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Halbig: Court Holds Clear Language of the ACA Prohibits Health Care Subsidies in Federally-Run Exchanges
Remember my post, “The Great and Powerful ACA: Are High, Inflated Premiums Hiding Behind the Curtain?” I warned of the possible consequences of Halbig v. Burwell…and it happened.
Halbig v. Burwell was decided earlier today.
The Halbig court held that the Internal Revenue Service (IRS) went too far in extending subsidies to those who buy insurance through the federally run, Healthcare.gov website.
The Halbig court ruled that the subsection of the ACA that allows high insurance premium tax credits, according to the plain language of the statute, only applies to those individuals enrolled “through an exchange established by the state.” (emphasis added). Therefore, if Halbig is upheld on en banc review by the D. C. Circuit (see below) or on appeal to the U. S. Supreme Court, residents who reside in two-thirds (or 36) of the states that did not establish state-run health care exchanges (including NC), will not benefit from the health care subsidies.
Looking at the decision through a purely objective, legal lens, I believe the federal court of appeals is correct in its ruling. I also agree that the ruling will have drastic and devastating consequences for the ACA and the people who would have benefited from the health care subsidies.
However, the law governing statutory construction and interpretation is clear. Statutory interpretation is the process by which courts interpret legislation.
For years, the U.S. Supreme Court has been explicit on statutory interpretation. “We begin with the familiar canon of statutory construction that the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.” Consumer Product Safety Commission et al. v. GTE Sylvania, Inc. et al., 447 U.S. 102 (1980).
In other words, if the words of a statute are unambiguous, then the statutory interpretation ends. The clear words of the statute must be followed.
Let me give an example of ambiguous language:
A magazine printed the following: “Rachel Ray enjoys cooking her family and her dogs.” If that were true, Rachel Ray’s family and dogs would be very upset. I am sure what the editor meant to write was “Rachel Ray enjoys cooking, her family, and her dogs.”
It is amazing how important a comma is.
The Halbig court held that the section of the ACA allowing health care subsidies only apply to those enrolled in an exchange established by the state is not ambivalent. Thus, according to statutory interpretation rules, the judicial inquiry ends.
So what happens now?
A request for an en banc ruling by the D. C. Circuit is the next step for Department of Justice. An en banc ruling is a decision made by all the justices, or the entire bench, of an appeals court, instead of a panel selected by the bench. In this case, three federal judges sat on the panel and the case was decided 2-1. An appeals court can only overrule a decision made by one of its panels if the court is sitting en banc.
Looking beyond any en banc ruling, the case could, potentially, be heard by the U.S. Supreme Court, especially in light of the importance of the decision and the fact that a 4th Circuit Court of Appeals ruled the opposite way literally hours after Halbig was announced. See David King, et al. v. Burwell, et al.
The Fourth Circuit found the ACA ambiguous, and it states, “For reasons explained below, we find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion. We thus affirm the judgment of the district court.”
Bizarre that two courts hold opposing positions on the same issue and publish both decisions on the same day. It reminds of the old Sam the Sheepdog cartoon, “Duh! Which way did he go? Which way did he go, George?”
Finally, in closing, and on a personal note, I would like to dedicate this blog to my lab-doberman mix, Booker T, who, sadly, passed Sunday. He was my best friend for over 14 years. You will be greatly missed, Booker T. Rest in peace.
The Great and Powerful Affordable Care Act: Are High, Inflated Premiums Hiding Behind the Curtain?
A lawsuit that could come out as early as tomorrow could be catastrophic for the Affordable Care Act (ACA) in as many as 36 states and impact approximately 5.4 million Americans.
In so many ways, in the last year or so, the all-changing, great and powerful ACA that promised affordable health care for all and “if you like your health care coverage, you can keep it,” has fallen monumentally short of its original, lofty promises.
In a way, we all wanted to believe in the promises of the ACA, like Dorothy in “The Wizard of Oz.” Who can forget the disappointed sigh Dorothy expels when Toto pulls back the curtain of the Great and Powerful Oz only to see a mundane, elderly man with absolutely no super powers or means to grant her wishes. Dorothy wanted Oz to be real. She wanted desperately for Oz to be as Great and Powerful as he proclaimed. However, in reality, he was not.
Like Dorothy wanted Oz to be real, we all wanted the ACA to create an affordable, nationwide health care system…this health care utopia.
So many lofty promises of the ACA have already been crushed, either by the Supreme Court’s decision that allows states to opt-out of Medicaid expansion, or by President Obama himself in executive actions, including an action delaying the employee mandate.
The courts may deflate the illusions of grandeur of the ACA even more with an upcoming and anxiously awaited decision. The case of Halbig v. Burwell, a D.C. Court of Appeals case, has concerned citizens everywhere, who wait on bated breath for a ruling. Halbig could have a huge (negative) impact on health care premiums. Halbig could be the Toto that pulled back the curtain on the ACA.
Let me explain:
There is a subsection of the ACA that allows high insurance premium tax credits, in an effort to make premiums more affordable for low-income families. The subsection applies to individuals who make less than $46,075. In implementing the ACA, it was contemplated that those individuals who make under $46,075 will have difficulty affording the insurance premiums; therefore, the ACA gives nice, large tax credits to offset the costs of premiums.
However, according to the plain language of the statute, these tax credits only apply to those individuals enrolled “through an exchange established by the state.” (emphasis added). Yet two-thirds (or 36) of the states did not establish state-run health care exchanges (including NC). Instead, these states relied on the federal exchange, in part, to avoid additional cost expenditures.
Here is a map of states according to whether it is expanding Medicaid:
The Halbig case asks the question: Can people living in states run by a federal health exchange reap the benefit of tax credits intended for those people participating in an exchange run by the state?
If the Halbig Court takes that stance that the statute is not ambivalent and must be followed exactly as it is written, then millions of Americans will become ineligible for the tax credits for health care premiums, because they will not be enrolled in a state-run exchange. Premiums would sky-rocket and many Americans would be unable to afford health care…again. It is estimated that without the tax credits, the health care premiums will cost 4x as much.
Interestingly, the Internal Revenue Service (IRS) weighed in and issued a highly-contested rule authorizing the federal exchange to issue tax credits. Amidst all the tomfoolery about the IRS targeting 501(c) charities owned by the Tea Party, it is surprising, at least to me, that the IRS would issue such a contentious ruling in favor of the ACA and anti-conservatives.
Hence, the Halbig case, in which Plaintiffs argue that the IRS has exceeded its statutory authority in issuing tax credits to those residing in states with federal exchanges, when the ACA clearly states that the tax credits only apply to state-run exchanges.
If the D.C. Court of Appeals sides in favor of the Plaintiffs, the following could occur:
• Residents of 36 states could pay health care premiums 4x more than promised;
• The ACA would fall short of promises…again;
• The IRS will have exceeded its authority to benefit Democrats…again;
• People may not be able to afford the health care premiums;
• The ACA could risk the downfall of many more promises.
We all wanted the ACA to create health care utopia. We all wanted the Great and Powerful Oz to be Great and Powerful.
But the courts may tell us we just can’t say, “Pay no attention to the man behind the curtain!!”
High Court to Decide Whether Agencies Like CMS Can Flip-Flop Decisions
Do you know anyone who constantly changes his or her mind? Sometimes changing your mind can have drastic consequences. Think about it in the aspects of politics. Imagine that Obama announces that he was switching parties to become a Republican? This would be a huge decision with drastic consequences.
As crazy as it sounds, politicians do switch sides. The most recent switch-hitter that I can recall is Charlie Crist of Florida. Republican Crist served as Florida’s governor from 2007 to 2011. In December 2011, Crist officially changed his party affiliation to Democrat. More famously, Ronald Reagan began his political career as a Democrat. Hillary Clinton used to be a Republican. These changes had profound impact.
Now imagine that the Supreme Court rules one way, then overturns itself. There would be drastic consequences, and it does not happen often (actually the Supreme Court has overturned itself 10 times over the course of history).
Similarly, what if the Center for Medicare and Medicaid (CMS) issued a final ruling, caused millions of providers to change the way they bill Medicare or Medicaid, then changed its mind?
Can CMS change its mind after issuing a final ruling?
This is precisely what the Supreme Court will decide.
In Perez v. Mortg. Bankers Ass’n, U.S., No. 13-1041, petition filed 2/28/14, the federal government is asking the Supreme Court to review whether an agency altered its interpretation of a regulation without adhering to the Administrative Procedure Act (APA). In Perez, the Department of Labor (DOL) issued a reinterpretation of a prior ruling without obtaining notice and comment from the public.
If the Supreme Court allows the DOL to uphold its reinterpretation, this holding could have serious ramifications in the health care arena. Medicare and Medicaid are also highly regulated, like labor laws. IF DOL’s reinterpretation stands, then CMS could also issue redeterminations of prior rulings without notice and comment.
Allowing CMS to flip-flop decisions would impact providers who rely on CMS rulings in order for their practices to remain compliant.
As of now, the Supreme Court has not decided whether it will hear arguments on this case. But both petitions filed with the Supreme Court cite a circuit court split in opinions. It is more likely for the Supreme Court to grant review of a case when there is a split of opinion.
DMA, LIke the Titanic, Has Difficulty Changing Course
At a preliminary injunction hearing today, I realized that NC Division of Medical Assistance (DMA), like the Titanic, has difficulty changing its course.
It is my contention (and, I argue, the 4th Circuit’s position, as well) that a Managed Care Organization (MCO) does not have the authority, without DMA’s express authorization, to terminate, suspend or refuse to contract with any provider. PERIOD. I don’t care if the provider has phantom clients and is billing Medicaid 34/hr/day. (People, I am obviously against Medicaid fraud. I am trying to make a point).
An MCO cannot, without express authorization from DMA, terminate, suspend, or refuse to contract with any provider.
Why do I think this? (besides the fact that this is a better position for my clients). And why do I think DMA is Titanic-like?
On or about May 10, 2013, the 4th Circuit published K.C. v. Shipman (“Shipman”). The second sentence of Shipman says it all, “PBH [the MCO at-issue in this particular case], a local subdivision of the state that manages the delivery of plaintiffs’ Medicaid services pursuant to a contract with NCDHHS.” Hmmmm…too legalese-like?
FYI: NCDHHS = NC Dept. of Health and Human Services (DHHS), which is the state agency that manages DMA, which is the division that manages Medicaid. For a complete list of DHHS’ divisions, click here.
Shipman goes on to say, “states should enjoy both an administrative benefit (the ability to designate a single state agency to make final decisions in the interest of efficiency) but also a corresponding burden (an accountability regime in which an agency cannot evade federal requirements by deferring to the actions of other entities).” (emphasis added). Accountability, People!!! That’s what I am talking about!
In other words, DMA, as the single state entity, cannot contract with a third-party and NOT carry the burden of supervising that third-party and insuring that the third-party follows federal law. Or even simpler, the single state entity cannot contract out of (or divorce itself from) federal laws and hide behind a contract. Or even simpler, a teacher at a school cannot suspend a student without the authorization of the principal/school.
Yet, despite Shipman, MCOs are still contending that, “DMA cannot tell us what to do.”
Yet, despite Shipman, MCOs are still terminating, suspending and refusing to contract with providers without the express authority of DMA.
Yet, despite Shipman, TODAY, in my preliminary injunction hearing (the transcript of which will be a public record), the MCO’s attorney argued that (per case law from 1941) the MCO is an independent contractor (hence DMA having no control over the MCO). The DMA attorney piggy-backed the MCO argument and pointed out that DMA had taken no action in this case (i.e., the provider’s Medicaid contract was NOT terminated according to DMA). In other words, the teacher tried to expel a student from school without the school/principal authorizing the expulsion…or even backing it up.
It is as if Shipman came out May 10, 2013, and, here on now May 28, DMA (or its agents the MCOs) is struggling to change its course. But, like the Titanic, DMA is too big, too heavy and too dinosaur-ish to move quickly adapt or change to comply with new federal law (although, even prior to Shipman, I argued it is absolutely obvious that an MCO is the agent of the state…it’s just nice to have some “auth-or-i-TIE” to back my argument).
“Iceberg!” (Shipman)
At the moment that someone yelled, “Iceberg,” what did the Titanic do?
1. Some say the officer in charge had a 30 second delay in giving the order to change the ship’s course after the spotting of the iceberg. Apparently, he was dumbfounded for 30 seconds. Can’t say I blame him. Pretty scary stuff! But, some say, that 30 second delay sunk the Titanic.
2. Some say when the iceberg was spotted, the steersman, Robert Hitchins, went into a panic and turned the Titanic the wrong way. Remember, the Titanic was launched back when sailors were more used to sailing ships. They learned on “Tiller Orders.” If you want to go one way, you push the tiller the other way. So it is not surprising that, in a panic, Hitchins would have resorted to Tillers Orders.
3. Some say the Titanic sank because it was the largest ship afloat. The Titanic was only the second of three Olympic class ocean liners operated by White Star Line. It carried 2,224 passengers. Because of the Titanic’s massive size, the hull plates buckled inward along her starboard side and opened 5 of 16 watertight compartments to the sea.
4. Some say (this has nothing to do with sinking, but with loss of life), the Titanic lacked enough lifeboats. The Titanic had enough lifeboats for 1,178 people, slightly more than 1/2 of the passengers. Supposedly, the reason the Titanic had insufficient lifeboats was because of outdated maritime safety regulations.
Similarly, DMA, like the Titanic, has made some “sink-able” errors, but with administration committed to change, let’s hope we can correct the “sink-able” errors before the Medicaid behavioral health system sinks. Because, instead of 2,224 passengers, Medicaid carries 1.5 million passengers.
Let’s review the Titanic-like errors of DMA. For the sake of this blog, the “Iceberg!” moment was the publication of K.C. v. Shipman.
1. K.C. v. Shipman was published May 10, 2013. It is now May 28, and DMA and the MCOs are still arguing in court that MCOs are not agents of DMA. An 18 day delay is a bit more than a 30 second delay, but the similarity is there nonetheless.
2. A panicked turn the wrong way…Shipman came out and legal advocates for DMA and the MCOs instantly begin to argue, “Yeah, but…” Yeah, but Shipman does not apply to providers…Yeah, but Shipman only applies to managed care, not fee-for-services…Yeah, but just because PBH is an agent of the state, it does not mean that all MCOS are agents. Folks, an agent is an agent is an agent. A panicked turn the wrong way is merely a way of denial (and I am not talking about the river De-Nile). And, some say, the panicked turn the wrong way sunk the Titanic.
3. Largest ship afloat; large bureaucratic agency. I do not have the data, but I am willing to bet that DHHS/DMA is one of the biggest NC governmental agencies. In January, the State Auditor released a Medicaid audit. According to the January audit, “[i]n SFY 2011, North Carolina Medicaid incurred administrative expenses of approximately $648.8 million which when compared to MAP spending of $10.3 billion produced an ADM/MAP percentage of 6.3 percent. This percentage was significantly greater than the ratio for states with comparable spending.” With that much spending on administration, the agency can’t be small! Like the Titanic, big things are hard to maneuver or change course. The hull plates begin to buckle. Imagine an elephant going through an obstacle course at top speed…it just isn’t pretty.
4. Like too few lifeboats, Medicaid’s mental health system has too few providers and too many wanting for a seat on the lifeboat. Not to mention, the MCOs seem to have taken it upon themselves to insure there are too few providers by terminating Medicaid contracts, suspending Medicaid contracts and refusing to enroll providers. Today, my client informed me (and, folks, this is not verified; it is hearsay) that during the time in which this provider’s certain Medicaid contracts were terminated by this one MCO, that this one MCO also terminated 27 other providers’ Medicaid contracts. It’s as if, prior to setting sail, a person brought the captain an extra few thousand lifeboats, and, instead of putting the lifeboats on the ship, the captain said, “No thanks. We don’t have room.” But as to Medicaid behavioral health, we have too many in need and not enough providers providing services. (Again, this does not go to the reason of the sink-age (I know that is not a word) of the Titanic, but rather to the number of deaths/recipients not receiving medically necessary mental health services.
In sum, today I decided that DMA is like the Titanic. So big that both were/are very difficult to change its course. Since Shipman, DMA has had an 18 day delay digesting the decision (and counting). Since Shipman, DMA has panicked and turned the wrong way. Since Shipman, DMA has shown it is just too big to move quickly (and it’s hulls may be buckling). Since Shipman, DMA has proven too little providers and too many Medicaid recipients in-need is not a healthy combination.
Remember the saying, “[T]hose that do not learn from history are doomed to repeat it?”
People, the Titanic sank!
Supreme Court of the United States Holds NCGS §108A–57 Violates Federal Law!
Remember my post on March 14, 2013, stating that NCGS 108C-7 violates federal law? Well, obviously I wrote that blog without pursuing a legal case and without having a judge decide whether NCGS 108C-7 actually violates federal law.
But there may be some validity to my claim that 108C-7 violates federal law.
Yesterday the Supreme Court of the United States wrote an opinion regarding another North Carolina Medicaid statute: NCGS 108A-57. Wos v. E.M.A. In Wos v. E.M.A., the Supreme Court held that the NC Medicaid statute 108A-57 is pre-empted by the Supremacy Clause in the Constitution.
By way of background, the case originated from a mom and dad bringing a medical malpractice claim against the doctor and hospital that delivered their child, E.M.A. E.M.A. suffered multiple serious injuries during birth, leaving her deaf, blind, and unable to sit, walk, crawl, or talk. She also suffers mental retardation and seizures. Due to these birth injuries, Medicaid paid $1.9 in hospital costs, surgeries and health care on behave of E.M.A. In November 2006, the NC Court approved a settlement for $2.8 million. If you think that the settlement seems low, it is low. Apparently the settlement was based on the amount of malpractice insurance the defendants possessed.
A representative from Medicaid (DMA) informed the parents that Medicaid would seek reimbursement for the $1.9 million expended.
“E. M. A. and her parents then filed this action under Rev. Stat. §1979, 42 U. S. C. §1983, in the United States District Court for the Western District of North Carolina. They sought declaratory and injunctive relief, arguing that the State’s reimbursement scheme violated the Medicaid anti-lien provision, §1396p(a)(1) .”
After appeal after appeal and all the way up to the U.S. Supreme Court, North Carolina fought E.M.A. and her parents, saying that the State was entitled to Medicaid reimbursement as required under NCGS 108A-57.
The U.S. Supreme Court disagreed .
In the words of the Supreme Court (as to why the NC Statute was pre-empted):
“Instead, North Carolina has picked an arbitrary number—one-third—and by statutory command labeled that portion of a beneficiary’s tort recovery as representing payment for medical care. Pre-emption is not a matter of semantics. A State may not evade the pre-emptive force of federal law by resorting to creative statutory interpretation or description at odds with the statute’s intended operation and effect. ”
Interesting that the Supreme Court picked the word “arbitrary.”
In light of the Wos v. E.M.A. decision, I think it would be prudent to question other Medicaid statutes. Most likely other Medicaid statutes, similarly, violate federal law. Maybe…..108C-7.
See my March 14, 2013, blog for my legal reasons that 108C-7 violates federal law.
