Court creates big problems for stability of Obamacare

Judge Rosemary Collyer of the United States District Court for the District of Columbia ruled this afternoon that the House of Representatives could pursue a legal action — had “standing” to use legal parlance — against a representative of the Obama administration for illegally spending money to fund a key part of the Affordable Care Act: cost sharing reductions. The judge did not decide the merits of the claim brought by the House of Representatives, noting that the Obama administration hotly dispute the allegations made by the House.

The judge’s ruling today is of great significance to the future of the Affordable Care Act.   If the House of Representatives prevails on the merits of its claim — which is that Congress appropriated no money to pay insurance companies billions of dollars to provide about 6 million  Americans with policies with much richer benefits than they otherwise would have been entitled to —  the future of the ACA will be cast in doubt.  It will likewise label members of the Obama administration as having undermined the Constitutional structure  and, as I have discussed elsewhere, conceivably expose those spending  and receiving the money illegally to criminal penalties. Success by the House in this lawsuit will not just threaten policies in states that failed to establish their own Exchanges, but health insurance policies purchased on Exchanges in all 50 states. The kicker is that many individuals had believed that the “standing barrier” was pretty strong but that, if it could ever be pierced, the House had a very strong case on the merits.The language of Judge Collyer in her opinion fortifies the House’s position.

I have written about this issue several times. See here and here.  Let me provide a summary. From all appearances, Congress did not directly appropriate money for a critical part of Obamacare that keeps premiums low: the cost sharing subsidies created by section 1412 of the law and now codified at 42 U.S.C.  § 18071.  The idea of this provision is that poorer purchasers can purchase a policy for “Silver” prices that ordinarily would have 30% cost sharing, but receive a policy that provides anywhere from “Silver plus” (27%) to “Platinum-plus” (6%) levels of cost sharing.  This way, lower-middle-class people can get a policy that they might be able to afford without much of its purpose being undone by hefty deductibles and copays.

It appears clear that Congress at least strongly contemplated that provision of these extra benefits to the poor would come not from higher prices for policies paid by wealthier purchasers on the individual exchange.  Instead, the federal treasury would pay the insurers for the extra costs they incurred in offering these more generous variants of the policy. And it appears that the Obama administration has been making such payments to insurers, even if the amount of the payments — potentially in the billions —  has not been made clear.  The problem, as outlined at some length in Judge Collyer’s opinion, is that Congress never actually made a specific appropriation to fund the cost sharing reductions.

What Judge Collyer says quite clearly in her opinion in United States House of Representatives v. Burwell  is that mere contemplation to fund is not enough.

Appropriation legislation “provides legal authority for federal agencies to incur obligations and to make payments out of the Treasury for specified purposes.” Id. at 13. Appropriations legislation has “the limited and specific purpose of providing funds for authorized programs.” Andrus v. Sierra Club, 442 U.S. 347, 361 (1979) (quoting TVA v. Hill, 437 U.S. 153, 190 (1978)). An appropriation must be expressly stated; it cannot be inferred or implied. 31 U.S.C. § 1301(d). It is well understood that the “a direction to pay without a designation of the source of funds is not an appropriation.” U.S. Government Accounting Office, GAO-04-261SP, Principles of Federal Appropriations Law (Vol. I) 2-17 (3d ed. 2004) (GAO Principles). The inverse is also true: the designation of a source, without a specific direction to pay, is not an appropriation. Id. Both are required. See Nevada, 400 F.3d at 13-14. An appropriation act, “like any other statute, [must be] passed by both Houses of Congress and either signed by the President or enacted over a presidential veto.” GAO Principles at 2-45 (citing Friends of the Earth v. Armstrong, 485 F.2d 1, 9 (10th Cir. 1973); Envirocare of Utah Inc. v. United States, 44 Fed. Cl. 474, 482 (1999))

Judge Collyer also appears clear that Congress never appropriated any money for the Cost Sharing Reductions.

Finally on January 17, 2014, the President signed the Consolidated Appropriations Act for 2014, Pub. L. 113-76, 128 Stat. 5 (2014). That law similarly did not appropriate monies for the Section 1402 Cost-Sharing Offset program.8 Indeed, the Secretaries have conceded that “[t]here was no 2014 statute appropriating new money” for the Section 1402 Cost-Sharing Offset program. 5/28/15 Tr. at 27.

 

And all of this spells big time trouble.  Judge Collyer emphatically rejected the argument that the executive branch could increase its power by spending money Congress had not actually appropriated by using “standing doctrine” to prevent anyone from challenging the increased spending.

Once the nature of the Non-Appropriation Theory is appreciated, it becomes clear that the House has suffered a concrete, particularized injury that gives it standing to sue. The Congress (of which the House and Senate are equal) is the only body empowered by the Constitution to adopt laws directing monies to be spent from the U.S. Treasury. See Dep’t of the Navy v. FLRA, 665 F.3d 1339, 1348 (D.C. Cir. 2012) (“Congress’s control over federal expenditures is ‘absolute.’”) (quoting Rochester Pure Waters Dist. v. EPA, 960 F.2d 180, 185 (D.C. Cir. 1992)); Nevada v. Dep’t of Energy, 400 F.3d at 13 (“[T]he Appropriations Clause of the U.S. Constitution ‘vests Congress with exclusive power over the federal purse’”) (quoting Rochester, 960 F.2d at 185); Hart’s Adm’r v. United States, 16 Ct. Cl. 459, 484 (1880) (“[A]bsolute control of the moneys of the United States is in Congress, and Congress is responsible for its exercise of this great power only to the people.”), aff’d sub nom. Hart v. United States, 118 U.S. 62 (1886). Yet this constitutional structure would collapse, and the role of the House would be meaningless, if the Executive could circumvent the appropriations process and spend funds however it pleases. If such actions are taken, in contravention of the specific proscription in Article I, § 9, cl. 7, the House as an institution has standing to sue.

(emphasis added)

So, we shall see. There is more to the Judge’s ruling and more to the lawsuit.  Today’s ruling, however, revives the specter of the judicial branch reducing the likelihood that the Affordable Care Act can achieve the objectives of its supporters.

 

Note:  Kudos to Sarah Kliff and Andrew Prokop, who, though I do not think they share my views on the ACA generally, have nonetheless written (really swiftly!) a good article on today’s ruling.

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