MENU

Reason.com

Free Minds & Free Markets

By Propping Up Obamacare With Illegal Payments, Trump Is Eroding the Rule of Law

The president is using unconstitutional insurer subsidies as negotiating leverage.

PAT BENIC/UPI/NewscomPAT BENIC/UPI/NewscomFor a prime example of how the poorly conceived policy of Obamacare interacts with the Trump administration's disregard for the rule of law, look no further than the debate over the health law's subsidy payments to health insurance companies.

Over the last several months, as Republicans have struggled with legislation to repeal and replace Obamacare, President Trump has repeatedly warned that the health care law is already failing. If Congress did nothing, he said last week, he would let it "implode." That may sound passive, but coming from Trump, it was an active threat to hasten the law's demise.

Since taking office, the president has dangled the possibility that his administration might cut off payments being made to insurers as part of Obamacare—money that insurers say is vital to stabilizing the health law's insurance exchanges. Over the weekend, he raised the idea again, tweeting that, should Congress fail to act, bailouts for insurance companies "will end very soon."

The threat is meant to be leverage to force a recalcitrant Congress to act. In fact, it's a reckless move, because the payments are illegal and never should have been made in the first place.

As surface politics, Trump's threat is poorly chosen—cutting off the payments would cause premiums to rise. As policy and precedent, it's even worse—these payments are unconstitutional, and Trump's threats suggest he believes he has the legal authority to choose whether or not to make them.

The debate over these subsidies offers a window into how the failings of Obamacare, the weaknesses of Congress, and the Trump administration's policy bluster are interacting to the detriment of the rule of law. But to understand the larger implications, it helps to know a little bit about the interlocking subsidies and side payments called for under the health care law.

The payments in question are known as cost-sharing reduction (CSR) subsidies. Health insurers operating under the law are required to reduce deductibles and copayments for individuals who make less than 250 percent of the poverty line, a group that encompasses a little more than half of enrollees. The federal government then pays insurers directly in order to cover the cost of further subsidizing this population.

These subsidies come in addition to the insurance subsidies that Obamacare offers to people earning up to 400 percent of the poverty line. Essentially, it's an additional layer of financial assistance designed to reduce the out-of-pocket cost burden that even Obamacare's already subsidized insurance places on the near poor.

The CSR payments provide a considerable boost to health insurers' bottom line: about $7 billion last year, and an expected $10 billion this year. By 2026, the payments are expected to total about $130 billion.

Unsurprisingly, health insurers are keen to keep them going. Their argument for continuing the payments is fairly straightforward: They are part of the statute of the Affordable Care Act. Under the law, insurers would be required to offset the out of pocket costs for lower-income people regardless of whether the CSR subsidies are paid. So insurers would almost certainly sue to regain the payments if Trump cut them off. If the payments are not made, insurers say they will raise premiums in order to compensate.

The important complication is that even though the payments are written into the law, money to pay them was never appropriated by Congress. Under the Constitution, Congress must appropriate money in order for the executive branch to spend it.

The Obama administration explicitly asked for a Congressional appropriation of money for the CSR payments, but Congress never provided it. The administration then made the payments anyway, and the Trump administration has so far continued the practice.

Under the Constitution, however, only Congress has the power to appropriate funds. In 2014, House Republicans sued the Obama administration for exceeding its constitutional authority by spending money on the payments without authorization and thereby usurping the congressional power of the purse. The Obama administration argued that it was required to follow the text of Obamacare.

In May of last year, a federal judge agreed with House Republicans. U.S. District Judge Rosemary Collyer ruled that the Obama administration had unambiguously overstepped its authority in making the payments without an explicit fiscal go-ahead from the legislative branch. "Congress authorized reduced cost sharing but did not appropriate monies for it, in the [fiscal year] 2014 budget or since," she wrote in her decision. "Congress is the only source for such an appropriation, and no public money can be spent without one." However, Collyer also stayed her decision in order to give the Obama administration time to appeal.

The lawsuit would have continued under a Hillary Clinton administration. But Donald Trump's win in November threw its status into uncertainty. Since the election, both the Trump administration and House Republicans have asked for and been granted delays. They now suggest they would like to resolve the matter out of court.

Many insurers are already losing money in the exchanges and are skittish about the future of Obamacare. The lack of certainty about whether CSR payments will continue to be made has caused them to hedge their bets by raising premiums. This is politically unpopular, and as a result, both Republican and Democratic members of Congress have indicated that they want to see the CSR subsidies paid in order to stabilize the jittery Obamacare exchanges. Trump, of course, has refused to commit one way or another, saying explicitly on several occasions that he hopes the threat of cutting off the payments will bring Democrats to the negotiating table, or push Republicans in Congress to act.

The result is a cascade of linked policy and political failures, in which partisan convenience has trumped both good sense and constitutional duty at nearly every turn.

The original health care law, which was passed over the unanimous objections of the opposing political party, was designed to work only if future lawmakers acted from a position of total political support by authorizing money to make the CSR payments. The Obama administration then chose to implement the law in a way that defied Congress and exceeded its constitutional authority.

Many Republicans in Congress now apparently want to keep making the CSR payments in order to not undermine the exchanges. Even Mitch McConnell has said that, in the absence of a repeal bill, the markets must be stabilized. But GOP lawmakers, despite cautioning Trump against cutting off the payments, have not appropriated money for them via independent legislation (although some are now suggesting that this may be on the table).

Meanwhile, the Trump administration has acted in a way that simultaneously increases policy uncertainty while undermining the rule of law. As recently as last week, Health and Human Services Secretary Tom Price, who supported the House lawsuit against the subsidies when he was in Congress, refused to say whether the payments ought to be continued.

This should not be a drawn-out decision, left open for months at a time. Nor should it be treated as a blunt cudgel for gaining political leverage. If Trump and his team truly believe that the CSR payments are unconstitutional, they should have stopped making them immediately.

Instead, the president has continued to make the payments while openly musing about the possibility of cutting them off in hopes of improving his political bargaining position. In doing so, he has not only caused chaos and instability in the marketplaces. He has effectively taken the position that this is all a matter of executive discretion. It is not. Either the CSR subsidies are statutorily required and clearly appropriated by Congress, or they are not. Judge Collyer's decision on this question was clear: The payments have not been authorized. They should never have been paid.

By refusing to commit, and by treating the payments as optional, Trump is arguably expanding on the errors of his White House predecessor, who at least maintained that he had a legal obligation, based on statute, to make the payments, with or without explicit congressional appropriation.

Trump's decision to hold the CSR subsidies hostage for political gain sets a dangerous precedent that will surely be followed by those who succeed him. What is ultimately at stake here is not only the future of the health care law, but of the constitutional separation of powers and the limits of executive branch authority. Trump's ham-fisted attempt at dealmaking is eroding those limits, and in the long run we are all worse off for it.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Charles Easterly||

    You know who else held up his arm and hand like when addressing his supporters?

  • Citizen X - #6||

    Huey Newton?

  • Citizen X - #6||

    The Pope?

  • Scarecrow Repair & Chippering||

    Anyone mincing down Polk Street before Carnival?

  • Rhywun||

    The Queen?

  • ||

    Not Bob Dole.

  • ChipToBeSquare||

    The Romans?

  • Mark22||

    Pretty much every politician on the planet. But usually not in Trump's faggy schoolmaster style.

  • Scarecrow Repair & Chippering||

    A lawless nation. Is that better than rule of man? What a clusterfuck the founders would see today. I can't imagine how they would react.

  • BYODB||

    Yeah, you can. Revolution. ^_^

  • Scarecrow Repair & Chippering||

    NO I Don't wanna know that I can! Wahhhhhh! No spoilers!

  • WakaWaka||

    Could I have a link to the original article where these payments by the previous administration were denounced as lawless? I'm not being difficult, I want to see what the history of the whole situation was then.

    Any deflection of 'whataboutism' is an admission that principles matter some times

  • Citizen X - #6||

    Educate yourself, girl. Suderman wrote almost exactly the same article a little more than a year ago with "Obama" swapped for "Trump" - scroll down about 8 articles. There might be more, i didn't go much past that.

  • WakaWaka||

    Thanks, buddy

  • Diane Reynolds (Paul.)||

    The threat is meant to be leverage to force a recalcitrant Congress to act. In fact, it's a reckless move, because the payments are illegal and never should have been made in the first place.

    As surface politics, Trump's threat is poorly chosen—cutting off the payments would cause premiums to rise. As policy and precedent, it's even worse—these payments are unconstitutional, and Trump's threats suggest he believes he has the legal authority to choose whether or not to make them.

    Thank you. I'm a bit confused by this post. I'm reading about how Trump flouts the rule of law by possibly cutting off illegal payments. My head is about to explode.

  • ||

    At this point, it may actually be verging on impeachable, just because of Trump's lack of political sense.

    The Obama administration argued that they were required to make the payments by the text of the ACA, and that question was allowed to stay open pending appeal. Trump is not making that argument - he's just framing it as 100% his personal choice, when as Suderman points out, it's 100% not.

    In fact, there is now existing case law saying that this specifically is illegal. It sits under challenge, but the GOP keeps not pushing that challenge forward, but also not vesting anything in arguing that the payments aren't illegal. They are not pursuing the case (and can't without 100% changing their position), such that they are essentially acknowledging that the payments are illegal, yet Trump keeps making them anyway.

  • JWatts||

    "In fact, there is now existing case law saying that this specifically is illegal."

    That was the case last year, and yet the Obama administration kept making the payments. This isn't new or unique to Trump. Indeed, at this point it's on going policy.

    http://reason.com/blog/2016/05.....care-subsi

    The ruling came out in May of 2016.

  • ||

    But the ruling was stayed pending appeal. The Obama Administration continued on the premise that it was required to make the payments, and they were going to get to make that argument again on appeal. They weren't doing anything illegal. Once the appeals court declared the payments unconstitutional, if they still continued to make them, that would be explicitly illegal.

    The GOP asserted in court that the payments are illegal, and the court agreed. They are now the ones delaying appeal because they no longer want the payments declared illegal.

    The problem is that they aren't challenging the decision that the payments are illegal - they're still taking the position that the payments are illegal.

    They either need to reverse their position 100% and take up the Obama Administration's position, crossing their fingers and hoping they win on appeal, or they are knowingly making illegal payments that they themselves pointed out were illegal in the first place.

  • JWatts||

    "The problem is that they aren't challenging the decision that the payments are illegal - they're still taking the position that the payments are illegal."

    The Senate has explicitly asked for a continuance of payments until they appropriate the money.

  • Diane Reynolds (Paul.)||

    So the payments are illegal-ish?

  • Jima||

    Well, if you believe you can continue to use threats to withhold illegal payments and then keep making them as if they were legal, why not just send in federal agents to arrest those who thwart your policy ideas? It's the same, right? If there are no laws, then whoever has the biggest guns makes the rules. Just make companies write new private insurance policies at gunpoint until you get the policy you like, right? We are already a banana republic, we just haven't gone all in yet. Don't worry baby, it's just the tip...

  • Mark22||

    Suderman wrote almost exactly the same article a little more than a year ago with "Obama" swapped for "Trump"

    Then the proper title isn't "Trump erodes the rule of law by doing X", the proper title is "Trump continues to erode the rule of law by continuing X" or "Obama eroded the rule of law by doing X and Trump continues at that eroded level".

    The title, misleadingly, implies that Trump started this, regardless of whether Suderman has written about this before.

  • Rhywun||

    The president is using unconstitutional insurer subsidies as negotiating leverage.

    From the "Damned If You Do, Damned If You Don't" files.

  • Citizen X - #6||

    Why, it's almost as if the ACA was designed and enacted without consideration as to its own legality!

  • Philadelphia Collins||

    You mean taxes don't originate in the Senate?

  • ||

    You mean penaltaxes and they're ratified into law by SCOTUS.

  • BYODB||


    The Obama administration explicitly asked for a Congressional appropriation of money for the CSR payments, but Congress never provided it. The administration then made the payments anyway, and the Trump administration has so far continued the practice.


    And amusingly, the law is still failing with a huge cash infusion each year. Yeah, Trump should stop making those payments. I double-dog dare him.

  • Mickey Rat||

    Unfortunately, as SCOTUS indicated in the last ACA case, what the law and the Constitution says does not matter if it impedes the policy from functioning.

  • XM||

    Isn't it amusing that whether they state it explicitly or not, the ACA fans' defense of their policy boils down to "Obamacare works great as long as the government props it up with tons of money".

    And remember now, it's the "uncertainty" of the law's future that's driving insurers out of the exchange. When Obama was president they would consider doing that a form or treason.

  • kyleh||

    This is like criticizing Earned Income Tax Credit or Medicaid because they're "propped up with tons of money". That's the whole point of entitlements - they are subsidies for low-income folks.

  • Longtobefree||

    Except for the minor detail of legislative allocation of federal tax dollars to pay for the EIC and Medicaid.

  • josh||

    This is why we can't have nice things.

  • Azathoth!!||

    So, 'get rid of these things in a way you can deal with before I get rid of these things in a way you can't' is being okay with Obama's illegal subsidies?

    Or are you just missing the fact that he's trying to get rid of it?

  • ||

    He's trying so hard it's going to happen any week now.

  • CatoTheChipper||

    Trump's assertion of his authority to arbitrarily rule on this matter does us all the great service of showing how monumentally shitty Obamacare is. That is all.

  • ||

    No, no, no. The takeaway is that it's his fault it's failing.

  • JWatts||

    "Trump's decision to hold the CSR subsidies hostage for political gain sets a dangerous precedent that will surely be followed by those who succeed him"

    Oh Suderman, is it that hard to admit that this dangerous precedent has already been set by the Obama administration. I don't agree with Trump on this, he should end the subsidies immediately. But it's stupid to try and claim this is a Trump precedent.

    For example, here's an article that you wrote about the matter last fucking year.

    "The administration's argument for its actions, in other words, is all but an admission that what it is doing is not legal or justifiable—and that when it comes to Obamacare, it simply doesn't care. "

    http://reason.com/blog/2016/06.....nistration

  • Jerryskids||

    BUT BOOOOOSH!!!!

  • JWatts||

    No, you miss the point. Trump is threatening to stop making the payments unless Congress appropriates the money. That's a 180 degree position from Obama's position, which was that it could make the payments even without an appropriation.

  • JWatts||

    This article by Suderman is factually challenged.
    "Over the weekend, he raised the idea again, tweeting that, should Congress fail to act, bailouts for insurance companies "will end very soon.""

    So Trump is clearly pointing out that if Congress doesn't pass an appropriation that the bailouts will end soon. How the hell is that illegal or immoral?

    From the LA Times:

    "Congress could simply put an end to that uncertainty by voting to appropriate the CSR money, an idea supported by many lawmakers.

    Alexander said Tuesday that he asked the president to continue funding the CSR payments for August and September to give Congress time to appropriate the money going forward."

    http://www.latimes.com/politic.....story.html

    It looks like Trump has told Congress to either appropriate the money or he'll stop the payments. A high ranking Senator has specifically asked him to give them two more months.

    Contrast and compare with the last administration actions.

    Look Trump does a lot of stupid things, but on this issue, he's hewing far closer to the law than his predecessor.

  • Robert||

    So...uh...threatening to stop doing something illegal is...like...bad, I guess?

  • Longtobefree||

    It is bad if it interferes with bread and circuses.

  • Migrant Log Chipper||

    Has there ever been a bigger legislative goatfuck than Obamacare....can't think of one off hand?

  • Migrant Log Chipper||

    It's like a Three Stooges sketch.....nyuk, nyuk, nyuk.

  • Longtobefree||

    Never mind CSR, just void the executive exemption of congress and their staff from the ACA. That will get the job done in a heartbeat.

  • damikesc||

    For a prime example of how the poorly conceived policy of Obamacare interacts with the Trump administration's disregard for the rule of law

    How is Trump's "disregard for the rule of law" the issue here when the problem is that Obama illegally spent money?

    As surface politics, Trump's threat is poorly chosen—cutting off the payments would cause premiums to rise. As policy and precedent, it's even worse—these payments are unconstitutional, and Trump's threats suggest he believes he has the legal authority to choose whether or not to make them.

    It's a political realization that ending the unconstitutional payments will likely hurt citizens and HE will be blamed for abiding by the law.

    Many Republicans in Congress now apparently want to keep making the CSR payments in order to not undermine the exchanges. Even Mitch McConnell has said that, in the absence of a repeal bill, the markets must be stabilized.

    So, we'll see the Republicans, who couldn't repeal Obamacare, fall over themselves to protect it.

    And Susan Collins says they must continue? Then why doesn't she demand the House pass a bill to do so then demand the Senate pass it as well?

  • Mark22||

    The president is using unconstitutional insurer subsidies as negotiating leverage.

    And this is different from the past dozen presidents... how?

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online