Week In Washington: ACA Litigation, Work Requirements, and More

March 29, 2019

Texas v USA: The big news this week was a shift in the Department of Justice stance on the Texas v. USA case.

Background: Several Republican Attorney Generals sued the Federal government over the constitutionality of the ACA. Their contention was that the effective repeal of the mandate invalidated the entire ACA. The Trump Administration position was that the repeal of the mandate invalidated the market reform portions of the ACA (i.e., no underwriting in the individual market) but not the rest of the ACA. In 2018 Judge O’Connor ruled that the litigants were accurate and that the ACA was indeed unconstitutional (although the ruling was stayed). It’s an important reminder that the entire ACA was invalidated in that ruling, which means any CMMI demonstration would be illegal, changes to Medicare payments the ACA initiated would end, ending lifetime limits could be reinstated, etc. A good summary of the case can be found here.

What Happened: The Trump Administration changed its legal position and filed a brief stating that now they believe the changes to the mandate mean the entire law is unconstitutional. The Washington Post reported that the legal position change was initiated by chief of staff Mick Mulvaney.

Next Steps: The change in DOJ position does not fundamentally alter the trajectory of the case. It will be ruled on by the 5th Circuit Court and no matter the outcome be appealed to the Supreme Court. The 5th Circuit is expected to take the case in July so a final Supreme Court ruling is still at minimum a year away.

Key Implications: The change does not have direct implications for the Texas v. USA case but may have other implications. As the Administration doesn’t believe the ACA is constitutional, this may complicate regulations and operations. While unlikely there is tail risk around the question of would the Administration stop enforcing the ACA. Additionally, given the unprecedented situation, frankly weird things could happen. For example, a person being prosecuted for Medicare fraud, is asking for a mistrial under grounds that the Administration believes the ACA is unconstitutional (most Medicare fraud cases are now being prosecuted under ACA legal framework).

Medicaid Work Requirements: The other big legal issue was that a Federal Judge ruled against the usage of work requirements to be included as a part of an 1115 waivers. Federal District Judge James Boasberg ruled that Arkansas’ and Kentucky’ work requirement waivers were not legal and HHS had exceeded its authority in approving them. Both states are expected to appeal the ruling. Several states, such as Idaho, which are considering submitting work requirement waivers, may not submit them, given the legal uncertainty.

Centene/WellCare: Centene moved to buy WellCare for more than $15 billion with an eye towards better competing in the Medicare Advantage world against larger national carriers.

Open Enrollment Data: CMS released its annual Open Enrollment report for the Exchanges. Approximately 11.4 million individuals selected plans during the 2019 OE. This is a decrease from 11.8 million the previous year. Overall the age distribution was constant between last year and this year. Notably the number of new enrollees was down (last year 27% of enrollees were new enrollees, this year 24%)