The legal battle over billions of dollars in cost-sharing reimbursements due to insurers under the Affordable Care Act underscores the wisdom of the line from Charles Dickens' "Oliver Twist" that "the law is a ass."
Boiled down to its essence, the dispute is this: The ACA requires insurers to reduce deductibles and co-pays for low-income buyers on the individual insurance market, and it requires the government to reimburse the insurers for those reductions; but because the ACA didn't specifically provide an appropriation for the payments, congressional Republicans have maintained that they can't be made.
In other words, the payments are mandated by law, and also illegal (and unconstitutional).
President Trump cited this argument on Oct. 12, when he said through his press office that "the government cannot lawfully make the cost-sharing reduction payments."
His Department of Health and Human Services stated the very same day that it would stop the payments "immediately."
But that raises an important question: If the payments are illegal, why did the Trump administration make them every month after it took office, from February through September?
The so-called CSR payments differ technically from the premium subsidies that go to millions of insurance buyers whose incomes are between 100% and 400% of the federal poverty line — more than 80% of all buyers on the individual exchanges. Those subsidies are effectively made to the buyers themselves and used to reduce premiums. They were specifically appropriated in the ACA.
The CSR subsidies, which go to households earning up to 250% of the poverty line, or about half of all buyers on the exchanges, are treated differently. Insurers reduce those buyers' deductibles, co-pays, and other out-of-pocket expenses and receive money from the government to cover the reductions. (President Trump calls the reimbursements a "bailout" of the insurers, but he doesn't know what he's talking about, since the insurers are required by law to make the reductions and required by law to be reimbursed.)
The reimbursements are made a month or so in advance, and then trued-up later when the insurers submit documentation. But the ACA didn't include a specific appropriation for the reimbursements, presumably because of a drafting glitch. These are the payments at the center of a bipartisan compromise worked out by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.). Their deal, which faces an uncertain fate in the House and Senate, would continue the payments for at least two years.
The government itself said in a filing Friday in federal court in San Francisco that it made payments to insurers Friday, though it indicated the payments were for premium subsidies and didn't include a CSR component.
The payments were duly made by Treasury on Oct. 20 (that is, Friday). Even if the government subtracted out the CSR payments from Friday's installment, that doesn't explain why the Trump administration made them from February through September.
These events underscore an important aspect of the CSR controversy: It's entirely about Obamacare politics, and not about the niceties of appropriation law at all. The reimbursements were thrown into question by a 2014 lawsuit filed by House Republicans whose goal manifestly was to interfere with the smooth working of the Affordable Care Act by seizing on a technical point that they should have resolved through a routine amendment. They won a round in federal court last year, when a conservative judge ruled that the payments were illegal; but the judge stayed her ruling until the question could be aired before an appeals court in Washington, where it's still on the docket.
The legal maneuvering in San Francisco is an outgrowth of that case. California, 18 other states, and the District of Columbia have asked a federal judge there for a temporary restraining order requiring that the payments continue to flow. The judge, Vince Chhabria, has scheduled a hearing for Monday on that motion, and placed the states and the government on a tight briefing schedule. The DOJ's filing, which was due at 9 a.m. Friday, is the harvest.
The DOJ sets forth the Trump administration's arguments that the payments are illegal because Congress never appropriated the money, even if it mandated the reimbursements.
The conclusion that the payments can't legally be made now isn't held only by conservative foes of the Affordable Care Act. Nicholas Bagley of the University of Michigan law school, a supporter of the law, believes the House Republicans have a stronger case on the merits than do the states (though he also maintains that the Republicans didn't have standing to bring their lawsuit in the first place).
But Bagley, along with many other legal scholars, also argues that the insurers' right to the reimbursements is unequivocal. If Congress doesn't take the sane route and appropriate the money formally, he says, the insurers can sue for the money in the federal court of claims, where he says they will "almost certainly" win. The money would then be paid out of the government's permanent judgment fund. That process, however, would take months, at least.
In other words, the courthouse brouhaha should never have arisen; Congress should have fixed its technical error instead of exploiting it for political gain. Trump, of course, seized on the same error for no purpose other than to sabotage the Affordable Care Act. As we've reported, his actions have cost 3.5 million Americans their health coverage so far this year. The blocking of CSR payments is just one element of his strategy, but it shows how inconsistent and injurious his actions are.