When Governor Shumlin signed Act 48 (“An act relating to a universal and unified health system”) into law in June, 2011, Vermont started on the path to a single payer system.  One critical aspect of a revised system is developing a financing plan that assures a single payer system will cost less than the current system.  33 V.S.A. §1822 (a) (5) Although the question of how Vermont’s single payer plan will be paid for will remain open until 2013, the groundwork for developing a financing proposal is underway.  The Agency of Administration is conducting a statewide listening tour that focuses on financing issues.  The tour is designed to engage health care providers, employers of all sizes, and members of the public in the development and design of the financing structure that the Secretary of Administration is to present to the Vermont Legislature in the 2013 session.  See Act 48, Sec. 9 (c)

The first three sessions of the tour have already been held in Brattleboro, Rutland and Williston.  The final session is scheduled for January 12, 2012 in St. Johnsbury.  Each session is structured the same way.  Attendees are presented with information about the escalating costs of the current system; how these costs are expected to increase in the near future; the consequences of the increased costs to employers, individuals and families, and the medical system; the available sources for funding health care reform (providers, employers, individuals, and government); and a snapshot of the mechanics of state and federal revenue streams.  The attendees provide input by expressing their preferences, through small group exercises, on the principles that should underlay financing a health care system, and the potential funding sources.

Act 48, which identifies a number of guiding principles for Vermont’s health care reform in section 1a, specifies that “the financing of health care in Vermont must be sufficient, fair, predictable, transparent, sustainable and shared equitably.”  Sec. 1a (11)  The first small group exercise is designed to capture the participants’ ranking as to which of these principles they find most important, which they find less important, and why.  Similarly, in the small group exercise devoted to potential funding sources,   participants are asked to state which funding source or mix of sources identified in the educational presentations best reflects the principles they selected earlier, and which funding source(s) cause them the most concern as an individual/provider/employer.

Finally, after the small group discussions, each participant is given $1000 in $100 denominations and asked to allocate the money among boxes representing the various state and provider funding sources identified in the presentation.  The Agency of Administration will aggregate the information it receives at each of the listening sessions and use it as a basis for developing its financing proposal next year.  Act 48 is quite explicit that “the state must ensure public participation in the design, implementation, evaluation and accountability mechanisms of the health care system.”  Sec. 1a (3)  This listening tour and the information it elicits from the public is an important step in meeting the public input mandate in designing the financing system.

For more information about the status of Vermont’s health care reform efforts, including the language of Act 48 and information about the listening tour and presentations, please go to http://hcr.vermont.gov/.

On Monday, November 14, 2011, the U.S. Supreme Court agreed to review four key legal and constitutional questions arising out of the federal Patient Protection and Affordable Care Act:

 1. Is the individual insurance coverage mandate constitutional?

2. If not, can the rest of the health care law survive without it?

3. Does the Tax Anti-injunction Act bar challenges to the individual mandate until it has gone into effect in 2014, and is actually enforced against a taxpayer?

4. Is the Medicaid expansion, which Congress is requiring states to shoulder, constitutional?

 A total of four U.S. Courts of Appeals have examined the federal health care law to date; two have upheld it as a valid exercise of Congress’s constitutional power, one has dismissed challenges on jurisdictional grounds, and the fourth, coming from the 11th Circuit, held the key individual mandate portion of the law unconstitutional. It is this last decision that is the primary vehicle for the high court’s review.

The central issue in all of the challenges is whether Congress has the constitutional power to require individuals to purchase health insurance (the minimum coverage requirement) or face a penalty when they pay their income tax (the individual mandate). Only the United States Court of Appeals for the 11th Circuit has struck down the mandate.

That case, State of Florida, et al. v. HHS, et al, decided in August 2011, created a split in the Circuits and set the stage for the Supreme Court’s decision to review the law. Although the appeals court found that Congress exceeded its constitutional power under the commerce clause in enacting the individual mandate, it also found that the rest of the law could stand. This latter action reversed the lower court ruling declaring the whole law unconstitutional. The case was closely watched because it was brought by the attorneys general of 26 states.

The unconstitutional finding in State of Florida contrasted with the June 2011 decision from the 6th Circuit in Thomas More Law Center v. Obama, which upheld the minimum coverage/individual mandate. The Court affirmed the lower court decision and found the minimum coverage provision to be an economic regulation, rejecting the challenge that the provision was not economic and therefore beyond the reach of Congressional power.

The Fourth Circuit rejected two constitutional challenges to the individual mandate on jurisdictional grounds in September 2011. In the first, the Commonwealth of Virginia v. Sibelius, the court held the State of Virginia did not have standing to sue the federal government and ordered the case remanded and dismissed for lack of subject matter jurisdiction. Virginia tried to argue that its newly-enacted state law, The Virginia Health Care Freedom Act, conflicted with the federal law and gave it standing. The court rejected the argument because Virginia’s new law had no enforcement mechanism and regulated no state program, so there was no invasion of the state’s sovereignty. The law simply tried to immunize Virginians from the operation of federal law

In the second case, Liberty University v Geithner, the Court held the Tax Anti-Injunction Act divested it of jurisdiction. The Act prohibits pre-enforcement actions that seek to restrain the assessment of a tax. The Court found the individual mandate to be a tax, and concluded that a challenge can only be brought after an individual fails to buy health insurance and is required to pay the penalty. This approach would defer a decision on the individual mandate until at least 2014. The lower court had concluded the Anti-Injunction Act did not apply, and upheld the constitutionality of the individual coverage minimum.

Most recently, on November 8, 2011, the U.S. Circuit Court for the District of Columbia affirmed Congress’s constitutional authority to enact the individual mandate in Seven-Sky et al v. Holder et al. The majority held the mandate and the penalty are not tax provisions, so the Anti Injunction Act did not apply.

In Vermont, due to the implementation of Act 48, the health care legal framework is shifting even more than it has been for years under Catamount Health, the Blue Print for Health, and the annual adjustments to the public programs designed to cover more people through Medicaid, VHAP, Dr. Dynasaur, SCHIP and the pharmacy programs. Our Act 48 commits the State to developing a health insurance exchange and availing ourselves of the funding and waivers available to states under the Patient Protection and Affordable Care Act. Consequently, any changes in the federal law will affect how we proceed with state health care reform and need to be carefully tracked. If the individual mandate is struck down, it is not necessarily a killing blow to Vermont’s reform efforts. However, if the other parts of the law fall as well, there would be a significant impact on how we finance state reform.

Oral arguments are anticipated to be in March, with a decision expected in June.

As most Vermonters are aware, in May 2011, the Vermont legislature passed Act 48, a bill that reforms the way Vermont pays for and delivers health care.  Act 48 puts Vermont on the path to a single payer system, but leaves many questions to be answered in the future, including how to finance the new system.

Act 48 has three main components:

1. Act 48 establishes the powerful, 5-member, Green Mountain Care Board.  This board is charged with changing the way Vermont pays for health care and controlling growth in health care costs.  The Board will oversee pilot projects, like the Blue Print for Health, that test new models of payment (and delivery) and will work to design a health care budgeting system for the state that assures adequate health care resources and fair pay for providers.  In addition, the Board will recommend the benefits package to be provided under a single payer.
2. Act 48 requires the Green Mountain Care Board and the Secretary of the Administration to develop a detailed plan for a single payer.  Based on the benefits package developed by the Board, the Secretary of Administration will develop a financing plan for universal coverage.  The plan will address the likely costs of coverage, potential savings from reforms, and recommended sources of revenue.  The Legislature will then vote to approve or disapprove the financing plan.  The financing plan is due in 2013, but full implementation of the plan requires a federal waiver, which, under current law, is not available until 2017.
3. Act 48 Establishes a Health Benefit Exchange as required by federal law.  The creation of the Exchange will bring federal financial benefits, including tax credits, to help make premiums affordable for uninsured Vermonters.  The Exchange must be operational for 2014 for families, individuals and small employers and will open to large employers in 2017.  The Exchange will offer plans from at least two private insurers plus two multi-state plans required by federal law.  The Exchange will simplify health insurance administration and help people comparison shop for health insurance.

Act 48 establishes the framework for health care reform in Vermont but leaves many important questions unanswered.  In the coming months, in this blog, we will try to answer some of the following questions.

1. Under a single payer system, where insurance is no longer purchased primarily through employment, but rather is a right of residency in Vermont, how will businesses that employ people who are residents of other states be affected?  Will those businesses be able to buy insurance for those out of state employees?  Similarly, how will Vermont residents who work for employers in other states be affected?
2. If a Vermont resident/employee leaves his or her job and moves to another state, will Green Mountain Care offer the option of some kind of COBRA-like coverage?
3. How will the Green Mountain Care affect Worker’s Compensation?
4. Will dental and vision coverage be included?  If not, will employers be able to buy these additional coverages for their employees?
5. Will there still be Health Savings Accounts?
6. Will employers be able to provide wellness incentives or benefit packages that are “richer” in coverage than the Green Mountain Care plan if they want to?
7. Will Vermont lose any money or benefits proposed under the federal Patient Protection and Accountable Care Act by implementing its own health care system, either during transition or when fully implemented?

Stay tuned for the answer to these and many other questions about Vermont’s health care reform.

The Ninth Circuit Court of Appeals is allowing a commerce clause challenge to Washington State’s Certificate of Need (CON) laws to proceed.  The Court found that the original federal legislation that authorized states to enact CON statutes, which was repealed in 1986, did not provide the State with the necessary congressional authorization to avoid a commerce clause challenge for a CON regulation it adopted in 2008.  Since Vermont has recently limited its CON statute by disbanding the Public Oversight Commission, and it is unclear under the State’s Health Reform law exactly how the CON process will fit within our state reform efforts, other states’ experiences with their CON laws are worth watching.

In Yakima Valley Memorial Hospital v. Washington State Department of Health, — F.3d —-, 2011 WL 3629895 the State refused to license the Yakima Valley Memorial Hospital to perform elective percutaneous coronary interventions (PCI) under CON regulations that required examination of factors related to access to care, patient safety, quality outcomes, costs, the stability of Washington’s cardiac care delivery system and its existing cardiac care providers.  The hospital challenged the regulations under the Sherman Act and the Commerce Clause.  In deciding that the commerce clause challenge could go forward, the Court included a helpful, short history of CON laws:

The concept of certificate of need regimes, which many states enforce, is to avoid private parties making socially inefficient investments in health-care resources they might make if left unregulated.  A certificate of need program corrects the market by requiring preapproval for certain investments and, in theory, thereby ensures that providers will make only necessary investments in health care…Congress made certificate of need regimes part of the federal government’s national health planning policy in the National Health Planning and Resources Development Act of 1974 (NHPRDA).  The NHPRDA conditioned federal funding on enforcement of certificate of need regimes as part of the congressional effort to reduce health–care inflation and achieve an adequate supply and distribution of health resources…Congress repealed the NHPRDA in 1986, leaving states free to abandon their certificate of need programs… (citations omitted)

Yakima Valley, at 11212-11213.

The Court held that the hospital did not state a cause of action under the anti-trust laws but that it had proved standing and stated a cause of action under the Dormant Commerce Clause.  The State’s argument that NHPRDA provided sufficient authorization for the State to engage in regulation that might otherwise be impermissible under the Commerce Clause was unavailing.  There was no savings clause in the repeal.  The Court remanded the case to the district court to decide whether the CON laws impermissibly burden interstate commerce.

Like Vermont, the majority of states still have CON laws.  As is true in much of health care today, their ability to rein in costs and effectiveness is being questioned.  Legal challenges such as Yakima Valley may advance the policy discussions and provide insight into the future of CON laws here and across the nation.