(timeless at the ?annel] grates 113301152 of Representatives Maabingten, 319.40. 20515 February 3. 2015 The Honorable Jacob Lew Secretary U.S. Department of the Treasury 1500 Avenue. NW. Washington, DC. 20220 Dear Secretary Lew: Pursuant to Rules and X1 ofthe US. House of Representatives, the Committee on linergy and Commerce and the Committee on Ways and Means are conducting oversight into the implementation ofthe Patient Protection and Affordable Care Act Speci?cally. the Committees are examining the implementation of the cost-sharing reduction program. Section 1402 of the PPACA reduces health care costs for certain qualified individuals who purchase health plans in public insurance exchanges (?beneficiaries?) by requiring insurance companies to reduce co+payments. deductibles, and other out-of-pocket costs for those bene?ciaries. Sections 1402 and 1412(c)(3) together authorize the federal government to make direct payments to insurance companies to offset estimated costs incurred by providing the cost? sharing reductions to bene?ciaries (?Section 1402 Offset Program payments"). Congress has never appropriated any funds to permit the administration to make any Section 1402 Offset Program payments to insurance companies. Despite lacking an appropriation, Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner informed the House Committee on Oversight and Government Reform in December 2014 that insurers ?have been paid a cumulative total of $2.7 billion in advance [Section 1402 Offset Program] payments through the November 2014 payment cycle?? Article 1 ofthe US. Constitution expressly prohibits the expenditure ofpublic funds without an appropriation made by law.2 Accordingly. it appears that the Department ofHealth and Human Services has directed the 'l'reasury Department to make payments to insurers for the Section 1402 Offset Payments, and that the Treasury Department has made and continues to make these payments. even though no funds are lawfully available to do so. lit The Care Act. Before the H. Comm. on Oversight and Clov?t. Reform. 1 I.) Cong. Statement of Marilyn Tavenner (Dec. 9. 2014}. 3 US. Const. art. I. cl. 7 (stating. ?No Money shall be drawn from the Treasury. but in Consequence of Appropriations made by Law"). Letter to the Honorable Jacob Lew Page 2 We note that in its FY 2014 budget submission to Congress, the administration acknowledged that it needed an appropriation to fund payments to insurers related to the Section 1402 cost-sharing reduction program.? Speci?cally, in the CMS portion of its budget submission. the administration requested that Congress appropriate tier this program ?such sums as necessary" for FY 2014 and $l .42 billion for the ?rst quarter ofFY 2015.4 In thejustifieation it prepared in support of the FY 2014 budget submission to Congress, CMS asked for an ?annual? appropriation for Section 1402 Offset Program payments in the amount billion in the first year of Exchange] operations. .[and] a $1.4 billion advance appropriation for the ?rst quarter of FY permit CMS to reimburse [certain insurance] issuers."j Congress denied the administration?s request for an appropriation to fund Section I402 Offset Program payments to insurance companies, and no funds have since been appropriated.? Notwithstanding the absence of appropriations for Section 1402 Oftset Program payments. then-HHS Secretary nominee Sylvia Burwell stated in a May 21, 20M letter that, for "ef?ciency" purposes, the administration was making Section 1402 Offset Program payments "from the same account from which the premium tax credit portion of the advance payments are made.? Section 140] ofthc PPACA, which created the refundable tax credit providing premium assistance for coverage under a quali?ed health plan (codi?ed at 9? 36B ofthe Internal Revenue Code also provides a permanent funding stream for the credits. Section 1401(d) amends 31 USC 1324, which appropriates amounts necessary to pay refunds under the IRC. to af?rmatively include 368. No such permanent funding stream is found in the Section 1402 Offset Program. The non-partisan Congressional Research Service has likewise opined that, "unlike the refundable tax credits [the offset program payments] do not appear to be funded through a permanent appropriation. Instead. it appears. . .that funds for these payments are intended to be made. . .through annual appropriations.? In short. we are concerned that the administration is unlawfully and unconstitutionally misusing the permanent appropriation intended only to pay for tax refunds due under the IRC to make Section 1402 Offset Program payments to insurance companies, even though it is clear that 31 U.S.C. 1324 may not be used for that purpose, and (ii) Congress has never appropriated any other funds for the advance cost-sharing reduction payments to insurers. '1 Sec OM B, Fiscal Year 20M Budget. App. at 448 (April 10,2013). 4 1d. 5 FY 2014 CMS Justi?cation of Estimates for Appropriations Committees at 2, See also Id. at [83-34 requests an appropriation in order to ensure adequate funding to make payments to issuers to cover reduced cost- sharing in FY 2014"}. See trfso July 29, 20 3 CRS Memo to Sen. Coburn at 941} {continuing that Congress had not appropriated funds for Section I402 Offset Program payments). Letter from Sylvia M. Burwell, Din, OMB. to Senators Ted Cruz and Michael S. Lee {May 21, 2014). . CRS Memo to Sen. {Toburn at Letter to the I lonorable Jacob Lew Page 3 To assist the Committees? understanding of the Treasury Department?s administration of the cost-sharing reduction program. please provide as to the following a full explanation for, and all documents relating to: l. The administration?s decision to make Section 1402 Offset Program payments to insurers. despite a lack of appropriation to do so; and 2. The administration?s abrupt reversal in course from its FY 2014 budget submission to Congress. in which it requested an ?annual? appropriation to fund the Section 1402 Offset Program payments. to its FY 2015 Budget submission. which did not include an annual appropriation request. Additionally. please con?rm: 3. Whether the Treasury Department is making Section 1402 Offset Program payments to insurers: and 4. The cumulative amount ofsuch Section 1402 Offset Program payments advanced to insurers to date. We ask that the Treasury Department provide its responses to the Committees by close of business on February 17. 2015. If you have any questions, please contact Emily Newman with the Committee on Energy and Commerce at (202) 225-292? or Amanda Neely with the Committee on Ways and Means at (202) 225-26] 0. Sincerely, Fred Upton i aul Ryan Chairman Chairman Committee on Energy and Commerce Committee on Ways and Means Attachment ee: The Honorable Frank Pallone Ranking Member Committee on Energy and Commerce The Honorable Sander Levin. Ranking Member Committee on Ways and Means