The Supreme Court’s wrongheaded decision in Gobeille.

It never fails. You leave the country for a much-needed vacation and the Supreme Court drops an opinion you’ve been waiting for.

On Tuesday, in Gobeille v. Liberty Mutual, the Supreme Court rebuffed Vermont’s effort to lift the veil of secrecy surrounding health-care prices. In an opinion by Justice Kennedy, the Court held that ERISA prevented Vermont from applying its transparency law to require self-insured employers to report price data to a new state database. (For background, I’ve got an article in the New England Journal of Medicine on why I think the Court is wrong. Or just read Justice Ginsburg’s dissent.)

I’m late to the party, but I wanted to offer a few thoughts on the decision.

First, Gobeille will blow an enormous hole in the all-payer claims databases that eighteen states have moved to establish. Because two-thirds of all employers self-insure, the databases will lose about two-thirds of the data that they hoped to collect. That data loss will be non-random, too. As the American Hospital Association explained in an (excellent) amicus brief:

[D]ifferent industries self-insure at different rates. Whereas only around 20% of employers in the construction industry and agriculture industry offer a self-insured plan, for example, over 55% of retail employers do. To the extent that construction workers have different health care needs than retail workers, excluding self-insured claims from these databases will skew the picture painted of the population, by over-counting workers in industries that tend not to self-insure and under-counting those that do.

Instead of a vital resource for policymakers and researchers, all-payer claims databases are likely to become partial and misleading repositories of health-care prices.

Second, the states can try to work around Gobeille by requiring providers instead of payers to report the prices they charge. The trouble, as Vermont’s lawyer explained at oral argument, is that provider data is prohibitively difficult to compile in a manner that allows for comparisons across an episode of care. “If someone has their knee replaced, it starts with the doctor’s visit, their surgery. There’s an anesthesiologist. There’s a stay at a rehab facility. There’s follow-up physical therapy. And if you’re trying to compare outcomes and costs for a procedure like that, it’s the payer, the centralized payer … who has all that information.” If the payers don’t supply that information, no one will.

Third, the Court left open the possibility that the Department of Labor could require payers “to report data similar to that which Vermont seeks” and give that data back to the states. Justice Breyer expanded on that approach in his concurring opinion. Could the Labor Department quickly adopt that approach, perhaps before President Obama leaves office?

It’s conceivable, but I’m not optimistic. Time is very short to run the gantlet of notice-and-comment rulemaking. There are questions about the Labor Department’s legal authority to collect price information. The agency may not have the resources or the desire to manage an enormous database of health-care prices. And the Labor Department may be reluctant to launch a rulemaking that would surely encounter fierce resistance from corporate America.

Finally, and most importantly, Gobeille is a stark reminder that ERISA preemption has gotten out of hand. When Congress enacted ERISA in 1974, its primary concern was the safety and soundness of company pension plans. Congress barely appreciated that it was entangling itself in the regulation of health care. Still less did it mean to strip states of their historical authority to regulate health care or to take steps to drive down health-care spending. Exorbitant prices for health care weren’t nearly as big a problem back then: we spent just 7.5% of our GDP on health care in 1974 as compared to 17.5% today.

In other words, ERISA is a poorly drafted statute targeted at a different problem that inadvertently prevents states from intervening in health-care markets that look nothing like they did back in 1974. Yet the statute is a political third rail: I can’t remember even a half-serious proposal from any politician urging that its preemptive scope be restrained. As frustrating as it is, it seems that we’re stuck with ERISA—and with the Supreme Court’s wrongheaded interpretation of it.


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