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WASHINGTON
Jonathan Turley

Obamacare lawsuit tests 'power of the purse'

Gregory Korte
USA TODAY
President Obama speaks to members of the news media before a meeting with Health and Human Services Secretary Sylvia Matthews Burwell at the White House Nov. 7.

WASHINGTON — Earlier this year, the Obama administration quietly moved nearly $4 million in health insurance subsidy payments from one Treasury account to another.

The budget director explained action in terms of "efficiency." But the House of Representatives says the transfer skirted the law and violated the Constitution — and is asking a court to strike down part of the Affordable Care Act as a result.

That argument comes from a lawsuit filed by the House of Representatives last month as it attacks Obamacare on two fronts. The first, long-debated claim is that Obama did not have the power to delay a provision requiring large employers to provide health insurance for full-time employees.

But the lawsuit also raises a brand new argument: That paying insurer subsidies out of an account not appropriated by Congress violates the separation of powers.

The lawsuit challenges a lesser-known provision of Obamacare that gives subsidies to health insurance companies as a way of helping reduce out-of-pocket expenses for low-income policyholders who buy insurance on government exchanges.

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The Affordable Care Act authorized those payments — but didn't set aside any money specifically for them. The lawsuit argues that the money needed to come from annual appropriations from Congress.

For a time, the White House seemed to agree. After Congress required the across-the-board spending cuts known as "sequestration," the Office of Management and Budget designated the subsidies as subject to appropriations and said it was cutting $290 million from the program beginning in 2013.

But a year later, OMB excluded the the payments from sequestration by moving them to an account that does not require annual appropriations. Instead, Treasury is paying the subsidies from the same IRS account used to give tax credits to low-to-moderate income taxpayers who buy their insurance on exchanges.

In a letter to Sen. Ted Cruz, R-Texas, then-OMB director Sylvia Mathews Burwell said the move was made "to improve the efficiency in the administration of the subsidy payments."

"The Burwell change of the accounts is a very interesting strategy, and one that's been used before, but I don't know if it's legal," said Roy T. Meyers, a professor at the University of Maryland, Baltimore County who studies the federal budget process.

But the House lawsuit argues that the law allows only tax credits to be paid from that account, and that the subsidies aren't a tax credit. "The constitution does not permit such a sleight of hand," wrote the House's lawyer, Jonathan Turley.

Experts said it's a novel enough argument that it's unpredictable how courts would rule — that is, if the lawsuit gets past a procedural hurdle.

"There's no plausible argument that Congress has standing to sue," said University of Michigan law professor Nicholas Bagley. "The typical rule is that where the U.S. Treasury is making payments to someone else that you think they ought not be making, that's not an injury to you."

If the House lawsuit is successful, it could mean that copays and deductibles for millions of low-income subscribers would skyrocket.

"For a lot of those individuals, without additional financial support, they probably would have to drop coverage. They just don't have the working capital in a family budget to afford it. So it's a critical part of the puzzle," said former Health and Human Services Secretary Kathleen Sebelius, "Would it strike the law down? No. But would it make insurance unaffordable for the lowest income working Americans? You bet."

OMB, HHS and the Treasury Department would not comment on the subsidy payments, referring all questions to the White House. There, spokeswoman Brandi Hoffine said the lawsuit "is without any sound legal basis."

Turley also declined to comment on the lawsuit. But in testimony to the House Rules Committee, Turley suggested that a defense of Congress's constitutional spending power could be one way to challenge the Affordable Care Act. Turley, a law professor at George Washington University, is also an occasional, paid columnist for USA TODAY's editorial page.

Jonathan Turley, Professor of Public Interest Law at the George Washington University Law School; testifies at a House Rules Committee hearing July 16.

"You have agency changes that are committing essentially the government to essentially billions of dollars in tax credits, those strike at the very heart of the power of the purse," Turley said in the July hearing.

But he also conceded that either argument still has the same procedural problem — whether the House of Representatives can prove it was injured by the administration's action and is therefore entitled to sue.

"And the question is, who has the right, under standing, to contest that type of shift? Who has standing under these rules?" Turley said. "I'm not saying that this is going to be an easy fight. I think Congress has it on the merits. I think the president has the advantage on standing. But the outcome in this case, in the long run, I don't think you can honestly say that this case is doomed to failure."

Washington Bureau Chief Susan Page contributed. Follow @gregorykorte on Twitter.

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