Is the Affordable Care Act (ACA) good or bad for structured settlements? What impact will it have on settlement planning in personal injury cases?
Four years following the ACA's enactment, and two years after the U.S. Supreme Court upheld its primary provisions as constitutional, including the individual mandate and elimination of pre-existing condition restrictions which became effective nationally on January 1, 2014, those questions not only lack definitive unanswers - they have not yet been comprehensively addressed in any public forum.
One primary related issue is what impact the ACA will have upon future medical expenses in personal injury cases. The answer depends, however, not only on the terms and conditions of the ACA, but also on how the ACA interacts with other related laws and legal developments such as Medicaid (including the Bipartisan Budget Act of 2013), Medicare (including WCMSAs , liability MSAs and MMSEA) as well as state specific collateral source and subrogation rules.
To provide a point of reference for future S2KM reporting about the legal interplay involving the ACA, personal injury cases and structured settlements, S2KM is publishing a series of blog posts looking generally at the "ACA and Future Medical Expenses":
- Part 1 reviews an article written by Seth Cardeli, titled "Thwart the Assault on Future Medical Expenses", which appeared in the May 2014 issue of the American Association for Justice (AAJ) Trial Magazine.
- Part 2 summarizes ACA-related analysis by speakers at professional conferences S2KM has previously attended and includes excerpts from prior S2KM reviews of those conferences.
- Part 3 (this post) summarizes similar ACA analysis from articles and papers previously reviewed by S2KM and also features excerpts from those reviews.
Authors of Articles and Papers Addressing ACA Issues
NAELA devoted the entire Spring 2011 edition of its "NAELA Journal" to health care reform generally and the ACA more specifically. Available to NAELA members only, this NAELA analysis featured a detailed introduction by NAELA Journal's then Editor-in-Chief William J. Brisk plus eight articles and a supplement of online resources.
- Brisk's introduction addressed why health care reform is "too significant to ignore" and highlighted its most important features. His analysis identified what the ACA actually does and does not accomplish and emphasized the important roles Medicare, Medicaid, private health insurance companies and health maintenance organizations will play in implementing health care reform.
- Additional NAELA Journal topics and authors:
- Health Care Changes: Challenges to Medicare - Vicki Gottlich, Patricia Nemore, and Alfred J. Chiplin Jr.;
- The New CLASS Act - Morris Klein;
- Nursing Home Regulations - Charles Perez Golbert;
- Health Care Reform’s Impact on Small Businesses and Individuals - Ben A. Neiburger;
- Health Care Reform and End-of-Life Issues - Fay Blix;
- The Affordable Care Act’s Changes to Medicaid’s Coverage for Long-Term Services and Supports - Gene Coffey;
- Health Insurance Reforms: Once In a Lifetime Change or Same as It Ever Was? - Lucinda E. Jesson;
- Medicaid Expansion Under the 2010 Health Care Reform Legislation: The Continuing Evolution of Medicaid’s Central Role in American Health Care - Renée M. Landers and Patrick A. Leeman;
- Online Resources Available to Supplement Health Care Reform Discussion - prepared by Claire DeMarco.
Alfred Chiplin, Jr. and Bethany Lilly
In addition to the Spring 2011 edition of the NAELA Journal, NAELA awarded its 2014 John Regan Writing Award, honoring the authors of the best article published in the "NAELA Journal" during the past year, to Alfred Chiplin, Jr. and Bethany Lilly, for their 2013 article titled "Medicare’s Future: Letting the Affordable Care Act Work, While Learning From the Past" analyzing various ACA cost-saving components on Medicare.
Chiplin and Lilly begin their article with an extensive review of the historical debate concerning public health insurance in the United States including a summary of key components of the current Medicare system and current concerns about Medicare solvency.
This historical debate not only defines the current structure of the Medicare program but also, according to Chiplin and Lilly, "the on-going debate ... about the necessary elements of a comprehensive program, including health care financing and accessing the quality of necessary services."
Chiplin and Lilly provide statistical evidence to highlight the negative impact of rising health care costs on Medicare and Medicare beneficiaries as well as the United States economy. Following their historical and statistical summaries, Chiplin and Lilly address the central issue in their article: "how will the ACA reduce health care costs?"
The ACA's cost-containment programs, according to Chiplin and Lilly, are based upon the theory that costs can be reduced by demanding a higher quality of care and greater efficiency from providers and allowing providers to share in the savings. ACA programs the authors highlight include:
- Patient-Centered Medical Home
- Medicare Shared Savings Program
- The Independent Payment Advisory Board
- Quality Review Mechanisms.
Chiplin and Lilly view ACA as "a vast experiment in paying for high-quality health care while preserving the Medicare program and expanding access to health care for other population segments." Implementation will be a tough, but doable challenge so long as we "let the tools of the ACA work".
Among the implementation challenges: the "fiscal cliff", insurance exchanges, and integrating services for "dual-eligibles". Overtime, the authors believe the ACA's spending and cost-containment provisions should at least slow the health care spending curve.
The impact of the ACA on future medical expenses, perhaps the most important ACA-related issue for personal injury stakeholders, including settlement planners and structured settlement professionals, was addressed most recently by plaintiff attorney Seth Cardeli in an article featured in the May 2014 issue of the AAJ's Trial Magazine, and summarized by S2KM, titled "Thwart the Assault on Future Medical Expenses".
In his article, Cardeli labels as "speculative and misleading" current defense efforts to convince courts the ACA changed how courts should calculate future medical expenses thereby transforming the ACA into "the latest tort 'reform' vehicle." Their efforts should fail, Cardeli maintains, because they wrongly attempt to circumvent states' collateral source and subrogation rules.
Cardeli's article cites cases from several state venues where courts have rejected defendants' attempts to limit plaintiff evidence of future medical expenses or to present their own evidence of ACA-related health care coverage. He urges plaintiff attorneys to aggressively oppose all related motions in limine by arguing:
- The effect of the ACA on a plaintiff's recoverable future medical expenses is speculative.
- Evidence of collateral sources is prejudicial to personal injury plaintiffs.
- Tortfeasors should bear the risk that any future medical expenses will not be covered by medical insurance.
Joshua Congdon-Hohman and Victor Matheson
A 2012 research paper titled "Potential Effects of the Affordable Care Act on the Award of Life Care Expenses" and written by economists Joshua Congdon-Hohman and Victor Matheson provides a notable counter argument to Seth Cardeli's Trial Magazine article. Contrary to Caredi, these economists maintain: "the ACA may well have indirectly resulted in a great deal of tort reform" and, as a result, "awards in personal injury cases could be dramatically impacted".
- When the ACA is fully implemented in 2014, all individuals will be required to purchase health insurance or pay a penalty.
- The ACA provides insurance premium subsidies for low income individuals who do not receive health insurance through the government or from a family member’s employer.
- The ACA prevents price discrimination based on health status and bans annual and lifetime expenditure limits.
- Most individuals will pay the same cost for health insurance before and after an accident.
- The legal maximum out-of-pocket expenses allowable under the ACA is $5,950 per year.
- The goal of tort law is to make the plaintiff "whole".
- Funding of health care through private insurance is a valid methodology for accomplishing this goal now that the ACA makes those markets available to injury victims.
- Therefore, the ACA:
- Should simplify and reduce calculations of future medical damages;
- By limiting those costs to "[health insurance] premiums and out-of-pocket limits less any pre-injury expected medical costs and penalties if uninsured."
Similar to Cardeli, and significantly, Congdon-Hohman and Matheson acknowledge a collateral source issue is "at play" and "remains of significant importance". Unlike Cardeli, however, they argue "there is reason to believe the ACA changes the underlying reason of excluding collateral source compensation from inclusion in tort cases."
More specifically, Congdon-Hohman and Matheson maintain: "removing existing health insurance coverage from exclusion under the collateral source rule would not significantly affect health insurance coverage rates reducing the economic rationale for having a collateral source rule in place for health insurance."
As a related result of the ACA, Congdon-Hohman and Matheson believe life care planners will play an increasingly important role in personal injury damage analysis.
- Prior to the ACA, life care planners were tasked with identifying medical and living expenses not otherwise required "but for" the accident.
- Under the ACA, the authors maintain life care planners must also identify which health care and living expenses will, and will not, be covered by the ACA's minimum insurance requirements. And, despite certain minimum federal standards, these requirements may also differ by state.
Rebecca Levenson and Ann Levin
During 2013, S2KM reviewed two law review articles which address whether and how the ACA will impact the collateral source rule (CSR):
- Rebecca Levenson (Levenson), "Allocating the Costs of Harm to Whom They are Due: Modifying the Collateral Source Rule after Health Care Reform" (Levenson article), University of Pennsylvania Law Review, Volume 160.
- Ann S. Levin (Levin), "The Fate of the Collateral Source Rule After Health Care Reform" (Levin article), UCLA Law Review, Volume 60.
Although every state and federal court recognizes the CSR in some form, many states have limited its scope or abolished it completely as a result of tort reform. Plaintiffs in different states and/or different courts therefore can receive widely different damage awards for the same injury because different courts measure medical costs differently.
Levenson and Levin each summarize traditional arguments favoring and opposing the common law CSR. However, neither Levin nor Levenson:
- Directly address whether and/or how the CSR will affect calculations of future medical damages, as opposed to past medical damages.
- Discuss how the ACA's restrictions against pre-existing conditions impact calculations of medical damages.
CSR proponents emphasize the deterrence theory of tort law which seeks to punish tortfeasors and deter them from injuring future plaintiffs:
- Defendants should not be unjustly enriched if a plaintiff purchases medical insurance.
- The CSR incentivizes plaintiffs to purchase medical insurance.
- Collateral sources never fully reimburse plaintiffs.
- Subrogation rights reduce and/or prevent double recoveries.
- The CSR promotes independence of jury determinations.
CSR opponents argue the purpose of tort law is compensation for harm not deterrence. They criticize the CSR for:
- Allowing some plaintiffs to recover twice.
- Generating different damage awards for the same injuries in different cases.
- Adding an unjustified element of punitive damages.
- Inflating awards.
- Encouraging claimants to go to trial.
Both Levenson and Levin agree the ACA's individual mandate weakens the traditional common law CSR rationale and that medical damages should now be calculated differently. However they do so for different reasons and propose different solutions.
- Levin - Levin's primary argument for changing the traditional common law CSR is that it calculates medical damages based on medical provider bills instead of the lower negotiated reimbursement rate paid by most health insurers. To achieve fairness and accuracy post-ACA, Levin maintains courts should calculate medical damages using: 1) the negotiated reimbursement rate; and 2) a portion of the premium payments the plaintiff has paid for medical insurance.
- Levenson - The purpose of changing the CSR after the ACA, according to Levenson, should be to align the CSR's outcome with the underlying goal of the individual mandate. Whether and what changes will occur, however, will vary from jurisdiction to jurisdiction depending upon a number of factors which Levenson identifies including the current status of the CSR in a particular state. Levenson insists any changes in the CSR must account for the different groups affected: insured plaintiffs, willfully uninsured plaintiffs and exempt plaintiffs.
For personal injury and settlement planning professionals who are attempting to understand how the ACA impacts personal injury damage analysis, future medical expenses, negotiation strategy, work product, and funding options, this S2KM blog series hopefully captures some of the complexity of the related laws, issues and perspectives and encourages continuing and more comprehensive analysis.
The impact of the ACA on structured settlements, and settlement planning more generally, depends not only upon the terms and conditions of the ACA itself, but also upon the new and evolving legal construct for future medical expenses in personal injury cases created by the interaction of the ACA with these related laws and legal developments.
For S2KM's continuing coverage of ACA-related issues, see the structured settlement wiki.