What You Need to Know about Cost-Sharing Reductions

A PDF version of this document is available via the Texas Public Policy Foundation.

On October 12, the Trump Administration announced it would immediately terminate a series of cost-sharing reduction payments to insurers. Meanwhile policy-makers have spent time debating and discussing cost-sharing payments in the context of a “stabilization” bill for the Obamacare Exchanges. Here’s what you need to know about the issue ahead of this year’s open enrollment period, scheduled to begin on November 1.

What are cost-sharing reductions?

Cost-sharing reductions, authorized by Section 1402 of Obamacare, provide individuals with reduced co-payments, deductibles, and out-of-pocket maximum expenses.[1] The reductions apply to households who purchase Exchange coverage and have family income of between 100% and 250% of the federal poverty level (FPL, $24,600 for a family of four in 2017). The system of cost-sharing reductions remains separate from the subsidies used to discount monthly insurance premiums, authorized by Section 1401 of Obamacare.[2]

What are cost-sharing reduction payments?

The payments (also referred to as CSRs) reimburse insurers for the cost of providing the discounted policies to low-income individuals. According to the January Congressional Budget Office (CBO) baseline, those payments will total $7 billion in the fiscal year that ended on September 30, $10 billion in the fiscal year ending this coming September 30, and $135 billion during fiscal years 2018-2027.[3]

What is the rationale for CSR payments?

Insurers argue that CSR payments reimburse them for discounts that the Obamacare statute requires them to provide to consumers. However, some conservatives would argue that the cost-sharing reduction regime might not be necessary but for the myriad new regulations imposed by Obamacare. These regulations have more than doubled insurance premiums from 2013 through 2017, squeezing middle-class families.[4] Some conservatives would therefore question providing government-funded subsidies to insurers partially to offset the cost of government-imposed mandates on insurers and individuals alike.

Why are the CSR payments in dispute?

While Section 1402 of Obamacare authorized reimbursement payments to insurers for their cost-sharing reduction costs, the text of the law did not include an explicit appropriation for them. Some conservatives have argued that the Obama Administration’s willingness to make the payments, despite the lack of an explicit appropriation, violated Congress’ constitutional “power of the purse.” In deciding to terminate the CSR payments, the Trump Administration agreed with this rationale.

What previously transpired in the court case over CSR payments?

In November 2014, the House of Representatives filed suit in federal court over the CSR payments, claiming the Obama Administration violated both existing law and the Constitution, and seeking an injunction blocking the Administration from making the payments unless and until Congress grants an explicit appropriation.[5] In September 2015, Judge Rosemary Collyer of the United States District Court for the District of Columbia ruled that the House of Representatives had standing to sue, rejecting a Justice Department attempt to have the case dismissed. Judge Collyer ruled that the House as an institution had the right to redress for a potential violation of its constitutional “power of the purse.”[6]

On May 12, 2016, Judge Collyer issued her ruling on the case’s merits, concluding that no valid appropriation for the CSR payments exists, and that the Obama Administration had violated the Constitution by making payments to insurers. She ordered the payments halted unless and until Congress passed a specific appropriation—but stayed that ruling pending an appeal.[7]

How did the Obama Administration justify making the CSR payments?

In its court filings in the lawsuit, the Obama Administration argued that the structure of Obamacare implied an appropriation for CSR payments through the Treasury appropriation for premium subsidy payments—an appropriation clearly made in the law and not in dispute.[8] President Obama’s Justice Department made this argument despite the fact that CSR and premium subsidy regimes occur in separate sections of the law (Sections 1402 and 1401 of Obamacare, respectively), amend different underlying statutes (the Public Health Service Act and the Internal Revenue Code), and fall within the jurisdiction of two separate Cabinet Departments (Health and Human Services and Treasury).

The Obama Administration also argued, in court and before Congress, that it could make an appropriation because Congress had not prohibited the Administration from doing so—effectively turning the Constitution on its head, by saying the executive can spend funds however it likes unless and until Congress prohibits it from doing so.[9] In her ruling, Judge Collyer rejected those and other arguments advanced by the Obama Justice Department.

Did Congress investigate the history, legality, and constitutionality of the Obama Administration’s CSR payments to insurers?

Yes. Last year, the Ways and Means and Energy and Commerce Committees organized and released a 158-page report on the CSR payments.[10] While congressional investigators received some documents relating to the Obama Administration’s defense of the CSR payments, the report described an overall pattern of secrecy surrounding critical details—portions of documents, attendees at meetings, etc.—of the CSR issue. For instance, the Obama Administration did not fully comply with valid subpoenae issued by the committees, and attempted to prohibit Treasury appointees who volunteered to testify before committee staff from doing so. However, despite the extensive oversight work put in by two congressional committees, and the pattern of secrecy observed, neither of the committees have taken action to compel compliance, or redress the Obama Administration’s obstruction of Congress’ legitimate oversight work.

What has the Trump Administration done about the CSR payment lawsuit?

After the election, the Justice Department and the House of Representatives filed a motion with the United States Circuit Court of Appeals for the District of Columbia.[11] The parties stated that they were in negotiations to settle the lawsuit, and sought to postpone proceedings in the appeal (which the Obama Administration had filed last year). The Justice Department and the House have filed several extensions of that request with the court, but have yet to present a settlement agreement, or provide any substantive updates surrounding the issues in dispute. In announcing its decision to terminate the CSR payments, the Trump Administration said it would provide the court with a further update on October 30.

In August, the Court of Appeals granted a motion by several Democratic state attorneys general seeking to intervene in the suit (originally called House v. Burwell, and renamed House v. Price when Dr. Tom Price became Secretary of Health and Human Services).[12] The attorneys general claimed that the President’s frequent threats to settle the case, and cut off CSR payments, meant their states’ interests would not be represented during the litigation, and sought to intervene to prevent the House and the Trump Administration from settling the case amongst themselves—which could leave an injunction permanently in place blocking future CSR payments.

Upon what basis did President Trump stop the CSR payments to insurers?

Under existing law, court precedent, and constitutional principles, a determination by the executive about whether or not to make the CSR payments (or any other payment) depends solely upon whether or not a valid appropriation exists:

  • If a valid appropriation does not exist, the executive cannot disburse funds. The Anti-Deficiency Act prescribes criminal penalties, including imprisonment, for any executive branch employee who spends funds not appropriated by Congress, consistent with Article I, Section 9, Clause 7 of the Constitution: “No money shall be drawn from the Treasury but in Consequence of Appropriations made by Law.”[13]
  • If a valid appropriation exists, the executive cannot withhold funds. The Supreme Court held unanimously in Train v. City of New York that the executive cannot unilaterally impound (i.e., refuse to spend) funds appropriated by Congress, which would violate a President’s constitutional duty to “take Care that the Laws be faithfully executed.”[14]

Has a court forced President Trump to keep making the CSR payments?

No. In fact, until the Administration had announced its decision late Thursday, no one—from insurers to insurance commissioners to governors to Democratic attorneys general to liberal activists and Obamacare advocates—had filed suit seeking to force the Trump Administration to make the payments. (While the Democratic attorneys general sought, and received, permission to intervene in the House’s lawsuit, that case features the separate question of whether or not the House had standing to bring its matter to court in the first place. It is possible that appellate courts could, unlike Judge Collyer, dismiss the House’s case on standing grounds without proceeding to the merits of whether or not a valid appropriation exists.)

Given the crystal-clear nature of existing Supreme Court case law—if a valid appropriation exists, an Administration must make the payments—some would view the prolonged unwillingness by Obamacare supporters to enforce this case law in court as tacit evidence that a valid appropriation does not exist, and that the Obama Administration exceeded its constitutional authority in starting the flow of payments.

How will the decision to stop CSR payments affect individuals in Exchange plans?

In the short- to medium-term, it will not. Insurers must provide the cost-sharing reductions to individuals in qualified Exchange plans, regardless of whether or not they get reimbursed for them.

Can insurers drop out of the Exchanges immediately due to the lack of CSR payments?

No—at least not in most cases in 2017. The contract between the federal government and insurers on the federal Exchange for 2017 notes that insurers developed their products based on the assumption that cost-sharing reductions “will be available to qualifying enrollees,” and can withdraw from the Exchanges if they are not.[15] However, under the statute, enrollees will always qualify for the cost-sharing reductions—that is not in dispute. The House v. Burwell case instead involves whether or not insurers will receive federal reimbursements for providing the cost-sharing reductions to enrollees. This clause may therefore have limited applicability to withdrawal of CSR payments. It appears insurers have little ability to withdraw from Exchanges in 2017, even if the Trump Administration stops reimbursing insurers.

If insurers faced a potential unfunded obligation—providing cost-sharing reductions without federal reimbursement—to the tune of billions of dollars, how did they react to Judge Collyer’s ruling last year?

Based on their public filings and statements, several did not appear to react at all. While Aetna and Centene referenced loss of CSR payments as impacting their firms’ outlooks and risk profiles in their first Securities and Exchange Commission (SEC) quarterly filings after Judge Collyer’s ruling, most other companies ignored the potential impact until earlier this year.[16] Some carriers have given decidedly mixed messages on the issue—for instance, as Anthem CEO Joseph Swedish claimed on his company’s April 26 earnings call that lack of CSR payments would cause Anthem to seek significant price hikes and/or drop out of state Exchanges,[17] his company’s quarterly SEC filing that same day indicated no change in material risks, and no reference to the potential disappearance of CSR payments.[18]

Even before Judge Collyer’s ruling in May 2016, one could have easily envisioned a scenario whereby a new President in January 2017 stopped defending the CSR lawsuit, and immediately halted the federal CSR payments: “Come January 2017, the policy landscape for insurers could look far different” than in mid-2016.[19] However, despite public warnings to said effect—and the apparent lack of public statements by either Donald Trump or Hillary Clinton to continue the CSR payments should they win the presidency—insurers apparently assumed maintenance of the status quo, disregarding these potential risks when bidding to offer Exchange coverage in 2017.

Did insurance regulators fail to anticipate or plan for changes to CSR payments following Judge Collyer’s ruling?

It appears that many did. For instance, the office of California’s state insurance commissioner reported having no documents—not even a single e-mail—analyzing the impact of Judge Collyer’s May 2016 ruling on insurers’ bids for the 2017 plan year.[20] Likewise, California’s health insurance Exchange disclosed only two relevant documents: A brief e-mail sent months after the state finalized plan rates for the 2017 year, and a more detailed legal analysis of the issues surrounding CSR payments—but one not undertaken until mid-November, after Donald Trump won the presidential election.[21]

Some conservatives may be concerned that insurance commissioners’ failure to examine the CSR payment issue in detail—when coupled with insurers’ similar actions—represents the same failed thinking that caused the financial crisis. That herd behavior—an insurer business model founded upon a new Administration continuing unconstitutional actions, and regulators blindly echoing insurers’ assumptions—represents the same “too big to fail” mentality that brought us a subprime mortgage scandal, a massive financial crash on Wall Street, a period of prolonged economic stagnation, and a taxpayer-funded bailout of big banks.

How can Congress restore its Article I power?

With respect to the CSR payments, conservatives looking to restore its Article I power—as Speaker Ryan recently claimed he wanted to do by maintaining the debt limit as the prerogative of Congress—could take several appropriate actions:[22]

  • Insist on a settlement of the lawsuit in the House’s favor, consistent with the last Congress’ belief that 1) Obamacare lacks a valid appropriation for CSR payments and 2) decisions regarding appropriations always rest with Congress, and not the executive;
  • Ask the Justice Department to investigate whether any Obama Administration officials violated the Anti-Deficiency Act by making CSR payments without a valid congressional appropriation; and
  • Insist on enforcement of the subpoenae issued by the House Ways and Means and Energy and Commerce Committees during the last Congress, and pursue contempt of Congress charges against any individuals who fail to comply.

How can Congress exercise its oversight power regarding the CSR payments?

Before even debating whether or not to create a valid appropriation for the CSR payments, Congress should first examine in great detail whether and why insurers and insurance commissioners ignored the issue in 2016 (and prior years); any potential changes to remedy an apparent lack of oversight by insurance commissioners; and appropriate accountability for any unconstitutional and illegal actions as outlined above.

Some conservatives may be concerned that, by blindly making a CSR appropriation without conducting this critically important oversight, Congress would make a clear statement that Obamacare is “too big to fail.” Such a scenario—in addition to creating a de facto single-payer health care system—would, by establishing a government backstop for insurers’ risky behaviors, bring about additional, and potentially even larger, bailouts in the future.

What are the implications of providing CSR payments to insurers?

Given the way in which many insurers and insurance regulators blindly assumed cost-sharing reduction payments would continue, despite the lack of an express appropriation in the law, some conservatives may be concerned that making CSR payments would exacerbate moral hazard. Specifically, when filing their rates for the 2017 plan year, insurers appear to have assumed they would receive over $7 billion in CSR payments—despite the uncertainty surrounding 1) the lack of a clear CSR appropriation in the statute; 2) the May 2016 court ruling calling the payments unconstitutional; 3) the unknown outcome of the 2016 presidential election; and 4) the apparent lack of a firm public commitment by either major candidate in the 2016 election to continue the CSR payments upon taking office in January 2017.

Some conservatives may therefore oppose rewarding this type of reckless behavior by granting them the explicit taxpayer subsidies they seek, for fear that it would only encourage additional irresponsible risk-taking by insurance companies—and raise the likelihood of an even larger taxpayer-funded bailout in the future.

How can Congress solve the larger issue of CSRs creating an unfunded mandate on insurance companies absent an explicit appropriation?

One possible way would involve elimination of Obamacare’s myriad insurance regulations, which have led to insurance premiums more than doubling in the individual market over the past four years.[23] Repealing these new and costly regulations would lower insurance premiums, reducing the need for cost-sharing reductions, and allowing Congress to consider whether to eliminate the CSR regime altogether.


[1] 42 U.S.C. 18071, as created by Section 1402 of the Patient Protection and Affordable Care Act, P.L. 111-148.
[2] 26 U.S.C. 36B, as created by Section 1401 of PPACA.
[3] Congressional Budget Office, January 2017 baseline for coverage provisions of the Patient Protection and Affordable Care Act, https://www.cbo.gov/sites/default/files/recurringdata/51298-2017-01-healthinsurance.pdf, Table 2.
[4] Department of Health and Human Services Office of Planning and Evaluation, “Individual Market Premium Changes: 2013-2017,” ASPE Data Point May 23, 2017, https://aspe.hhs.gov/system/files/pdf/256751/IndividualMarketPremiumChanges.pdf.
[5] The House’s original complaint, filed November 21, 2014, can be found at https://jonathanturley.files.wordpress.com/2014/11/house-v-burwell-d-d-c-complaint-filed.pdf.
[6] Judge Collyer’s ruling on motions to dismiss, dated September 9, 2015, can be found at https://docs.justia.com/cases/federal/district-courts/district-of-columbia/dcdce/1:2014cv01967/169149/41.
[8] Links to the filings at the District Court level can be found at https://dockets.justia.com/docket/district-of-columbia/dcdce/1:2014cv01967/169149.
[9] Testimony of Mark Mazur, Assistant Secretary for Tax Policy, before the House Ways and Means Oversight Subcommittee hearing on “Cost Sharing Reduction Investigation and the Executive Branch’s Constitutional Violations,” July 7, 2016, https://waysandmeans.house.gov/event/hearing-cost-sharing-reduction-investigation-executive-branchs-constitutional-violations/.
[10] House Energy and Commerce and House Ways and Means Committees, “Joint Congressional Investigative Report into the Source of Funding for the ACA’s Cost Sharing Reduction Program,” July 7, 2016, https://waysandmeans.house.gov/wp-content/uploads/2016/07/20160707Joint_Congressional_Investigative_Report-2.pdf
[13] The statutory prohibition on executive branch employees occurs at 31 U.S.C. 1341(a)(1); 31 U.S.C. 1350 provides that any employee knowingly and willfully violating such provision “shall be fined not more than $5,000, imprisoned for not more than two years, or both.”
[14] Train v. City of New York, 420 U.S. 35 (1975).
[15] Qualified Health Plan Agreement between issuers and the Centers for Medicare and Medicaid Services for 2017 plan year, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Plan-Year-2017-QHP-Issuer-Agreement.pdf, V.b, “Termination,” p. 6.
[16] Aetna Inc., Form 10-Q Securities and Exchange Commission filing for the second quarter of calendar year 2016, http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1hSFIwY0RvdkwyRndhUzUwWlc1cmQybDZZWEprTG1OdmJTOWtiM2R1Ykc5aFpDNXdhSEEvWVdOMGFXOXVQVkJFUmlacGNHRm5aVDB4TVRBMk5qa3hOQ1p6ZFdKemFXUTlOVGM9JnR5cGU9MiZmbj1BZXRuYUluYy5wZGY=
p. 44; Centene, Inc., Form 10-Q Securities and Exchange Commission filing for the second quarter of calendar year 2016, https://centene.gcs-web.com/static-files/23fd1935-32de-47a8-bc03-cbc2c4d59ea6, p. 42.
[17] Transcript of Anthem, Inc. quarterly earnings call for the first quarter of calendar year 2017, April 26, 2017, http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NjY3NTM5fENoaWxkSUQ9Mzc1Mzg1fFR5cGU9MQ==&t=1, p. 5.
[19] Chris Jacobs, “What if the Next President Cuts Off Obamacare Subsidies to Insurers?” Wall Street Journal May 5, 2016, https://blogs.wsj.com/washwire/2016/05/05/what-if-the-next-president-cuts-off-obamacare-subsidies/.
[20] Chris Jacobs, “Don’t Blame Trump When Obamacare Rates Jump,” Wall Street Journal June 16, 2017, https://www.wsj.com/articles/dont-blame-trump-when-obamacare-rates-jump-1497571813.
[21] Covered California response to Public Records Act request, August 25, 2017.
[22] Burgess Everett and Josh Dawsey, “Trump Suggested Scrapping Future Debt Ceiling Votes to Congressional Leaders,” Politico September 7, 2017, http://www.politico.com/story/2017/09/07/trump-end-debt-ceiling-votes-242429.
[23] HHS, “Individual Market Premium Changes: 2013-2017.”

Insurance Commissioners’ CSR Malpractice

Today, a Senate committee hearing will feature testimony from insurance commissioners about the status of Obamacare in their home states. It will undoubtedly feature pleas from those commissioners for billions of new dollars in federal funds to subsidize insurance markets. But before Congress spends a single dime, it should take a hard look at insurance commissioners’ compliance with their regulatory duties regarding Obamacare. On several counts, preliminary results do not look promising.

Of particular issue at today’s hearing, and in health insurance markets generally: Federal payments to insurers for cost-sharing reductions, discounts on co-payments, and deductibles provided to certain low-income individuals. Obamacare authorized those payments to insurers, but did not include an appropriation for them. Despite lacking an explicit appropriation, the Obama administration started making the payments anyway when the exchanges began operation in 2014.

By the middle of 2016, it seemed clear that the cost-sharing reduction payments lay in significant jeopardy. While the federal district court allowed the payments to continue during the Obama administration’s appeal, a final court ruling could strike them down permanently. Moreover, a new administration would commence in January 2017, and could stop the payments immediately. And neither Hillary Clinton nor Donald Trump had publicly committed to maintaining the insurer payments upon taking office.

Let’s Let the Problem Fester to Put Trump in a Bind

How did insurance commissioners respond to this growing threat to the cost-sharing reduction payments? In at least some cases, they did nothing. For instance, in response to my public records request, the office of Dave Jones, California’s insurance commissioner, admitted that it had no documents examining the impact of last May’s court ruling on the 2017 plan bid year.

To call this lack of analysis regarding cost-sharing reductions malfeasance would put it mildly. A new president could easily have cut off those payments—payments totaling $7 billion this fiscal year—unilaterally on January 20. Yet the regulator of the state’s largest insurance market had not so much as a single e-mail considering this scenario, nor examining what his state would do in such an occurrence.

Break the Law to Fund Our Political War Against You

Indeed, insurance commissioners who remained silent last year about cost-sharing reduction payments have responded this year in alarming fashion. The commissioners’ trade association wrote to the Trump administration in May asking them “to continue full funding for the cost-sharing reduction payments for 2017 and make a commitment that such payments will continue.”

The insurance commissioners essentially demanded the Trump administration violate the Constitution. Article I, Section 9, Clause 7 of the Constitution grants Congress the sole power to appropriate funds, and the Supreme Court in a prior case (Train v. City of New York) ruled that the executive cannot thwart that will by declining to spend funds already appropriated. Under the Constitution, a president cannot spend money, or refuse to spend money, unilaterally—but that’s exactly what the insurance commissioners requested.

By implicitly conceding the unconstitutional actions by the Obama administration, and asking the Trump administration to continue those acts, the commissioners’ own letter exposes their dilemma. Why did commissioners ever assume the stability of a marketplace premised upon unconstitutional actions? And why did commissioners purportedly committed to the rule of law ask for those unconstitutional actions to continue?

This post was originally published at The Federalist.

How Donald Trump Created the Worst of All Possible Health Care Worlds

Following last week’s developments in the ongoing saga over Obamacare’s cost-sharing reduction (CSR) payments, two things seem clear. First, President Trump won’t stop making these payments to insurers, designed to reimburse them for providing reduced deductibles and copayments to low-income individuals. If Trump’s administration continued to pay CSRs to insurers mere weeks after the Obamacare “repeal-and-replace” effort collapsed on the Senate floor, it should be fairly obvious that this president won’t cut off the payments.

Second, notwithstanding the above, Trump won’t stop threatening to halt these payments any time soon. Seeing himself as a negotiator, Trump won’t cede any leverage by committing to make future payments, trying to keep insurance companies and Democrats in suspense and extract concessions from each. He has received no concessions from Democrats, and he likely has no intentions of ever stopping the payments, but will continue the yo-yo approach for as long as he thinks it effective—in other words, until the policy community fully sees it as the empty threat that it is.

President Trump Is Savaging the Constitution

From a constitutional perspective, Trump’s approach to CSRs undermines the rule of law. The president referred to the payments in a May interview with The Economist, stating that “If I ever stop wanting to pay the subsidies, which I will [sic].”

But as any conservative will explain (and this space previously outlined), the president cannot stop making any payments unilaterally. The Supreme Court ruled unanimously in Train v. City of New York that if a law makes a constitutional appropriation, the president cannot refuse to spend the money. He must make the appropriation. Conversely, if the law lacks an appropriation, the president cannot spend money—that prerogative lies with Congress, as per Article I, Section 9, Clause 7 of the Constitution.

Judge Rosemary Collyer ruled last May that Obamacare lacks an appropriation for the cost-sharing reduction payments. If the president agrees, he should stop the payments immediately. If the president disagrees, he should continue the Obama administration’s appeal of that ruling, and commit to making payments unless and until the Supreme Court orders him to stop. Instead, the president has treated the payments—and thus the Constitution—as his personal plaything, which he can obey or disregard on his whim.

This Policy ‘Uncertainty’ Has Consequences

Having under-estimated their risk before this year, many insurers have over-estimated their risk now. Carriers have threatened higher premium increases, or reduction in service areas, because they finally recognize the inherent uncertainty around CSR payments lacking an explicit appropriation in statute.

Insurers’ cries of “uncertainty” have joined chorus with liberals’ claims of “sabotage” against the Trump administration. The same liberal groups and advocates who failed to recognize the uncertainty last year—because higher premiums for 2017 would have hurt Hillary Clinton and Democrats during last fall’s elections—now almost gleefully embrace the concept, believing it can benefit them politically.

Therein lies the full scope of the political danger for Trump and Republicans. It seems obvious that Trump will continue to make the payments to insurers. But it seems equally obvious that Trump enjoys keeping insurers on the proverbial short leash, and won’t give them the “certainty” over the payments that they desire. The end result: An administration that receives political blame from the Right for making unconstitutional payments, and from the Left for “uncertainty”-related premium increases, because Trump has not confirmed those unconstitutional payments will continue.

Rule of Law, Not of Men

But in an ironic twist, the political benefit from creating this unilateral policy could accrue to Democrats, if Republicans receive fallout from higher premiums in 2018. Perhaps that outcome could persuade both parties to abandon the executive unilateralism that has become far too common in recent administrations. Restoring the rule of law seems like such a simple, yet novel, concept that some enterprising politicians in Washington might want to try it.

This post was originally published at The Federalist.

The Implications of Trump and Schumer’s Argument over Cost-Sharing Reduction Payments

Leaders in both parties engaged in rhetorical bluster over the weekend regarding Obamacare’s cost-sharing reductions. Those payments to insurers for lowering deductibles and co-payments—ruled unconstitutional by a federal district court judge last May—remain in political limbo, and a subject of no small controversy.

But the rhetorical exchanges yielded inconvenient truths, both for Democratic leaders demanding the Trump administration continue the payments, and for the president himself, who has threatened to stop them.

Schumer: If the Payments Are Constitutional, Trump Can’t Withhold Them

Schumer therefore implicitly admitted—as elsewhere—that the payments are not only illegal, but unconstitutional. Obamacare lacks an explicit appropriation for the cost-sharing reduction payments. That’s the reason Judge Rosemary Collyer ruled the Obama administration’s actions in making said payments unconstitutional last year. (The ruling is currently stayed pending appeals.)

As one summary of the case noted, Train v. City of New York established the principle that “the President cannot frustrate the will of Congress by killing a program through impoundment.” Yet Schumer, in asking the Trump administration to continue making payments to a program that Congress never funded in the first place, wants the executive unilaterally—and unconstitutionally—to frustrate the expressed will of the legislative branch, thereby diminishing Schumer’s own authority as a lawmaker.

It’s highly likely Schumer, a lawyer who spent several years serving on both the House and Senate judiciary committees, knows full well the nature of unconstitutional actions, begun by the last administration, that he wants the current one to continue. But if he wants to have any credibility on the rule of law—whether criticizing the Trump administration’s other “abuses,” or standing up for the independence of the Russia investigation—he would be wise to 1) admit that the Obama administration violated the Constitution in making the payments to begin with and 2) hold the last administration just as accountable as he wants to hold the current president.

Trump: Upholding the Constitution Is a Choice

But for the president, as for Schumer, the question of the cost-sharing reduction payments should come down to a binary choice: Does a lawful appropriation for CSRs exist, or not? If a lawful appropriation exists, then the president must make the payments, consistent with Train v. City of New York outlined above. If a lawful appropriation does not exist, then the president must not make the payments, consistent with both Article 1, Section 9, Clause 7 of the Constitution—“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law”—his duty to “take Care that the laws be faithfully executed,” and his oath of office.

This conservative believes President Trump should have cancelled the CSR payments within days of taking office, not because it would have been popular—it likely would not have been—but because the rule of law demands it. Likewise, President Trump should have long since undone billions of dollars in reinsurance payments to insurers that the Government Accountability Office found illegal, and cancelled the “grandmothered” plans President Obama allowed some individuals to keep in 2014—violating his constitutional duty to “take Care that the laws be fully executed” in the process.

Making a clean break with the numerous legal and constitutional violations the Obama administration perpetrated to keep Obamacare afloat early in his administration would have demonstrated President Trump’s desire to escape the executive unilateralism of his predecessor.

Government of Laws, Or of Men?

That Barack Obama, a constitutional law professor, bequeathed such legal gamesmanship and a culture of inherently arbitrary actions to both parties stands as one element of his legacy. As the debate this weekend demonstrated, that legacy has affected—and infected—our constitutional discourse, and not for the better.

This post was originally published in The Federalist.

Stop Bailing Out Obamacare

Last Tuesday’s announcement by UnitedHealthGroup, the nation’s largest health insurer, that it will dramatically scale back participation on Obamacare’s exchanges next year illustrates the law’s inherent flaws. Obamacare isn’t too big to fail, but it is too big, and it is failing; more bailouts will not solve the problem.

Even as the remaining Republican presidential candidates put forward their specific ideas for a conservative alternative to Obamacare, they should immediately declare—as health insurers prepare their bids for the 2017 plan year—that they will halt the tide of taxpayer funds the Obama administration continues to shovel insurers’ way.

With enrollment in exchanges dramatically below initial projections, and enrollees sicker than average, those insurers face mounting Obamacare losses. In 2014, insurers lost a collective $4 billion selling individual health insurance, and likely lost a similar amount last year. UnitedHealthCare said it would scale back its Obamacare involvement after losing more than $1.1 billion in the individual insurance market the past two years.

Cut the Cost-Sharing Subsidies

Congressional oversight has exposed health insurers lobbying for what amounts to a cash-for-clunkers swap, in which only additional taxpayer funds will keep them in the exchange game. Thus far, attention has focused largely on the temporary transition programs created for the exchanges’ first three years—reinsurance and risk corridors—and the way in which the administration has flouted the plain text of the law to sweeten those pots for insurers.

The administration has flouted the plain text of the law to sweeten those pots for insurers.

But if Jesse James went where the money was, he would focus on Obamacare’s cost-sharing subsidies—a permanent program, unlike risk corridors and reinsurance. This program, intended to reimburse insurers for reductions they make in certain low-income individuals’ deductibles and co-payments, comes with a significant catch: The text of the law nowhere appropriates funds for the subsidies—and Congress has not done so since.

In 2013, the administration initially accepted that Obamacare contains no explicit appropriation for cost-sharing subsidies; it requested new funding from Congress, and conceded these subsidies, if funded, would be subject to a budget sequester. Months later, however, the administration started paying cost-sharing subsidies to insurers. It now claims that Congress provided an appropriation for the cost-sharing subsidies by funding the law’s premium subsidies.

That premise defies the plain text of the law, which pays the subsidies to different entities. (Individuals qualify for premium subsidies, whereas insurers receive cost-sharing subsidies.) The House of Representatives, protecting its “power of the purse,” has sued the administration for violating the Constitution by spending funds never appropriated; oral arguments in district court in Washington are pending.

We Spend What We Want

Irrespective of the status of litigation against the Obama administration in January 2017, a future Republican administration can—and should—turn off the taps of unappropriated funds for the cost-sharing subsidies. According to the Congressional Budget Office, Washington will spend $130 billion on cost-sharing subsidies in the coming decade—all without an express appropriation from Congress.

Washington will spend $130 billion on cost-sharing subsidies in the coming decade—all without an express appropriation from Congress.

Lest any argue that cutting off these funds qualifies as an Obama-esque use of imperial power, such a move would actually represent constitutional modesty—the executive deferring to Congress on whether to spend taxpayer dollars. In 1975, a unanimous Supreme Court ruling in Train v. City of New York meant that “[t]he President cannot frustrate the will of Congress by killing a program through impoundment”—that is, the executive failing to spend funds appropriated by Congress. Surely the inverse premise—that the president cannot frustrate congressional will by spending funds never appropriated—should likewise apply.

Both Donald Trump, who prides himself on not being beholden to special interests, and Ted Cruz, famous for his 2013 fight to defund Obamacare, have every reason to stop the flow of billions of dollars in unappropriated taxpayer funds. Moreover, by pledging to administer the law as actually written—as opposed to how the Obama administration has unilaterally rewritten it to help insurers—they would show its unworkable nature. Insurers must submit their 2017 plan bids by May 11, but few would do so if they knew they would not receive an estimated $9 billion in cost-sharing subsidies next year—funds Congress never appropriated in the first place.

Like a patient in intensive care, President Obama continues to administer billions of dollars to insurers as a form of fiscal morphine, hoping upon hope the cash infusions can tide them over until the exchanges reach a condition approaching health. But only markets, and not more taxpayer money, will turn this ailing patient around. Republican candidates should, sooner rather than later, pledge to end the morphine drip on Day One, and outline the prescription for freedom they would put in its place.

This post was originally published at The Federalist.