Unlawful Obamacare Fees to Add to National Debt

In 2015, the administrators of the U.S. Department of Health and Human Services (HHS) ordered a number of states to either pay the Affordable Care Act’s Health Insurance Providers Fee (HIPF) or have their allocation of federal funds to support their Medicaid programs and their Child Health Insurance Programs (CHIP) cut off. There was just one problem: it wasn’t lawful to compel states to pay it.

In response, a number of states dug deep into their state budgets to come up with the money to pay the annual fee so they wouldn’t jeopardize the funding for their health insurance programs for low-income earners and children, then sued the HHS in federal court to try to get it back. At the time, Texas’ attorney general spelled out what the state found inappropriate in the HHS’ actions, as reported by Courthouse News’ David Lee:

Texas Attorney General Ken Paxton said Tuesday the regulation “coercively threatens” to cut off Medicaid funding for millions of Texans and over 350,000 children.

“This threat to cut Medicaid funding to Texans unless the state continues to pay hundreds of millions in taxes to Washington amounts to the very ‘gun to the head’ the Supreme Court warned about in earlier rulings on Obamacare,” Paxton said in a statement. “Not only is the federal government threatening the health care needs of millions of Texans, but it is doing so using Texans’ own money, collected from them through taxes. This represents yet another huge overstep of authority for this administration, which once again has demonstrated their willingness to circumvent the Constitution in order to achieve their policy goals.”

Last week, the states prevailed against HHS, winning their legal argument. Courthouse News’ David Lee reports on the legal resolution:

A federal judge in Texas ordered the government Tuesday evening to pay back six states nearly $840 million in questionable Obamacare fees on state Medicaid programs.

U.S. District Judge Reed O’Connor concluded plaintiffs Texas, Indiana, Kansas, Louisiana, Wisconsin and Nebraska are entitled to disgorgement “as a means of enforcing” the Affordable Care Act’s statutory mandate exempting states from paying the health insurance provider fee, abbreviated as HIPF in court documents….

Texas Attorney General Ken Paxton lauded the ruling late Tuesday. He said Texas will receive over $304.7 million, Indiana $94.8 million, Kansas $142.1 million, Louisiana $172.4 million, Wisconsin $88.9 million and Nebraska $36.2 million, for a total of $839.3 million.

“We all know that the feds cannot tax the states, and we’re proud to return this illegally collected money to the people of Texas,” Paxton said.

In essence, the federal district judge found that the Affordable Care Act specifically exempted states from having to having to pay this fee, where the Department of Health and Human Services improperly demanded they pay it.

What had been bad news for these states’ governments and taxpayers now becomes bad news for federal taxpayers, because the money to reimburse the winning states will likely come out of the U.S. Treasury Department’s Judgment Fund, which is the slush fund that the U.S. government uses to pay out the funds it needs to settle the lawsuits that it loses.

Because HHS spent the money it collected from the unlawful fee it assessed against these states in the years that they contested the legality of the HIPF, and because the U.S. government is running a deficit, the Treasury Department will almost certainly need to borrow the money needed to reimburse the states as a result of the decision.

That means that this settlement will likely increase the national debt by over four-fifths of a billion dollars. Perhaps not all that much in terms of the U.S. government’s total public debt outstanding of $21.4 trillion, but still money that it doesn’t have, and never should have had if not for its bureaucratic greed.

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Craig Eyermann is a Research Fellow at the Independent Institute and the creator of the Government Cost Calculator at MyGovCost.org.