Hey Republicans, Time to Limit or Scrap the Judgment Fund
Those of us who believe the impending collapse of Obamacare is by design, not defect, are not surprised by the death spiral’s latest swirl, described in a Washington Examiner op-ed by the Pacific Research Institute’s Sally Pipes. In a nutshell, big insurers are fleeing Obamacare exchanges because of inevitable, crushing losses.
The insurers want a bailout. Obama wants to give them one. He knows the Republican-controlled Congress will not help him – at least not directly. So the president is scheming to use the slush most beloved of the White House and mullahs of Tehran: the “Judgment Fund.”
Can it save Obamacare, or at least stop the bleeding?
Well, that depends on whether you believe Obamacare is meant to be saved. The goal-line for Hillary Clinton and other backers of the president’s signature “achievement” has always been fully socialized, single-payer, government-rationed medical care. The meltdown of the exchanges ostensibly seems like a catastrophe, but it is a planned catastrophe: Trigger an unaffordability crisis, prompting cries that only government can fix the government-created mess.
Those cries can already be heard. Much has been made of Bill Clinton’s accidentally telling the truth about the Obamacare – that it’s “the craziest thing in the world” to have “this crazy system” in which working people “wind up with their premiums doubled and their coverage cut in half.” But it is crazy like a fox, which the former president and his wife know because they are the foxes. The Clintons, like the incumbent president, want to “fix” the quite intentionally crazy system with ever more government control and socialization of costs.
Remarkably, the Democrats’ contrived disaster is not much of an issue in the 2016 campaign. For the second straight time, Republicans have nominated for president a devotee of government-controlled health care. As one would figure, Donald Trump seems unable to exploit the unfolding folly of government-controlled health care or to refute the Left’s proposals for more government control.
Meantime, Obama’s immediate problem is how to redistribute more billions of taxpayer dollars to the big insurers who implement the highly regulated exchanges.
As Ms. Pipes explains, Obamacare comes with a “risk-corridor” program: The more profitable exchanges (the ones with healthy young people who would pay for insurance but not need much care) are supposed to compensate the losses of the red-ink exchanges (the ones with sickly and older people who need much more care). But remember, we’re talking about “the craziest thing in the world.” With premiums skyrocketing and coverage becoming inaccessible, healthy young people are naturally balking. Thus the profitable exchanges are not so profitable. They can’t cover the red-ink exchanges, whose losses are even greater than foreseen.
The challenge for our lawless president is the usual one: the law.
Congress dictated that the risk-corridor program had to be budget-neutral. As Pipes elaborates, this means “the money paid out to insurers could not exceed the money collected.” Since not nearly enough money was collected on the profit side, the loss side received just 12.6 percent of its total claims – those insurers are billions in the hole. How will they recoup these (inevitable) losses?
Congress does not appear inclined – at least before the election – to enact a bailout. Consequently, Obama is poised to go with what we might call the Iran Plan: Nod-and-a-wink lawsuits by the insurers, which the administration will “settle” by paying in judgments what Congress won’t provide in legislation.
Recall Obama’s recently revealed $1.7 billion ransom payment to the ayatollahs for the release of four American hostages held by the regime. The president was well aware that Congress would never approve such a payment (which would have involved at least $1.3 billion to supplement the $400 million the executive branch was holding from a failed shah-era arms deal). So the administration quietly arranged to settle a suit brought by Iran, agreeing to pay the additional $1.3 billion out of the Judgment Fund.
To ensure that no one would be any the wiser, Treasury made 13 transfers of $99,999,999.99, with no mention of Iran in the Judgment Fund’s public listings – just an acknowledgment that the transfers involved some undescribed matter (or matters) in which the State Department was a party. Had the stellar investigative journalist Claudia Rosett not discovered the transfers, we would probably still be in the dark about how Obama came up with the money.
At the time, Ms. Rosett reported that the Treasury Department describes the Judgment Fund as a “permanent, indefinite appropriation” available to pay legal judgments against federal agencies “where funds are not legally available to pay the award from the agency’s own appropriations.” As I countered, there is only one reason why funds would not be “legally available to pay . . . from an agency’s own appropriations”: namely, that Congress has not made an appropriation that gives the agency permission to pay the funds in question. That is supposed to mean the agency does not pay.
Obama is using the Judgment Fund as a limitless credit line to pay out any amounts he chooses, no matter how exorbitant, when Congress won’t cooperate by appropriating funds. It’s a simple device: encourage the party the White House wants to pay off to file a lawsuit against the United States; regardless of how frivolous the legal claim may be, the Justice Department in its discretion chooses to settle the case. The Judgment Fund is then tapped to pay the settlement. Who needs Congress?
Well, the Constitution says the president needs Congress. Under Article I, section 9, “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law[.]” Article I makes clear that appropriations may only be made by Congress. It is an essential limitation on executive power. There cannot legitimately be a “permanent, indefinite appropriation” that enables the president to pay any obligation he unilaterally chooses to impose on taxpayers.
Let’s assume for argument’s sake, moreover, that Congress has the power appropriate a fund of indefinite parameters to enable the Treasury to pay off a limited number of good-faith legal judgments in a calendar year (the exact amount of which cannot be predicted with certainty when the annual budget is enacted). Manifestly, this fund could not permissibly be used to circumvent a decision by Congress not to appropriate funds or to place strict limits on an appropriation. With respect to the risk-corridor, Congress took pains to prescribe a budget-neutral cost-sharing arrangement, not a bailout. Obama has no authority to legislate his own bailout by abusing the Judgment Fund.
Obama-style “fundamental transformation” has meant exploiting the loose joints in the system. Putting the Constitution aside for a moment, having an indefinite fund to pay judgments was no big deal as long as everyone was playing fair. It would be burdensome if Congress had to enact a law every time the government lost a civil law suit, or had to settle one. Clearly, however, if the system is going to be gamed, as Obama gamed it on the Iran ransom and seems ready to game it with the big health insurers, then it becomes, as Bill Clinton might say, a “crazy system” – an unsustainable one.
Congress must act to end this corrupt device. Either defund the Judgment Fund or set strict limits that require the administration to seek individual congressional appropriations for judgments above a certain amount (say, $1 million), and judgments of certain types (e.g., payments to countries on the list of state sponsors of terrorism, or payments to parties for whom Congress has already provided a set amount in the budget).
In the unlikely event that the Constitution permits a “permanent, indefinite appropriation,” President Obama plainly cannot be trusted to administer it. Congress must either tightly regulate resort to the Judgment Fund or scrap it entirely. Otherwise, future presidents will rely on Obama’s imperial precedent, undoing a crucial protection against autocratic government.