Courts and Healthcare Policy in 2020

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2019 saw court hearings of a number of cases related to the Affordable Care Act (ACA). Several other Trump administration policies were also challenged, including Medicare payment policies, price transparency, how the Medicaid program can change and whether Medicaid beneficiaries can sue over curtailed benefits, and immigration changes affecting access to programs like Medicaid.

In 2020, the courts will continue to play an important role as some cases continue in the process, and potential new lawsuits challenge the administration’s continued effort to change health policy.

Cases Related to the Affordable Care Act

Texas v. United States. The most consequential case related to the ACA is the constitutional challenge to the law. A group of Republican-controlled states and two Texas residents argue that the entire ACA became unconstitutional when Congress eliminated the penalty for individuals who fail to obtain health insurance. Last month, a divided three-judge panel of the 5th U.S. Circuit Court of Appeals issued a ruling stating the individual mandate was unconstitutional because it can no longer be justified as a tax since Congress set the penalty at 0. However, the panel also remanded the case to the lower court to determine what portions of the ACA are or are not severable from the individual mandate.

Now, a coalition of Democratic attorneys general has asked the U.S. Supreme Court to take up the case and not wait for the Texas court to rule on whether some or all of the ACA provisions are so intertwined with the individual mandate that they, too, must be deemed unconstitutional.

Risk corridors. The Supreme Court is already reviewing a third ACA case. It is a challenge brought by health insurance companies seeking $12 billion in “risk corridor payments” that were envisioned by the ACA. The risk corridor program was designed to compensate insurers who lost money in the early years of the exchanges, but congressional Republicans blocked CMS from making most of the promised payments.

The court is expected to issue a ruling by June.

Association health plans. One lawsuit challenges the administration’s expansion of association health plans through a Department of Labor rule that seeks to make it easier for small employers to band together and offer plans that do not have to comply with ACA consumer protections. A panel of the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in November. A ruling is expected in the coming months.

Short-term plans. Similar to the association health plan case, this case involves the administration’s expansion of short-term, limited-duration plans, which also need not comply with ACA protections. Briefing in the case is ongoing, and the court has not yet scheduled a date for oral arguments.

Cost-sharing reductions (CSR). Litigation continues over the ACA’s cost-sharing reduction program, which was intended to compensate insurers for setting low deductibles and copayments on the exchanges. In 2017, the administration decided to stop making the CSR payments, prompting numerous lawsuits from insurers. The insurers have won various lower-court rulings, and a consolidated group of the lawsuits is on appeal at the U.S. Court of Appeals for the Federal Circuit. Oral arguments were held Jan. 9.

The CSR litigation raises legal issues similar to those posed by the risk corridor case at the Supreme Court because both involve government payments to insurance companies that were intended by the drafters of the ACA but subsequently revoked. The Supreme Court’s decision in the risk corridor case may therefore presage the eventual outcome on CSRs.

Contraceptive mandate. The Supreme Court is considering whether to take up another controversial ACA-related issue: the ACA’s requirement that employers provide coverage for birth control in employee health plans. Last year, two federal appeals courts blocked Trump administration rules that created exemptions for employers with religious or moral objections to the contraceptive mandate.

The justices will discuss whether to take the case at their private conference Jan. 10, with an announcement likely following within weeks.

Nondiscrimination provisions. A new lawsuit is likely this year over the administration’s efforts to weaken some of the ACA’s nondiscrimination provisions, codified in Section 1557 of the law. HHS is currently finalizing regulatory changes expected to roll back Obama-era protections for groups such as transgender people, gay and lesbian people, and people who have terminated a pregnancy. Once the administration issues its final rule, a legal challenge is expected.

“Take care” clause. This broad-based lawsuit brought by a group of cities argues that the administration violated the Constitution by sabotaging the ACA. The lawsuit says President Trump’s various administration actions weakening the ACA conflict with the Constitution’s requirement that the president “take care that the laws be faithfully executed.” The case was filed in 2018 but remains in the early stages at a federal district court in Maryland.

Medicaid in the Courts

As the administration injects conservative policies into the Medicaid program, objectors are filing lawsuits.

Work requirements. The most prominent legal issue in Medicaid is the ongoing fight over work requirements, and a key ruling from the D.C. Circuit could come any day.

CMS has aggressively advocated for work requirements to be included in Section 1115 waivers. As waivers including work requirements are approved, opponents are responding with lawsuits challenging those waivers. Democrat-appointed District Judge James Boasberg repeatedly sided with the opponents last year, ordering Arkansas to suspend its work requirement program and blocking the policy from taking effect in Kentucky and New Hampshire. Other lawsuits challenging the policy in Indiana and Michigan are in the early stages before Boasberg, and more lawsuits could be coming.

Boasberg’s rulings against work requirements are now on appeal at the D.C. Circuit, which heard oral arguments in October. The D.C. Circuit has considered the case on an expedited schedule.

Beneficiaries’ right to sue. Another policy being tested in the courts is the extent to which beneficiaries have a right to sue state officials to challenge state actions that curtail Medicaid benefits. The ability to bring such lawsuits in federal court has long been viewed as an important safeguard for beneficiaries, but in recent years, some courts have expressed doubt about the legal theories underlying such lawsuits.

The Supreme Court declined to weigh in on the issue in 2018. However, currently pending at the 5th Circuit is a lawsuit brought by beneficiaries challenging Texas’ attempt to remove abortion providers from its Medicaid program. The ruling could extend far beyond the abortion context and help clarify the authority of beneficiaries to sue over a wide range of allegedly unlawful coverage policies by states.

Block grants. While no lawsuit has yet been filed, CMS’ push to permit states to convert their federal Medicaid funding into a form of a block grant has opponents on the ready. Tennessee was the first state to submit a waiver request to convert its program to a block grant. Once a waiver is approved, lawsuits are sure to follow.

Payment Policy Challenges

In Medicare, CMS remains engaged in litigation over two controversial payment policies that the agency says will bring down costs but hospitals describe as illegal. Continuing to fight both policies is a priority for the hospital industry in 2020.

340B cuts. One lawsuit challenges the agency’s 2018 and 2019 reimbursement cuts for drugs in the 340B drug discount program. Hospitals argue that the agency does not have the authority to make those cuts, and a federal district judge agreed. The case is now at the D.C. Circuit. Oral arguments were heard in November and a decision is expected by summer of this year. Meanwhile, CMS retained the 340B cuts in its 2020 hospital outpatient pay rule.

Site neutrality. Another case challenges CMS’ site-neutral policy, which cut payments for outpatient clinic visits at certain off-campus hospital facilities in 2019. Under the policy, the agency reimbursed hospitals for those visits at a rate equivalent to the cost of such services provided in doctors’ offices under the physician fee schedule. In September, a district judge said CMS lacked authority to make the cuts and vacated them. CMS’ appeal of that ruling could be heard by the D.C. Circuit sometime in 2020.

As with the 340B reimbursement cuts, the litigation did not stop CMS from going ahead with phasing in the cuts in its 2020 outpatient rule.

Transparency Policy

CMS faces drug and hospital industry-led legal challenges to two final rules issued last year that require drug companies and hospitals to disclose more information about pricing. Both challenges are based on the First Amendment.

Drug prices. A drug-pricing rule, issued in May by the U.S. Food and Drug Administration (FDA), seeks to require pharmaceutical companies to include the list prices of their drugs in television advertising. A district judge struck the rule on the grounds that the FDA overstepped its statutory authority. However, the judge did not rule on the drug manufacturers’ argument that the rule’s requirement of disclosure of list prices infringes on the manufacturers’ right to free speech. The case is on appeal at the D.C. Circuit, and oral arguments are scheduled for Jan. 13.

Hospital prices. The hospital transparency rule, issued in November by CMS, seeks to require hospitals to publish the confidential rates they negotiate with private insurers. The hospital industry sued, arguing the rule is highly burdensome and violates hospitals’ free speech. The district judge presiding over the case has set an expedited schedule to review it — but this case, like many of the other lawsuits challenging regulatory actions, likely will end up at the D.C. Circuit.

Other Health Law Issues

Immigrants and health insurance. Two immigration policies finalized last year have health law consequences. The “public charge” rule, issued in August by the Department of Homeland Security, and an executive proclamation on immigration, issued in October, have led to two lawsuits.

The public charge rule makes it harder for legal immigrants who receive certain forms of public assistance, including Medicaid, to remain in the country and become permanent U.S. residents. The proclamation requires new immigrants seeking entry into the country to demonstrate that they will be able to obtain health insurance, not including subsidized ACA plans or Medicaid.

Conscience rule. The rule, issued in May by the HHS Office of Civil Rights, expands the ability of medical professionals to refuse to provide care based on religious or moral objections.

Lawsuits challenging the immigration policies and the conscience rule are pending in federal courthouses around the country, and most of them are moving quickly. Substantive rulings from federal appeals courts are expected on all three issues in 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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