Court Finds Insurer Reimbursement Lacks Required Appropriation
The Affordable Care Act (ACA) -- commonly known as Obamacare -- has been controversial from the start. Chief among my criticisms were the claims by its proponents that Congress, acting pursuant to its Commerce Clause power, could order individuals to purchase private insurance; that the penalty for failing to do so was not a tax but rather a penalty; and that the federal exchanges for certain states were really state exchanges. After two trips to the Supreme Court that resulted in opinions by the Chief Justice largely upholding the ACA through creative rewriting -- or what I like to call legalistic legerdemain -- most supporters thought the ACA was safe.That all changed last Thursday when U.S. District Court Judge Rosemary Collyer issued a decision holding that payments from the U.S. Treasury to private insurers under the ACA must be appropriated by Congress. I have thought from the start that people would be surprised to learn (like I did) that private insurers are receiving billions of dollars in transfers from the Treasury to subsidize lower insurance costs for eligible individuals. These insurer payments are designed to reimburse deductibles, coinsurance, copayments, and similar charges. According to the complaint in this case, such payments were estimated to exceed $3 billion in 2014 and total approximately $175 billion over the ten succeeding years. These payments confirm my view that the ACA is a backdoor government funded health plan; then again, transparency has never been part of the effort used either to pass the ACA or defend it in court.
The appropriation issue is a very simple one. Under the Constitution, only Congress can authorize the federal government to spend money. This is known as the "power of the purse." Article I, Section 9, states the rule quite clearly: "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . .." The meaning of these words is not controversial. As the Supreme Court stated in a 1937 decision, this clause "was intended as a restriction upon the disbursing authority of the Executive department . . .. It means simply that no money can be paid out of the Treasury unless it has been appropriated by an act of Congress." In an 1850 decision, the Supreme Court used words that are right on point for the ACA:
No officer, however high, not even the President, much less a Secretary of the Treasury or Treasurer, is empowered to pay debts of the United States generally, when presented to them. . . . The difficulty in the way is the want of any appropriation by Congress to pay this claim. It is a well-known constitutional provision, that no money can be taken or drawn from the Treasury except under an appropriation by Congress. . . . However much money may be in the Treasury at any one time, not a dollar of it can be used in the payment of any thing not thus previously sanctioned. Any other course would give to the fiscal officers a most dangerous discretion.At its core, Judge Collyer's ruling is thus quite straightforward: While Congress passed the ACA, which authorized insurer reimbursement, Congress has not appropriated the money to actually reimburse them. The Administration initially requested an appropriation for these insurer payments, but since one was not forthcoming, the Administration shifted course and decided that the payments were not required to be appropriated because the benefits are permanent. The Judge's words concerning this approach are instructive:
To recapitulate, the consequence at issue here is that a permanently authorized benefit program was made dependent on non-permanent appropriations. That approach is perfectly consonant with principles of appropriations law; most federal entities operate in the same fashion. The Secretaries’ argument, taken to its logical conclusion, is that every permanent authorization must also constitute a permanent appropriation or else an “absurd result” would obtain. That is assuredly not the law. Higher premiums, more federal debt, and decreased enrollment are not consequences of the ACA’s text or structure. Those results would flow—if at all—from Congress’s continuing refusal to appropriate funds for Section 1402 reimbursements. That is Congress’s prerogative; the Court cannot override it by rewriting 31 U.S.C. § 1324(b).Why does this matter? The Constitution, which was designed with checks and balances among the branches of government, directs and compels this division of responsibility precisely to maintain balance and avoid concentrating power in the Executive. Congress alone has the power of the purse. If the Executive had the power to spend money as he alone sees fit, there would be no balance. As James Madison stated in The Federalist 58,
[t]he House of Representatives cannot only refuse, but they alone can propose the supplies requisite for the support of government. They, in a word, hold the purse—that powerful instrument by which we behold, in the history of the British Constitution, an infant and humble representation of the people gradually enlarging the sphere of its activity and importance, and finally reducing, as far as it seems to have wished, all the overgrown prerogatives of the other branches of the government. This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure.Supreme Court Justice Joseph Story summarized the importance of having the power of the purse and appropriations reside in the legislative branch in his 1833 treatise, Commentaries on the Constitution of the United States.
The object is apparent upon the slightest examination. It is to secure regularity, punctuality, and fidelity, in the disbursement of the public money. As all the taxes raised from the people, as well as the revenues arising from other sources, are to be applied to the discharge of the expenses, and debts, and other engagements of the government, it is highly proper, that congress should possess the power to decide, how and when any money should be applied for these purposes. If it were otherwise, the executive would possess an unbounded power over the public purse of the nation; and might apply all its monied resources at his pleasure. The power to control, and direct the appropriations, constitutes a most useful and salutary check upon profusion and extravagance, as well as upon corrupt influence and public peculation. In arbitrary governments the prince levies what money he pleases from his subjects, disposes of it, as he thinks proper, and is beyond responsibility or reproof. It is wise to interpose, in a republic, every restraint, by which the public treasure, the common fund of all, should be applied with unshrinking honesty to such objects, as legitimately belong to the common defence, and the general welfare. Congress is made the guardian of this treasure . . ..The Administration initially tried to dismiss this case on procedural grounds by arguing that the House of Representatives, which brought the suit in 2014, lacked standing to sue because this was a political dispute between two branches of government. Judge Collyer rejected that argument last September, ruling that the House had standing to bring suit "to preserve its power of the purse and to maintain constitutional equilibrium between the Executive and the Legislature." Frankly, this is exactly the type of issue that must be addressed by a court because it is a fundamental separation of powers dispute. Under our system, Congress appropriates and the Executive then can spend. But the President cannot spend that which is not appropriated -- even if there is money sitting in the federal government's coffers.
So where does this leave the ACA? Surely ailing to say the least -- and maybe worse. In her ruling, Judge Collyer enjoined the use of unappropriated monies to fund the insurer payments due under the ACA, but she stayed the injunction pending appeal. I expect a fast appeal by the Administration, and this case ultimately could end up back at the Supreme Court.
The decision can be accessed by clicking here.