• A government defeat in House v. Burwell

    Having previously held that the House of Representatives has standing to sue, the district court in House v. Burwell has now held that the Obama administration is violating the Appropriations Clause in making cost-sharing payments under the ACA in the absence of the requisite congressional appropriation. The court has stayed its decision pending appeal, meaning that it won’t take immediate effect. Indeed, I suspect it will never take effect.

    The ACA offers two kinds of subsidies for those buying health insurance on the exchanges: premium subsidies, which were at issue in King v. Burwell, and subsidies to reduce out-of-pocket spending for those who make less than 250% of the poverty level. The cost-sharing subsidies aren’t paid directly to individuals. They go, instead, to reimburse insurance companies, which are required under the law to cut their low-income enrollees a break on out-of-pocket spending. Under the court’s ruling, it’s those payments from the Treasury to the insurers that are unlawful.

    At bottom, the court’s reasoning is pretty straightforward. Although the ACA tells the administration to pay cost-sharing subsidies, the ACA doesn’t contain a specific appropriation to make those payments. And, under 31 U.S.C. §1301(d), “[a] law may be construed to make an appropriation out of the Treasury … only if the law specifically states that an appropriation is made.” As a result, the Appropriations Clause prohibits the administration from making cost-sharing payments. Q.E.D.

    Most of the court’s analysis focuses on the government’s argument that a preexisting, permanent appropriations statute—31 U.S.C. §1324—supplies the relevant legal power to make the payments. That statute appropriates the money to issue tax refunds, including refunds arising as a result of tax credits. The ACA’s premium subsidies are tax credits, so §1324 supplies the appropriation for those subsidies.

    Although cost-sharing reductions are not tax credits, the administration argued that the ACA created a single program to make advance payments of both the premium tax credits and the cost-sharing reductions. In the administration’s words, credits and reductions are both “properly regarded as ‘refunds due from’ [under the tax code] because [they] are compensatory payments made to subsidize an individual’s insurance coverage based on that individual’s satisfaction of the eligibility requirements in Section 36B.”

    The district court characterized this as “a most curious and convoluted argument whose mother was undoubtedly necessity.” As the court tartly noted, the cost-sharing reductions … do not reduce anyone’s tax liability. Nor do the reimbursements made to the insurers. Neither is intended to do so. Rather, [the] reimbursements are made to compensate insurers for the costs that they bear instead of share. These reimbursements simply are not ‘refunds’ as that term is used in 31 U.S.C. § 1324.”

    As to the government’s structural claims, the court was unpersuaded that the ACA couldn’t work as intended if it didn’t include an appropriate for cost-sharing reimbursements. As the court wrote, “[t]he only result” of the conclusion that there’s no appropriation is that the reimbursements “must be funded annually.” That made the case quite different from King, where, in the court’s view, “the statute could not function if interpreted literally; it had to be saved from itself.”

    The court acknowledged that its decision could have serious consequences. Among other things, insurers would have to raise their premiums to make up the shortfall, raising the cost to the government of paying out premium subsidies. But the court said that these were the “wrong consequences” to focus on. “For purposes of interpreting the ACA, the relevant question is not whether Congress intended premiums to skyrocket, deficits to explode, or enrollment to plummet—those are not consequences of the statute that Congress wrote in 2010. The relevant question is far narrower: Would it have been ‘nonsensical’ or ‘absurd’ for Congress to authorize a program permanently in 2010 but not appropriate for it permanently at the same time?” For the court, the answer was a clear “no.”

    For what it’s worth, I share the district court’s skepticism of the administration’s arguments. As I explain in some detail here, it’s hard to read §1324 as supplying an appropriation for cost-sharing reductions. What I don’t share, though, is the district court’s confidence that she could properly hear this case. Until now, no one has thought that one house of Congress could file a federal lawsuit to hash out an appropriations dispute with the executive branch. This shouldn’t be the first time, even if the administration broke the law.

    What happens now? Even if the D.C. Circuit expedites the government’s appeal, the court is unlikely to resolve the case before the election. When it does, I suspect it will have very little patience for the district court’s conclusion that the House of Representatives has standing to sue. My hunch, too, is that the Supreme Court will either not intervene or uphold the D.C. Circuit’s eventual dismissal of the case. This opinion will attract a lot of attention—and it should—but it’s not an existential threat to the ACA.

    @nicholas_bagley

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