The Incidental Economist

In yesterday’s post, I canvassed the latest decisions from the Court of Federal Claims in the fight over whether insurers can recover cost-sharing payments. Three different judges have now concluded—rightly, in my view—that the United States has breached its payment obligation and must pay damages.

The harder question is how to calculate those damages. Should insurers gets every penny of the cost-sharing payments? Or have they mitigated their damages by silver-loading? On that question, Judge Sweeney sided with the insurers: mitigation will play no role in the damages calculation. Judges Wheeler and Kaplan echoed her analysis, though they’ve left room to reconsider.

Judge Sweeney’s decision is especially noteworthy because, in April of last year, she certified a class comprising every single insurer in the country that sold an exchange plan in 2017 and 2018. The judge has asked for the parties to get back to her by February 28 with a joint report on what class members are owed. She’ll then enter a final judgment—likely totaling in the billions. The United States is almost certain to appeal.

* * *

All three judges center their mitigation analysis on congressional intent. Here’s Judge Sweeney: “That insurers and states discovered a way to mitigate the insurers’ losses from the government’s failure to make cost-sharing reduction payments does not mean that Congress intended this result.”

I think that’s a mistake. Congressional intent matters in deciding whether an obligation exists in the first place. But mitigation is about the proper measure of damages for breach of that obligation. That’s a question of contract law, not congressional intent.

Judge Sweeney also argues that insurers could have engaged in silver-loading even if the cost-sharing payments hadn’t been stopped. In that counterfactual world, insurers would have received both enhanced premium tax credits and cost-sharing payments, but no one would say they received a “double recovery.” For Judge Sweeney, that means there’s nothing wrong with double-dipping, and thus no role for mitigation.

This is clever, but it’s also mistaken. Contract damages are meant to restore a plaintiff to the position that she would have been in had a breach never occurred. Before the cost-sharing payments were stopped, insurers weren’t silver-loading, and there’s no reason to think they would have adopted the practice. (If they had tried, HHS would probably have said it was unlawful.) Damages should be measured with reference to what insurers would have done if cost-sharing payments had never been cut off—not some hypothetical world in which insurers silver-loaded and still received cost-sharing payments.

* * *

Maybe I’m wrong about this; I’m open to persuasion. But if the judges’ legal arguments are as fragile as I think they are, what explains their reluctance to take mitigation into account?

Consider the practical challenges. It’s hard to know what the world would have looked like if the cost-sharing payments had been made, so it’s hard to know whether any given insurer is better off or worse off now that they’ve been terminated. Many insurers will doubtless claim that they lost market share because they couldn’t cope as effectively with silver-loading as their competitors. Others will say that ending the cost-sharing payments drove some of their customers away, silver-loading notwithstanding. Insurers in states that silver-loaded may claim they’ve been harmed more than insurers in states that went for the full silver-switcheroo. Some of those claims will be true; others, not so much. And the right measure of damages will vary from state to state and insurer to insurer.

It’ll be a huge mess. And it’s not like the court can decide the mitigation question once and move on. The Court of Federal Claims would have to undertake a demanding inquiry for every single insurer on the exchanges—not once, but for each and every year until Congress fixes this mess. Can you really blame the judges if they’re reluctant to take on that Sisyphean task?

* * *

On appeal, the Federal Circuit will be sensitive to those practical concerns. But it will also worry about insurers getting a windfall if they recover the full amount of cost-sharing subsidies. I’d bet the appeals court will hold that the United States breached its payment obligation, but that it should still have a chance to demonstrate that insurers have mitigated their damages.

How the Court of Federal Claims will cope with that instruction is another question. In a healthier political climate, Congress might relieve the court of its burden by entering into a global settlement with insurers to resolve these claims. But we don’t have a healthy political climate, and in any event cutting billion-dollar checks to insurers isn’t a political winner. Which means the lower court may have its work cut out for it. Expect delays.

It’s also possible, though I don’t know how likely it is, that the Federal Circuit will just declare that insurers have fully mitigated their damages, at least in the 43 states that adopted silver loading in 2018. As a matter of raw economics, that’s almost certainly too simplistic a picture: ending the cost-sharing subsidies, and switching to silver-loading, surely harmed some insurers relative to the baseline. But maybe the problems of proof are so daunting that a rough-and-ready solution like that makes sense.

We’ll see. I haven’t even touched on other complications associated with the latest rulings: Is the Trump administration willing to tap the Judgment Fund for tens of billions of dollars to pay insurers? Would Congress intervene to foreclose the Judgment Fund from paying? If payment is made, would the rules governing medical loss ratios require insurers to pay damages back to their enrollees?

Maybe most importantly, does Congress appreciate the risks here? Every year that the cost-sharing obligation stays on the books, the United States is accruing roughly $12 billion in potential liability. Congress could and should stop the bleeding: there’s no reason at all to funnel money to insurers that have adjusted to a world without cost-sharing payments. But there’s a big gap between what Congress should do—and what it will do.

@nicholas_bagley

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Commuting is one of the least pleasant things we do. But it’s not just an annoying time waster — there’s a case that it’s a public health issue.

This episode was adapted from a column Austin wrote for the Upshot. Links to sources can be found there.

@aaronecarroll

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The litigation to recover cost-sharing money has heated up in the Court of Federal Claims, with potentially enormous consequences for the public fisc. As matters stand, three federal judges have now concluded that the United States is liable to insurers for missed cost-sharing payments. If their decisions stand, insurers could recover roughly $12 billion a year, every year, until Congress intervenes to stop the bleeding.

There are a lot of moving pieces, so I’m doing this in two parts. Today I’ll cover the details of the recent decisions. Tomorrow I’ll opine on what’s likely to happen on appeal. (Amy Lotven first broke the story; Charles Gaba and Dave Anderson both have good posts on the recent decisions.)

* * *

Quick background: The Affordable Care Act created two forms of subsidies for exchange plans: premium tax credits and cost-sharing payments. To fund the tax credits, Congress linked them to a permanent appropriation in the tax code. But Congress didn’t adopt a similar appropriations measure for cost-sharing payments.

The lack of an appropriation put the Obama administration in a bind. Refusing to make cost-sharing payments might lead the ACA to totter, but a Republican-controlled Congress wasn’t about to fund them. So the Obama administration concocted a legal theory that Congress had, in fact, appropriated the money. That legal theory made zero sense, however, and the House of Representatives went to court to put a stop to the cost-sharing payments.

When President Trump took office, he tried to use the threat of ending the cost-sharing payments to force Democrats to negotiate with him over repealing and replacing the ACA. It didn’t work, and when Trump’s legislative strategy collapsed, he unceremoniously ended the cost-sharing payments.

But that was hardly the end of the matter. Even if Congress never appropriated the cost-sharing money, the ACA still contains within it a congressional promise to make cost-sharing payments. That kind of promise is enforceable in the Court of Federal Claims under the Tucker Act, with payment coming from the Judgment Fund—whether or not Congress has separately appropriated the cost-sharing money. Predictably, insurers filed a bunch of lawsuits seeking to force the government to pay up. I’ve been saying for years that they’ll probably win.

* * *

That prediction is looking pretty good. In separate opinions released last week, Judges Sweeney and Wheeler of the Court of Federal Claims held that the government was liable for damages to insurers for failing to make cost-sharing payments. Judge Kaplan held the same late last year—indeed, she awarded Montana Health a $1.2 million judgment for 2017, which the federal government appealed in December.

None of these judges bought the Justice Department’s rationale for refusing to pay. And good reason: it’s garbage. In the government’s telling, Congress never made a promise because it didn’t appropriate the money for cost-sharing payments. But it’s black-letter law that Congress can enter into a binding obligation, even if it doesn’t appropriate the funds to follow through on that commitment in the same statute. Congress might, for example, plan on appropriating the money at some later date. At any rate, the obligation stands until Congress changes course.

The cleanest support for that proposition, ironically, comes from the Federal Circuit’s decision in the risk corridor litigation. There, too, the court held that the ACA created a binding obligation to pay. The insurers still lost the risk corridor cases because, in the Federal Circuit’s view, later appropriations statutes implicitly narrowed the initial obligation. Here, in contrast, no subsequent congressional action qualified the initial cost-sharing promise—so the United States remains on the hook.

* * *

But for how much?

The simplest approach is straightforward: insurers are owed every cent that Congress promised to pay them, period. If so, that’s about $12 billion each and every year that the cost-sharing obligation stays on the books. Insurers could buy us a damn border wall every year with that money.

But that simple approach overlooks that insurers have mitigated their losses. As I explained back in December 2017,

Silver loading has allowed insurers to sidestep most of the harm associated with the loss of the cost-sharing subsidies. Insurers haven’t hemorrhaged customers; instead, they’ve adapted. Indeed, some insurers are better off now than they were before: as premium subsidies increase, they’ll get more customers signing up for their gold and bronze plans. …  Giving [insurers] the full amount of the cost-sharing money wouldn’t put them in the same position they would have been in if the federal government adhered to its promise. It would give them a windfall. Contract law doesn’t require the courts to make contracting parties even better off than they would have been in the absence of a breach.

The mitigation question is where all the shooting is in the case. Insurers didn’t have a chance to mitigate their damages in 2017. But what about 2018? 2019? And beyond?

That’s what’s so striking about the decisions from the Court of Federal Claims. Three separate judges have all either held or strongly suggested that mitigation would play no role in their decisions. Here’s Judge Sweeney:

[The United States] does not identify any statutory provision permitting the government to use premium tax credit payments to offset its cost-sharing reduction payment obligation (even if insurers intentionally increased premiums to obtain larger premium tax credit payments to make up for lost cost-sharing reduction payments). … That insurers and states discovered a way to mitigate the insurers’ losses from the government’s failure to make cost-sharing reduction payments does not mean that Congress intended this result. Moreover, [the United States’] concern that Congress could not have intended to allow a double recovery of cost-sharing reduction payments is not well taken. The increased amount of premium tax credit payments that insurers receive from increasing silver-level plan premiums are still premium tax credit payments, not cost-sharing reduction payments. Indeed, under the statutory scheme as it exists, even if the government were making the required cost-sharing reduction payments, insurers could (to the extent permitted by their state insurance regulators) increase their silver-level plan premiums; in such circumstances, it could not credibly be argued that the insurers were obtaining a double recovery of cost-sharing reduction payments.

Judge Kaplan made much the same point last year. Judge Wheeler was slightly cagier: he dropped a footnote saying that the parties haven’t yet addressed whether silver-loading means that insurers have mitigated their damages. But he echoed Judge Sweeney in saying that “[n]owhere in the legislative history, statutory text or implementing regulations are CSR payments subject to alteration based on the availability of offsetting funds derived from premium increases permitted by state regulators.”

In other words, three different judges—two appointed by George W. Bush and one by Obama—appear impatient with the government’s argument that insurers have mitigated their damages. Which means that the Court of Federal Claims is poised to enter ongoing, multi-billion dollar judgments against the United States, with no end in sight.

@nicholas_bagley

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We’ve talked about some of the negative health impacts alcohol can have, but we haven’t talked about the calories. It’s not great news on that front. Booze is calorie dense. Even the “light” stuff.

@aaronecarroll

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Our guest this month is Dr. Bernice Pescosolido, who is a medical sociologist at Indiana University. Dr. Pescosolido studies the environments, neighborhoods, and connections that contribute to patients’ identities, and looks how this social fabric works or doesn’t work for some people. Particularly, Dr. Pescosolido studies the rising suicide rates in the United States, and tries to track the pathways that have led victims to suicide. She also studies what kind of social factors contribute to how patients come into contact with (or don’t manage to engage with) the medical system.

The Healthcare Triage podcast is sponsored by Indiana University School of Medicine whose mission is to advance health in the state of Indiana and beyond by promoting innovation and excellence in education, research and patient care.

IU School of Medicine is leading Indiana University’s first grand challenge, the Precision Health Initiative, with bold goals to cure multiple myeloma, triple negative breast cancer and childhood sarcoma and prevent type 2 diabetes and Alzheimer’s disease.

As always, you can find the podcast in all the usual places, like iTunes and Soundcloud.

@aaronecarroll

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There are just too many flavors of this, so let’s organize it, roughly in order from least available to most:

Type A1: I am off the internet. Don’t even call or text me.

Type A2: I am off the internet, but in a tremendous, time-sensitive emergency, you can text or call me.*

Type B1: I will have spotty internet access, but don’t intend to use it.

Type B2: I will have spotty internet access, but don’t intend to use it. In a time-sensitive emergency, you can text or call me.*

Type C: I will be reluctantly checking email from time to time, but don’t count on a response unless it’s an emergency. I’m on vacation!

Type D: I’m traveling for work, so getting to email will be difficult. I will get back to you as soon as I can.

Type E: I’m in meetings all day, so getting to email will be difficult. I will get back to you as soon as I can.

Type F: I’m getting ready for a long vacation or work trip. Though I’m still working for a day or two before I leave, I am scrambling to finish up high-priority items. I may not get to your email until after I return.

Type G: I’m just overwhelmed right now with a time-sensitive project and need to focus. Probably this time-hoarding anxiety will pass sooner than I think. I will get to your email then.

I think types F and G (especially F) are often overlooked as auto-responses. Instead, we tend to just ignore stuff. We could at least communicate why.

* Obviously only applies to people with my number.

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The following post is by Rohan Rastogi, an MPH student in Health Policy at the Harvard T.H. Chan School of Public Health and a medical student at the Boston University School of Medicine. He tweets about health policy and medicine at @rorastog.

Your clinician’s hands pose the greatest risk for acquiring an infection while in the hospital. Despite adequate education, clinicians are notoriously non-compliant with hand hygiene guidelines, which recommend frequent use of alcohol-based hand sanitizer.

Though making hand sanitizer more accessible improves compliance, an unexpected antagonist may prevent hospitals from optimally locating dispensers—fire safety codes.

Historically, alcohol-based hand sanitizer was not always recognized as a key component of hospital hand hygiene. The 1983 CDC guidelines recommended using hand sanitizers only in emergency situations where a sink was not readily available.

More recent evidence, however, indicates that using alcohol-based hand sanitizer is usually better than traditional handwashing with soap and water. It’s faster, more accessible than sinks, less irritating to skin, and more effective at reducing transfer of the majority of dangerous bacteria.

Although hand hygiene is considered the single most important strategy to control infection transfer between clinicians and patients, health care workers sanitize less than half as often as they should. With one in every 31 patients acquiring an avoidable infection while in the hospital, understanding how to encourage clinicians to consistently use hand sanitizer has become a billion-dollar question.

In an experiment on behavior change, researchers found that easily accessible hand sanitizer dispensers doubled clinician hand hygiene compliance, while hand hygiene education, feedback, and patient awareness campaigns had no effect. A closer look on accessibility found that improving dispenser placement is more impactful than increasing the number of dispensers. All this to say, the real estate mantra of location, location, location holds true when it comes improving clinician hand sanitizer compliance.

Hand hygiene experts have gone to great lengths to find the perfect hand sanitizer dispenser location. In a particularly notable study, researchers suspended dispensers over patient beds using a trapeze-bar apparatus to improve visibility, which improved compliance compared to a traditional wall-mounted location.

When interviewed, clinicians say that hand sanitizer dispensers have to be in their line of sight, on their workflow route, unobstructed, standardized, within arm’s reach during procedures, and near the patient. A literature review recommended five dispenser locations to improve clinician hand hygiene compliance: outside the patient room, at the room entrance, immediately beside the point of care, immediately adjacent to the patient bed, and at the foot of every patient bed.

It’s unsurprising that placing dispensers as close to patient care activity as possible improves hand sanitizer use. And yet, controversy arose in the early 2000s, when fire marshals began forcing hospitals to move their dispensers.

Given that hand sanitizers must contain at least 60% alcohol by weight to be effective, alcohol-based hand sanitizers are flammable. Isolated incidents, such as the 2013 Oregon case and the 2002 Kentucky case, implicated hand sanitizers in burn injuries when a static spark ignited residual undissolved solution.

Despite these well-publicized events, fires involving alcohol-based hand sanitizer are exceedingly rare. A World Health Organization report states that “although alcohol-based hand rubs are flammable, the risk of fires associated with such products is very low.” The scientific community seems to agree that current hospital fire regulations “represent an abundance of caution.” As such, the minor fire risk must be weighed against the substantial potential benefit for hospital infection safety.

Answering the question of whether fire codes prevent optimal dispenser placement, and thereby hamper hand hygiene, requires a closer look at the codes. The Center for Medicare and Medicaid Services (CMS) and the Joint Commission (JC) adopted sections (18.3.2.6 and 19.3.2.6) of the National Fire Protection Agency’s 2012 Life Safety Code in 2016.

Among the rules: dispensers must be separated from each other by at least 4 feet of space and dispensers cannot be installed within 1 inch of an ignition source (e.g. electrical outlet, appliance, device). According to Dr. Eli Perencevich, an infectious disease physician and researcher from the Iowa Carver College of Medicine, however, these CMS/JC rules may serve as a template for more restrictive state and local fire marshal regulations.

The CMS ruling, in fact, explicitly allows this practice: “States and local jurisdictions may choose to retain stricter codes that prohibit or otherwise restrict the installation of [alcohol-based hand rub] dispensers in health care facilities. Facilities will still be required to comply with those stricter State and local codes.”

The end result—the practice of hospital hand hygiene stops at the patient doorway. A study in Dartmouth’s hospital found that only 37% of hand hygiene events involved in-room dispensers, of which 75% involved the dispenser located just inside the doorway…far away from the patient. This finding led the authors to conclude that there exists “a focus on hand hygiene before and after patient contact but not during patient care.”

In the US, this emphasis on sanitizing upon entering and exiting rooms originates from the most basic compliance monitoring strategy—direct observation at the doorway. The complexities of observing hand hygiene at the point of care have likely exacerbated its neglect.

The red tape of hand hygiene may be hindering hospitals’ ability to protect patients from their clinicians. Some suggest that hospitals should put the power to sanitize back into the hands of clinicians—provide them with personal carry sanitizer bottles. While the idea of sidestepping the wall placement regulations may be enticing, further studies will show whether it improves compliance or reduces infection transmission. Until then…ask your doctor about handwashing.

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There has been a lot of news lately about increasing crime in states where recreational marijuana has been legalized. Crime is rising in some of these states, but it doesn’t seem to be tied to the legal weed. We lay out all the relevant research.

This episode was adapted from a column I wrote for the Upshot. Links to sources can be found there.

@aaronecarroll

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Breakfast still isn’t the most important meal of the day. You also may have heard claims that eating breakfast somehow promotes weight loss. Well, there’s a new study out, and it looks like eating breakfast isn’t going to contribute to weight loss. Take that, Big Breakfast!

@aaronecarroll

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