coverage to more than thirty million Americans and greatly improve coverage for those already insured had survived yet another near-death experience that at least matched the drama of its slim passage by Congress in 2010.  But, the Court had substantially curtailed the ACA’s mechanism for providing health insurance coverage to the poorest in our country.

Medicaid, of course, is the public health insurance program established in federal law and carried out jointly by the Federal and State governments, that, even before the ACA, provided coverage for approximately sixty million Americans (according to Faces of Medicaid, a November 2011 publication of the Kaiser Commission on Medicaid and the Uninsured).  The Federal government pays for at least fifty percent of the cost of the Medicaid program in each State and sets a minimum level of benefits and eligibility categories that States may expand upon.

The ACA, as passed by Congress and signed by President Obama, provides that States must expand coverage in their Medicaid programs for the first time to all those under age 65 in households with incomes beneath 133 percent of the federal poverty level (FPL) ($14,856 for a single person) or risk losing their existing  Medicaid funds.  Previously, the Federal government required States to cover only those at very low income levels who also met another eligibility requirement, such as being a child or having a disability.  The ACA provided that if a State did not expand its Medicaid program, the United States Secretary of Health and Human Services (HHS) could withdraw all federal funding for that state’s Medicaid program.

But, this stipulation was hardly a ruthless powerplay by Congress.  It was more in the nature of an extravagant gift to the States because the ACA requires the federal government to pay the States’ entire annual cost of this Medicaid expansion at first and then a slightly decreasing amount until 2020 and thereafter when the federal government must pay 90 percent of the cost incurred by States to expand Medicaid eligibility to all low-income Americans.  All in all, the ACA was expected to provide health insurance to more than 15 million poor U.S. residents through the expansion of Medicaid by States, about half of the more than 30 million slated to gain health insurance because of the ACA.

So, how did the Court limit but not invalidate the Medicaid provision of the ACA as scotusblog.com had reported?  In a blow to poor, uninsured Americans,  Chief Justice John Roberts’ majority opinion in NFIB v. Sebelius struck down the ACA’s provision allowing the Secretary of HHS to withhold all of a State’s Medicaid funds if it chose not to expand Medicaid eligibility to all those below 133 percent of the FPL.  The Chief Justice reasoned, in part, that under the Constitution’s Spending Clause, the Federal government could not try to expand insurance coverage for the poor in this way because States would be unconstitutionally coerced into partnering with the federal government to provide health insurance for the poor as distinguished from being merely encouraged to do so.

Although States still have quite a strong incentive to expand their Medicaid programs to their poorest residents, because the Federal government will pay them so generously to do it, they are less likely to go along because they no longer risk losing their existing federal Medicaid payments.  Recent pronouncements by some State officials around the country who oppose the ACA indicate the Court’s ruling will lead them to refuse to expand their Medicaid programs to more of their poor residents.  Millions in poverty who would have obtained health insurance because of the ACA may remain uninsured as a result of Chief Justice Roberts’ opinion.

Adding to the disappointment in the troubling outcome of the Medicaid issue in the ACA case was the unconventional or, one might say, tortured or unpersuasive reasoning behind the Court’s conclusion.  Justice Roberts explained why he viewed the ACA’s deal for States to expand their Medicaid programs as impermissible under the Spending Clause.  He wrote that States really had no choice but to expand their Medicaid programs because the resulting loss of existing Medicaid funds would be tantamount to “economic dragooning that leaves the States with no real option….”  The Court’s majority also expressed grave concern that Congress, by leaving States with “no choice” but to adopt a funding stream with conditions, would be acting to “achieve its objectives without accountability…,” while state officials would be unfairly held “politically accountable.”  These are factual assertions, as opposed to legal ones, and they appear to not equate with reality.

To be sure, the ACA as signed by the President provides States with a choice to expand their Medicaid programs (mostly at the expense of the federal government) or forfeit their Medicaid funding.  These days, State officials are making extremely difficult budgetary decisions every day and the ACA presented yet another one.  It has also always been the case that States can only receive Medicaid funds if they comply with minimum requirements for the program.

Also, most members of Congress would probably find the notion that they were not politically accountable for the ACA to be amusing.  To say that the ACA has been the subject of public debate would be the understatement of the decade.  From the standpoint of State elected officials, if they decided to cancel their Medicaid program because they would not agree to expand Medicaid pursuant to the ACA they would have every opportunity to explain that the federal law provided them with a tough choice in a press release or in a letter to constituents.  It is not that complicated a proposition for voters to understand.

Yes, State officials would very likely experience a negative public reaction for such a decision in most, if not all States, but not because the public didn’t “get” the options posed to State officials by the Federal government.  There would probably be an enormous backlash because the public does “get” that eliminating Medicaid would be devastating to the health and wellbeing of a State’s population, its health care system, and its economy.

As Justice Ruth Bader Ginsberg pointed out in her opinion that dissented from the Court’s majority position on the Medicaid issue, the NFIB v. Sebelius majority “for the first time ever –finds an exercise of Congress’ spending power unconstitutionally coercive.”  The Court’s ample precedent permitting Congress to attach conditions to the receipt of federal funds by States seemingly should have guided the resolution of this ACA’s Spending Clause issue as it had in every other similar instance.  In Justice Ginsberg’s words, it was “a simple case” to uphold the ACA’s Medicaid expansion provision in its entirety.

The Court majority’s reasoning in reaching its conclusion that States were unconstitutionally coerced into expanding Medicaid by the terms of the ACA also employed another unusual twist of logic.  The Chief Justice conjured a new standard in NFIB v. Sebelius that Congressional action requiring States to abide by the conditions of one federal funding stream if they expect to receive another is strongly suggestive of an unconstitutionally coercive federal policy.  The Court’s majority found that the ACA’s expansion of Medicaid was in fact an entirely new program of federal funding and that under the Chief Justice’s new reasoning Congress could not condition a State’s receipt of its existing Medicaid funds upon its willingness to comply with the conditions of the so-called new Medicaid program created by the ACA.

An analogy of the Court reasoning would go something like this: an addition to an existing home has all the same characteristics as the construction of a new home in a lot next door.  To back up the Court’s assertion that the new second story on the Medicaid house was actually a neighboring Medicaid abode at a separate address, Justice Roberts had an explanation.  He wrote that a State’s expanded Medicaid program, providing eligibility for everyone younger than 65 who are below 133% of the FPL ($14,856 for a single person) was “no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage.”

In essence, the Court was stating that this population of such limited means targeted by the ACA was not destitute enough to be worthy of federal assistance intended to alleviate its distress.  Since a person without a child or a disability living at the poverty line could never be considered among the neediest in our society, Justice Robert surmised, a public health insurance program to help them could only be considered part of a plan to make sure everybody at every income level has health insurance.  That this unprovoked and breathtaking effort to judicially define the relative neediness of poor members of our society played such determinative role in the NFIB v. Sebelius case is difficult to comprehend.

The true impact of the Supreme Court’s decision on the Medicaid expansion issue in NFIB v. Sebelius is clearly yet to be known.  Perhaps public sentiment or a thoughtful analysis of the options provided by the ACA will lead State officials throughout the country to expand their Medicaid programs and the vision of the law for poor Americans will be realized.  This surely is the desire of advocates for health care access for the poor.

A broader question is whether any future expansion of Medicaid eligibility or benefits by the Federal government will prompt legal challenges from States who wish to make their compliance with such Medicaid changes optional.  If the Court did assess such litigation in the same way as it did in NFIB v. Sebelius, it would put a damper on the ability of the Federal government to continue to improve health care access for the poor though the Medicaid program.

Pulling back to perhaps the ultimate question at stake, can the United States Constitution be interpreted as a bar to federal policies that increase health insurance coverage and access to health care for the poor?  No.  The march toward health care justice continues on.

Matt Selig is the Executive Director of Health Law Advocates (HLA), Massachusetts’ only non-profit public interest law firm dedicated exclusively to improving access to health care.  As an attorney at HLA since 2005, Matt has represented low-income consumers needing legal help to access health care.  Matt’s career in health care advocacy dates back to the early 1990’s when he served as a staff assistant for the late Senator Edward M. Kennedy on the United States Senate Committee on Labor and Human Resources (now known as the Committee on Health, Education, Labor and Pensions).  He later worked as a legislative aide for Massachusetts State Representative Kay Khan who is now the Co-Chair of the Massachusetts Legislature’s Joint Committee on Children, Families and Persons with Disabilities.  He received his undergraduate degree from Washington University in St. Louis and graduated magna cum laude from Suffolk University Law School.  

Affordable Care Act Continues to Create a Healthier America

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By: Eva Marie Stahl, PhD, MPA, and Anna Dunbar-Hester, JD, MPP

Thanks to the Affordable Care Act (ACA), 32 million people will gain access to health insurance. In addition, the millions of Americans who already have health insurance will benefit from new consumer protections and an emphasis on preventive and patient-centered care. The ACA moves us closer to a health care system where all Americans can access quality, affordable care. The Supreme Court reaffirmed the Congressional intent and the ACA’s legitimacy through its recent June ruling on the constitutionality of the law.

Specifically, the Court upheld the entire law except for the enforcement mechanism attached to an expansion of the Medicaid program. Medicaid is a state-run public health insurance program for low-income populations that is supported through federal matching funds. In its original form, the ACA expanded the Medicaid program to cover new populations with incomes up to 133 percent of the federal poverty level (FPL), or about $15,000 for an individual. If a state refused to expand its Medicaid program, it risked losing all of its federal Medicaid funds. The ruling removes only the penalty; the expansion option remains intact.

While there are some negative implications of the ruling, for the majority of consumers, the benefits remain unchanged. These benefits have already begun rolling out, although the majority of them kick in beginning in 2014. Most states will expand their Medicaid program and implement the law as intended.  By and large, the Supreme Court ruling is a win for consumers.

The ACA provides unprecedented consumer protections to Americans in every state

The ACA takes important steps toward expanding coverage, reducing cost and improving the quality of health care for all consumers in all states. It builds on successful health reforms from across the country and extends them to all states. (Of course, many of the reforms were modeled in Massachusetts.) The ACA offers many new benefits for consumers ranging from reforms of our private insurance market, creation of health care marketplaces (Exchanges), to expansion of Medicaid and strengthening the safety net.

As in Massachusetts, success of these reforms is inextricably tied to the individual mandate. Now validated by the Supreme Court, the individual mandate strongly encourages everyone to gain insurance coverage. Requiring all who are able to purchase health insurance protects the market from adverse selection (people buying insurance only when they are sick) and keeps premiums from skyrocketing over time – it provides stability. These are key pieces of reform that allow many of the following benefits to be possible.

Private Insurance, Market Reform and Exchanges

Those who already have health insurance will benefit greatly from the ACA, but this group of people may be the least aware of these new benefits.

Beginning January 1, 2014, no one may be denied coverage due to a pre-existing condition or health status, and no one’s health coverage can be pegged to a lifetime dollar amount. Already implemented reforms include allowing young adults to continue to enjoy their parents’ health insurance coverage until the age of 26. As of August 2012, women can now access preventive coverage with no co-pay including mammograms and birth control. In addition, seniors continue to receive discounts on their prescriptions as the ACA brings us closer to elimination of the ‘donut hole’ (gap) in prescription drug coverage for Medicare recipients.

As consumer advocates, we see health reform making a difference every day. Consumers and businesses all over the country received reimbursement checks if their health insurer failed to direct enough premium dollars toward health care. This reimbursement is based on the new medical loss ratio (MLR) requirement – for every premium dollar, 80 cents must be spent on care. If the insurance company spends less than 80 cents on care, they have to correct the balance using rebates. In Florida, a school system in Sarasota received a check for over $800,000.[1] On average, consumers will receive $151 per household.[2]

Consumers have access to new tools to hold insurers accountable and level the playing field. New rate review tools provided by the ACA hold insurers accountable for premium increases, requiring insurers to be transparent and justify premium hikes. For example, New York consumer advocates used ACA rate review tools to pressure insurers to be more transparent about premium rate hikes.[3] This pressure resulted in New York’s largest insurer agreeing to make rate filings publicly available.

In 2014, about 16 million consumers will have access to insurance Exchanges (online marketplaces, similar to the Massachusetts Health Connector) where they can use federal subsidies to purchase health insurance for the first time. For wage earners between 133 and 400 percent of FPL, federal subsidies will support the purchase of insurance, making it affordable. The ACA requires a consumer-friendly Orbitz-type website with simplified application forms and information about plan quality. California, for example, is leveraging the ACA quality reporting requirements to explicitly address health disparities in its Exchange.[4] Small businesses will be able to use the Exchanges to provide insurance to their employees – making it easier for them to do so.

Medicaid Expansion

As it was passed, the ACA would have extended Medicaid benefits to Americans earning very low wages, less than about $15,000 annually per individual or just over $30,000 for a family of four (under 133 percent of the FPL). The expansion, if fully implemented, will reach almost 17 million people nationally. The Federal government will fund 100 percent of the expansion through 2016, transitioning to 90 percent support by 2020. This $931 billion dollar contribution over eight years will persuade most states to implement the law.[5] This is a great deal for states, enabling them to provide insurance coverage to many uninsured at very little cost to state budgets.[6]

Also, the Medicaid expansion is vital because it completes the coverage package that was envisioned by the ACA: it picks up where the Exchange leaves off, providing coverage to low-income populations not eligible for a federal subsidy in the Exchange. According to the Urban Institute, 82 percent of these uninsured are adults without dependent children. They have traditionally been denied public coverage opportunities at the state level.[7]

Providing coverage to the “expansion population” holds promise of long-term better health whether through preventive prenatal services, near-elderly health care as consumers transition to Medicare, or a reduction in racial and ethnic disparities in health.

The Safety Net

The safety net will continue to play an important role for many people despite the benefits rolled out by the ACA.  Even if the Medicaid expansion were implemented in every state, an estimated 20 million people would remain uninsured – the ACA does not provide universal coverage. Of those approximately 20 million, the Urban Institute estimates that 37 percent will be eligible for Medicaid but not enrolled; 25 percent will be undocumented immigrants; 16 percent will be exempt from the personal responsibility provision to buy health insurance because it is unaffordable; 15 percent will not be eligible for subsidies and will choose to not buy health insurance; and 8 percent will be eligible for subsidized coverage in the Exchanges but not enroll.[8] These estimates were calculated before the Supreme Court ruling, so additional people will remain uninsured if some states don’t take up the Medicaid expansion.

People who are uninsured or underinsured need the protection of a strong safety net – something to catch them if they need health care when they cannot afford it.  The safety net will continue to play this important role in our communities. Recognizing this need, the ACA includes provisions to bolster the safety net such as strengthening non-profit hospital partnerships with communities. Non-profit hospitals have always played an invaluable role in the safety net. The ACA elevates that role by spelling out some specific expectations of these hospitals to address community needs, thereby bringing a new level of transparency to these institutions. Under the ACA, non-profit hospitals are now required to have financial assistance policies and publicize them to the community where they reside. They are also required to make reasonable efforts to determine if a patient qualifies for financial assistance before engaging in extraordinary debt collection practices, such as placing a lien on a patient’s home. The expectation that non-profit hospitals provide benefits back to the community are justified in part by the fact that they don’t pay federal income taxes, and are generally exempt from state and local property, income, and sales taxes, although some states and municipalities determine tax exemptions using their own tests.

Similar to insurance reforms and other innovations included in the ACA, the nonprofit hospital provisions were based on leading state laws around the country. Now these critical protections will set a floor for all states and enhance access to critical service providers.

The chasm ahead

As a result of the Supreme Court ruling, state level politics will determine the insurance status of low-income populations. By saying ‘no’ to Medicaid expansion, they risk the health of some of their most vulnerable constituents and walk away from billions of federal dollars.[9] The population at greatest risk will be those who are between a state’s own current Medicaid eligibility level and 100 percent FPL. For those earning less than 100 percent FPL, there are no real opportunities for insurance coverage. While this group will not be subject to the individual mandate penalty, they will be left uninsured. Those between 100 and 133 percent FPL will qualify for subsidies in the Exchange. However, these subsidies may not be enough to make insurance affordable and the benefits may be less robust.

If a state opts not to expand Medicaid, it will place significant strain on the safety net across their communities. Hospitals’ emergency departments and community health centers will find themselves juggling even greater demand for services. The inequalities in health access between states will grow.

Consumers march forward

The vast majority of Americans will benefit from the upheld portions of the ACA. We expect more preventive care, fairer play from insurers, and more affordable options through Exchange subsidies. However, the Supreme Court decision potentially set us back in our journey to becoming a nation where income doesn’t determine health status. In fact, by removing the Medicaid “stick” and allowing states to choose whether to take up the expansion for people under 133 percent of the poverty level, there’s an increased chance that income will determine health status. The Southern states, which have more poverty and low-income people of color, also have some of the most vocal governors threatening not to expand Medicaid. Where does this leave us? It is a major step backwards. In the words of Dr. Martin Luther King, Jr.: “Of all the forms of inequality, injustice in health care is the most shocking and inhumane.” Consumer advocates will continue to push for Medicaid expansion in every state and make efforts to strengthen the safety net, but this is more than a health care issue – it is a civil rights issue.

We expect those in more progressive states to forge ahead with implementation and reap the benefits of expansion through lower uninsured rates and greater access to care. Those who reside in more conservative climates will face a steep but winnable – on both moral and economic grounds – climb to health coverage.

The history of the Medicaid program tells us that states end up joining the bandwagon sooner or later because it makes sense for their consumers and their economies – better consumer health, healthier communities. Despite Medicaid being a voluntary program, all states joined by 1982. Finally, the uninsured do not simply evaporate, they shift to and rely on a different space in the health care system – the safety net. For many states, it is a calculation of where they will support the uninsured – in emergency rooms or practitioner’s offices.

In the coming year, consumer advocates will continue to raise their voices about the potential negative implications for consumers, and we will continue to celebrate all we’ve gained.

Eva Marie Stahl, PhD, MPA, and Anna Dunbar-Hester, JD, MPP, work as policy analysts at Community Catalyst, a national non-profit consumer advocacy organization dedicated to quality affordable health care for all. Community Catalyst works in partnership with national, state and local consumer organizations, policymakers, and foundations, providing leadership and support to change the health care system so it serves everyone – especially vulnerable members of society.

At Community Catalyst, Eva focuses on legislative and legal challenges to the ACA, the establishment of Exchanges, and Essential Health Benefits. Prior to joining Community Catalyst, Eva completed her PhD in health policy at Brandeis University.  During that time she worked for the Institute of Medicine (IOM) and for the Agency for Health Care Research and Quality (AHRQ).  She holds a MPA from the Lyndon B. Johnson School of Public Affairs and a BA from Colgate University.        

Anna’s work at Community Catalyst is focused on state and federal laws regulating nonprofit hospitals, including requirements to be responsive to community needs for affordable access to hospital care and participate in public health strategies. Prior to joining Community Catalyst, Anna worked for a Massachusetts State Senator as legal counsel and policy advisor. She holds a JD and MPP from the University of Minnesota and a BA from Bryn Mawr College.

[1] O’Donnell, Christopher. “Sarasota Schools get $800,000 Insurance Rebate,” Herald-Tribute. Aug. 6, 2012. Available at http://www.heraldtribune.com/article/20120806/ARTICLE/120809734/2416/NEWS?Title=Sarasota-schools-get-800-000-insurance-rebate&tc=ar.

[2] “The 80/20 Rule: Providing Value and Rebates to Millions of Consumers.” Healthcare.gov. http://www.healthcare.gov/law/resources/reports/mlr-rebates06212012a.html

[3] Bernstein, Nina. “Insurer Drops Fight to Keep Rate Filings From Public,” New York Times. Oct. 25, 2011. Available at http://www.nytimes.com/2011/10/26/nyregion/united-health-oxford-stops-effort-to-keep-rate-increase-filings-secret.html.

[4] Nguyen, Quynh Chi and Alice Dembner. “Promoting Racial and Ethnic Health Equity through Exchanges,” Community Catalyst, March 2012. Available at http://www.communitycatalyst.org/doc_store/publications/Health_Equity_through_Exchanges.pdf.

[5] Angeles, January. “How Health Reform’s Medicaid Expansion Will Impact State Budgets,” Center on Budget and Policy Priorities. July 25, 2012. Available at http://www.cbpp.org/cms/index.cfm?fa=view&id=3801.

[6] Id.

[7] Kenney, Genevieve, et al. “Opting in to the Medicaid Expansion under the ACA: Who Are the Uninsured Adults Who Could Gain Health Insurance Coverage?” Urban Institute. August 2012. Available at http://www.rwjf.org/files/research/74697onepage082012.pdf.

[8] Buettgens, Matthew and  Hall, Mark A. “Who Will be Uninsured After Health Insurance Reform?” Urban Institute, March 2011. Available at http://www.rwjf.org/files/research/71998.pdf.

[9] “Supreme Court Ruling on Medicaid: Challenges and Opportunities for State Advocates.” Community Catalyst. July 2012. Available at http://www.communitycatalyst.org/doc_store/publications/SupremeCourt-Ruling-on-Medicaid_MemoJuly2012.pdf.

Health Law Case Brief: Coleman v. Court of Appeals of Maryland

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By: Margaretta Homsey Kroeger, Esq.

In March 2012, the United States Supreme Court held in Coleman v. Court of Appeals of Maryland that sovereign immunity barred suits for damages brought against state employers under the self-care provision of the federal Family and Medical Leave Act (FMLA or the Act).[1]  In a plurality opinion,[2] the Court concluded that the self-care provision of the Act, which entitles employees to take unpaid leave to care for their own serious health conditions,[3] did not validly abrogate the States’ immunity from suit under §5 of the Fourteenth Amendment.[4]

The petitioner had made three arguments on appeal: (1) that the self-care provision was intended to address sex discrimination and stereotyping; (2) in the alternative, that it was a “necessary adjunct” to the family-care provisions of the Act which had previously been upheld; and (3) that it helped single parents, who were mostly women, to keep their jobs when they became ill.[5]  The Court rejected these arguments and held that the self-care provision did not abrogate the States’ sovereign immunity because it was not directed at an identified pattern of state constitutional violations and it was not congruent and proportional to any such violations.[6]

Enacted by Congress in 1993, the FMLA[7] entitles eligible employees to take up to 12 work weeks of unpaid leave per year for medical and family-related reasons.[8]  The Act’s stated purpose is to promote, inter alia, the stability and economic security of families and equality of employment opportunity for women and men.[9]  Consistent with the Equal Protection Clause of the Fourteenth Amendment, the Act is intended to minimize the potential for sex-based employment discrimination “by ensuring generally that leave is available for eligible medical reasons (including maternity-related disability) and for compelling family reasons, on a gender-neutral basis.”[10]

Under the FMLA, employees are entitled to take leave in order to care for family members or to care for their own health conditions. The family-care provisions of the Act state that an employee may take leave: (A) for the birth of the employee’s son or daughter in order to care for such son or daughter; (B) for the placement of a son or daughter with the employee for adoption or foster care; or (C) in order to care for the employee’s spouse, son, daughter, or parent with a serious health condition.[11] The self-care provision of the Act states that an employee may also take leave: (D) “because of a serious health condition that makes the employee unable to perform the functions of the position of such employee.”[12] The FMLA creates a right of action for the enforcement of its provisions by employees, providing that an action for equitable relief and damages “may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction.”[13]

In Coleman, the petitioner Daniel Coleman had requested sick leave from his employer, the Court of Appeals of Maryland.  After making his request, he was told that he would be terminated if he did not resign.  Coleman then sued his employer in federal court, alleging that the Court of Appeals of Maryland had violated the self-care provision of the FMLA.

The United States District Court for the District of Maryland dismissed the FMLA claim on sovereign immunity grounds.[14]  It found that the Court of Appeals of Maryland was an entity of the State for the purposes of sovereign immunity under the Eleventh Amendment, and it ruled that the self-care provision of the FMLA did not validly abrogate that immunity.[15]  The United States Court of Appeals for the Fourth Circuit affirmed,[16] and the Supreme Court granted certiorari.

Writing for a plurality of the Court, Justice Kennedy first observed that “[a] foundational premise of the federal system is that States, as sovereigns, are immune from suits for damages, save as they elect to waive that defense.”[17]  Congress may, however, abrogate the States’ sovereign immunity from suit pursuant to its enforcement power under §5 of the Fourteenth Amendment, which gives it the authority to enforce the substantive rights guaranteed by §1 of the Amendment, including due process and equal protection of the laws.  The Court noted that the enforcement power includes the authority to remedy as well as to deter violations of these substantive rights by appropriate legislation.[18]

The Court then set out the specific requirements that must be met in order for Congress to validly abrogate the States’ sovereign immunity when enacting legislation pursuant to §5.  First, Congress must make its intention to abrogate “unmistakably clear in the language of the statute.”[19]  The Court determined that the FMLA met this requirement because it specifically subjects any “public agency” to suit under its provisions.[20]  Second, legislation enacted under §5 “must be targeted at ‘conduct transgressing the Fourteenth Amendment’s substantive provisions,’”[21] and “[t]here must be a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end.”[22]

The Court noted that it had previously considered whether these requirements were met in the context of a suit for damages under one of the family-care provisions of the FMLA.  In Nevada Department of Human Resources v. Hibbs, the Court held that Congress could subject the States to suit for violating subparagraph C of the FMLA, which entitles employees to take unpaid leave to care for a family member with a serious health condition.[23]  The Court observed that its holding in Hibbs “rested on evidence that States had family-leave policies that differentiated on the basis of sex and that States administered even neutral family-leave policies in ways that discriminated on the basis of sex.”[24]  Significantly, Congress had enacted the FMLA family-care provision as a response to “a well-documented pattern” of unconstitutional gender-based discrimination by the States in administering family-leave policies.[25]  As a result, the Court in Hibbs had “concluded that requiring state employers to give all employees the opportunity to take family care leave”[26] was a remedy “‘narrowly targeted at the faultline between work and family—precisely where sex-based overgeneralization has been and remains strongest.’”[27]

Turning to the self-care provision of the FMLA at issue before it in Coleman, the Court determined that, unlike the family-care provision in Hibbs, the self-care provision was not supported by evidence of a pattern of unconstitutional state conduct, nor was it a narrowly tailored remedy targeted at such conduct.  Accordingly, the Court held that the self-care provision did not validly abrogate the States’ sovereign immunity.[28]

On appeal, the petitioner had argued that the self-care provision, standing alone from the other provisions of the Act, was intended to address sex discrimination and sex stereotyping.  The Court dismissed this argument, emphasizing that the evidence before Congress when it enacted the FMLA “did not suggest States had facially discriminatory self-care leave policies or that they administered neutral self-care leave policies in a discriminatory way.”[29]  Instead, the Court observed, the legislative history suggested that Congress was concerned about economic burdens imposed on employees and their families due to “illness-related job loss,” and that the self-care provision was based on “a concern for discrimination on the basis of illness, not sex.”[30]

Although the Court acknowledged that the self-care provision could benefit women who needed to take leave for pregnancy-related illnesses, it stated that, “as a remedy, the provision is not congruent and proportional to any identified constitutional violations.”[31]  The Court noted that when the FMLA was enacted, the vast majority of state employees were covered by paid sick-leave and short-term disability plans, and there was no evidence before Congress that pregnancy-related illnesses were excluded from these plans.  Consequently, the Court reasoned that subjecting States to suit for failing to provide self-care leave “is not a congruent and proportional remedy if the existing state leave policies would have sufficed.”[32]

The Court also rejected the two alternative arguments advanced by the petitioner.  First, the petitioner had argued that the self-care provision was “a necessary adjunct to the family-care provisions.”[33]  The petitioner asserted that employers might assume that women would be more likely to take family-care leave under the FMLA than men, and therefore employers would still have an incentive to discriminate against women.  As a result, the petitioner suggested that it was necessary to combine the family-care leave provisions with the self-care provision in order to reduce the difference in the expected amount of time that women would take under the FMLA as compared with men.  The Court was not convinced, pointing out that there were no congressional findings suggesting that “the availability of self-care leave equalizes the expected amount of FMLA leave men and women will take,” nor were there any findings or evidence suggesting that “the self-care provision is necessary to the family-care provisions or how it reduces an employer’s incentives to discriminate against women.”[34]

The petitioner had also argued that the self-care provision helped single parents, the majority of whom are women, to keep their jobs after becoming ill.  The Court was similarly unpersuaded by this argument, stating that, “at most,” this meant that the self-care provision remedied “neutral leave restrictions which have a disparate effect on women.”[35]  The Court noted that disparate impact alone was insufficient to show a constitutional violation under the Fourteenth Amendment.  Accordingly, even if the provision assisted single parents, who are disproportionately female, it was not targeted at a pattern of state constitutional violations as required to validly abrogate the States’ sovereign immunity when enacting legislation pursuant to §5.

The Court concluded by noting that a State such as Maryland is still free to waive its immunity or to create a parallel state law cause of action if it agreed with the petitioner that state employer liability was necessary to remedy discrimination against women.  It then held that the States’ sovereign immunity was not validly abrogated by the FMLA’s self-care provision, and it affirmed the judgment of the Fourth Circuit.[36]

Justice Scalia concurred in the judgment, but objected to the plurality’s use of the “congruence and proportionality test” because, in his view, it invited arbitrary and policy-driven judicial decisions.[37]  Instead, he urged that the Court should “adopt an approach that is properly tied to the text of §5,” which, he noted, authorizes Congress “to enforce” the provisions of the Fourteenth Amendment.[38]  He suggested that the Court therefore limit the §5 power “to the regulation of conduct that itself violates the Fourteenth Amendment,” except in the unique context of racial discrimination.[39]  Because the failure to grant self-care leave is not such conduct, he concurred in affirming the judgment of the Fourth Circuit.

In dissent, Justice Ginsburg asserted that the self-care provision was a valid exercise of the §5 power.  In her view, the self-care provision played an important role in the statutory scheme of the FMLA, whose aim was to enforce the right to be free from gender-based workplace discrimination.[40]  The purpose and legislative history of the FMLA, she wrote, both “reinforce the conclusion that the FMLA, in its entirety, is directed at sex discrimination.”[41]  Justice Ginsburg noted that the FMLA was originally intended to ensure, in a gender-neutral way, that pregnant women would not lose their lobs after giving birth, and that the self-care provision played a key role in achieving that goal.  She observed: “It would make scant sense to provide job-protected leave for a woman to care for a newborn, but not for her recovery from delivery, a miscarriage, or the birth of a stillborn baby.”[42]

The dissent further stated that the plurality erred in concluding that there was no evidence that the self-care provision was a necessary adjunct to the family-care provisions, noting that Congress had heard testimony indicating that a gender-neutral law that only contained family-care provisions would be seen as a benefit for women and would promote discrimination against women in the workplace.  According to the dissent, self-care leave was necessary to making the family-care provisions effective; it stated that, “[b]y reducing an employer’s perceived incentive to avoid hiring women,” the self-care leave provision “lessens the risk that the FMLA as a whole would give rise to the very sex discrimination it was enacted to thwart.”[43]  Finally, the dissent emphasized that the plurality opinion did “not authorize state employers to violate the FMLA,” and noted that an employee could still seek injunctive relief for a violation of the self-care provision and that the U.S. Department of Labor could bring an action against a State to recover “monetary relief” on an employee’s behalf.[44]

Margaretta Homsey Kroeger is a Skadden Fellow at Greater Boston Legal Services in the Elder, Health and Disability Unit, where she focuses on advocating for youth with disabilities who are aging out of the foster care system.  She provides outreach, community education, and direct legal representation to youth who need assistance accessing disability benefits, health care, and related services.  Prior to her fellowship, Ms. Kroeger clerked for Justice William P. Robinson III of the Rhode Island Supreme Court.  She received her law degree from BostonCollegeLawSchool, where she was a Public Service Scholar and served as an articles editor of the Boston College Law Review and as vice president of the Public Interest Law Foundation.  She received her undergraduate degree from HarvardUniversity with a concentration in History.

[1] Coleman v. Court of Appeals of Maryland, 566 U.S. ___, 132 S. Ct. 1327, 1332 (2012).

[2] Justice Kennedy wrote the plurality opinion, which was joined by Chief Justice Roberts and Justices Thomas and Alito.  Justice Thomas also wrote a concurring opinion, and Justice Scalia wrote an opinion concurring in the judgment.  Justice Ginsburg wrote the dissenting opinion, which was joined by Justice Breyer; Justices Sotomayor and Kagan joined the dissent as to all but the first footnote.

[3] See Family and Medical Leave Act of 1993, 29 U.S.C. §2612(a)(1)(D).

[4] Coleman, 132 S. Ct. at 1338.

[5] Id. at 1334-37.

[6] Id. at 1338.

[7] 29 U.S.C. §2601 et seq.

[8] See 29 U.S.C. §2612(a)(1).

[9] 29 U.S.C. §2601 (b)(1)-(5).

[10] 29 U.S.C. §2601 (b)(4).

[11] 29 U.S.C. §2612(a)(1)(A)-(C).

[12] 29 U.S.C. §2612(a)(1)(D).

[13] 29 U.S.C.  §2617(a)(2).

[14] Coleman v. Court of Appeals of Maryland, No. L–08–2464, 2009 WL 8400940, at *1 (D. Md. May 7, 2009).

[15] Coleman, 132 S. Ct. at 1333; see also Coleman v. Maryland Court of Appeals, 626 F.3d 187, 191 (4th Cir. 2010) (“The Eleventh Amendment bars suit in federal court against an unconsenting state and any governmental units that are arms of the state unless Congress has abrogated the immunity.”) (citing Alden v. Maine, 527 U.S. 706, 755–57 (1999)).

[16] Coleman, 626 F.3d at 194.

[17] Coleman, 132 S. Ct. at 1333.

[18] Id.

[19] Id.

[20] Id.

[21] Id. at 1334 (quoting Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627, 639 (1999)).

[22] Id. at 1334 (quoting City of Boerne v. Flores, 521 U.S. 507, 525 (1997)).

[23] Id. at 1332 (citing Nevada Department of Human Resources v. Hibbs, 538 U.S. 721 (2003)).

[24] Coleman, 132 S. Ct. at 1332.

[25] Id. at 1334.

[26] Id.

[27] Id. (quoting Hibbs, 538 U.S. at 738).

[28] Id. at 1338.

[29] Id.

[30] Id. at 1335.

[31] Id.

[32] Id.

[33] Id.

[34] Id. at 1335-36.

[35] Id. at 1337.

[36] Id. at 1338.

[37] Id. at 1338 (Scalia, J., concurring in the judgment).

[38] Id.

[39] Id.

[40] Id. at 1339-40 (Ginsburg, J., dissenting).

[41] Id. at 1340.

[42] Id. at 1345-46.

[43] Id. at 1349.

[44] Id. at 1350.

Health Law Case Brief: Federal Aviation Administration v. Cooper

Posted

By: Sarah Kitchell

With its recent ruling in Federal Aviation Administration v. Cooper, 132 S. Ct. 1441 (2012), the Supreme Court limited civil damages available to individuals suing federal agencies for violations of the Privacy Act of 1974 (codified in part at5 U.S.C. § 552a).  The Court held that the term “actual damages,” as used in the Privacy Act, is limited to pecuniary damages only and does not include damages for mental or emotional distress.

The Privacy Act of 1974 (the “Act”) sets forth a detailed process for the maintenance, collection, use, dissemination, and disclosure of records which are held by Executive Branch agencies and contain information about individuals.[1]  The Act directs federal agencies to establish safeguards to protect against unauthorized disclosures of information “which could result in substantial harm, embarrassment, inconvenience, or unfairness” to the individual, 5 U.S.C. § 552a(e)(10), and authorizes, among other things, a private right of action for individuals to enforce the terms of the Act, 5 U.S.C. § 552a(g)(1).  At issue in this case was the individual’s right to bring an action against the agency when the agency failed to comply with the Act in such a way as to have an “adverse effect” on the individual, § 552a(g)(1)(D), and, if the individual can show that the agency acted in a way that was “intentional or willful,” that individual’s right to receive an amount equal to the sum of “actual damages sustained by the individual,” costs of the action and reasonable attorneys fees, § 552a(g)(4) (emphasis added).

The individual bringing suit against the federal agency in this case was Stanmore Cooper, an airplane pilot.  As a result of a joint criminal investigation called “Operation Safe Pilot” involving the Department of Transportation (“DOT”), the parent agency to the Federal Aviation Administration (“FAA”), and the Social Security Agency (“SSA”), Cooper had been indicted and pled guilty to making false statements to a government agency.  Cooper, who had been diagnosed with human immunodeficiency virus (“HIV”), intentionally withheld disclosure of his condition to the FAA on certain medical certifications required for his pilot’s license,[2] but disclosed his condition to the SSA in order to obtain social security disability benefits after his condition worsened.  Cooper alleged that, in connection with their participation in Operation Safe Pilot, the two federal agencies unlawfully shared confidential medical information about him in a way that violated the Privacy Act,[3] causing him “humiliation, embarrassment, mental anguish, fear of social ostracism, and other severe emotional distress.”  FAA v. Cooper, 132 S. Ct. at 1447 (quoting App. to Pet. for Cert 120a).  Cooper did not allege economic or pecuniary harm resulting from this disclosure, however.

Despite concluding that the FAA and SSA had violated the Act and that there was a triable issue of fact whether the government’s violation was intentional or willful, the district courtgranted summary judgment against Cooper.  See 816 F. Supp. 2d 778 (N.D. Cal. 2008).  The court determined that the term “actual damages” was “facially ambiguous,” id. at 791, and concluded that because the canon of sovereign immunity requires that waivers of sovereign immunity must be strictly construed in favor of the Government, the scope of the Government’s waiver in §552a(g)(A) must be limited to pecuniary damages only.  The Ninth Circuit Court of Appeals reversed and remanded, concluding that the term “actual damages” is not ambiguous when traditional tools of statutory interpretation are applied, and held that “Congress clearly intended that when a federal agency intentionally or willfully fails to uphold its record-keeping obligations under the Act, and that failure proximately causes an adverse effect on the plaintiff, the plaintiff is entitled to recover for both pecuniary and non-pecuniary injuries.”  622 F.3d 1016, 1035 (9th Cir. 2010).

The Court, in an opinion authored by Justice Alito and joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas, ruled that the term “actual damages,” as used in the Privacy Act, does not include mental or emotional distress.  The Court held that because the “Act does not unequivocally authorize an award of damages for mental or emotional distress,” it does “not waive the Federal Government’s sovereign immunity from liability for such harms.”  FAA v. Cooper, 132 S. Ct. at 1456.

The principle of sovereign immunity declares that the government must consent to be sued, and the sovereign immunity canon is an interpretive tool that provides that any waiver of sovereign immunity (allowing for monetary recovery from the federal government) must be strictly construed in favor of the government so as to limit that recovery.  In this case, Justice Alito acknowledged that by allowing recovery of “actual damages” as a result of violations of the Act, Congress expressly waived its sovereign immunity.  However, what concerned the Court was the scope of that waiver and whether Congress intended to limit recovery of damages provided under §552a(g)(4).  FAA v. Cooper, 132 S. Ct. at1448.  Justice Alito remarked that Congress does not need to use “magic words” to invoke sovereign immunity because the interpretive tool of the canon of sovereign immunity allows the Court to “take the interpretation most favorable to the government” if the scope of Congress’s waiver is not clearly discernable from the statutory text “in light of traditional interpretive tools.”  Id.

Justice Alito then turned to such “traditional interpretive tools” to conclude that the term “actual damages,” as used in the Privacy Act, was ambiguous.  He cited the Ninth Circuit, agreeing that the precise meaning of the term “changes with the specific statute in which it is found.”  Id. at 1449 (quoting FAA v. Cooper, 622 F.3d at 1029).  Drawing connections to defamation and privacy torts, which “serve similar interests” to the Privacy Act, Justice Alito inferred that Congress “intended the term ‘actual damages’ to mean ‘special damages.’”  Id. at 1445 (citing Doe v. Chao, 540 U.S. 614 (2004) for the proposition that § 552a(g)(4)(A) parallels the “remedial scheme for the common-law torts of libel per quod and slander,” which limit recovery unless plaintiffs can prove “special harm,” also known as “special damages”).  Justice Alito next quoted several treatises on torts and remedies, stating that “special damages” are limited to “actual pecuniary loss, which must be specially pleaded and proved” whereas “general damages” cover “loss of reputation, shame, mortification, injury to the feelings . . . and need not be alleged in detail and require no proof.”  132 S. Ct. at 1451 (quoting D. Haggard, Cooley on Torts, §164, 579-80 (4th ed. 1932)).  Finally, Justice Alito reasoned that because Congress chose to use authorize “actual damages” rather than “general damages,” Congress viewed these terms as “mutually exclusive” and intended “actual damages” to mean “special damages for proven pecuniary loss.”  Id. at 1452.  Ultimately, because Congress did not speak “unequivocally,” Justice Alito wrote, the Court adopted the interpretation most favorable to the government: that “the interpretation of ‘actual damages’ [is] limited to proven pecuniary or economic harm.”  Id. at 1453.

Justice Sotomayor’s dissent, joined by the Justices Ginsburg and Breyer,[4] argued that the Court’s ruling “is at odds with the text, structure, and drafting history of the Act.  And it cripples the Act’s core purpose of redressing and deterring violations of privacy interests.”  Id. at 1456 (Sotomayor, J., dissenting).  The dissent disagreed with the majority’s reliance on the sovereign immunity canon, arguing that “traditional tools of statutory construction – the statute’s text, structure, drafting history, and purpose – provide a clear answer” that “actual damages” include all proven injuries, including mental and emotional distress demonstrated by competent evidence.  See id.  By limiting the term “actual damages” to pecuniary damages only, Justice Sotomayor contended, the majority has created “a disconnect between the Act’s substantive and remedial provisions” and allows “a swath of Government violations to go unremedied.”  Id. at 1459.

Sarah Kitchell is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Boston office. She focuses her practice on general health law, including the representation of hospitals, health systems and other health care clients.

Sarah received her J.D., magna cum laude, with a concentration in health law from the Boston University School of Law and was awarded the Dr. John Ordronaux Prize for greatest overall professional ability.   While in law school, she was editor-in-chief of the Boston University Law Review and served as a summer associate at the Firm. Prior to law school, Sarah worked for the National Cancer Institute’s Cancer Information Service at the University of Iowa Hospitals & Clinics and at a rural health clinic in Tennessee. Sarah received her B.A. from Stanford University with honors and was elected to Phi Beta Kappa.

Sarah is admitted to practice in Massachusetts.

[1] The Act applies to records under the control of federal agencies that contain individually identifiable information including, but not limited to, the individual’s “education, financial transactions, medical history, and criminal or employment history.”  5 U.S.C. §552a(a)(4).  For more information on the Act, including a discussion of caselaw, see U.S. Dep’t of Justice, Office of Privacy and Civil Liberties, Overview of the Privacy Act of 1974 (2010), available at http://www.justice.gov/opcl/1974privacyact-overview.htm.

[2] Cooper admitted that he withheld this information intentionally because at the time, the FAA did not issue medical certifications to individuals diagnosed with HIV.  See FAA v. Cooper, 132 S. Ct. at 1446.

[3] The Respondent’s brief alleges that Operation Safe Pilot intentionally and willfully violated the Act’s narrow law-enforcement exception allowing sharing of records between agencies, set forth in §552a(b)(7), because the agencies’ investigators disclosed confidential records “without written requests from, or approval by, their respective agency heads.”  Brief for the Respondent, FAA v. Cooper, No. 10-1024 (2011) at 3.  The Respondent’s brief further alleges that the agencies also “did not provide written notice to, or obtain written consent from, any pilot” being investigated, also in violation of the Act.  Id.

[4] Justice Kagan took no part in the case, presumably due to her connection with the case as Solicitor General.

Health Law Case Brief: Marmet Health Care Center v. Clayton Brown, Clarksburg Nursing Home v. Marchio

Posted

By: Phillip Rakhunov

On February 21, 2012, the United States Supreme Court announced its decision in Marmet Health Care Center, Inc. v. Brown.  The question in this case was whether the Federal Arbitration Act (“FAA”) preempted a determination by West Virginia courts that, as a matter of state public policy, pre-dispute arbitration agreements are not enforceable with respect to claims made against nursing homes for injury or wrongful death resulting from negligence.

The main case (and the companion cases) arose from classic negligence wrongful death actions brought by plaintiffs against nursing homes.  The basic facts of each case are substantially the same.  In each case, an ill or incapacitated person needing extensive, ongoing nursing care was admitted to a nursing home, and a family member signed an admission agreement with the nursing home that contained a garden-variety pre-dispute arbitration clause. The clause generally provided that any disputes that the ill or incapacitated person might have in the future with the nursing home would be submitted to arbitration.  Later, after the patient died, a family member filed a lawsuit against each nursing home, alleging that various acts and omissions of the nursing home negligently caused injuries which eventually resulted in the ill or incapacitated person’s death.  In each case, the nursing homes successfully moved the trial court to dismiss the cases on the basis of the arbitration clauses.  The plaintiffs in each case appealed to the West Virginia Supreme Court of Appeals.

In a consolidated appeal, the West Virginia Court considered the history and purposes of the FAA and, surprisingly, determined that Congress did not intend for the FAA to apply to arbitration clauses in pre-injury contracts, where a personal injury or wrongful death occurred after the signing of the contract.  Specifically, the West Virginia Court made three rulings:  (1) that the FAA preempted Section 15(c) of the West Virginia Nursing Home Act, which purports to declare “null and void as contrary to public policy” any waiver of a nursing home resident’s ability to “commence an action in circuit court”; (2) that, in any event, as a matter of West Virginia public policy, all pre-injury agreements to arbitrate personal injury or wrongful death claims are unenforceable and that this categorical rule of public policy was not preempted by the FAA; and (3) that the arbitration provisions at issue were procedurally and substantively unconscionable.

In so ruling, the West Virginia Court’s decision focused heavily on the often difficult and emotional decision to be admitted to a nursing home and on the circumstances surrounding the admission process.  The Court of Appeals showed a marked compassion towards the plaintiffs in passionately describing how such a decision, often made in the midst of a crisis brought on by a precipitous deterioration in a love-one’s health, is also often prompted by the loss of, or deterioration in the health of, a spouse or care giver, or when the care-giving family is no longer able to adequately manage the demands of home care.  The West Virginia Court focused on how the confusing and hurried admissions process might discourage the patient (or patient’s family) from questioning the content of the forms to be signed, including the “buried” arbitration provision, because of the implicit perception that the forms must be signed as a condition of admission.

Additionally, the West Virginia Court’s opinion reflected a patent hostility towards the Supreme Court’s expansion of the reach of the FAA over the past century.  In searching for a way to circumvent the FAA, the Court of Appeals criticized the United States Supreme Court for having stretched the application of the FAA, based on “tendentious reasoning,” from being a procedural statutory scheme effective only in the federal courts, to being a substantive law that preempts state law in both the federal and state courts.  The West Virginia Court ceased on the apparent lack of Supreme Court precedent regarding the enforceability of an arbitration clause in a health care contract and, despite recognizing that a rule of state law disfavoring arbitration for a class of interstate commercial transactions is preempted by the FAA, purported to carve out an exception to the FAA, ruling that Congress did not intend for the FAA to be, in any way, applicable to personal injury or wrongful death suits that only collaterally derive from a written agreement that evidences a transaction affecting interstate commerce, particularly where the agreement involves a service that is a practical necessity for members of the public.

In an unusually harsh, but succinct unanimous per curiam opinion, the Supreme Court found that the West Virginia Court’s “interpretation of the FAA was both incorrect and inconsistent with clear instruction” in the Supreme Court’s precedents.  The Supreme Court unanimously reaffirmed that state public policy cannot trump the FAA to agreements implicating interstate commerce.  Because the Court of Appeals cited common law unconscionability as an alternative basis for its holding, the Supreme Court reluctantly remanded the case for the West Virginia court to determine whether the arbitration agreement at issue was otherwise unenforceable under state common law principles that are not specific to arbitration.

Although succinct in its analysis, the Marmet decision sends a strong message that a unanimous Supreme Court would likely fully embrace the prior term’s ruling by a divided (5 to 4) Court in AT&T Mobility LLC v. Concepcion, 563 U.S. __, __, 131 S.Ct. 1740 (2011) (slip op., at 6-7), and makes it clear that “when a state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward:  The conflicting rule is displaced by the FAA.”

Phillip Rakhunov is a business litigator who represents health care organizations, financial institutions, investment professionals, fiduciaries and various other business entities and individuals in a broad array of business disputes, including securities fraud litigation, enforcement of restrictive covenants, and high stakes contract litigation. Mr. Rakhunov regularly appears in state and federal courts, as well as before arbitration and mediation tribunals. Fluent in Russian, Mr. Rakhunov also represents Russian-speaking clients and other clients in need of his unique background and language.  Mr. Rakhunov received his law degree from Northeastern University School of Law and his undergraduate degree from Tufts University.  Mr. Rakhunov is admitted to the state and federal bars of Massachusetts and New Hampshire.