On June 28, 2012, the United States Supreme Court provided its much awaited ruling on the Patient Protection and Affordable Care Act. In what is considered a surprise judgment by many quarters, the Court upheld almost all provisions of the law passed in 2010.
Here is how the court ruled on the two key provisions that generated the most debate – the “individual mandate” and the challenge by the states for the expansion of Medicaid program:
- Treating the provisions of the individual mandate as a tax versus a penalty, the Court confirmed the validity under Congress’ constitutional authority
- Regarding the expansion of Medicaid, the court ruled that the federal government cannot place sanctions on the states’ existing Medicaid funding if the states decline to go along with the Medicaid expansion
So, what impact will the Supreme Court ruling have on the outsourcing / global sourcing activity in the healthcare vertical? Will we see a surge in demand and see activity accelerate now that the uncertainty surrounding the law is now over? Three reasons why we believe that the Supreme Court ruling does not suggest any short-term (i.e., in 2012) acceleration in outsourcing activity in the healthcare vertical:
- Obama versus Romney: GOP candidate Mitt Romney’s assertion – “What the court did not do on its last day in session, I will do on my first day if elected president of the United States. And that is I will act to repeal ObamaCare” – makes it clear that until the outcome of the Presidential election is known, uncertainty will continue to shroud the healthcare law
- Next major milestone – 2014: A number of new milestones under the law, including the establishments of health insurance exchanges and the individual mandate, do not come into effect until 2014. Healthcare companies are likely to wait until the outcome of the elections is known before making deep investments in these areas
- Big payers adhering – come what may: Select large payers such as UHG, Aetna, and Humana have pledged to adhere to certain provisions of the reform irrespective of the future. These payers have already implemented some of these changes (e.g., MLR mandates) and thus the technology impact of some of these changes is likely limited in the short term.
The above is not to suggest that outsourcing / technology innovation activity in the healthcare vertical has reached its peak. If President Obama wins the election, we are likely to see a surge of activity as companies prepare for the 2014 initiatives. Even a number of current bystanders will jump in the fray to ensure compliance with regulatory reform. On the other hand, a repeal could significantly alter outsourcing activity and potentially even jeopardize existing initiatives if Mitt Romney is successful!
As it pertains to uncertainty in the healthcare markets, is this the beginning of the end, or the end of the beginning? Only time, and the results of the presidential election will tell….