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United States House of Representatives v. Burwell

United States District Court, District of Columbia

May 12, 2016

SYLVIA MATTHEWS BURWELL in her official capacity as Secretary of the United States Department of Health and Human Services, et al., Defendants.


ROSEMARY M. COLLYER, United States District Judge.

This Court previously held that the U.S. House of Representatives "has standing to pursue its allegations that the Secretaries of Health and Human Services and of the Treasury violated Article I, § 9, cl. 7 of the Constitution when they spent public monies that were not appropriated by the Congress." U.S. House of Reps. v. Burwell, 130 F.Supp. 3d 53, 81 (D.D.C. 2015). The merits of that claim are now before the Court.

This case involves two sections of the Affordable Care Act: 1401 and 1402. Section 1401 provides tax credits to make insurance premiums more affordable, while Section 1402 reduces deductibles, co-pays, and other means of "cost sharing" by insurers. Section 1401 was funded by adding it to a preexisting list of permanently-appropriated tax credits and refunds. Section 1402 was not added to that list. The question is whether Section 1402 can nonetheless be funded through the same, permanent appropriation. It cannot.

"If the statutory language is plain, we must enforce it according to its terms." Kingv. Burwell, 135 S.Ct. 2480, 2489 (2015). Although the "meaning-or ambiguity-of certain words or phrases may only become evident when placed in context, " id, the statutory provisions in this case are clear in isolation and in context. The Affordable Care Act unambiguously appropriates money for Section 1401 premium tax credits but not for Section 1402 reimbursements to insurers. Such an appropriation cannot be inferred. None of Secretaries’ extra-textual arguments-whether based on economics, “unintended” results, or legislative history-is persuasive. The Court will enter judgment in favor of the House of Representatives and enjoin the use of unappropriated monies to fund reimbursements due to insurers under Section 1402. The Court will stay its injunction, however, pending appeal by either or both parties.


The merits are fully briefed and ripe for resolution.[1] The following facts are undisputed.

A. Constitutional Background

Congress passes all federal laws in this country. U.S. Const. art. I, § 1 (“All legislative Powers herein granted shall be vested in a Congress of the United States[.]”). Those “Powers” includes sole authority to adopt laws that authorize the expenditure of public monies and laws that appropriate those monies. Authorization and appropriation by Congress are nonnegotiable prerequisites to government spending: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . . .” Id. art. I, § 9, cl. 7; see also United States v. MacCollom, 426 U.S. 317, 321 (1976) (“The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress.”). The distinction between authorizing legislation and appropriating legislation is relevant here and bears some discussion.

Authorizing legislation establishes or continues the operation of a federal program or agency, either indefinitely or for a specific period. GAO Glossary at 15.[2] Such an authorization may be part of an agency or program’s organic legislation, or it may be entirely separate. Id. No money can be appropriated until an agency or program is authorized, although authorization may sometimes be inferred from an appropriation itself. Id.

Appropriation legislation “provides legal authority for federal agencies to incur obligations and to make payments out of the Treasury for specified purposes.” Id. at 13. Appropriations legislation has “the limited and specific purpose of providing funds for authorized programs.” Andrus v. Sierra Club, 442 U.S. 347, 361 (1979) (quoting TVA v. Hill, 437 U.S. 153, 190 (1978)). An appropriation must be expressly stated; it cannot be inferred or implied. 31 U.S.C. § 1301(d) (“A law may be construed to make an appropriation out of the Treasury . . . only if the law specifically states that an appropriation is made.”). It is well established that “a direction to pay without a designation of the source of funds is not an appropriation.” U.S. Government Accounting Office, GAO-04-261SP, Principles of Federal Appropriations Law (Vol. I) 2-17 (3d ed. 2004) (GAO Principles). The inverse is also true: the designation of a source, without a specific direction to pay, is not an appropriation. Id. Both are required. See Nevada, 400 F.3d at 13-14. An appropriation act, “like any other statute, [must be] passed by both Houses of Congress and either signed by the President or enacted over a presidential veto.” GAO Principles at 2-45 (citing Friends of the Earth v. Armstrong, 485 F.2d 1, 9 (10th Cir. 1973); Envirocare of Utah, Inc. v. United States, 44 Fed.Cl. 474, 482 (1999)).

Appropriations come in many forms. A “permanent” or “continuing” appropriation, once enacted, makes funds available indefinitely for their specified purpose; no further action by Congress is needed. Nevada, 400 F.3d at 13; GAO Principles at 2-14.[3] A “current appropriation, ” by contrast, allows an agency to obligate funds only in the year or years for which they are appropriated. GAO Principles at 2-14. Current appropriations often give a particular agency, program, or function its spending cap and thus constrain what that agency, program, or function may do in the relevant year(s). Most current appropriations are adopted on an annual basis and must be re-authorized for each fiscal year. Such appropriations are an integral part of our constitutional checks and balances, insofar as they tie the Executive Branch to the Legislative Branch via purse strings.

B. Statutory Background

On December 24, 2009, H.R. 3590 (111th Cong. 2009), as amended and retitled “Patient Protection and Affordable Care Act, ” passed the Senate by a vote of 60-39. On March 21, 2010, the House agreed to the Senate amendments by a vote of 219-212. On March 23, 2010, H.R. 3590, as agreed to by both the Senate and the House, was signed into law by the President. See Pub. L. No. 111-148, 124 Stat. 119 (2010) (ACA).[4] The ACA enacted a host of reforms and programs; two are relevant here.

1. Section 1401 (“Refundable Tax Credit Providing Premium Assistance for Coverage under a Qualified Health Plan”)

The thrust of Section 1401 was to add a new section to the Internal Revenue Code: 26 U.S.C. § 36B. See ACA § 1401(a). Section 36B provides in principal part that “there shall be allowed as a credit against the [income] tax imposed by this subtitle for any taxable year an amount equal to the premium assistance credit amount of the taxpayer for the taxable year.” 26 U.S.C. § 36B(a). Those taxpayers “whose household income for the taxable year equals or exceeds 100 percent but does not exceed 400 percent of an amount equal to the poverty line for a family of the size involved” are entitled to tax credits to cover their health insurance premiums. 26 U.S.C. § 36B(c). Section 1401 is codified in the Internal Revenue Code, not in Title 42.[5]

The appropriation for Section 1401 premium tax credits was made in Title 31 of the U.S. Code, “Money and Finance, ” which also sets out basic rules of federal appropriations. At 31 U.S.C. § 1301(d), the statute specifies that “[a] law may be construed to make an appropriation out of the Treasury . . . only if the law specifically states that an appropriation is made.” At 31 U.S.C. § 1324, the law provides for “Refund of internal revenue collections.” Specifically, it appropriates to the Secretary of the Treasury “[n]ecessary amounts . . . for refunding internal revenue collections as provided by law.” Id.

The parties agree that 31 U.S.C. § 1324 constitutes a permanent appropriation for Section 1401 premium tax credits. Specifically, the ACA amended § 1324(b) so that it reads:

Disbursements may be made from the appropriation made by this section only for-
(1) refunds to the limit of liability of an individual tax account; and
(2) refunds due from credit provisions of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) enacted before January 1, 1978, or enacted by the Taxpayer Relief Act of 1997, or from section 25A, 35, 36, 36A, 36B, 168(k)(4)(F), 53(e), 54B(h), or 6431 of such Code, or due under section 3081(b)(2) of the Housing Assistance Tax Act of 2008.

31 U.S.C. 1324(b) (emphasis on term added by ACA § 1401(d)). Put simply, ACA tax credits to subsidize health insurance for eligible taxpayers are permanently funded via the reference to “36B” in 31 U.S.C. § 1324(b)(2).

2. Section 1402 (“Reduced Cost-Sharing for Individuals Enrolling in Qualified Health Plans”)

Section 1402 of the ACA provides that “[i]n the case of an eligible insured enrolled in a qualified health plan-(1) the Secretary shall notify the issuer of the plan of such eligibility; and (2) the issuer shall reduce the cost-sharing under the plan at the level and in the manner specified in subsection (c).” ACA § 1402(a). Cost sharing includes “deductibles, coinsurance, copayments, or similar charges.” ACA § 1302(c)(3)(A)(i). Section 1402 thus requires insurers offering qualified health plans through ACA Exchanges to reduce deductibles, coinsurance, copayments, and similar charges for eligible insured individuals enrolled in their plans. These reductions are referred to in the ACA as “cost-sharing reductions.” See, e.g., ACA §§ 1331(d)(3)(A)(i), 1402(c)(3)(B), 1412(c)(3).

The insurers are supposed to get their money back. See ACA § 1402(c)(3)(A) (“An issuer of a qualified health plan making reductions under this subsection shall notify the Secretary [of HHS] of such reductions and the Secretary shall make periodic and timely payments to the issuer equal to the value of the reductions.”). Nothing in Section 1402 prescribes a “periodic and timely payment[]” process, however. Nor does Section 1402 condition the insurers’ obligations to reduce cost sharing on the receipt of offsetting payments.[6]

To qualify for reduced cost sharing, an individual must enroll in a qualified health plan and have a household income that “exceeds 100 percent but does not exceed 400 percent of the poverty line for a family of the size involved.” 42 U.S.C. § 18071(b)(2).[7] Individuals with income between 100 and 250 percent of the poverty line qualify for an “additional reduction.” Id. § 18071(c)(2).[8] Eligibility for premium tax credits under Section 1401 is also a prerequisite to receiving cost-sharing reductions under Section 1402. See ACA § 1402(f)(2) (“No cost-sharing reduction shall be allowed under this section . . . unless . . . a credit is allowed to the insured . . . under section 36B of [the Internal Revenue] Code.”).

Section 1402 is codified not in the Internal Revenue Code, but in Title 42, which includes federal laws concerning “Public Health and Welfare.” Title 42 includes such programs as Social Security, Medicare, Medicaid, and most of the ACA.

3. Section 1412 (“Advance Determination and Payment of Premium Tax Credits and Cost-Sharing Reductions”)

Section 1412 of the ACA requires the Secretaries to consult and establish a program under which eligibility determinations are made in advance “for the premium tax credit allowable under section 36B of the Internal Revenue Code of 1986 and the cost-sharing reductions under section 1402.” ACA § 1412(a)(1). After the Secretary of HHS tells the Secretary of the Treasury and the pertinent Exchange who is eligible for either benefit, Treasury “makes advance payments of such credit or reductions to the issuers of the qualified health plans [on such Exchange] in order to reduce the premiums payable by individuals eligible for such credit.” Id. § 1412(a)(3).

C. Other Relevant Background

During deliberations over the ACA, the Congressional Budget Office (CBO) scored Section 1402’s cost-sharing reductions as “direct spending.” See, e.g., Sec’y Mot., Ex. 6, Letter of Douglas W. Elmendorf, Director, CBO to the Hon. Nancy Pelosi, (Mar. 20, 2010) [Dkt. 55-8] (CBO Ltr.) at tbl. 2 (listing “Premium and Cost Sharing Subsidies” as “direct spending”), reprinted in Cong. Budget Office, Selected CBO Publications Related to Health Care, 2009-2010 at 20 (Dec. 2010)); CBO Ltr. at tbl. 4 (including “Exchange Subsidies & related spending” in estimating effect of ACA on the federal deficit).

During the same deliberations, several members of Congress described Sections 1401 and 1402 as costing “500 billion dollars, ” an estimate that almost certainly combined the costs of Section 1401’s premium tax credits and Section 1402’s cost-sharing reimbursements. See 156 Cong. Rec. S2069, S2081 (Mar. 25, 2010) (Sen. Durbin) (“$500 billion of tax cuts and cost-sharing”); 155 Cong. Rec. S12565, S12576 (Dec. 7, 2009) (Sen. Enzi) (“this bill will commit the Federal Treasury to paying for these new subsidies for the uninsured forever”); 156 Cong. Rec. H1891, H1898 (Mar. 21, 2010) (Rep. Paulsen) (“$500 billion … [in] new entitlement spending”); 156 Cong. Rec. H1891, H1910 (Mar. 21, 2010) (Rep. Diaz-Balart) (“half a trillion dollars . . . [for] a massive new entitlement program”).

On April 10, 2013, the Office of Management and Budget (OMB) submitted the President’s Fiscal Year 2014 Budget of the U.S. Government. Budget [Dkt. 30-1].[9] The Appendix to the FY 2014 Budget Request contained “more detailed financial information on individual programs and appropriation accounts than any of the other budget documents.” App. to Budget [Dkt. 30-2] at 3. The Appendix included, among other things, “explanations of the work to be performed and the funds needed.” Id. In the FY 2014 Budget Appendix, the Administration requested the following:

For carrying out, except as otherwise provided, sections 1402 [Reduced Cost-Sharing] and 1412 [Advanced Payments] of the Patient Protection and Affordable Care Act (Public Law 111-148), such sums as necessary. For carrying out, except as otherwise provided, such sections in the first quarter of fiscal year 2015 (including upward adjustments to prior year payments), $1, 420, 000, 000.

Id. at 448.

On the same day, HHS separately submitted to the relevant appropriations committees in the House and Senate a Justification of Estimates for Appropriations Committees. Justification [Dkt. 30-3]. In that document, the Centers for Medicare and Medicaid Services (CMS) explained:

The FY 2014 request for Reduced Cost Sharing for Individuals Enrolled in Qualified Health Plans is $4.0 billion in the first year of operations for Health Insurance Marketplaces, also known as Exchanges. CMS also requests a $1.4 billion advance appropriation for the first quarter of FY 2015 in this budget to permit CMS to reimburse issuers who provided reduced cost-sharing [under Section 1402] in excess of the monthly advanced payments received in FY 2014 through the cost-sharing reduction reconciliation process.

Id. at 7. In its conclusion, HHS referred to “Cost-Sharing Reductions” as one of “five annually-appropriated accounts.” Id. In a later graphic entitled “Reduced Cost Sharing, ” HHS listed “--” under “Budget Authority” for “FY 2013 Current Law, ” id. at 184. The chart reflects a view by HHS and OMB that no prior appropriation funded Section 1402 reduced cost sharing.[10] HHS compared the Section 1402 program to “other appropriated entitlements such as Medicaid.” Id.

On May 17, 2013, the Administration submitted a number of amendments to the FY 2014 Budget Request. See Amendments [Dkt. 30-4]. The Secretaries acknowledge that neither these amendments, nor any other post-budget submission, withdrew the request for an annual appropriation for Section 1402 reimbursements. See Joint Stipulation [Dkt. 30] at 3 n.1.

On May 20, 2013, OMB issued its Sequestration Preview Report for FY 2014, which listed “Reduced Cost Sharing” as subject to sequestration in the amount of $286 million, or 7.2% of the requested appropriation. Report [Dkt. 30-18] at 23. Because permanently-appropriated programs (such as Section 1401) are exempt from sequestration, OMB’s including Section 1402 on a list of sequestration-bound programs appears to acknowledge that no permanent appropriation was available for Section 1402 reimbursements.

On July 13, 2013, the Senate Appropriations Committee adopted S. 1284, a bill appropriating monies to HHS and other agencies for FY 2014. An accompanying report stated that “[t]he Committee recommendation does not include a mandatory appropriation, requested by the administration, for reduced cost sharing assistance . . . as provided for in sections 1402 and 1412 of the ACA.” S. Rep. No. 113-71, 113th Cong., at ...

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