Sunday, May 15, 2016

Oops! Obamacare Runs Afoul of the Constitution: Megan McArdle

Sunday, 15 May 2016 8:37 AM

District Court Judge Rosemary Collyer has ruled for Congress in House v. Burwell, a case challenging the authority of the executive branch to pay Obamacare subsidies for which no money has been appropriated.

These are not the highest-profile subsidies; they’re something called the cost-sharing reduction, which lowers the deductibles and out-of-pocket expenses for families buying silver plans who make less than 250 percent of the poverty line. The federal government has paid the insurers a lot of money that wasn’t appropriated, and the House has sued to stop that.

As a matter of abstract principle, the judge’s ruling seems right to me. The administration’s argument is essentially “Well, the law’s really not all that well written, so YOLO, we’re just going to do this.” Congress’s argument is: "Under the separation of powers, we’re in charge of the purse, we didn’t give you the money, so you can’t just go and spend it anyway.”

As lawyer Doug Mataconis writes: “a review of Judge Collyer’s opinion seems to make clear that the allegations of the Complaint are true and that the Administration was indeed spending money in a manner not specifically authorized by Congress. This would seem to be a clear violation of Article I, and therefore unconstitutional. The fact that it was accomplishing a public policy goal is, in the end, entirely irrelevant.”

If the executive branch can just decide what money ought to be spent to satisfy the purposes of a badly written law, then we end up in a pretty bad place: Congress has no incentive to pass well-written laws, because the executive branch will essentially rewrite the law at will.

Moreover, if the case is struck down because Congress does not have the standing to sue over the proper execution of the laws it passes (an argument that Jonathan Adler, one of the architects of the last round of Obamacare suits, thinks has real merit) we also end up in a pretty bad place. This seems superficially appealing to people who really wish we lived in a parliamentary system, because it would give the president some of the same sort of fiat powers that prime ministers have. But we do not live in a parliamentary system, and allowing the executive branch to run free of congressional control this way would not give us one. We would not have the mechanisms that parliaments use to make the prime minister’s powers work (for example, the ability to bring down the prime minister through a vote of no confidence and replace their government); instead, we’d be in a situation where the executive has immense power, and the only way to check it is for two separate chambers of Congress to vote to impeach.

But cases like this are rarely decided on such high planes of abstract principle. They are decided by reference to large bodies of previously existing case law, and of course, by reference to the policies of the justices. The ultimate resolution of this case may hinge on the political composition of the appellate panel that ultimately decides it, and then whether it goes to the Supreme Court, and whether Republicans have allowed another justice to be appointed to that Supreme Court, or it deadlocks, letting that lower court ruling stand.

So for now, let’s entertain the hypothetical: What happens if the House argument is ultimately upheld, and Department of Health and Human Services is told it can’t pay the insurance companies?

Entirely unclear. The law still mandates that those subsidies be paid out by insurers. Nicholas Bagley has argued that the insurers could sue HHS to get reimbursed, rendering the net effect of this lawsuit “nothing but more legal bills.” On the other hand, his post on the ruling does not make that argument, so I’m not sure he still believes it.

Alternatively, the insurers could simply raise premiums on all their plans, which would do two things. First, it would raise costs for folks who get low or no subsidies, possibly causing further adverse selection in the individual market. And second, it would push total subsidy expenditure a few inches closer to that strange, near mystical line of 0.504 percent of GDP at which the subsidies are capped, forcing the federal government to start deciding whose subsidies to trim back.

Meanwhile, Sarah Kliff at Vox seems to be proceeding from the assumption that the cost-sharing reduction subsidies could simply go away, which would wreak a different sort of havoc in the insurance markets. Those reductions add a significant amount of value to Obamacare policies, and without them, I have to assume that participation in the exchanges, already low among people who do not qualify for large subsidies, will fall even further. And moreover, that it will fall unevenly, with sicker patients remaining on the exchanges while the healthier patients drop their insurance, forcing premiums to rise even further to compensate for the sickness of the pool.

And isn’t this an argument for just letting the executive branch do what it wants? In the minds of many, I’m sure it will be. But if we completely untether the executive branch from the control of Congress, it is possible to contemplate even worse fates than a dysfunctional network of health care exchanges. If this year's presidential race has taught us nothing else, it should have taught us that.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.


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