Recommended Reading

As proof that the only news in health law does not involve the Supreme Court’s consideration of the challenge to the Affordable Care Act, here are some interesting recent articles that are worth a read:

1.      Frank McClellan and others recently released the results of their study, “Do Poor People Sue Doctors More Frequently? Confronting Unconscious Bias and the Role of Cultural Competency.” Some doctors perceive that socioeconomically disadvantaged patients tend to sue their doctors more frequently, which has influenced them not to provide care or to provide care in different ways to this population. For example, 57 percent of physicians polled in California in 1995 cited this belief as important in their decision not to treat Medicaid patients.  Yet McClellan and his co-authors review studies showing that, to the contrary, poor patients tend to sue their physicians less often than other groups.   Indeed, there is evidence that patients in lower socioeconomic groups are also less likely to file nonmeritorious malpractice claims.  One possible explanation that the authors of this project offer to explain this disconnect between physician perception and fact is unconscious or implicit bias, which “describes thinking and decision making affected by stereotypes without one being aware of it” that “can explain why people may consciously believe in a truth, whereas their behavior, affected by subconscious prejudices, is contrary to that truth.”  For example, physicians unconsciously concerned that poor patients will not adequately compensate them for their care “might consciously or unconsciously presume poor patients are more likely to sue as an excuse or way of avoiding the presumed difficulty associated with collections from such patients.” The authors of this study make recommendations to confront unconscious bias and provide culturally competent care (”CCC”), including increasing diversity, educating providers about CCC, improving provider communication skills, and enhancing patient health literacy.  CCC educational efforts are especially valuable in specialties like orthopaedic surgery, where approximately 84 to 89 percent of providers are white males.   It is thought that these efforts will improve medical care to lower socioeconomic groups and reduce the risk of malpractice claims.

2.      In “Diversion of Offenders with Mental Health Disorders: Mental Health Courts,” Sarah Ryan and Dr. Darius Whelan review the use of mental health courts in the United States, Canada, England, and Wales and consider whether these courts should be established in Ireland.  The article first reviews Therapeutic Jurisprudence (”TJ”), a foundational theory underlying problem-solving courts like mental health and drug courts that “promotes the employment of a ‘problem-solving pro-active and results oriented posture that is responsive to the current emotional and social problems of legal consumers.’”  While advocating its strengths, the authors also warn of the danger that paternalistic applications of TJ can water down due process and rule of law values.  They then identify and compare features of mental health courts that have developed in the United States, Canada, England, and Wales since the pioneer court started operating in Broward County, Florida in 1987.   After evaluating the main merits (e.g., more appropriate treatment and potentially reduced recidivism and costs) and criticisms (e.g., concerns about coercion, waiver of due process rights, stigmatization and segregation of the mentally ill, diversion of resources, and lack of empirical data that they are effective) of these courts, the authors conclude that mental health courts could offer a partial solution to the challenges facing Ireland’s criminal justice system.  Not surprisingly, they urge policymakers to select the best features of the programs that have evolved to date and to apply TJ “in a careful manner, to avoid interference with defendants['] constitutional rights.”  For example, the authors recommend that a solicitor be appointed at the first indication an offender could be eligible to participate.  Further, they believe that Ireland should not require offenders to plead guilty as a pre-condition to participate in the program because such a requirement is “antithetical to the goal of decriminalising the mentally ill.”  They warn, however, that for the program to be viable, Ireland would have to allocate substantial funding to develop community mental health treatment facilities.

3.      Recent Harvard Law School graduate Maggie Francis has written, “Forty Years of ‘Testing, Testing’: The Past and Future Role of Policy Experimentation in Healthcare Reform,” which reviews the federal government’s use of pilot projects and demonstration projects over the past forty years to test innovative health reform ideas.   As Ms. Francis describes, her article is the “first . . . in the legal literature to analyze the use of systemic policy experimentation by the federal government to reform the healthcare system.”  She describes the number and types of problems facing the healthcare system and why policymakers have chosen pilots as a means of addressing these problems.   The article then evaluates whether pilot projects are a useful tool in healthcare reform.  Ms. Francis identifies numerous advantages to pilots, including that they provide some cover to controversial innovations from political pressures and permit government to try multiple theories in different pilots to assess what works better in different populations, locations, etc. and to make adjustments based on experience that should make large-scale implementation smoother.  She also warns of some possible roadblocks, including lack of adequate information and competence to select the right pilots and then to oversee their implementation and evaluation.  A common criticism of these programs is that they take too long to test new ideas and expand those that are successful.  Securing consistent funding has also been a challenge.  In addition, political interference and gamesmanship can undermine efforts to innovate.  Ms. Francis concludes that, despite their limitations, pilot projects satisfy policy makers’ need for information about reform ideas and their consequences and offer the most promise where “organizational challenges, rather than stakeholder opposition and distributional problems, are the primary obstacle to reform.”  As a result, she posits that pilots might be more successful at encouraging widespread adoption of less controversial innovations, such as medical homes, than with contributing “significantly to the goal of cost control, which necessarily raises contentious distributional issues among powerful stakeholders in the healthcare industry and is likely to trigger rent-seeking behavior by interest groups.”  Ms. Francis’s observations are not merely historically interesting but rather offer important insights given the variety of pilot projects included in the ACA to help identify a politically viable way to bend the healthcare cost curve while improving quality.  Ms. Francis reviews the diverse medley of pilots in the ACA, including, but far from limited to, the creation of the Center for Medicare and Medicaid Innovation, reminding us all how much more there is to the ACA than just the mandate and how much we will learn from its implementation.

Happy reading!

Why Defeating the Individual Mandate isn’t Much of a Victory for Individual Freedom

Dear Americans:

A recent poll by the Kaiser Family Foundation suggests that 51% of us believe the Affordable Care Act’s (ACA) minimum coverage requirement — its “individual mandate” — is unconstitutional. By my completely unscientific calculations, if about 41% of us like the ACA as a whole, then at least one in ten Americans likes our new reform law but believes the individual mandate to be unconstitutional.[1] This doesn’t count those who dislike the entire Act despite approving of its various features. In other words, there are a lot of us out there who agree with the ACA’s ends, but do not find them to constitutionally justify its means.

If this describes you, there’s something you should know about this lawsuit that’s been in the news lately. You can’t possibly win.

Yes, the Supreme Court may end up killing the mandate in an exciting 5-4 squeaker. But unless you passionately care about states’ rights in the purest, platonic sense, prepare to be deeply disappointed — win, lose, or draw.

My guess is that, if you support the plaintiffs in HHS v. Florida, you do so because you see the mandate as a threat to your personal freedom. Understandably, you don’t like the idea that your government can tell you to buy something you may not want. Health coverage itself is perfectly fine (a majority of the ACA’s detractors already have it), but coercion gives you the creeps. Me too.

Unfortunately, this lawsuit has little or nothing to do with our individual liberties. No iteration of the word “liberty” was mentioned in the March 27 oral arguments on the mandate’s constitutionality.  Attorney for the private plaintiffs, Michael Carvin, mentioned “individual freedom” once, but only after he said this:

Well I don’t think the test of a law’s constitutionality is whether it more adheres to the libertarian principles of the Cato Institute or the statist principles of someone else. I think the test of a law’s constitutionality is not those policy questions; it’s whether or not the law is regulating things that negatively affect commerce or don’t.

To borrow from Bob Dylan, a favorite of mine and the Chief Justice’s, if you’re looking for someone to protect you and defend you, Carvin just said “It ain’t me, babe.” In a nutshell, his argument was this: Congress cannot regulate inactivity, and not buying health insurance is inactivity. Neither proposition is self-evident, but assume for a moment that the latter argument is true. What is at stake here?

Congress premised the individual mandate on its power to regulate commerce between the states, pursuant to Article I, Section 8 of the Constitution. This power is, in a word, tremendous. The Supreme Court, in a 2005 case about the personal growth of medical marijuana, put it like this:

First, Congress can regulate the channels of interstate commerce.

Second, Congress has authority to regulate and protect the instrumentalities of interstate commerce, and persons or things in interstate commerce.

Third, Congress has the power to regulate activities that substantially affect interstate commerce.

Carvin didn’t argue that health insurance does not substantially affect interstate commerce. That would be insane. Rather, he argued that although “free riders,” who don’t buy health insurance until they need it, do have a substantial effect on the cost of insurance, they simply haven’t done anything until they do it. And until they do, the federal government can’t touch them. But their state can.

Why? The 10th Amendment says those “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Among these are your state’s “police powers,” which allow it to regulate your behavior in ways Washington can’t. If the plaintiffs here are fighting for any constitutional right at all, and not simply doing this to screw with the President, it is Florida’s right — not your own.[2]

I doubt this will satisfy you, as you probably care more for your own liberty than the exclusivity of your state’s right to violate it. But if the rest of the ACA is upheld (which remains a good bet) some states may do exactly that, and enact their own mandates to prevent free riders from jacking up already high premiums. As for Congress, although it would no longer be able to regulate interstate commerce with an individual mandate, it was never likely to do something so unpopular again anyway. Congress would, however, remain perfectly free to enact individual mandates under a number of its many other Article I powers. That was one of the first things Congress ever did, in fact.

There are other lawsuits out there which could actually help you, but these are premised on our Fifth Amendment rights. As Sixth Circuit Judge Sutton (Bush 43 appointee) has asked, “Why construe . . . this limitation — that citizens cannot be forced to buy insurance, vegetables, cars and so on — solely in a grant of power to Congress, as opposed to due process limitations on power with respect to all American legislative bodies?” But the plaintiff states have no stake in our liberties, and the private plaintiffs’ liberties have yet to be affected; focused on the fastest and easiest path to the ACA’s total destruction, both deemed the Bill of Rights “a loser” in this context.

This is what I mean when I say you can’t win. I write not to change your mind on any issue, but to warn you. We may disagree on the ACA’s mandate’s constitutionality, or even its necessity. But unlike many of this lawsuit’s political allies, who wax poetic on liberty despite having supported more draconian mandates 20 years ago, I’m willing to tell you what the Washington elite already knows:

You don’t have a dog in this fight, and the only prize is a bowl of kibble.

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[1] A roughly equal number supports the ACA as a whole, but is not sure of the mandate’s constitutionality. The same poll found that only 12% of respondents would be angry if the Supreme Court killed the mandate provision.

[2] This is exactly why the Fourth Circuit dismissed a similar lawsuit brought by the state of Virginia: when a state challenges a law that only applies to individuals, its lack of a “personal stake” in the case means that it may misrepresent or even disserve the interests of the people who do.

Risky Business

Of course, all the usual caveats apply–oral argument can be misleading, it is hard to know exactly what the justices are thinking, etc., etc.

That said, most everyone seems to agree that the Court is headed towards invalidating the minimum coverage provision. Moreover, after listening to this morning’s argument, there seems at least a non-trivial chance that the Court will invalidate the entire ACA, all 2,700 pages, because the individual mandate is unseverable. (This would conveniently moot the Medicaid question that bedeviled them this afternoon.)

If the Court were to take both of these steps, I fear it would thrust itself into a full-fledged political maelstrom, the intensity of which the justices are unlikely to appreciate. Justice Thomas could not care less; he has said as much, many times. Justice Scalia probably feels the same way; the Constitution says what it says, period.

But the Court, regardless of its politics, cannot afford to be wholly oblivious to the political consequences of its decisions, at least as they relate to its own institutional standing. A decision invalidating the ACA (especially one that takes down the Act in its entirety), rendered by a predictable 5-4 split, will serve to reinforce the notion among many Americans that the Court is no more than another partisan institution, one that operates much like the other branches. That would be wrong factually, but I fear it would be the prevalent perception. And such a perception could do real lasting damage to the Court.

The danger seems especially acute given all the other highly partisan, ideological issues presently heading the Court’s way. Consider the following cases the Court is apt to decide in the next 2 or 3 years: the Arizona immigration case (to be argued next month); the Texas affirmative action case (to be argued in the fall); the Citizens United sequel from Montana (cert petition filed earlier this week); the constitutionality of Section 5 of the Voting Rights Act (currently percolating in the courts of appeals); the constitutionality of California’s Proposition 8 banning gay marriage (currently awaiting a decision from the Ninth Circuit about an en banc hearing); and the constitutionality of the Defense of Marriage Act (also percolating in the courts of appeals).

Again, we are just speculating at this point. But a steady stream of highly divisive, conservative 5-4 decisions, led off by a decision to invalidate the most important federal statute in a generation, could be toxic. It could take years for the Court to regain its standing among the American public.

This is not a partisan concern. It is a concern–voiced eloquently by Chief Justice Roberts on several occasions–rooted in beliefs about the importance of the Supreme Court, the independence of the federal judiciary, and ultimately the rule of law.

In other words, I fear the justices might be playing with fire. I sure hope they are careful.

[Ed. Note: This post originally appeared on the aca litigation blog, an amazing resource filled with case documents, transcripts, and in-depth analysis. Bradley Joondeph is a Professor of Law, Santa Clara University School of Law ]

No mandate? OK, but be prepared to pay

[Ed. Note: This commentary was published in the St. Louis Post Dispatch on Wednesday, 3/28, by  long time contributor to HRW, Thomas "Tim" Greaney, Chester A. Myers Professor of Law and co-director of the Center for Health Law Studies and John J. Ammann, director of Legal Clinics at St. Louis University School of Law.]

This week the U.S. Supreme Court is hearing three days of oral arguments on the constitutionality of the Affordable Care Act, the federal health care reform legislation. The pivotal question, whether a federal mandate to buy health care insurance can pass muster under the Commerce Clause, is one that has divided the lower courts and generated a backlash against this vital legislation.

Polls suggest that a strong majority of citizens agree with most of the specific provisions of the health care reform law, though many harbor doubts about its constitutional basis. While we believe there is ample precedent supporting the constitutionality of the law, it is worth considering whether a mandate-free health care reform law would be fairer or more effective. We think not.

Congress unquestionably could have avoided any serious constitutional questions by offering a carrot rather than the stick of a monetary penalty. For example, the law could have made the premiums for government-provided insurance such as Medicare less expensive for those who voluntarily purchase private insurance when they are young. While such an approach may strike some as more equitable, it would undermine effective health care reform. Indeed, this thought experiment exposes the short-sightedness of allowing unrestricted choice to trump all else in the health care debate.

The idea of the federal government using a carrot rather than stick to prompt certain behavior has a long and unquestioned pedigree in the law. Indeed, the federal government uses positive incentives in many aspects of American life to mandate compliance with its rules. For example, if states want federal highway funds, they have to follow federal transportation regulations. If states want federal education funds, they have to adopt federal guidelines such as those under the No Child Left Behind law.
Read more.

Why Can’t We Analogize the Mandate?

Legal arguments often rely on analogies.  Indeed, during the first year of law school, students learn to analogize and distinguish cases. “This case is like this one, not that one.” Good lawyers can always conjure up and deploy a good analogy.

So why was it so hard yesterday for some of the most skilled lawyers and judges in the country to identify a good analogy for the individual mandate– the Affordable Care Act’s requirement that almost everyone buy minimum essential health insurance coverage or pay a penalty?

After listening to Tuesday’s historic two-hour oral argument and reading the transcripts, I counted roughly 17 different analogies to the insurance mandate– none of which seem particularly apt.

Here’s a brief rundown of the analogies invoked yesterday (by both the justices and the advocates), and then some thoughts on why they fall flat:

1.  Is mandating health insurance like mandating that people buy cell phones to call 911? (Chief Justice Roberts).

2.  Is the mandate like a requirement that we buy insurance to pay for our own burial services? (A macabre Justice Alito, who’s right: we’re all going to die).

3.  Is the mandate like forcing us to buy broccoli? (Justice Scalia, invoking the dreaded broccoli analogy, which is apparently one of the parade of horribles that logically flows from the health insurance mandate, a canard that David Orentlicher has exposed).

4.  Is it like forcing us to buy cars? (Chief Justice Roberts and later, Justice Scalia, referring to the government’s reply brief, which tried to distinguish a federal mandate that we buy U.S. automobiles from the insurance mandate).

5.  Is it like imposing a duty to rescue strangers in trouble, like a “blind man walking in front of a car”? (Justice Kennedy).

6.  Is it like setting phone rates to require that some callers subsidize others? (Solicitor General Don Verrilli).

7.  Is it like requiring everyone to join an exercise club? (Justice Scalia).

8.  Is it like mandatory inoculation during a pandemic? (Justice Breyer, perhaps inspired by the movie Contagion).

9.  Is it like forcing people to deposit all their money in the Bank of the United States? (Justice Breyer’s colloquy with Paul Clement, counsel for the state plaintiffs, invoking McCulloch v. Maryland).

10.  Would it be like the federal government requiring us to buy car insurance if states didn’t already do so? (Justice Sotomayor, to whom Paul Clement responds that there are lots of people in Manhattan that don’t drive cars. True, but we all have bodies, which require regular tune-ups and sometimes major repairs).

11.  Would it be like Congress forcing everyone to buy “a great new wonder drug”? (Paul Clement).

12.  Is it like growing wheat (Wickard v. Fillburn), or weed (Raich), or carrying guns near schools (Lopez), or committing violence against women (Morrison)? Note that these are the four most direct Commerce Clause precedents, which get comparatively buried during oral argument, amid all the analogy-searching.

13.  Is it like Congress requiring everyone to buy an electric car? (Paul Clement, who is hitting his stride by this point).

14.  Is it like requiring us to buy anti-pollution devices or low-emission mufflers for our cars? (Justice Breyer, who is not).

15.  Is it like requiring that everyone buy private mortgage insurance? (Michael Carvin, counsel for the private plaintiffs).

16.  Is it like requiring some pesticides rather than others in food? (Justice Sotomayor).

17.  Is the decision not to purchase health insurance like local manufacturing, which is regulated federally because some products might, eventually enter interstate commerce? (Justice Sotomayor).

Finally, near the end of two hours of oral argument, Justice Kennedy–the one everyone is watching–hints that health insurance simply may be unique (p. 103 of the transcript).

This last point is important. The reason we can’t analogize health care is because it is, indeed unique. Now, to be fair, the justices are trying to locate a limiting principle here. If the federal government can make us buy health insurance, is there anything it can’t do?

Unfortunately, the limitation here isn’t so much a principle as the unique nature of health care and health insurance. None of the analogies above do the health care market justice (or the health insurance market, which is a distinction without a difference that was probably overemphasized yesterday).

The United States spends $2.6 trillion per year on health care, which is probably far more than all the markets in the above analogies combined. Everyone consumes health care at some point. Health expenses are one of the biggest contributors to bankruptcy in the United States. Insurance is designed to account for the capricious risks that we all face with a stroke of bad health luck. The federal government heavily subsidizes care, and both public and private insurance subsidizes the uninsured. Federal laws like EMTALA aren’t to blame here–most doctors and hospitals would (and do) cross-subsidize care for the uninsured on their own, even without a federal law governing emergency care.

All of the analogies above fail in some obvious way. Indeed, you’d have to combine the salient features of all 17 analogies and create a Frankenstein analogy to approximate the scope, scale, and dynamics of the health care market. Health care is not a conventional good or service by any stretch of the imagination. Whether Justice Kennedy acts on the flicker of intuition that he revealed on this point will probably decide the case.

Day 2, The Individual Mandate: Justice Kennedy Swings Again

More than a few prognosticators have posited a 5-4 split (either way) after reading the tea leaves of oral argument before the Supreme Court on the Individual Mandate today. I don’t disagree. I won’t venture a guess, up or down, but I will say that it is likely, as usual, that Justice Kennedy (surprise, surprise) will be the swing vote. As such, you can find below three Justice Kennedy quotes that may be indicative of which way he’ll swing. (page numbers refer to the page number of the transcript, linked here.) And for those of you swallowed by sorrow at the prospect of the Individual Mandate going down in flames, pay particular attention to the last quote and Justice Kennedy’s consideration of “degrees” of uniqueness as a cabining principle. It is, I believe, as I heard a particularly astute health law professor say today, indicative that “Justice Kennedy is in play.”

JUSTICE KENNEDY–Could you help — help me with this. Assume for the moment — you may disagree. Assume for the moment that this is unprecedented, this is a step beyond what our cases have allowed, the affirmative duty to act to go into commerce. If that is so, do you not have a heavy burden of justification?

I understand that we must presume laws are constitutional, but, even so, when you are changing the

relation of the individual to the government in this, what we can stipulate is, I think, a unique way, do you not have a heavy burden of justification to show authorization under the Constitution? (p.11-12)

JUSTICE KENNEDY: But the reason, the reason this is concerning is because it requires the individual to do an affirmative act. In the law of torts, our tradition, our law has been that you don’t have the duty to rescue someone if that person is in danger. The blind man is walking in front of a car and you do not have a duty to stop him, absent some relation between you. And there is some severe moral criticisms of that rule, but that’s generally the rule.

And here the government is saying that the Federal Government has a duty to tell the individual citizen that it must act, and that is different from what we have in previous cases, and that changes the relationship of the Federal Government to the individual in a very fundamental way.

JUSTICE KENNEDY: And the government tells us that’s because the insurance market is unique. And in the next case, it’ll say the next market is unique. But I think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets — stipulate two markets — the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.

That’s my concern in the case. (p. 104)

Photo credit, Daniel Schwen.

Supreme Court ACA Hearings, Day One

[Ed. Note: This post is from Professor Bradley Joondeph's aca litigation blog. It's as good of a quick analysis of the day's Supreme Court argument as you'll find. Below the post, you'll also find I've added the first paragraph and a link to Professor Joondeph's article in the latest issue of the University of Richmond Law Review, Beyond the Doctrine: Five Questions That Will Determine the ACA's Constitutional Fate. These five questions are worth considering, as is, I might add, the linked issue of the University of Richmond Law Review, dedicated to the ACA, "Everything but the Merits."]

A quick analysis of today’s argument

Nothing is certain merely from listening to oral argument at the Court. But it sure seemed as if a large majority of the justices (and perhaps all of them) thought the Court has jurisdiction in this case and can proceed to address the merits of whether the minimum essential coverage provision is within Congress’s enumerated powers. There were several different theories, and there seemed to be some sharp disagreement as to whether the AIA is jurisdictional in nature. But it also seemed that a majority of justices could agree on a narrower proposition, something along these lines: (1) statutes stripping the courts of jurisdiction are generally construed narrowly, meaning that Congress must make its intent clear; (2) the ACA–especially in specifically demarcating the exaction in 5000A(b) a “penalty”–did not make Congress’s intent for the AIA to apply clear; thus (3) even if the AIA is jurisdictional, it does not apply to the penalty imposed in 5000A(b). (Perhaps some justices might concur only in the judgment, finding that the Government can waive the AIA in certain circumstances, as it did in Davis.)

No doubt, the meaning of the AIA (and whether it is jurisdictional in nature) are somewhat important in their own rights. But in the broader scheme, what matters from today is that the Court is almost certain to get to the minimum coverage provision’s constitutional merits. That is the question for tomorrow–the biggest single day at the Court since December 2000.
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Beyond the Doctrine: Five Questions That Will Determine the ACA’s Constitutional Fate

Bradley W. Joondeph, Professor of Law, Santa Clara University School of Law

The litigation challenging the constitutionality of the Patient Protection and Affordable Care Act (-ACA‖ or -Act‖) raises a number of interesting and important questions of constitutional law. But in cases of this magnitude and political salience, the Supreme Court’s deliberations typically are shaped by forces that transcend the relevant doctrine. The Court’s response to the ACA is unlikely to be an exception. Specifically, the Justices’ reactions to five questions–all of which go beyond the doctrinal merits–will likely determine the Act’s fate: (1) whether this is the sort of case in which judicial review is necessary, or instead one that the elected branches are capable of solving on their own; (2) whether the states are separately incompetent to reform the nation’s health care financing system, such that invalidating the Act will leave a policy void (and whether the existence of such a void should matter); (3) whether Congress’s power to adopt a more radical, single-payer-type system for all Americans should inform whether Congress has the authority to adopt the more incremental ACA; (4) whether the Court can invalidate the ACA, especially with an ideologically predictable 5-4 split, without appearing overly partisan to the American public; and (5) how Chief Justice Roberts will perceive the impact of this case on his legacy-as an opportunity to reaffirm the singular importance of judicial restraint, or as an instance where the Court’s intervention is necessary to preserve foundational principles. Each of these considerations extends beyond the precise constitutional questions presented. But in a case such as this, it is the Justices’ reactions to these broader questions that tend to drive their doctrinal analysis, rather than the other way around. - UNIVERSITY OF RICHMOND LAW REVIEW [Vol. 46:763]

U.S. Supreme Court Health Reform Litigation, the Individual Mandate, Anti-Injunction Act, Commerce Clause and Even The Militia Act

We are literally only days away from the Supreme Court oral arguments in the ACA litigation (or the Health Reform case as it is popularly known) and as such, we thought it would be of some help to publish again some of our past posts on aspects of the law now being challenged. In addition to being published here at HRW, many of the pieces below found further life elsewhere, the Washington Post, NY Times, The Record, The Health Care Blog, Health Law Prof Blog, Concurring Opinions, the aca litigation blog, to name a few. Some originated elsewhere and found a home here. Either way, they’re here in one place for your enjoyment as we all hold our breaths and get ready to attempt to count robed votes by virtue of questions posed in the arguments to come.

Professor Mark Hall, Wake Forest University School of Law

Constitutional Mortality: Precedential Effects of Striking the Individual Mandate

Why the 11th Circuit’s Opinion on Health Care Reform Self-Destructs

Judge Vinson’s Tea Party Manifesto

Commerce Clause Challenges to Health Care Reform

From Justice Story: A Postal Power Parable on Mandating Health Insurance

What’s Surprising about the Virginia Ruling Striking the Individual Mandate?

Are The Attorneys General’s Constitutional Claims Bogus?

Is it Unconstitutional to Mandate Health Insurance?

Professor Frank Pasquale, Seton Hall Law

Professor Frank Pasquale featured in The Record on ‘A Constitutional Right to Health Care’

A Constitutional Right Not to be Bankrupted by Health Care Costs

Huq on Constitutional Challenges to HCR

Parsing “Populism” in Resistance to Reform

Professor Brad Joondeph, Santa Clara University School of Law

aca litigation blog (All the briefs, docs, lawyers, helpful updates, analysis, etc. in one easy place. Prof Joondeph and Brandon Douglass are to be commended for this splendid effort — yeomen’s work and finely done. The aca litigation blog is automatically fed into our sidebar and we were pleased to offer a few of Professor Joondeph’s posts in full here at HRW, and very much look forward to posting more. If you haven’t checked it out yet, you absolutely should.)

Clarifying the AIA question

The Anti-Injunction Act Complications

Professor Tim Greaney, St. Louis University School of Law

Health Reform, a Class Act

Bradley Latino, J.D.

The Individual Mandate, a Brief History - Part I, Conservative Origins

The Individual Mandate, a Brief History - Part II, The Republican Alternative (1993-1994)

The Original Individual Mandate, Circa 1792

Kate Greenwood, Research Fellow & Lecturer in Law, Seton Hall Law

Recommended Reading: Interesting Takes on the Individual Mandate

Michael Ricciardelli, J.D.

Judge Hudson, Bartleby the Scrivener and the “Tribeless, Lawless, Hearthless One”

Election Fallout and Why State Initiatives to Exempt Residents from Health Care Law are Not Just Symbolic

Missouri Votes Against Individual Mandate, May Impact Standing Argument in Federal Court

Judge Rules, Virginia Moves Forward Against Individual Mandate

Is a For-Profit Structure a Viable Alternative for Catholic Health Care Ministry?

On March 26-27, Seton Hall Law will be home to a two day Symposium entitled “Is a For-Profit Structure a Viable Alternative for Catholic Health Care Ministry?” Funded through the generosity of a number of contributors, the Symposium is being hosted by Seton Hall Law’s Center for Religiously Affiliated Nonprofit Corporations and its Center for Health & Pharmaceutical Law & Policy, in collaboration with the University of St. Thomas, John A. Ryan Institute for Catholic Social Thought, the Terrence J. Murphy Institute for Catholic Thought, Law and Public Policy and the Veritas Institute.

In an April 2010 article, a reporter for The Boston Globe pondered whether “… for-profit Catholic health care is an oxymoron, or whether profitability and religious mission can be integrated.” This Symposium will examine whether a for-profit structure is a viable alternative for Catholic health care ministry.

The Program will provide a unique forum for dialogue among practitioners, academics and scholars in law, finance, theology and Catholic social teaching to “drill down” to specific legal, financial and operational issues relevant to an objective examination of the relationship of the for-profit legal and financial structure to the Catholic tradition of health care ministry. The Symposium will consist of a sequence of presentations intended to provide an objective overview of the relevant issues with opportunity for audience interaction. The first day, presenters will provide foundational descriptions of changes in law and finance that may occur when converting from a nonprofit legal structure to a for-profit structure. The second day, theologians, canonists and scholars in applied Catholic Social Thought will respond to the legal and financial descriptive presentations. The panelists will frame the conversation, in part, by referencing examples of for-profit models in Catholic health care.

In asking the Symposium’s question, “Is a For-Profit Structure a Viable Alternative for Catholic Health Care Ministry?” the proceedings are designed to engage scholars and practitioners from multiple disciplines to develop an objective framework for analyzing the following questions:

1. Is the delivery of health care as a ministry compatible with providing that care through an investor-owned company publicly identified as Catholic?
2. If not, why not?
3. If yes, are there any management, governance or other structures or processes that may need to be developed to accommodate Catholic health care as a ministry?

The Symposium will not take a position on whether such conversions, in any of its forms, should or should not occur. The Symposium will provide the audience participants with the range of issues that may impact their specific decision.

An Examination of the Key Issues

The legal and financial differences between a non-profit and for-profit corporation will be analyzed from the perspective of Roman Catholic canon law, ethics and Catholic social teaching. The Symposium, focusing on these disciplines, will address questions such as the following:

1. What is the relationship between the theological understanding of health care as a ministry and the legal definition of health care as a public good or a private commodity?
2. Is Catholic identity in the legal purpose clause of a corporation subject to treatment as a trade or a service mark?
3. Is Catholic identity an intangible asset subject to valuation?
4. If the charter of the corporation is a contract between the investor and the corporation, what is the shareholder purchasing in terms of Catholic identity?
5. If a corporate culture is rooted in values, is it necessary to use religious language to describe values rooted in the Catholic tradition to create a culture consistent with Catholic ministry? Or is it sufficient to describe Catholic identity in terms of objectively discernable proscriptions and prescriptions?
6. If professional managers tend to be beyond effective shareholder control  and shareholders cannot instruct the board of directors, each of whom cannot be removed without cause, by whom and how is Catholic identity determined or monitored?
7. What is the relationship between corporate law and Catholic Social Thought on private property, labor and capital, subsidiary, the distribution of goods and services, and human rights to social goods such as health care?
8. In states adopting corporate constituency statutes instructing directors that they either may, or must, take into account the interests of constituencies other than shareholders in exercising their powers, does Catholic identity create new, discreet constituents other than shareholders or those identified in statutes?
9. Are new benchmarks necessary to determine Catholic corporate success? If so, do these new benchmarks differ or align with benchmarks for success for any corporation having no religious affiliation?

Kate Greenwood on American Law Journal TV Regarding Off-Label Promotion

In Case you missed it: Research Fellow & Lecturer in Law, Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy, Kate Greenwood, on American Law Journal TV regarding Pharmaceutical Off-Label Marketing and Free Speech. A regular blogger here at HRW, Kate Greenwood appeared along with attorneys Hope Freiwald of Dechert, LLP and Brian J. McCormick, Jr., of Sheller, P.C.

Ruane v. Levy: Both Sides of the Bar Meet in Health Care Fraud and Abuse Class

[Ed note: This article was authored by John Barry '13, a second year law student pursuing a Health Care Concentration at Seton Hall Law.  A native of New York, he graduated in 2005 from the University of Pennsylvania with a degree is psychology.]

Recently, Professor Zack Buck’s Health Care Fraud and Abuse class was treated to a spirited panel on the current state of health care fraud, prosecution and defense.  The panel, meeting again this year to allow students an opportunity to hear details about actual practice from both sides of the bar, was moderated by Chris Zalesky, the Vice President of Global Policy & Guidance for Johnson & Johnson in the Office of Health Care Compliance & Privacy.  Zalesky has more than 20 years of experience in regulatory affairs, quality assurance and research and development functions within the medical device and pharmaceutical industries. He has also taught as an Adjunct here at Seton Hall Law.

The panel included Maureen Ruane, Assistant U.S. Attorney and Chief of the Health Care & Government Fraud Unit for the United States Attorney’s Office, District of New Jersey, and Bruce Levy, an attorney with the firm of Gibbons, P.C.  Ruane served as Assistant United States Attorney from 1998 to 2004, and returned to the office in 2010 after working as a partner in the law firm of Lowenstein Sandler.  Levy, also formerly an Assistant U.S. Attorney, currently focuses his practice at Gibbons on criminal, civil, and administrative cases arising from federal and state health care fraud investigations, health care compliance, The False Claims Act and qui tam cases, corporate investigations, and white collar criminal law.

Touching on a wide variety of topics, Ruane explained that the “sea of health care fraud is so deep” that it affects all aspects of the American health care system, from hospitals to physicians to pharmacies and all other health care providers.  Many of the fraud prosecutions that flow through Ruane’s office come in the form of qui tam actions under the False Claims Act.  Coming from a Latin phrase meaning “[he] who sues in this matter for the king as [well as] for himself,” a qui tam action is a unique fixture of the False Claims Act that allows private citizens to act as whistleblowers and sue health care corporations for perpetrating fraud on the government.  The whistleblower, or “relator,” stands to gain a percentage of the civil damages awarded against the corporations.

Having seen countless relators over her time with the government, Ruane was in a rather unique position to speak about the underlying motivations behind the people who sue on behalf of “king and self.”  Contrary to common thinking, Ruane explained that whistleblowers generally did not act out of greed or a desire to hurt the company.  In fact, she felt the opposite:  most relators were actually intensely loyal to their companies and had usually tried to voice their concerns multiple times in-house before bringing a complaint to the attention of government prosecutors.

Working as defense counsel, Levy voiced the concerns of private industry, in particular about the lack of guidance in the current law.  He stressed that many pharmaceutical companies, hospitals, physicians and health care providers feel as if they are trying to act within the bounds of the law when in reality those boundaries are more blurry than clear.  As an example, Levy talked about how he felt the need for clearer guidance on pharmaceutical marketing of “off-label” medications.   When the Food and Drug Administration approves a medication for use in the U.S. health care market, the drug is approved for a specific use or indication.  However, clinical studies often show beneficial uses for medications for additional aliments, and it is legal for physicians to prescribe the drugs for these other uses.  In addition, Medicare and many private insurers will pay for use of a medication for different indications than what the FDA approved, in effect, subsidizing “off-label” use. There are thus competing federal agency views on medications, with the FDA only approving the drug for a particular use, but the Center for Medicare Services alternatively approving use of the drug for other, off-label uses.  Problems arise because there are complex, and Levy felt unclear, regulations as to how pharmaceutical companies may represent or market the drug for off-label use.  Levy explained that he felt new legislation was required to give clear guidance to the industry.

Both Ruane and Levy, approaching the bar from different perspectives,  engaged in lively conversation and took questions from the audience, giving students numerous real-world examples of the theories and topics they learn about in class.  As might be imagined, bringing with them contrasting prosecution and defense-side perspectives, the two often approached the same issues from opposing viewpoints, providing a unique experience for the class.  However, the one thing they both agreed on was that with rising health care costs directly on the government’s radar, aggressive prosecution of health care fraud will not slow down any time in the future.

Trip Report, Sierra Leone, Tom Johnson, Jr., Africa Surgery, Inc. (ASI)

[Ed. note: I had the honor of meeting Tom Johnson a few years back, here at Seton Hall Law when I was still a student and he held a fundraiser through the school. AfricaSurgery, Inc. does God's work-- and I'm well pleased to publish his updates here on HRW. With the help of others, he does a lot-- with very little.]

October 27, 2011 - February 15, 2012

Umu Sesay was brought to us by a Catholic missionary priest in 2007.  Her small, seven-year-old spine was so deformed by a tuberculosis infection that I could hardly believe she was still able to stand and to walk around.  We had Umu complete a six-month medical regimen to cure her TB, and we sent her to Ghana in April of 2008 for surgery by a team from the Foundation of Orthopedics and Complex Spine (FOCOS).   Unfortunately, Umu’s chest cavity was so compressed that she was unable to reach the minimum breathing required by the anesthesiologist before she could be cleared for surgery.   But Umu held onto the small plastic device used to measure her inhalation capacity, and she practiced breathing through it after her return to Sierra Leone.  By January, 2010 her persistence had paid off.   She was finally able to make all four of the small plastic balls rise up to the top of a plastic tube, when she inhaled through the testing device.  Umu was one of the four patients ASI sent from Sierra Leone to Ghana for spinal surgery by a FOCOS team in November, 2011.   All four surgeries were successful, and Umu and her three “surgery-mates” are out of pain and the danger of paralysis.  They all can now stand up quite straight.

Umu, whose parents are both deceased, is staying for one month at the ASI base in Freetown where she is receiving nutrient enriched food.  She is being tutored by an ASI helper who is himself a college student and who is a former school teacher.  Umu surprised us with how knowledgeable she is for an 11 year-old girl from a farming village.  Umu will soon be placed with the Cluny Sisters (Catholic missionaries) where she will live at their boarding school for the hearing impaired.  She will attend a primary school for hearing children, until the school year ends in July.  We expect that her spine will have healed by then so that she can be returned to her aunt in their home village.  Umu will no doubt be required to perform many chores, but hopefully she will be able to continue to attend school.

In November, a friend took me to a small village a couple of miles beyond his own to see a six-year-old boy with a “swelling and a sore in his mouth” which turned out to be a fast-growing tumor.  We took little Alimamy Kamara, along with his father, to be seen by the German orthopedic surgeons who were visiting Sierra Leone at that time and who had a reconstructive-plastic surgeon on their team.  The tumor was determined to be inoperable.  The team supplied us with palliative pain medication in the form of suppositories and a liquid formulation that could still be swallowed by the boy whose throat was closing up.   Alimamy died 13 days later. But our visit to his small village turned out to be a blessing for a young man who was also suffering with a painfully swollen face.

Alusine Kamara, age 20, had an abscess in his lower left jaw.  At first reluctant to accept our offer of help, Alusine’s increasing pain eventually forced him to allow us to take him 100 miles down to Freetown.  There the only oral surgeon in the country began what turned out to be a three-month-long process involving admission to the government hospital, heavy doses of intravenous and oral antibiotics and pain meds, and two surgeries.  Two more men completed similar treatments for abscessed jaws while I was in-country, and another man and one woman are to be admitted for oral surgery before the end of this month (Feb. 2012).  This will bring to 18 the number of persons for whom ASI has provided this rather expensive treatment.  The average cost is about $450.  Such abscess can be avoided by simply having decayed teeth pulled in time, saving much pain for the patient, and expense for us.  ASI did have the rotten molars of 55 persons pulled, between March, 2011, and February, 2012, at a cost of about $3.00 each.

While I was in-country, one of my helpers, Foday Tarawalie, brought 38 new patients with eye problems and 21 old cases in need of follow-up medications to the Baptist Eye Hospital in Lunsar.  Nine of the new cases received surgeries to regain their eyesight which was being obstructed by cataracts and/or pterygiums.   The 29 other new cases were medically treated for a variety of conditions including glaucoma and potentially-blinding infections.  ASI is continuing to fund Foday who is continuing to bring old and new patients to the hospital for sight-saving treatments.

Before I arrived in Sierra Leone, 48 surgeries to treat persons with hernias had already been done with funds provided by ASI since February, 2011.   While I was in country 11 more hernia repair surgeries were arranged and funded by ASI, including one for a seven-year-old boy.   Hernias remain a very prevalent health problem in Sierra Leone preventing thousands of men, boys and women from living productive lives.

New Jersey was well represented in Sierra Leone this year.  Dr. Nina Seigelstein returned to the Holy Spirit Hospital with a team including another gynecological surgeon, a scrub nurse, and a midwife.  They preformed 22 major surgeries on women brought to them by ASI, as well as for others who came on their own.   A detailed account can be found at the website: www.oneworldwomenshealth.org.

A member of the ASI board of directors, Sergio Burani, made a nine-day visit to Sierra Leone for the purpose of making a photo documentary of our work.  Sergio fell into stride with the ASI team.  At one point Sergio asked a vendor in an open-air market in the capital city, Freetown, if he could photograph him and his produce.  The man refused but was overheard by the market head-man who, after we explained our mission, insisted that Sergio “snap” away with his camera as much as he wanted to.  All the fuss caught the attention of a passerby who told us of his mother who was in the main government hospital.  Her family could not afford to pay for the medications needed to treat her badly-infected foot which had suffered a wound when a large mortis fell on it.  The young man explained that the entire congregation of their church had decided to pray for his mother to be healed as the only solution at hand.  We paid a visit to the hospital where we heard that the foot might have to be amputated.  We ended up transporting the woman and her daughter 100 miles up-country to our base near the Holy Spirit Hospital.  The woman is being treated as an out-patient for the infection and for a low hemoglobin blood count.  She is scheduled to receive a skin graft by the next reconstructive plastic surgery team that will visit the hospital in early March.  She will not have to lose her foot.

While there, Sergio also instructed six disabled students, three with severe hearing loss, and three post-operative spinal surgery secondary school boys, in the principles of photography and the use of six non-automatic, non-digital cameras which he donated.  One of the hearing-impaired students has already set off on his own, photographing students at their graduation ceremony.   He now is trying to scrape together the money to have his film developed in the hope that he will be able to reap a small profit selling his prints.

On behalf of all of the many Sierra Leoneans whom your generosity is allowing ASI to help, I want to thank you for your support and for your prayers.   I wish to extend special thanks to the Knights of Columbus George Washington Council 359, which gave ASI $3,000 last year.  This more than covered my personal travel and living expenses, enabling all of your donations to go directly to providing medical, surgical, and health care.  We at ASI will continue our work in Sierra Leone to the extent that our funds will allow.  If you are able to join us in this effort, checks can be made out to Africa Surgery, Inc., or to ASI, and mailed to:

Tom Johnson

Africa Surgery, Inc.

70 Macculloch Ave.

Morristown, NJ 07960

You can also donate on line at our website:  www.africasurgery.org

Must-Read Articles on Drug Shortages

In February, Health Affairs featured Duff Wilson’s article on “Deepening Drug Shortages.”  As Wilson notes, “the number of reported drug shortages in the United States nearly tripled between 2005 and 2010, increasing from 61 to178 and emerging as a systemic problem in the US health care system.”  Sharona Hoffman has recently written on the topic:

How could such shortages plague premier hospitals in the twenty-first century in the wealthiest country in the world? How could even patients with comprehensive health insurance and abundant financial resources be denied adequate care because the medications they require are simply not available in the marketplace?

The Article posits that public health policies and standards must serve multiple roles. They should deter both carelessness that leads to product contamination and strategic decisions to discontinue or suspend manufacturing when such decisions will cause shortages. At the same time, governmental rules should encourage production of vulnerable drugs. Accordingly, the Article proposes a blend of legislative, regulatory, and private-sector interventions that should realign manufacturers’ incentives and significantly diminish the drug shortage phenomenon.

Hoffman’s article is well worth reading in full, and I hope it guides policymakers.  As I noted last year, a plutonomy will not reliably generate even the products that its most powerful consumers may occasionally need.

A New Insurance Product: Responsible Corporate Officer Defense Insurance

Unsurprisingly, the market has responded to the new risks corporate officials in the life sciences industry face if their companies commit crimes that threaten the public’s health.  On February 7, 2012 insurance broker Marsh USA and insurer Allied Assurance Co. unveiled a new product, called RCO Corporate Response, “which provides insurance coverage for pharmaceutical, life sciences, and health care corporate officers who may be held liable for their companies’ actions under the Responsible Corporate Officer (RCO) doctrine.”

For those who are rusty, The Responsible Corporate Officer Doctrine allows for the conviction of a high-level corporate official (ambiguity of terminology suggests that directors could be liable as well) whose company has violated the Food, Drug and Cosmetic Act irrespective of the official’s knowledge or involvement in the offense if the individual occupied a position that had a relationship with the unit that violated the statute, should have known about the activity, and had the authority to intervene. In short, the government need not produce evidence that the corporate official participated in or was aware of the illegal conduct. Potential penalties include fines, imprisonment, and debarment from the FDA.  As shall be discussed further, these penalties can lead to exclusion from Federal healthcare programs.

The Doctrine, which was first articulated by the Supreme Court in U.S. v. Dotterweich in 1943, was affirmed in 1975 in U.S. v. Park (and so sometimes referred to as the Park Doctrine).  The Dotterweich Court expounded on the rationale for imposing such a hardship on corporate defendants not actually involved in the illegal conduct: the welfare of unwitting consumers who have no ability to protect themselves against dangerous products and services must prevail over the hardship the Doctrine creates for the corporate executive with the position, responsibility and power to protect the public. The Park Court emphasized that guilt was not based solely on the defendant’s corporate position and explicitly recognized an affirmative defense where the defendant is “powerless to prevent or correct the violation.”

The Doctrine has been rarely used, so fast forward to 2007, when the corporate entity Purdue Frederick pled guilty to a felony of misbranding along with the CEO, Chief Medical Officer and Chief Legal Officer who plead to misdemeanor misbranding pursuant to the Responsible Corporate Officer Doctrine. The convictions arose from Purdue Pharma’s off-label promotion of OxyContin, which the FDA approved in 1995 to manage chronic moderate to severe pain.  From 1995 until 2001, contrary to the package insert and evidence on the ground, a number of Purdue employees promoted OxyContin “as less addictive, less subject to abuse and diversion, and less likely to cause tolerance and withdrawal,” as subject to fewer peak and trough blood level effects, and producing less euphoria than other pain short-action opioids. These representations apparently occurred in some instances at supervisors’ urging, or as a result of sales training.

OxyContin became the number one prescribed Schedule II narcotic in the United States, with 5.8 million prescriptions in 2000. OxyContin revenues reached approximately $3 billion in June 2001, accounting for 80% of Purdue Pharma’s revenue.  Despite its various troubles with OxyContin, Purdue Pharma never saw a dip in its revenues.  Effective August 9, 2010, Purdue discontinued manufacturing and distributing the original formulation, replacing it with an FDA-approved reformulation that is apparently more difficult for abusers to penetrate by cutting, breaking, crushing or dissolving.

OxyContin is an effective and efficient analgesic.  In addition to its legitimate use, however, OxyContin became very popular as a street drug, either taken orally, injected, or crushed, which circumvented the controlled release mechanism and allowed a more rapid and intense heroin-like high.   The legal complications began when Appalachia experienced particular challenges with Oxy diversion, leading to criminal charges by US Attorney for the Western District of Virginia against what appears to have essentially been a shell corporation,  Purdue Frederick, as well as three senior corporate officers.  Notably, Purdue Parma, L.P., which is the corporate entity that actually sells OxyContin as well as the company’s other pain medications, was not charged, thereby enabling it to continue to submit drug applications to the FDA and have its products paid for by the Federal healthcare programs.  Purdue Frederick and its executives agreed to plead guilty and pay fines totaling $634,515,475. Almost immediately, the HHS OIG used its discretionary exclusion power to debar all three executives from participating in Federal healthcare programs for twelve years. The executives have been unsuccessful in every level of administrative and judicial appeal thus far. In retrospect, the Purdue Parma execs may feel relieved after hearing that three Synthes executives received multi-month prison terms in addition to their fines pursuant to the RCO Doctrine for their company’s conduct of unauthorized clinical trials of bone cement in which three patients died.

On the heels of this success, the FDA announced that it was increasing its use of misdemeanor prosecutions against responsible corporate officials.  The agency unveiled its internal agency guidance for determining when to forward a case to the Department of Justice for a “Park Doctrine Prosecution.” The guidance provides that a first time conviction for a violation of the FDCA will be a misdemeanor, with the second resulting in a felony.  Further, some misdemeanor convictions can result in debarment by the FDA.  Most importantly for this discussion, the guidance states that “Knowledge of and actual participation in the violation are not a prerequisite to a misdemeanor prosecution but are factors that may be relevant when deciding whether to recommend charging a misdemeanor violation.”  The guidance enumerates the following additional criteria:

• The individual’s position in the company; relationship to the violation; whether the official had the authority to correct or prevent the violation
• Actual or potential harm to the public
• Obviousness of the violation
• Existence of a pattern of illegal behavior and/or failure to heed prior warnings
• Whether the violation is widespread
• Seriousness of the violation
• Quality of the legal and factual support for the proposed prosecution
• Whether prosecution is a prudent use of agency resources

Within the same week, Lewis Morris, Chief Counsel to the Inspector General of Health & Human Services testified before the House Ways and Means Committee that the OIG would review the case of any individual convicted pursuant to the RCO Doctrine for exclusion from participation in Federal healthcare programs.  This, Mr. Morris testified, will overcome the barriers presented by corporations’ attitude that they are too important to the healthcare system to criminally prosecute and that fines are simply a cost of doing business.   Mr. Morris assured the House Committee that the OIG would use this tool judiciously, employing a presumption in favor of exclusion only “when there is evidence that an executive knew or should have known of the underlying criminal misconduct of the organization.”  The HHS OIG criteria for permissive exclusions from Federal healthcare programs includes a consideration of the entity’s misconduct, including whether it is part of a pattern of conduct and whether it caused harm to beneficiaries; the individual’s role in the sanctioned entity with a focus on degree of managerial control or authority and the position’s relation to the underlying misconduct and whether the misconduct occurred in the individual’s chain of command; and finally, detailed information about the nature of the sanctioned entity including its size, revenues, organization and structure.

With this background, one wonders how the new RCO insurance policy would work in these cases?

The benefits of the policy include coverage for:

• Defense costs incurred in the investigation or defense of any misdemeanor criminal proceeding, administrative proceedings brought pursuant to the RCO doctrine, as well as debarment proceedings.
• Defense cost coverage for potential RCO claims.
• Lost future compensation resulting from exclusion/debarment.
• “Recoupment loss” and/or clawback awards, which is the value of any compensation that must be returned or repaid by an insured person as a result of a judgment, decision, or settlement of an RCO claim.

An obvious omission from this list of benefits is the actual fines that are levied as part of the conviction, which are generally in the hundreds of millions. This is undoubtedly because insuring such risk would be against public policy.  Not mentioned on the web site, but revealed in an interview with the Philadelphia Inquirer is that policy exclusions “might” kick in if evidence exists that the insured engaged in affirmative conduct that resulted in conviction. PharmaLot uncovered the same caveat in its interview with Jack Flug, a managing director at Marsh:  “If the government decided the target knew what was going on and intentionally did something wrong, the coverage would cease. The intent factor is critical.”  Again, maybe dictated by public policy concerns.

But how will this work in practice?  Recall that the FDA’s Park Doctrine guidelines - “Knowledge of and actual participation in the violation are not a prerequisite to a misdemeanor prosecution but are factors that may be relevant when deciding whether to recommend charging a misdemeanor violation.”  DOJ will employ a presumption in favor of exclusion only “when there is evidence that an executive knew or should have known of the underlying criminal misconduct of the organization.”   These criteria raise questions of just how the insurance company is going to ferret out evidence of intent, or whether it will use the language of these two government agencies to create its own presumption that intent exists once a conviction occurs, unless the insured can prove otherwise. Ultimately, there’s a real question of just how many payouts will actually be made under these new RCO policies.

Another question, obviously, is whether prosecutors engaged in settlement negotiations will allow these insurance policies to be invoked.  U.S. v. Stein, the 2008 opinion in which the Second Circuit held that prosecutors’ threat to indict KPMG if it paid its employees’ legal fees violated the employees’ Sixth Amendment rights to assistance of counsel, sheds one possible perspective on the outcome of this question.

Finally, the Marsh’s policy description does not mention covering directors, though one would have to imagine it would be willing to sell such a policy if so requested.  While it has yet to happen, given their aggressive stance, the FDA and OIG would not miss the opportunity, with the right facts, to  pursue the Responsible Officer Doctrine against a board member, perhaps on the Audit Committee.

A final twist: according to the Inquirer, upon learning of the new policy, Secretary of Health & Human Services Kathleen Sebelius replied, “I don’t practice law on a regular basis, but usually you can’t insure yourself as a bank robber for robbing banks. That is intriguing. I’d like a list of their customers because that would give us a pretty good target of people to go after.”

Of Princes, Paupers, and Physicians

Why is US health care so expensive? We’ve long been told: “it’s the prices, stupid.” There is more confirmation here, as Ezra Klein explains why an MRI costs $1,080 in America and $280 in France:

[U]nlike in other countries, sellers of health-care services in America have considerable power to set prices, and so they set them quite high. Two of the five most profitable industries in the United States — the pharmaceuticals industry and the medical device industry — sell health care. With margins of almost 20 percent, they beat out even the financial sector for sheer profitability. The players sitting across the table from them — the health insurers — are not so profitable. In 2009, their profit margins were a mere 2.2 percent. That’s a signal that the sellers have the upper hand over the buyers.

I don’t agree that insurers are being bullied as buyers. If we’re going to bring up the financial sector, a better analogy would compare pay differentials between revenue-generating traders (providers) and the back office clerical and IT workers (insurers), rather than assume some common baseline of industrial profitability. The health care providers actually (try to) improve health; the insurers (are supposed to) support that primary effort. But overall, the story Klein tells here is broadly consistent with many other explanations of high prices in US health care.

What will solve that problem? Probably not health care reform, though regulators will struggle mightily to impose some discipline via IPAB and other entities. Followers of Clayton Christensen think pure technological innovation may wildly succeed where an oft-captured regulatory system is failing. Farhad Manjoo provides some empirical support for their hopes:

As computers get better, we’ll need fewer humans across a range of specialties. Look at mammography: One of the main ways radiologists can improve their breast diagnoses is by “double reading.” When two radiologists independently examine a collection of mammograms, the number of cancers detected increases substantially. A study published in 2008, however, found that a radiologist who uses ImageChecker can skip the second reading: A computer and a human are just as good as two humans.

[T]he doctors who are the juiciest targets for automation might not be the ones you’d expect. They’re specialists . . ., the most highly trained, highly paid people in medicine. It’s precisely these factors that make them vulnerable to machines. By definition, specialists focus on narrow slices of medicine. They spend their days worrying over a single region of the body, and the most specialized doctors will dedicate themselves to just one or two types of procedures. Robots, too, are great specialists. They excel at doing one thing repeatedly, and when they focus, they can achieve near perfection. At some point—and probably faster than we expect—they won’t need any human supervision at all.

Robots and automation are already taking on prominent roles in wars, factories, and political campaigns. The type of pattern recognition common to some medial specialties may be natural to them, particularly as electronic medical records and digitization take hold. Of course, an all purpose “physician robot” would be a much harder endeavor. In the context of a discussion of rationing, one health law textbook suggests that a mapping of possible interventions “would require rigorous scientific information on each of the almost 10,000 diagnostic entries in the International Classification of Diseases (9th ed.) (known as ‘‘ICD-9’’) and for each of the 10,000 medical interventions listed in the AMA’s Common Procedural Terminology (known as ‘‘CPT’’ codes).” ICD-10 has about 7 times more codes than ICD-9. But just as chess was once considered a field impenetrable to artificial intelligence, and now has been mastered by some computers, so too might medicine itself become subject to the exponential growth in information processing characteristic of mature digitized industries. It’s becoming clear that “the variety of jobs that computers can do is multiplying as programmers teach them to deal with tone and linguistic ambiguity.”

So will technology save us from ever-increasing health care costs? I’m not optimistic, because politics and economics are a constraint on all these developments. The same patterns of patronage and tribute that make comparative effectiveness research such a hard sell in the US may well restrain technology adoption. Just as specialists dominate the RUC, they can probably find ways to slow the adoption of technological substitutes for their hard-won expertise. As Umair Haque has observed, “In a neofeudal polity, patronage replaces meritocracy. ‘Success’ for an organization, coalition, or person is to become a client of a powerful patron, pledging your services (soft and hard, informal and formal), in perpetual alignment with the patron’s interests.” We’ll see many physicians in coming years invest time and effort in technological innovation, and others devoted to deterring its spread in order to protect current income streams.

At this point, you’re probably expecting me to side decisively with the technologists as heroes. But I can’t do so. I don’t buy an economic model premised on incentivizing innovation by setting off a race among radiologists (or, more realistically, financiers) to be the first to patent the machine that can replace all the other radiologists. Rather, I think the real foundation for radically productive innovation in this and other fields is a baseline of social support and commitment to retraining for professionals who could be displaced by the technology. I’m not saying, “pay radiologists what they make now, forever.” Rather, I’m trying to articulate a variant of a “guaranteed basic income” argument for those who invest heavily in learning about science, technology, and medicine. This baseline of educated users, improvers, and evangelizers of technology is the foundation of any venturesome economy. As Amar Bhide has explained,

[T]he different forms of innovation interact in complicated ways, and it is these interconnected, multilevel advances that create economic value. . . . To state the proposition in the terminology of cyberspace, innovations that sustain modern prosperity have a variety of forms and are developed and used through a massively multiplayer, multilevel, and multiperiod game.

We may well find that in decades to come, machines can do the jobs of radiologists and pathologists much better than people can. But if that transition occurs, it’s important to recognize how much current specialists invested to attain their skills, how hard they presently work to maintain a high level of medical skill in this country, and how future innovations may well dry up if people feel that those on STEM career paths are utterly vulnerable to being “kicked to the curb” once a machine does their job slightly better. Not only is “sole inventorship” a myth; we often fail to appreciate the complex educational and service apparatus necessary for innovation to take place. As Alperovitz and Daly have shown, any system that grants 93% of its gains to 1% of the people is an ongoing instruction in the economic futility of the efforts of the vast majority of its citizens.

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