Hospital CEOs Weigh In on King v. Burwell Ruling

The U.S. Supreme Court's decision settles one argument, but the ruling does not affect all hospitals or patients in the same way—and it doesn't even address other big problems with healthcare access and cost.

In a decision that probably should have been expected, given previous rulings on the Patient Protection and Affordable Care Act, the U.S. Supreme Court voted 6-3 Thursday to keep in place federal insurance subsidies in states that did not set up their own health insurance exchanges.

I spoke with several hospital and health system CEOs afterward to understand how the King v. Burwell ruling affects their organizations. The long-awaited decision provides clarity, if nothing else, that Obamacare is alive and well. But the ruling does not affect all in the same way.

In Wisconsin, for example, which is one of 34 states that decided not to create a state exchange and not to expand Medicaid, a different ruling would have thrown healthcare in the state into chaos, says Mark Herzog, president and CEO of Holy Family Memorial, a 62-bed hospital and associated health system in Manitowoc. "Without subsidies, a significant portion of Wisconsin's strategy for reducing the number of uninsured would have been dismantled. Absent a legislative fix at either the federal or state level, thousands of people could have become uninsured and a huge financial burden placed on Wisconsin taxpayers."

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He says that's the opposite of what Gov. Scott Walker and Wisconsin lawmakers intended when they adopted a "hybrid approach" to coverage expansion in 2013. That plan included expanding Medicaid eligibility for those below 100% of the federal poverty level ($11,670 a year) and eliminating Medicaid eligibility for those above 100%.

"Under Wisconsin's plan, the 60,000 people who lost their Medicaid coverage would be able to purchase low-cost, subsidized health coverage on the exchange," Herzog says. "And today, they still can."

Herzog says the irony of the entire healthcare dialogue from both political camps is that, while something like half of the targeted uninsured population retains insurance coverage, the quality of the coverage that's being bought is really quite low.

"Most family deductibles are in the $10,000 to $14,000 range, something even middle and upper income families would consider catastrophic coverage only," he says. "Time will tell whether these plans—which are not restricted to exchange offerings—really meet the intent of the ACA to engage consumers proactively in managing their health with a provider partner. That kind of deductible scares many from even seeking preventive care for fear of the follow-up bills if a test or procedure is needed."

Herzog contends that many such individuals really are not aware of their coverage details and only find out after they have to cover several thousands of dollars in uncovered services.

The cost of healthcare, and who bears it, indeed feeds into the circular nature of the debate surrounding Obamacare, what it's intended to do by those who passed it, and now, thanks to several top court decisions, what it can do.

"Implementation of the ACA will continue to be tumultuous and dynamic," Herzog predicts. "This is just another of many momentous decision points to come over the next five-plus years."

Fear of sowing chaos may have factored heavily in the court's decision. What many on both sides of the debate fail to recognize is that healthcare costs will be borne ultimately by taxpayers, both individual and in the business community, through cost shifting.

In fact, the Supreme Court's decision gives opponents of Obamacare a paradoxical sort of political cover, in that now they do not have to face the fallout that would have come with a different court ruling in which at least 6 million potential voters would have been alienated.

(Imagine the stories queued up to hit the local news about tests and procedures now canceled because of this decision. That load of bad PR has now been averted.)

"Moving more people to an insured status, no matter your political leanings, is the only thing that can reduce the cost-shifting burden to employers and employees who pay most of the health subsidy in our country," says Doug Luckett, president and CEO of 435-bed CaroMont Health in Gastonia, NC. "The burden can't be borne for long by our working population without it."

North Carolina uses a federally run exchange, and state residents would have lost subsidies had the court decided for the plaintiff.

"There is no free lunch in healthcare. It seems that we have moved to the side of the thought that quality healthcare is a right in the USA, not a privilege," says Luckett. "Equity in paying for the quality, adequacy, access, and capacity for this system, no matter how imperfect, is easier if most everybody picks up some of the freight."

Some things won't change with the decision, according to Jim Nathan, president and CEO of Lee Memorial Health System, a 1,423-bed public health system in Fort Myers, FL, where the governor and legislature has had a long-running battle of hot potato over whether to expand Medicaid and accept federal subsidies. At the moment, expansion seems unlikely. So yesterday's decision is both good and bad for Nathan's organization and for those who need healthcare coverage.

"This decision will not make states that have chosen not to expand any more likely to do so," he says. "There is strong political leadership simply opposed to Obamacare, and I do not see this decision changing that opposition."

Nathan says it's unfortunate that Florida did not follow the lead of the state senate this year, which he says proposed a businesslike, conservative approach to expansion.

Ultimately, people should be cautious about taking too much meaning away from this one court decision, not matter how momentous. In a snapshot of the ruling's meaning to hospitals' business prospects, the top rating agencies at Standard & Poor's and Moody's were quick to contend that the decision should have no effect on the healthcare sector. Period.

Paul Keckley, managing director for Navigant Healthcare, who accurately predicted a 6-3 decision in favor of Burwell prior to its release, agrees that the ruling will have little effect on the financial prospects for most healthcare organizations simply because it maintains what has become the status quo.

"Hanging in the balance was a substantial uptick in bad debt, so [the decision] takes that off the table, at least for the time being," he says.

He also says that although the decision settles a lot, much is still uncertain. For example, the continued instability of the individual insurance market is what people will miss in dissecting the Court's decision, he says.

"This didn't fix young people entering the workforce who don't have access to employer coverage. All this did was eliminate a part of the puzzle, but it doesn't solve it," says Keckley. "If more and more companies are dropping coverage and more people are working for themselves, we need a vehicle for coverage, and the exchanges are only a piece of that."

Nathan goes further. Throughout all the health reform debates of recent years, he says it's been forgotten, or it's conveniently not in most politicians' talking points, that commercial health insurance, which has borne much of the gross payment for health insurance for the past 50 years or so, "is dying."

"This [court decision] dovetails on the widening gap [between] the very wealthy and the very poor in our nation," he says. "The movement to high-deductible health plans may make the premiums more affordable but when someone is seriously ill, they often won't be in a position to pay their out-of-pocket expenses. We are far from resolving how to pay for healthcare services and how to assure the appropriate use of healthcare dollars to deal with chronic health conditions, preventive care, and coordination of care."