Recent Key Developments are Major Turning Points in Health Policy

Earlier this month, all eyes were on two major events in the federal health policy world: the outcome of the election and the Supreme Court’s decision in California v. Texas. Both are certain to have major implications on health policy going forward, and while we now know the outcome of the election, the Supreme Court decision will not be known for several months.

In this article, we explore the likely health policy priorities of the Biden administration as well as the potential outcomes of the Supreme Court decision.

The Biden Presidency

In the wake of the election, we now have a better sense of what 2021 is likely to hold for health policy. While the president-elect’s policy priorities are central to understanding what is likely to come, the new administration’s actions will also be shaped by the challenges and needs within the country when he takes office, as well as the makeup of the Senate.

Before delving into the specific priorities the president-elect is likely to consider pursuing, it is worth considering the limitations around what he will be able to achieve based on the makeup of the Senate. While he might consider pursuing some “pie in the sky” goals as a statement of priorities, what can be achieved in actuality will be tempered by the political landscape—as many of President-elect Biden’s campaign health priorities would require Congressional action and/or funding. For at least the next two years, given the makeup of the Senate and the nation’s political polarization, the kind of broad bipartisanship that would be required to enact the administration’s priorities unlikely to materialize except on the most critical or non-controversial policies. At this point in time, even the best-case scenario for the new administration is likely to be an even split in the Senate, meaning that neither party will have a filibuster-proof majority. Only provisions that directly affect revenues and spending could be passed via budget reconciliation, which is not subject to the filibuster.

As we discuss in more detail below, there are certainly some areas where bipartisan agreement might be forged. In areas where it cannot be, such as priorities related to the Patient Protection and Affordable Care Act (ACA), only actions that can be advanced unilaterally by the Executive Branch (via Executive Orders, regulations, guidance, etc.) are likely to move forward.

COVID-19 Response

Without a doubt, the top priority of the new administration when it takes office will be addressing the COVID-19 pandemic—and the president-elect has made it clear what steps he intends to take to do so. While some of these can be achieved unilaterally via Executive Orders, regulations and guidance, others will require partnership with Congress. Despite the likely challenges for future legislative action noted above, if there is likely to be bipartisan action on any issue, it is COVID-19 relief.

President-elect Biden’s plan for addressing COVID-19 includes:

  • strengthening testing, expanding access to a range of testing modalities, and promoting culturally competent, comprehensive contact tracing;
  • expanding American-based production and stocks of personal protective equipment (PPE);
  • promoting evidence-based national guidelines and resources for schools, businesses and families, including those relative to social distancing, safety standards, and closures, and providing funding for states and local governments schools and businesses;
  • supporting vaccine manufacturing and an evidence-based, transparent approval process, as well as developing distribution plans to ensure free access;
  • protecting older individuals and others at high risk, including by establishing a COVID-19 Racial and Ethnic Disparities Task Force and implementing plans for older Americans and people with disabilities;
  • rebuilding and expanding defenses against pandemic threats, including the White House National Security Council Directorate for Global Health and the U.S. Agency for International Development’s Pathogen-Tracking Program, rejoining the World Health Organization, and expanding the Centers for Disease Control disease detectives; and
  • instituting a nationwide mask mandate.

While these priorities are likely to be shaped by his new COVID-19 Taskforce and discussions with the House and Senate, President-elect Biden’s current platform provides a good initial indication of how policy responses to the pandemic may change post-inauguration. Some of the priorities outlined in the plan can be advanced by the Executive Branch. Additionally, given the critical nature of the pandemic and its economic impact, which is likely to grow more dire in the coming weeks, some of these priorities have the potential to move forward in some form via partnership with Congress.

Affordable Care Act (ACA)

In light of the pending Supreme Court verdict in California v. Texas (which is discussed further below), the Biden administration will be transitioning in at a time of uncertainty for the ACA. While it is not an expected outcome, if the Court finds that the individual mandate is both unconstitutional as it currently stands and inseverable from the rest of the law, the Biden administration will be faced with both the unwinding of the law—which will not be an easy task, as we explored in our white paper last month—and determining whether and how he can move forward in reforming our country’s health care system. It is unlikely that the president-elect would accept simply moving back to our healthcare system as it was prior to the ACA. On the other hand, as noted above, it would be a herculean task to pass any comprehensive reforms given the expected makeup of the Senate.

Looking beyond this pending challenge, the president-elect has expressed a desire to build on and strengthen the ACA in a continued incremental manner. This includes shoring it up by eliminating barriers to ongoing implementation and enforcement, instituting fixes and filling gaps left in the law, and expanding beyond the existing statute. We can expect the president-elect to seek to advance these priorities as he enters office, and continue doing so if the ACA is upheld by the Supreme Court in whole or large part.

Specific priorities the president-elect has shared include:

  • Providing access to coverage to otherwise-eligible individuals in states that have not expanded Medicaid via the public option (see below)
  • Instituting a public option that would be an active negotiator of costs, promote primary care and care coordination, and be a mechanism for covering the Medicaid expansion population in certain states
  • Expanding the tax credits by eliminating the 400 percent Federal Poverty Level (FPL) cap, lowering the threshold for “affordable” employer-sponsored insurance (ESI)/who can opt out of ESI for premium tax credits (PTCs), and making Gold plans the benchmark plans for PTCs. It is possible he would also seek to address the “family glitch” with the affordability standard for opting out of ESI for PTCs

Other actions likely to be considered by the new administration include:

  • Restoring prior regulatory and subregulatory standards, including related to Section 1332 guardrails, Section 1557 Nondiscrimination requirements, and private insurance market standards such as related to Essential Health Benefits, network adequacy and the premium adjustment percentage methodology
  • Restoring payments of cost-sharing reduction (CSRs), as discussed further below
  • Rolling back non-compliant plans such as Association Health Plans (AHPs) and Short-Term Limited Duration Insurance (STLDI)
  • Supporting and promoting waivers that align with the administration’s priorities, such as Medicaid buy-in Section 1115 Waivers and Section 1332 Waivers that integrate a state-based public option into the market
  • Increasing outreach and enrollment (O&E) efforts and Navigator funding
  • Re-expanding the annual open enrollment period (OEP) and creating a special enrollment period (SEP) for the COVID-19 public health emergency
  • Reintroducing a Qualified Health Plan (QHP) standardized plan

Unlike the COVID-19 priorities discussed in the previous section, it is very unlikely that any action related to the ACA will be a bipartisan effort. The ACA remains mired in political divide, with lawmakers unable to agree on steps that would strengthen/expand the law or dial it back. This renders most of the fixes outlined above related to Medicaid and the PTC, as well as any action related to a public option, unlikely to be achieved—with the caveat that the PTC changes could be advanced by budget reconciliation if the makeup of the Senate allows. Likewise, restoring payments of CSRs could be challenged without a Congressional appropriation.

On the other hand, rolling back guidance and non-compliant plans; addressing the “family glitch,” increasing O&E efforts and Navigator funding, addressing the OEP and a COVID-19-related SEP, and introducing a QHP standardized plan could be achieved unilaterally by the Executive Branch. Any regulatory changes will not be immediate as the regulatory process will need to be followed.

Prescription Drugs

Prescription drug policy is an area where there may be bipartisan agreement; the new administration may even seek to advance priorities of the current administration, including those laid out in recent Executive Orders. Prescription drugs are likely to join COVID-19 and the ACA as items toward the top of the new administration’s healthcare priorities list, and include actions such as:

  • allowing Medicare to negotiate prescription drug prices;
  • tying drug prices paid by Medicare to the cheaper rates paid by other developed nations and, more generally, establishing an independent board within the Department of Health and Human Services (HHS) to set prices (which would also be available to commercial plans);
  • establishing a tax penalty on drug manufacturers for price increases that exceed the general inflation rate in Medicare;
  • allowing the importation of drugs certified as safe by HHS;
  • accelerating the development of safe generics; and
  • ending the tax deduction for prescription drug advertisements.

Other Substantive Policy Priorities

Other priorities that the new administration has touted include: lowering the age of Medicare eligibility; repealing the Hyde amendment, codifying Roe v Wade, and curtailing restrictive state abortion laws; restoring funding for Planned Parenthood; removing restrictions on global health initiatives; addressing maternal mortality; investing in Community Health Centers; and enforcing mental health parity. Like each of the other priorities noted above, some of these changes—such as the investments and enforcement actions—could be achieved solely by the administration, while others, like the Medicare eligibility change and abortion law-related changes, would require bipartisan action and are unlikely to advance in the near term.

Ongoing Action of the Current Administration

In addition to promoting its proactive priorities, the new administration must also focus on which of the prior administration’s actions it wants to unwind. Many of these—as noted above—relate to the ACA. However, there are a number of technical regulations, as well as guidance on issues of likely agreement (for example: telehealth and delivery system reform, as well as Executive Orders about prescription drugs) that the president-elect may want to retain. Making these decisions will require the incoming administration to sift through the current administration’s policy actions carefully and thoughtfully to determine where it wants to take action and where it does not. All said, this process will likely take a number of months, and after the Biden administration reviews these policy actions, most changes it wants to make must undergo a full regulatory process.

The incoming administration will also consider waivers granted over the last four years that contradict its policy priorities—including Section 1115 Waivers authorizing work requirements and the Healthy Adult Opportunity (HAO) guidance. In addition to halting approvals of work requirement and block grant waivers, the new administration is expected to rescind the HAO guidance, stop defending against the work requirement lawsuits, and rescind approvals of work requirement waivers.

Further, while much focus is already directed at 2021, there are still nearly two months left of the current administration: time during which more policy changes are likely to be put into place before the president-elect takes office. The current administration has health-related rules pending, such as the Notice of Benefit and Payment Parameters (NBPP) for 2022. While the NBPP is a proposed rule that can be rewritten when finalized, other pending rules can only be rescinded via a full regulatory process.  There are also a number of Section 1115 Waiver requests pending across the country that could be approved prior to the change in administrations. CMS typically reserves the right to withdraw waivers in the Special Terms and Conditions, which would allow the new administration to rescind a waiver that it finds does not advance the goals of the Medicaid program. However, in its Georgia Section 1332 Waiver terms—discussed below—the administration included language making it harder for CMS and the Department of the Treasury to rescind the waiver. While the Georgia Section 1332 Specific Terms and Conditions (STCs) includes language similar to that of other waiver STCs (allowing the Departments to amend, suspend or terminate the program), it also includes language that gives the state a cause of action if the Departments “breach” the STCs—defined as taking any action that is inconsistent with the STCs, including suspending, modifying or terminating the waiver on a basis other than those specifically authorized within the STCs. It is likely that any additional Section 1115 Waivers approved by the current administration will include a similar provision.

The incoming administration may also face issues resulting from inaction. Assuming the current administration fails to enact further measures against the COVID-19 surge as it worsens, the Biden administration will have an even harder time getting the pandemic under control come January.

Supreme Court and Other Litigation Updates

The much-awaited argument of California v. Texas before the Supreme Court happened just a week after the election. While a decision is not expected for months, many are already making predictions on the verdict based on how the questioning proceeded (while others remain skeptical, with memories of the unexpected decision in NFIB v. Sebelius still top of mind).

The arguments and questioning by the justices focused on three core issues in the case:

  • whether the plaintiffs have standing;
  • whether the individual mandate is constitutional; and
  • whether—if the individual mandate is unconstitutional—it can be severed from the remainder of the law.

In regard to the plaintiffs’ standing, the justices raised questions about how a mandate with no penalty causes harm to the plaintiffs, as well as why invalidating the mandate alone would not address any harm. The justices also questioned the plaintiff’s claims that the harm can be proven based on other parts of the law (known as “standing through inseverability”).

Additionally, the justices’ questioning focused on severability and whether the entire ACA should be overturned if the individual mandate is found unconstitutional. Justices pointed out the presumption of severability, as well as the fact that Congress chose to only address a portion of the law and that it is not the Court’s job to legislate. The defendants also noted that zeroing out of the penalty is a signal that Congress no longer believed it was necessary to support the remainder of the law, which has proven to be true.

On the other hand, significantly less time was spent discussing the constitutionality of the individual mandate. One notable point on this topic came from the defendants, who argued that Congress may have chosen to not fully repeal the mandate so that it could reimpose the tax penalty at a later date.

With the arguments completed, now begins the long wait for the decision to be issued and the future of the law to be known. Many believe that the justices’ questioning indicates it is unlikely the entire law will be struck down. However, there are a range of possible outcomes for the case. Beyond the extreme holdings on either end that the individual mandate is constitutional or the entire law must be struck down, the justices could hold that:

  • The individual mandate is unconstitutional but severable from the rest of the law, which should be upheld
  • Some but not all provisions within the ACA cannot be separated from the mandate, and those provisions must be overturned along with the mandate. SCOTUS could identify those provisions or remand the case back to a lower court to do so.

The Court could also find that the plaintiffs do not have standing to sue and not issue a decision on the merits of the case. Interestingly, a finding that the mandate is found unconstitutional but severable from the remainder of the law would have the same practical impact as if the mandate were found constitutional, since the penalty is already zero.

Whatever the decision, it could not be implemented immediately. The ACA is complex and now intertwined in our health care system; it will take time to unwind (for example, insurance rates and contracts for 2021 will be in place by the time a decision is issued). However, if the law were overturned, the impact would be very stark, especially during or on the heels of the pandemic. Millions of individuals stand to lose coverage with the elimination of Medicaid expansion; Health Insurance Marketplaces (as well as the premium tax credits and cost-sharing reductions issued through them); and coverage standards and protections—including pre-existing condition protections, prohibitions on annual and lifetime limits, and Essential Health Benefits.

Other ACA-Related Litigation

While all eyes are on California v Texas, it is not the only ACA-related case proceeding through the courts. In August, a three-judge panel of the Court of Appeals of the Federal Circuit issued decisions on two cases related to the lack of payments for cost-sharing reductions (CSRs). The decisions issued in Sanford Health Plan v. United States and Community Health Choice v. United States affirmed the lower court decisions, holding that Section 1402 of the ACA imposes an “unambiguous” and enforceable obligation for the federal government to make CSR payments to insurers. The panel held that insurers are entitled to the unpaid CSRs, but in Community Health Choice v. United States, which includes a request for payment for 2017 and 2018,[1] the panel specified that the amounts due are to be reduced by the increased premium tax credits (PTCs) they received as a result of “silver-loading.”[2] At the end of September, the plaintiffs in Community Health Choice v. United States asked the Court of Appeals to reconsider the panel’s decision regarding off-setting the payments.


[1] Sanford Health Plan v. United States only requests payment for 2017

[2] “Silver loading” is defined as the practice undertaken in response of the lack of payments of CSRs by “loading” the resulting premium increases in the Silver level of coverage through which CSRs are available and PTC payments are based.

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