By Rob Oldham
Over the last few weeks, the Trump administration has taken an important step in dismantling the Affordable Care Act by cancelling $7 billion in cost-sharing subsidies that the federal government had been paying to health insurance companies. The ACA mandates that insurance companies reduce out-of-pocket costs, like copays and deductibles, for low-income enrollees on the ACA exchanges, and the subsidies fund those reductions. But according to a federal court ruling, the cost-sharing subsidies are not continuously funded by the ACA, meaning the Trump administration cannot make the payments without a specific appropriation from Congress.
The case of the cost-sharing subsidies implicates a well-traversed area of constitutional authority: Who controls the spending powers of the federal government? Is it the president, who directs the Treasury, or Congress, which writes laws authorizing outlays from the Treasury? Article I of the Constitution seems to clearly put spending in Congress’s domain, saying, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law…” Indeed, plenty of intellectual energy has been expended affirming that, as the Supreme Court ruled in United States v. MacCollom (1976), “the expenditure of public funds is proper only when authorized by Congress.” However, reality has always been more complicated, with the president sometimes spending unappropriated funds to carry out his executive duties. While courts usually rule in favor of Congress’s power, presidents have taken advantage of ambiguity in laws to spend unappropriated funds, which is what happened with the cost-sharing subsidies.
The subsidies were essential for the ACA to lower the uninsured rate. It had a three-part structure to achieve its goal: obliging insurers to cover all people, requiring all people to buy insurance, and making insurance affordable. Two government spending programs were designed to lower health care premiums and out-of-pocket costs for low-income persons, respectively. Premiums were reduced by tax credits authorized by the ACA’s section 1401 and out-of-pocket costs were reduced by section 1402’s cost-sharing subsidies.
Although they perform the same function of making healthcare costs cheaper for low-income persons, there is a critical difference between sections 1401 and 1402 that explains why the Trump administration cancelled the cost-sharing subsidies and left the premiums in place (which might cause the federal deficit to increase, according to the CBO). Section 1401 authorizes a permanent appropriation for the premiums, meaning Congress does not have to reauthorize them via annual appropriations. Section 1402, however, authorizes a current appropriation, specifically saying the payments shall be made “at such time and in such amount as the Secretary of Health and Human Services specifies.” A current appropriation must be renewed every year.
The lack of continuous funding for cost-sharing subsidies presented a problem for President Obama. He wanted to ensure that the federal government could continue to offset the costs of reductions that insurance companies had to make. Without the subsidies, the companies would have to recoup their losses on the reductions in other ways, potentially by increasing premiums. So, while the administration continued to ask Congress to appropriate the cost-sharing subsidies in annual budget requests (a tall order after the 2010 Tea Party wave brought a Republican majority to the U.S. House), the administration simultaneously began making the payments without an appropriation.
This caught up with Obama in November 2014 when the House Republicans filed a lawsuit claiming that the payment of the subsidies infringed on Congress’s Article I power to appropriate the funds that the federal government spends. In May 2016, D.C. District Court Judge Rosemary Collyer (a George W. Bush appointee) ruled in favor of the House Republicans. She wrote:
“Paying out Section 1402 reimbursements without an appropriation…violates the Constitution. Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one.”
Collyer’s opinion addresses a series of arguments the Obama administration used to justify paying the cost-sharing subsidies without an appropriation. The administration’s most compelling arguments laid out a legal theory of the discretion that should be afforded to the executive branch when Congress either does not make an appropriation or was ambiguous. These arguments cited the Supreme Court’s ruling in King v. Burwell (2015), a similar case where the plain text of the ACA did not appear to authorize premium subsidies for persons that purchased plans on federal-run, as opposed to state-run, exchanges. In a 6 to 3 decision, the court ruled the subsidies could go toward plans purchased on the federal exchanges because the full context of the ACA clearly indicated that Congress wanted to cover as many people as possible. Not allowing the credits for federal exchange enrollees would undermine the law’s purpose.
The argument for the cost-sharing subsidies is similar. An amicus brief filed by a group of health policy scholars laid out the case, arguing that Congress could not have intended to make premium subsidies continuous and cost-sharing subsidies on a year-by-year basis as this would have prevented the ACA from achieving its legislative goal of decreasing the uninsured rate. Essentially, the administration was saying it should be able to take certain actions and spend funds to help the law achieve its overall goal even if Congress did not approve the actions.
Despite the Obama administration’s efforts to justify executive preeminence in spending and administering laws, Judge Collyer ruled in favor of the House Republicans. She did, however, allow the payments to continue being made while the case was appealed. This continued through 2017, which is when the Trump administration inherited responsibility for the payments.
After the subsidies were cancelled by Trump, 18 states and Washington, D.C. filed suit to compel the federal government to make the payments. They made similar arguments to the Obama administration in terms of the executive’s power to make the payments in the absence of an appropriation (with an added twist that Trump was attempting to undermine the ACA and crash the health insurance exchanges). Federal Judge Vince Chhabria, an Obama appointee in the Northern District of California, ruled in favor of the Trump administration, but he also conceded that the appropriation issue was “a close and complicated question.”
The future of the cost-sharing subsidies is unknown. While there appears to be support in the U.S. Senate for reviving them, Speaker Paul Ryan and President Trump have expressed their opposition. Ryan’s statement following their cancellation hits at the core legal issue surrounding the subsidies:
Under our Constitution, the power of the purse belongs to Congress, not the executive branch. It was in defense of this foundational principle that the House, under the leadership of former speaker John Boehner, voted in 2014 to challenge the constitutionality of spending by the Obama administration that was never approved by Congress. The House was validated last year when a federal court ruled that the Obama administration had indeed been making unauthorized and therefore illegal payments through Obamacare. Today’s decision by the Trump administration to end the appeal of that ruling preserves a monumental affirmation of Congress’s authority and the separation of powers.
This harkens back to one of Ryan’s 2016 campaign arguments about the upside of a Trump presidency: He would restore the balance of power to the federal government by limiting executive meddling in matters reserved for Congress. While there is a question of whether Trump too has been seduced by the allure of executive orders (and of whether Ryan’s hope on the campaign was sincere or realistic), the president’s actions on cost-sharing subsidies has certainly shifted some power back to the legislative branch. While that balancing of power could come at the expense of the ACA’s ability to improve the American healthcare system, it should please those longing for a constitutional order based on the separation of powers.
However, with that power comes a responsibility for Congress to address major policy concerns. Congress’s ability to act on policy has been less than stellar in recent years, meaning Ryan’s vision of an empowered legislative branch might not comport with current political realities. As President Trump continues to dump policy items like cost-sharing subsidies and immigration reform into its lap, Congress should meet his challenges and show the American people it can be trusted with governing in a rapidly changing world. If it does not, the legislature risks ceding even more of its power to the executive and drifting further away from being “the First Branch” of government.
Rob Oldham is a political writer interested in legislative politics at the state and national levels.