|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
The future fate of the ACA left hanging for another year
On Wednesday, in a long-anticipated ruling, the Fifth Circuit Court of Appeals in New Orleans upheld a lower court’s finding that the Affordable Care Act (ACA) provision requiring individuals to purchase health insurance is unconstitutional. However, the appeals court sent the question of “severability”—essentially, whether striking down the individual mandate means that the entire ACA must be stricken—back to district court judge Reed O’Connor in Texas for further consideration. The appeal followed a ruling from O’Connor last December, in a case which pitted Democratic state attorneys general against the Trump administration and its state-level Republican allies. In that sweeping decision, O’Connor held that not only was the individual mandate invalid, since Congress eliminated the tax-based legal rationale for its existence as part of its 2017 package of tax cuts, but the entire law was illegal—from calorie counts on menus to Medicaid expansion to insurance marketplaces. The appeals court agreed with the first part of that argument, but asked O’Connor for more clarity around which specific elements of the ACA should be eliminated, setting up another round of legal wrangling that will likely last a year or more before reaching its inevitable conclusion at the US Supreme Court.
The O’Connor ruling has cast a long shadow over the healthcare industry for the past year, as it would have had a drastic impact on almost every facet of the largest sector of the US economy. The appeals court decision extends that uncertainty another year and will likely reverberate politically as well. Coming as it did on the same day that President Trump was impeached by the US House of Representatives, the decision may not have fully sunk in among partisans—it barely garnered a mention at Thursday’s Democratic presidential debate, where the limited time spent on healthcare continued to center on the merits of Medicare for All (M4A) rather than on the fate of the ACA. The appeals court has surely given Republicans an early Christmas gift, however, as the timeframe for any final resolution of the case will likely come well after the 2020 elections. That leaves doubts about the ACA hanging over yet another election cycle—the fifth since the law’s passage. Whether the landmark 2010 law will succumb to this latest threat, or whether Chief Justice John Roberts will step in—again, as he did in 2012—to rescue it, will be one of the most consequential questions to be answered in the coming year.
Christmas comes early for healthcare industry groups
Today, President Trump is set to sign into law a $1.4T spending agreement that keeps the Federal government open and avoids a year-end budget showdown with Congress. The agreement is comprised of two separate spending packages, with a total of 12 budget bills, and includes good news for almost every segment of the healthcare industry. It repeals the long-debated “Cadillac Tax” on high-cost health plans, which was a key funding mechanism for the ACA and was intended to force employers to encourage their employees to use healthcare services more frugally. It also repeals the “device tax” on medical device manufacturers, and the separate fee on health insurers, both also part of the ACA. In sum, those three repeals will reduce tax revenue by about $375B over the next decade and will remove a substantial portion of funding originally earmarked to sustain the 2010 health law. Meanwhile, notably absent from the budget deal are measures to address surprise billing, which have proven difficult to finalize despite broad bipartisan support, and steps to reduce the cost of prescription drugs, a key legislative priority on both sides of the aisle. Thanks to intense lobbying by various industry interest groups, and the toxic political environment in Washington, the year is drawing to an end with virtually no progress to show on either front. As a result, despite a year’s worth of heated rhetoric about the high cost of care, the burden of health spending on individuals, and the need to rein in runaway health spending, 2019 is ending with almost every industry interest—pharmaceutical companies, device manufacturers, insurers, physician groups, and hospitals—largely avoiding accountability in the form of federal legislation. As we head into an election year, we’ll likely have to wait until after next November to see real progress on any of these issues. Merry Christmas.
Trump administration moves to allow drug imports from Canada
Undeterred in their search for a win in efforts to lower prescription drug costs, the Trump administration moved forward with plans to enable American consumers to purchase drugs from Canada. The proposed regulation, announced in Florida on Wednesday by Health and Human Services (HHS) Secretary Alex Azar, would allow states to import drugs from Canada; a second draft would also allow pharmaceutical companies to apply for permission to import drugs from any foreign country. Canadian economists expressed concern that the policy could strain the country’s supply of critical medications. But Azar said he couldn’t predict how much money patients would save, as it’s unclear how many states would participate in the plan, although governors of Florida, Maine, Colorado, Vermont and New Hampshire have expressed interest. Pharmaceutical companies remain adamantly opposed to the plan, despite the exclusions of some high-volume yet expensive medicines for chronic disease patients, including insulin for diabetics, and Humira, used to treat rheumatoid arthritis. Proposals to allow Americans to buy drugs from Canada remain very popular with voters. Advancing these efforts will likely be seen as putting the administration on the side of consumers, even if patients are still a long way from actually being able to purchase their medications from Canada—and pharmaceutical companies are sure to lobby heavily to prevent the rule from being implemented.