Mini Obamacare Bailout? Treasury Covers Some Obamacare Costs Without Congressional Approval

A few weeks ago, I wrote about how Obama’s budget contained a $22 billion student loan bailout to cover a massive shortage of funds for the Department of Education Federal Student Loan program. Because the program is categorized as a “credit program”, due to a “quirk in the budget process for credit programs, the department can add the $21.8 billion to the deficit automatically, without seeking appropriations or even approval from Congress.”

Now it is being reported that the Treasury Department approved and paid for $3 billion in Obamacare costs without seeking Congressional approval. Have we uncovered another similar quirk in the federal budget process that allows for the Treasury to cover Obamacare costs that aren’t funded? We don’t actually know yet, because the letter from the Treasury which “revealed that $2.997 billion in such payments had been made in 2014”, “didn’t elaborate on where the money came from.”

Here’s what’s going on:

“At issue are payments to insurers known as cost-sharing subsidies. These payments come about because President Obama’s healthcare law forces insurers to limit out-of-pocket costs for certain low income individuals by capping consumer expenses, such as deductibles and co-payments, in insurance policies. In exchange for capping these charges, insurers are supposed to receive compensation.

What’s tricky is that Congress never authorized any money to make such payments to insurers in its annual appropriations, but the Department of Health and Human Services, with the cooperation of the U.S. Treasury, made them anyway.”

So here we have two agencies collaborating on funding for Obamacare without Congressional approval. When asked about the $3 billion by House Ways and Means Chairman [mc_name name=’Rep. Paul Ryan (R-WI)’ chamber=’house’ mcid=’R000570′ ], he received a letter which merely described the what the cost-sharing program was, without explaining anything 1) regarding how the payments came to be made, or 2) where the money came from.

What’s more, because the cost-sharing payments from the Department of Homeland Security is part of a larger lawsuit against Obama’s Executive Actions, filed by [mc_name name=’Rep. John Boehner (R-OH)’ chamber=’house’ mcid=’B000589′ ], the letter referred [mc_name name=’Rep. Tim Ryan (D-OH)’ chamber=’house’ mcid=’R000577′ ] to the Department of Justice.

It turns out that Department of Justice recently argued this topic on January 26th. In this brief the Department of Justice argued that [mc_name name=’Rep. John Boehner (R-OH)’ chamber=’house’ mcid=’B000589′ ]’s position, that the cost-sharing program payments required annual appropriation, was incorrect, “The cost sharing reduction payments are being made as part of a mandatory payment program that Congress has fully appropriated.” So the Department of Justice and the Treasury Department and the Department of Health and Human Services maintain that the payment they made was licit and Congressionally approved as part of Congressional appropriations.

However, prior budget requests and negotiations tell a different story about how Obamacare cost-sharing is funded.

“For fiscal year 2014, the Centers for Medicare and Medicaid Services (the division of Health and Human Services that implements the program), asked Congress for an annual appropriation of $4 billion to finance the cost-sharing payments that year and another $1.4 billion “advance appropriation” for the first quarter of fiscal year 2015, “to permit CMS to reimburse issuers …”

In making the request, CMS was in effect acknowledging that it needed congressional appropriations to make the payments. But when Congress rejected the request, the administration went ahead and made the payments anyway.

The argument that annual appropriations are required to make payments is also backed up by a report from the Congressional Research Service, which has differentiated between the tax credit subsidies that Obamacare provides to individuals to help them purchase insurance, and the cost-sharing payments to insurers.

In a July 2013 letter to then [mc_name name=’Sen. Tom Coburn (R-OK)’ chamber=’senate’ mcid=’C000560′ ], Congressional Research Service wrote that, “unlike the refundable tax credits, these [cost-sharing] payments to the health plans do not appear to be funded through a permanent appropriation. Instead, it appears from the President’s FY2014 budget that funds for these payments are intended to be made available through annual appropriations.”

As we are likely to not receive any answers soon regarding the $3 billion in Obamacare funding, or the source, here are some things to think about and look for as we wait:

1) How will cost-sharing be funded in this year’s budget?
2) Where did the $3 billion come from? If the $3 billion came from another agency, does that mean we have agencies who have large enough slush funds to absorb a $3 billion transfer?
3) If the $3 billion was tacked onto the deficit (like the student loan “bailout”), what does this bode for future cost-sharing payments? The Congressional Budget Office has already estimated that cost-sharing payments to insurers are expected to cost about $150 billion over the next 10 years.