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Health Care Law
SUNY Buffalo Law School
Wooten, James A.

Health Law Outline, Prof Wooten, Fall 2015
I. Law and the American Health Care System
Four conceptual paradigms can be applied to transform the health care system:
1. Economic (the standard competitive model)
2. Professional (professional self-regulatory norms)
3. Rights based (social justice)
4. Institutional (comparative institutional analysis)- law is most attentive to, who should decide things. Allocating responsibility for decisions (ex rule says the jury is responsible for this, we defer to them- they are allocated that responsibility.)
*The Eras of Health Care Delivery (p. 29, see Class 2 handout)
1. Era of professional (physician) dominance (1945-1965): physicians controlled most aspects of health care delivery, including responsibility for quality of care. Health care was largely a local, private sector enterprise with minimal governmental involvement. Physicians were self-regulating and controlled state licensure of medical care, thereby creating entry barriers to potential competitors. The legal system upheld physician control and acted as a conduit for the expansion of the medical industry. *Most impt. to spend time on*
·         Insurance came from an employer, privately paid, or charity healthcare. A LOT of healthcare was delivered for free during this time period. For profit businesses did not like this. Hospitals have their origin as charitable organizations.
·         How would this era have been affected by the internet/TV drug advertisements? Patients would come to doctors asking for certain drugs, rather than just accepting whatever the Dr. prescribed. Patients could also research things and can question Dr. opinion/prescription.
2. Government Entry (1965-1985): triggered by the enactment of Medicare/Medicaid, Federal Government became an increasingly powerful actor as a purchaser, provider and regulator of health care services.
à What changed from professional dominance above?
·         Access is changed- source of insurance shifted. Previously, people who were unemployed or retired had no source of insurance (or charity care). Government stepped in to pay for care for retirees/poor. What are the consequences of Medicaid/Medicare? Shift from charity to payment, potentially changed the ethos of care, effects down the line….. Hospitals was now getting paid for caring for patients, this meant more for-profit entities were interested in helping to provide patient care because more medical services were being paid for.
·         Modes of payment (fee for service)- Federal Government came in as a payer, either directly through Medicare or through the states with Medicaid. Dr’s were opposed to this new era and so payment system was friendly to physicians, fee for service. This means doctor’s were paid more for each patient they saw (v. wages where doctors are paid by the hour). Deferred to medical community for price for services. As a result, Medicare cost way more than was expected, which triggered medical inflation (p.197).
·         Experimenting with new payment practices to hold down medical inflation, 1983: retrospective fee for service- patient receives care, bill is taken care of after the service is received. Prospective payment system hospital care- patient has dx assigned to them, medicare would pay them based on their dx instead of each individual service they received, this person would receive the average of every other person receiving the same service (diagnostic related groups).  
3. Managed Care (1985-present): private sector has played an increasingly central role in health care delivery. Managerial control and market forces, led by the ascendance of managed care. Government has retained role in financing/regulating but private sector dominates the field. Key attraction has been including capitation and providing bonuses to physicians for cost savings.
·         Employers /Insurers are now paying for health care, rather than just the Government. Most people under 65 are receiving their insurance from employer financed health plan.
·         Utilization Review- to keep costs low, insurer asks for justification for dx/tx from doctor, adds another layer of monitoring/oversight.
·         Pre-approval- insurers looking more closely, if patient needed tx, have to ask the insurance company first to see if they will pay for it BEFORE tx is done.
·         Capitation payment- providers receive a certain amount of money for everyone they cover. Merges financing and provision so the people providing the services are now the risk bearers. If the physicians provide too many services, the HMO ends up in negative. To hold back cost, one way to cut costs is to have people paying be the risk bearers. (*If providers provide too much, they end up losing money so the risk is shifted back to the providers.*) EX. Current model is PPO where providers are willing to accept discounted fee for service rates or capitated payment arrangements. VS POS plan where can see out of network for an additional cost to the member.
4. Modern Day moving towards Consumer directed health care: emerging as market-based successor to managed care, increasingly receptive to strategies that place more responsibility on individual patients to control costs. Thought is if patients are forced to absorb more of the actual costs for health care, they will comparison shop.
·         Moving towards keeping people healthy, asks what can be done to make patients/consumers of health care exercise pressure to control costs?
·         Ideas of high deductible health plans, co-pays which shift some of the cost to patients, think twice before going to the doctor then (worth at least this much to person to go but won’t overuse because still paying). However, creates some problems because some don’t go to the doctor when they should, patients don’t always know what is best for them.
·         In this case, patient is more hesitant to just listen to the Dr. tell what is necessary because they are paying more up front. Gives patient some time to think before receiving tx.
 II. The Affordable Care Act
*Pre-ACA Modes of Access
-Employer plans
-Individual Insurance Market
-VA System
-State Children’s Health Insurance Program (CHIP)
à Before the ACA, all of these individual programs were offered. Left a lot of people uncovered.
How do these components interact (conflict)?
-Medicare/Employer Plans: If you work past 65 may intersect
-Medicaid/Employer Plans: competition between people who were poor enough to qualify for Medicaid, but could ask their employers for a raise and then get an employer plan.
-Medicaid/Individual Insurance Market: more liberal Medicaid is, fewer people have to enter insurance market which may upset insurance brokers.
-Medicare/Medicaid: Poor people over 65 may be eligible for both.
*ACA Reforms to Incr

sick people who show up, they are mandated to provide coverage but are now left with not enough money to take care of these people.
3. Operation of Health Care Exchanges
-ACA created health insurance marketplaces, states could run them or if not then Federal Government could implement them.
-Thought behind these was it is easier for the government to afford to provide health care to a spectrum of people (bad——good heath) rather than an individual provider and everyone on the spectrum was given the opportunity to buy health insurance.
-These exchanges exist to mainly serve people who are in the gap between employer insurance and Medicaid/Medicare coverage
**King v. Burwell (2015) (handout)
Rule: Tax credits are offered for insurance bought on the Federal Exchange. Have to look at the entire document, cannot take out one provision.  
·         Previously, common approaches to expanding health insurance were “Guaranteed Issue” OR “Community Rating”. In either of these situations, people tried to wait until they were sick to buy insurance. *Insurance mandate through ACA solved these problems.
·         Facts: P lived in state where there was no state insurance exchange, so they were forced to by individual insurance from the Federal Insurance Exchange.
·         Issue: P’s challenged the legality of subsidies issued by the IRS on behalf of states that used the federal health insurance exchange (and thus did not set up their own exchange). The challenge hinged on the meaning of four words in the Affordable Care Act; “established by the State”. These four words referred to a part of the law that said “exchanges established by the State” could issue subsidies, but didn’t mention states that didn’t establish their own exchange (so federal exchanges).
·         Holding: The IRS clarified that this section, 36 (b), gave them the power to issue subsidies whether or not a state had created it’s own exchange or defaulted to the federal exchange. The court said the subsidy language was legal and tax credits were available on insurance plans offered from the Federal Insurance Exchange.
·         Analysis: People have to buy individual insurance on the exchange or pay a penalty unless coverage on the exchange will be more than 8% of your annual income. The P argue that without the tax credit, the insurance will be more than 8% of their income and they can’t get a tax credit because they would be buying off the federal exchange. They assert they can’t be fined then. Court says you need to look at statute as a whole, and if the case was as the P asserted, the whole purpose of the ACA wouldn’t turn out as intended. In all the states with federal exchanges, people who couldn’t get tax credits would be left without insurance.