The Rise of the Lawsuit: ACA, 340B, Drugs and Beyond
In my earlier blog post I talked about a few health care trends for 2019. One of those was “the rise of the lawsuit.” I thought I would take a closer look at a number of current health care public policy lawsuits and their implications.
Affordable Care Act (ACA) Lawsuits
There has been a web of cases surrounding the ACA since it was enacted; however, there are some recent decisions on key suits. In December 2018, a judge ruled in Texas v Azar that the law was unconstitutional. The precursor case to this was NFIB v Sebelius from 2012 where the ACA went all the way to the U.S. Supreme Court, which found it was constitutional, specifically including that the individual mandate was a legitimate tax.
Enter in the large-scale tax law enacted by Republicans in 2017, which reduced the individual mandate penalty to zero. This prompted 20 states to file suit against the ACA and 16 other states in support of the ACA. The judge ruled in this recent case that since there is no financial penalty, it is not a tax. And because the individual mandate is instrumental to the ACA’s overall functioning, it cannot be severed from it, which is why the judge invalidated the entire ACA. The ACA is still the law of the land while Texas v Azar continues to move through the legal process.
There have been other ACA-related lawsuits, including on Cost-Sharing Reductions (CSRs). Under the ACA, CSRs are paid by the federal government directly to insurers to help reduce out-of-pocket expenses of individuals purchasing their plans on the federal Exchange (marketplace). CSRs were one of several mechanisms designed to assist lower income individuals in affording plans on the Exchange. CSR payments have been an issue of contention and legal wrangling for years with Republicans claiming CSR funding was never appropriated by Congress. The Trump Administration stopped paying CSRs altogether in late 2017.
Multiple insurers filed lawsuits on CSRs. One of the main lawsuits was filed by Common Ground Health Care (WI) for payments for 2017 and 2018 (and recently amended the lawsuit to include 2019 plan year). This is now a class action lawsuit covering qualified plans (over 90 insurers to date) that want to be a part of the class. Judges in these various CSR cases, including the Common Ground case, have so far ruled in favor of the insurers. These cases are still pending.
Additional ACA-related lawsuits include on association health plans, where a recent ruling just vacated two policies of AHPs. In this ruling, sole proprietorships and unrelated entities from different geographic areas would not be allowed to form AHPs. There are additional lawsuits on the ACA’s risk corridors, risk adjustments and on short-term plans.
Implications: What we see with the ACA lawsuits is that the court is the arbiter of last resort and where serious, ongoing disagreements on large-scale policy issues, such as the ACA, will need to be settled. The implications for the various ACA lawsuits, while significant to plans, groups or individuals, will not have nearly the broad impact of Texas v Azar if the ACA is ultimately invalidated. The implications of overturning the ACA are immense, including eliminating coverage for millions of individuals, rolling back Medicaid expansion in dozens of states, upending federal insurance requirements, among many other serious health care and financial impacts to individuals, and to state and federal governments. Expect Texas v Azar case to be appealed all the way up to the U.S Supreme Court.
Medicaid 1115 Waivers
To date, nine states have been granted approval by the Centers for Medicare & Medicaid Services (CMS) under 1115 waivers to implement work requirements within their Medicaid programs. There are several court cases related to these work requirements, including in Arkansas and in Kentucky, with a third case just filed in New Hampshire. The cases were filed by Medicaid recipients.
An 1115 waiver allows states the flexibility to experiment with new approaches or demonstrations while still adhering to the fundamental objectives of Medicaid. The latter element is the crux of why some have filed lawsuits against the work requirements—claiming the requirements do not fundamentally keep Medicaid’s objective as being a “medical assistance” program, but instead moves it into a work program.
In the Kentucky case, implementation of its waiver was temporarily blocked by the court due to lack of input during the waiver review process. A refiled waiver was subsequently approved. The Arkansas 1115 waiver was granted and work requirements were implemented in Arkansas beginning in 2018. On March 27, the judge presiding over both cases ruled simultaneously against the work requirements of both states.
Implications: These cases certainly have implications for the approved or pending waiver states and Medicaid beneficiaries themselves, but also have bigger implications for 1115 waivers overall. Depending on the final disposition of these lawsuits, they could establish new boundaries (broad or narrow) regarding what states can do and what the federal government can allow related to Medicaid program changes like work requirements. Expect these cases to continue to be litigated.
340B Lawsuit
In AHA et al. v Azar, providers filed suit against the federal government for significant reimbursement cuts to certain hospitals that qualify for the 340B drug discount program. The almost 30 percent reduction in reimbursement for drugs purchased by hospitals under the 340B program was put into effect by federal regulation. Almost immediately, providers and associations representing providers filed a lawsuit. In December 2018, the court ruled in favor of 340B providers, saying the government did not have the authority to reduce 340B payments in that manner. This case continues to be litigated with the federal government appealing the court’s decision.
Implications: The result of this case will better define how the Department of Health and Human Services (HHS) can alter 340B reimbursement in the future. If the final ruling goes against HHS, then it will indicate large-scale reimbursement changes in this program would require the involvement of Congress. In addition, if the cuts are nullified, there is an open issue of how HHS will repay the affected 340B providers. If it goes in favor of HHS, it would open the doors for these cuts and potentially much broader cuts to payments under the 340B program. Finally, a decision either way could always lead to Congress stepping into the fray and introducing or even passing legislative changes.
Site Neutral Lawsuit
As the Administration continues moving towards “site neutral” payment policies under Medicare, one case to watch relates to hospitals and what are called “provider-based departments” (PBDs). The Administration significantly cut payments to certain PBDs that were located off of the hospital campus. These cuts were based on the Administration’s interpretation of a law passed by Congress in 2015 (BBA 2015). However, the Administration then extended that site neutral payment onto all off-campus PBDs, regardless of whether they had been grandfathered or not, for one frequently used service (G0463) at PBDs. Providers immediately filed a lawsuit on this cut, saying the federal government did not have the authority to cut PBDs that were grandfathered under the law. The case continues.
Implications: The implications for this court case extend beyond just these grandfathered off-campus PBDs. The Administration proposed in the 2020 budget request (which has no force of law) to extend the same site neutral policy onto on-campus PBDs for certain services. Therefore, this decision will have ripple effects on whether the Administration will continue pushing reduced payments at PBDs (or even across other settings) in this manner or whether they will need to have Congress statutorily step in. If providers win, similar to the 340B lawsuit, it will better establish boundaries for HHS in determining payment reductions.
Closing These are only a few lawsuits of interest, but there many others related to health care overall. Take the lawsuit against UnitedHealthcare on mental health care policies where a court recently found the insurer wrongly denied mental health care services. There are also a number of ongoing court cases related to pharmaceutical companies. For example, the Minnesota attorney general sued three pharmaceutical companies over insulin costs and there is another class action lawsuit over the opioid epidemic.
What these cases indicate is that in our system of checks and balances, the courts create an important opportunity to push back against perceived policy overreach by Congress or the Executive Branch while also offering interested parties the ability to address injustices. Several of these cases will also lead to newly defined boundaries of the Executive Branch’s regulatory authority. Expect these types of lawsuits to continue and increase, especially in a politically divided landscape.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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