Tossing out President Barack Obama's health care law would have major unintended consequences for Medicare's payment systems, unseen but vital plumbing that handles 100 million monthly claims from hospitals and other service providers, the administration has quietly informed the courts.
Although the law made significant cuts to providers and improved prescription and preventive benefits for seniors, Medicare has been overlooked in a Supreme Court debate focused on the law's controversial requirement that individuals carry health insurance. Yet havoc in Medicare could have repercussions in an election year when both parties are avidly courting seniors.
In papers filed with the Supreme Court, administration lawyers have warned of "extraordinary disruption" if Medicare is forced to unwind countless transactions that are based on payment changes required by more than 20 separate sections of the Affordable Care Act.
Opponents argue that the whole law should go. The administration counters that even if it strikes down the insurance mandate, the court should preserve most of the rest of the legislation. That would leave in place its changes to Medicare, as well as a major expansion of Medicaid coverage.
Last year, in a lower court filing on the case, Justice Department lawyers said reversing the Medicare payment changes "would impose staggering administrative burdens" on the government and "could cause major delays and errors" in claims payment.
Medicare payment policies are set through a time-consuming process that begins with legislation passed by Congress. Even if Obama's overhaul were completely overturned, the government still would have authority under previous law to pay hospitals, doctors, insurance plans, nursing homes and other providers.
"There is an independent legal basis to pay providers if the Supreme Court strikes down the entire law," said Thomas Barker, a former Health and Human Services general counsel in the George W. Bush administration.
But reversing the new law's payment changes from one day to the next would be a huge legal and logistical challenge, raising many questions. How would the government treat payments made over the last two years, when the overhaul has been the law of the land? Would providers have a right to refunds of cuts that had been made under the legislation?
Former program administrators disagree on the potential for major disruptions, while some private industry executives predict an avalanche of litigation unless Congress intervenes.
"Medicare cannot turn on a dime," said former administrator Don Berwick, whose confirmation was blocked by Senate Republicans opposed to Obama's law. "I would not be surprised if there are delays and problems with payment flow. Medicare has dealt with sudden changes in payment before, but it is not easy."
It's not just reimbursement levels that would get scrambled, Berwick said. The law's new philosophy of paying hospitals and doctors for quality results instead of for sheer volume of tests and procedures has been incorporated in some payment policies.
Tom Scully, Medicare chief during former President George W. Bush's first term, does not foresee major problems, although he acknowledges it would be a "nightmare" for agency bureaucrats.
"It is highly unlikely in the short term that any health plan or provider would suffer," said Scully. "They're probably likely to get paid more going forward. If you look at the way the law was (financed), it was a combination of higher taxes and lower (Medicare) payments. That's what you would be rolling back."
The White House declined to comment.
Administration officials say they are confident the entire law will be upheld by the Supreme Court and there is no planning to address what would happen if all or parts of it are struck down. Sharp questioning by the court's conservative justices during public arguments has led many to speculate that at least parts of the law will be struck.
Opponents of the law argue that Congress overstepped its constitutional authority by requiring most Americans to have health insurance, starting in 2014. The administration says the mandate is permissible because it serves to regulate interstate commerce, underpinning another provision of the law that requires insurance companies to accept people in poor health. A decision is expected by early summer.
"There is no doubt that striking down (the) Medicare provisions would be enormously disruptive for patients, physicians, hospitals and countless other providers and suppliers," said Rep. Sander Levin, D-Mich., ranking Democrat on the House Ways and Means Committee, which oversees the program.
Former officials say it's likely that some form of high-level assessment and contingency planning is discreetly going on within the administration. It's happened in the recent past.
Last year, when the GOP-led House was threatening to block funding for carrying out Obama's law, Health and Human Services Secretary Kathleen Sebelius wrote to Congress outlining potential consequences. She highlighted the possibility of suspending payments to Medicare Advantage plans, popular private insurance alternatives that cover about one-fourth of all beneficiaries. That would have sent nearly 12 million seniors back into traditional Medicare, where some might have to scramble to find new doctors and many would face higher out-of-pocket costs.
The overhaul law also included major changes to the payment formula for Medicare Advantage plans. But Scully dismissed the notion that the program would be jeopardized if the Supreme Court throws out the law.
"The idea that Medicare Advantage plans would shut down and patients would be thrown into the street is just people making up arguments to stir the pot," he said.
Repeal of the law would also mean that seniors would lose some new benefits, including the closing of the prescription coverage gap called the "doughnut hole," and no-charge preventive services such as an annual wellness physical.
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