DC Federal District Court: Obamacare’s Illegal Kickbacks Stealing from Taxpayers

Devon Herrick
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Posted: May 17, 2016 12:30 PM
DC Federal District Court: Obamacare’s Illegal Kickbacks Stealing from Taxpayers

The Affordable Care Act (ACA) requires all U.S. residents to enroll in health coverage. Americans with incomes too low to afford coverage qualify for premium subsidies to help them with the cost. The ACA also has provisions where Americans earning near the poverty level can receive cost-sharing reductions to assist with out-of-pocket costs below their deductibles.

Costly regulations make Obamacare coverage so expensive that the Administration has to basically give it away to make the program appear successful. Only 17 percent of Obamacare’s 12 million enrollees are paying their entire premiums. About 83 percent of enrollees qualify for premium subsidies, while around 56 percent receive both premium subsidies and cost-sharing reductions (roughly 5 million people).  

That may be about to change: the cost sharing reductions are unconstitutional. The problem is that cost-sharing subsidies are being paid, even though the funds were never appropriated by Congress. Illegally looting the treasury to make Obamacare appear like a success is both a burden for taxpayers and an abuse of presidential power. The amounts are far from trivial: taxpayers’ costs will total $7 billion in 2016 -- more than doubling to $16 billion in another 10 years.

How did this happen? When Obamacare was rammed through Congress in December 2010, it was an unfinished work-in-progress. The Congressional staffers writing the bill had inadvertently neglected to include specific provisions for the appropriations for cost sharing reductions. Ordinarily, this would have been caught and remedied during the conference committee between House and Senate versions of the bill. But the untimely death of Massachusetts Senator Edward Kennedy resulted in a Republican winning his senate seat. At that point, Obamacare proponents no longer had sufficient votes to pass a reconciled bill in the Senate. The Democrat-controlled House took the nearly unprecedented step of passing the incomplete Senate version rather than compromising with Republicans and working to pass a reconciled bill both parties could accept.

What difference does it make? Potentially a lot! The loss of cost sharing reductions could sink Obamacare if the ruling is upheld. Granted, the Obamacare ship was already taking on water. The standard plan for the purposes of subsidies is the second-lowest Silver plan. By law, it is designed to cover approximately 70 percent of its aggregate members’ medical costs after factoring in their deductibles. Cost sharing reductions raise this level to 73 percent for those at 250 percent of poverty and 87 percent for those earning twice the poverty level. It’s 94 percent for those earning just above poverty.

Let me put this into perspective. The average deductible for the standard silver plan is just over $3,000, but would drop to around $2,500 for someone earning 250 percent of poverty. For someone earning 150 percent of poverty, the cost sharing reductions would lower his or her deductible to about $700; and just over $200 for someone at the poverty level.  It’s safe to argue that someone earning between 100 percent and 250 percent of poverty ($11,880 to $29,700) would have a hard time paying $3,000 in cost-sharing before their deductible is met. Suffice it to say, a $3,000 deductible for someone at that income level makes coverage basically worthless to all but the sickest patients. 

The Republican-controlled House voted to sue the executive branch for its abuse of presidential power. On May 12, Judge Collyer of the federal district court for the District of Columbia ruled in favor of the House leadership.  However, Judge Collyer stayed her order until the Obama Administration had the opportunity to appeal.  

The way in which the Affordable Care Act was passed seems rather underhanded. The irony is that the case will now go to the U.S. Court of Appeals, District of Columbia Circuit. Supreme Court nominee, Merrick Garland, is one the judges in the D.C. Circuit Court of Appeals.  His appointment is being stonewalled by Republicans in the Senate, who are dragging their feet. Who knows? Judge Garland may have an opportunity to uphold the federal district court decision and show Congressional Republicans he plans to follow the Constitution, including its separation of powers. Or he may decide to uphold the Obamacare cost-sharing subsidies that Congress has never appropriated, illustrating a good reason to oppose his appointment.

Either way, Obamacare needs to be fixed sooner rather than later. The NCPA has outlined a list of reforms to fix health care in America. You can find them at http://www.ncpa.org/pub/ncpa-alternatives-to-obamacare.