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Health Law and Policy
University of Illinois School of Law
Hyman, David A.

Health Law and Policy Outline (Spring 2016)
Professor: David Hyman
Healthcare Law vs. Public Health
Healthcare: getting services from a practitioner
Public health: dealing with populations (vaccines, obesity, etc.)
Three big issues with healthcare overall: cost, quality and access
Cost can be an impediment in both arenas
Doctors pay, pharma costs, restrictions on entry, for –profit insurers, etc.
Hospitals are about 1/3rd of healthcare spending
Doctors get paid about 20% of total, but direct 80% of spending
Other notable spenders: home healthcare (3%), nursing homes (5.5%), 15.5% other.
Moral Hazard: Persons behave differently when they don’t experience costs
Quality is bad in healthcare generally
Small number of bad doctors disproportionately affecting results, but also systemic problems
Geographic variance (less so with private insurance vs. Medicare/Medicaid)
Quality at non-profit vs. for-profit institutions virtually a non-issue
Access may mean a number of different things
Access to the healthcare system itself (seeing a doctor when you need to, geographical proximity, not states)
Access varies because of employment mix from state-to-state
Debate about whether this means you’re insured
Very hard to know how many uninsured (periodic insurance, time of year, sample size)
Question of whose definition matters
Physicians are technical; patients want compassion, service, etc.
Legislators and insurers implement their own standards
How do you measure? Structure, process, outcome, other?
How do you battle low quality? Med mal? Do we need low quality options?
The Eras of Health Care Delivery
1945-1965: Professional Dominance
Local and Private and non-government interference
Hospitals treated as charitable organizations
1965-1985: Medicare/Medicaid Era
Modestly egalitarian social contracts
Government role morphs from providing funds to setting policy
1985-2005: Managerial Approach/Managed Care
A push to create market controls on government dominated markets
Emphasis on Private health management organizations
2005-2015 consumer Directed Health Care (CDHC)
Policies to incentivize or penalize health behavior at the patient level
Premiums, deductibles, and co-pays are increasingly used to direct health care behavior, or at least send some of the risk back to the riskiest persons (i.e. smokers have to pay more)
PPACA (Patient Protection and Affordable Care Act)
Four major parts:
Individual Mandate: those who can afford healthcare must buy healthcare (or pay tax penalty)
Employer Mandate: 50+ FTEs, provide insurance to at least 95% of them (and their dependents).
Business Subsidies: smaller employers eligible for tax credits if they pay the premiums on their employee’s health insurance
Tax Credits: if your income is between 100-400% of FPL, you’re eligible for federal refundable income tax credits (to help pay your premiums)
Expansion of Medicaid Eligibility: individuals and families who otherwise would have qualified for Medicaid may qualify for tax credits (not all states have done this)
Also set up health insurance exchanges (states can set up their own, and federal exchange)
Premiums are higher than previous plan premiums, because the law mandates that all risk be pooled together (without regard to preexisting conditions).
Adverse selection problem: problem of course is, with no limits on preexisting conditions, nothing stops the sick from buying up insurance after the fact. This results in a death spiral: only the sick buy health insurance, driving up rates (only higher risk population is covered).
Risk Pooling: you want a lot of low risk insurance users to be in a pool to cover the higher risk users. Could use risk ratings (charge higher risk people more) or restrictions (pre-existing terms conditions previously, limiting when you can enroll).
Exchanges have certain standards to follow:
85/15 rule (85% of revenue on claims, 15% on overhead)
Preventative care covered at 100%
No preexisting condition discrimination
All builds a basic floor for coverage
ACA basically required states to expand Medicaid, but this was rejected as too coercive by SCOTUS.
Too much money involved, basically requiring states to expand. That’s no good, so now this is opt-in only (additional federal funds for a time if you expand Medicaid). But, there are some populations in states that have too much income for Medicaid, but too little for subsidies (NFIB v. Sebelius).
Major problems with ACA Rollout
The biggest issue was the website was incredibly bad and poorly designed (state and federal websites)
Lack of states opting into Medicaid and burden on central exchange vs. state exchanges
Problem with data breaches as well
Many databases across states and federal level didn’t or couldn’t talk to each other (information sharing problem)
Some programs were poorly designed or stuck in litigation
CLASS (homecare) should be voluntary contribution, but isn’t working as intended
Contraception mandate is highly controversial (less and less cost shifting)
Co-ops failed due to insolvency
Implementation has been ad-hoc/piecemeal (relying on executive orders)
Medicaid expansion seems to be working fairly well (bulk of the newly insured)
ACA also allows for demonstration projects (experiments showing new ways to deliver, pay or design benefits in healthcare) and taxes Cadillac Plans (high cost $10k indiv., $27.5k fam)
Organization of Health Care Delivery
Physicians’ cooperative model: nonprofit hospitals that operate primarily for the benefit of the participating physicians. The nonprofit form is believed to facilitate the control by physicians better than for-profit form (Utah County v. Intermountain Health Care)
Polycorporate enterprise: nonprofit hospital where the power is largely in the hands of administrators, not physicians. Likely to become multihospital systems and competitors with profit-making chains, HMO’s and other health care corporations (Utah County v. Intermountain Health Care)
The essential problem with the health care industry is that it has been shielded from consumer control by employers, insurers, and the government.
Competition Policy
If the obligation of the physician is understood to be to the welfare of the patient, then in particular it takes precedence over financial difficulties. Another consequence of informational inequality between the physician and the patient and the lack of insurance of a suitable type, the patient must delegate to the physician much of his freedom of choice.
Consumption externality exists when one person’s consumption of a good or service has an effect on utility of another person. Positive externality is when one person’s consumption of a good raises the u

services that are otherwise unprofitable/removed from for-profit hospitals. More concerned with public interest.
IHC Health Plans v. Commish of IRS: Does Mormon health plan qualify for tax-exempt status as an organization operated exclusively for charitable purposes?
IRS lists three requirements for tax exemption:
Corporation must be organized for exempt purposes
No part of earnings inure to benefit of any shareholder or individual
Corporation must not engage in political campaigns or lobbying
Promotion of health is a general purpose of charity law that is deemed beneficial to community as a whole, even though those getting direct benefits doesn’t include the entire community (like relief of poverty or advancement of education).
To qualify for tax-exempt status, health care provider must make service available to the whole community, and provide additional community benefits.
Benefits must further goal of government-funded institutions or provide service that wouldn’t otherwise be provided in the community at a discount.
Additional public benefit must be sufficient to give rise to strong inference that public benefit is primary purpose.
IHC didn’t do any of this (paid service to limited part of community), so no tax-exempt status.
Revenue Sharing Arrangements: requirement that there be no inurement is to prevent siphoning of charity’s income for personal use. Doesn’t mean no one can get paid.
Cost Shifting: charging one person less means someone else is likely charged more.
Not illegal, just reality; those with regular insurance get charged more than those on Medicare, etc.
If an organization isn’t giving some of its benefits to those unable to pay, that shows commercial activity, not charitable.
Marshfield v. City of Eau Claire (Property Tax): clinic wants state property tax exemption.
Have to show that the property is being used for a benevolent purpose. Medical care is not per se benevolence just because it’s making members of the community healthier; it might be if it’s free of charge/reduced price for poor.
Doesn’t mean property has to be exclusively used for benevolent purpose, but paying patients must be incidental to benevolent purpose (private benefit must be incidental to tax-exempt purpose to keep exemption).
: nonprofits becoming for profits. Must get court approval to switch.
Communities may be unable to continue supporting nonprofits, and thus nonprofits should be allowed to modernize/invest in new tech. to remain competitive.
Competitive pressure makes some plans reconsider ability to compete with national insurers.
Concerns to public when conversions occur. Should be scrutinized closely, primary consideration on retaining community benefit.