In Case You Missed It, Obamacare Just Logged a Major Victory at the Supreme Court

By Markets Fool.com


Source: White House on Flickr.

Continue Reading Below

Within recent memory, there are few laws that have been as polarizing as Obamacare -- known officially as the Patient Protection and Affordable Care Act.

On one hand, the majority of Americans simply don't hold a favorable view of Obamacare, at least in its current form. Based on the March update from the Kaiser Family Foundation's Health Tracking Poll, 43% of respondents still have an unfavorable view of Obamacare, compared to 41% of respondent who have a favorable view of the health reform law. This two percentage point gap is actually the smallest it's been in more than two years, but it still demonstrates that there are more Americans who aren't a fan of Obamacare or its individual mandate than Americans who like the law.

On the flipside, Obamacare has at least partially held true to some of its goals in the early going. Americans may not like this law, but according to Gallup, it's lowered the uninsured rate to just 12.9% as of the fourth-quarter of 2014 -- down from 17.1% a year ago. With nearly 12 million people enrolling in the Nov. 15, 2014 - Feb. 15, 2015 period, it's possible this figure could shrink even more when Gallup releases its first quarter update. Furthermore, it's possible the marketplace transparency and added choices for consumers are helping to keep medical cost inflation at a minimum -- another goal of the law. The Great Recession certainly played a role in taming the rate of medical cost increases, but it's plausible that Obamacare is having an effect too.

In case you missed it...
Regardless of whether you're a supporter or opponent of Obamacare, you may have missed an important "ruling" from the U.S. Supreme Court earlier this week that resulted in Obamacare logging a key victory.


Source: White House on Flickr.

Continue Reading Below

The case, Coons vs. Lew, was initially brought to court in 2011 by business owner Nick Coons and orthopedic surgeon Dr. Eric Novack. The two, with the help of additional legal backing, alleged that the Independent Payment Advisory Board, or IPAB, would trim Medicare costs and potentially hurt their business by instituting reimbursement levels that wouldn't cover their own expenses. These allegations are where the term "Obamacare death panel" emerged, as the 15-member government panel would be in charge of potentially cutting Medicare rates in the future.

Additionally, plaintiffs argue, none of the 15-member panel has been appointed yet (meaning the Obama administration and the Department of Health and Human Services would handle all 15 appointments), and their reimbursement rulings wouldn't be challengeable in court. The plaintiffs in this case also went after the context of the individual mandate, attempting to overturn the actionable penalty aspect of the ACA.

In August 2014, the 9th U.S. Circuit Court of Appeals in San Francisco dismissed the case by noting that that the IPAB didn't do any direct harm to either Nick Coons' business or Dr. Eric Novack. Furthermore, the Court ruled that the earliest point at which the IPAB would assert its power and potentially reduce Medicare reimbursements would be in 2019.

Earlier this week the U.S. Supreme Court upheld the decision of the San Francisco-based Appeals Court by declining to hear the so-called "death panel" case, confirming that the existence of the IPAB isn't sufficient grounds to overturn or modify Obamacare.The high court also declined to hear any challenges to the individual mandate.

This case was particularly interesting from the aspect of diagnostic device makers, as they're just as likely to be affected by Medicare cuts five years or more from now.


Source: Exact Sciences.

For example, Exact Sciences' noninvasive DNA colon cancer screening diagnostic Cologuard received Medicare reimbursement approval from the Centers for Medicare and Medicaid Services last year, with a reimbursement amount of $502 per test. This was higher than Wall Street initially thought Exact Sciences would get for its test, and pretty much right on par with what Exact Sciences was asking for. However, with Obamacare intent on trimming its government-sponsored ties with third-party businesses, it's possible the reimbursement amount for this potentially life-saving diagnostic test could fall in the future.

A bigger challenge looms
Although Obamacare proponents can relish this week's victory, a significantly bigger challenge looms this June when the Supreme Court is expected to make its ruling on King vs. Burwell.

The plaintiffs in this case are alleging that the subsidies being paid out to qualified enrollees via the federally run Healthcare.gov are illegal. The plaintiffs argue that the language of the ACA allows "states" to pay out subsidies to qualified individuals, while Healthcare.gov is operated by the federal government -- which is not a state.


Source: Covered California.

If the Supreme Court rules against the plaintiffs it's unlikely we'll see anything change with regard to Obamacare. However, if the plaintiffs are victorious in this case, it would invalidate subsidy payments to nearly seven out of eight Healtcare.gov enrollees. To add some context to this, we're talking about somewhere between 7 million and 8 million members suddenly losing their subsidies -- a subsidy, mind you, which averaged $264 per month in 2014 and brought the cost of a monthly premium to $82. It's likely that few of these subsidy recipients would be able to continue paying their monthly premium, and it could seriously threaten the long-term existence of Obamacare.

A ruling in favor of the plaintiffs would also be bad news for healthcare investors. Insurer Anthem has been one of the biggest beneficiaries of Obamacare, so it would potentially have the most to lose if Healthcare.gov's subsidies were deemed illegal. Its saving grace could be that it has a strong base of commercial and private insurance members as well beyond just Obamacare.

Once again, diagnostic developers could be hit hard, especially those catering to chronic conditions like hepatitis C, where many people are still unaware they have the disease. OraSure Technologies has a point-of-care test that can with greater than 98% accuracy diagnose a patient as hepatitis C positive or not in approximately 20 minutes. It's a quick diagnosis that may not happen if subsidies are taken away from millions of Americans.

While Obamacare proponents can breathe easier with one challenge now settled, the ruling expected this June by the Supreme Court really could go either way, as it depends solely on the interpretation of a few sentences of written law. I, for one, would urge investors to be cautious leading up to this verdict, and perhaps even stick to the sidelines until we have better clarity on what the future may hold for Obamacare.

The article In Case You Missed It, Obamacare Just Logged a Major Victory at the Supreme Court originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool recommends Anthem. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.