For immediate release: Feb 05, 2010
Posted by: [Attorney General]
Contact: Bryan Corbin
Phone: 317-233-3970

Attorney General Zoeller issues report on federal healthcare bill as requested by members of Indiana's congressional delegation

Constitutionality of proposal, impact on Indiana examined in report to Senator Lugar and other members

INDIANAPOLIS - If the Senate health care bill before Congress became law, Indiana would bear substantial costs. The bill would add roughly half a million more Hoosiers to the Medicaid rolls and create unintended consequences for patients, taxpayers and Indiana's medical-device industry, according to the Indiana Attorney General's report on the proposal.

Attorney General Greg Zoeller today submitted his report on the Senate version of the federal health care legislation to Senator Richard Lugar and other members of the Indiana congressional delegation. Under a state law, Indiana Code 4-6-8-2, the Attorney General -- at the request of a member of the delegation -- can prepare a report on existing or proposed federal legislation. Lugar on January 5 submitted a request to Zoeller triggering that law and seeking a specific review of the version of the Patient Protection and Affordable Care Act that the U.S. Senate passed December 24.

"Our state statute authorizes the Attorney General to provide a report from the perspective of the sovereign State of Indiana on significant federal legislation. Our report to Senator Lugar and the Indiana delegation identifies the legal and constitutional challenges likely to be litigated should this health care bill be enacted into law; and it also highlights the significant impact of this proposed legislation on Indiana. The sheer scope of the bill and some of the provisions that are of an unprecedented nature are examined in our report," Zoeller said. 

The 55-page report Zoeller released was researched and drafted in-house, overseen by Solicitor General Thomas M. Fisher, with existing attorney and staff resources and without substantial additional costs for the Attorney General's Office. The report examines the constitutionality of the legislation and explores its impact on Indiana.

Among the findings of the Attorney General's report:

1. Constitutionality at issue. Several provisions of the Senate bill raise serious constitutional issues and might be struck down in a court challenge:

. The bill's "individual mandate" requiring everyone to buy health insurance or face a penalty would be unprecedented; never before has the federal government required Americans to purchase any good or service, nor has it regulated inactivity.

. The bill's "Nebraska Compromise" amendment would expand the number of Medicaid participants in all states but fully fund the expansion for Nebraska only, while the other 49 states (including Indiana) would have to absorb additional costs. While courts are properly reluctant to second-guess legislative deal-making, such disparate treatment of one state appears to violate Article I of the U.S. Constitution, the report says.

Zoeller, who worked on Capitol Hill as an aide to then-Senator Dan Quayle in the 1980s, noted that compromises and concessions to appease key lawmakers are an unfortunate reality in getting legislation passed in Congress. "But even allowing for wide latitude in congressional deal-making, the unfairness and favoritism of the Nebraska Compromise goes too far," Zoeller said.

2. Insurance exchanges problematic. The bill would require states to create insurance "exchanges" and require for-profit health insurers to offer certain types of coverage, making private insurers essentially highly-regulated entities similar to public utilities, the report says. Before insurance exchanges are available, states would have to administer a temporary reinsurance program for high-risk patients. That mandatory obligation on the part of state officials might be found unconstitutional, according to the report.

3. Indiana Medicaid costs. For Indiana, the bill would expand the Medicaid program by approximately 500,000 recipients, increasing Indiana's Medicaid costs by $2.4 billion over 10 years, according to the actuary for the Family and Social Services Administration (FSSA). Moreover, the bill would divert pharmaceutical rebate savings from the states to the federal government, potentially resulting in a loss to Indiana of $750 million by 2019. FSSA estimated it ultimately would cost Indiana $60 million to $80 million to implement the insurance exchange to accommodate program growth. The influx of new patients at reduced reimbursement rates could drive medical providers out of the Medicaid system. Indiana's health insurance plans for state government employees would have to be reconfigured, the report says.

4. State insurance plans preempted. The Senate bill likely would spell the end of the popular Healthy Indiana Plan (HIP) where low-income Hoosiers now are able to purchase state-run health coverage -- funded partially through cigarette tax - that emphasizes preventive care. The report predicts HIP would have to be shut down as its participants were shifted to the federal plan. Some state insurance regulations and licensing requirements also would be preempted by the federal legislation. 

5. Economic impact. With new excise taxes imposed on pharmaceutical manufacturers and medical device manufacturers, the Senate bill would have a substantial negative impact on two Indiana industries that employed a combined 35,500 Hoosiers in 2007.

The report concludes that the Senate version of the health care bill is unlikely to achieve one of its major goals, reducing the cost of health care. It would instead subsidize rising health care costs through an expansion of Medicaid and through the proposed insurance exchange system. At the same time, the Senate's proposed cuts to Medicare reimbursement rates would likely lead to fewer physicians willing to see Medicare patients. And, by mandating that insurance plans sold on exchanges or offered by large employers offer specified benefits, the Senate bill is likely to cause a steep increase in insurance premiums, the report concludes.

While the status of the Senate version of the bill is uncertain, the health care proposal still is before Congress and the Attorney General's report is one more piece of information for the Indiana congressional delegation to consider in light of the state impact.

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Click here to view the Attorney General's Report to Senator Lugar, the Executive Summary and cover letter.

Click here to listen to an audio clip of Attorney General Zoeller discussing the report on the federal health care legislation.

Below is the text of the Indiana statute referenced in Senator Lugar's request:
IC 4-6-8-2
Reports; senators or representatives in congress
     Sec. 2. The attorney-general shall also make any reasonable or appropriate investigation or study of any such existing or proposed federal legislation whenever he is specifically requested so to do by any of this state's senators or representatives in congress and report the result thereof as requested.
(Formerly: Acts 1943, c.229, s.2.)

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