A New Legal Blow Against Obamacare

The federal district court sitting in D.C. yesterday handed a victory to those who believe in following statutory text, potentially halting the payment of billions of dollars to insurers under the Affordable Care Act’s entitlement “cost‐​sharing” provisions.


Since January 14, 2014, the Treasury Department has been authorizing payments of reimbursements to insurers providing Obamacare coverage. The problem is that Congress never appropriated the funds for those expenditures, so the transfers constitute yet another executive overreach.


Article I of the Constitution provides quite clearly that “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law.” The “power of the purse” resides in Congress, a principle that implements the overall constitutional structure of the separation of powers and that was noted as an important bulwark against tyranny by Alexander Hamilton in the Federalist 78.


It’s a basic rule that bears repeating: the executive branch cannot disburse funds that Congress has not appropriated.


Accordingly, in a win for constitutional governance, Judge Rosemary Collyer held in House of Representatives v. Burwell that the cost‐​sharing reimbursements authorized under the ACA’s section 1402 must be appropriated by Congress annually, and are not assumed to be appropriated.


Judge Collyer gave a biting review of the federal government’s argument in the case: “It is a most curious and convoluted argument whose mother was undoubtedly necessity.” The Department of Health and Human Services claimed that another part of the ACA that is a permanent appropriation—section 1401, which provides tax credits—also somehow included a permanent appropriation for Section 1402. Hearkening to the late Justice Scalia’s lyrical prose, Collyer explained that the government was trying to “squeeze the elephant of Section 1402 reimbursements into the mousehole of Section 1401(d)(1).”


Indeed, this ruling is a bit of a feather in Cato’s cap as well. The legal argument that prevailed here—that the section 1402 funds cannot be disbursed without congressional appropriation—first was discussed publicly at a 2014 Cato policy forum. The lawyer who came up with the idea, David Rivkin of BakerHostetler, refined it in conjunction with his colleague Andrew Grossman, also a Cato adjunct scholar who spoke at the forum. After BakerHostetler had to withdraw from the case due to a conflict, George Washington University law professor Jonathan Turley (who also spoke at the forum) took over the case.


Judge Collyer stayed her injunction against the Treasury Department pending appeal before the U.S. Court of Appeals for the D.C. Circuit. Regardless of how that court decides — as in King v. Burwell, even if there’s a favorable panel, President Obama has stacked the overall deck — the case is likely to end up before the Supreme Court. If Chief Justice Roberts sees this as a technical case (like Hobby Lobby or Zubik/Little Sisters) rather an existential one (like NFIB v. Sebelius or King), the challengers have a shot. But because Democrat‐​appointed justices simply will not interpret clear law in a way that hurts Obamacare, this case, like so much else, turns on the presidential election and the nominee who fills the current high‐​court‐​vacancy.


Whatever happens down that line, Judge Collyer’s succinct ruling makes a powerful statement in favor of constitutional separation of powers as a bulwark for liberty and the rule of law.


Update (June 2, 2016): It has come to my attention that this suit was conceived in a different manner than described above. As seen here, here, here, and here, it was Florida International University law professor Elizabeth Price Foley who conceived of the lawsuit and developed it with David Rivkin, both in terms of legal doctrine and amassing political support in the House. We’re proud to have Foley on the editorial board of the Cato Supreme Court Review.