Two misplaced objections to the risk corridor lawsuits.

By my count, health plans have filed five separate lawsuits in the Court of Federal Claims seeking money that they’re owed under the risk corridor program. As I’ve explained here and here, I think the lawsuits have merit, which is why I expect to see a lot more of them. If you’re a health plan, why leave money on the table?

In conversation, however, I’ve encountered two arguments about why the health plans shouldn’t prevail. Neither withstands scrutiny. (Warning: this is serious law-wonkery.)

First, I’ve heard it argued that if there’s no appropriation for HHS to make the risk corridor payments, then HHS can’t pay out the money, even if a court orders it to do so. That’s true, as far as it goes: Congress holds the purse-strings, and no court can order an agency to pay money if the money hasn’t been appropriated. It’s the sovereign’s prerogative to disregard its debts.

But here’s the key: the health plans aren’t asking for the money to come out of an HHS appropriation. They want the money to come out of a different pot of money—the Judgment Fund, which is a permanent appropriation enabling the federal government to satisfy court judgments.

To get paid, then, a health plan just needs a judgment from the Court of Federal Claims saying that it’s entitled to risk corridor money. That shouldn’t be hard to get: HHS admits that it’s obligated to pay the money. Congress could always amend the Judgment Fund to prohibit it from satisfying judgments arising from the risk corridor program. In the meantime, however, the fund is available to compensate health plans.

Second, remember when Marco Rubio claimed to “kill Obamacare” and took credit for an appropriations rider targeting the risk corridor program? Some people seem to think that the Rubio rider also changed the terms of what Congress promised to health plans.

Sure, the argument goes, the risk corridor program originally promised to reimburse health plans that lost money on the exchanges. Under the Rubio rider, however, health plans are entitled only to whatever money the risk corridor program has received from health plans that performed well on the exchanges. Once the program goes into the red, health plans are no longer owed anything. No entitlement, no lawsuit.

But that’s not how appropriations law works. Yes, Congress can use an appropriations measure to trim an entitlement. But it’s got to speak clearly when it does so. “The mere failure to appropriate sufficient funds is not enough,” according to the GAO’s Red Book, the bible of appropriations law. The Red Book explains:

For example, the [Supreme] Court refused to find a repeal by implication in “subsequent enactments which merely appropriated a less amount … and which contained no words that expressly, or by clear implication, modified or repealed the previous law.” United States v. Langston, 118 U.S. 389, 394 (1886) … . A failure to appropriate in this type of situation will prevent administrative agencies from making payment, but … is unlikely to prevent recovery by way of a lawsuit.

With this in mind, take a look at the Rubio rider. It reads, in its entirety:

Sec. 227. None of the funds made available by this Act from the Federal Hospital Insurance Trust Fund or the Federal Supplemental Medical Insurance Trust Fund, or transferred from other accounts funded by this Act to the ‘‘Centers for Medicare and Medicaid Services—Program Management’’ account, may be used for payments … relating to risk corridors.

Nothing in the rider says that Congress has changed what health plans are owed or put the kaibosh on full recovery. All it says is that certain funds appropriated in this particular statute can’t be used to make risk corridor payments. That’s not enough to find a repeal by implication.

That’s not all. There are at least three other problems with reading the Rubio rider to amend the risk corridor entitlement suffers. First, it would run counter to the statutory canon disfavoring repeals by implication, which the Supreme Court has held “applies with even greater force when the claimed repeal rests solely on an Appropriations Act.” Second, it would suggest that the statute was enacted in violation of congressional rules, which say that “[a] provision changing existing law may not be reported in a general appropriation bill.” And third, it would raise due process concerns to read the statute to renege on a promise that health plans relied upon.

In other words, it looks to me that the health plans have a strong case. Their claim is simple: the federal government made a promise, it broke that promise, and now it must make them whole. So far, everything I’ve seen suggests they’re right.


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