The fight over the risk corridor program is heating up.

From the Wall Street Journal.

Congressional Republicans are warning the Obama administration not to settle with insurers that have sued the government over an Affordable Care Act program to compensate them for losses under the law, saying such a move would bypass spending limits set by Congress.

I get what the Republicans are doing here. It’s easy to score points by railing against insurer “bailouts.” But the Obama administration isn’t exploring settlement (as Chairman Upton of the House Committee on Energy and Commerce says) because it “is panicked, and this ‘Better Call Saul’ sue-and-settle scheme is the pinnacle of desperation as the health law crumbles.”

In point of fact, whether risk corridor payments are made doesn’t much matter to the future of the ACA. Sure, Republicans’ refusal to fully fund the program contributed to the collapse of a bunch of co-ops and small insurers. But that damage is done.

For insurers that weathered the storm, they’ll participate on the exchanges if they think they can make money. Whether they win their lawsuits will affect their earnings, not their participation.

No, the Obama administration is exploring settlement because it thinks it’s probably going to lose these lawsuits. As I have explained many times, the risk corridor program creates an entitlement in health plans to risk corridor payments. If HHS can’t make those payments directly—and it can’t, on account of congressional appropriations riders—health plans can seek damages in the Court of Federal Claims.

Any judgment against the United States can then be paid out through the Judgment Fund, as is generally the case for suits against the government. And if the Judgment Fund is available to pay judgments, the government can settle claims out of the same fund.

Nonetheless, in a letter sent to HHS on Tuesday, Chairman Upton claims that using the Judgment Fund to settle the lawsuits would “be a direct circumvention of clear Congressional intent to prohibit the expenditure of federal dollars on this program.”

Chairman Upton is mistaken. Congress hasn’t expressed any such intention. It could easily do so. It just has to enact a statute that looks like this:

No funds appropriated under section 1304 of chapter 31 of the U.S. Code [i.e., the Judgment Fund] may be used to make any payments in connection with the risk corridor program established under section 1342 of the Patient Protection and Affordable Care Act, Public Law 111-148.

Conspicuously, Congress hasn’t done that. Instead, it has enacted two annual appropriations statutes saying that the administration can’t use money appropriated in those statutes to make risk corridor payments. Congress has said nothing about other sources of payment. Here’s the language if you don’t believe me:

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 under section 1342(b)(1) of Public Law 111–148 (relating to risk corridors)

That’s it. There’s nothing there about the Judgment Fund. House Republicans might wish that they’d said more—but they haven’t, at least not yet.

In the meantime, the Obama administration seems to realize that it’s playing a losing hand. Any prudent litigator would think about settling these cases. Heck, the administration might even be able to settle them for less than their face value, which would save taxpayer dollars.

I understand that Republicans don’t much like the ACA. But the fight here is over what the law demands, not whether you love or hate health reform. Unless and until Congress passes a statute limiting the use of the Judgment Fund, the Obama administration is right to think about settlement.


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