The nation continues anxiously to await the Supreme Court’s decision in King v. Burwell, which will likely be announced late this month. On June 8, 2015, however, the Court quietly announced another important Affordable Care Act decision that should not go unmarked. It denied certiorari (discretionary review) in Mayhew v. Burwell.
Mayhew involved an ACA Medicaid “maintenance of effort” (MOE) requirement. Maine had since 1991 covered low-income “children” aged 18 to 20. The ACA prohibits states from, prior to October 1, 2019, imposing more restrictive eligibility requirements on children (as that category is defined by the state) than those in effect as of the adoption of the ACA in 2010. In response to budget issues, Maine attempted to eliminate coverage for 19- and 20-year-old children. The U.S. Department of Health and Human Services refused to allow it to do so, citing the MOE requirement.
Maine sued, claiming that the HHS decision was unconstitutional because, among other reasons, it violated the coercion doctrine announced by the Supreme Court in NFIB v. Sebelius in 2012. In that case, the Supreme Court held that the ACA’s requirement that states expand Medicaid to cover adults with incomes not exceeding 138 percent of poverty, under threat of losing all Medicaid funds, was unconstitutionally coercive. Maine’s Department of Health and Human Services argued that the ACA’s requirement that Maine maintain its pre-ACA eligibility requirements for children was equally coercive. (Interestingly, Maine’s Attorney General disagreed with this argument and in fact sided with the federal government in the case, leaving the Department to be represented by outside counsel).
In its November 17, 2014 decision, the First Circuit Court of Appeals unanimously rejected this argument, holding that the MOE requirement, unlike the Medicaid expansion at issue in NFIB, did not coerce the state into establishing a new and different Medicaid program; rather, it was a routine measure to require states to continue pre-existing coverage during a transitional period for a population that had traditionally been covered by Medicaid. The First Circuit also noted that the MOE requirement did not violate precedents requiring states to be given adequate notice of changed requirements in federal spending programs because states have been on notice from the beginning of the Medicaid program that Medicaid program requirements evolve over time, as they in fact have.
Does The Court’s Refusal To Review Mayhew Have Any Significance?
The Maine DHHS asked the Supreme Court to review this decision, but on June 8 the high court declined to do so. This is not surprising, as the Supreme Court grants a very small percentage of discretionary review requests, and there was no division among the courts of appeal on the issue.
The Supreme Court’s decision may have implications for other pending cases, however. First, Mayhew is likely to be noted by the Florida district court in the case that Governor Scott has brought challenging the decision by HHS to partially terminate Florida’s Medicaid low-income pool (LIP) hospital funding program. Termination of a Medicaid waiver program — which was time-limited to begin with — is the kind of routine Medicaid program decision that the First Circuit observed does not invoke the NFIB coercion doctrine. A Supreme Court decision to review Mayhew could have strengthened Florida’s argument that the LIP program termination was unconstitutional.
Second, the certiorari denial could be construed by some to offer a clue as to the thought of at least some Supreme Court justices on the constitutional issues raised at the oral argument in King v. Burwell. During that argument, Justice Kennedy suggested that if the ACA were interpreted to threaten the stability of insurance markets in states that failed to operate their own exchanges by denying them premium tax credits, an unconstitutional coercion issue could be presented.
If the Court was contemplating deciding King on this basis, the theory goes, it could have held onto Mayhew for further consideration in light of its decision in King. However, if unconstitutional coercion plays a role in the Court’s King decision, it is likely to be as the predicate for a decision (or more likely, a concurring opinion) relying on the doctrine of constitutional avoidance — interpreting the ACA to permit federally facilitated exchanges to grant premium tax credits in order to avoid having to address the unconstitutional coercion argument. The Court can decide this without having to define the boundaries of the coercion doctrine. Thus the Mayhew certiorari denial likely tells us nothing about the Court’s King v. Burwell decision.
Answering Questions Regarding Exchange Establishment Grants
CMS on June 8, 2015, issued two frequently asked questions clarifying the use of ACA section 1311 establishment grant funds by the states. These grants were made available under the ACA to help states establish their own exchanges, but have also been used to assist states in coordinating with federally facilitated exchanges. Nearly $5 billion in grants have been provided to the states under section 1311.
Under the ACA section 1311 grants are only available through 2014 and cannot be used for operating exchanges. Some states, however, were funded prior to the end of 2014 for activities continuing beyond the end of 2014, while others have received no-cost extensions of grants received prior to 2015 to assist in continuing to fund ongoing establishment activities. As a number of states are having trouble transitioning to operating on a self-supporting basis, these grants continue to be very important.
In April, however, the HHS Office of Inspector General reiterated that establishment grant funds cannot be used for operating costs, and urged CMS to issue more detailed guidance as to how funds could be used. The FAQ is no doubt intended to respond to this request.
The FAQ adopts a quite liberal standard for defining establishment activities, including for example outreach activities that could be narrowly viewed as operational. Under the FAQ, 1311 establishment grant funds may be used for:
- Activities to stabilize marketplace IT Systems;
- Instituting financial and programmatic audit policies and procedures to comply with federal annual reporting requirements, including establishment of data systems that support compliance;
- Outreach and education, including in-person assistance, to support increasing total enrollment as is necessary for the viability of the Marketplace;
- Call center activities to support outreach or to provide manual support while IT functionality is developed; and
- Long-term capital planning to support the successful establishment of the Marketplace.
Grants may also be used to cover indirect costs related to these activities.
There are limits, however. Establishment grants may not be used to cover purely ongoing operational costs, such as rent, hardware/software maintenance and operations, telecommunications, utilities, or call center operations not related to exchange establishment activities. CMS will work with the states to define boundaries between establishment and operational activities on a case-by-case basis.
A second FAQ describes procedures to be followed by 1311 grantees requesting a no-cost extension for existing establishment grants and limitations on the use of 1311 no-cost extension funds.
It is important to note that the final establishment grants were made in 2014 and the FAQ applies only to states that have remaining unspent funds under these grants. Establishment grants will not assist states that might want to transition from a federally facilitated to a state-operated exchange in the wake of a Supreme Court decision in King v. Burwell invalidating the issuance of premium tax credits by the federally facilitated exchanges unless a state still has money left over from an earlier establishment grant. Most federally facilitated exchange states that have received establishment grants received smaller grants some time ago and are unlikely to have unspent funds remaining.
Medicaid Enrollment Update
In other news, CMS issued on June 4, 2015, its Medicaid and CHIP March 2015 Monthly Applications, Eligibility Determinations, and Enrollment Report. As of March 2015, 71 million Americans were enrolled in Medicaid and CHIP, 12.2 million more than during the summer of 2013, before the ACA Medicaid expansions went into effect — a 21.2 percent increase. Enrollment has increased by an average of 28.1 percent in Medicaid expansion states, but only 8.3 percent in non-expansion states.
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