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23–194 2017

THE COST SHARING REDUCTION PROGRAM 

INVESTIGATION AND THE EXECUTIVE 

BRANCH’S CONSTITUTIONAL VIOLATIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JULY 7, 2016 

Serial No. 114–OS13 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

ROBERT J. DOLD, Illinois 

TOM RICE, South Carolina 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

DAVID STEWART, Staff Director 

NICK GWYN, Minority Chief of Staff 

SUBCOMMITTEE ON OVERSIGHT 

PETER J. ROSKAM, Illinois, Chairman 

PAT MEEHAN, Pennsylvania 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM REED, New York 

TOM RICE, South Carolina 

KENNY MARCHANT, Texas 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 

CHARLES B. RANGEL, New York 

DANNY DAVIS, Illinois 

iii 

C O N T E N T S 

Page 

Advisory of July 7, 2016 announcing the hearing ................................................. 2 

WITNESSES 

Michael Deich, Senior Advisor, Office of Management and Budget .................... 19 

John A. Koskinen, Commissioner, Internal Revenue Service .............................. 9 

Mark J. Mazur, Assistant Secretary for Tax Policy, U.S. Department of the 

Treasury ................................................................................................................ 15 

Mary Wakefield, Ph.D., R.N., Acting Deputy Secretary, U.S. Department of 

Health and Human Services ............................................................................... 13 

QUESTIONS FOR THE RECORD 

Questions from The Honorable Peter Roskam, a Representative in Congress 

from the State of Illinois, to the Internal Revenue Service .............................. 212 

Additional Questions from The Honorable Peter Roskam, a Representative 

in Congress from the State of Illinois ................................................................. 214 

(1) 

THE COST SHARING REDUCTION PROGRAM 

INVESTIGATION AND THE EXECUTIVE 

BRANCH’S CONSTITUTIONAL VIOLATIONS 

THURSDAY, JULY 7, 2016 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON OVERSIGHT, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:07 a.m., in 

Room 1100, Longworth House Office Building, Hon. Peter Roskam 

[Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Thursday, June 30, 2016 

No. OS–13 

Chairman Roskam Announces Hearing on 

The Cost Sharing Reduction Program 

Investigation and the Executive Branch’s 

Constitutional Violations 

House Ways and Means Oversight Subcommittee Chairman Peter Roskam (R–IL) 

announced today that the Subcommittee will hold a hearing on ‘‘Defying the Constitution: The Administration’s Unlawful Funding of the Cost Sharing Reduction 

Program.’’ The hearing will focus on the Committee’s year-and-a-half-long investigation into the Administration’s funding of the Affordable Care Act’s Cost Sharing Reduction program. The hearing will take place on Thursday, July 7, 2016, in 

Room 1100 of the Longworth House Office Building, beginning at 10:00 a.m. 

In view of the limited time to hear witnesses, oral testimony at this hearing will 

be from invited witnesses only. However, any individual or organization may submit 

a written statement for consideration by the Committee and for inclusion in the 

printed record of the hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to make a submission, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a 

Word document, in compliance with the formatting requirements listed below, by 

the close of business on Thursday, July 21, 2016. For questions, or if you encounter technical problems, please call (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any materials submitted for the printed 

record, and any written comments in response to a request for written comments 

must conform to the guidelines listed below. Any submission not in compliance with 

these guidelines will not be printed, but will be maintained in the Committee files 

for review and use by the Committee. 

All submissions and supplementary materials must be submitted in a single document via email, provided in Word format and must not exceed a total of 10 pages. 

Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record. 

3 

All submissions must include a list of all clients, persons and/or organizations on 

whose behalf the witness appears. The name, company, address, telephone, and fax 

numbers of each witness must be included in the body of the email. Please exclude 

any personal identifiable information in the attached submission. 

Failure to follow the formatting requirements may result in the exclusion of a 

submission. All submissions for the record are final. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available online at 

http://www.waysandmeans.house.gov

f 

/. 

Chairman ROSKAM. The Committee will come to order. The 

Ways and Means Oversight Subcommittee hearing on the cost 

sharing and reduction investigation is under way. Welcome today. 

We are joined by the Chairman of the Ways and Means Committee, 

Chairman Brady, and I am going to yield to Chairman Brady for 

an opening statement and then we will hear from Mr. Lewis. 

Chairman Brady. 

Chairman BRADY. Thank you, Chairman Roskam, for holding 

this important hearing. 

Today we are releasing substantive findings from our 17-month 

investigation into the Administration’s unlawful funding of 

Obamacare’s cost-sharing reduction program. The reason why our 

investigation took 17 months is because the Administration obstructed the process and simply refused to give the facts to the 

American people. 

So we are here today to fulfill our constitutional responsibility to 

conduct oversight and reinforce Congress’ constitutional power of 

the purse. We are not here to litigate whether the Administration 

acted unlawfully in funding Obamacare’s cost-sharing reduction 

program. That was settled in May when the Federal judge ruled 

that the Administration had no constitutional or statutory authority to fund this program. 

As our Constitution makes clear in article I, section 9, clause 7, 

‘‘No money shall be drawn from the Treasury but in consequence 

of appropriations made by law.’’ This means the executive branch 

may not spend a single taxpayer dollar without an explicit appropriation by Congress. Our Founding Fathers entrusted Congress 

with the power of the purse, not the White House. 

While current law authorizes the cost-sharing reduction program, 

Congress has never provided an appropriation for it. The Administration knew this and they didn’t care. They broke the law and 

spent the money anyway. This is stealing from the American people, plain and simple. To date, the Administration has unlawfully 

spent $7 billion of taxpayer funding that was never appropriated 

for the CSR program. Let me repeat that: The Administration unlawfully spent $7 billion, taxpayer dollars for this program. 

4 

So in February of 2015, our Committee and the Energy and Commerce Committee initiated a joint investigation into how all this 

was put into motion. The Administration has met us with unprecedented resistance at every turn. Numerous times we would call for 

agencies to turn over critical documents and numerous times we 

were denied. 

We also asked Administration personnel to come speak with us 

in person about how things transpired. Again, we were denied. At 

the beginning of the year, I finally said enough is enough. I issued 

subpoenas to compel the testimony of agency officials and legally 

require the Administration to turn over requests to documentation. 

This was one of my first acts as Chairman. It was the first time 

in years our Committee has subpoenaed the Administration for information needed to fulfill our oversight responsibilities. 

The lengths we have had to go, in this investigation, clearly underscore the unprecedented level of obstruction by this Administration. In fact, all of the agencies represented here today still have 

not complied with our subpoenas to turn over relevant documents. 

But these lengths also demonstrate how seriously we take our duty 

to oversee the Administration’s actions. We will not be deterred by 

stonewalling. 

Thanks in large part to the outstanding work of Chairman Roskam, Chairman Upton at Energy and Commerce, and the oversight 

teams, our two committees, we have uncovered critical information 

about the Administration’s unlawful actions. And it is because of 

this hard work that we now have a chance to deliver real findings 

to the American people. 

This morning, along with the Energy and Commerce Committee, 

we released a comprehensive staff report on what we have uncovered thus far. The report, which can be found on our Committee’s 

website, details how the Administration decided to fund the CSR 

program illegally, and it provides an in-depth look at their unprecedented obstruction of this investigation. 

Our investigation in this matter is far from complete, but today 

represents a major step toward providing Americans with the 

transparency and accountability they deserve from their government. 

Again, thank you to Chairman Roskam and all the Members of 

the Oversight Subcommittee for your hard work and dedication. I 

yield back. 

Chairman ROSKAM. Thank you, Chairman. 

Mr. Lewis. 

Mr. LEWIS. Thank you, Mr. Chairman. 

Let me just say good morning and welcome to the witnesses. I 

begin by thanking each and every one of you for being here. Thank 

you for your service. 

In particular, I would like to thank the Commissioner for joining 

us once again. The Commissioner is an honorable man who has 

faithfully served his country. I would like to quote the former IRS 

Chief Risk Officer who said he is not only a phenomenal leader but 

one of the best managers we ever had in government. 

Mr. Chairman, I must tell you, I am upset. And I am very disappointed with today’s hearing, with the topic. I am afraid it is 

nothing more than another attempt to roll back healthcare reform. 

5 

Almost 2 years ago, House Republicans filed a lawsuit against the 

Obama Administration over the funding of the cost-sharing reduction program, better known as CSR. This program simply helps 

low-income people afford medical costs. 

Today, over 6 million Americans have been helped. Today, over 

6 million have better access to care. To be clear, the lawsuit claims 

that this program needs annual funding from Congress. The Administration argues that it does not. Mr. Chairman, this is a lawsuit between two branches of government. Both parties agree on 

the facts. 

So I respectfully ask, what is the point of this hearing? Why are 

we placing public servants in the middle of an ongoing legal case? 

Some of you argue that we are here because the work of the Committee is being blocked. This is not the case. This is not true. For 

the record, there are four government officials representing four 

different agencies here today. The Administration has voluntarily 

provided 13 current and former officials for interviews on this matter. Thirteen. Not 5, not 6, not 10, but 13. The lawsuit is still pending in the courts. It is ongoing. Yet, here we are. 

Mr. Chairman, there is real work to be done. There are real 

issues that need to be addressed. This is not it. This is not the one. 

There may be others. We should not waste the time and energy debating how to tear apart the good part of healthcare reform. We 

should not be trying to roll back what helps people make ends 

meet. We can and we must do better, and we can do better. We 

are called to be leaders, to be headlights and not tail lights. 

Mr. Chairman, I deeply believe that this Subcommittee can do 

good work on behalf of the American people. I am hopeful that we 

will return to that work very, very soon. 

Thank you, and I yield back. 

Chairman ROSKAM. Thank you, Mr. Lewis. Let me attempt to 

answer some of the questions that you have laid out. 

And before I do that, I want to thank Chairman Brady and 

Chairman Upton for the work that they have done in driving this 

investigation and, from my point of view, that work has paid off. 

The Ranking Member just a minute ago said there is real work 

to be done, and I agree with that. He gave us an admonition and 

the question was, what is the point of the hearing. Let me describe, 

I think, what the point of the hearing is. But there is also a notion 

that when you are doing good work—and we all want to do it— 

there have to be clear lines, clear lines of authority. 

We have all heard that phrase, ‘‘Good fences make good neighbors.’’ And what we have seen going back and forth between the 

executive branch and the legislative branch are areas where the 

legislative branch, at least the Majority in the House thinks so, 

feels encroached upon. 

And it is not as if this is just a parochial thing. We are talking 

about these constitutional themes that this entire Subcommittee 

believes matter. Now, how that manifests itself, I don’t obviously 

speak for the Minority, but these things do matter and it is not just 

esoteric. 

So as we all learned, we have this system of checks and balances. 

And there are three coequal branches of government, and they are 

meant to restrain one another. That was the nature of the architecVerDate Sep 11 2014 07:00 Jul 13, 2017 Jkt 023194 PO 23194 Frm 00009 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\23194\23194.XXX 23194
6 

ture that the founders had, and they looked at these as essential 

safeguards to protect the American public from their own government. 

In our hearing today, we are going to be looking at how this Administration has run roughshod over two key authorities that the 

Constitution gave to Congress. The Constitution didn’t give them 

to the Administration, didn’t give them to the courts; the Constitution in article I gives them to Congress. 

And as Chairman Brady discussed a minute ago, the first key 

authority is Congress’ power of the purse. And as we all know, the 

Constitution says this: ‘‘No money shall be drawn from the Treasury but in consequence of appropriations made by law.’’ That 

means that the government may not spend any taxpayer money 

unless Congress passes a law that says it can. 

The American people elect Members of Congress. And here in the 

House, we are up for election every 2 years. And we are all too familiar with that process, and that is the process by which the 

American public adjusts the dials. They make the choices at the 

ballot box that is manifested in who is seated in this Congress, and 

the Constitution says those people, who are sent by those representatives, get to choose how the money gets spent. Other people 

don’t; Congress does. 

And it also means that the President cannot take money from 

one program and spend it on another just because he wants to or 

just because he thinks it is a good idea. Money is specifically appropriated for individual programs, and it seems to me that this Administration has ignored those constitutional restraints. 

So if you set aside the ‘‘good intentions’’ by which the Administration is cloaking itself and you begin to project out and think, 

well, what would a future Administration be able to do if we allow 

this to stand? Can a future Administration say they are going to 

do what they perceive to be a good idea regardless of what the Constitution says? And I would argue that that isn’t a good thing. 

The Affordable Care Act established many programs. One of 

them was the premium tax credit, which helps people pay for their 

insurance premiums. Congress wrote the Affordable Care Act to 

allow the Administration to pay for that program from an account 

held by the Treasury Department. That account is paid for with a 

permanent appropriation so the tax credit account always has 

money. In this hearing, we might refer to that as the section 1324 

account, or the premium tax credit appropriation. 

Okay. So far, so good. Permanent appropriations are unusual 

though. Congress pays for most programs with annual appropriations, meaning each year the Administration has to ask Congress 

for money to pay for those programs. Well, the ACA set up one of 

those programs that requires an annual appropriation. Let me repeat that: The ACA set up the program that requires an annual 

appropriation called the cost-sharing reduction program, or the 

CSR program. 

The cost-sharing reduction program requires insurance companies to reduce copayments, deductibles, and other out-of-pocket 

costs for qualified people. Under the CSR program, the government 

is supposed to help offset the insurance company’s cost. Let’s get 

7 

that clear. Who’s the beneficiary here? It is the insurance companies. 

The underlying statute says the insurance companies have an obligation. This program is a subsidy for insurance companies. It is 

not a subsidy that is going directly to poor people. It is a subsidy 

that is going to insurance companies to offset their costs for the 

CRS payments. 

But unlike the premium tax credit program, Congress did not 

give any money in the ACA for the CSR program. Instead, each 

year the President’s supposed to ask for money from Congress and 

the Congress can decide whether or not to give the executive 

branch that money. That is the architecture of the ACA. And in 

2012, the Treasury Department wrote the President’s Office of 

Management and Budget a memo saying exactly that. In 2013, the President initially asked Congress for $3.9 billion to 

pay the cost-sharing reduction payments to the insurance companies in his fiscal year 2014 budget request. But then something 

strange happened. In July of 2013, the HHS assistant secretary of 

financial services called the Senate Appropriations Committee staff 

and asked them to take that line out of the President’s budget. 

How unusual. 

Then in the fall of 2013, OMB created a memorandum explaining 

why the Administration could use the money Congress appropriated to pay for the premium tax credit program, that permanent 

appropriation I was just talking about, to pay for the cost-sharing 

reduction program using a permanent account to pay for an annual 

expense. 

OMB shared that memo with top officials in the Administration 

to get their approval, including—think about this. The level of 

granularity of this account is getting the attention of these people: 

The general counsels of Treasury and HHS, as well as the Attorney 

General, Eric Holder, who all had to sign off on that plan. 

Now, around that same time, the IRS’ deputy chief financial officer was confirming that the Administration was squared away to 

make these payments, which were set to start being paid in January of 2014. At first, he was under the impression that the payments would be made from an annual appropriation to HHS, but 

then he learned HHS had withdrawn its request. HHS explained 

to him that the payments would come from the premium tax credit 

account. 

The deputy CFO had two big concerns: First, how would HHS 

make payments from a Treasury account? He wanted to be sure 

that an audit trail would be in place to later trace the accuracy of 

the payments, but then he became concerned about a bigger problem. Were the funds in the premium tax credit account even available for these payments? 

Because not only does the Constitution prohibit the Administration from making payments unless they have an appropriation, 

there is a law called the Antideficiency Act, and of all things, it 

makes it a criminal violation for a Federal official to pay for a program if Congress has not appropriated funds for that program. 

Helping the IRS avoid Antideficiency Act violations was one of 

the deputy CFO’s primary responsibilities, and so he did the right 

thing. He raised red flags to the IRS’ Chief Risk Officer, David 

8 

Fisher, the IRS’ chief counsel’s office as well. His warning set off 

a chain of discussions at the IRS, and by early January of 2014, 

IRS Chief Counsel William Wilkins reached out to the OMB General Counsel, Geovette Washington, to discuss these issues. She 

then set up a meeting at OMB for seven IRS officials to come to 

OMB and look at the memo they prepared about the CRS funding. 

So on January 13, 2014, IRS lawyers and the chief risk officer 

and chief financial officer and several other officials went to OMB 

in the Old Executive Office Building. And there, these top IRS officials were escorted into an OMB conference room. Ms. Washington 

was at the meeting, along with several of her subordinates. The 

OMB lawyers passed out copies of the memo. 

Ms. Washington told the IRS officials not to take notes on it or 

to take a copy with them. Think about that. No notes, no copies, 

which several participants, according to our investigation, found to 

be very strange indeed. The OMB lawyers left the room and let the 

IRS officials read the memo. Then the OMB lawyers come back in. 

Ms. Washington talked about how she was excited to have had a 

chance to brief Attorney General Eric Holder about this issue and 

that he had approved the memo. 

Chief Risk Officer David Fisher and others raised concerns that 

the payments would violate the Antideficiency Act and the Constitution at that meeting. According to Mr. Fisher, OMB offered a 

weak explanation for why the payments would be okay. Back at the 

IRS, the officials briefed Commissioner Koskinen about the OMB 

meeting. Mr. Fisher told Commissioner Koskinen that he was worried about the Antideficiency Act violations. 

Our investigation has revealed, however, by the time the officials 

met with Commissioner Koskinen the decision already had been 

made. At the meeting, the IRS officials saw copies of an action 

memorandum directing the IRS to make certain CRS payments 

from the premium tax credit memo. Secretary Lew had already 

signed off on that memo. 

Administration officials who constructed this plan and moved 

ahead with it chose to fund the CRS payments from money that 

Congress designated for other programs. In other words, all of 

those individuals chose to hijack Congress’ power of the purse and 

make those violations in violation of the Constitution and in violation of Federal law. 

To this day, they have made more than $7 billion in CSR payments without congressional authorization. That is the first thing. 

The second thing is this, that we will talk about here today, is Congress’ power to oversee the executive branch, which is not mitigated, which is not restrained, which is not hampered by a pending 

lawsuit. 

Congress’ oversight authorities are critical to ensuring the Administration is transparent to the American people. That is our job. 

Congress has run into unprecedented obstruction during the course 

of this investigation. It took the Committees a year and a half to 

gather the facts surrounding the Administration’s decision to make 

these illegal payments. And even now, OMB, Treasury, and HHS 

are in violation of subpoenas issued by the Ways and Means Committee. 

9 

The Administration has argued that because the House sued the 

Administration to stop them from making these payments, the 

Ways and Means Committee and Energy and Commerce Committee shouldn’t be investigating the facts surrounding the decisionmaking. The House’s lawsuit only focuses on a narrow legal 

issue. The House and the Administration have agreed that the 

court didn’t need to do any of the factfinding to reach its decisions. 

That is why we need to do the factfinding here. 

The Committees want to know who, why, and how the Administration decided to embark on this unconstitutional course. While 

our oversight—while the prerogative of the American people, as 

manifested through them adjusting the dials in their periodic elections has been run roughshod over, it is our responsibility to determine these facts. And the fact that there is pending litigation has 

no influence on our inquiry there. And we will stipulate further 

that it is going to be the courts that are going to make the ultimate 

constitutional decision but already the lower court has decided as 

I have described. 

Instead of accountability and transparency, the Administration 

threw up roadblock after roadblock. But despite those, and through 

persistent efforts, we have learned a great deal. We look forward 

to learning more from the Administration, why they decided to 

make these payments, why they worked so hard to prevent Congress from learning these facts. And we are here to listen. We are 

here to learn. We are also here to defend the prerogative of the 

American public. 

We will hear from just one panel. Our panel is the four witnesses, the Department of Health and Human Services Acting Deputy Secretary, Mary Wakefield; Treasury Assistant Secretary for 

Tax Policy, Mark Mazur; IRS Commissioner, John Koskinen; and 

Office of Management and Budget Senior Advisor, Michael Deich. 

Commissioner, welcome. Let’s start with you. You have 5 minutes. Thank you for coming. 

STATEMENT OF JOHN A. KOSKINEN, 

COMMISSIONER, INTERNAL REVENUE SERVICE 

Mr. KOSKINEN. Chairman Roskam, Ranking Member Lewis, 

and Members of the Subcommittee, as always, I appreciate the opportunity to appear before the Subcommittee. This hearing marks 

the 35th time I have testified before the Congress. 

During my 21⁄2 years as IRS Commissioner, I have developed a 

deep respect for this Subcommittee and its primary role in overseeing the work of the IRS. We do not always agree, but you raise 

important questions and your requests and suggestions often lead 

to improvements in our service to American taxpayers. 

I am scheduled to lead the IRS for another 16 months, but I 

serve obviously at the pleasure of the President and a new President can always ask me to step aside sooner. But as long as I am 

Commissioner, I am committed to working with you in pursuit of 

our common goals and helping you fulfill your important oversight 

role. 

The IRS has been charged with implementing the tax-related 

provisions of the Affordable Care Act. These efforts include supporting the integrated system of Federal subsidies that help milVerDate Sep 11 2014 07:00 Jul 13, 2017 Jkt 023194 PO 23194 Frm 00013 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\23194\23194.XXX 23194
10 

lions of American families afford health insurance coverage purchased through the Federal and State health insurance marketplaces. This system consists of interrelated subsidies, the premium 

tax credit, and cost-sharing reduction payments. 

The health insurance marketplaces, which are overseen by the 

Centers for Medicare and Medicaid Services, are responsible for determining whether an individual is eligible for APTC payments as 

well as the CSR payments. The IRS provides the marketplaces 

with data and computational services for use in their determinations about eligibility for financial assistance. 

CMS certifies the payments using the information it receives 

from the marketplaces and notifies the Treasury Department’s Bureau of Fiscal Services, which disperses the payments to insurers. 

The IRS role in this process involves providing administrative support to ensure proper funding of and accounting for the advance 

premium tax credit and the shared CSR payments. 

The source of funding for these payments is a permanent and 

definite appropriation to the Secretary of the Treasury. The IRS 

manages and administers this appropriation on the Treasury’s behalf for various types of payments, including CSR payments, premium tax credit refunds, and advance payments of the premium 

tax credit. 

At the beginning of each fiscal year, the IRS ensures that sufficient funding has been transferred into an allocation account for 

CMS to use in obligating and disbursing payments, including those 

for CSR payments. The IRS manages unobligated funds in the account at the end of the fiscal year and performs financial reporting 

as the parent of the allocation account. 

Because the payments are reflected on the IRS’ financial statements, the IRS coordinates closely with CMS throughout the year 

to ensure that CMS has effective controls over the integrity of the 

payment process and amounts. The IRS continually monitors those 

controls to mitigate any risk to financial reporting. This includes 

an independent third-party assessment performed at CMS for the 

IRS to share with the Government Accountability Office for the financial statement audit. 

The IRS has received a clean audit opinion from the GAO on its 

accounting and financial reporting with regard to the cost-sharing 

reduction payment for the 2 years the program has been in operation. Before the first CSR payments were made in late January 

2014, the Treasury Department determined that it would, through 

the IRS, administer cost-sharing reduction payments pursuant to 

the Affordable Care Act under the section 1324(b) appropriation. 

Thereafter, we proceeded with our activities to support implementation and operation of the CSR payments. 

Chairman Roskam, Ranking Member Lewis, and Members of the 

Subcommittee, as well as Chairman Brady, this concludes my 

statement, and I would be happy to answer your questions. 

[The prepared statement of Mr. Koskinen follows:] 

11 


23194A.001

WRITIEN TESTIMONY OF 

JOHN A. KOSKINEN 

COMMISSIONER 

INTERNAL REVENUE SERVICE 

BEFORE THE 

HOUSE WAYS AND MEANS OVERSIGHT SUBCOMMITIEE 

ON THE COST -SHARING REDUCTION PROGRAM 

OF THE AFFORDABLE CARE ACT 

JULY 7, 201 6 

Chairman Roskam, Ranking Member Lewis and Members of the Committee, as 

always, I appreciate the opportunity to appear before the Subcommittee today. 

This hearing marks the 35th time that I have testified before Congress. During 

my two and a half years as the IRS Commissioner, I have developed a deep 

respect for this Subcommittee and its primary role in overseeing the work of the 

IRS. We do not always agree, but you raise important questions, and your 

requests and suggestions often lead to improvements in our service to American 

taxpayers. I am scheduled to lead the IRS for another sixteen months but I serve 

at the pleasure of the President and a new President can always ask me to step 

aside sooner. As long as I am the Commissioner, I am committed to working with 

you in pursuit of our common goals and helping you fulfill your important 

oversight role 

The IRS has been charged with implementing the numerous tax-related 

provisions of the ACA. In focusing on tax administration, one of our 

implementation efforts has involved supporting the integrated system of federal 

subsidies designed to help millions of American families afford health insurance 

coverage purchased through the federal and state Health Insurance 

Marketplaces. 

This system consists of interrelated subsidies. One is the premium tax credit, 

which is designed to help people pay health insurance premiums for coverage 

purchased through the Marketplace. The taxpayer may pay for the insurance up 

front and then claim the credit on his or her federal tax return, or choose to have 

all or part of the credit paid in advance directly to the health insurance issuer. 

Those receiving the advance premium tax credit (APTC) may also qualify for a 

second subsidy: cost-sharing reduction (CSR) payments, which reduce what an 

individual pays out of pocket for health care expenses. These payments, made 

directly to the health insurance issuer, lower the individual's insurance 

deductibles, copays and annual out-of-pocket maximum. 

The Health Insurance Marketplaces, which are overseen by the Centers for 

Medicare and Medicaid Services (CMS), are responsible for determining whether 
12 

f 


23194A.002

an individual is eligible for APTC payments as well as CSR payments. The IRS 

provides the Marketplaces with data and computational services for use in their 

determinations about eligibility for financial assistance. CMS certifies the 

payments using the information it receives from the Marketplaces and notifies the 

Treasury Department's Bureau of the Fiscal Service, which disburses the 

payments to the insurers. 

The IRS's role in this process involves providing administrative support to ensure 

proper funding of, and accounting for, the APTC and CSR payments. The source 

of funding for the payments is a permanent, indefinite appropriation to the 

Secretary of the Treasury. The IRS manages and administers this appropriation 

on the Treasury's behalf for various types of payments including CSR payments, 

premium tax credit refunds and the APTC. 

At the beginning of each fiscal year, the IRS ensures that sufficient funding has 

been transferred into an allocation account for CMS to use in obligating and 

disbursing payments, including CSR payments. The IRS manages unobligated 

funds in the account at the end of the fiscal year and performs financial reporting 

as the parent of the allocation account. 

Because the CSR payments are reflected on the IRS's financial statements, the 

IRS coordinates closely with CMS throughout the year to ensure that CMS has 

effective controls in place over the integrity of the payment process and amounts. 

The IRS continually monitors these controls to mitigate any risk to its financial 

reporting. This includes an independent third-party assessment performed at 

CMS for the IRS to share with the Government Accountability Office (GAO) for 

the financial statement audit. The IRS has received a clean audit opinion from 

the GAO on its accounting and financial reporting with regard to the CSR 

program for the two years the program has been in operation. 

Before the first CSR payments were made in late January 2014, the Treasury 

Department determined that it would, through the IRS, administer cost-sharing 

reduction payments pursuant to the Affordable Care Act under the section 

1324(b) appropriation. Thereafter, we proceeded with our activities to support 

implementation and operation of the CSR payments. Chairman Roskam, 

Ranking Member Lewis and Members of the Committee, this concludes my 

statement. I would be happy to answer your questions. 

2 
13 

Chairman ROSKAM. Thank you, Commissioner. 

Ms. Wakefield. 

STATEMENT OF MARY WAKEFIELD, PH.D., R.N., ACTING 

DEPUTY SECRETARY, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Ms. WAKEFIELD. Chairman Roskam, Ranking Member Lewis, 

and—— 

Chairman ROSKAM. Turn on your mike. 

Ms. WAKEFIELD. Chairman Roskam, Ranking Member Lewis, 

and Members of the Subcommittee, I appreciate this opportunity to 

testify on the Department of Health and Human Services’ implementation of the Affordable Care Act, including the provisions of 

the Affordable Care Act that require the executive branch to make 

advance payments of premium tax credits and cost-sharing reductions that help to defray the cost of insurance coverage. 

The Affordable Care Act is expanding access to care for millions 

of Americans who would otherwise be uninsured. It improves the 

quality of care for people no matter how they get their insurance 

while also slowing the growth in healthcare costs nationwide. Now, 

we have an estimated 20 million Americans that have gained coverage since the Affordable Care Act’s coverage provisions have 

taken effect, and cost-sharing reductions are a key part of providing more Americans with access to quality health care that they 

can afford. 

This financial assistance helps low-income Americans to see their 

doctor on a regular basis and also to afford their out-of-pocket 

healthcare expenses. The Administration has faithfully implemented the Affordable Care Act, including provisions that require 

the executive branch to make advance payments of premium tax 

credits, as I indicated, and cost-sharing reductions that help to defray the cost of insurance coverage. 

Both the advance payment of premium tax credits and cost-sharing reductions are fully funded by the Affordable Care Act through 

the appropriation provided under section 1324. As you know, the 

House has filed the lawsuit against HHS concerning the payment 

of cost-sharing reductions. This issue continues to be litigated, and 

for additional information, I would refer you to the briefs that have 

been filed in the case. 

At HHS, we remain committed to cooperating with the Committee to provide information that it needs to fulfill its legislative 

responsibilities while also taking into account the significant confidentiality interests of the executive branch. And we look forward 

to continuing to work with you and with your staff on important 

matters related to the implementation of the Affordable Care Act. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Wakefield follows:] 

14 

f 


23194A.003

Statement of 

Ma•·y Wakefield, Ph.D, R.N. 

Acting Deputy Secretary 

U.S. Department of Health and Human Services 

on 

Cost-Sharing Reductions 

before 

Committee on Ways and Means 

United States House of Rep•·esentatives 

July 7, 2016 

Chairman Roskam, Ranking Member Lewis, and Members of the Committee, I appreciate this 

opportunity to testifY on the Department of Health and Human Services' (HHS) implementation 

of the Affordable Care Act (ACA), including the provisions of the ACA that require the 

Executive Branch to make advance payments of premium tax credits and cost-sharing reductions 

that help to defray the cost of insurance coverage. 

The ACA is expanding access to care for millions of Americans who would otherwise be 

uninsured, improving quality of care for people no matter how they get their insurance, while 

slowing the growth in health care costs nationwide. An estimated 20 million Americans gained 

coverage since the Affordable Care Act's coverage provisions have taken effect and cost-sharing 

reductions are a key part of providing more Americans with access to quality health care they 

can afford. This financial assistance helps low-income Americans to see their doctor on a 

regular basis and afford their out-of-pocket health care expenses. 

The Administration has faithfully implemented the Affordable Care Act, including provisions 

that require the Executive Branch to make advance payments of premium tax credits and costsharing reductions that help to defray the cost of insurance coverage. Both the advance 

payments of premium tax credits and cost-sharing reductions are fully funded by the Affordable 

Care Act, through the appropriation provided under 31 U.S.C. § 1324. As you know, the House 

has filed a lawsuit against HHS concerning the payment of cost-sharing reductions. 'This issue 

continues to be litigated, and for any additional information, I would refer you to the briefs in the 

case. 

We remain committed to cooperating with the Committee to provide the information it needs to 

fulfill its legislative responsibilities, wllile also taking into acc.ount the significant confidentiality 

interests of the Executive Branch, and we look forward to continuing to work with you and your 

staff on important matters related to the implementation of the ACA. 
15 

Chairman ROSKAM. Thank you. 

Mr. Mazur. 

STATEMENT OF MARK J. MAZUR, ASSISTANT SECRETARY 

FOR TAX POLICY, U.S. DEPARTMENT OF THE TREASURY 

Mr. MAZUR. Good morning. Chairman Roskam, Chairman 

Brady, Ranking Member Lewis, and Members of the Subcommittee, 

I appreciate the opportunity to be here today to testify regarding 

the cost-sharing reduction program under the Affordable Care Act. 

Since the enactment more than 6 years ago, the ACA has significantly reduced the number of Americans without healthcare coverage. Twenty million people have gained health insurance coverage because of the ACA. The uninsured rate is the lowest on 

record. 

Moreover, the ACA is making health coverage more affordable 

and accessible for Americans across the country. About 85 percent 

of marketplace consumers benefit from tax credits to make their 

coverage more affordable and they pay an average premium of 

$106 per month after tax credits. And since enactment of the ACA, 

we have seen the slowest growth in healthcare costs in 50 years. 

This reduced growth rate and cost benefits all of us. 

For insured individuals and families, the total cost of health care 

covered by our plan consists of a combination of payments to insurers and direct or indirect payments to healthcare providers. The 

payments to insurers take the form of monthly premiums that the 

insurers charge. The payments to healthcare providers, collectively 

known as cost-sharing payments, reflect the fact that insurance 

plans typically do not pay the full cost of covered healthcare services. Rather, plans require insured individuals to pay a copayment 

or coinsurance for visits to healthcare providers. 

Further, some plans require individuals to pay a specified 

amount out of pocket, known as a deductible. The principle goal of 

the ACA is to make health insurance more affordable for low- and 

moderate-income Americans. To achieve that goal, the Act established an integrated system of Federal subsidies that lower insurance premiums and reduce out-of-pocket costs for millions of eligible individuals through the premium tax credits and through the 

cost-sharing reductions. 

Premium tax credits, as you know, subsidize monthly insurance 

premiums for eligible individuals. Those credits are available to eligible individuals with household incomes from 100 percent of the 

Federal poverty level, to 400 percent of the Federal poverty level, 

and that reduces the cost of insurance purchased through the 

ACA’s marketplaces for low- and moderate-income households. 

For individuals eligible for the premium tax credit and who have 

household income up to 250 percent of the Federal poverty level, 

the ACA also helps with cost-sharing expenses, such as copayments 

and deductibles for plans obtained through the marketplaces. The 

permanent appropriation in 31 U.S.C. section 1324 provides funding for all components of ACA’s integrated system of subsidies for 

the purchase of health insurance, including both the premium tax 

credits and the cost-sharing reduction portions of the advanced 

payments. 

16 

Since January 2014, the executive branch has been making advance payments of premium tax credits and cost-sharing reductions 

to issuers of qualified health plans as provided for in the Affordable 

Care Act. I understand that some Members of this Committee disagree with, and will have questions about, the Administration’s 

legal conclusions that 31 U.S.C. section 1324 permanently appropriates funding for cost-sharing reduction payments. 

The Administration’s conclusion about those payments are the 

subject of active litigation brought by the House of Representatives. 

So for further information on the legal justifications, I would refer 

you to briefs filed in that case. 

We welcome the opportunity to continue our work with this Committee and with all of Congress to achieve the objectives and goals 

of the Affordable Care Act. Thank you. 

[The prepared statement of Mr. Mazur follows:] 

17 


23194A.004

EMBARGOED FOR DELIVERY 

Written Testimony of Mark J. Mazur 

Assistant Sec1·etary for Tax Policy 

U.S. Department of the T1·easury 

Befo1·e the House Ways and Means Subcommittee on O versight 

July 7, 2016 

Chainnan Roskam, Ranking Member Lewis, and members of the Committee, I appreciate the 

opportunity to be here today to testify regarding the cost-sharing reduction program under the 

Affordable Care Act (ACA). 

Background 

Since its enactment more than six years ago, the ACA has significantly reduced the number of 

Americans without health care coverage. Twenty million people have gained health insurance 

coverage because of the ACA- a reduction in the number of uninsured that is historic. The 

uninsured rate is the lowest on record. 

Moreover, the ACA is making health coverage more affordable and accessible for Americans 

across the country. About 85 percent of Marketplace consumers are taking advantage of tax 

credits to make their coverage more affordable, paying an average premium of $ 106 per month 

after the tax credits. And since the enactment of the ACA, we've seen the slowest growth in 

health care costs in 50 years. 

The Cost-Sharing Reduction Program 

For insured individuals and families, the total cost of health care covered by a plan consists of a 

combination of payments to insurers and direct or indirect payments to health care providers. 

The payments to insurers take the fom1 of monthly premiums that the insurers charge. The 

payments to health care providers, collectively known as "cost-sharing" payments, reflect the 

fact that insurance plans typically do not pay the full cost of covered health care services. 

Rather, plans typically require insured individuals to pay an amount either as a "co-payment" or 

"co-insurance" for visits to health care providers. Further, some plans require an individual to 

pay a speci tied amount out of pocket, known as a deductible, before certain benefits are covered 

by the insurer. 

A principal goal of the ACA is to make health insurance more affordable for low- and moderateincome Americans. To achieve that goal, the Act establishes an integrated system of fc.dcral 

subsidies that lowers insurance premiums and reduces out-of-pocket costs for millions of eligible 

individuals, through premium tax credits and cost-sharing reductions. 

Premium tax credits subsidize monthly insurance premiums for eligible individuals. TI10se 

credits are available to eligible individuals with household incomes from I 00 percent to 400 

percent of the federal poverty level to reduce the cost of insurance purchased through the ACA 's 

insurance Marketplaces for low and moderate income households. 
18 

f 


23194A.005

EMBARGOED FOR DELIVERY 

For individuals who are eligible for the premium tax credit and have household income up to 250 

percent of the federal poverty level, the ACA also helps with cost-sharing expenses (such as copayments or deductibles) for silver-level health plans obtained through the Marketplaces. 

The pennanent appropriation in 31 U.S.C. § 1324, as amended by the ACA, provides funding for 

all components of the ACA's integrated system of subsidies for the purchase of health insurance, 

including both the premium tax credit and cost-sharing reduction portions of the advance 

payments. Since January 201 4, the Executive Branch has been making advance payments of 

premium tax credits and cost-sharing reductions to issuers of qtk1lified health plans as provided 

for by the ACA. 

Conclusion 

I understand that some members of this Committee disagree with, and thus will have questions 

about, the Administration's legal conclusion that 31 U.S.C. § 1324(b) pennanently appropriates 

funding for cost-sharing reduction payments. The Administration's conclusions about those 

payments are the subject of active litigation brought by the House of Representatives. Thus, for 

further information, I would refer you to the briefs filed in that case. 

We welcome the opportunity to continue our work with this Committee and all of Congress to 

achieve the objectives and goals of the ACA. 
19 

Chairman ROSKAM. Just to put a finer point on it, Mr. Mazur, 

your invitation was for further legal justification. We are going to 

stipulate that is not the nature of the inquiry. We are looking for 

the process justification. So thank you for the opportunity to inquire there. 

Mr. Deich. 

STATEMENT OF MICHAEL DEICH, 

SENIOR ADVISOR, OFFICE OF MANAGEMENT AND BUDGET 

Mr. DEICH. Chairman Roskam, Ranking Member Lewis, and 

Members of the Subcommittee, thank you for the opportunity to 

testify before you today. 

Chairman ROSKAM. Turn on your mike. Can you pull it closer? 

Mr. DEICH. Is that better? 

Chairman ROSKAM. Yes, sir. Thanks. 

Mr. DEICH. Great. I am Michael Deich, and I have had the 

privilege of working for the Office of Management and Budget 

twice over the last 20 years. In my first position from 1996 to 2001, 

I served as Associate Director for General Government and Finance. 

Since returning to OMB last year, I have served as Senior Advisor to the Director and have been delegated the duties of the Deputy Director. In this capacity, I advise the Director on development 

of the President’s budgets and on appropriations activity. Every 

day, I am reminded of the excellent work performed by OMB staff, 

and I am honored to be part of this agency and proud of the mission it performs. 

The Office of Management and Budget assists the President in 

developing and executing—— 

Chairman ROSKAM. Mr. Deich, I am getting some requests. If 

you can move a little bit closer to the mike or pull it closer to you, 

that would be helpful. 

Mr. DEICH. Is that good? Thank you. 

Chairman ROSKAM. Thank you. 

Mr. DEICH. A core part of OMB’s mission is working with every component of the executive branch to develop the President’s 

budget proposals, submitting the President’s budget to Congress, 

working toward enactment of the budget, and overseeing the executive branch’s implementation of enacted appropriations. 

OMB ensures agencies develop, express, and implement policies 

and practices in accordance with the President’s priorities and with 

statutory direction. OMB is committed to improving the effectiveness and efficiency of government programs. As part of its mission, 

OMB works with other executive branch agencies to ensure the 

successful and ongoing implementation of the Affordable Care Act. 

As my colleagues have noted, the ACA has expanded access to 

care for millions of Americans who otherwise would be uninsured. 

It has improved the quality of care for people no matter how they 

get their insurance, and it has slowed the growth in healthcare 

costs nationwide. 

Cost-sharing reductions have helped improve the affordability of 

coverage options for eligible consumers. Moving forward, the Administration will work to build on the progress that has been made 

20 

to further reduce the number of uninsured Americans, improve 

health care, and slow healthcare cost growth. 

OMB respects Congress’ oversight role in examining the Affordable Care Act and will continue to work with the Committee to respond to its requests for information. OMB has a long history of 

working collaboratively to respond to congressional inquiries and 

will continue to work with this Committee to accommodate its request for information. 

Thank you again for the opportunity to testify today. I look forward to answering your questions. 

[The prepared statement of Mr. Deich follows:] 

21 


23194A.006

Statement of 

Michael Deich 

Senior Advisoa· 

Office of Management and Budget 

Before 

Committee on Ways and Means 

Subcommittee on Oversight 

United States House of Representath•es 

July7, 2016 

Chairman Roskam, Ranking Member Lewis, and members of the Subcommittee, thank 

you tor the opportunity to testify before you today. 

I am Michael Deich and I have had the privilege of working for the Otlice of 

Management and Budget (OMB) twice over the last 20 years. In my first position, from 1996 to 

200 I, I served as the Associate Director for General Government and Finance. Since retnrning 

to OMB last year, I have served as the Senior Advisor to the Director. I have also been 

delegated the duties of the Deputy Director. In this capacity, I advise the Director on 

development of the President's Budget and on appropriations activity. Every day, I am reminded 

of the excellent work performed by OMB staff and I am honored to be a part of this agency and 

proud of the mission it perfonns. 

The Office of Management and Budget assists the President in developing and executing 

his policies and programs and in meeting certain statutory requirements, including preparation of 

the President's Budget. A core part ofOMB's mission includes working with every component 

of the Executive Branch to develop the President's Budget proposals, submitting the President's 
22 


23194A.007

Budget to Congress and working towards its enacnnent, and overseeing the Executive Branch's 

implementation of the enacted appropriations. OMB ensures agencies develop, express, and 

implement policies and practices in accordance with the President's priorities and statutory 

direction and is committed to improving the effectiveness and etliciency of government 

programs. In this role, OMB works with other Executive Branch agencies to ensure the 

successful and ongoing implementation of the Affordable Care Act (ACA). 

The ACA has expanded access to care for millions of Americans who would otherwise be 

uninsured. It has improved the quality of care for people no matter how they get their insurance 

and it has slowed the growth in healthcare costs nationwide. As of early 2016, according to 

HHS, 20 million more Americans have health insurance thanks to the ACA, and the Nation's 

uninsured rate now stands at the lowest level on record. These gains and refotms that improved 

coverage for all Americans are improving access to care and families' financial security, while 

the ACA's refonns to the healthcare delivery system are contributing to slower growth in 

healthcare costs and improving healthcare quality. Cost sharing reductions further help to 

improve the affordability of coverage options for eligible consumers. Moving forward, the 

Administration will work to build on this progress to further reduce the number of uninsured 

Americans, improve healthcare, and slow healthcare cost growth. 

OMB respects Congress's oversight role in examining the Affordable Care Act and will 

continue to work with the Committee to respond to its requests for infonnation. OMB has a long 

history of working collaboratively to respond to congressional inquiries and we will continue to 

work with this Committee to accommodate its request for infonnation. 

2 
23 

f 


23194A.008

Thank you again for the opportunity to testify today. I would be happy to answer your 

questions. 

3 
24 

Chairman ROSKAM. Thank you all for your testimony. 

Chairman Brady. 

Chairman BRADY. Chairman, first, let me ask unanimous consent that the staff report on this investigation be submitted for the 

record. 

Chairman ROSKAM. Without objection, so ordered. 

[The submission of The Honorable Kevin Brady follows:] 

25 


23194A.009

House Committee on 

Energy and Commerce 

Majority Staff 

energycommerce.house.gov 

House Committee on 

Ways and Means 

Majority Staff 

waysandmeans.house.gov 

JOINT CONGRESSIONAL 

INVESTIGATIVE REPORT 

INTO THE SOURCE OF 

FUNDING FOR THE ACA•s 

COST SHARING 

REDUCTION PROGRAM 

JULY 2016 
26 


23194A.010

I. Table of Contents 

I. TABLE OF CO NTENTS ......•.........•.........•.........•.....•...•.........•...................•.........•.....................•.........•..... 1 

II. EXECUTIVE SUMMARY ....•.............................•...................•...................•.......................................•....... 4 

III. FINDINGS ....•...............•...•.........•...............•...•.....•.........•.................................................•....•.............. 10 

IV. BACKGROUND •...•.....•...•.....•.........•...•.....•.........•...•.....•.........•.........•.........•.........•.........•...............•... 13 

A. THE ACA AUTHORIZES COST SHARING REOUCfiONSAND PREMIUM TAX CREOITS ................................. 13 

1. Section140! Establishes Premium Tax Credits ........................................................................................ 13 

2. Section1402 Establishes tl1e Cost Sharing Reduction Program ................................................................ 14 

3. HowAdvnnced Premium Tax Payments Work ......................................................................................... 14 

4. How Cost Sharing Reductions Work ......................................................................................................... 15 

5. Premium Tax Credit Payment Mechanism ............................................................................................... 15 

B. THE COST SHARING REDUCTION PROGRAM REQUIRES AN ANNUAL APPROPRIATION ............................. 17 

C. H Ol/SE V. BURWELL LAWSUIT ........................................................................................................................ 18 

D. THE COMMITTEES' INVESTIGATION .............................................................................................................. 19 

V. AFTER REQUESTING AN ANNUAL APPROPRIATION FOR THE COST SHARING 

REDUCTION PROGRAM, THE ADMINISTRATION WITHDRAWS ITS REQUEST VIA A 

TELEPHONE CONVERSATION •..............•...•...................•...........•...•...............•...................•...................•... 21 

A. IN 2010, THE ADMINISTRATION BEGINS TO DISCUSS HOW TO FUND THE COST SHARING REDUCTION 

PROGRAM ..... . . ... 21 

6. THE AD:-AINISTRATION DEVELOPS A PLAN fOR THE MECHANICS OF MAKING PREMIUM TAX CREDIT 

PAYMENTS .. . ... 23 

1. lnter-AgeuClj Discussions on How to Implement the Premium Tax Credit Program Begin in 2011 ....... 24 

2. lu a Memorandum Regarding Premium Tax Credit Paymeuts, Treasury Ackmrwledges that the ACA did 

Not Provide an Appropriatiou for the Cost Sharing Reduction Program .......................................................... 24 

3. OMB Makes the Fiua/ Decision Regardiug Advanced Premium Tax Credit Accounting Structure ....... 27 

4. IRS and CMS Sign a Memorandum of Understauding in January 2013 to Govem the Payment of 

Advnuced Premiwu Tax Credits but Not Cost Slmriug Reductions .................................................................. 28 

C. THE ADMINIS'ffiA TION REQUESTS AN ANNUAL AI'PROPRIATION fOR THE COST SHARING REDUCTION 

PROGRAM................................................... ........................... . ... 30 

1. Tile Typical HHS Budget Process... . .. 30 

a. HHS Prepares Its Initial Budget Request ........ 30 

b. OMB's l'all Review .... . .... .. 32 

c. HHS' Appeals PI'()C('SS. . ...... 34 

d. The President Submits His Budget to Congress .................................................. . ........................ 36 

e. The Department Discusses the Budget Request with Congress .............. . . ..... 36 

(. The President Can Amend His Budget through a Budget Amendment. . ...... 38 

2. The President's FY 20!4 Budget Jududes a Request for an Amwal Appropriatiou ................................. 39 
27 


23194A.011

a. 

b. 

3. 

HHS' FY 2014 Budget PI'QCCss 

Prcsidcn~s FY 2014 Budget Request to Congress ... 

OMB Submits its Sequestration Report to Congress ...... . 

...... 40 

. ...... 40 

································ ... 42 

4. Tire President Did Not Withdraw His Requt'St for mr Arumal Appropriatiou for the CSR Program witll a 

Budget Amendment.. . ............................. ........................... ........................................................ 43 

D. THE ADMINISTRATION INFORMALLY WITHDRAWS ITS APPROPRIATION REQUEST BY PIIONE .................. 44 

1. Tile Administration Tells tire Court tl~nt itluformally Withdrew tire Request by Not Requesting mr 

Appropriation in its FY 2015 Budget Request ................................................................................................... 44 

2. Assistant Secretary for Financial Resources Ellen Murray Calls tile Senate Appropriations Committee 45 

3. Tire Administration has Meetings and Makes Phone Calls Before tire Senate Appropriations Committee 

Denies tile Appropriation Request ...................................................................................................................... 48 

VI. THE ADMINISTRATION SURREPTITIOUSLY RAIDS A PERMANENT APPROPRIATION 

TO PAY FOR THE COST SHARING REDUCTION PROGRAM .............................................................. 52 

A. 0MB DRAFTS A MEMORANDUM TO j USTIFY PAYING FOR THE COST SHARING REDUCTION PROGRAM 

THROUGH THE PREMIUM TAX CREDIT ACCOUNT .......................... .. .. .. 52 

J. OMB Lboks for Sources of Frmdingfor tile Cost Sharing Reduction Program ......................................... 52 

2. OMB Prepares a Memorandum 1/~nt Allegedly Supports Frmding tile Cost Sharing Reduction Program 

Using tire Appropriation for Tax Credits and Refuuds ...................................................................................... 55 

3. OMB Sllows the Memorandum to tire Treasury and HHS General Counsel Offices ................................ 57 

4. Attomey General Eric Holder Reviews OMB's Memormrdum........... ............................. ...59 

5. Wllite House Meetings Regarding fire Cost Sharing Reduction Program ................................................. 60 

6. The IRS Expresses Concems about tire Cost Sharing Reduction Program's Source of Frmds .................. 62 

7. Top IRS Officials Attend a Meeting at OMB to Review tire Memorandum ............................................. 67 

a. The Purpose of the Meeting ............................................................................................................................... 67 

b. What Happened at the Meeting ......................................................................................................................... 71 

c. TheOMB Memorandum's Rationale.............................................................................................. .. .... 72 

8. IRS Officials Still Haw Concems Following Review ofOMB's Memorandum ....................................... 74 

B. THE ADMINISTRATION BEGINS TO PREPARE TO MAKE COST SitAR lNG REDUCTION PAYMENTS .............. 76 

1. Secretnr.v Lew Authorizes tire IRS to Administer Cost Sharing Reduction Payme11ts .............................. 76 

2. Commissio11er Koskirmr Meets will! Co11cerrred IRS Officials .................................................................. 83 

3. A Memorandum of U11derstandi11g betwee11 tire IRS and CMS Sets Forti! How to Make Cost Sharing 

Reductio11 Payme11ts ......................................................................................................................................... 85 

C. THE ADMINISTRATION DOES NOT REQUEST AN ANNUAL AI'PROPRIATION IN ITS FY 2015 BUDGET 

REQUEST ................................................................................................................................................................. 87 

Vll. THE ADMINISTRATION HAS OBSTRUCTED THE COMMITTEES' INVESTIGATION ..... 89 

A. BACKGROUND OF THE COMMITTEES' INVESTIGATION ................................................................................. 90 

1. Tire Committees Initiate tire l11vestigation ami Req11est Documents and lnformntion .............................. 90 

2. Tire Admi11istratio11 Delays ami Impedes Sclreduli11g Transcribed luterviews .......................................... 93 

3. Tire Administration Refuses to Produce to tire Committees a Final OM8 Memorandum ........................ 95 

2 
28 


23194A.012

4. Due to the Admiuistratiou's Explicit Refusnl to Produce Documeuts aud Testimouy, lite Committees are 

Forced to Issue Subpoe11as .................................................................................................................................. 96 

B. THE ELEMENTS OF THE ADMINISTRATION'S O BSTRUCTION •...........................•...................••...................... 98 

1. Tire Admiuistratio11 has Not Complied with the Committees' Subpoe11as ................................................. 99 

a. The Department of the Treasury has Produced only 31 pages of Doo•ments to the Committees, 

Including a Redacted Version of a "Final" Action Memorandum Signed by Secretary Lew ................ .......... 102 

b. The Department of the Treasury has Not Undertaken a Reasonable-Let Alone a Thorough-Search for 

Reoords Responsive to the Committee's Subpoenas ..... 105 

c. The Department of Health and Human Services has Not Produced All Records Responsive to the 

Subpoenas, and has Not Cited Any Valid Legal Basis to Withhold Any Materials ........................................... 107 

d. 111e Office of Management and Budget has Refused to Produce a Memorandum Subpoenaed by the 

Committees, and has Not Cited any Valid Legal Basis to Withhold the Document .. 108 

2. Treasury has Refused to Co11jirmto the Committee 011 Ways a11d Mea11s whether the Departme11t Timely 

Delivered Depositio11 Subpoe11as to Wit11esst.'S ........................................ . ................... ........................ 109 

3. Tire Departme11t of the Treasury Issued Testimorry Autlrorizatio11 Memora11da to Wit11esses Based ou 

Over-Broad Toulry Regulatiorrs............... ...................... ................... .................................. .113 

a. Treasury hilS Promulgated Extensive Touhy Regulations that Allow I he Oept~rtrne t to Limit 

Information Current and Former IRS Employees Can Provide to Congress . . .... 114 

b. Treasury Used Its Touhy Regulations to Prohibit Employet.'S from Answering Questions from Congress 

about the CSR program.. ..................................... ......................... . ........... 116 

c. Treasury Officials En.forced Testimony Authorizations lnoonsistcntly ... . ............ 119 

4. HHS a11d OMB also Limited lire Scope of Their Employees' and Former Employees' Testimony to the 

Committees ....................................................................................................................................................... 122 

5. Lawyers for the Administration Did Not Allow Witnesses to Arrswer Substantive Questio11s about the 

CSR Program............. ...................... . .............................................. . 125 

a. Counsel for HHS lnstructed Witnesses Not to Answer Substantive Questions About the Source of 

Funding for the CSR Program ..... 126 

b. Witnesses Were Not Permit-ted to Al'•swer Questions about the Names of Individuals Involved in 

Decisions about ~le Source of Funding for the CSR Program Employed at the Department of Justice and the 

White House. ............................ . .......... 133 

c. OM6 Counsel Refused to Allow an OMB Witness to Answer Questions Regard ing the Dates or Times 

of Meetings or Conversations with Other Administration Officials About the CSR Program ..... 139 

d. The Administration failed to Provide Any Valid Legal Grounds for Instructing Witnesses Not to 

Answer Substantive Questions Posed by the Committees ............................................................................... .... 144 

6. Lawyers for the Departmerrt of the Treasrrry Pressured at Least One Witness irrto Followirrg Restrictiorrs 

Set Fort/1 inl1is Testimony AutiJOrizntiorr ........................................................................................................ 145 

Vlll. CONCLUSION ................................................................................................................................... 156 

3 
29 


23194A.013

II. Executive Summary 

More than two c.enturies ago, this country adopted the Constitution as the blueprint and 

basis for our federal government. While this framework has been amended over the years, the 

system of checks and balances among the Legislative, Executive, and Judicial branches remains 

fmnly intact. Congress passes laws, and the Executive branch implements them. The 

Constitution further makes clear that the power of the purse lies with Congress- "No money 

shall be drawn from the Treasury but in Consequence of Appropriations made by Law(.)" This 

requirement ensures that the Executive branch does not spend taxpayer money without the 

approval of Congress. 

The Administration, however, has done just that. Since January 2014, the Administration 

has been paying for the cost sharing reduction (CSR) program established by the Patient 

Protection and Affordable Care Act (ACA) without a lawful congressional appropriation. Tltis 

action is a clear constitutional violation of the most fundamental tenet of appropriations law. 

Found under Section 1402 of the ACA, the CSR program requires health insurance 

companies that offer qualified health plans to reduce co-payments, deductibles, and other out-ofpocket expenses for eligible beneficiaries. Section l412(c)(3) authorizes the federal government 

to make direct payments to insurance companies to offset estimated costs incurred by providing 

these CSRs to eligible beneficiaries. Nothing in the ACA provides an appropriation or a source 

of funding for the CSR program. Therefore, the Administration needed to request an 

appropriation from Congress to make CSR payments to insurance companies. 

The Administration, however, has been making CSR program payments through a 

permanent appropriation, found at 31 U.S.C. § 1324. This appropriation can only be used to 

disburse money for specific, enumerated programs, including tax refunds and several enumerated 

refundable tax credits. Congress must amend this appropriation to include other programs. 

Congress did just that for one part of the ACA- the premium tax credit. Congress did not do so, 

however, for the CSR program. Nevertheless, the Administration has been funding the CSR 

program through this permanent appropriation. 

The House Committee on Energy and Commerce and the House Committee on Ways and 

Means launched an investigation in February 2015 to understand the rationale behind the 

Administration's decision to ti.md the CSR program through the permanent appropriation, 

including who made that de.cision. The committees' questions have included: Why did the 

Administration initially request an annual appropriation for the CSR program from Congress? 

How was that decision made? Who made it? When did the Administration detennine that an 

annual appropriation for the CSR program was not necessary? Who made that decision? When 

was the decision made to use the permanent appropriation at 31 U.S.C. § 1324 to fund the CSR 

payments, and on what grounds? 

Despite the Administration's relentless efforts to obstmct the committees' investigation, 

the committees have been able to shed some light on the Administration's decision. 

4 
30 


23194A.014

The Administration knew it coultl not use the permanent appropriation to fum/ the CSR 

program. 

After Congress passed the ACA, the Administration took multiple actions that indicated 

it understood that it needed an annual appropriation to fund the CSR program. For example, 

beginning in 201 1, during its platming efforts to develop a payment mechanism for the ACA 

premium tax credits, the Administration understood that it could not use the 31 U.S.C. § 1324 

permanent appropriation to pay for the CSR program. The ACA established the premium tax 

credit (PTC)- a refundable tax credit available to eligible taxpayers-under Section 140 I. The 

ACA also amended 31 U.S.C. § 1324 to specifically allow the use of this permanent 

appropriation to pay for premium tax credits. The ACA, however, did not detail the process 

through which the Department of Health and Human Services (HHS) would make the advanced 

payments tor premium tax credits (APTC) from the 31 U.S.C. § 1324 permanent appropriation, 

given that the Internal Revenue Service (IRS) manages that pennanent appropriation. 

Ultimately, the Administration settled on using an allocation acc-ount structure- which 

created a sub-account or "child account" from which HHS could draw funds for APTC 

payments. CSR payments, however, were never a part of this planning process. In fact, a 

Memorandum of Understanding (MOU) between IRS and the Centers for Medicare and 

Medicaid Services (CMS) was signed in January 2013 regarding how to administer APTC 

payments, but it did not address CSR payments. 

Moreover, as the Administration was developing the allocation account payment 

structure for APTC payments, the Department of the Treasury wrote a memorandum to the 

Office of Management and Budget (OMB) asserting that although the 31 U.S.C. § 1324 

permanent appropriation would be used to make the APTC and PTC payments, it could not be 

used to make CSR payments. The memorandum stated that "there is currently no appropriation 

to Treasury or to anyone else, for purposes of the cost-sharing payments."' 

Tlte Administration requested an all/lila I appropriation for tlte CSR program, but shortly 

thereafter, informally withdrew the request. 

Further demonstrating that the Administration knew that Congress did not fund the CSR 

program in the ACA itself, the Administration initially requested an annual appropriation for the 

program. On AprillO, 2013, the Administration submitted its FY 2014 budget request to 

Congress. This budget requested $3.9 billion for the CSR program. 

AJso on April10, 2013, OMB submitted to Congress its sequestration preview report 

explaining what would happen to the President's budget in the event of sequestration. According 

to this OMB repot1, the $3.9 billion the Administration bad requested to fund the CSR program 

was subject to a mandatory 7.3 percent budget cut under sequester mandates. Notably, most 

permanent appropriations- including the permanent appropriation for tax refunds and creditswere not subject to sequestration. OMB's revised sequestration report, submitted to Congress on 

May 20,2013, similarly reflected a 7.2 percent budget reduction for the CSR program. 

1 Memorandum from U.S. Dcp't of the TreaS1u·y to Office ofMgull. and Budget (July 31, 2012) [hereinafter 

Treasmy Al'TC Memorandum]. 

5 
31 


23194A.015

On July II, 2013, the Senate Committee on Appropriations expressly denied the 

President's request for nearly $4 billion to fund the CSR program. Between April 10, when the 

President submitted his budget request and OMB issued its Sequestration Preview, and July II, 

when the Senate Committee on Appropriations' denied the appropriation request, HHS Assistant 

Secretary for Financial Resources Ellen Murray engaged in several key conversations about the 

source of funding for the CSR program, including: (I) a telephone conversation with someone in 

the Executive Office of the President, the name of whom the Administration refuses to disclose; 

(2) a conversation with HHS General Counsel William Schultz; and (3) a telephone conversation 

with the then-Staff Director of the Senate Appropriations Committee. During the telephone 

conversation with the Senate Appropriations Committee, Ms. Murray informally withdrew the 

Administration's FY 2014 request for the aruma! appropriation for the cost sharing reduction 

program. Rather than include the withdrawal in the President's formal budget amendment, the 

Administration took the highly unusual step of withdrawing the appropriations request via a 

telephone conversation. 

Tlte Administration developed a new-nlbeit illegal-patlt forward to pay for tlte CSR 

program. 

Arotltld the same time that the Administration infonnally withdrew its CSR funding 

request, OMB began to develop a memorandum justifying another way to fund the CSR 

program. The Administration has refused to provide the committees with a copy of this 

memorandum-even pursuant to two congressional subpoenas. Nevertheless, the committees 

teamed through witness testimony that the memorandwn provided OMS's fmallegal analysis 

and justification for making CSR payments using the premium tax credit account- the account 

funded through the 31 U.S.C. § 1324 permanent appropriation. 

In late 2013, OMB shared this memorandum with top Administration officials at several 

departments and agenc ies. For example, OMB showed the memorandum to both the Treasury 

and HHS general counsel offices. Additionally, then-OMS General Counsel Geovette 

Washington briefed then-Attorney General Eric Holder on the issue. According to witness 

testimony, the Attorney General personally approved the legal analysis in the memorandum. 

High-level IRS officials raised concerns about tit is plan, but the decision had already been 

made. 

Toward the end of2013, several high-level IRS officials began raising concerns about the 

source of funding for the CSR program. The first CSR payments were scheduled to be paid out 

at the end of January 2014. Only a couple of months earlier, the IRS teamed that the 

Administration would be using an IRS-administered permanent appropriation- not subject to 

sequestration- to fund the CSR program instead of an annual appropriation to HHS. According 

to the fonner-IRS Chief Risk Officer, "[t]he question at hand became whether or not the [ACAJ 

actually authorized, appropriated those dollars using the pennanent appropriation [under 31 

U.S.C. § 1324]."2 After the IRS raised these concerns to OMB, OMB permitted the IRS officials 

to review its memorandum at the Old Executive Office Building. At this meeting, OMB officials 

instructed the IRS officials not to take notes or take a copy of the memorandum with them. The 

' H. Couuu. on Ways & Means, Deposition of David Fisher, at 53 (May II , 2016) (hereinafter Fisher Dcpo.). 

6 
32 


23194A.016

legal memorandum did not alleviate all of the IRS officials' concerns that the Administration's 

course of action violated appropriations law. 

A few days later, the IRS held an intemal meeting with IRS Commissioner John 

Koskinen. The IRS officials who attended the OMB meeting were given an opportunity to raise 

their concerns directly to the Commissioner. Although Commissioner Koskinen listened to those 

concerns, the Administration already had decided to move forward with its plan. The 

Administration intended to make the CSR payments through the premium tax credit account. At 

the meeting with Commissioner Koskinen, participants reviewed a final Action Memorandum to 

Treasury Secretary Jacob Lew. This Action Memorandum, which recommended that the IRS 

administer the CSR payments through the§ 1324 permanent appropriation in the same way it 

administered the APTC payments, had already been approved by Secretary Lew. Despite two 

subpoenas issued by two congressional committees, the Administration has produced only a 

redacted version of the final Action Memorandum to the committees and has not provided any 

legal basis or explanation for the redactions. 

Wlren Congress started tlsking questions tlbout the source of fimding, the Administmtion 

refitsed to provide answers. 

For well over a year, the committees have steadily pursued requests for documents and 

testimony about the Administration's funding oft be CSR program. Using a number of different 

tactics, the Administration bas impeded and obstructed the investigation at every turn. This level 

of obstmction by an Administration is unprecedented at both the Committee on Energy and 

Commerce and the Committee on Ways and Means. 

The Administration has, in part, atlempted to argue that the ongoing House v. Bunve/1 

litigation effectively preempts any oversight by the conunittees of the CSR program. It does not. 

The lawsuit involved no discovery. The parties stipulated to the facts. The question before the 

court was purely a question oflaw. The committees' separate and independent oversight inquiry 

focuses on the underlying facts surrounding tl1e Administration's decisions. Nevertheless, the 

Administration has attempted to use the lawsuit to excuse it from cooperating with the 

committees' oversight. 

The Administration has refused to comply with subpoenas issued by Congress. As of the 

drafting oftltis report, neither the Department of the Treasury, nor the Department of Health and 

Human Services, nor the Office of Management and Budget are in compliance with subpoenas 

issued by the committees. None of the three have produced a meaningful number of responsive 

documents. None of the three have certified that their production is complete or produced a log 

of documents withheld from the committees, or even provided a legal basis- to the extent one 

applies- to justify withholding large amounts of information from Congress. Further, the 

committees have evidence that the Department of the Treasury has not even conducted a 

reasonable search for documents responsive to the subpoena and the committees' document 

requests dating back for eighteen months. 

The Department of the Treasury has refused to confim1 to the Committee on Ways and 

Means whether it ever delivered deposition subpoenas to witnesses. Treasury counsel rentsed to 

7 
33 


23194A.017

let the witnesses answer the committee's questions regarding when- or if- they had received 

their own subpoenas, and Treasury counsel itself refused to provide that infonnation to the 

committee. This failure raises questions about the courtesies provided by Congress to the 

Administration and its employees with respect to the service of congressional subpoenas. 

The Department of the Treasury limited its employees' and former employees' testimony 

to Congress by issuing testimony authorizations to witnesses based on over-broad Touhy 

regulations inconsistent with federal law. Tbe Treasury regulations, found at 26 C.F.R. 

§ 301 .9000, require IRS employees to obtain pennission from the IRS before speaking to 

Congress, and tben to limit their speech to Congress to those topics approved by the IRS, at risk 

oflosing their jobs if they do not meet the terms dictated by the IRS. Treasury used these 

regulations, and the testimony authori.zations based on them, to unilaterally and grossly restrict 

the testimony that current and fonner IRS officials were permitted to provide to Congress. 

Furthem10re, Treasury selectively and inconsistently enforced the tenns of the testimony 

authorizations by allowing witnesses to answer certain questions clearly prohibited by the 

authorizations without objection. 

The Department of Health and Human Services and the Office of Management and 

Budget also severely restricted the scope of testimony provided by current and former 

employees. Lawyers for the Administration repeatedly instmcted witnesses not to answer 

substantive questions regarding the source of funding for the CSR program. Despite repeated 

iJlquiries from committee counsel, Administration counsel refused to provide a va lid justification 

for restricting the witnesses' testimony. The excuses provided- that the Administration can 

withhold information that seeks internal or interagency deliberations, or seeks information it 

deems protected by a vague and undefined "confidentiality interest," or "embeds a deliberative 

fact" into a question the Administration did not want a witness to answer- are not legally 

cognizable bases on which the Administration can withhold information from Congress. 

The Administration further instructed witnesses not to answer purely factual questionsincluding questions seeking the names of individuals involved in decisions about the source of 

funding for the CSR program, or confinnation of the occurrence of meetings about the CSR 

program. When asked what barred the witnesses from answering these questions, 

Administration lawyers explained that the Executive branch has "confidentiality intere.sts" and 

"heightened sensitivities" that allow it to withhold this infonnation from Congress. When asked 

to explain tbe basis of those "interests" and "sensitivities," Administration lawyers refused to do 

so. No such legal privilege exists- nor has one ever existed- that supports the Administration's 

position that it can withhold purely facrual infonnation from Congress. 

The position of the Administration- that it can unilaterally block from disclosure to 

Congress the answer to any question that seeks intemal or interagency communications, or an 

undefined "confidentiality interest," or even a fact that it does not want Congress to knoweffectively exempts the entire Executive branch from congressional oversight. 

Finally, lawyers for the Administration pressured at least one witness into following the 

restrictions set forth in his testimony authorization issued by the IRS after the witness questioned 

the Administration's ability to limit his testimony. The answers this witness provided in a 

8 
34 


23194A.018

compeUed deposition- without Treasury counsel present- provided more insight into the 

Administration's decision-making process than did testimony from any other individua l. His 

answers also shed light onto why the Administration restricted the testimony of every other 

witness- going so far as to not letting witnesses answer questions about the names of individuals 

involved- and why the Administration has failed to comply with the committees' document 

subpoenas. 

Congress relies on access to documents and witnesses trom the Executive branch in order 

to conduct the oversight critical to a functioning govenunent. The Administration's actions in 

restricting the scope of testimony provided by witnesses and refusing to provide documents to 

the committees shows that it does not believe in transparency. Instead, the Administration's 

actions make clear it believes congressional oversight to be an unnecessary nuisance. As a 

result, the committees are left with no choice but to conclude that the Administration has 

intentionally obstructed this investigation. The Administration did so because it broke the law 

and violated the Constitution in funding the CSR program through the pennanent appropriation 

for tax refunds and credits. 

9 
35 


23194A.019

III. Findings 

J;> The Administration began to have discussions about the source of funding for the cost 

sharing reduction program after Congress passed the Patient Protection and Affordable Care 

Act in 2010. 

J;> In 20 12, the Administration developed an allocation account structure to pay for the premium 

tax credits. At that tin1e, Treasury counsel concluded that 31 U.S.C. § 1324- the permanent 

Treasury appropriation for tax credits-could not be used to make CSR payments. 

J;> HHS' typical budget process is- for the most part- a thorough, institutionali zed, and welldocumented process. 

J;> The Administration can withdraw an appropriation request without going through the formal 

and documented budget amendment process. 

:> The Administration requested an aooual appropriation of almost $4 billion for the cost 

sharing reduction program in its FY 2014 budget request, submitted to Congress on Apri110, 

2014 

J;> According to OMB's April 10,2013 sequestration preview report, the annua l appropriation 

for the cost sharing reduction program would have been subject to a 7.3 percent reduction if 

the sequester went into effect. 

J;> The Administration did not submit a fonual budget amendment withdrawing its request for 

the annual appropriation for the cost sharing reduction program. 

}> Between AprillO, 2013 and July II, 2013, in an unusual move, the Administration 

informally withdrew its request for an ammal appropriation for the cost sharing reduction 

program by calling the Senate Committee on Appropriations. 

J;> OMB prepared a memorandum that provided the Administration's legal analysis and 

justification for funding the cost sharing reduction program through the premium lax credit 

account. 

J;> OMB shared its memorandum with both the Treasury and HHS general counsel offices in 

late 2013. 

> OMB shared its memorandum with Attorney General Eric Holder in late 2013 and briefed 

him on the issue. 

10 
36 


23194A.020

J:> Some senior IRS officials raised concems about the source of funding for the CSR program. 

J:> OMB shared its memorandum with IRS officials in a meeting weeks before the first cost 

sharing reduction payments were to be made. The IRS officials were not permitted to take 

notes at the meeting or take a copy of the memorandum. 

J:> After reviewing the memorandum, some of the IRS officials still had concems about the 

source of funds, and wanted to make sure that these payments were not in violation of 

appropriations laws or the Antideficiency Act. 

l> Secretary Lew approved an Action Memorandum dated January 15, 2014, authorizing the 

IRS to administer the cost sharing reduction payments in the same manner as the advanced 

premium tax credit payments. 

J:> A few days after the meeting at OMB to review OMB's memorandum, several high-level 

IRS officials met with IRS Commissioner John Koskinen to discuss how the Administration 

planned to fund the cost sharing reduction program. It was clear that the decision had 

already been made to move forward with making the cost sharing reduction payments 

through the premium tax credit account. 

J:> The Administration could not make cost sharing reduction payments until a Memorandum of 

Understanding was in place. 

J:> The Administration did not request an annual appropriation for the cost sharing reduction 

program in its FY 2015 budget request, submitted to Congress on March 14, 2014. 

J:> The Administration has not complied with subpoenas issued by the United States Congress. 

J:> The Department of the Treasury improperly withheld and redacted documents responsive to 

the committees' subpoenas without any valid legal basis to do so. 

l> The Department of the Treasury did not undertake a reasonable or thorough search for 

rc.cords responsive to the conunittecs' subpoenas. 

l> The Department of Health and Human Services improperly withheld documents responsive 

to the committees' subpoenas without any valid legal basis to do so. 

l> The Office of Management and Budget improperly withheld documents responsive to the 

committees' subpoenas without any valid legal basis to do so. 

II 
37 


23194A.021

l> The Department of the Treasury did not provide deposition subpoenas issued by the 

Committee on Ways and Means to the relevant deponents in a timely mam1er. 

l> The Department of the Treasury has promulgated Touhy regulations that-contrary to federal 

statute-limit the rights of IRS employees to provide infonnation to Congress. 

l> Treasury used its Touhy regulations and Testimony Authorizations to prohibit current and 

former IRS employees from providing testimony to Congress about the source of funding for 

the CSR program. 

l> Treasury officials selectively enforced the Treasury Authorizations by allowing witnesses to 

answer certain questions prohibited by the aud1orizations without objection. 

> HHS and OMB imposed scope restrictions to prevent current and fonner employees from 

providing full and complete testimony to the Congress. 

> HHS counsel prevented witnesses from answering substantive questions regarding the cost 

sharing reduction program, citing the need to protect "internal deliberations" and 

"confidentiality interests" as justification to withhold infonnation from Congress. 

> Witnesses were instructed not to reveal to Congress the names of White House and 

Department of Justice officials involved in decisions regarding the cost sharing reduction 

program. 

l> OMB prevented a witness from answering factua l questions regarding the dates or tin1es of a 

meeting or conversation, refusing to invoke a legal privilege to justify withholding the 

information from Congress. 

l> The Administration sought to withhold information from Congress by effectively claiming 

the deliberative process privilege. That privilege does not apply in this instance. 

> The Department of the Treasury pressured at least one witness into following the restrictions 

set forth in his Testimony Authorization after the witness questioned Treasury's ability to 

limit his testimony. 

12 
38 


23194A.022

IV. Background 

A. The ACA Authorizes Cost Sharing Reductions and Premium Tax 

Credits 

On March 23, 20 I 0, President Obama signed the ACA into lawJ The law imposed 

numerous taxes and regulations affecting health insurance offered to individuals and families, 

including a mandate requiring all individuals to obtain insurance or pay a penalty. The ACA 

also created several new entitlement programs aimed at helping people pay tor health insurance 

coverage. These entitlements included an expansion of the Medicaid program, as well as 

subsidies available to individuals who purchase coverage through health insurance exchanges 

created by the law. 

The law's exchange subsidies consist of two components: 

I. Premium Tax Credits (PTC): A refundable tax credit available for eligible taxpayers 

who purchase a qualified health plan (QHP) on the health insurance exchanges 

created by the ACA.4 The government can pay this credit to insurance companies in 

advance to offset an individual's monthly premium (in which case it is known as an 

Advanced Premium Tax Credit (APTC)), or a taxpayer may claim it as a credit on a 

tax return. 

2. Cost Sharing Reductions (CSR): The law requires insurance companies to reduce 

copayments, deductibles, and other expenses paid by eligible beneficiaries. The law 

authorizes the federal government to offset the cost of these reductions by making 

payments to the insurance companies5 

The law established a process to detennine an applicant's eligibility for PTCs and CSRs 

in advance, which allows individuals to have PTCs applied to their monthly premiums and 

qualify for cost sharing reductions.6 

1. Section 1401 Establishes Premium Tax Credits 

Section 1401 of the ACA added Section 36B to the Internal Revenue Code, establishing 

the PTC. This credit is available to taxpayers with incomes between 100 and 400 percent of the 

federal poverty level (FPL). In order to quality for the credit, eligible individuals cannot have an 

offer of coverage through their employer, or be enroUed in a govemment program like 

Medicaid.7 AdditionaUy, to claim the credit, the taxpayer must purchase a QHP through one of 

the health insurance exchanges created by the law. The PTC amount is based on the taxpayer's 

l Patiem Protection and Affordable Care Act, Pub. L. No 111-148, 124 Stat. 119 (2010). 

• 26 U.S.C. § 36B. 

' 42 u.s. c.§ 18071. 6 42 U.S.C. § 18081 and 18082. 

' 26 U.S.C. § 36B(c)(2)(B)(i). 

13 
39 


23194A.023

income, family size, and the price of a benchmark health plan. 

8 For eligible individuals, the 

government can pay the credit in advance to the insurance companies so that the insurance 

companies reduce those individuals' premiums. These payments are referred to as advanced 

premium tax credits (APTC).9 

2. Section 1402 Establishes the Cost Sharing Reduction Program 

Section 1402 of the ACA created the CSR program. The statute requires insurers to 

reduce co-payments, deductibles, and other out-of-pocket costs for eligible insured individuals. 

These individuals must have an income between l 00 and 250 percent of the FPL, must be 

eligible for PTCs, and must have purchased a specific type of QHP on the exchange. 10 

Although the ACA authorizes the government to offset insurance companies' expense lor 

the cost of providing cost sharing reductions, the law did not designate any funds for such 

payments. 

11 

3. How Advanced Premium Tax Payments Work 

One of the key features of the ACA is the creation of the health insurance exchanges, 

govenunent-created entities that facilitate the purchase of health insurance. The exchanges also 

make detenuinations about insurance purchasers' eligibility for APTCs and CSRs when 

individuals sign up for coverage. 12 Sections 1411 and 1412 of the ACA outline tlus process. 

The exchanges connect with various federal agencies such as the IRS, the Social Security 

Administration, the Department of Homeland Security, and others to verify eligibility 

infonuation provided by applicants. Based on this infonuation, the exchanges detenuine 

whether an individual qualifies for APTC and CSR, and, if so, in what amounts. 

While both the APTC and PTC reduce premiums, they operate diiTerently from each 

other. As the name implies, insurance purchasers receive the benefit of APTCs in advance. An 

exchange projects an estimate of an individual's income, family size, and other information and 

makes the APTC payment to the individual's insurance company based on those projections. At 

the end of the tax year, those individuals must reconcile the an1ount of the APTCs they received 

with the amount of the PTC to which they are actually entitled. 13 That is, if taxpayers receive too 

much in APTC, they must repay the excess payment to the government. If taxpayers receive too 

little in APTC, they are able to claim the difference as a refund on their tax returns for that 

year.l4 

8 26 U.S.C. § 36B(b)(2)(B)(i). 9 42 U.S.C. § t8082(c}(2}. 10 42 u.s.c. § 18071(b)(t). 11 42 U.S.C. § 18082(c)(3). 12 42 U.S.C. § 18081(a). 13 26 U.S.C. § 36B(t). 14 /d. 

14 
40 


23194A.024

4. How Cost Sharing Reductions Work 

Cost sharing reductions are different from both APTC and PTC. CSRs are not a tax 

credit, and they do not affect premium costs. The CSR program requires insurance companies to 

reduce co-payments, deductibles, and other out-of-pocket costs for eligible insurance purchasers. 

While APTC payments can be applied to any meta l level health plans (bronze, silver, gold, or 

platinum), CSRs are available only if an eligible individual chooses a silver level plan. IS Further, 

unlike with the APTC, an individua l receiving a cost sharing reduction receives no payment, and 

is not required to reflect the reduction on any IRS tax filing. 

For example, an APTC-eligible individual with an expected income equal to 175 percent 

of the federal poverty level (approximately $20,790 in 2016) who enrolls in a silver plan on the 

exchange will see the actuarial value of the plan increase from 70 percent to 87 percent. This 

means that the individual will be required to pay approximately 13 percent of the total covered 

costs (as opposed to 30 percent), with the health plan covering the rest. Under the ACA, the 

government is authorized to .rrovide a payment to the insurer to c.over the expected cost of 

providing these reductions. 1 

Unlike APTCs, individuals are not required to reconcile any excess CSRs that they may 

have received: if an insurance c.ompany reduces co-payments or de.ductibles too much for an 

individual, that company cannot recoup the cost from that policyholder. On the other hand, if an 

insurance company does not reduce costs enough for an individual, that person cannot claim 

additional CSRs on a tax retum. 

5. Premium Tax Credit Payment Mechanism 

The ACA amends a permanent indefinite appropriation established for the payment of 

specifically listed income tax refunds and specifically listed tax credits by adding premium tax 

credit payments to the list of approved tax credits that can be paid out of the permanent 

appropriation. 17 The IRS manages this particular appropriation, which is used for other tax 

refund payments as well as the PTC and APTC. This created a logistical problem for APTC 

payments: the Centers for Me-dicare and Medicaid Services (CMS) detennines applicants' 

eligibility for APTC payments and makes the payments to issuers, but cannot directly use the 

permanent indefmite appropriation to make the payments because it is managed by the IRS. 18 

To resolve this problem, the IRS created a sub account-known as an "allocation 

account" or a "child account" within the "parent" tax-credit appropriation account- which CMS 

IS 42 U.S.C. § 18071(bXI). 16 U.S. Dep't ofHealih & Hmnan Servs., Notice of Payment and Benefit Parameters for 2014 Plan Year, 78 Fed. 

Reg. 1548l(Mar. II, 2013). 11 Patient Protection and Affordable Care Act, Pub. L. No 111-148, S~tion t40I(d)(I), t24 Stat. 119 (Mar. 23, 

2010). 18 U.S. DEP'TOF HEALTH & HUMAN SERVS. OFFICE OF INSPECTOR GEN. AND TREASURY INSPECTOR G EN. FOR TAX 

ADMIN., REVIEW OF THE ACCOUNTING STRUCTURE USED FOR THE ADMINISTRATION OF PREMIUM TAX CREDITS 

(Mar. 31, 2015) (bereillllfter HHS OlGffiGTA PTC REPORT]. 

15 
41 


23194A.025

can access. 19 CMS provides the IRS an estimate of the funds needed to make APTC payments in 

a given year, and the IRS transfers the necessary funds into the allocation account. 2

° CMS then 

directs payments to insurers from the allocation account.21 

In January 2013, CMS and the IRS signed a Memorandum of Understanding (APTIC 

MOU) that outlined the roles and responsibilities of both agencies for administering APTC 

payments and making the payments from the § 1324 pennanent appropriation.22 The APTC 

MOU did not apply to CSR payments-CMS established a separate account intended for CSR 

payments and requested an annual appropriation of approximately $4 billion to make CSR 

payments in fiscal year 2014.

23 

At some point, however, the Administration changed its strategy for making CSR 

payments. In response to questions posed by Senators Mike Lee and Ted Cnrz, then-Office of 

Management and Budget Director Sylvia Mathews Burwell wrote that HHS would not be using 

the account set up by CMS for the CSR program to make CSR payments. Instead, for 

"efficiency" purposes, payments would be "paid out of the same account from which the 

premium tax credit portion of the advance payments for that program are paid."24 

The IRS accordingly set up a second allocation account specifically for CSR payments 

within the premium tax credit account.25 The IRS and CMS signed a second MOU specifically 

related to CSR payments on January 2014 (the CSR MOU), just days before the frrst payments 

were to be made?6 As with APTC payments, CMS would infonn the IRS how much it estimated 

CMS would need for the year, the IRS would then transfer the requested funds into the child 

account, and CMS would pay the insurers through that account.27 

•• /d. 20 Jd. 

21 Jd. 22 Memora11dum of Understanding betweentbe Intemal Rev. Setv. and the Ctrs. for Medicare & Medicaid Servs., 

MOU13-150(Jon. 2013). 21 Ctrs. for Medicare and Medicaid Servs., Justification of Estimates for Appropriation Couunittees for Fiscal Year 

2014 (2013). 

ZA Lettc•· ti·om Hou. Sylvia Matltews Burwc ~ Office ofMgrnt. and Budget, to Hon. Ted Cmz and Hon. Mike Lee, 

U.S. Senate (May21, 2014). 25 Memorandum of Understanding between the Intemal Rev. SeiV. and the Ctrs. for Medicare & Medic~id Servs., 

MOU14-127 (Jau. 2014) [hereinafter CRS MOU). 26 Jd. 

21 ld. 

16 
42 


23194A.026

B. The Cost Sharing Reduction Program Requires an Annual 

Appropriation 

The U.S. Constitution reseiVes to Congress decisions regarding taxation and spending. 

With regard to spending, the Constitution provides that "[n]o Money shall be drawn from the 

Treasury, but in Consequence of Appropriations made by Law[.]"28 The power of the purse is 

one of Congress' most important roles, and it is essential to maintain the separation of powers 

envisioned by the founders to ensure that representatives of the American people determine how 

taxpayer fimds are spent. 

Appropriations can take different forms. Typically, Congress appropriates funds for a 

given program on an annual basis through an appropriations bill. Occasionally, Congress enacts 

permanent appropriations that provide funds until Congress repeals or modifies the 

appropriation. In these instances, payments can be made without the need for Congress to pass 

any additional appropriations legislation. 

The Executive branch may only spend money that Congress has appropriated. Originally 

passed in 1870 to curb Executive branch abuses, the Antideficiency Act prohibits any federal 

officer or employee from "involv(ing] (the] government in a contract or obligation for the 

payment of money before an appropriation is made . .. . "29 If a U.S. government officer or 

employee violates the Antideficiency Act, that person "shall be subject to appropriate 

administrative discipline including, when circumstances warrant, suspension from duty without 

pay or removal from office."3

° Further, if the officer or employee "knowingly and willfully" 

violates the Act, that person can be sentenced for up to two years in prison and fined up to 

$5000.

31 

Congress has a process that guides the creation and funding of programs it establishes. 

Generally, Congress establishes programs through authorization acts and funds them through 

appropriations acts. Legislative committees with jurisdiction over a particular program develop 

authorization legislation. Congress can authorize programs on an annual basis or for any other 

length of time specified in statute. Appropriations committees then consider whether to 

appropriate funds for the Executive branch to use in implementing or maintaining programs. 

While authorizations often prescribe specific funding amounts, they do not in themselves 

appropriate any funds unless explicitly stated, as described below. As the Government 

Accountability Office (GAO), the foremost experts on appropriations law, explains, authorizing 

legislation " is basically a directive to Congress itself, which Congress is free to follow or alter 

(up or down) in tbe subsequent appropriation act."32 

Jn order for legislation to constitute an appropriation, the law must meet clear 

requirements. While it is not necessary for legislation to use the word "appropriation,'' "an 

2$ U.S. CONST. art. I. § 9. cl. 7. 

,. 31 u.s.c. § t341. 30 31 u.s.c. § 1350. 

" Jd. 

ll GoV'T ACCOUNTABO..ITY OmCE, PRINCIPLES OF FEDERAL APPROPRIATIONS LAW, 2- 56 (4th ed. 2016). 

17 
43 


23194A.027

appropriation must be expressly stated" and "cannot be inferred or made by implication."33 

Additionally, appropriations must meet two specific criteria: they must (I) designate that 

payment is to be made, and (2) indicate a source of funds to be used. Unless the law meets both 

criteria, it does not constitute an appropriation. As the GAO explains, "[b]oth elements of the 

test must be present. Tims a direction to pay without a designation of the source of funds is not 

an appropriation."J4 

Congress both authorized and funded the premium tax credit program in the ACA. 

Section 1401 of the ACA added Section 36B to the Internal Revenue Code, which authorizes the 

PTC program. ~ Additionally, Sectionl401 amended an existing permanent appropriation- 31 

U.S.C. § 1324- and designated the permanent appropriation as the source of funding for the 

PTC program.36 The appropriation's statutory language also limits payments from the 

appropriation to only tax refunds and specific credit provisions within Internal Revenue Code, 

including the PTC provision, Section 36B.37 

With respect to the CSR program, however, Congress provided only an authorization, 

and not an appropriation, in the ACA. The CSR program is not a tax provision and not codified 

within the Internal Revenue Code. Further, there is no langua~e in the ACA or anywhere else 

tying the CSR program to the 31 U.S.C. § 1324 appropriation. 8 Despite statements by the 

Administration, it has never been a principle of appropriations law that an authorized program 

can be funded from the account of another program simply for "efficiency" purposes if Congress 

docs not appropriate money to the program. 

C. House v. Burwell Lawsuit 

On November 21,2014, the U.S. House of Representatives filed a lawsuit against 

Secretary Burwell, Secretary Lew, and the Departments of Health and Human Services and the 

Treasury. 39 Among other claims, the complaint alleged that the cost sharing reduction payments 

made pursuant to Section 1402 of the ACA violated article I, section9, clause 7 of the 

Constitution and the Administrative Procedure Act.40 On September 9, 2015, Judge Collyer of 

the U.S. District Court for the District of Columbia held that the House had standing to pursue 

these claims because the claims were "predicated on a constitutional violation.'"'1 The lawsuit 

involved no discovery. The pa11ies stipulated to the facts. The question before the court was 

purely a question of law. 

On May 12, 2016, Judge Collyer ruled in favor of the House on the merits of the claim. 

She wrote: 

"!d."' 2- 54. " !d. nr2- 23. 

" Palicm Proleclion and Affordable Care Acl, Pub. L. No 111·148, 124 Stal. t 19 (2010). 36 /d. (amending 31 U.S.C. § 1324 by adding "36B" lo lhe list of lax credils available 10 be paid fromlhe permanent 

•rpropria1ion). 

l 31 u.s.c. § 1324. 38 Patient Protection and Affordable Care Act, Pub. L. Not I t·l48, 124 Stal. I t9 (2010). 39 U.S. Ho11seojReps. v. B11nvel/, No. t:l4-ev..01967, Complaint (D.D.C. Nov. 2 1. 2014). 

"'Jd. 31 t7- 18, 22- 23. 

" U.S. Ho11seojReps. v. Brmv•ll, No. 1:14-ev..01967, Memorandum Op. at32 (D.O.C. Sepl. 9, 2015). 

18 
44 


23194A.028

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 pem1anently-appropriated tax credits and 

refunds. Section 1402 was not added to that list. The question is 

whether Section 1402 can nonetheless be fund ed through the same, 

permanent appt·opl"iation. It cannot.42 

In other words, the court concluded that the Administration unconstitutionally paid for the CSR 

program tluough the pem1anent appropriation for tax credits and refw1ds. The litigation is still 

pending, waiting for the appeals process to conclude. 

D. The Committees' Investigation 

The commiHees' oversight inquiry is separate and independent from the lawsuit. It 

foct•ses on the underlying facts surrounding the Administration's decision to fund the CSR 

program using the § 1324 permanent appropriation. On the other hand, the lawsuit focuses on 

the legality of the Administration's decision and does not delve into the reasons why the 

Administration shifted course. 

For more than a year, the committees have requested documents, witness testimony, and 

other information from the Administration about the source of funding for the CSR program. 

From the outset, the committees have clearly stated the purpose of their investigation: to fully 

understand the facts surrounding the Administration's decisions to fund the cost sharing 

reduction program from the permanent appropriation for tax refunds and credits. In the course of 

this investigation, the committees have sent fifteen letters, issued six subpoenas for documents, 

and conducted twelve transcribed interviews of current and fonner Administration officials 

involved in decisions regarding the source of funding for the CSR program. The Cormnittee on 

Ways and Means additionally issued four subpoenas for testimony and conducted one 

deposition. 

lluougbout this investigation, the Administration has argued that the House v. Burwell 

litigation effectively preempted any oversight by the committees into the cost sharing reduction 

program. At every tum, the Administration has conflated the committees' separate and 

independent factual inquiry with the legal arguments posed by both sides in the litigation. l11e 

Departments of Health and Human Services and the Treasury have accused the commiltees of 

"utilizing oversight to accomplish inappropriate litigation objectives," including by conducting 

interviews "in an attempt to elicit information outside the bounds of traditional district court 

d iscovery.'"'3 

"US. House of Reps. v. Bwwe/1, No. 1: 14-cv-01967, Op. at I (D. D.C. May t2, 2016). 

"Letters from Atme Wall, Assistant Sec'y for Legis. Affairs, U.S. Dep't of the Treasury, and Jim R. Esquea, 

Assistant Sec'y for Legis., U.S. Dep't of Health & Human Servs., to Hou. Kevin Brady, Cbainnan, H. Comm. on 

Ways & Means, and Hon. Fred Upton, Chaim~an, H. Comm. on .Energy & Couuuerce (Jan. t9. 2016). 

19 
45 


23194A.029

There was, however, no discovery in the lawsuit. Because the lawsuit purely focused on 

the legality of the Administration's decision, the only relevant, and stipulated, fact was that the 

Administration made the CSR payments from the pennanent appropriation for tax refunds and 

credits. The Administration has failed to explain how the committees can seek infonnation 

"outside the bounds of . .. discovery" in a case with no discovery. Further, at no time has the 

Administration explained why the House v. Bulwe//litigation prevents the committees from 

exercisiug thei.r constitutional oversight responsibilities. 

In refusing to acknowledge the committees' separate and fact-based inquiry, the 

Departments wrote, "If, as we suspect, our agencies ultimately prevail, that would eliminate the 

legal issue tl1at is the stated predicate for the oversight." In fact, the Administration did not 

prevail. But, as the committees have maintained throughout this investigation, the cotmnittees' 

questions could not and would not be answered by the lawsuit, regardless of which party 

prevailed on the merits. The committees' questions are fundamentally different: they seek to 

understand the facts underlying the Administration's decisions, not the legality of the final 

decision itself. 

At every tum, the Administration has misrepresented and distorted the scope of 

Congress' authority to conduct oversight of the Jaws it has passed, and of the circumstances of 

this present case. It has attempted to argue that Congress' constitutional oversight authority is 

somehow suspended while litigation is pending. It has argued that while Congress may have 

"authority" to conduct oversight, there is no "need" while the issue is being litigated. But none 

of these arguments are valid. 

Under the powers set forth in the Constittttion, Congress has an obligation to understand 

the facts of the Administration's decisious here. The committees have an oversight interest in 

the laws and regulations passed by Congress, and must ensure that the Administration spends 

taxpayer dollars prudently and in accordance with the Jaw. That oversight interest cannot be 

tolled as the Administration requests. Further, it is the committees of the United States House of 

Representatives, not the Administration, that have sole authority to detennine tbe type of 

infonnation oecessary to conduct effective oversight. The lawsuit did not, and will not, answer 

the committees' questions about the source of funding for the CSR program. TI1e answers to 

these questions are ones that Congress alone must seek. 

The committees' investigation is extensively detailed in Section VII. 

20 
46 


23194A.030

V. After Requesting an Annual Appropriation for the Cost 

Sharing Reduction Program, the Administration 

Withdraws Its Request via a Telephone Conversation 

The Administration requested an annual appropriation to make cost sharing reduction 

payments to insurance companies in the President's Fiscal Year 2014 (FY 2014) Budget 

submitted to Congress on April lO, 2013. Yet, a year later, the President's FY 2015 Budget did 

not include any such request. What happened during that intervening time? The Administration 

surreptitiously decided to pay for the CSR program through a Department of the Treasury 

managed-permanent appropriation dedicated to funding tax credits and refunds. 

A. In 2010. the Administration Begins to Discuss How to Fund the 

Cost Sharing Reduction Program 

FINDING: The Administl'8tion began to have discussions about the source of funding 

fo•· the cost sha•·ing reduction program afte1· Congress passed the Patient 

Protection and Affordable Care Act in 2010. 

High-level discussions about the source of funding for the CSR program began soon after 

the law's enactment. During the fall of2010, several top IRS officials- including Associate 

Chief Counsel Mark Kaizen, Deputy Associate Chief Counsel of General Legal Services Linda 

Horowitz, and Chief of the Ethics and General Law Branch of General Legal Services Kirsten 

Witter- discussed the source of funding issue both internally and with OMB, specifically with 

OMB attorney Sam Berger. Associate Chief Counsel Linda Horowitz testified: 

Q. Do you remember if that was the frrst that you had been made 

aware of a question about source of nmding, around December 

2013? 

A. It was not the first time. 

Q. Do you remember what the first time was? 

A. I think sometime in 2010. 

Q. Do you remember how you became aware of that? 

A. Not specifically, no. 

Q. Do you remember with whom you had those conversations? 

A. I certainly had those conversations internally within our own office 

in GLS. And I believe there were some conversations with folks 

outside of!RS as well. 

21 
47 


23194A.031

Q. And when you say "outside of IRS"-

A. Other agencies. 

Q. Would that be HHS? 

A. I'm not sure. 

Q. Would it be OMB? 

A. It was 0 1\'ffi. Yes, I recall that. 

Q. Okay. W ho at OMB have you worked the most with on this 

issue? 

A. Counsel from 01\'ffi. 

Q. Do you •·emember their names? 

A. I rcmcmbc•· only one name. That's Sam Be•·ger. 

Q. Okay. Did you work with Mr. Berger back in 2010 on this 

question? 

A. Yes. Sorry.44 

According to Ms. Horowitz, the conversations took place specifically within her office-which 

handles appropriations law questions- and between her office and OMB. She stated: 

Q. And who in your office was working on that question in 20 I 0? 

A. Kirsten Witter, who is the branch chief in the Ethics and General 

Govemment Law Branch, and Mark Kaizen, who is my immediate 

supervisor who is the associate chief counsel in General Legal 

Services. 

Q. Did they communicate with OMB as well, or was it just you that 

was communicating? 

A. I believe we all communicated with OMB. 

Q. Did you have conference calls where everyone was communicating 

with OMB at that point? 

"H. Comm. on Ways & Means, Trnnscribed In1e1view of Linda Horowilz, at 20-23 (Apr. 22, 20t6) (hereinafter 

Horowitz Tr.] (Although Ms. Horowitz could uo1 rccaU when in 20 I 0 ll1e conference caU occwrcd, according to 

public records, Mr. Berger graduated from law school iu2010 and began his tenure at OMB in September 2010). 

22 
48 


23194A.032

A. I recall one conference call. 

Q. And I'm sorry. Was that around 2010, or was that around 2013? 

A. I'm referencing 20 I 0.4s 

As early as 2010, the Administration began having conversations about how to fund the 

CSR program. Based on subsequent actions, the Administration appeared to believe that the 

CSR program required an annual appropriation. 

B. The Administration Develops a Plan for the Mechanics of 

Making Premium Tax Credit Payments 

FINDING: In 2012, the Administration developed an a llocation account str ucture to pay 

for the premium tax credits. At that time, Treasury counsel concluded that 

31 U.S. C. § 1324-the permanent T•·easury approp•·iation for tax creditscould not be used to make CSR payments. 

Section 1402 of the ACA authorized the CSR program, but did not provide a funding 

source for CSR payments.

46 Conversely, the ACA specifically provided fuodi11g for the PTCs 

through 31 U.S.C. § 1324, a pem1aoent Treasury appropriatioo.

47 The ACA's PTC provisions, 

however, did not deta il how HHS would be able to use a Treasury appropriation to make 

advanced payments as specified in the statute.48 

Therefore, the Administration took steps early on to determine how to make the APTC 

payments authorized by and appropriated in the A CA. Ultimately, OMB decided that HHS and 

Treasury should use an allocation account structure. An allocation account is used "when a law 

requires departments (or agencies) to transfer budget authority to another Federal entity."49 A 

2015 report by the lUIS Office of Inspector General (OIG) and the Treasury Inspector General 

for Tax Admin.istration (TIGTA) described tbe steps the Administration took to set up a payment 

structure for APTC payments. so 

As the Administration developed its plan to make tbe PTC payments, it also analyzed the 

statutory language surrounding the CSR program. 

•s Horowitz Tr. lS- 23 (emphasis added). 

"Patieot Protection and Affordable Care Act. Pub. L. No 111-148. Sec. 1402, 124 Stat. 119 (2010). 

" Patient Protection and Aflordable Care Act, Pub. L. No 111 · 148, Sec. 140l{d), 124 Stat. 11 9 (20 10). 

"Pat.ient Protection and Affordable care Act, Pub. L. No 111-148, Sec. 1412, 124 Stat. 119 (2010). 

' 9 HHS OIGmGT A PTC REPORT, supra note 18. According to O!vffi, "Allocation means a delegation, authorized 

in law, by one agency of its autho1ity to obligate budget authority and outlay fm1ds to another agency. When au 

agency makes such a delegation, the Treasury Department establishes a subsidiary account called a 'transfer 

appropriation account', and the receiving agency may obligate up to the amount included in the account." Office of 

Mgmt. aud Budget, OMB Circular A· ll , Sec. 20. at 22 (J1me 20 15), available or 

tp ://www. whitchouse.gov/sitcsldcfault!tilcslomblasscts/a 11_ current _year/a 11 _ 20 15 .pdf. 

HHS 010/TIGTAPTC REPORT. supra note 18. 

23 
49 


23194A.033

1. Inter-Agency Discussions on How to Implement the Premium Tax 

Credit Program Begin in 2011 

h1 late 20 II, HHS, Treasury, and OMB discussed options for how the Administration 

would make advanced premium tax credit payments. IRS Deputy Chief Financial Officer Greg 

Kane explained that the IRS began working with a number of other agencies and departments to 

implement the advanced premium tax credit program. He stated: 

Q. And in your capacity as Deputy CFO at the IRS, bow have you 

been involved in the implementation of the Patient Protection and 

Affordable Care Act? 

A. So my role was to provide advice in regard to how we would 

account for, test internal controls, and administer the account from 

which payments would be made. 

Q. What projects did you work on with relation to the ACA? 

A. So, in late 2011, we began working with CMS, HBS, ms and 

Tr·easury, and OMB to pr·epar·e for the implementation of the 

advanced pr·emium tax cr·edit and the premium tax credit. I 

am a part of the ACA program office meetings for other provisions 

to see if they would have any impact on financial reporting or 

financial accounting and provide input if I see anything that they 

need to be advised of. 51 

2. In a Memorandum Regarding Premium Tax Credit Payments, 

Treaswy Acknowledges that the ACA did Not Provide an 

Appropriation for the Cost Sharing Reduction Program 

ln 20 12, the Administration examined the possibility of using an allocation account 

structure to make premium tax credit payments. According to TIGTA and HHS OIG, "the IRS 

had no prior experience with allocation accounts in connection with tax refund activity and was 

concerned in itially with the legality of this approach.''52 Mr. Kane confim1ed that using 

allocation accounts was a unique arrangement for the IRS. Mr. Kane stated: 

Q. Is this the tirst time, to your awareness, that CMS and Treasury 

have worked together to have an account to make payments? 

A. Yeah. Based on the uniqueness of the law, where the Secretary of 

HHS makes detennination and we make payment, IRS had never 

" H. Comm. On Ways & Means, Transcribed Interview of Greg Kane at30- 31 (Mar. 10. 2016) [hereinafter Kane 

Tr.) (emphasis added). 

" HHSOIGffiGTAPTCREPORT. supm note 18. 

24 
50 


23194A.034

had any experience in administering, you know, an account like 

that. 5

3 

At OMB's request, Treasury prepared a memorandum anal/zing the legal basis on which 

the IRS could make these payments using an allocation strucntre. 

5 The committees obtained 

this memorandum, which, in part, examines whether the ACA provides a source of funding for 

the CSR program (see below). Despite the IRS' concerns, Treasury concluded in the 

memorandum that "ACA §§ 1411 and 1412 may be interpreted to authorize the transfer of funds 

from Treasury's refund appropriation to an HHS allocation account for purposes of making U1e 

advanced payments of the tax credit.',ss 

Although Treasury's memorandum focused on whether an allocation account for APTC 

payments was allowed by the stantte, it also mentioned advanced payments for CSRs. When 

discussing the meaning of the statutory direction in the ACA that the "Secretary of the Treasury 

shall make the advanced payment" for premium tax credits,

56 Treasury counsel wrote: 

We note that section 1412(c)(3) [related to advanced payments for cost sharing 

reductions] contains similar language to section 1412(c)(2)(A) with respect to the 

cost-sharing payments under section 1402 for which the Secretat'Y of the 

Treasut·y has no funding or program responsibility.

57 

Treasury continued that "[s]uch a reading, of course, would not be applicable to the largely 

parallel language in section I324(c)(3); there is currently no appropt·iation to Tt·easm·y OJ' to 

anyone else, for purposes of the cost-sharing payments to be made under section."58 At this 

point in 2012, Treasury understood that the 31 U.S.C. § 1324 appropriation would be available 

for APTC payments, but not for CSR payments where "the Secretary of the Treasury has no 

funding or program responsibility."59 Additionally, based on its analysis, Treasury believed no 

appropriation for CSR payments existed at the time.60 The entirety ofTreasury's analysis related 

to the CSR program is produced below: 

" Kane Tr. at 34. 

s-t Treasury APTC Memorandum. suprn note I. 

" !d. 

u Patient Protectjon and Affordable Care Act Section 1412(c), codified at 42 U.S. C. § 18082 (c). 

" Treasmy APTC MclllOrandum, supra note I (emphasis added). 

,. !d. (emphasis added). S9 /d. 

"'/d. 

25 
51 


23194A.035

Role of the S&eretary o1 the Treasury 

Finally, the direction to the Secretary of the Treasury to make the advanced payment 

under section 1412(c)(2)(A) shoUld not preclude reading sections 141 t and 1412 as 

requiring certification of payments by HHS, Whether directly under the SlaMe or as a 

consequence of a transfer of fUndS to an HHS alfocati<ln account.. Section 

1412(c)(2)(A) can be read sinply as a direction to the Secretary of the Treasury to make the payment to the issuer of a qualified health plan on a specified schedule rather 

that to the taxpayer Who would nonnally receive the payment for a refundable credit 

we note thai section 1412(c)(3) contains language similar to section 14 12(c)(2)(A) with 

1 In 1996, 31 USC 1304(a)(2) was amended to substitute the Secretary of the Treasury 

for the Comptroller General. 

respect to the cost-sllaring payments under sedi<ln 1402 for wllich the Secretary of the 

Treasury has no fUnding or program responslbi6ty. Therefore, we believe that the 

statute should be read in accordance with tts plai"t meaning as referring to Treasury's 

disbursing authority and lnstructinO the secretary to w11orn to make the payment and 

When. This reading does not atter the overall statutory scheme placing programmatic 

responsibility for the advanced payments of the tax credits with HHS. 

We acknow1edge that other stalutes authoriZe or requ~e agencies to "pay" or "make 

payments· wl1en the payments will in fad be made by Treasury's Financial 

Management Sel\'ice (FMS) under its SlaMory disbursing tundi<ln. Even if OMS 

disagreed that section 14 12(c)(2)(A) referred to FMS's disbursing tundi<ln, ft Vo'OUd not 

folow that IRS was required to certify payments under the Slalute. Atlhough the 

reference to the Secretary of the Treasury in section 1412(c)(2)(A) must be presumed to 

have meaning, the Plain meaning or "Shall make the adVance payment• is not "Shall 

cenify the advance payment• Moreover, as discussed abOve, a requirement that 

Treasury certify the payments determined by HHS would be hollow at best There is no 

reason to assume that Congress would have imposed such an illogical requirement, 

much less that ft would have done so through oblique language. 

Instead, the reference to the Secretary or the Treasury can be read to refer. not to the 

mechanics of the payment process, but to the source offtllds. rrtte 31 u.s.c. § 1324, 

amended by sedi<ln 1401 to oover refUnds under secti<ln 368 of the laX OOde, 

appropriates fUndS "to the Secretary of the Treasury.• Thus. the langUage requJr1ng that 

the Secretary of the Treasury shall make the payments can be read simply to mean the 

payments shall be made from fUndS available to that Secretary.• Had Congress written 

section 1412(c)(2)(A) to say that 11Jhe Secretary [ol HHS] shan make the advance 

payment .. :it would have been at best unclear Whether the appropr1ation under 31 

U.S.C. § 1324 was available for that purpose. 

Such a reading, of course, would nol be applicable to the largely parallel language in 

sedi<ln 1324(c)(J); there is currently no appropr1atlon, to Treasury or to anyone else, for 

putpOses of the cost-shar1ng payments to be made under that secti<ln. However, this 

does not suooest that section 1412(c)(2)(A) should be read to require certllcation of 

payments by Treasury; such a reading would be equally Inapplicable to section 

1412(c)(3). Rather, H the tatter section does not reler to the FMS disbursement 

fUnction, fts meaning can be determined only in oonnection with Whatever stalute 

ultimately appropriates fUnds for the oost-sllaring payments. 

'SUch a reading would not make the notification to the Secretary of the Treasury of 

HHS advance determinations, as required under secti<ln 1412(c)(1). superftuous. 

Regardless of Who performs the payment certHicatlon fUnction, Treasury will require 

such notice to ensure that budQe:tary resources are available, and uttimatety to reconcile 

advance payments with Individual tax rel\Jms. 

26 
52 


23194A.036

3. OMB Makes the Final Decision Regarding Advanced Premium Tax 

Credit Accounting Structure 

Despite the IRS' concerns with the legality of the allocation account approach,61 OMB 

ultimately decided to move forward and use an allocation account to make the APTC payments. 

On August 6, 2012, an official in OMB's Health Division emailed f-IHS and Treasury officials to 

inform them that OMB had decided that "an allocation accow1t atTangement between Treasury 

and HHS is the most logical way to move forward:"62 

Heather and Saesha, 

Thank you for your patience while we reviewed the APTC financial management issue with our 

colleagues. 

In response to your request for OMS views on the issue, we have reached the conclusion that an 

allocation arrangement between Treasury and HHS Is the most logical way to move forward. As the 

next step, we'd like to reconvene the group that met previously and discuss the implementation of 

this approach. 

If you could send some dates and times that work on your end forthe week of August 131

h 

(preferably not the 131

h), that would be great. 

In the meantime, If each agency could update the crosswalk you submitted previously (attached) 

assuming an allocation arrangement, that might be a good way to determine if and where any 

remaining areas of disagreement exist. 

let me know If you have any questions. Thanks. 

Rich Toner 

Health Division 

Office of Management & Budget 

The Treasury recipient forwarded the email to Gregory Kane, Kirsten Witter, and other Treasury 

officials and commented that, "[t]his probably will not be a surprise to anyone, but OMB moved 

forward on HHS's recommendation that APTC should be done tbrough an allocation account":

63 

61 Id. atS. 61 Eruail from Richard Toner, Office ofMgmt & Budget, to Heather Tompkins, U.S. Dep't of Health & Humau 

Se1vs., and Saesha CarWe, U.S. Dep't of the Tt·easury(Aug. 6, 2012, 11:05 a.m.). 61 Em.1il from Saesha Carlile, U.S. Dep't of the Treasury, to Gregory Kane, Kristeo Witter, '" (1/., U.S. Dep't oftbe 

Treasury (Aug. 6, 2012, II :16 a.m.). 

27 
53 


23194A.037

probably wen not ~ ~ surpris~ to anyone, but OMB moved lorward on HHS' ree:ommtndattOn 

APTC should be done through an allocation accoont~ OMBis asl<lns for our avallabmtv n~xt 

as well as an updated crosswall< (see attached) l am proposing the followons tomes for a 

Please let me know which ones work best for you by olO later thM COB tomorrow. 1 will 

up a call unless otIs everyone's preference that we have an In-person meet Ins. I don't feel that 

August t4'", te>o00 - ll:30AM 

AUf:USI 14111, 1.00- 30 PM 

August 161", 11:00- !2:30PM 

Au&ust 161h, 3:30- S:OO PM 

c01n you tolks te~te a look at the anachment and let me know •t you th1nk any updiltes are 

necessary? 

Best. 

Saesha 

4. IRS and CMS Sign a Memorandum of Understanding in January 2013 

to Govern the Payment of Advanced Premium Tax Credits but Not 

Cost Sharing Reductions 

In January 2013, IRS and CMS signed a Memorandum of Understanding regarding the 

administration of APTC payments (APTC MOU). According to the APTC MOU: 

This Memorandum of Understanding (MOU) between the Internal 

Revenue Service (IRS) and the Centers for Medicare and Medicaid 

Services (CMS) identifies the roles and responsibilities of each party for 

program operations supporting the payment of and accounting for the 

advance payment of the premium tax credit (APTC) undet· section 

1412 of the Patient Protection and Affor·dable Care Act (PPACA).64 

This agreement applied only to the payment of premium tax credits. Nowhere in the nine 

page document are CSRs mentioned.65 In fact, in the same time frame, HHS created a separate 

.., Mcmorandtun of Understanding between the Jmemal Rev. Scrv. aud the Ctrs. for Medicare & Medicaid ScJ\IS., 

MOUI3-150 (Jau. 2013) (emphasis added) . 

• , /d. 

28 
54 


23194A.038

account to make CSR payments once Congress appropriated funds. IRS Deputy Chief Financial 

Officer Greg Kane testified: 

Q. So, aside from that child (allocation] account we were just 

discussing, was a different account ever established to make the 

cost sharing reduction payments? 

A. There was. 

Q. Where was that established? 

A. There was one in the original HHS budget. 

Q. The account would have then been located at HHS? Is that 

accurate? 

A. Correct. 

... Q. How did you become aware of that account? 

A. So, in the early stages of 2011, 2012, when we were all getting 

prepared, the cost sharing reduction discussions were with 

IlliS and OJ\IID, and we wet·e talking about the APTC/PTC 

process. 

Q. And at that point you became aware that HHS bad already set 

up an account? 

Treasury Counsel. That's a "yes" o•· " no" question. 

A. Yes.66 

As shown, the Administration decided to use an allocation account structure to make 

APTC payments. 1n the same legal memorandum justifying this approach, however, Treasury 

counsel concluded that the 31 U.S.C. § 1324 permanent Treasury appropriation was available for 

APTC payments, but not for the CSR payments. Treasury counsel also believed no 

appropriation for CSR paymenlS existed at that time. 

Around this same time, HHS was preparing its FY 2014 budget request to submit to 

Congress. HHS had already created a separate accouot to make payments for the CSR 

program- likely in preparation for requesting an atmual appropriation for the program in its FY 

2014 budget. 

66 Kane Tr.at 44-45 (emphasis added). 

29 
55 


23194A.039

C. The Administration Requests an Annual Appropriation for the 

Cost Sharing Reduction Program 

At the same lime that the Administration was finalizing its APTC payment stmctt•re, it 

was also preparing its request for an aruma! appropriation for the CSR program through HHS' 

annual budget process. 

1. The Typical HHS Budget Process 

FINDING: HHS' typical budget process is-for the mosl part- a thorough, 

institutionalized, and well-documented process. 

Each year, the Executive branch embarks on an institutionalized process to draft and 

prepare the President's annual budget request to Congress. Each department and agency holds 

countless meetings, prepares several budget drafts and accompanying charts, and engages in 

extensive negotiations within the department or agency as well as with OMB to fmalize its 

budget request. HHS is no different- its budget process is similarly in-depth and 

institutionalized. 

HHS' Office of the Assistant Secretary for Financial Resources orchestrates the HHS 

budget process.67 Typically, HHS' budget process begins during the spring of a given year and 

finishes when the President's final budget request is submilled to Congress the following 

Febmary. For example, HHS began preparing its proposed FY 2017 budget during the spring of 

2015. Tbe President submitted his FY 2017 Budget to Congress in February 2016. 

a. HHS Prepares Its Initial Budget Request 

HHS begins to prepare its budget request during the spring the year before the President's 

final budget request is submitted to Congress. The process begins when the Department sends 

instructions to each of its operating divisions. Assistant Secretary for Financial Resources Ellen 

Murray described these instructions during her transcribed interview with the committees. She 

stated: 

(The operating divisions] asked for, of course, by program, their 

recommendation for budget request. They're asked for any statutory 

language that they would request. They're asking for j ustification for their 

dollar request. There's info•mation[) about FTE (full-time employees), 

you know, a lot of detailed information, IT specifics and so on.68 

67 See Office of lite Ass't Sec. for Fin. Resources, U.S. Dep't of Health and Human Servs., 

http://www.WIS.gov/about/agencies/asfrlindex.html ("The Office of the Assistant Secretary for Financial Resources 

(ASFR) provides advice and guidance to the Secretary on all aspects of budget, financial management, grants and 

acquisition management, and to provide for the direction and implemcutation oftltesc activities across Ute 

Department."). 

" H. Common Energy & Co1mn., Transcribed lnterviewofEl.len Murray, at 14 (Mar. 4, 2016) [hereinafter Murray 

Tr.]. 

30 
56 


23194A.040

After the operating divisions receive the instmctions and prepare the requested 

information, HHS begins meetings with the operating divisions during the summer. Ms. Murray 

stated: 

Q. So once [the operating divisions] start submitting information that 

you requested, via the instn•ctions, what then happens? 

A. We have meetings with each operating division and the larger staff 

divisions. Included in those meetings is what is called the 

Secretary's Budget Council, which includes the deputy secretary, 

and some of the senior ofllcials, and the ofllce of the secretary, and 

myself, and my staff, and we have a fulsome discussion of their 

budget request. Obviously, we concentrate on those areas of 

proposed reductions or increases or new programs. 

Q. Apart from the instructions that you submitted, are there other 

documents that are created during this summer process? 

A. Well, as each operating division comes and gives a short 

introduction, they provide usually a PowerPoint presentation. But 

it's really to facilitate sort of a fulsome discussion of their request. 

We talk about duplications with other agencies. We have an 

interest in secretarial priorities. Opioids, mental health; those are 

particularly addressed. So it's a very good discussion, but it's 

mainly on initiatives. 

Q. So mainly, it sounds like during the summer there's a lot of 

meetings that are happening and discussions about what's going to 

be important to make sure to have in HHS's budget request? 

As the Assistant Secretary for Financial Resources, Ms. Murray's role is to lead these budget 

meetings with the Secretary's Budget Council. Ms. Murray testified: 

I think my biggest role is really to lead these budget meetings and to talk 

about the budget the Agency is proposing. Ask questions, ask questions 

about areas of concern, maybe program integrity issues that have come up 

in programs. 

I'm a lot focused on duplication, focused on our priorities. We then have 

to make some recommendations to the Secretary, and so that's another 

whole round of meetings where she has to make tough choices between 

different requests to come up with our final proposal to OMB. 70 

69 !d. al t4- 15. 70 ld. all7. 

31 
57 


23194A.041

Deborah Taylor, the fonner Chief Operating Officer for the Centers for Medicare and Medicaid 

Services (CMS), one of HHS' operating divisions, similarly described the HHS summer budget 

process. During her transcribed interview with the committees, she stated: 

[S]ometime in the summer, OPDIVs [the operating divisions] typically do 

a presentation to the Secretary's budget council, where they explain their 

budget requests; they walk through any places where they maybe deviated 

from Department instntctions. 71 

After the operating divisions submit their budget requests to HHS, the department makes 

decisions on those requests and then passes them back--<>r returns them- to the operating 

divisions. Ms. Taylor testified: 

And then the Department gives a passback. They either accept the budget 

as proposed, or they make some changes to it. Agencies have an 

opportunity to appeal it, and then, at that point, the Department has a 

process for sending it to OMB for approva l.72 

Meanwhile, as HHS is preparing its initial budget request, the Oftice of Management and 

Budget (OMB) issues its Circular A-11.13 This document provides guidance to the Executive 

branch on how io prepare and submit a particular fiscal year budget and execute the budget.'• 

Typically, the OMB Circular A-ll is issued during the summer before tbe President's final 

budget is submitted to Congress. The Executive branch agencies and departments have usually 

begun to prepare their budget requests when OMB issues its Circular A-11. 

b. OMB's Fall Review 

HHS submits its initial budget request to OMB around Labor Day. Ms. Murray described 

the submission: 

This submission includes the primary part of- it is a letter from the 

Secretary that describes our initiatives, describes the budget, but then 

U1ere's a lot of required tables that are included, [by the) FTE, dollar 

amounts' 5 

After OMB receives HHS' budget request- a long with the other Executive branch departments' 

and agencies' budget requests- it begins its "fall review." During OMB's fall review, OMB 

71 H. Conun. on Energy & Conun .• Transcribed Interview of Deborah Taylor, at 15 (Apr. 14, 2016) [hereinafter 

Taylor Tr.). " !d. 13 See, e.g., Office ofMgmt. & Budget, Preparatiot~ Submission, and Execution of the Budget, Cireular A-ll (Jtule 

2015), available ar hllps:l/www. whitchouse.gov/sites/defatdtlfileslomb/assetsla II_ CtUTent_year/a 11_20 15.pdf. 14 See, e.g., Office ofMgmt. & Budget, Mctuorandum to the Heads of Executive Departments and Establishments, 

Preparing, Submitting, and Executing U1e Budget. Transminal MetUOrandum No. 89 (J•me 30, 20 15) available ar 

bttps://www. wbitehouse.gov/sitesldefaultlfileslomblassetsla II_ clllTent_year/2015 _letter.pdf. 

" Murray Tr. at 16. 

32 
58 


23194A.042

meets directly with HHS and its operating divisions about HHS' budget request submission. Ms. 

Murray stated: 

Q. So after HHS submits its budget request to OMB in roughly 

SeptemberA. Around Labor Day. 

Q. - what's the next step? What happens next? 

A. Well, OMB meets with each of our operating divisions. There's a 

lot of questions back and forth between OMB and my staff. OMB 

has intemal meetings that we're not part of, and they give us 

what's called pass-back, which is sort of their response to our 

budget request, and that happens right after Thanksgiving. 

Q. So during this fall review, OMB does at points engage with you 

a11d the Agency and staff as it's hashing out the budget request? 

A. They actually have meetings with each of our operating divisions, 

but there is probably daily communication between my staff and 

analysts at OMB.'6 

After OMB completes its fall review, it passes back its budget decision to HHS. This 

passback, which generally occurs around late November, is a separate, stand-alone document. 

Ms. Murray testified: 

Q. Just going back to the pass-back, what exactly does it look like? Is 

it what you submitted with -

A. No, it's a separate document. 

Q. It's a totally different looking document? 

A. Yes.17 

Usually, OMS's decisions in the passback do not perfectly align with HHS' original request. 

Ms. Murray stated that OMB "come(s] back with their decision, which would be in most cases 

different than what we requested. "78 

16 /d. at 17. 71 /d. at 20. 18 /d. at 19. 

33 
59 


23194A.043

c. HHS' Appeals Process 

When HHS receives the passback, it decides whether and what budget decisions to 

appeal. The Department often makes an appeal. Assistant Secretary Murray testified that in 

"[m]y experience, we have a lways appealed the decision.'m HHS appeals the decision by 

sending a formal appeal letter to OMB. Ms. Murray stated: 

Q. So when HHS appeals OMB's budget decisions, how does that 

process work? 

A. We send a fonnal appeal letter to OMB. 

Q. And does the letter include the different items that HHS is 

appealing? 

A. Yes. 

Q. Is there any other- l'm assuming-document attachments to the 

letter? 

A. No. The letter is pretty general. And I don' t mean to jump in, but 

this is really a collegial process to document final determination on 

sort oflarge policy issues. So nuts and bolts may not necessarily 

be addressed in these letters. 

Q. With respect to the individua l items that are being appealed 

though, what information is provided to make the case and the 

appeal? 

A. There would often be a j ustification on our part as to why we 

would disagree. 

Q. Is that within the letter? 

A. Often it is. so 

Although HHS sends a fonna lletter appea ling OMB's budget decisions, HHS begins to 

communicate with OMB about its appeal before the letter is sent. Ms. Murray testified about her 

and her office's role in the appeals process: 

Q. What exactly is your role? 

79 !d. 80 !d. at 20-21. 

34 
60 


23194A.044

A. Well, I would actually work with my staff to draft the appeal letter 

based on secretarial decisions. And I would be in communication 

with OMB as we work out some of these issues verbally. 

Not everything may be capntred in these letters. Again, this is two 

officers attempting to collegially put together what we think is the 

best budget for HHS.81 

HHS, specifically the Office of the Assistant Secretary for Financial Resources, appears to 

handle the appeals process. The operating divisions, however, also play a role. Fonner CMS 

Chief Financial Officer Deborah Taylor testified: 

Q. If the appeal involves the CMS component of the budget, would 

you be involved at that point? 

A. So " involved" may be the Department saying to us: We think 

we're going to appeal this; are you okay with that? 

And, typically, we will say yes. Or it is: We don' t think we are 

going to appea l this; do you have any strong objections? 

Q. If the Department does apt>eal something that affects the CMS 

budget, do you play any role in preparing documents or any sort of 

materials to support the appeal? 

A. It depends, but I think we - you know, depending on how much 

help they would need, yes, we could certainly be asked to do that.82 

After OMB receives HHS' letter appealing aspects of OMS's budget decision, OMB 

makes a final determination. Assistant Secretary Murray explained that she is not part of the 

final decision-making, but she emphasized that HHS and OMB try to come to a consensus. She 

stated: 

Q. Do you !mow who actually makes the decisions on the appeals? Is 

it different? Is it usually at a very high level, or do you know how 

that works? 

A. I would not be part of those discussions. They would be at OMB. ~ 

Assistant Secretary Murray later testified: 

Q. Going back to the appeals process quickly, if there is a 

disagreement between HHS and OMB, with respect to the funding 

8' /d. at 22. 

"' TaylorTr. at 19. 

" Murray Tr. at 22. 

35 
61 


23194A.045

for a specific program, who makes the final decision? Which 

agency makes the fmal decision on what will be included in the 

budget? 

A. I would like to think that we would come to a consensus, but if, 

obviously OMB is part of the Office of the President. 

Q. So does OMB have the final decision ultimately? 

A. I would like to think that our final decisions have been one of 

consensus where we agree to OMB's number.84 

d. Tile President Submits His Budget to Congress 

After the appeals process is complete, HHS works to finalize its budget and submits it to 

OMB. Assistant Secretary Murray stated: 

During the period after we finish the appeals until the budget is submitted 

to Congress, we are working with our operating divisions at OMB to 

figure out our congressional justifications. We put together a document 

called the budgeting brief which summarizes our budget for HHS. 

We sometimes review language that OMB is going to include in their 

budget documents that relate to OMB. We are preparing the Secretary for 

hearings. It's a busy time.ss 

Typically, the President's final budget request is submitted to Congress around the first week of 

Febntary, although it is sometimes submitted late. 

e. Tlte Department Diswsses tlze Budget Request with Congress 

Once the President submits his proposed budget to Congress, HHS begins to engage 

directly with Congress through budget hearings and frequent communications with the 

congressional appropriations committees. Ms. Murray testified: 

Q. After the budget is submitted to Congress, what role does HHS 

have at that point? 

A. Once the budget is submitted to Congress, we begin the hearings, 

as you're well aware, and we work with the Secretary and prepare 

for those hearings. We work with our appropriations committees 

and other committees, giving technical assistance, discussing our 

proposals, and we follow closely the process through Congress . 

.. !d. 3123. 

as !d. a1 23- 24. 

36 
62 


23194A.046

Q. What is your role throughout this process? 

A. I communicate with the appropriations conunittees. I work with 

the Secretary to keep her apprised of the process, and then we start 

the next year. 

Q. So do the appropriations committees ask for additional infom1ation 

from HHS other than what's included in the fonnal submission? 

A. Yes, they do. 

Q. Can you describe the type of information they may request. 

A. They may ask the justification for a particular number. TI1ey may 

ask infonnation about how many grants this number would allow 

the program to put out. They may ask clarifying questions about 

language. It's a continual back-and-forth process. 

Q. Does HHS provide answers to the questions from the 

appropriators? 

A. We try to be very responsive to our appropriators. We deal with 

them individually. 

Q. What do you mean by that? 

A. Well, we have Democrat and Republican, Senate and House, so we 

call them the four comers, so there's discussions with all four 

groups. We actually have-some of our programs- we're funded 

in three different subcommittees, so there 's twelve subcommittees 

with which we work. 

Q. Can you tell us the timeframe typically in which the conversations 

with the appropriations conunittees take place? 

A. They would begin probably the day we send up the budget and 

would continue until the night before they markup their bill.

86 

According to Assistant Secretary Murray, HHS has an ongoing dialogue with the appropriations 

committees until they pass the respective appropriations bills. Through this dialogue, HHS 

provides technical assistance, addresses questions, and produces additional information in 

response to requests. Meanwhile, HHS has starte.d the budget process for the next fiscal year. 

,. ltl. at 24-25. 

37 
63 


23194A.047

f. Tire President Can Amend His Budget through a Budget Amendment 

FINDING: The Administration can withdraw an appropriation request without going 

throu h the formal and documented bud et amendment rocess. 

After the President submits his proposed budget to Congress, it can stiU be amended 

through a fonnal budget amendment. According to the OMB Circular A-ll, amendments "are 

proposed actions that revise the President's Budget request and are transmitted prior to 

completion of action on the budget request by the Appropriations Committees of Both Houses of 

Congress."87 1l1e circular describes the process, including when OMB wiU consider an 

amendment and what an agency needs to submit to OMB.ss Assistant Secretary Murray 

described the budget amendment process from her experience. She testified: 

Q. After the President submits his budget to Congress, his budget 

request to Congress, is there a process for him to revise that 

request if- after it has already been submitted? 

A. !understand. The President could issue a budget amendment. 

Q. Can you describe briefly how that process works, to your 

understanding? 

A. Well, again, that would be a collaborative process between the 

agency in question and the White House, and it would reflect a 

change in the initial submission of the budget.

89 

She further stated: 

Q. Have you been involved, or do you get involved if HHS- if there 

is an amendment that the White House is going to submit to 

Congress that affe·cts HHS? Do you or HHS get involved with that 

process? 

A. Yes. 

Q. In what way? 

A. As we would [with) the original budget, certainly coJmmmication 

between the two offices as to the substance and the amount of that 

request.90 

87 Oftice of Mgmt. and Budget, Circular No. A-ll, Section II 0-Supplemcntals and Amendments 2 (20 15). 

as /d. 89 Murray Tr. at 70. 90 Id. at 71. 

38 
64 


23194A.048

The Administration can also amend the President's budget request through informal and 

undocumented means. Ms. Murray testified: 

Q. So if a request for supplemental funds is requested, that would be 

an amendment to the budget request? 

A. That would be a budget amendment, yes. 

Q. What if the administration decides it no longer needs funds for 

something, would that also •·equii·e a budget amendment 

•·equest? 

A. That request could be made to the Hill through a budget 

amendment, o•· through a less formal means. 

Q. Could you describe the less formal means there which that 

could be [•·Jclayed? 

A. That could be done simply as I decided with the CSR program, 

where I made a call to the appropriations clerk.91 

As demonstrated, HHS' budget process is- for the most part- a thorough, 

institutionalized, and documented process. HHS' final budget request is the product of not just 

several dralls of tables and budget justifications, but also countless meetings and 

communications between its operating divisions and the main Department as well as between 

HHS and the President's Office of Management and Budger. The President then publishes his 

budget request as a statemeot of his Admioistration's priorities and submits it to Congress for 

consideration. The Administration, however, can also amend its fmal budget request by simply 

calling one of the congressional appropriations committees. 

2. The President's FY 2014 Budget Includes a Request for an Annual 

Appropriation 

FINDING: The Adm.inistration requested an annual appropriation of almost $4 bill.ion 

for the cost sharing reduction p1·ogram in its FY 2014 budget request, 

submitted to Congress on April tO, 2013. 

The President's FY 2014 Budget- submitted to Congress on Aprii iO, 201 3- included a 

request for an armual appropriation for the CSR program. At what point HHS decided to include 

an appropriation request in the Department's budget request is unclear. HHS counsel repeatedly 

refused to allow witnesses to answer the committees' questions about when or whether the 

Administration decided to include a request for an aruma! appropriation for the CSR program in 

the FY 2014 budget. 

., !d. at 72- 73 (empbasis added). 

39 
65 


23194A.049

a. HHS' FY 2014 Budget Process 

Similar to a typical budget cycle, HHS started preparing its FY 2014 budget request 

during summer 2012. HHS submitted its initial budget request to OMB around Labor Day 20 12. 

Initially, HHS allowed Ms. Murray to answer whether HHS' initial request to OMB included an 

annual appropriation for the CSR program. Ms. Murray testified: 

Q. Do you recall when HHS submitted its budget, its fiscal year 2014 

budget to OMB? 

A. I believe, again, at the Labor Day timeframe. 

Q. Did HHS request an annual appropriation for the Cost Sharing 

Reduction Program when it submitted its request to OMB? 

HHS Counsel 1. I'm going to caution the witness oot to reveal the 

sobstaoce of internal interagency deliberations. 

Committee Counsel. This is a factual questioo. It's a yes or no answer 

whether it was included. It doesn't speak to internal deliberations. 

HHS Counsel I. Do you think it's okay? 

HHS Counsel 2. Yes. 

HHS Counsel I. Okay. The witness can answer. 

A. We did. We did request an appropriation. 92 

This was the first and only time HHS allowed a witness to answer questions about whether HHS' 

draft budget requests included a request for an annual appropriation for the CSR program. From 

that point forward, HHS claimed that the cormnittees' questions jeopardized HHS' 

confidentiality interests in these internal deliberations and refused to allow witnesses to answer. 

b. Preside11t's FY 2014 Budget Request to Cougress 

The President's FY 2014 Budget included a request for an annual appropriation for the 

cost sharing reduction program. The President's budget requested: 

n Id. at 26-27 (empbasis added). 

40 
66 


23194A.050

Rlrouctl> CosT SIIARINO FOR IlmMDuALs Ew!OLUNO IN Qu.wmo JiBAL111 

PLANs 

For corryins out, except as otherwise provided, sections 1402 and 1412 

oflh• Pa<Umt Protection and Afford a bit Can! Act (Public Law 11!- 148), 

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qua nor of fiscal yettr 2015 (iJU:Iuding upward a<Qustmcnts to prior ycor 

payrnenlS), $1,420,0Q0,000. 

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Section 1402 of the Putiool Prol.l.octioo nnd Affordable Care Act 

(P.L. 111-148) provides for reductions in cost sharing for certain 

individuab enrolled in qualilied health plans purchased on the 

Eltchanges, and section 1412 of the Patient Protection and Afford· 

able Care Act (P.L. 111-148) provides for the advance paymcnL 

of these reductions to issuers. This assist.& nee helps eligible low· 

and moderat.e-i ~'Omc qualified individuals and families afford 

the out-of-pocket spending associated with health care services 

provided through Exchnnge-ba.qed qualified health plan coverage. 

In total, the Administration requested almost $4 billion for the CSR program in FY 20 14.

93 

91 Office ofMgmt. and Budget, TI1e Budget for tbc U.S. Govenuncut Fisca l Year 2014, Appendix 448 (Apr. 10, 

2013). 

41 
67 


23194A.051

CMS' budget justifications also explained how and why it requested nearly $4 billion for 

the CSR program. In its overview of the budget request, it states: 

CMS requests funding for its five annually-appropl'iated accounts 

including Program Management (PM), discretionary Health Care Fraud 

and Abuse Control (HCF A C), Grants to States for Medicaid, Payments to 

the Health Care Trust Funds (PTF) and beginning in FY 2014, Reduced 

Cost Sharing fot· Individuals Em·olled in Qualified Health Plans (Cost 

Shal'ing Reductions."' 

The budget justification further explains the request for the CSR program: 

The FY 2014 t·equest fot· Reduced Cost Shat·ing for Individuals 

Enrolled in Qualified Health Plans is $4.0 billion in the first yeat· of 

opet·ations for Health Insurance Marketplaces, also known as Exchanges. 

CMS also requests a $1.4 billion advance appropriations for the first 

quarter ofFY 2015 in this budget to pennit CMS to reimburse issuers who 

provided reduced cost-sharing in excess of the monthly advanced 

payments received in FY 2014 through the cost-sharing reduction 

reconciliation process. 5 

CMS also stated in its conclusion that its "request includes funding for a new appropriation for 

reduced cost-sharing provided to individuals enrolled in plans through the Marketplaces, 

begimting in 2014.'196 The President's FY 2014 Budget and the CMS budget justifications 

submitted with the budget are clear: the Administration requested an annual appropriation for 

the CSR program. 

3. OMB Submits its Sequestration Report to Congress 

Fll\'DlNG: According to Ol\m's April tO, 2013 sequestration preview report, the annual 

appropl'iation for the cost sbal'ing reduction program would have been 

subject to a 7.3 percent reduction if the sequester went into effect. 

The Budget Control Act of2011 , as amended by the American Taxpayer Relief Act of 

2012, required nearly across-the-board budget cuts for most annually appropriated programs.97 

Known as "sequestration," the cuts would reduce federal spending by more than $1 trillion over 

ten years. Most permanent appropriations- including the pennanent appropriation for tax 

credits and refunds-were not subj ect to sequestration.98 On AprillO, 2013, the same day the 

President submjtted b.is FY 2014 Budget, OMB sent Congress its OMB Sequestration Preview 

Report to the President and Congress for Fiscal Year 2014 and OMB Report to the Congress on 

... U.S. Dep'l. ofHeallb and Human Scrvs., errs. for Medicare and Medicaid sc.vs., Justifications ofEsrimares for 

Appropria1ions Commiuees, Fiscal Year 20t4, al 2 (Aplil tO, 20t3) (emphasis added) . 

., !d. a1 7 (emphasis added). ,. !d. 

97 Budge! Control Acl of20tt, Pub. L. t12-25 (20t1) . 

.. 2 u.s.c. § 905(d). 

42 
68 


23194A.052

the Joint Committee Reductions for Fiscal Year 2014.99 Similar to other annual appropriations, 

the report confirmed that the CSR program would be subject to sequestration. 

100 

C<Dttn for Altdim• aad ~ltdiffid S.ni<t' 

009·3S.011S Aft'onlabltlasurmot E.xduage Gnnu 

No edt£..,. ~Umbtory Appropri.tion 1,343 7j 98 

009.38.0126 R.tdu<td Cost Sb.aJin& for lndnidu>k Emollin' in Qu>lififd l!u1th PI= 

Nocdtr.c.t Mandatory Appropri.ltion 3,978 73 290 

009.3S.OS11 ProV<UD Mmogflllelll 

Nocdtr-. M...Utory Appropri.tion 2S3 73 18 

No~ ~U..Utory Spedio& authority 944 73 69 

A«ount Toto/ 1,197 87 

According to the OMB report, approximately 7.3 percent, or $290 million, of the annual 

appropriation for the CSR payments would be subject to sequestration and unavailable to pay 

insurance companies if the sequester went into effect. Under the tenus of the ACA, however, the 

insurance companies still would be required to reduce cost sharing for qualified insurance 

purchasers. OMB's revised sequestration report, submitted to Congress on May 20, 2013, 

similarly reflected a 7.2 percent budget reduction for the CSR program. 

At what point other agencies outside ofOMB, including HHS, discovered that the CSR 

program would be subject to sequestration is unclear. But based on subsequent events, it is 

reasonable to assume that the sequestration report factored into the Administration's decision to 

find a separate source of ti.1nding for the CSR program-one that was not subject to 

sequestration. 

4. The President Did Not Withdraw His Request for an Annual 

Appropriation for the CSR Program with a Budget Amendment 

FINDING: The Administration did not submit a fot·mal budget amendment 

withdrawing its request for the annual appropriation for the cost sharing 

reduction program. 

The President submitted his FY 20 14 Budget to Congress on April 10,2013. On May 13, 

2013, the Administration submitted a fonnal budget amendment. 101 Tl1at budget amendment, 

however, did not withdraw the original request for an allllual appropriation for the CSR program. 

99 OFFICE OF MO~rr. AND BVl>GET, OMB SEQVESTRATION PREVIEW REPORT TO THE PR.Esll)ENT AND CONGRESS FOR 

FISCAL YEAR 2014 AND OMB REPORT TO THE CONGRESS ON THE JOINT COMMITTEE REDUCTIONS FOR FISCAL YEAR 

20t4 (April tO, 20 t3) (OMB submiued a corrected version on May 20, 20t3 that reduced the cut to lhe CSR 

p,rogram to 7.2 percent, or $286 million.). 00 /d. at 23; Budget Control Act of2011, Pub. Law No. t t2·25 (Aug. 2, 2011). 101 Letter from President Barack Obama to the Hon. Jolu1 Boehner, Speaker, U.S. House of Reps. (May 17, 2013}, 

enclosing Letter from Hon. Sylvia M. Bwwell, Dir., Office of Mgmt. and Budget. to the President (May 16, 20 t 3), 

coclosingamendtncnts to FY 2014 Budget for various depattn~ents , including U.S. Dcp't ofHeal~l and Hwnau 

Se1vs., H. Doc. No. 113-31. 

43 
69 


23194A.053

D. The Administration Informally Withdraws Its Appropriation 

Request by Phone 

FINDING: Between Ap.-il10, 2013 and July 11, 2013, in an unusual move, the 

Administration informaUy withdrew its request for an annual appropriation 

for the cost sharing reduction program by caDing the Senate Committee on 

Appropriations. 

Although the budget amendment process is fonnal and documented, in this case, the 

Administration took an informal and undocumented route to withdraw the Administration's 

request for billions of dollars for the CSR program. Rather than including the withdrawal in the 

President's fom1al budget amendment submitted to Congress on May 17,2013, Administration 

officials testified that the Administration informally withdrew the appropriation request via a 

telephone call to the then-Staff Director of the Senate Committee on Appropriations. 

1. The Administration Tells the Court that it Informally Withdrew the 

Request by Not Requesting an Appropriation in its FY 2015 Budget 

Request 

In the House v. Bunve/llitigation, the Administration claimed that it infom1ally withdrew 

the request by not requesting the annual appropriation in its subsequent FY 20 15 budget request 

to Congress. During oral argument, the Administration mentioned that it withdrew its request 

after it initially made the request based on principles of appropriations law. The Administration 

stated: 

There was initially a request and that request was later withdrawn because 

the administration took a second look and realized that there were 

principles of appropriations law that made the request mmecessary. 102 

After the oral argument, the Court took the unusual measure of requesting that the 

Administration provide evidence of how the Administration withdrew the request. The Court's 

Order directed the parties to: 

(S]ubmit a stipulated record of the request(s), consideration, and funding 

decisions for Section 1401 and 1402 of the Affordable Care Act in the FY 

2014 Appropriation Bills, including any action by the Defendaot(s) to 

withdraw the funding •·equest for Section 1402, with supporting 

documentation. 

101 

The Administration submitted a response to the Court, and, in a footnote, claimed that its 

statement during the oral argument referred to OMB not requesting an annual appropriation in 

the FY 2015 budget. The Administration stated: 

101 U.S. House of Reps. v. BuMell, No. 14-cv-01967, Tr. ofRcc. at 23 (D.D.C. May 28, 2015). 101 U.S. House of Reps. v. Bwwc/1, No. 14-cv-01967. Minute Order (D.D.C. Jtwe 1, 2015) (emphasis added). 

44 
70 


23194A.054

The reference of a withdrawal is to OMB's submission of the Fiscal 

Yea•· 2015 Budget, which did not request a simila•· line item. 

Defendants' counsel did not intend to suggest that there was a separate 

fonual withdrawal document, and apologizes for being unclear on that 

point. "'' 

In other words, the Administration claimed that it implicitly withdrew its request for annual 

appropriation for the CSR program by not including it in its FY 2015 budget request to 

Congress, and not through a separate, explicit action, like a telephone call asking the Senate 

Appropriations Committee to remove it from the appropriations bill. 

2. Assistant Secretary for Financial Resources Ellen Murray Calls the 

Senate Appropriations Committee 

On July II, 2013, the Senate Committe-e on Appropriations issued its report, which 

denied the Administration's request for an annual appropriation for the CSR program. to~ This is 

the only budget request impacting the Department of Health and Human Services denied by the 

Senate Committee on Appropriations. The report provided no reason or j ustification for denying 

the request. This report stated: 

REDUCED COST SHARING FOR INDIITIDUALS ENROLLING IN QU/ILIFIED 

HEALTH PLA."'S 

~e~~:~1~r:u.~~~~4·:::::::::::: :: : ::::::::::::::::::::::::::::::::::::::::::::::::::::::: ··sa:977;s93;ooo Committee recommendation ......................................................................................... .. 

The Committee recommendation does not include a mandatory 

appropriatio!l, requested. b,)l the administ:atio!l, for r_educed cost sharing assiStance for mdiVJdua]s enrolling lD qualified health 

plans purchased through the Health Insurance Marketplace, as provided for in sections 1402 and 1412 of the ACA. 

This program helps eligible low- and moderate-income individ- uals and families afford the out-of-pocket costs associated with 

healtbcare services. 

Ms. Murray, however, knew that the conunittee would deny the Administration 's appropriation 

request before it issued its report. She testified: 

Q. Were you aware before that report was released on July II that the 

Senate Appropriations Conun inee would not be [recommending an 

appropriation for the CSR program]-

A. Yes. 

, .. U.S. House of Reps. v. Bunve/1, No. 14-ev-{)1967, Joiut Submission in Response to This Coun's June I, 2015 

Minute Order (D.D.C. June 15. 2015) (emphasis added). 105 S. Comm. on Appropriations, Departments of Labor, Health and Human Services, and Edue<~tion, and Related 

Agencies Appropriations Bill, 2014, !13th Cong. (S. Rept. 113-71). 

45 
71 


23194A.055

Q. You knew before the report. When did you know? 

A. I spoke to the staff director, Erik Fatemi. 

Q. Roughly when? 

A. To the best of my recollection, the June or July timeframe. 

Q. But it was before that report was released? 

A. Correct. 

Q. Is that one conversation with Mr. Fatemi or were there several? 

A. I can remember one specific conversation. 

Q. What do you t·ecall about that conversation? 

A. I called Mt·. Fatemi and said they would not need an 

appt·opl'iation for the Cost Sharing Reduction Pl'ogram. 106 

Although the Administration had fonnally asked for an annual appropriation in its FY 2014 

budget request to Congress, it suddenly detennined it no longer needed one. Ms. Murray stated: 

Q. Did you provide an explanation to Mr. Faterni about why an 

appropriation was not necessary? 

HHS Counsel. Thank you. 

Witness: Yes, we did. Yes, I did. 

Q. What explanation did you provide to him? 

A. I told him that there was already an appropriation for the program, 

and we did not need the bill to include one.

107 

Mr. Faterni did not ask why the Administration no longer wanted the annual appropriation for the 

CSR program. Ms. Murray testified: 

Q. What did you say would be the appropriation for the CSR 

program? 

106 Murray Tr. at 35-36 (emphasis added). 107 /d. at 37. 

46 
72 


23194A.056

A. I do not believe l was specific with Erik Fatemi, and he did not 

ask. 

Q. Did you tell him anything about the basis for that decision? 

A. I did not. 

Q. And he did not even question -

A. I did not. 

Q. He did not ask you any questions about what money would be used 

to fund tbat program? 

A. He did not. 108 

Assistant Secretary Murray amended the President's FY 2014 budget request by callillg the 

Senate Appropriations Committee to withdraw an appropriations request. The Administration 

could have withdrawn its request through the fonnal budget amendment process. Instead, it 

unusually witbdrew the request through a phone call, leaving no record of the "amendment" In 

fact, it is so rare that Assistant Secretary Murray cited only this example- withdrawing the 

request for an annual appropriation for the CSR program via a telephone call to the Senate 

Appropriations Committee-as a way to informally amend the President's budget request. She 

stated: 

Q. So if a request for supplemental funds is requested, that would be 

an ameudment to the budget request? 

A. That would be a budget amendmeot, yes. 

Q. What if the administration decides it no Ionge•· needs funds for 

something, would that also require a budget amendment 

request? 

A. That •·equest could be made to the Hill through a budget 

amendment, Ol' tht·ough a less formal means. 

Q. Could you describe the less formal means there which that 

could be [r]elayed? 

A. That could be done simply as I decided with the CSR program, 

where 1 made a call to the appropriations cler k.109 

106 /d. at 55. 109 !d. at 72- 73 (emphasis added). 

47 
73 


23194A.057

Additionally, HHS General Counsel William Schultz was not even aware of "less fonnal means" 

to amend the President's budget request. Mr. Schultz testified: 

Q. But do you specifically - are you specitlcally aware of any less 

fom1al ways that revise or change a budget request? 

A. I'm not sure what you mean. 

Q. Sure. So my understanding, and I'm not a budget expert, is that 

there is a formal amendment process by which the Administration 

can change its budget request. We 've also learned that there are 

less formal ways, such as phone calls, to change a budget request. 

So are you aware of any less forma l ways? 

A. I mean, I wouldn't have any knowledge of that. 110 

Although the Administration requested an annual appropriation for the CSR program in 

its FY 2014 budget request to Congress, it decided shortly after submitting that budget requestwhich took almost a year to draft and prepare-that it no longer needed one. Instead of 

including this withdrawa l in its formal budget amendment, the Administration chose to wipe out 

a request for billions of taxpayer dollars through an undocumented, informal telephone call the 

Senate Committee on Appropriations. Tltis unusual move ensured that there was no record that 

the Administration had changed its mind about how to fund the CSR program. 

3. The Administration has Meetings and Makes Phone Calls Before the 

Senate Appropriations Committee Denies the Appropriation Request 

Prior to the Senate Committee on Appropriations denying the appropriations request for 

the CSR program, and prior to Ms. Murray calling the conunittee to withdraw the request, but 

after the FY 2014 budget request was submitted to Congress, high level officials within the 

Administration held meetings and had telephone conversations about the CSR program. Despite 

shaky memories and the Administration's obstruction, this investigation shed light on some of 

these conversations. Ms. Murray recalled one conversation with HHS General Counsel William 

Schultz. She testified: 

Q. Did any meetings take place between April I 0 of 2013 [and) your 

conversation with the Senate Appropriations staff director about 

the Cost Sharing Re-duction Program? 

A. Yes. 

Q. When did those meeti11gs take place? 

110 H. Comut on Energy & Comm., TrrulScribed hucrvicw of William Schultz, at 60-6 t (Apr. 26, 20 t 6) [hereinafter 

SebuhzTr.]. 

48 
74 


23194A.058

A. I can't give a specific date but within that time period. 

Q. Was it May? 

A. I don't remember a specific date. 

Q. Do you recall the number of meetings? 

A. I do not. I remember one specific conversation. 

Q. Was that conversation with one individual or with multiple 

individuals? 

A. With one. 

Q. Do you recall any other conversations around that time about the 

appropriation requests for the Cost Sharing Reduction Program? 

A. Again, I'm trying to be responsive but very careful not to 

misspeak, and I don' t have any other specific recollections of 

conversations or meetings. 

Q. The conversation you r ecollect, was that with an HHS official? 

A. Yes, it was. 

Q. Who was that official? 

A. General counsel, William Schultz. 

Q. And that conversation between you and Mr. Schultz was about the 

Cost Sharing Reduction Program and about whether or not it 

needed an annual appropriation? 

HHS Counsel. So if you stopped your questiou after tbe first part, she 

would be able to answer that question. 

Committee Counsel. If I stopped it at Cost Sharing Reduction Program? 

HHS Counsel. Yes. 

Q. Was that conversation about the Cost Sharing Reduction Program? 

A. Yes. 

Q. Was it about the fiscal year 2014 budget request? 

49 
75 


23194A.059

HHS Counsel. That is, I think, crossing the Line into intemal 

deliberations.'" 

Ms. Murray also recalled another conversation with someone from the Executive Office 

of the President, but HHS counsel would not allow her to provide the name of this person. Ms. 

Murray stated: 

Q. Do you recall any conversations with - about the Cost Sharing 

Reduction Program before or after that report in the summer of 

2013 with anyone outside of HHS, apart from the Senate 

Appropriations staff director? 

A. Ido. 

Q. With whom, or· with what agency or capacity wer·e they in? 

A. With the office of the- Executive Office for the President. 

Q. Did you have any other conversations with anybody from 

Congress about the Cost Sharing Reduction Program in the 

summer of2013? 

A. Not to my recollection. 

Q. Do you recall when the conversation with the Executive Office of 

the President took place? 

A. I do not. 

Q. Was it after the Senate report was released in July? 

A. It was before. 

Q. Do you recall who the conver·sation was with? 

HHS Counsel I. You can answer· that. 

Witness. Yes, I do. 

Q. Who was the conversation with? 

HHS Counsel I. Again, because of our· deliber·ative interests in 

maintaining executive branch confidentiality, Ms. Mur.-ay is 

not prepar·ed to answer· that question today. 

111 Murray Tr. at 4 t-42 (erupbasis added). 

50 
76 


23194A.060

Q. This conve•·sation was with-tb.is conve•·sation was with 

somebody from the Executive Office of the P•·esident was 

(regarding] the Cost Sha•·ing Reduction P•·og.-am, correct? 

A. Yes, it was.'" 

Despite the Administration's refusal to provide information to Congress and allow 

witnesses to answer Congress' questions, this investigation has yielded evidence suggesting that 

the key decision-making about how to fund the CSR program likely occurred between April 

2013 and July 2013. The Administration requested an annual appropriation for the CSR program 

in its FY 201 4 budget request submitted to Congress on April 10, 2013. On that same day, OMB 

submitted its sequestration preview report to Congress stating that the CSR program would be 

cut by 7.3 percent in the event of sequestration. On July I I, 2013, the Senate Committee on 

Appropriations denied the request. Between April I 0 and July II, Assistant Secretary Murray 

called the Senate Committee on Appropriations to withdraw the Administration's request for an 

annual appropriation. Also during that time, Ms. Murray bad a least one conversation with the 

Executive Office of the President and at least one conversation with HHS General Counsel 

William Schultz about the CSR program. 

111 /d. at 63- 64 (emphasis added). 

51 
77 


23194A.061

VI. The Administration Surreptitiously Raids a Permanent 

Appropriation to Pay for the Cost Sharing Reduction 

Program 

A. OMB Drafts a Memorandum to Justify Paying for the Cost 

Sharing Reduction Program through the Premium Tax Credit 

Account 

FINDING: OMB prepared a memorandum that provided the Administution's legaJ 

analysis and justification for funding the cost sharing reduction program 

through the premium tax credit account. 

OMB attorneys prepared a memorandum, which allegedly provided the legal basis for the 

decision to make CSR payments from the premium tax credit account. The Administration has 

refused to provide this memorandum to Congress-even pursuant to subpoena. Nevertheless, 

Administration witnesses made it clear during transcribed interviews and a deposition that this 

memorandum was key to obtaining buy-in from the highest levels of the Administration to move 

forward with paying for the CSR program through the PTC account. 

1. OMB Looks for Sources of Funding for the Cost Sharing Reduction 

Program 

By June 20 13- shortly after OMB submitted its sequestration report and around the same 

time Assistant Secretary Ellen Murray called the Senate Conm1ittee on Appropriations to 

infonnally withdraw the Administration's request for an annual appropriation- OMS began 

developing a legal justification to justify an alternative source of funding for the CSR program. 

In June 2013, Geovelte Washington became OMB's General Counsel. Soon after, Ms. 

Washington became aware that " there were questions about the funding that was available for 

the cost sharing program. "

113 One of her staff counsels, Sam Berger, briefed her on the issue. 

Ms. Washington stated: 

Q. Are you familiar with the Affordable Care Act Cost Sharing 

Reduction Program? 

A. Yes. 

Q. In what context? 

A. During my time at OMB, there were questions about the funding 

that was avaiJable for the cost sharing program. 

113 H. Comru. on Ways & Means, TraJISCJ'ibed Interview ofGeovcne Washington, at 20 (May 6, 2016) [hereinafter 

Washington Tr.). 

52 
78 


23194A.062

Q. When did those questions first arise? 

A. I first became aware that this was an issue right after I arrived at 

OMB. 

Q. Who made you aware of the issue? 

A. My staff briefed me on this issue that they had been working on 

before I arrived, and I don't recall. It would have been Sam 

[Berger]. 114 

Ms. Washington and Mr. Berger also worked with other agencies affected by this issue. 

Ms. Washington stated that Mr. Berger worked directly with the HHS General Counsel's Otlice. 

She testified: 

Q. Do you know if[Sam Berger) was working with anyone outside of 

OMB on the issue? 

A. Yes. 

Q. Witb wbom? 

A. So as a matter of course, because this is an issue that would have 

involved other agencies, he would have been working- as a 

general matter, we would work with the agencies that were 

involved, and my memory is that he had been in discussions with 

other the relevant agencies on the issue. 

Q. When you say the relevant agencies, was he in communication 

with HHS? 

A. Yes. 

Q. Do you know with whom in HHS? 

A. We wo•·ked with the Genera l Counsel's Office at HHS. 

Q. Do you recall any of the names of those individuals? 

A. My primary cont act would have been the general counsel, Bill 

Schultz.

115 

'" /d. 31 20-21. 

liS Jd. al22- 23 (emphasis added). 

53 
79 


23194A.063

Ms. Washing1on testified that she spoke directly with the HHS General Counsel, William 

Schultz, as well as the Treasury General Counsel's Office about the source of funding issue for 

the CSR program. She stated: 

Q. Did you talk directly with Mr. Schultz? 

A. Yes. 

Q. Did you talk with anyone at Treasury? 

A. Yes. 

Q. With whom over there? 

A. I would have worked with people in the General Counsel's Office 

over there. 

Q. Do you recall the names of those people? 

A. God, my memory is bad. Chris Meade, the general counsel. 116 

HHS General Counsel William Schultz also remembers discussing the CSR program with Ms. 

Washington during the summer and fa ll of20 13. Mr. Schultz testified: 

Q. Going back to my question, you said that you recalled having 

discussions or conversations during the summer or fall, late 2013, 

with folks both at the White House and OMB. What are the names 

of the OMB officials that you recall having meetings with? 

A. The one I recall is with general counsel, Geovetle Washington. 

think there are others, but I don' t even know their names. 

Q. Do you recall how many times you mel with Geovelle 

Washington? 

A. No. 

Q. Was it more than once? 

A. Yes. 

Q. Do you recall generally when you met with Ms. Washington? 

A. You mean what timcframe? 

11 ~ /d. at 23- 24. 

54 
80 


23194A.064

Q. Yes. 

A. I mean, generally, it's in the timeframe you're talking about, the 

summer or fall of2013.

117 

Ms. Washington also consulted with the Department of Justice regarding the source of 

funds for the CSR program, although OMB counsel refused to allow Ms. Washington to provide 

the names of those with whom she consulted. 118 Ms. Washington stated: 

Q. Did you ever talk with anyone at the Department of Justice about 

the Cost Sharing Reduction Program? 

A. Yes, I did. 

Q. Do you remember if those conversations occurred before or after 

tbe January 14th (sic) meeting tbat we've discussed at length 

today? 

OMB Counsel: Ms. Washington has acknowledged tbat she 

consulted or discussed this with the Department of Justice, but she 

is not going to discuss individual interactions that she had with tbe 

Department of Justice. 119 

Ultimately, Ms. Washington stated that she " recall(ed) conversations with officials at the 

Department of Justice about cost sharing reductions in 2013."120 Ms. Washington's testimony 

clarifies OMB's role in addressing the source of funding issue for the CSR program: although 

OMB consulted with other agencies, including HHS, Treasury, and the Department of Justice, 

OMB took the lead in identifYing a source of funding to make the CSR payments. 

2. OMB Prepares a Memorandum that Allegedly Supports Funding the 

Cost Sharing Reduction Program Using the Appropriation for Tax 

Credits and Refunds 

At some point in 20 13, OMB drafted a memorandum that allegedly explained the legal 

basis for making CSR payments from the 31 U.S.C. § 1324 permanent Treasury appropriation 

dedicated to tax credits and refunds. 121 Former OMB General Counsel Geovette Washington 

explained the purpose of the memorandum. She testified: 

117 Schultz Tr. at 39. 118 Wasbington Tr. at 87. 119 !d. at85. 120 !d. at87. 121 See Fisher Oepo. at 28. 50; Washington Tr. at 44-45. 

55 
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23194A.065

Q. In some cases, a high level official has to sign off on the course of 

administrative actions. In order to make the cost sharing reduction 

payments, was signoff on the memo necessary'> 

A. Can I ask you a question about your question? 

Q. Of course. 

A. So in the course of my time in the government, there were 

processes - clearance processes is what we called them. Before 

you could .. . say, the director could take action, people had to 

sign. 

Is that the type of process you're asking me? 

Q. Exactly. 

A. No. That was not the purpose of this memo. 

Q. What was the purpose of the memo? 

A. The purpose of the memo was to d iscuss the ava ilable funding for 

the Cost Sharing Reduction Program.122 

Ms. Washington acknowledged that the memorandum was addressed to her. She stated: 

Q. To whom was the memo addressed then? 

A. The memo was addressed to me. 

Q. And who wrote the memo? 

A. The memo was from members of my staff. 

Q. Do you recaU which members? 

A. Sam Berger, John Simpkins, and Steve [Aitken]. 

Q. Did you help edit this memo? 

OMB Counsel. Ms. Washington is not going to discuss the drafting or 

editing of the memo. 123 

122 Wash.inglon Tr. a1 49-50. 

m !d. a1 44-45. 

56 
82 


23194A.066

Tlus memorandum was integral to the Administration's decisions regarding funding the CSR 

program. It became the legal basis on which the Administration depended to justify making CSR 

payments from an appropriation meant to pay for tax credits and refunds, and it was reviewed 

and approved by the highest levels of the Administration. 

3. OMB Shows the Memorandum to the Treasury and HHS General 

Counsel Offices 

FINDING: OMB shared its memorandum with both the Treasury and HHS general 

counsel offices in late 2013. 

After OMB prepared its memorandum, it shared it with different agencies at meetings 

held at OMB. These in-person meetings appeared to occur in late 2013. For example, OMB 

showed the memorandum to the Treasury's General Counsel's Office. Ms. Washington stated: 

Q. When did you show this memo to people at Treasury? 

A. I don't recall the time. 

Q. Did you E-mail it to them? 

A. No. 

Q. Did they see it in person? 

A. Yes. 

Q. Do you recall who from Treasury saw the memo? 

A. I don' t recall, but I was talking to people in the General Counsel's 

Office. Our contact on - generally, on ma!ters when we're talking 

about appropriations issues, we deal primarily with the General's 

Counsel Office. As I previously testified, I was talking to people 

in the General Counsel's Office. 

My practice would have been to talk to people - if I was going to 

the share the final memo with people, it would have been people in 

the General Counsel's Office. 

Q. Was that before this meeting, the January 13,2014 meeting? 

A. I believe, yes. Yes. 124 

OMB also shared it with the HHS General's Counsel's Office. Ms. Washington testified: 

114 Jd. at 42-43. 

57 
83 


23194A.067

Q. When did you show the memo to people at HHS? 

A. I don't recall a time. I don't recall a date. 

Q. Was it before this meeting? 

A. Yes. 

Q. And to whom did you show it at HHS? 

A. So the memo, the fmal memo, would have been shared with 

someone in the General Counsel's Office. Let me be clear. I'm 

not sure that I - because I don't recall a specitic meeting, I'm not 

sure that I'm the person who did it. It may have been someone on 

my staff who did it. 

Q. Would Sam Berger be the person on your staff most likely to do 

that? 

A. Mostly likely, it would have been Sam. 125 

HHS General Counsel William Schultz also acknowledged reviewing OMB's memorandum. He 

testified: 

Q. How did you receive a copy of the memorandum? 

A. I didn't receive a copy. I reviewed it. 

Q. Where did you review the memorandum? 

A. AtOMB. 

Q. Were you given a copy to take with you from OMB? 

A. No. No. 

Q. Do you recall when, approximately, you reviewed the 

memorandum at OMB? 

A. I believe it would be in the fall, maybe late fall of2013. 

Q. Were any other HHS employees with you when you reviewed the 

memorandum? 

A. I don't know for sure, but it's likely that Ken Choe was there, my 

125 ld. at 43-44. 

58 
84 


23194A.068

deputy. 

Q. Do you recall if anyone from other agencies were present wben 

you reviewed the memorandum? 

A. No. I don't recall anybody else from another agency. 

Q. It was just yourself and Mr. Choe? 

A. From outside OMB. 

Q. Okay. Do you recall which OMB officials were present? 

A. I recall Geovette Washington. 126 

Administration lawyers would not allow witnesses to answer more questions about the review of 

OMB's memorandum. 

4. Attorney General Eric Holder Reviews OMB's Memorandum 

FINDING: OMB shared its memorandum with Attorney General Eric Holder in late 

2013 and briefed him on the issue. 

At some point during this process in fall or winter 2013, Ms. Washington briefed 

Attomey General Eric Holder on the CSR funding issue. He also reviewed and signed off on the 

analysis contained in OMS's memorandum. Former IRS Chief Risk Officer David Fisher 

testified that he recalled that Attomey General Eric Holder had reviewed and approved the 

memorandum. In an exchange with Congressman Jim McDermott, Mr. Fisher stated: 

Q. Do you know specific names of individuals who reviewed and 

approved the memo? 

A. The only name that I recall that was mentioned was Eric Holder, 

the Attorney General. 

*** 

Mr. McDermott. TI1is document you held, was there at any point 

anyplace where people's initials had been put on it as having read 

it or approved it or anything? 

Frequently, in the Federal Government, people have to sign off on 

stuff-

~ Schultz Tr. at 41-42. 

59 
85 


23194A.069

The Witness. Yep. 

Mr. McDennott. - before it comes to a meeting. Did you see any 

formal acknowledgment by anybody that they had actually read 

this and approved it? 

The Witness. On the document, no. TI1ere was the comment - I don' t 

recall seeing anything to that effect on the memo. The reference to 

the Attorney General was made verbally. It was not noted on the 

memo. 

Mr. McDennott. Made by whom? 

The Witness. Ms. Washington. 

Mr. McDennott. Ms. Washington said, "TI1e Attorney General has 

seen this and approves of it"? 

The Wi111ess. It stood out in my mind only because there was sort of a 

lighthearted comment along those lines, that it appeared to be this 

was the first time she had met the Attomey General. And she was 

relatively new to OMB. And it stood out in my mind that it sort of 

made an impression on her, the fact that she had an opportunity to 

brief the Attomey General himself. 

So that was really the only reason that it's a recollection of mine, is 

that she bad made this sort of anecdote along the lines of having 

had the first opportunity to brief the Attomey General ~ersonally. 

That was the only reason his name, I believe, came up}2 

5. White House Meetings Regarding the Cost Sharing Reduction 

Program 

Administration officials appear to have discussed the CSR program in meetings at the 

White House. For example, fonner HHS General Counsel William Schultz testified: 

Q. Do you recall who those conversations were with at either the 

White House or OMB during this time period? 

A. Well, I recall some people they were with, yeah. 

Q. Who were these people? 

HHS Counsel. He's not going to get into participants in White House 

m Fisher Oepo. at 31- 33. 

60 
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23194A.070

meetings. 

Committee Counsel. Why? 

HHS Counsel. We have certajn Executive Branch confidentiality 

interests.t28 

Similarly, former OMB General Counsel Geovette Washington testified: 

Q. Exrubit 7 is another White House Visitor Record Request from 

November 27th at 11 a.m. with Mr. Choe, Mr. Delery, Mr. 

Gonzalez, Mr. Meade, Mr. Schultz, Mr. Verrilli. Do you 

remember attending a meeting on November 27, 2013 at the White 

House with those persons I just listed? 

OMB Counsel. As I mentioned, the Executive Branch has 

significant confidentiality uJlerests in internal discussions or 

interagency deliberations and Ms. Washington is not going to 

discuss interagency deliberations today. 

Q. The cotl1lllittee disagrees that the question bas called for any kind 

internal deliberations at all, just merely the existence of the 

meeting. Are you willing to answer whether or not you attended a 

meeting with those individuals listed? 

A. I am not authorized to answer that question today. t

29 

White House Visitor Access Records indicate that another meeting with the same participants 

took place the day prior, on November 26, 2013.t30 

Because the Administration refused to provide any information about meetings at the 

Whjte House regarding the CSR program, tills investigation bas been unable to confirm whether 

the source of funds for the CSR program was a topic of discussion at these meetings. 

"" Scbt~IZ Tr. at 33-34 (emphasis added). 110 Washington Tr. at 87--88. 

,,. White House Visitor Access Records released 2013, avai/abla at bttps://www. whitchousc.govlbricfutgroom/disclosurcslvisitor-records. 

61 
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23194A.071

6. The IRS Expresses Concerns about the Cost Sharing Reduction 

Program's Source of Funds 

FINDING: Some senior IRS officials raised concerns about the source of funding for the 

CSR ro ram. 

As OMB was preparing and vetting its legal memorandum both internally and with other 

agencies, senior officials at the IRS expressed concerns about the funding source for the CSR 

program. For example, IRS employees raised questions about establishing sufficient IRS audit 

trails, especially because CMS would be directing CSR payments out of an IRS-managed 

account. Fonner IRS Chief Risk Officer David Fisher explained: 

And there was a concern, an internal control concem, as well, just from an 

accounting standpoint, of an auditor looking for the full audit trail, as I 

believe IRS was getting summary information and the details were going 

to be in the HHS books, if you will. And so there was a lready some 

confusion and concern a bout IRS ft·om an a udit standpoint, about 

being a ble to trace these payments a ll the way back to the source, 

which is fun damental for a financial audit. 131 

IRS officials also expressed confusion over whether the funds for the CSR payments 

would be subject to the sequester. In late fall2013, Mr. Kane approached both the Chief Risk 

Officer and the IRS Chief Counsel's office to express those concerns. Mr. Fisher testified: 

Q. Do you recall the firs! time that you heard of the cost-sharing 

reduction program generally? 

A. It would have been fall of2013, late fall of2013. 

Q. In what context did you become aware of it? 

A. There was a discussion I had with the Deputy Chief Financial 

Officer at the IRS regarding some, at the time, sort of accountingrelated issues associated with the pending payments that would 

come from the cost-sharing program when that program would 

stat1, which I believe was the end of January 2014, was when the 

first payment was due. 

As the Chief Risk Officer, I am commonly engaged with senior 

leaders from around the IRS. And thet·e was a potential concern 

about these payments. So it was from the Deputy Chief 

Financial O fficer's perspective. 

Ill Fisher Depo. al 19 (emphasis added). 

62 
88 


23194A.072

Q. And the Deputy Chief Financial Officer was at that time Gregory 

Kane? 

A. Correct. 

Q. Do you recall specifically what month he approached you? 

A. No. It would have been late fall, probably October, maybe 

November. 

Q. What concern did Mr. Kane raise to you about the CSR program? 

A. The concern was related to sequestration. And ill his role, as 

planning for the potential sequester, he needed to identify all 

funding sources that needed to have the sequester applied against 

it. And he t·aised a little confusion about the fu.nding source fot· 

the cost-sbat·ing program, as to whether or not that source was 

going to he subject to sequestet· ot· not subject to sequester. 132 

Mr. Fisher further stated: 

It was [Deputy Chief Financial Officer Greg Kane's) understanding that 

HHS either had or was going to submit a budget request - or, through the 

budget process, a request for an appropriation for the cost sharing 

program. That would be subject to sequester. 

And it's relevant to the lR.S because the IRS is the one who's actually, 

quote, writing the check, if you will, disbursing the funds. The way the 

law was written, HHS identifies the need for a payment to the Treasury. 

Treasury then has the IRS go make the payment. But, from an accounting 

standpoint, payment is on the IRS's books. And, therefore, the IRS would 

need to decide whether or not to sequester those funds if sequestration 

kicked in. 

The original understanding, I believe, from Mr. Kane was that these funds 

were going to be appropriated funds and, therefore, subject to the 

sequester. But it bad •·ecently come to his attention that the budget 

request, I believe, had been withduwn and that the expectation was 

that these payments would come out of the permanent appropt·iation, 

ft·om which refunds and other credits like the Advance Premium Tax 

Credit would be paid. And that appropriation is not subject to 

sequester. 

So this was entirely an accounting •·elated discussion related to, you 

know, appropt·iations law, as to whether o•· not the payments fot· this 

m id. at 12- 13 (emphasis added). 

63 
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23194A.073

pa.-t of the Affo.-dable Cat·e Act would be subject to sequest.-ation. 

And be wasn' t exactly sure because of what he saw as somewhat of a shift 

in where the funds bad originally been planned to come out of, which 

would've been subject to the sequester, to now this change in thought 

process which would no longer make it necessary to sequester any of those funds.t33 

Around that same time, Mr. Kane also expressed his concerns to IRS Deputy Associate 

Chief Counsel Linda Horowitz. Ms. Horowitz testified: 

Q. Has anyone come to you with questions about the cost sharing 

reduction program? 

A. Yes. 

Q. Did those questions pertain to how the payment process was set 

up? 

A. Generally, yes. 

Q. Who came to you with questions? 

A. The CFO Office. 

Q. Do you recall whom within the CFO Office? 

A. I think it was Greg Kane, the deputy CFO. 

Q. When did he come to you with those questions? 

A. ! think in December of2013. 

Q. Did he first approach you in person or over email or by telephone? 

A. I'm not sure. 

Q. After the initial approach, did you communicate with hin1 any 

more about the cost sharing reduction program? 

A. Yes. 

Q. How did those communications take place? 

A. I think they were telephonic, but I'm not - I can't be certain. 

" 3 Jd. at 16-17 (emphasis added). 

64 
90 


23194A.074

Q. At a high level, would you describe why he was coming to you 

personally about those issues? 

A. So he came to me because I work with Greg on a lot of fisca l law 

issues. We have a, you know, client/attorney relationship. So he 

came to me on that particular issue with regard to the source of 

funding for those payments. 134 

According to Ms. Horowitz, Mr. Kane's questions were related to the source of funding for the 

CSR program. Ms. Horowitz testified: 

Q. You had indicated that there were questions about the source of the 

funding as the general kind of parameters of the issue. Is that the 

same issue that was discussed both in 2010 [with OMB] and in 

2013 [with Mr. Kane]? 

A. Yes. 

Q. And when you say "source of funding," is it a larger question of 

kind of the traditional source of funding as an issue of 

appropriations law when, as you discussed, when describing fiscal 

year law, or was it a question of more the mechanical which 

account makes payments? 

A. At what time? 

Q. Either. How about20l0? 

A. In 20 l 0, I think it was simply the question of the source of the 

funding.m 

In late 2013, the discussions initially revolved around whether CSR payments would be 

subject to the sequester. According to Mr. Fisher, in the beginning of2014, the discussion 

shifted to a broader question regarding the legality of using the premium tax credit appropriation 

to make CSR payments. Mr. Fisher testified: 

Q. Did the questions about the sequester expand into broader 

questions about appropriations law from late 2013 to the beginning 

of2014? 

A. Yes. 

Q. Do you w1derstand how that expansion occurred? 

" ' Horowitz Tr. at 18- 19. 

us ld. at 21- 22. 

65 
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23194A.075

A. l could sott of track the evolution. How it occurred, I don't know. 

Q. You said you could track the evolution? 

A. Well, I mean, if the question is what was the nature of the change 

or evolution of the discussion regarding appropriations law 

associated with the cost sharing reduction payments, I can recall 

how it evolved. I don't remember, sort ot: who, what, when in 

tem1s of what instigated it or things along those lines. So that was 

what I thought your initial question was. So that one, the answer is 

no. 

Q. Would you describe how it evolved? 

A. Sure. 

Given our understanding that the intent was to use the pennanent 

appropriation, then the sequestration question was no longer - it 

was moot, because the permanent appropriation is not subject to 

sequester. So any concerns related to sequestration and the 

accounting for it and those kinds of things that bad been the 

genesis of some of the early discussions were no longer relevant. 

The question at hand became whether 0 1· not the statute 

actually authorized, appropriated those dollars using the 

pet·manent appropriation. And as we said just before the break, 

there was question on the cost sharing reduction payments. There 

was no question on the Advance Premium Tax Credit, which, as 

outlined in section 1401 of the Affordable Care Act, which 

introduces section 368 of the Internal Revenue Code under the 

section I had previously highlighted, was clear in the intent, 

expectation, and authorization to use the pennanent appropriation 

as the funding source, the account for the Advance Premium Tax 

Credits. 

In section 1402 that describes the cost sharing reduction payments, 

there was no such reference to the Internal Revenue Code. 

Actually, as I recall reading last night, there was one reference to 

section 368 of the Internal Revenue Code in section 1402, but it 

was a definitional point about defining what an individual is or 

something like that. It had nothing to do with payments. So there 

was a reference to the Internal Revenue Code but not in the kind 

that you would, I think, nan•rally interpret as meaning, "Go use the 

permanent appropriation based on this." It was simply a 

definitional reference. 

66 
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23194A.076

Other than that, tbet·e was nothing cleat· in the statute that I 

believe the accounting folks are always looking foL Before 

they go, you know, tou ch that permanent appro8t·iation, they 

want to make sm·e that that is legally authorized. 6 

According to Mr. Fisher, Mr. Kane was concerned about the use of the pem1anent appropriation 

as a source of funds for the CSR program because such a use was contrary to his experience. 

Mr. Fisher testitied: 

(I)n Mr. Kane's experience-and he's been at the IRS for a long timewas that every time the use of the permanent appropt·iation for a new 

credit bad come about, it bad been explicitly t·efet·enced in the statute, 

just li.ke it was for the Advance Premium Tax Credit, but, to our readinfl in 

the next section, was not done for the cost-sharing reduction payments. 37 

7. Top IRS Officials Attend a Meeting at OMB to Review the 

Memorandum 

FINDING: OMlJ shared its memorandum with IRS officials in a meeting weeks before 

the fit·st cost sbat·ing reduction p ayments were to be made. The ffiS officials 

were not permitted to take notes at the meeting or take a copy of the 

memorandum with them. 

After IRS officials raised concems about how the Administration planned to fund the 

CSR program, OMB organized a meeting to allow several IRS officials to review its 

memorandum providing the Administration's legal justification for the sources of funds. At the 

meeting, the IRS officials were given an opportunity to review the memorandum, but were not 

pennitted to take notes or take the memorandum with them. After reviewing the memorandum, 

the officials were given an opportunity to ask some questions. The answers provided by OMB 

did not alleviate everyone's concems that this was a correct and legal course of action. 

a. Tire Purpose of the Meetiug 

The first CSR payments were supposed to be paid to insurance companies at the end of 

January 2014. 138 Yet, in early January, IRS officials still had concems about the source of 

funding for the payments. Around this time, IRS General Counsel William Wilkins reached out 

to OMS General Counsel Geovette Washington regarding the source of funding for the CSR 

payments. Shortly after Mr. Wilkins reached out to her, Ms. Washington invited IRS officials to 

meet with her at the Old Executive Office Building. The meeting took place on January 13, 

2014. The IRS officials in attendance were: IRS General Counsel William Wilkins, Chief 

Financial Officer Robin Canady, Deputy Chief Financial Officer Greg Kane, Chief Risk Officer 

David Fisher, Associate Chief Counsel Mark Kaizen, Deputy Associate Chief Counsel of 

ll6 Fisher Depo. ar 52- 54 (emphasis added). 137 Fisher Dcpo. ar 63 (emphasis added). 

'" Kane Tr. ar 40. 

67 
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23194A.077

General Legal Services Linda Horowitz and Chief of Ethics and General Law Branch of General 

Legal Services Kirsten Witter. 139 Several OMB officials also attended including OMB General 

Counsel Geovette Washington and OMB lawyers Sam Berger, Steve Aitken, and John 

Simpkins.t•o Mr. Wilkins testified: 

Q. I'll represent that this is a printout of several of the columns from 

the W11ite House visitors log from January 13, 2014. 

Do you see your name here on this list in the highlighted portion? 

A. Yes. 

Q. Do you recall this meeting at the White House? 

A. It was in the Old Executive Office Building, but yes. I do recall it. 

Q. Sorry. Apologies. It is the White House visitors log, but you're 

right. It is the OEOB, as noted on the visitors log. 

Do you recall the purpose of this meeting? 

A. Yes. 

Q. What was the purpose of this meeting? 

A. The purpose was to hear from the general counsel of Office of 

Management and Budget on legal analysis sm·rounding 

appropriations fot· cost shat·ing payments. 

Q. Who was the general counsel of the Office of Management and 

Budget at that time? 

A. Geovette Washington. 

Q. Who initiated this meeting? 

,,. White House Visitors Access Records released 2014, nvnilable nt https://www.wbitebouse.govlbriefulg· 

roomldisclosureslvisitor-records. 140 Wasbiugtou Tr. at 51; see also H. Couun. on Ways & Means, Tmuscribed Interview of David Fishel', at 16-17 

(May 3. 20 16) (hereinafter Fisher Tr.); H. Conun. on Ways & Means, Tmnscribed Interview of William Wilkins, at 

53 (Mat. 17, 2016) [beteinaftcr WilkiJIS Tr.]; H. Conun. on Ways & Means, Tmnscribcd hlle•view of Mark Kaizcn, 

at 18- 19 (Apr. 15, 2016)fbereinaftet Kaizen Tr.]. 

68 
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23194A.078

A. I believe that invitation came fJ·om Geovette Washington, but I 

had earlier put in a call to bet· which may have led to the 

invitation. 

Q. Did you ask her to hold this meeting? 

A. No. 

Q. But is it fair to say that a conversation between you and her 

p.-ompted this meeting? 

A. Yes. 

Q. Do you recall how far in advance you spoke with her before 

January 13? 

A. Only a few days. Less than a week. 141 

Ms. Washington also recalled the meeting. She stated: 

Q. Do you recall why this meeting was initiated? 

A. Yes. 

Q. Why was this meeting initiated? 

A. The frrst payments on the Cost Sharing Reduction and Premium 

Tax Credit Programs were needing to be made at the end of 

January. We at OMB had discussed the final - shown the final 

memo to people in the office at Treasury and at HHS and we 

needed to show the memo to the people at IRS so that they 

could understand the rationale fot· the payments. 142 

Mr. Fisher was not originally invited to attend the meeting at OMB. After learning about 

the meeting, however, he requested to attend because he believed, as the Chief Risk Officer, he 

should attend. Mr. Fisher explained: 

A. But I think my insights to that point had led me to believe that 

there was at least some risk here and it was appropriate for the 

Chief Risk Ofticer to be involved in the discussion and requested 

that I be permitted to attend. And that was, you know, approved 

without any difficulty, and the Chief Counsel made those 

arrangements for me to attend. 

"' Wilkins Tr. at 52- 54 (emphasis added) .. 

" 2 Washington Tr. at 42 (emphasis added). 

69 
95 


23194A.079

So it would have been an informal understanding sometime during 

the week leading up to the meeting. And then I suggested that I 

think the Chief Risk Officer should be there. TI1at request was 

granted without questions. 

Q. What was the risk, specifically, that you identified? 

A. E ntirely related to appt·opriations law and whether or not the 

utiJization of the permanent appropl'iation for the cost-sharing 

pt·ogram h ad been appropl'iately appropt·iated by the law, you 

know, through the vehicle of the statute. And tha t was, I' ll say, 

unclea r at the time. And that was the purpose, that we were 

going to go undustand the administration 's thought process in 

coming to the conclusion that, yes, that could be use.d. 

Q. At the January 13th, 2014, meeting. 

A. That was really the purpose of that meeting. 

143 

Mr. Fisher further explained that he believed the meeting was held to address the fRS ' concerns 

about how the CSR program would be ti.mded. In an exchange with Congressman Jim 

McDennott, he testified: 

Mr. McDermott. Just to follow up on Mr. Roskam's question, why do you 

think that meeting occurred? 

The Witness. The meeting at the Office of Management and Budget? 

Mr. McDennott. Yes. Yes. 

The Witness. So it was set up prior to my even knowing about the 

meeting, but my understanding, through the accounting folk.s, is 

that the fRS had raised some concems and was looking for, 

whether it was a legal analysis or - something more authoritative 

that would provide confidence that these payments were, in fact, 

authorized out of the permanent appropriation. 

Because that - my understanding of past practice had been, every 

time the permanent appropriation had been referenced and utilized 

for credit payments or for reti.mds because that's what it's for, is 

for refunds and credit payments, specific credit payments - there 

had always been a discrete update to the Intemal Revenue Code. 

It's my understanding that it always occurred. 

*** 

" 3 Fisher Oepo. at 25- 26 (emphasis added). 

70 
96 


23194A.080

And we, the ffiS, were looking for the administration's 

pe•·spective on this. From an appropriations law standpoint, is 

this an appropriate thi11g, to use the permanent 

appropriation? 144 

These senior IRS officials were understandably concerned about the legality of making the CSR 

payments through a permanent appropriation. Hearing oftbese concems, OMB called the 

meeting to provide these IRS officials the Administration's legal justification for doing just 

that- raiding a pennanent appropriation to make the CSR payments. 

b. W1rat Happened at the Meeting 

The January 13, 2014 meeting took place at the Old Executive Office Building at the 

White House complex. OMB oftlcials distributed hard copies of the OMB memorandum to the 

IRS officials and gave them a chance to review it. After the IRS officials reviewed the 

memorandum, they were given an oppo1tunity to ask some brief questions before the meeting 

concluded. Mr. Fisher testified: 

Q. Could you describe what happened at that meeting? 

A. So a bunch of us went in vans from the IRS to the Old Executive 

Office Building. We were taken into the General Counsel's 

conference room. l11ere were some brief introductions of the lRS 

attendees and the OMB attendees. 

We were given a memo to read. We were instructed we were not 

to take notes and we would not be keeping the memo, we'd be 

giving it back at the end of the meeting. But we had an 

opportunity to read the detailed memo identifying why - or 

justifying the payments out of the permanent appropriation. 

The OMB team left the room. The IRS team stayed in the room. 

We all individually read the memo. At the end of that, ihe OMB 

people came back in. There was some brief conversation with a 

small nmnber of questions that were asked and answered back and 

fo11h. The meeting concluded, and we got in the vans and went 

back to the lRS. 145 

As Mr. Fisher stated, Ms. Washington instructed the IRS officials that they could review 

the legal memorandum, but they could not take notes or take the document with them. Associate 

General Counsel Mark Kaizen further testified: 

A. We were provided a written document to take a look at. 

'"'/d. aJ49- 50 (emphasis added). 141 !d. aJ26- 27 (emphasis added). 

71 
97 


23194A.081

Q. Did you keep a copy of that docwnent? 

A. No. 

Q. Was each person 111 the room given a copy of the 

document? 

A. No. 

Q. How many copies, approximately, were distributed? 

A. I don't remember the number of documents. There just 

wasn't enough for everybody, so there was some sharing 

that was taking place. 

Q. Did you take notes on the document? 

A. No. 

Q. Were you instructed not to take notes? 

A. Yes}46 

c. The OMB Memorandum's Rationale 

Although OMB refused to produce the memorandum to Congress- even pursuant to a 

subpoena- the committees received testimony describing the contents of the memorandum. For 

example, Mr. Fisher testified: 

Q. What did the memo discuss? 

A. I guess, in my words, it would be a •·atiooale fot· why using the 

pet·maoent appt·opriation for the cost sharing reduction 

payments was appropriate . 

• • • 

Q. What was the rationale in the memo? 

A. I don't recall most of the details of the memo, in large part because 

it didn' t make much of an impression on me. It was a lengthy, sort 

of, list of small justifications of individual things trying to identify 

why the administration believed that it was Congress' intent to 

have the payments for both the Advance Premium Tax Credit and 

,.,. Kaizen Tr. a121- 22. 

72 
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23194A.082

the cost sharing reduction payment being made in the same 

manner. 

And there was allusions to a statement that had been made on the 

floor. There were allusions, I believe, to statements that might 

have been made in the media. There was the coupling of the fact 

that in section 1412, the payment authorization section, is that both 

of these payments were in the same section, for both the Advance 

Premium Tax Credit and the cost sharing reduction payment both 

being referenced and discussed in section 1412. 

And there were a number of other justifications on why the 

administration concluded that it was appropriate to use that 

appropriation for these payments. But, as I recall, there was no 

sort of single, main argument. It was more of a collection of 

almost a commentary on elements that, in total, would draw the 

conclusion that these f.'\Yments out of the pem1anent appropriation 

would be appropriate. 4 

Mr. Fisher further testified: 

Because it became clea t· that, while we were seeing the memo for the 

first time bet·e in mid-January, this memo bad been discussed both 

within the Office of Management and Budget and in the Justice 

Department. Whether there were other parties involved in those 

discussions, I don't know, but those were the two that stood out that bad 

been involved in, you know, supporting or approving of Mr. Berger's 

memo. 

And our understanding, as I believe it was explained in the meeting, was 

that the administration has gone through the legal analysis and has come 

up with the opinion that, based on the infonnation contained in this memo, 

it was appropriate to use the pem1anent appropriation to pay for not only 

the Advance Premium Tax Credit but also the cost-sharing reduction 

payments. 

And that was the administration's conclusion, and, therefore, the payments 

should be made. I mean, I think that was the assumption out of that legal 

ana lysis that the administration had perfom1ed, is that the law as stated 

should now be fulfilled, with HHS identifying to whom and how much 

payments should be made for the cost-sharing reduction program. TI1at 

information would be communicated to the Treasury Department, and the 

IRS would then go make those payments out of the permanent 

appropriation based on this legal analysis. 148 

'" Fisher Dcpo. a1 27- 28 (emphasis added). 

''' /d. at 29 (emphasis added). 

73 
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23194A.083

At the meeting, OMB characterized the document as the Administration's legal analysis and 

conclusion regarding the source of funding for the CSR program. Mr. Fisher testified: 

Q. You said initially that one of the lines of questioning was a 

question of whether this document was a decision or what type of 

document it was. 

A. Uh-huh. 

Q. What was the answer to that question? 

A. So it was characterized as: This is the administration's legal 

analysis, that a conclusion bas been made, a legal conclusion 

has been made, and that it was appropriate to move forward 

on the payments per the schedule, beginning in late January, 

using the pet·manent appropriation. 

So that was their legal conclusion. And I think the expectation was 

that it would be now followed in practice by the implementing 

agencies. 149 

OMB organized the meeting to provide the Administration's " legal conclusion" to these 

IRS officials and to let them know they could move forward with making the CSR payments 

from the pennanent appropriation. OMB believed everyone was on the same page following the 

meeting. In fact, after the meeting, then-OMB General Counsel Washington testified: " I would 

have told the director (Sylvia Mathews Burwell] that the meeting had occurred and tbat things 

seemed to be fine. 0 

8. IRS Officials Still Have Concerns Following Review of OMB's 

Memorandum 

FINDING: After reviewing the OMB memorandum, some of the ms officials still bad 

concerns about the sout·ce of funds, and wanted to make sure that these 

payments were not in violation of appropriations laws or the Antideficiency 

Act. 

After the meeting at OMB, on the drive back to the IRS, the IRS officials who reviewed 

the OMB memorandum were not in consensus about the merits ofOMB's legal analysis of the 

source of funds issue. Mr. Fisher testified that "as we returned to the IRS, there was a discussion 

about what do we do next. The group was not in consensus on the merits of the argument as 

conveyed to us through the memo and in this discussion."151 

"' !d. at 29-30 (emphasis added). 1

"' Washiuglon Tr. al57. 1

$

1 Fisher Depo. at 33. 

74 
100 


23194A.084

Mr. Fisher and others suggested that the group should meet with Commissioner Koskinen 

before the first payment was to be made to ensure he was fully infom1ed on the issue. He 

testified: 

And I know l was certainly one of the advocates for setting up a 

meeting with the Commissione•· of the IRS to make sure he's fully 

informed. 

Exactly like we talk about in enterprise risk management, that's exactly 

what we're there to do, is to identify potential risks, manage them where 

we can, and things that rise to the level of the enterprise that really require 

senior-level engagement, it's our job to bring that to his anention. 

And I don't believe I was the only one, but I was certainly one of the 

advocates fo•· making su•·e that we set up a meeting with the 

Commissione•· between that dale and when the fint payment was to 

be made. I wanted to make sure that we bad that discussion before the 

payment date, which, again, was late January. 152 

Mr. Fisher raised concerns that the CSR payments potentially violated the Antideficiency Act 

during the course of that conversation. He testified: 

Q. 

A. 

During the course of these discussions about the meeting with 

Commissioner Koskinen, did you or anybody else raise the topic of 

the Antideficiency Act? 

So, just to be clear, there was one discussion. It was not EluraL It 

was a single meeting. And, yes, I raised those concerns. 1 

Mr. Fisher continued: 

There could be many other people who think this is about health care. 

To us, this was not about health care. And I know that's bard to 

believe fo•· some people, but this was about appropriations law, which 

those of us- I was a CFO in the Federal Government at the Goverruneot 

Accountability Office. For those of us who work in financial 

management, when it comes to the Antideficiency Act, which has crinlinal 

penalties associated with it, we take it very seriously. The IRS takes its 

audit very scl'iously. And we wanted to make sure that these 

payments were not going to be in violation of app•·opl'iation law and 

the Antideficieocy Act. That's what this was all about. 154 

IS% /d. at 33- 34 (emphasis added). 

'" /d. 81 36. 

IS< /d. at 34 (emphasis added). 

75 
101 


23194A.085

The IRS officials were given an opportunity to review the Administration's legal analysis 

and justification- which had already been reviewed and approved by the Attorney General of 

the United States- for funding the CSR program through the same appropriation as the premium 

tax credit. 1l1e IRS officials' concerns that this course of action violated appropriations law were 

noted, but not addressed or ameliorated by OMB's legal memorandum. 

B. The Administration Begins to Prepare to Make Cost Sharing 

Reduction Payments 

FINDING: Secretary Lew approved an Action Memorandum dated January 15, 2014, 

authorizing the ms to administer the cost sharing reduction payments in the 

same manner as the advanced premium tax credit payments. 

While the Administration allempted to assuage the concerns of the IRS officials, 

Treasury Secretary Lew approved an Action Memorandum authorizing the IRS to administer the 

CSR payments in the same manner as the APTC payments. Although the IRS officials had an 

opportunity to raise their concerns to IRS Commissioner John Koskinen, by the time of that 

meeting, the Administration already had decided to move forward. II appears that the Action 

Memorandum was approved before the meeting with Commissioner Koskinen took place. 

1. Secretary Lew Authorizes the IRS to Administer Cost Sharing 

Reduction Payments 

On January 15, 20 15- two days after the IRS officials met with OMB about OMB 's 

legal memorandum- Treasury Assistant Secretary for Tax Policy Mark Mazur provided 

Treasury Secretary Lew an "Action Memorandum" for his approval. 155 The final Action 

Memorandum states, "(g]iven that the Intemal Revenue Service (IRS) will administer the 

advance premium tax credit payments in coordination with HHS, we recommend that IRS 

similarly administer the cost-sharing payments in coordination with HHS."156 The tinal 

memorandum (see below) reflected that Secretary Lew approved the recommendation and 

authorized the action. Only after the committees served subpoenas and only after a witness 

acknowledged in a transcribed interview did Treasury produce this final memorandum. But 

Treasury only produced a redacted version of the document to the committees: 

•ss Action Memorandum from Mark Mazur, Ass'l Sec'y for Tax Policy, U.S. Dep'l of the Treasury, to Hon. Jacob 

Lew, Sec'y, U.S. Dep'l of the Treasury, Cost-Sharing Payments Under the Affordable Care Act (Jan. 15, 2014). 1$6 /d. 

76 
102 


23194A.086

DEPARTMENT OF TliE TREASURY WA»DDITOH, D.C. 1021CI 

Janlllll)' IS, 2014 

ACTION MEMORANDUM FOR SECRRTARY LEW 

FROM: MMk M11211t, Assistant Secrowy for Tax Polley '-i> W\. 

SUBJE~ Cost.Sbarii1,C Paymcnl> Undu the Affordable Gate Ad 

RECOMMENDATION 

That Treosury, through the lnlcmal Revenue Service, admlniJilcr oost·sbarlng paymc:ob pur&unnl 

10 c!Je Affordable Care ACL 

App'tove ___ Disapp.-ove ___ Lc:raDiac"'" 

BACKGROUND 

Tho Affordable C..re Act (ACA) mandates that )lealth lnsur11DCe Luuea make reductiC!>Sin cost· 

abarii1,C (•.g., ~pays and dtductlblesj (oteUgibJo indivi.W.U J)llldwlng health ins- on an 

&cllange and requires the federal goYCrliiDelll to cOJDpeiiS8!c Luucto fur the cost of those 

rcducllons. The Dopettment of Health and Humm SUvlcos ~iHS) lmplemenled these 

requin:mc:nl> in a final rule issued in MArch 2013, Cost-cbaring payments arc scheduled to 

commence in Jato January. 

Under thc ACA, thc Sccnl!aJY. of thc Treasury l.t ~to make advanoc payment.> lilc 

p.-emiWll lax credits and cost-sharing purauant to inatrucrions provided by HHS. Given that the 

lnlemal Revenue Scavlce (IRS) W.ill admlnister the advaJr:e premium tu credit paymcnta in 

coordination with AHS, we recomrnead that IRS sirnUarly &<!minister the cost-sborlng Jl'l)'lr!CillS 

io coordioation with mtS. 

Accordingly, IRS will tiSIO the seedoo 

1324(1>) appropriation os thc .ource for lheoe paymc:ota. 

Pending your appro .. l of thb me>oow>clum, IRS will finalize itc prepan~tlans to commence cost· 

Jlwi'11! paymc:oq by late lanunry and will kocp us ln(onnod of its JXOI"'S'-

Although Mr. Mazur sent the Action Memorandum to the Secretary, he had only a 

mi.nimal recollection of the details surrounding the purpose and creation of the document Mr. 

Mazur's interview, however, raised questions about whether the Action Memorandum was an 

unusual mechanism for authorizing how the CSR payments were to be funded. He testified: 

Q. Were you asked to prepare this memorandum? 

A. I don't bave a specific memory of being asked by a particular 

person to prepare this. 

77 
103 


23194A.087

Q. Was !his something that you would have done withoul being 

asked? 

A. 1 am not sure 1 would have been asked or it would have been a 

group decision to do. Bul it would have come to my atlent·ion, 

somehow, to do that 

Q. If it had been a group decision, who would have been involved, 

either by name or by title, in kind of the detennination that such a 

memo was necessary? 

A. I can't recall any specific individuals on this. But in terms of 

topics you would have - 1 would expect the budget office. 157 

Mr. Mazur further 1es1ified thai, while preparing this memorandum was within the scope of his 

office's responsibilities, rhe memorandum was outside the normal course of what his office 

handles. Underscoring the unusual nature of this memorandum, he could not even identify who 

or even what division within his office would be responsible for preparing such a document. He 

Slated: 

Q. So - and the way that the office is broken down, which division of 

the office would be responsible for creating a document of this 

nature? 

A. Again, for a document like this, it could be any one of a number of 

people in my office or in the Treasury Department 

We have no one on my staff who directly works on this topic, you 

know. We work on revenue issues, revenue proposals. This topic 

seems to be outside that So it is hard for me to say which of my 

direct reports 

Q. So this is outside of- I am sorry. 

A. It is bard for me to say which of my dinct reports would do 

this topic. 

Q. So if this is beyond the scope of what you.1· office does, why 

would you be in the position to make the recommendation to 

the Secretat·y of bow to implement the program? 

A. I disagree it is beyond the scope of what my office does. 

Q. Okay. 

1

" H. Comm. on Ways & Means, Tnmseribcd Interview of Mark Mazur, at 22- 23 (Apr. 28, 20 16) [hereinafter 

MazurTr.]. 

78 
104 


23194A.088

A. My office does work on implementing the Affordable Care Act. 

Q. Who in your office works on implementing the Affordable Care 

Act? 

A. Of our 100 people, probably 40 of them, depending 

Q. Who is the direct report to you that deals with this subj ect matter? 

A. Of what subject matter are you asking about? 

Q. Implementation of the cost share reduction payments -

A. I do not have a direct report who works on that particular topic. 

Q. Okay. Do you have a di.J·ect report who has reports to them 

who work on that particular topic? 

A. This particulat· topic is so narrow and outside of what our 

normal office is that I can't think of a direct report who I 

would say, "This is their job." 

Q. Okay. So it is so nan ·ow and outside of the normal course, but 

you have no t·ecoUection as to who could have prepared this 

document? 

A. Con·ect. 158 

Further, Mr. Mazur was unable to explain why his office- the oftice responsible for tax policy 

and tax provisions in the President's budget- prepared tlus Action Memorandum for Secretary 

Lew. In fact, cost sharing reductions would rarely fall within his purview, because they are not 

revenue (tax) provisions. Mr. Mazur stated: 

Q. Going back to your role in the President's budget, j ust for my own 

knowledge, you were discussing the receipts side of things. 

A. Yes. 

Q. Did the advanced premium tax credits fall within the receipt side 

of things? 

A. So the advanced pt·emium tax ct·edits are a tax credit. When 

our staff was estimating the baseline receipts for the Federal 

us Id. at 30-33 (erupbasis added). 

79 
105 


23194A.089

Government, they would take into account those tax ct·edits 

that were paid as a reduction in receipts. So yes. 

Q. And so are the cost share reduction payments also treated as - in 

that same manner? 

A. I am not a wa ~ of bow the cost sharing du ion payments at·e 

treated, in tet·ms or the federal budget, bow they flow through. 

I do know that the premium tax credits are treated as a tax credit, 

and so they count as a minus on individual income tax receipts 

when individuals claim that. 159 

Mr. Mazur did not know how CSR payments were treated and could not identify who in his 

office would have handled this issue, yet he and his office were responsible for an Action 

Memorandum that recommended the IRS treat CSR payments in the same manner as APTCs. 

Further demonstrating that this Action Memorandum was unusual, according to multiple 

witnesses, action memoranda were atypical, especially in this situation, where it was used to 

direct how a program should be executed. Mr. Mazur stated: 

Q. Wl1en you say that you, Treasury, prepare hundreds of memoranda 

a year, are they action memoranda? 

A. So in my office we have all different kinds of memoranda we 

prepare. Action memoranda are, I guess, one of those categories. 

Q. What are action memoranda typically used for? 

A. Typically to get the approval of a principal or a decision maker on 

a particular topic. 

Q. This particular one was initialed by Secretary Lew. Who else 

typically initials or signs action memoranda? 

A. In the Department of the Treasury it would depend on what the 

level of decision is. So there would be action memoranda for 

people who are going to go speak at an event, and the 

recommendation would be, "Speak at Event X," and they sign it. 

So whoever is doing that speech would sign that. And so it is a 

whole range of things. 

Q. Could you just give us a couple of more examples about types of 

issues action memoranda are used for? 

'

59 ld. at 55- 56 (emphasis added). 

80 
106 


23194A.090

A. So I would think a couple of possible uses of action memoranda: 

speaking events; sending a fonual Jetter or a fonnal report to 

someone; approving accounting for payments, I guess, as in this 

case. There is a range of things. 

Q. Have you ever seen another action memoranda approving, like you 

said, a payment method for anything else? 

A. I can't recall, but that doesn't mean they don't exist. 160 

The Chief of the IRS's Ethics and General Government Law Branch Kirsten Witter testified that 

she had not seen an action memorandum like this one before. She stated: 

Q. Have you seen an action memorandum like this before? 

A. Not precisely like this, no. 

* •• 

Q. Have you seen action memoranda before? 

A. Yes. 

Q. W hat gener ally do action memoranda do? 

A. The ones I have seen have genera!Jy been to permit the 

acceptance of gifts to the agency. 161 

The IRS General Counsel understood the Action Memorandum to be a "decision 

document that authorized and commanded action," 162 but he also stated tbat be could not recall 

ever seeing an action memorandum before. He testified: 

Committee Counsel. Mr. Wilkins, when you received the document that 

was signed, did you understand it to be a fmal document or did you 

have an opinion on it one way or the other? 

A. 1 understood it to be a decision document that authorized and 

commanded action. 

Committee Counsel. Thank you. 

Q. Are action memoranda typically used at Treasury? 

160 Mazur T1'. at 19- 20. 16

' H. Comm. on Ways & Means, Transcribed lnte1viewofl<irstin Witter. at 23- 25 (AprilS, 2016) [hereu>after 

Witter Tr.) (emphasis added). 162 Wilkins Tr. at 37. 

81 
107 


23194A.091

A. I couldn't tell you one way or the other. 

Q. Have you ever received an action memorandum before? 

A. I don't think so.'63 

Based on these IRS counsels' testimony, this Action Memorandum- seeking the Secretary's 

approval to fund the CSR program through the pennanent appropriation- was unusual. 

Ultimately, Mr. Mazur acknowledged that he made the recommendation to Secretary 

Lew to administer the CSR payments similar to how the APTC credit payments were being 

administered. Mr. Mazur testified: 

Q. Do you see the next sentence, where it says, "Given that the 

Internal Revenue Service, IRS, will administer the advanced 

premium tax credit payments in coordination with HHS, we 

recommend that IRS similarly administer the cost sharing 

payments in coordination with HHS"? 

A. Yes. 

Q. \Vho is the "we" making that recommendation? 

A. The "we" would be me. 164 

On or around January 15,2014, Treasu1y Oeput~ General Counsel Roberto Gonzalez 

emailed the final Action Memorandum to Mr. Wilkins. ~ After receiving the fmal Action 

Memorandum, Mr. Wilkins shared it with staff within the General Counsel's General Legal 

Services Office, including MarkKaizen and Linda Horowitz, as well as staff within the CFO's 

oftice.

166 

163 /d. at 37· 38. 

, .. Mazur Tr. at 26-27 (emphasis added). 

••s Wilkins Tr. at 33- 34. 

'

66 !d. at 38-39. 

82 
108 


23194A.092

2. Commissioner Koskinen Meets with Concerned IRS Officials 

FINDING: A few days after they met al OMB to review OMB's memorandum, several 

high-level IRS officials met with IRS Commissioner John Koskinen to 

discuss how the Administration planned to fund the cost sharing reduction 

p1·ogram. It was clear that the decision had already been made to move 

fonvard with making the cost sharing reduction payments th•·ough the 

premium tax credit account. 

Within a few days of the OMB meeting where IRS officials reviewed OMB's legal 

memorandum, a meeting was scheduled with IRS Commissioner John Koskinen. Former IRS 

Chief Risk Officer David Fisher explained the meeting: 

Q. Do you recall - or could you explain what happened in the course 

of that meeting? 

A. So the Commissioner gathered together aU of the people who 

had attended I he meeting al OMB. The1·e were some additional 

attendees thai would typically attend a senior-leader meeting 

with the Commissione•· - as I recall, his chief of staff, his deputy 

chief of staff, the Deputy Commissioner for Services and 

Enforcement -

Q. Who was that? 

A. Jolm Dalrymple was there. There may have been a couple of 

others. But it was sort of the typical senior folks that you would 

expect to be with the Commissioner when a meeting of some 

import was taking place. 167 

Mr. Fisher described the meeting as a "free and open discussion." 168 Participants, 

including Commissioner Koskinen, discussed the final Action Memorandum from Mark Mazur 

to Secretary Lew and that the Department of Justice had seen and approved OMB's legal 

memorandum. Mr. Fisher stated: 

[Conunissioner Koskinen) was informed of- well, two things. There was 

a memo that was circulated at that meeting that you shared with me last 

week in the transcribed interview that showed - I believe it was a memo 

from Mark Mazur to Secretary Lew that Secretary Lew had signed and 

initialed "Approve" that was more of the directive kind of note that 

Treasury had concluded that - now it was Treasury's counsel - had 

concluded that these payments were appropriate. I recall that memo. We 

discussed that briefly. And that was provided - I don't remember who 

167 Fisher Dcpo. at 38 {emphasis added). 

''* Jd. 

83 
109 


23194A.093

brought that memo. II was either through the Chief of StaiT or Chief 

Counsel - was brought to the group, and the Commissioner be.came aware 

of that. 

He bad also been informed that the Justice Department bad seen the 

memo and bad been approving of it, obviously was aware of OMB's 

position. This is, again, mostly through the General Counsel or Chief 

Counsel's communication to the Commissioner. And so there was a very 

strong consensus of the people who bad been in the loop on this at, 

you know, faii·Iy senior positions in govemment that these payments 

wea·e appropa·iate.'69 

Mr. Fisher admitted that he was in the dissent at the meeting. As the Chief Risk Officer, he 

expressed concerns about the risk associated with making the CSR payments through a 

permanent appropriation when the law does not expressly authorize such payments. He testified: 

I was in the dissent. I think I was wearing two hats in that perspective. As 

the Chief Risk Officea·, I fell there was some risk to making these 

payments with a·espect to the appropa·iations law and the 

Antideficiency Act, recognizing that thea·e were other opinions on the 

other side. I expressed that I felt that the memo that we read was not 

compelling to me to counter my concerns about the Appropriations Act 

issues related to the payment, as I read the law over and over again to try 

to convince myself, you know, what's the appropriate reading of this, 

recognizing that many others have now come to a different conclusion.

170 

Mr. Fisher felt that Commissioner Koskinen gave him the opportunity to express his concerns, 

even though the IRS ultimately decided to move forward with making the CSR payments 

through Treasury's permanent appropriation for tax credits. Mr. Fisher stated: 

[Commissioner Koskinen] listened to my concerns and thanked me, 

actually, in the meeti11g for expressing those concerns but felt the 

appa·opriate coua·se was to go foa·ward and make the payments, you 

know, pea· the strong majority of folks who believed that they were 

appa·opriate. 171 

As documents and testimony indicate, by the time the JRS officials had mel with Commissioner 

Koskinen, it appeared that a decision to use the permanent appropriation had already been made. 

OMB and the Department of Justice had blessed tlus course of action. Secretary Lew had 

already signed tbe Action Memorandum. 

'"' /d. at 39 (emphasis added). 170 Jd. at 39-40 (emphasis added). 

'" /d. at 40 (emphasis added). 

84 
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23194A.094

3. A Memorandum of Understanding between the IRS and CMS Sets 

Forth How to Make Cost Sharing Reduction Payments 

FINDING: The Administration could not make cost sharing reduction payments until a 

Memorandum of Understandin was in lace. 

At the same time that IRS officials raised concerns about the source of funding for the 

CSR program, IRS Deputy Chief Financial Officer Greg Kane began drafting a Memorandum of 

Understanding (MOU) to govern the CSR payment process. He testified: 

Q. Did you help create this memorandum of understanding? 

A. Yes, I did. 

Q. When did you begin working on this MOU? 

A. Around the first of January. 

Q. First of what year? 

A. First week of January 2014. 

Q. Were there previous versions of the MOU that you worked on? 

A. Of this particular MOU? No. 

Q. Would you just explain generally what the MOU does? 

A. So the memorandum of understanding clearly calls out the 

•·oles and responsibilities because of the shared p•·ocess on 

what CMS does, what IRS does. There a•·e references to the 

intemal control process. 

And then the introduction and overview section were written by all 

the counsels - HHS, IRS, CMS, and Treasury - to ensure that 

these documents based on the process wouldn't have to be 

revisited multiple times if there were changes and people leaving 

organizations and all that; it would only have to be revisited if the 

process were to change. m 

The Administration could not begin making CSR payments to the insurance companies until an 

MOU for CSR payments was in place. Mr. Kane stated: 

m Kane Tr. at 36-37. 

85 
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23194A.095

Basically, this Memorandum of Understanding had to be in place so that 

they could begin to execute the process, and for any funds that were going 

to be moved into their allocation account for purposes of making the PTC, 

cost sharing payments done prior to the end of January.

173 

He further testified: 

Q. Would you just explain generally what the MOU does? 

A. So the memorandum of understanding clearly calls out the roles 

and responsibilities because of the shared process on what CMS 

does, what IRS does. There are references to the internal control 

process. 

And then the introduction and overview section were written by all 

the counsels - HHS, IRS, CMS, and Treasury - to ensure that 

these documents based on the process wouldn't have to be 

revisited multiple times if there were changes and people leaving 

organizations and all that; it would only have to be revisited if the 

process were to change. 174 

On January 17, 2014, CMS CFO and Director of the Office of Financial Management 

Deborah Taylor, CMS Deputy Director of Operations, Center for Consumer Information and 

Insurance Oversight James Kerr, and IRS Chief Financial Officer Robin Canady all signed the 

MOU governing how CMS and the IRS would make CSR payments. m On the first page, the 

MOU notes that "[p ]er OMB guidance, CSR are not subject to sequestration."176 Several days 

later, on approximately January 22, 2014, the Administration made the first CSR payments to 

insurance companies from funds appropriated for tax credits. 177 

"' /d. al 56. 11' Kane Tr. at 36-37. 

"' CRS MOU, supr(lnole 25. 176 /d. 171 Email from CMS Clearances 10 numerous HHS pcrsom1el (Jan. 21, 2014, 12:23 p.m.) (including a draft blog 

released 10 be rolled oul "as early as . .. 1122" tba1 slated 0Jal "[l]oday, CMS is pleased lo report thai we are making 

the first payments to Markel place heal OJ insurers on behalf of consumers who are receiving tiuaucial assistance with 

lbeir premiums and cost-sharing."). 

86 
112 


23194A.096

C. The Administration Does Not Request an Annual Appropriation in 

its FY 2015 Budget Request 

FINDING: The Administration did not request an annual approp•·iation for the cost 

sharing reduction prognm in its FY 2015 budget •·equest, submitted to 

Congr ess on March 14, 2014. 

While the Administration was fmding and j ustifying another way to fund the CSR 

program, HHS began preparing its FY 2015 budget request. HHS counsel refused to let its 

witnesses answer whether this budget included a request for an annual appropriation for the CSR 

program at any stage in the lengthy process. But when the President submitted his final budget 

request to Congress on March 14,2014, it did not include any request for appropriations for the 

CSR program. HHS Assistant Secretary for Financial Resources Ellen Murray testified: 

Q. Did that fiscal year 20 15 budget request to Congress include a 

request for an annual appropriation from the Cost Sharing 

Reduction Program? 

A. It did not. 

Q. Do you know why not? 

A. We believed that we bad an appropriation through the Treasury 

Department, and an appropriation through the Labor-H bill was 

not necessary. 

Q. Which particular appropriation? 

A. The appropriation for the tax credit.178 

As this investigation has shown, the Administration initially believed that it needed an 

annual appropriation to f<md the cost sharing reduction program- the FY 2014 budget would not 

have included a request for an annual appropriation for the CSR program if this were not true. 

Although the Affordable Care Act provided filllding for the advanced premium tax credits, it did 

not do the same for the CSR program. Nevertheless, despite requesting an annual appropriation 

in its FY 2014 budget request submitted to Congress on April 10, 20 13, the Administration 

switched course. 

Around the same time that it understood that the CSR appropriation would be subject to 

sequestration, the Administration called the Senate Committee on Appropriations to infonnally 

withdraw its budget request. The Administration has refused to tell Congress who ultimately 

made the decision to withdraw the request. Meanwhile, the Administration scrambled to create a 

legal justification for raiding the premium tax credit account to pay for the cost sharing reduction 

program. A few high level lRS officials raised concem.s about this course action, fearing it 

178 Mm1·ay Tr. at 77. 

87 
113 


23194A.097

violated appropriations law. These same concerns were the basis of the district court's May II, 

2016 decision finding the Administration's actions unconstitutional.179 But despite these valid 

concerns, the Administration went forward and began making CSR payments from the premium 

tax credit account by the end of January 2014. 

119See U.S. House of Reps. v. Bum•e/1, No. 1:14-cv-01967, Op. (D.O. C. May 12, 2016). 

88 
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23194A.098

VII. The Administration has Obstructed the Committees' 

Investigation 

For more than a year, the committees have sought to understand the facts surrounding the 

Administration's decision to fund the cost sharing reduction program using the§ 1324 

permanent appropriation for tax refunds and credits. This investigation arose out of a concern 

that the source of funds was unconstitutional- and a federal court recently decided just that. 

180 

To fully understand the rationale and process for the Administration's decision, the 

committees have sought answers to a number of questions, including: 

• Who first identified the APTC account as a potential source of funds for the CSR 

program? 

When and how was that appropriation identified? 

• Why did the Administration initially request an annual appropriation for the CSR 

program before deciding to infonnally withdraw it? 

Did sequestration play a role in the Administration's decision to fund the CSR program 

through the APTC account? 

• Who at the White House and the Department of Justice was involved in these decisions? 

Unfortunately, the Administration has nndertaken extraordinary efforts to frustrate the 

committees' investigation and to prevent it from answering these and other legitimate questions. 

Since the start of this investigation, the Administration has: 

• Failed to comply with the committees' subpoenas; 

Failed to timely deliver subpoenas issued by the Conunittee on Ways and Means to 

Administration employees; 

• Relied on an overbroad regulation inconsistent federal law to limit infonnation provided 

to Congress; 

• Unilaterally restricted the scope of the testimony that current and former employees 

provided to Congress; 

• lnstmcted witnesses who appeared before the committees to not fully answer questions 

posed by Congress; and 

180 U.S. House of Reps. v. Bmwe/1, No. 1:14-ev-01967, Op. (D.D.C. May 12, 2016). 

89 
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23194A.099

• Pressured at least one witness who questioned the Administration's testimonial 

restrictions. 

On numerous occasions, the Administration has cited the ongoing litigation as a 

justification for its refusal to cooperate with the committees' investigation. The Administration 

has misrepresented and distorted the scope of Congress' authority to conduct oversight of the 

laws passed by Congress, and of the circumstances of the present case. It has attempted to argue 

that Congress' constinttional oversight authority is somehow suspended while litigation is 

pending. It has argued that while Congress may have "a\tthority" to conduct oversight, there is 

no "need" while the issue is being litigated. But none of these arguments are valid. 

From the outset, the committees have clearly stated the purpose of their investigation: to 

fully understand the facts surrounding the Administration's decisions to fund the cost sharing 

reduction program from the permanent appropriation for tax refunds and credits. The lawsuit did 

not, and will not, answer the committees' quest1ons about the source of funding for the CSR 

program because the committees' factual questions are fundamentally different from the legal 

issues presented in the House v. Bwwell litigation. 

Under the powers set forth in the Constitution, Congress has an obligation to understand 

the facts of the Administration's decisions here. The committees have an oversight interest in 

the laws and regulations passed by Congress, and must ensure that the Administration spends 

taxpayer dollars pmdently and in accordance with the law. That oversight interest cannot be 

tolled as the Administration requests. Further, it is the committees of the United States House of 

Representatives, not the Administration, that have sole authority to detem1ine the type of 

infonnation necessary to conduct effective oversight. 

Section A details the numerous steps the commjttees have undertaken to obtain 

infonnation from the Administration, while Section B details the obstmctive tactics used by the 

Administration to impede the committees' work. 

A. Background of the Committees' Investigation 

1. The Committees Initiate the Investigation and Request Documents and 

Information 

On Febmary 3, 2015, then-Ways and Means Committee Chainnan Paul Ryan and Energy 

and Collllllerce Committee Chairman Fred Upton wrote to Treasury and llliS requesting 

documents and information about the Administration's decision to make CSR payments to the 

insurance companies without an appropriation. TI1e committees explained tbe basis for tbe 

request: 

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 ("CMS") Administrator Marilyn Tavenner informed the House 

Committee on Oversight and Goveroment Refom1 in December 2014 that 

90 
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23194A.100

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 I of the U.S. Constitution expressly prohibits the expenditure of 

public funds without an appropriation made by law. Accordingly, it 

appears the Department of Health and Human Services ("HHS") has 

directed the Treasury 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.181 

In the same letters, the committees requested that the Departments produce documents relating 

to: 

I. 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 20 15 Budget submission, which did not include [an) 

annual appropriation request. 182 

On February 25, 2015, more than a week past the letter's deadline, the committees 

received a three-paragraph response from both Departments referring Chairmen Ryan and Upton 

to the Department of Justice (DOJ). The Departments wrote, in part: 

As you know, the House of Representatives bas filed a lawsuit against the 

Department of the Treasury and the Department of Health and Human 

Services asking the court to end these cost-sharing reduction payments. 

Your letters relate to matters that are the subject of the House lawsuit. 

The Department of Justice, which represented both defendants, filed a 

brief in the case on January 26, 2015. For matters raised in this 

litigation, we refe•· you to the Department of Justice. 183 

Regarding the committees' requests and questions, the Department provided only one sentenc.e 

of responsive infonnation: 

181 Leucrs fi·om Hon. Paul Ryan, Chainnau, H. Couun. on Ways & Means, lmd Hon. Fred Upton, Chainnan, H. 

Comm. on Energy & Commerce, to Hon. Jacob Lew, Sec'y, U.S. Dep't of the Treasury. and Hon. Sylvia Burwell, 

Sec'y. U.S. Dep'l of Health & Human Serv. (Feb. 3, 2015) (citations omined). 181 /d. 

'" Leiters from Randall DeValk, Acting Assistant Scc'y for Legis. Affairs, U.S. Dep"t oftbe Treastuy, and Jim R. 

Esquea, Assistant Sec'y for Legis., U.S. Dep't of Health & Human Seovs., to Hon. Pat~ Ryan, Cbairma ~ H. Comm. 

on Ways & McarlS, and Hou. Fred Upton, Chainuau, H. CoolllJ_ on Energy & Commerce (Feb. 25, 2015) (referTing 

to U.S. House of Reps. v. Bwwc/1, No. 1:14-cv-01967 (D.D.C. filed Nov. 21 , 2014)) (emphasis added). 

91 
117 


23194A.101

Cost-sharing reduction payments continue to be made to insurers on behalf 

of consumers and the cumulative amount of these payments for 2014 is 

S2.997 billion. 184 

The response did not otherwise answer any of the committees' questions or include any 

documents. 

Nearly six months later, the Departments had not provided any documents to the 

committees. On July 7, 20 15, the committees wrote again to the Departments to reiterate the 

request for documents and infonnation. The committees wrote: 

We remain concemed that the administration is unlawfully and 

unconstinllionally misappropriating funds to make Section 1402 Offset 

Program payments to insurance companies. To understand the 

[Departments'] administration of the cost-sharing reduction program, the 

conuninees sent you a letter on Febmary 3, 2015 requesting infom1ation 

and documents. To date, the [Departments have~ not provided any 

documents or infonnation in response to that request.' ·s 

The conunittees asked that the Departments produce all responsive documents and information 

by July 21, 2015. The committees concluded: 

If [the Departments) fail to produce the documents and information, the 

committees will have no choice but to consider the use of the compulsory 

process to obtain them. 186 

On July 21, 2015, the Departments responded to the committees' letters. The 

Departments' response again failed to address the committees' requests. Specifically, the 

response explained neither the Administration's decision to make the CSR payments from the 

peru1anent appropriation for tax credits and refunds, nor why the Administration requested a11 

atlllual appropriation to ftmd the CSR payments in the tiscal year 2014 budget before reversing 

course. Instead, the Departments merely provided a summary of the legal arguments presented 

by the Administration in the House v. Bwwe/1 Litigation. 

In the same letters, tbe Departments explicitly refused to produce the documents 

requested by the committees. The Departments wrote: 

'"'!d. 

As we wrote in our February 25, 2015 response to you, the House of 

Representatives has filed a lawsuit against Treasury and HHS asking the 

court to end cost-sharing reduction payments. Your letters contain 

document requests that relate to the issues raised by the complaint the 

us Leiters from Hon. Paul Ryan, Chairman, H. Comm. on Ways & Means, and Hon. Fred Up1on, Chairmar~ H. 

CoUlln. oo Energy & Commerce, 10 Hoo. Jacob Lew, See'y, U.S. Dep't of the Treasury, aod Hon. Sylvia Burwell, 

Scc'y, U.S. Dcp'l ofHeallh & Hwnan Serv. (July 7, 20t5) . ... ,d. 

92 
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23194A.102

House filed in that case. In January of this year, the Department of 

Justice, which represents both defendants, filed a motion to dismiss the 

case on the grounds that the suit is not justiciable. However, the court has 

not yet naled on that motion, and the case remains pending. II would 

therefore be premature for our agencies to address your document 

requests, as they relate to the issues t·aised in the lawsuit. 187 

The Departments did not provide any other explanation for why they would not produce the 

requested documents and infom1ation to the committees. 

2. The Administration Delays and Impedes Scheduling Transcribed 

Interviews 

Given the Departments' explicit refusal to provide the requested documents, the 

committees next attempted to understand the Administration's decisions about the source of 

funding for the CSR program through witness testimony. To that end, the committees wrote to 

the Departments on December 2, 2015 requesting transcribed interviews of eight current and 

former employees of the Departments of Health and Human Services and the Treasury. The 

committees again explained the purpose of the oversight inquiry, which was separate from the 

legal issues involved in the House v. Burwell litigation. They wrote: 

The Committees seek to fully uJJderstand the facts that led to the 

administration's i,nitial request for an annual appropriation to fund the 

CSR program payments to insurers, and the administration's subsequent 

actions, after Congress had rejected the appropriation request, to 

nevertheless pay insurers with fimds from the permanent appropriation for 

tax refunds and credits. Cong•·ess bas a constitutionally-based 

responsibility to ovet·see all asp ects of the administration's actions 

related to the CSR program.

188 

The committees asked the Departments to make the requested individuals available for 

interviews no later than December 16, 2015. The committees concluded that, if the Departments 

"fail( ed] to timely respond or schedule the requested interviews," the committees would have no 

choice but to resort to compelled process. Not only did the Departments fai l to make the 

requested individuals available for interviews by December 16, 20 15, but they failed to even 

respond to the letter by that date. 

111 Leiters from Anne WaU, Assislant Sec'y for Legis. Af&1irs, U.S. Dep't of the Treasury. and Jim R. Esquea. 

Assistant Sec'y for Legis .. U.S. Dep't of Health & Human Senos., to Hon. Paul Ryan, Chainnan, H. Comm. on 

Ways & Means, and Hon. Fred Uplon, Chaimum. H. Conun. on Energy & Commerce (July 2t , 20t5) (emphasis 

added). 

'" Leiters fi·om Hon. Paul Ryan. Chainnan, H. Comm. on Ways & Means. and Hon. Fred Upton, Chairman, H. 

Comm. on Energy & Commcrce, lo Hon. Jacob Lew, See'y, U.S. Dep'l of1he Treasury, and Hon. Sylvia Burwell, 

Sec'y, U.S. Dep't of Health & Human Serv. (Dec. 2. 2015) (emphasis added). 

93 
119 


23194A.103

On December 18, 20 15, two days after the deadline, the Departments responded to the 

committees' letters.189 Once again, the response focused entirely on the legal arguments at issue 

in the House v. Burwell litigation-even referring the committees to a recently-filed litigation 

brief for "further infonnation regarding the basis for the conclusion that Congress intended for 

cost-sharing reduction payments to be funded through a pennanent appropriation."190 The 

Departments' response, however, in no way addressed the factual issues central to the 

conunittees' separate and independent oversight inquiry. The Departments also failed to address 

the committees' request for witness interviews. 

At this juncture, and given the Departments' refusal to produce documents and refusal to 

make witnesses available, the committees prepared to issue subpoenas for the documents and 

infonnation required to complete the investigation. As conunonly occurs before the issuance of 

a congre,ssional subpoena, conunittee staff called the Departments' sta ff to discuss service of 

subpoenas for documents and depositions. 

On January 19, 2016, the Departments wrote to the committees again, claiming that the 

House v. Burwell litigation prevented the Departments from complying with the committees' 

requests for documents and interviews. In rejecting the Committees' request for transcribed 

interviews, the Departments wrote: 

Conducting the interviews you request on these topics could compromise 

the integrity of the judicial proceedings by circumventing the established 

rules of discovery and procedure, including judicial detennination of the 

applicability of privileges designed to protect litigants in civil litigation. 

Indeed, as noted above, the House has expressly acknowledged that 

discovery is not required in this case, a point with which we and the 

district court agree. Two House committees requesting interviews about 

agency action on the same day that the House has relied on those actions 

in litigation against those same agencies raises the appearance of utilizing 

oversight to accomplish inappropriate litigation objectives.191 

Once again, the Departments improperly conflated the committees' factual oversight 

inquiry with the legal issues involved in the litigation. The Departments further failed to explain 

how the facts gathered in the committees' investigation could be used to "accomplish 

inappropriate litigation objectives." As the Departments themselves pointed out, the House v. 

Burwell litigation required no discovery. Be.cause the only issue involved was whether the 

Administration could legally make CSR payments from the pennanent appropriation for tax 

refunds and credits, the only relevant fact was that the Administration made CSR payments using 

the pennanent appropriation. 

109 Lcuc.-s fi·om A.aule Wall, Assistant Se<:'y foa· Legis. Affairs, U.S. Dep't ofllle TreaslU)', and Jim R. Esquca, 

Assistant See'y for Legis .. U.S. Dep't of Health & Hmnan Sen'S., 10 Hon. Paul Ryan, Chainnan, H. Comm. on 

Ways & Means, and Hon. Fred Upton, Chairman, H. Comm. on Energy & Commerce (Dec. 18, 2015) . ... /d. 191 Lcucrs fi·om A.ame Wall, Assistant Se<:'y foa· Legis. Affairs, U.S. Dcp't of the Treasury, and Jim R. Esquca, 

Assistant See'y for Legis., U.S. Oep't of Health & Human Setvs., to Hon. Paul Ryan, ChaimJan, H. Como~ on 

Ways & Means, and Hon. Fred Upton, ChaimJan, H. Conun. on Energy & Commerce (Jan. 19, 2016) (citations 

omitted). 

94 
120 


23194A.104

l11e Departments' letter concluded by fonnally offering the committees a briefing with 

HHS Assistant Secretary for Financial Services Ellen Murray. HHS staff had infom1ally 

conveye.d this offer several days prior during a phone call with committee staff. At this point, 

and with the hope that Ms. Murray would answer the committees' questions, the co111J1littees 

agreed to postpone the issuance of subpoenas to HHS until after that briefing.t92 More than six 

weeks later, Ms. Murray provided a transcribed interview to the committees. In that interview, 

HHS counsel refused to permit her to answer most of the committee's basic and straightforward 

questions about the source of funding of the CSR program. 

Ultimately, the committees conducted transcribed interviews of twelve current and 

former Administration employees. In the course of these interviews, counsel for the 

Administration present at the interviews prevented employees from answering most of the 

committees' questions about the source of funding for the CSR program. 

The Committee on Ways and Means also deposed a fom1er IRS official. Through this 

deposition, the committees finally gained some insight into the Administration's decision to fund 

the CSR program using the permanent appropriation for tax credits and reftmds. 

3. The Administration Refuses to Produce to the Committees a Final 

OMB Memorandum 

Tbe Office of Management and Budget drafted a legal analysis regarding the revised 

source of funding lor the CSR program, which it shared with top Administration officials. The 

committees learned of this memorandum in the course of the transcribed interviews. On April 

25, 2016, the committees wrote to OMB requesting a copy of this memorandum. The 

committees wrote: 

In recent transcribed interviews with Treasury officials, several officials 

described a legal memorandum drafted by the Office of Management and 

Budget regarding the funding of the CSR program. The memorandum 

was shared with several Treasury ofticials around January 2014. The 

Committees requested the document from both the Department of 

Treasury and the Department of He-alth and Human Services, but both 

departments have. infonned the Committees that they do not have a copy 

of the memorandum in their possession.t 93 

On May 3, 2016, OMB refused to produce the requested document voluntarily, citing the 

Executive branch's "confidentiality interests in such pre-decisional deliberations and analysis," 

and the need to protect against the "chilling effect on future deliberations that would follow" 

192 Ways and Means Committee staff offered a similar accommodation to the Depa11ment oft he Treasury- namely. 

that Ute Co!UUllttces would postpone the issuance of subpoenas if the Department provided a similar briefing. 

Treasury did not aceept this offer of an accom111odation fro111 Ways and Means. 

'" L.ener from Hon. Kevin Brndy, Chairman, H. Comm. on Ways & Means, and Hon. Fred Upton, Cbainuan, H. 

Comm. on Energy & Commerce, to Hou. Sbatm Donovan, Dir., Office ofMgmt. & Budget (AprilS, 2016). 

95 
121 


23194A.105

disclosure of the document. 194 Instead, OMB offered a "summary of the government's legal 

analysis supporting the funding of the ACA's cost-sharing reduction program." 195 1l1e 

committees subsequently infonned OMB via staff telephone calls that a summary written in 

2016 about a memorandum drafted in 2013 would not be sufficient, and that the committees 

required production of the actual memorandum. 

4. Due to the Administration's Explicit Refusal to Produce Documents 

and Testimony. the Committees are Forced to Issue Subpoenas 

For nearly a year, the Departments refused to voluntarily produce documents on the 

source of funding for the CSR program. Between February 2015 and January 2016, the 

Departments did not produce a single document. 

On January 20, 2016, the committees issued subpoenas requiring the Department oftbe 

Treasury to produce documents relate-d to the source of funding for the CSR program. The 

subpoenas compelled Treasury to produce: 

All documents and communications referring or relating to budget 

requests and the source of funding for cost-sharing reduction payments 

made by the Administration to health insurance issuers under Section 1402 

of the Patient Protection and Affordable Care Act. 196 

The subpoenas required that Treasury produce unredacted documents to the committees by 

February 3, 20 16---one year to the day that the coimnittees first requested infonnation regarding 

the CSR program. 

Also on January 20, 2016, and after Treasury did not voluntarily provide transcribed 

interviews or even a briefing with requested otlicials, the Ways and Means Comntittee issued 

deposition subpoenas to three IRS officials. The committee issued these subpoenas to Chief 

Counsel William Wilkins; fonner CFO Robin Canady; and Deputy CFO Gregory Kane. 197 

On May 4, 2016, the coiJ'Unittees issued subpoenas compelling the Department of Health 

and Human Services to produce documents related to the source of funding for the CSR 

program. The subpoenas required HHS to produce: 

, .. Lellers from Tamara Fucile, Assoc. Dir. of Legis. Affain , Office ofMgmJ. & Budge!, 10 Hon. Ke\rin Brady, 

Chainnan. H. Conun. on Ways & Means, and Hon. Fred Uplon, Chainnan, H. Conun. on Energy & Conunerec 

(May 3, 20 16). ,., ld. 

, .. Subpoena lo Hon. Jacob Lew, Sec'y, U.S. Oep'l ofJheTreasury, from H. Conun. on Ways & Means (Jan. 20, 

2016); Subpoena 10 Hon. Jacob Lew, Sec'y, U.S. Dep'l oflhc Treasury, from H. Corum. on Energy & Commcrec 

(Jan. 20, 20 16). 197 Subpoena 10 William Wilkins, Inremal Rev. Serv., U.S. Dep'l oflhe Treasury, from H. CollllU. on Ways & 

Means (Jan. 20. 2016); Subpoena 10 Robin Canady, IJllemal Rev. Serv., U.S. Dep't oflbe Treasmy, from H. Colllln. 

on Ways & Means (Jan. 20, 20 16): Subpoena lo Gregory Kane, IJJiemal Rev. Serv., U.S. Dep 'I of I he Treasury. 

from H. Conun. on Was & Means (Jan. 20, 20 16}. 

96 
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23194A.106

All documents and communications referring or relating to budget 

requests and the source of funding for cost-sharing reduction payments 

made by the Administration to health insurance issuers under Section 1402 

and/or l412(c)(3) of the Patient Protection and Affordable Care Act. 198 

Also on May 4, 2016, the committees served subpoeoas on the Office of Management 

and Budget compelling production of the memorandum requested by the committees, which 

OMB refused to produce vohmtarily. The subpoeoas required OMB to produce: 

All drafts, including the final version, of a memorandum drafted by Office 

of Management and Budget (OMB) personnel related to the Cost-Sharing 

Reduction progran1 of the Patient Protection and Affordable Care Act, a 

version of which was distributed by OMB personnel to select lntemal 

Revenue Service officials on January 13, 2014, at a meeting in the Old 

Executive Office Building. 199 

On May 12, 2016, Judge Collyer of the U.S. District Court for the District of Columbia 

reodered her decision on the merits of the House v. Bum·e// litigation. Judge Collyer held that 

the Department of the Treasury and the Department ofHeahh and Human Services made billions 

of dollars in CSR payments to health insurers without an appropriation, and in violation of the 

Constitution. 

On May 20, 2016, the committees wrote to Treasury, HHS, and OMB demanding 

immediate production of all documents responsive to the subpoenas. The committees wrote: 

Much of the Administration's objection to the Committees' oversight is 

seemingly rooted in its purported concems about disclosing information 

related to the ongoing litigation brought by the House regarding the cost 

sharing reduction program. As we explained to you in December, the 

litigation did not deprive the Committees of their respective oversight 

authorities and obligations, and was not a valid basis for the Department to 

refuse to respond to congressional oversight requests . 

• * * 

The district court's ruling that the cost sharing reduction payments made 

by your Department violated the U.S. Constitution clearly demonstrates 

that misconduct has occurred. We remind you that the deliberative 

process privilege, if grounds for one ever existed, "disappears entirely 

when there is any reason to believe government misconduct [has] 

198 Subpoena to Hon. Sylvia Burwell, Se<:'y, U.S. Dcp'l of Health & Htunan Scrvs., from H. Conun. on Ways & 

Means (May 4, 2016): Subpoena ro Hon. Sylvia Burwel.l, Sec'y, U.S. Dep't of Health & Human Servs., from H. 

Comm. on Energy & Commerce (May 4. 20 16). 199 Subpoena to Hon. Shaun Donovan, Dir., Office ofMgmt. & Budget, fi·om H. Comm. on Ways & Me<1ns (May 4, 

20t6); Subpoena 10 Hoo. Sha1m Donovan, Dir., Office ofM~Unt. & Budget, from H. Conun.. on Energy & 

Conuuerce (May 4, 20 16). 

97 
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23194A.107

occurred." Therefore, we expect your Department to immediately produce 

all documents responsive to the subpoenas 200 

Neither Treasury, nor HHS,nor OMB have produced any additional documents to the 

committees since May 12, the date of Judge Collyer's ruling. 

B. The Elements of the Administration's Obstruction 

While the committees have steadily pursued requests for documents and infonnation for 

over a year, the Administration has employed a number of different tactics to impede and 

obstruct the committees' investigation. For the past year, the Administration has: 

• Failed to comply with the committees' subpoenas; 

• Failed to timely deliver subpoenas issued by the Committee on Ways and Means to 

Administration employees; 

• Relied on an overbroad regulation inconsistent with federal law to limit information 

provided to Congress; 

• Unilaterally restricted the scope of the testimony that current and fonner employees 

provided to Congress; 

• Instructed witnesses who appeared before the committees to not fully answer questions 

posed by Congress; and 

• Pressured at least one witness who questioned the Administration's testimonial 

restrictions. 

Given the level and types of obstruction, it appears that the Administration is using these tactics 

to keep infonnation about the source of funding for the CSR program out of the hands of 

Congress, and therefore out of the bands of the American people. 

200 Leiter from Hon. Kevin Brady, Cbainnan, H. Comm. on Ways & Means, and Hon. Fred Upton. Chairman, H. 

Comm. on Energy & Commerce, to Hon. Sylvia Bwwell, Sec'y, U.S. Dep't of Health & Human Servs. (May 20, 

2016) (similar letters sent to Hou. Sbaun Donovan, Director, Office ofMgmt. & Budget and Hon. Jacob Lew, Sec'y. 

U.S. Oep't of the Treasmy). 

98 
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23194A.108

1. The Administration has Not Complied with the Committees' 

Subpoenas 

FINDING: The Administration has not complied with subpoenas issued by the United 

States Con ress. 

Each subpoena issued by the committees was accompanied by extensive instructions. 

The deposition subpoenas issued by the Committee on Ways and Means were also served with a 

copy of the staff deposition authority rules promulgated by the House of Representatives, as 

required by the rules of the House. 

The subpoenas for documents demanded that the Departments produce responsive 

records "in unredacted form" as described by the various subpoena schedules. Instructions 

provided with the subpoenas explained the steps the Departments should take if documents were 

missing, redacted, or otherwise withheld. For example, the relevaut iustmctions for the 

subpoena issued by the Committee on Energy and Commerce to HHS require: 

I 0. If compliauce with the subpoeua canuot be made in full, 

compliauce shall be made to the exteut possible, aud your 

production shall be accompanied by a written explanation of why 

full compliance is not possible. 

II. In the event that a document or part of any document is withheld 

on any basis, provide the following infom1ation concerning each 

and every document or part of any such document withheld from 

production: (a) the reason the document is uot being produced; (b) 

the type of document; (c) the general subject matter; (d) the date, 

author and addressee; and (e) the relationship of author and 

addressee to each other. Note that subpoenas aud requests issued 

by the U.S. House of Representatives and its Committees are not 

limited by: any of the purponed non-disclosure privileges 

associated with the common law, including but not limited to, the 

deliberative process privilege, the attorney-client privilege, and 

attorney work product protections; any purported privileges or 

protections from disclosure under the Freedom of Information Act; 

or any purported coutracrual privileges, such as nou-disclosure 

agreements. 

12. If any docUJllent responsive to this subpoeua was, but no longer is, 

in your possession, custody, or control, identify the document 

(stating its date, author, subject and recipient(s)) and explain the 

circumstances by which the document ceased to be in your 

possession, custody, or control. 201 

201 Subpoena to Hon. Sylvia BmwelJ, Sec'y, U.S. Dep'l ofHeahh & Hou"'u Setv., from H. Con11n. on Energy & 

Commerce (May 4, 2016}. 

99 
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23194A.109

The subpoena instructions further call for the relevant Department to provide a certification once 

document production is completed. For example, the relevant instruction for the subpoena 

issued by the Committee on Energy and Conunerce to HHS requires: 

18. Upon completion of the document production, you should submit a 

written certification, signed by you or your counsel, stating that: 

(I) a diligent search has been completed of all documents in your 

possession, custody, or control which reasonably could contain 

responsive documents; (2) documents responsive to the request 

have not been destroyed, modified, removed, transferred, or 

othenvise made inaccessible to the Committee since the date of 

receiving the Committee's request or in anticipation of receiving 

the Committee's request, and (3) all documents identified during 

the search that are responsive have been produced to the 

Committee or identified in a lo§ frovided to the Committee, as 

described in Paragraph II above. 0 

As of the drafting oftbis report, neither the Department of the Treasury, nor the 

Department of Health and Human Services nor the Office of Management and Budget were in 

compliance with subpoenas issued by the committees. None of the three have produced all 

responsive documents. None of the three have cettified that production is complete or produced 

a log of documents withheld from the conunittces, or even provided a valid legal basis- to the 

extent one applies-to justify withholding large amounts of information from Congress. Further, 

testimony from Administration officials demonstrates that the Department of the Treasury has 

not conducted a reasonably thorough search for documents responsive to the subpoena. 

The Admin.istration's CSR program was a multi-department endeavor. Decisions 

regarding the source of funding were made not just at one Department, but between at le.ast three 

different components of the Executive branch, and involving some of the highest ranking 

officials in the govenunent. It is inconceivable that there are so few documents responsive to the 

six subpoenas issued by the two conunittces. 

As detailed below, the Administration took the position that all documents not already 

publicly available are somehow shielded !rom congressional oversight- and therefore shielded 

from the American people-without any basis in law, precedent, or fact. Indeed, the Supreme 

Court has reaffim1ed that Congress has tbe power to investigate the agencies tasked with 

carrying out the laws Congress promulgates. The Court explained: 

10! !d. 

A legislative body cannot legislate wisely or effectively in the absence of 

information respecting the conditions which the legislation is intended to 

affect or change; and where the legislative body does not itself possess the 

requisite information- which not infrequently is true-recourse must be 

had to other who do possess it. Experience has taught that mere requests 

for such information often arc unavailing, and also that infonnation which 

100 
126 


23194A.110

is volunteered is not always accurate or complete; so some means of 

compulsion are essential to obtain what is needed.203 

Moreover, the Administration took tltis position wltile refusing to assert any claim of 

privilege-to the extent any applies-over the documents sought by the committees. Assertiog a 

privilege requires the Administration to provide information justifying the claim of privilege to 

Congress or a court. Yet, despite its refusal to assert a privilege, the Admirtistration effectively 

asserted the deliberative process privilege by withholding documents that relate to "intemal 

Executive branch deliberations," among other purported justifications. 

Even if it were applicable here, the deliberative process privilege is a privilege that may 

be invoked by the Executive in response to a request for intemal, or deliberative, documents or 

testimony. A proper invocation of the privilege involves two prongs: ( I) the documents and 

communications must be prcdecisional, or crcatciJ>rior to the agency or department reaching a 

final decision, and (2) they must be deliberative.

2 To be deliberative, a document or 

communication must relate to the thou&ht processes or opinions of relevant officials- the 

informatioo cannot be purely factual.20 This privilege, when applicable, protects only 

predecisional documents-fmal documents cannot be withheld. 

The deliberative process privilege is not absolute; it can be overcome by a showing of 

need?06 Moreover, the privilege "disappears altogether when there is any reason to believe 

government misconduct [has] occurred."207 Here, a federal district court has ruled that the 

Administration spent monies to make CSR payments without an appropriation, in violation of !he 

Constitution and the Antideficiency Act.208 But even without that finding of illegality on the p311 

of the Administration, the committees merely need to demonstrate a plausible claim of waste, 

fraud, abuse, or maladministration to overcome an assertion of the deliberative process privilege. 

Under the position advanced by the Admirtistration here, agencies could withhold internal 

or deliberative documents fi·om Congress for any reason imaginable-even if they simply 

included an embarrassing comment. It is for this precise reason that any purported assertion of 

the deliberative process privilege can be so easily overcome. Furthermore, the Supreme Court 

has already dismissed the Admirtistration's argument that producing documents containing 

internal deliberations to Congress would create a "chilling effect," discouraging agency 

employees from providing candid advice. In NLRB v. Sears, Roebuck & Co. , the Supreme Court 

stated: 

The probability that an agency employe,e will be inhibited from freely 

advising a decisiorunaker for fear that his advice, if adopted, will become 

public is slight. First, when adopted, the reasoning becomes that of the 

agency and becomes its responsibility to defend. Second, agency 

''" McGrain v. Daugherty, 273 U.S. 135, t74-75. 100 In reSealed Case {Espy), 121 F.3d. 729 (D.C. Cit. 1997). 

"" /d. 206 Jd. 

''" /d. 200 U.S. House of Reps. v. Bunve/1, No. 1:14-cv-01967, Op. al 1 (D.D.C. May 12, 2016). 

101 
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23194A.111

employees will generally be encouraged rather than discouraged by public 

knowledge that their policy suggestions have been adopted by the agency. 

Moreover, the public interest in knowing the reasons for a policy actually 

adopted by an agency supports [disclosure. f 09 

a. Tire Department of the Treasury has Produced only 31 pages of Documents 

to tire Committees, Including a Redacted Version of a "Final" Action 

Memorandum Signed by Secretan; Lew 

FINDING: The Deputment of the Treasury improperly withheld and redacted 

documents responsive to the committees' subpoenas without any valid legal 

basis to do so. 

When the committees issued subpoenas to the Department of the Treasury on January 20, 

2016, Treasury had not produced a single page of documents in response to the committees' 

requests. Since the subpoenas have been issued, Treasury has produced only 31 pages of 

documents, one of which included substantial redactions. In addition, the committees have 

evidence that the Department has not even undertaken a reasonably thorough search for 

documents responsive to the subpoenas. 

The committees' subpoenas issued to Treasury required that the Department produce all 

responsive records by Febroary 3, 2016. On that day Treasury responded- not with a production 

of documents, but with a letter. The Department wrote: 

Prior to your recent subpoena, the Committee last requested documents 

from us on July 7, 2015. We responded at that time that it would be 

premature to address the response for documents given the pending 

litigation. We recognize that the Committee's subpoena is broader than 

the Committee's initial requests for documents, and we arc moving 

forward with a search for responsive materials. 

210 

On March 9, 20 16, Treasury produced 30 pages of documents to the committees on the 

eve of the first transcribed interview of a Treasury official. Tbe documents included: 

• Memorandum of Understanding between the Internal Revenue Service (IRS) and the 

Centers for Medicare & Medicaid Services (CMS) related to the CSR program; 

• Advance Premium Tax Credit, Cost Sharing Reductions, and Basic Health Program 

Cycle Memorandum, Internal Revenue Service, FY 2015 Financial Statement Audit; and 

,..NLR!J v. SeM;, Roebuck & Co., 421 U.S. 132, 161 (1975) (emphasis in original). 210 Letters from Anne Wall, Assistant Sec'y for Legis. Aff.1irs, U.S. Oep't oft be Treasury, 10 Hon. Kevin Brady, 

Chainuan, H. Comm. on Ways & Meaos, and Hon. Fred Uptoo, Chainuan, H. Conun on Energy & Commerce 

(Feb. 3, 2016). 

102 
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23194A.112

• IITC and BITC Reports from the second quarter of fiscal year 2014 through the first 

quarter of fiscal year 2016, among other documents. 

Each of the documents produced was responsive to the subpoena, as well as to the committees' 

original request. 

On March 16, 2016, Treasury produced one additiona l document- a ftnal, one page 

"Action Memorandum." This document was also responsive to the subpoena and to the 

conunittees' original request. But Treasury did not produce the document until after a witness 

described it during his transcribed interview, and even then, only after the committees 

specifically requested that Treasury provide this document. Furthem1ore, the document 

produced to the committees contains significant redactions. 

As discussed throughout this report, the final Action Memorandum, which was signed by 

Secretary Lew, authorized the IRS to make CSR payments from the§ 1324 permanent 

appropriation for tax refunds and credits. Moreover, and despite this being a final authorizing 

document, Treasury redacted a significant portion of this document. Despite multiple requests 

from the conunittees, including during subsequent transcribed interviews, Treasury has not 

provided tbe committees witb any basis- let along a valid legal one- for the redaction. For 

instance, during Mr. Wilkins's transcribed interview, Committee counsel and Treasury counsel 

discussed the redaction in the fmal Action Memorandum. Counsels stated: 

Q. Do you see this portion that is redacted? 

A. Yes. 

Q. In white. It says " redacted," right? 

A. Yes, I see those redactions. 

Q. Have you previously seen the text that's covered by the redactions? 

A . Yes. 

Q. Do you recall generally what that text pertained to? 

Treasury Counsel. You can answer yes or no. 

Mr. Wilkins. Yes, generally. 

Q. What category of infonuation does that text pertain to'! Is it legal? 

Is it advice? Is it other analysis? 

Treasurv Counsel. So, Amanda, we're happy to engage with you, you 

know, offiine about the basis for the redaction, but Mr. Wilkins 

103 
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23194A.113

isn't here to - you know, to sort of testify about the basis for the 

redaction in this interview. 

Committee Cow1sel I: It would be helpful to have that discussion 

because I'm sure you saw the instructions that we provided in the 

subpoena for these documents which require that you provide a log 

of reasons for redactions, and so far you have not provided any 

reason for tllis redaction. 

Treasurv Counsel. So I think we understand your position on that. The 

document was just produced yesterday. I'm happy to discuss that 

with you. 

Committee Counsel 2. Just so the record is clear, we did ask yesterday for 

an explanation of the redaction, and none has been forthcoming, so 

we will continue to await that.211 

Treasury bas never asserted any legal basis on which the Department may withhold 

infonnation from Congress, instead cloaking itself in an effective assertion of the deliberative 

process privilege. It has raised the specter of the deliberative process privilege, but never 

actually asserted it. Treasury has not provided a valid legal basis to redact documents or 

withhold them from the committees, because no legal privileges apply in this instance. The 

Department has further failed to provide a log identifYing the documents withheld from the 

committees, as required by the instructions provided with the subpoena. 

Furthermore, there is no conceivable basis- let alone a legal one- for the Department of 

the Treasury to withhold part of the rationale for a final decision made by a cabinet-level official 

authorizing expenditures that could total $ 130 billion over ten years. As the Supreme Court 

made clear in NLRB v. Sears, Roebuck & Co., the rationale behind a final decision cannot be 

withheld- " the public interest in knowing the reasons for a policy actually adopted by an 

agency"212 requires that Treasury disclosure the rationale here and produce an unredacted version 

of the final Action Memorandum to the committees. 

21 1 Wilkins Tr. at44-45. 

"'NLRB v. Sears, Roebuck & Co .. 421 U.S. 132, 161 (1975). 

104 
130 


23194A.114

b. 11w Department of the Treasury has Not Undertaken a Reasonable-Let 

Alone a Thorouglz-Searclt for Records Responsive to tlze Committee's 

Subpoenas 

FINDING: The Department of the Treasury did not undertake a reasonable or thorough 

search for records responsive to the committees' subpoenas. 

Testimony from Administration officials demonstrates that the Department of the 

Treasury never undertook a thorough se;uch for responsive documents, as required by the 

subpoena instructions. During a series of transcribed interviews with current and fonner 

Treasury and IRS officials, Treasury counsel appearing on behalf of the Department repeatedly 

refused to allow the witnesses to answer questions regarding whether they had collected 

documents pursuant to the committees' subpoenas. For example, Mr. Kane testified: 

Q. Between February 3rd, 2015, and today, has anyone ever instructed 

you to collect documents relating to the cost-sharing reduction 

program? 

Treasurv Counsel. So I think this is another - you know, for the same 

reasons that we discussed a few moments ago, I think this is 

another question that is not among the things that Mr. Kane 's here 

to discuss here.213 

Similarly, Ms. Witter testified: 

Q. Ms. Witter, has anyone told you to collect records relating to the 

cost-sharing reduction program either recently or in the past year? 

Treasury Counsel. So, Amanda, that question about efforts that Ms. 

Witter bas undertaken or not undertaken to respond to the 

committee's oversight requests, you know, is another area that we 

are not prepared to go into today. We have had some discussions 

with you, obviously, about documents. I'm happy to continue 

those discussions and that accommodations process. 

But Ms. Witter is here voluntarily today and is prepared to answer 

your questions about cost-sharing reduction payments consistent 

with the interests articulated in our correspondence. And so our 

suggestion would be to sort of move on to those questions. If there 

are other unresolved issues, we are happy to continue the dialogue 

with you about tbose.

214 

And, in a third instance, Mr. Kaizen testified: 

213 Kane Tr. a I 22. 

'" Witter Tr. al 12- 13. 

105 
131 


23194A.115

Q. Has anyone instructed you to collect records related to the Cost 

Sharing Reduction Program? 

Treasury Counsel. So, Amanda, I think that raises the same issue that I 

was explaining in response to the prior question.21

.1 

One witness, however, answered the question before Treasury counsel instructed him not to. 

Mark Mazur- the author of the Action Memorandum signed by Secretary Lew- said that no one 

had instructed him to collect records relating to the CSR program. 216 Mr. Mazur testified: 

Q. Thank you. Has anyone asked you to collect records relating to the 

cost-sharing reduction program? 

A. No.217 

As the drafter of the memorandum authorizing the Department to make CSR payments 

from the pennanent appropriation for tax credits and refi.mds, Mr. Mazur clearly possessed 

docwnents responsive to the committees' subpoenas. Mr. Mazur's interview took place on April 

28, 2016, more than two months after the committees issued subpoenas to the Department and 

well over a year after the committees sent the original document requests. 

The interviews also proved that records regarding the CSR program that Treasury and 

HHS should have collected and produced do exist. For instance, Mr. Mazur stated that he would 

have received the Action Memorandum returned with Secretary Lew's signature via emai1,

218 

and Mr. Kane said that he received an electronic calendar invitation for the January 13,2014 

OMB meeting.219 Similarly, IRS Chief Counsel Bill Wilkins received the Action Memorandum 

from Treasury Deputy General Counsel Roberto Gonzalez via email.220 The committees have 

not received any of these documents. 

Given this evidence, it is clear that the Department has not undertaken a reasonable, let 

alone thorough, search for responsive records pursuant to the subpoenas. 

"' Kaizen Tr. at 12- 13. 2

'

6 Mazur Tr. at I 0. 217 Mazur Tr. at I 0. 218 Manu-Tr. at 40-41. 219 Kane Tr. at 1 J. 220 Wilkins Tr. at 34- 35. 

106 
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23194A.116

c. 11te Department of Health and Human Services has Not Produced All 

Records Responsive to the Subpoenas, and has Not Cited Any Valid Legal 

Basis to With/told Any Materials 

FINDING: The Department of Health and Human Senices improperly \\ithheld 

documents responsive to the committees' subpoenas without any valid legal 

basis to do so. 

Since February 2015, HHS has made only three productions of documents to the 

committees. One of these productions consisted of only one substantive document, and another 

production consisted entirely of publicly available documents. The third production- the first 

containing any non-final internal documents-came only after each committee issued subpoenas 

compelling the production of all responsive documents. HHS continues to withhold information 

from the committees that it argues "inlp1icate's significant Executive Branch confidentiality 

interests in intemal deliberations." 

On March 3, 2016, more than a year after the committees first requested documents, HHS 

made its frrst production to the conuninees. The production consisted entirely of publicly 

available documents, and included excerpts from the Administration's fiscal year 2014 and 2015 

budget requests, and five filings from the House v. Burwell litigation. In other words, the 

Department did not produce any documents the committees could not already access. In 

producing the documents, HHS acknowledged that it was withholding those that related to 

"intemal Executive Branch deliberations" because they implicated " confidentiality interests." 

On March 18, 2016, HHS produced two additional documents to the committees: a 

memomndum of understanding between the IRS and CMS that Treasury had recently produced 

to the commit1ees, and a memorandum sent to Ellen Murray before her transcribed interview that 

"la(id] out the parameters of what she was authorized to discuss."22 1 Once again, HHS ren1sed to 

produce materials that it asserted "implicate( d) signjftcant Executive Branch confidentiality 

interests. "

222 

On May 6, 2016, HHS made a third production of documents to the committees. This 

was the first production made pursuant to the subpoena issued on May 4, 2016, and the fLrSt to 

include any non-final internal documents. For a third time, however, HHS ren1sed to produce 

documents that, in its opinion, "implicate( d) significant Executive Branch confidentiality 

interests. "223 

HHS has fa iled to comply with the committees' subpoenas for documents. The stated 

reason that the Department is withholding information from Congress- that the materials 

221 Leners lrom Jim R. Esquea. Assislanl sec•y for Legis., U.S. Oep'l of Health & Hwnan Servs., to Hon. Kevin 

Brady, CbainJlAII, H. Conull. on Ways & Means, and Holl. Fred Upt011, Chainnan, H. ConUlL on Energy & 

Commerce (Mar. 18, 20 16). 

m id. 

m Lette•·s from Jim R. Esquea, Assistant Sec'y for Legis., U.S. Oep't of Health & Human Servs .• to Hon. Kevin 

Brady, Cbainnan, H. Conuu. on Ways & Means. and Hon. Fred Upton, Cbaimlall, H. Couuu. on Energy & 

Co•mneree (May 6. 2016). 

107 
133 


23194A.117

"implicate significant Executive Branch confidentiality interests"- is vague and overbroad, and 

appears designed to block the committees from their pursuit of the facts surrounding the funding 

of the CSR program. 

HHS has asserted no valid legal basis on which it can withhold this infommtion from 

Congress, and has failed to provide a log of materials identifying the documents withheld from 

the conunittee, as required by the instructions provided with the subpoena. By citing the need to 

protect "internal Executive Branch deliberations" and " important Executive Branch 

confidentiality interests," HHS is effectively claiming the deliberative process privilege. This 

privilege, however, cannot be used to shield final documents or factual infonnation. It further 

cannot be used to shield deliberative information when there are allegations of wrongdoing, let 

alone a finding of illegal and unconstin1tional Executive branch actions by a federal court. 

d. The Office of Management and Budget has Refused to Produce a 

Memorandum Subpoenaed by tile Committees, and lias Not Cited any Valid 

Legal Basis to Withhold tl1e Document 

FINDING: T he Office of .Management and Budget improperly withheld documents 

responsive to the committees' subpoenas without any valid legal basis to do 

so. 

The committees subpoenaed OMB to compel production of a final memorandum 

regarding the source of funding for the cost sharing reduction program. On May 4, 2016, the 

committees subpoenaed OMB, requiring the office to produce the fmal memorandum. On May 

18,2016, in response to the subpoenas served by the committees on May4, OMB again offered 

only "a summary of the government's legal analysis associated with the funding sources for the 

cost-sharing reduction program."224 OMB explained that it would not produce the actual 

document because "the OMB memorandum contains internal deliberations and legal analysis 

associated with the funding sources for the cost-sharing reduction program. 22 ~ 

The document the conunittees seek provided the fmal advice ofOMB and served as a 

basis for the Administration's fmal decision to use the permanent appropriation to fund the CSR 

program. A synopsis of this widely-reviewed memorandum, written years later, does not provide 

the information necessary to answer the committees' questions. And, similar to the responses of 

Treasury and HI-IS to subpoenas issued by the committees, OMB has not asserted a claim of 

privilege to withhold the document, nor provided a log justifying the withholding of the 

document as required by the subpoena. 

As with Treasury and HHS, OMB is attempting to claim the protections of the 

deliberative process privilege without invoking the privilege because OMB knows fi11l well that 

the privilege does not apply. The privilege cannot be used to shield final documents. Further, as 

"' Leucrs ti·oru Tamara Fucile, Assoc. Dit. of Legislative Affairs, Office ofMgmt. & Budget, to HOil Kevin Brady, 

Chainnau, H. Comm. on Ways & Means, and Hon. Fred Upton, Cbainuau, H. Comm. ou Energy & Commerce 

(May 18, 20 16). ns Id. 

108 
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23194A.118

the Supreme Court made clear in NLRB v. Sears, Roebuck & Co, the privilege does not protect 

the rationale behind a final decision.226 It also cannot be used to shield deliberative infonnation 

when there are allegations of wrongdoing, let alone a finding of illegal payments by a federal 

court. 

The Departments of the Treasury and HHS and the Office of Management and Budget 

have each explicitly refused to produce documents responsive to the corrunittees' subpoenas. All 

have failed to provide logs detailing the documents withheld from the corruuittecs and the legal 

basis upon which they arc withheld. Further, in withholding all intemal and inter-agency 

documents from the committees, the Departments and OMB are effectively claiming the 

deliberative process privilege- which is inapplicable in these instances- without actually 

invoking the privilege. 

Congress' oversight prerogatives would be severely undermined if it accepted the 

proposition that an agency could unilaterally decide to block disclosure of internal deliberations 

to Congress. This practice encourages agencies to withhold any documents that show flaws or 

limitations in the agency's position. These actions demonstrate that the Administration is 

engaging in obstmction tactics for the purpose of denying the United States Congress 

infonnation and documents necessary to oversee the CSR program and to preserve its 

constitutional prerogative to detennine how taxpayer money should be spent. 

2. Treasury has Refused to Confirm to the Committee on Ways and 

Means whether the Department Timely Delivered Deposition 

Subpoenas to Witnesses 

FINDING: The Department of the Treasury did not provide deposition subpoenas issued 

by the Committee on Ways and Means to the relevant deponents in a timely 

manner. 

The issuance of a subpoena by a corruuittee of the United States Congress imposes a legal 

obligation on the individual to whom the subpoena is directed. By its very nature, a subpoena 

compels specific action by a specific individual in a specific time frame. It is therefore necessary 

tbat subpoenaed individuals know about the legal obligations imposed on them by a subpoena. 

As a courtesy to Administration employees, congressional committees customarily serve 

subpoenas for employees' testimony by allowing agencies to accept service on behalf of their 

employees in lieu of serving individuals the subpoenas directly. The department accepting 

service also assumes a responsibility of its own- that it will timely notify tbe subject that a 

subpoena has been issued to him or her, and deliver the subpoena and accompanying instntctions 

to that person. 

m NLR.8 v. Soars, Roebuck & Co., 421 U.S. 132, 161 (1975). 

109 
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23194A.119

On January 20, 2016, the Committee on Ways and Means issued deposition subpoenas to 

three IRS officials: Chief Counsel William Wilkins; fonner CFO Robin Canady;227 and Deputy 

CFO Gregory Kane. 228 Each subpoena required the relevant deponent to appear before the 

Committee on Ways and Means and provide testimony on dates in late Febmary and early March 

2016. A Treasury Defuty Assistant Secretary for Legislative Affairs accepted service on behalf 

of these employees.22 

In the normal course of its investigation, the committee sought to verify that Treasury 

timely provided notice of the subpoenas, and a copy of the subpoenas, to the employees 

themselves. Remarkably, however, Treasury has refused to confirm whether the Department 

ever provided those subpoenas and their attachmems to the witnesses. Treasury has also refused 

to provide the date on which the witnesses were made aware of the subpoenas. Not only has the 

Department itself refused to answer these standard questions, but Treasury counsel has further 

prevented the witnesses themselves fTom telling the Committee on Ways and Means when they 

received the subpoenas. 

All evidence, however, suggests that Treasury did not give the subpoenas and 

accompanying documents to the witnesses in a timely manner. Five days prior to the first 

scheduled deposition, on February 18, 20 16, committee staff still had not heard from counsel for 

the witnesses. On that day, Treasury counsel infom1ed Ways and Means staff that Robin 

Canady, who was scheduled to testify on Febmary 23, 20 16, was out of the country.230 The next 

day, however, Treasury counsel called Ways and Means staff again to say that the IRS Chief 

Counsel's Office had learned the previous evening that Mr. Canady had already returned to the 

cow1try, suggesting that Treasury had not previously been in touch with Mr. Canady about his 

deposition. 

Further, duriug interviews of the three employees,231 Treasury counsel refused to allow 

the witnesses to answer questions about the subpoenas, including when- or even if- they had 

22' At the time the subpoena was issued. the committees believed that Mr. Canady was a curretll employee of the 

Intemal Revenue Setvice. In &1ct, be bad retired from the IRS shortly before the subpoena was issued. The 

Department of tlJe Treasury arguably should not have even accepted service on behalf of a fonner employee. At a 

minimum, the Department should have immediately iufonned the couunittces that Mr. Canady had retired from 

federal service. 

m Subpoena to William Wilkins, httcmal Rev. Serv., U.S. Dep't of the Treasury, from H. Conml. on Ways & 

Means (Jan. 20, 2016): Subpoena to Robin Canady, lmerual Rev. Serv., U.S. Dep't oftlte Treasury, from H. Comm. 

on Ways & Means (Jan. 20, 2016): Subpoena to Gregory Kane. Intemal Rev. Setv .• U.S. Dep't of the Treasury. 

fi·om H. Co nun. on Was & Means (Jan. 20, 20 t6). 229 Email from Deputy Assistant Sec'y of Legis. Affairs, U.S. Dep"t of the Treasury, to Conuuittee Counsel, H. 

Comm. on Ways & Means (Jan. 20, 2016). 

" 0 Email from Maj. Oversight Staff Dir., H. Colll!ll. on Ways & MeruJs, to Deputy Assistant Sec'y of Legis. Affairs, 

U.S. Dep't of the Treasury. (Feb. t9, 2016). 

" ' As an acconunodation to tlte Department and the witnesses. the Committee on Ways and Means agreed to 

conduct the proceedings as transcribed interviews instead of depositions. dms allowing Treasury cotmselro attend 

the proceedings. See 161 Cong. Rec. E21 (daily ed. Jan. 7, 2015) (statement of Rep. Sessions, Procedures for Use of 

Staff Deposition Authority), available at https://www.congress.gov/crec/20 15/0 1107/CR.EC-2015-01-07 .pdf. The 

Procedures prohibit coWlSel for ruJ agency w1dcr investigation to attend depositions, but tmdcr tl1e practices of the 

Committee on Ways and Means, agency cotmsel may attend transcribed interviews. 

110 
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23194A.120

received the subpoenas and accompanying documents from the Department.232 For example, 

Treasury counsel permitted Mr. Wilkins to testify that he was "aware" of the deposition 

subpoena issued to him by the Committee on Ways and Means, but did not permit him to testify 

about when he received a copy of the subpoena. He testified: 

Q. Are you aware that Chainnan Brady sent you personally a 

subpoena to testify at deposition, Mr. Wilkins? 

A. Yes. *. * 

Q. Mr. Wilkins, arc you willing to tell us when you received a copy of 

that subpoena? 

Treasurv Counsel. So for the reasons I've stated, we're not in a 

position to answer that question today. It's not what we're here 

voluntarily to discuss with the committee. And so on that basis, I 

instruct you not to answer.

233 

Similarly, Mr. Kane testified: 

Q. Are you aware that Chaim1an Brady sent you a subpoena to testify 

at a deposition? 

Treasury Counsel. You can answer that "yes" or "no." 

A. Yes. 

Q. When did you become aware of that subpoena? 

Treasury Counsel. I think this is another question that we're not in a 

position to answer today.

234 

Mr. Kane did answer, however, that "[t)he only letters I saw was eventually in the news article 

that had my subpoena in it where you could click on things. That was the first time, when I 

went tbt·ough that, I saw any of the documents that were going back and forth. ,,zJs 

During Mr. Wilkins' interview, counsel for the Committee on Ways and Means explained 

the inlportance of knowing if atld when the Department provided the subpoena to the witness. 

Counsel for Treasury disagreed, claimjng this was not infonnation the committee needed to have 

in this instance. Counsel stated: 

232 Kane Tr. at 26-27; Wilkins Tr. at 18- 19. Counsel refused to allow Robin Canady to state whether he had 

received his subpoena, as well, although that imerview was JlOtttansct'ibcd. 

Ul Wilkins Tr. a1 18-23. 

"' Kane Tr. at 26. 

Ul ld. a1 19 (emphasis added). 

Ill 
137 


23194A.121

Committee Cowtsel. But to be clear, we think that this is a li11le 

separately situated from the earlier questions, which you have 

made your position clear on. 

The subpoena itself was actually issued directly to Mr. Wilkins by 

the chainnan, not to the Department of the Treasury, and it's a 

legally binding document that requires his attendance at a 

deposition. So whether or not be received it and when be received 

it is vitally important to this committee's investigative work, as 

well as the prerogative of Congress to be able to conduct oversight. 

I understand that you are saying that you would like us to be able 

to move forward with muntally agreeable practice, but if we have 

no way of knowing when or if the witnesses receive a 

legally-binding document, then we are in a very untenable position 

in enforcing tllis document. And so without an assurance of the 

date when he received the subpoena, and frankly, that the date be 

receive.d the subpoena is the date it was issued, that's not a practice 

that we will be able to continue going forward. So I would ask you 

to consider allowing the witness to answer the question of when he 

received the subpoena. 

Treasury Counsel. Right. So as I explained, and we talked about this 

offline, and to sort of restate, we honestly don't understand the 

issue here, given that each of these witnesses, we've arranged for 

them to appear voluntarily. If there is an issue with respect to 

going fonvard and continuing the practice of agencies accepting 

service of subpoenas, we are more than happy to work through that 

issue with you. 

If there is some additional information you need, I'm happy to talk 

about what that information is and how to provide it to you. But I 

think we have a difference of views as to whether this line of 

questioning implicates the interest we've articulated about sort of 

protecting our ability to respond to congressional investigations236 

A Department that accepts service of a subpoena on behalf of one of its employees has an 

obligation to send the subpoena and any attachments to the employee as soon as practicable. 

Treasury has refused to confirm whether or when it provided lawfully-issued congressional 

subpoenas to the relevant deponents after a Treasury official accepted service on the deponents' 

behalf, even in infonnal telephone calls with staft'. These refusals strongly suggest that Treasury 

failed in its obligation to provide the subpoenas to the relevant deponents after accepting service 

on their behalf. This failure raises questions about the courtesy provided by Congress to the 

Administration and its employees whereby congressional committees allow agency officials to 

accept service on behalf of their employees instead of servi11g individuals directly. 

ll6 Wilkins Tr. at 20-21. 

112 
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23194A.122

3. The Department of the Treasury Issued Testimony Authorization 

Memoranda to Witnesses Based on Over-Broad Touhy Regulations 

Before most IRS witnesses appeared before the committees, Treasury provided the 

witnesses a "Testimony Authorization" outlining the topics Treasury had decided the employee 

could and could not discuss. 237 These memoranda are issued "[p )ursuant to Delegation Order 

11-2 and 26 C.F.R. 30 1.9000-1" and are based on Treasury's so-called Touhy Regulations. 

In United States ex ref. Touhy v. Ragen, the Supreme Court held that the federal 

Housekeeping Statute pern1itted the DOJ to prohibit agency officers and employees from 

releasing "official fi les, documents, records and inforn1ation," except in the Attorney General's 

discretion. 

238 The Housekeeping Stan1te allows Executive branch agencies to prescribe 

regulations regarding the "custody, use, and preservation of its records, papers, and property." 239 

Seven years after the Court decided Touhy, Congress added a provision to the 

Housekeeping Stanlte explaining that that the statute "does not authorize withholding 

information from the public or limiting the availability of records to the public."240 

Almost all agencies now have implemented some version of Touhy regulations to govem 

their record management and explain what employees may and may not do with agency records. 

While many of those rules are appropriate, Treasury relied on their Touhy regulations to obstruct 

this investigation and prevent witnesses from speaking freely with Congress. In those instances, 

a federal statute, specifically 5 U.S.C. § 7211, trump the regulations. The statute, which protects 

the right of federal employees to provide infonnation to Congress, states: 

TI1e right of employees, individually or collectively, to petition Congress 

or a Member of Congress, or to furnish information to either House of 

Congress, or to a committee or Member thereof, may not be interfered 

with or denied. 24 1 

Treasury's Touhy regulation, however, does precisely that. 

m Treas\Uy Testimony Authorizations dil·ected to Greg Kane, Robin Canady, Kirsten Winer, Mark Kaizen, Linda 

Horowitz, aod David Fisher. Treasury staff sent emails to Ways aod MeaJJS staff articulating similar timitatiOJJS for 

Mr. Maz1.U''s resrimony. Mr. \Vilkins did not receive a testjrn_ony authorization, likely because Delegation Order I I · 

2 gives him the same authority as the Commissioner to provide testimony. Sec IRS Delegation Order 11-2, lntemal 

Rev. Manual at 1.2.49.3. 238 United States e.< rei. Touhy v. Ragen, 340 U.S. 462 (195t). 

m 5 U.S. C. § 301, previously codified at5 U.S.C. § 22. The current version states that "[t)be head of an Executive 

department or nJ.ilita1y department may prescribe regulations for tbe government of his department. tbe conduct of 

its employees, the distribution and perfonn.ance of its business, and the custody, use, and preservation ofits records, 

papers, and property. This section does not authorize withholding information C.·omtbe public or limiting 1he 

availability of records to the public." !d. 2

"' H. R. Rep. No. 85-1461, as r·cprintcd in t958 U.S.C.C.A.N. 335. 

' " 5 u.s.c. § 7211. 

113 
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23194A.123

a. Treasun1 has Promulgated Extensive Touhy Regulations that Allow tire 

Department to Limit I11jormation Current and Former IRS Employees Can 

Provide to Congress 

FINDING: The Department of the Treasu•-y has promulgated Touhy regulations thatcontrary to a federal statute-limit the rights of ms employees to provide 

information to Congress. 

Treasury's Touhy regulations and Testimony Authorizations impede congressional 

oversight, discourage congressional whistleblowers and the public airing of wrongdoing, and 

intrude on the prerogatives of Congress. Except in certain cases inapplicable here, the regulation 

provides: 

[W]ben a request or demand for IRS records or infonnation is made, no 

IRS officer, employee, or contractor shall testify or disclose IRS records 

or infonnation to any court, administrative agency or other authority, or to 

the Congress, or to a committee or subcommittee of the Congress without 

a testimony authorization242 

The regulation defines a testimony authorization as: 

(A) written instruction or oral instruction memorialized in writing within a 

reasonable period by an authorizing official that sets forth the scope of and 

limitations on proposed testimony and/or disclosure of IRS records or 

information issued in response to a request or demand for IRS rec<>rds or 

infonnation. A testimony authorization may grant or deny authorization 

to testify or disclose IRS records or information .... 243 

The regulation, which applies to current and fom1er officers, employees, and contractors of the 

IRS, provides explicit instructions about what one should do upon receiving a request from 

Congress. The regulation requires: 

An IRS officer, employee, or contractor who receives a request or demand 

in an IRS congressional maller shall notify promptly the IRS Office of 

Legislative Affairs. The IRS officer, employee or contractor who received 

the request or demand shall await instructions from the authorizing 

official. 244 

If the IRS decides that it does not want the relevant employee to disclose infonnation to 

Congress, the courts, or another body, the regulation states that the IRS can prohibit the person 

from speaking. The regulation states: 

l-ll 26 C.F.R § 301.9000-3. 

"" 26 C.F.R § 301.90000-1. 244 26 C.F.R § 301.9000-4(e). 

114 
140 


23194A.124

If, in response to a demand for IRS records or infonnation, an authorizing 

official. .. detem1ines that the demand for IRS records or infonnation 

should be denied, the authoriz ing official shall request the government 

attorney or other representative of the government to oppose the demand 

and respectfully inform the court, administrative agency or other authority, 

by appropriate action, that the authorizing official. .. has issued a testimony 

authorization to the IRS officer, employee, or contractor that denies 

permission to testify or disclose the IRS records or information. 

245 

Further, if Congress, a court, or another authority insists that the relevant IRS official provide 

testimony or other infonnation, the regulation requires the individual to risk contempt of court or 

Congress by refusing to disclose the inforn1ation sought. The regulation states: 

In the event the court, administrative agency, or other authority rules 

adversely with respect to the refusal to disclose the IRS records or 

information pursuant to the testimony authorization ... the IRS officer, 

employee or contractor who has received the request or demand shall, 

pursuant to this section, respectfully decline to testify or disclose the IRS 

records or infonnation. 

246 

If a current or former IRS officer, employee, or contractor violates the regulation, the IRS 

can subject him or her to severe penalties. The regulation states: 

Any IRS officer or employee who discloses IRS records or information 

without following the provisions of this section or § 301.9000-3, may be 

subj ect to administrative discipline, up to and including dismissal. Any 

IRS otlicer, employee, or contractor may be subrct to applicable 

contractual sanctions and civil and criminal penalties(.] 47 

While such punishment may be reasonable in instances in which an IRS employee discloses 

information protected by law, such as taxpayer files,

248 as applied to requests from Congress for 

infom1ation about IRS procedures, actions, and decisions, it is inconsistent with 5 U.S.C. § 72 11. 

Treasury's Touhy regulations also, on their face, prevent whistleblowers and other c.oncerned 

employees from disclosing malfeasance at the IRS, and may also run afoul of other federal 

statutes protecting disclosures made by whistleblowers. 

,., 26 C.F.R. § 30 1.9000-4(1). 

l# 26 C.F.R. § 301.9000-4(g). 

,., 26 C.F.R. § 301.9000-4(1>). 

,., See 26 U.S.C. § 6103 (probibiting disclosure ofta.xpayer information except in specified circumstances). 

115 
141 


23194A.125

b. Treasury Used Its Touhy Regulations to Prolribit Employees from 

Answering Questions from Congress about tire CSR program 

FINDING: Treasury used its Touhy regulations and Testimony Authorizations to 

prohibit current and former IRS employees from providing testimony to 

Congress about the source of funding for the CSR program. 

The Testimony Authorizations given to most of the Treasury employees who appeared 

before the commjttees all provide that "(p ]ursuant to Delegation Order 11-2 and 26 C.F.R. 

301.9000-1, you are authorized to appear and give testimony, subject to the linUtations listed 

below." The Testimony Authori.zations provided one area in which the witness could provide 

testimony, and twelve areas in which they could not. These twelve prohibited areas of testimony 

greatly narrowed the one area in which witnesses could provide testimony. In fact, the 

Testimony Authorizations specifically prohibited witnesses from spealcing about the exact issues 

Congress had been investigating for more than a year: namely, the deliberations and decisions 

surrounding the Administration's choice to use the§ 1324 pennanent Treasury appropriation to 

make the CSR payments. The Testimony Authorizations state:249 

Unless prohibited in the next aectlon, you may: 

• Testrfy as to facts or which you have personal knowledge In your official capacity 

regarding cost-sharing reduction payments under the Affordable Care Act. 

You may n ot: 

• Testify as to facts of which you have no personal knowledge; 

• Spect~late as to matters of which you have no sure knowledge; 

• T estlry in response to general questions concerning the positions, pollcles, 

procedures, or records or the Internal Revenue service that are not relevant to 

the lnvestlgatlon or reasonably calculated to lead to the discovery or relevant 

information; 

• Testify as to any current litigation; 

• Testify regarding legal advice provided, the thought processes or agency 

personnel or answer hypothetical questions; 

" 9 Memorandum from Leonard T. OtU'Sicr, Nat 'I Dir. of Legis. Affairs, lutemal Rev. Serv., to David Fisher, Fonner 

Chief Risk Officcr, lntemal Rev. Serv. (April21, 2016). 

116 
142 


23194A.126

• Disclose Information about internal IRS deliberations, or deliberations between 

IRS and Treasury or other Executive Branch agencies or offices, regarding costsharing reduction payments under the Affordable Care Act; 

• Testify as to any criminal investigation by the Treasury Inspector General for Tax 

Administration and his staff; agents and employees of the Federal Bureau of 

Investigation; and/or attorneys, agents and employees of the Department of 

Justice; · 

• Testify as to other cases or other matters of official business not relevant to the 

Investigation or reasonably calculated to lead to the discovery of relevant 

Information; 

• Disclose information that may tend to Identify a oonlidential informant, if any; 

• Disclose returns or return information protected by I.R.C. sec. 6103, if any; 

• Disclose tax convention information subject to I.R.C. § 6105, if any. 

• Disclose Information that is secret pursuant to Fed. Crlm. P. 6(e), if any. 

Treasury counsel instructed witnesses to refrain from not to answering numerous 

questions posed by Committee staft· on the grounds that they were outside tbe scope of the 

Treasury's unilateral Testimony Authorization. Further, during Mr. Wilkins's transcribed 

interview, Treasury counsel stated that the Department has a say in whether or not Mr. Wilkins 

responded to questions. Treasury counsel stated: 

Committee Counsel. Right. But the question is to Mr. Wilkins, and he 

can either answer it or not answer it as he sees fit. As general 

counsel of the IRS, I'm sure he's capable of answering the 

question and making that judgment for himself. 

So the simple question is, are you willing to answer the question as 

to when you became aware of the subpoena issued by Chaim1an 

Brady of the Committee on Ways and Means? 

T reasurv Counsel. And I just want to say - I just want to make clear 

that - and this may be another area where we have a difference of 

views. And I'm happy to, you know, discuss this with you, you 

!mow, offiine in greater detail. But I - you know, with r·espect to 

his official capacity actions, the agency does have, you know, a 

sort of say in bow that works. It's not solely Mr. Wilkins' 

decision. And so we think it's unfair to put him on the spot in the 

way that you're trying to do. 

117 
143 


23194A.127

We've tried to be very transparent with you about what these 

witnesses are going to be here voluntarily to talk about and what 

we're not going to be in a position to talk about. And this is a 

question that we 're not in a position to discuss?l{) 

Given Treasury counsel's statement, cowtsel for Ways and Means made clear to the witness that 

the Department could not restrict him from answering the colllUlittees' questions. Counsel 

stated: 

Committee Counsel. I want to be really clear, the committee disagrees 

with that position. Your ability to speak to Congress is guaranteed 

by law. Your right to speak to Congress is guaranteed under the 

First Amendment, and it is actually not the decision of the agency 

as to what you can answer. If you would like to take their 

guidance, of course, you're welcome to do that, you know that. 

But I want to make the record clear that we do not agree that the 

Department of the Treasury or the department -- or IRS itself has a 

legal right to restrict you from providing infonnation to the United 

States Congress. 

Treasury Counsel. I j ust want to say we have a different view about 

that, you know. 2 1 

Treasury counsel's statement that he had a "different view" about the ability of the Department 

of the Treasury or the IRS to restrict an individual from providing infom1ation to Congress is 

extremely conceming. Any such restriction by the Department of the Treasury, or any other 

department or agency of the Executive branch, would be in violation of the First Amendment and 

5 u.s.c. § 7211. 

These regulations and testimony authorizations require IRS employees to get permission 

from the IRS before speaking to Congress, and then to limit their speech to Congress to those 

topics approved by the IRS, or else risk losing their jobs. By their explicit terms, they prevent 

whistleblowers and other concerned parties from disclosing malfeasance at federal agencies, and 

they are inconsistent with 5 U.S.C. § 72 11, which protects federal employees' right to speak to 

Congress. Moreover, it is clear from the limitation prohibiting witnesses fromtestifyi11g about 

the Administration's deliberations regarding the CSR payments that the Department intended to 

use the Testimony Authorizations to prohibit witnesses from testifying about the entire subject of 

the committees' investigation. 

"" Wilkins Tr. at 22. 

lSI !d. at 24. 

118 
144 


23194A.128

c. Treasury Officials Enforced Testimony Autlrorizations Inconsistently 

FINDING: Treasury officials selectively enforced the Treasury Authorizations by 

aUowing witnesses to answer certain questions pr·ohibited by the 

authorizations without obj ection. 

Treasury itself demonstrated that the Testimony Authorizations were unsupported by 

legal authority and served only as a means to prevent oflicials and employees from tuming over 

infonnation to Congress that the agencies would rather keep private. Throughout the interviews, 

the agencies enforced the authorizations selectively. While agency counsels repeatedly 

prevented witnesses from answering questions posed by Majority staff, they allowed Minority 

staff to ask questions that implicated topics explicitly covered by the testimony authorizations. 

Each authorization stated that, among other topics, witnesses may not " testify as to any 

current litigation."252 Yet, during each transcribed interview of a current or former Treasury or 

IRS employee, the Minority staff of the Committee on Ways and Means asked a prepared set of 

questions about the House v. Burwell litigation. They asked each witness: 

• In your understanding, is there ongoing litigation related to Section 1402 of the 

Affordable Care Act, which govems the cost-sharing subsidies? 

• To your understanding, who filed that lawsuit? 

• Who are the defendants in that lawsuit? 

• In your understanding, what is the status of that lawsuit? 

Is it your understanding that both sides have stipulated that there are no material facts in 

dispute? 

• To your understanding, what is the nature of the claims that are raised by the plaintiffs in 

the lawsuits? 

• In your understanding, are you here today to discuss the same issues that are currently the 

subject of that lawsuit?253 

Treasury counsel allowed each witness to respond to all of those questions without 

objection or interference.254 During former IRS Chief Risk Officer David Fisher's interview, 

however, Ways and Means Majority counsel noted that, while those questions fit squarely within 

'-'' See, e.g .. Memorandum from Leonard T. Oursley. Nat'l Dir. of Legis. Affairs, Intemal Rev. Setv .. to Mark 

Kaizen, Gen. Legal Servs., Office ofChiefCom1sel, lnlemal Rev. Setv., Testimony Authorization (Apr. 6, 2016). 

'-" Kane Tt'. at 111-13; Wilkins Tr. at 49-51; WitterTr. at 48- 50; Horowitz Tr. at 57- 58; Kaizen Tr. at 45-47; 

Mazur Tr. at 57- 58. 

" 'Kane Tr. at 111-13; Willcius Tr. at 49-51; WittcrTr. at 48- 50; Horowitz Tr. at 57- 58; Kaizen Tr. at 45-47; 

Mazur Tr. at 57- 58. 

119 
145 


23194A.129

the Testimony Authorizations' prohibitions, agency counsel allowed Mr. Fisher to answer them 

anyway?55 Cow1sel asked: 

According to the testimony authorization that we've discussed at length 

today that you received from the Department of Treasury, the 

Administration claims to limit your testimony, that you're not pennitted 

to, quote, testifY as to any current litigation. 

It seems to us that the Department of Treasury has not objected to four or 

five questions that the Minority just raised about the ongoing litigation and 

it's seems as though if not for Treasury's restriction, you would be willing 

to answer our questions. So in light of the four questions tbat tbe Minority 

just posed, I just bave two additional questions on the topic of the ongoing 

litigation. 

Do you have any concems about tbe legality of the cost-sharing reduction 

payments?256 

Demonstrating the selective enforcement of the Testimony Authorizations, Treasury counsel 

objected and instmcted Mr. Fisher not to answer the Majority's questions, stating why, in 

Treasury counsel's opinion, tbe witness could answer the Minority's questions. Treasury 

counsel stated: 

Treasury Counsel. So, Machalagh, that question, as you know, is very 

different from a question about, you know, publicly-available 

information about the ongoing status of the litigation and goes 

right to the core of the interests we've articulated in our prior 

correspondence. 

Committee Counsel. The testimony authorization simply says to ongoing 

litigation. I fail to see the distinction. 

Treasury Counsel. 

that. 

I'm happy to continue discussions with you about 

MajoritY Counsel. For the record, no objections were made when the 

Minority asked questions about something that's explicitly 

prohibited by the testimony authorization. 

Q. Did you have any concerns about this while you were chief risk 

officer at the lRS? 

Treasury Counsel. 

m Fisher Tr. at t 24- 26. •l• /d. a.t t25. 

l l? !d. at 125- 26. 

That question raises the same concem?57 

120 
146 


23194A.130

At this point, the witness, Mr. Fisher, interjecied to protest Treasury counsel's inconsistent 

advice to him. He stated: 

I should have been advised, frankly, not to answer his question and I'm 

disappointed that I wasn't. 

The counsel here bas advised throughout the entire moming things 

consistent with the authorization and I have followed every one of their 

pieces of guidance. It wasn't for me to go back and reread the 

authorization. That's what they're here for. 

Now that you've pointed it out, I look at the authorization and I should not 

have answered your questions because I also agree that it's inconsistent 

with the authorization. ll1at doesn't - just because that has now been 

broken, that doesn't, to me, open any additional breaks in my testimony 

with respect to the things that are covered or not covered under the 

authorization. 

My position is the authorization holds and the things that I was prevented 

from discussing earlier remain prevented from being discussed as the 

questions I just answered related to titigation should have been covered 

and I should have been counseled not to answer them.258 

This selective enforcement raises additional concems about Treasury's promulgation of 

its Touhy regulations, and the subsequent reliance on those regulations in the course of the 

committee's interviews. T rcasury bas created a system in which the Department is the final 

arbiter of what a cun-ent or former official, employee, or contractor can say to Congress. 

Furthermore, Treasury can apparently amend the restrictions on an individual's testimony on the 

fly, and allow a witness to answer questions the Department views as favorable, but refuse to 

permit a witness to answer questions the Department deems unfavorable. 

2.<s fd. at 126. 

121 
147 


23194A.131

4. HHS and OMB also Limited the Scope of Their Employees' and 

Former Employees' Testimony to the Committees 

FINDING: 

HHS and OMB also dramatically and unilaterally limited the scope of the testimony 

current and fonner employees were permitted to provide to the committees. Both entities 

precluded witnesses from providing information about internal agency deliberations, or 

deliberations between agencies within the Executive branch. Such restrictions are inconsistent 5 

U.S.C. § 7211, cited above. 

OMB Associate Director of Legislative Affairs Tamara Fucile sent a letter to the 

committees prior to the transcribed interview ofGeovette Washington substantially and 

unilaterally limiting the scope of Ms. Washington's testimony. The letter stated: 

During the interview, Ms. Washington will not be in a position to disclose 

information about internal OMB deliberations or other Executive Branch 

deliberations in which OMB participated regarding the CSR program. 

The Executive Branch has significant confidentiality interests in these 

internal deliberations, including an interest in avoiding the chilling effect 

on future deliberations that would inevitably result from such 

disclosures259 

OMS relied on this letter to prevent Ms. Washington from answering the overwhelming majority 

of the committees' questions, including purely factual questions the answers to which are 

protected by no legal privilege. The broad testimonial restrictions imposed by this memorandum 

are inconsistent with 5 U.S. C. § 7211. 

While OMB did not explicitly cite its own Touhy regulations as a basis for limiting Ms. 

Washington's testimony, it is conceming that the regulations do not expressly protect disclosure 

to Congress. OMB's Touhy regulations are codified at 5 C.F.R. § 1305.1. The regulation applies 

whenever a subpoena, order, or other demand of infonnation from OMB is issued "in litigation 

(including administrative proceedings)."260 The regulation requires that: 

No employee or former employee of OMS shall, in response to a demand 

of a court or other authority, produce any material contained in the files of 

OMB, disclose any information relating to materials contained in the files 

of OMB, or disclose any information or produce any material acquired as 

part of the performance of the person's official duties, or because of the 

" 9 Letters from Tamara Fucile, Associate Dir. of Legis. Affairs, Office ofMgmt. aud Budget, to Hou. Paul Ryan, 

airman~ H. Co nun. on Ways & Means. and Hon. Fred Upton, ain au~ H. Couun. on Ene.rgy & Couuuerce 

(Apr. 27, 2015) 240 5 C.F.R. § 1305. 1. 

122 
148 


23194A.132

person's official status, without the prior approval of the General 

Counsel.261 

The regulation further requires that the employee or fonner employee must refuse to produce the 

material or infonnation even if a court so rules, thus risking contempt of court. The regulation 

states: 

lf the court or other authority declines to stay the effect of the demand in 

response to a request made in accordance with§ 1305.3(c) pending receipt 

of instn1ctions from the General Counsel, or if the court or other authority 

rules that the demand must be complied with irrespective of the 

instructions from the General Counsel not to produce the material or 

disclose the infonnation sought, the employee or fonner employee upon 

whom the demand has been made shall respectfully decline to comply 

with the demand.

262 

While the regulation makes clear that it applies " in litigation (including administrative 

proceedings),'' OMB should amend the regulation to c learly prote·ct the rights ofOMB 

employees to provide information to Congress under 5 U.S.C. § 72 11 . 

HHS' Touhy regulations, codified at 45 CFR 2.1 , expressly exempt cor!§ressional 

requests or subpoenas for testimony or documents from its Touhy procedures2 · Despite this 

exemption, however, HHS still dramatically, and unilaterally, restricted the scope of the 

testimony the Department would permit the witnesses to provide to Congress. 

HHS Assistant Secretary for Legislation Jim Esquea sent each witness a memorandum 

providing "guidance on the extent to which you are authorized to provide infonnation which may 

implicate Executive Branch confidentiality intere ~ 

261 5 C.F.R. § 1305.2. 262 5 C.F.R. § 1305.4 (citu1g United Stares ex rei. Touhyv. Ragen, 340 U.S. 462 ( 1951)). 

26l 45 C.F.R. § 2.l(a), (dX2). 264 Sec, e.g., Mcmorandtun from Jun Esquea, Assisrant Sec'y for Legis., U.S. Dep'l ofHcahh & Human Servs., Io 

Ellen MWTay, Assistaul Sec'y for Fin. Res .. U.S. Dep't of Health & Human Servs. (Mar. 3. 2016). 

123 
149 


23194A.133

~ 

TO: Ellm Mwray, Assistant Sccrellr)' for Financial ROSO<IRlCS 

FROM: Jim E$quea, AssiS1ant Sccrelary for Legislation ~ V 

SUBJECT: Transcribed Interview befOI'e the House Commillee oo Energy and Commerce 

DATE: March 3, 2016 

It is my understanding that you will be panicip;lting in your official capacity as tbc Department 

ofHe.hh and Human Services' (IIUS) AssiSWlt Scertllr)' for Financial Rcsourccs in a 

transcribed interview oo March 4, 2016, pursuant to • request from the Hou~eCommiuec on 

Energy and Comm<ree in connection with its oversight inquiry regatding~m~-shlring t«<u<:tion 

payments under tbc Affordable Care Act. The~ of this memorandum is to provide you 

with guidance on the atcntto which you an: authorized to provide infonnatioo which may 

implicete Elloeutive Bnmch confidentiality interests. 

The Commillee has indiceted in iu lc:ncrs on this topic lhlt they are soeldng information 

rcptding the development of the J>rcsiclc:nrs Budget as well as internal communications 

reptding eppropriotions available to implement this sce~ion oflhe ACA. As you know, HHS 

strives to ooopcratc with Congress and to respond to its req\ICSlS for infonnation regarding the 

programs we administer. In this case, we have been in regular communication with the 

Comminoc to reach an eocommndation regarding its request. As pan oftbat accommodation, the 

Depanment bas agreed to the: Comminee's rcquost that )'OU panicipate in o trtnsc:ribecl interview 

100lOfTOW. 

As you have diseussed with my staff, ond as reflected in the Department's c:on-cspondenoe with 

the Comminee. partu:ularly our March 3. 2016lettcr, soonc ofthemfonnatioo that the 

Commince is scclcing implieates si8J1ifieant Executive B~ confodentiality interests. These 

confidentiality intertslS nrc beiahtoted to the: extent the questioning""'"'""" tbc wne issues as 

are before the court in the litigation brought by the House ofRcpracntAtiws. Accordingly, 

while you arc generally authorized to respond to queS1ions about the ACA 's program for cost· 

sharing reductions, you should not disclose information about intc:rnal HHS dellbcrstions or 

deliberations between HHS and olhcr Excc:uuvc Branch agencies or offices regarding this 

pi'OjJTIJI\. Of course, )'OU should also be careful to testify as to lhosc foets of which you have 

personal knowledge an<! to "'froin from ,._.lating e.s to matters of which you have no sure 

lolOWiedge. Counsel from the Department will be available attbc interView to answet any 

questions you may have regarding the scope of )'OUr outhorization to diSCIISS CCI1ain informal ion. 

Each memorandum instructed, "you should not disclose infonnation about intemal HHS 

deliberations or deliberations between HHS and other Executive Branch agencies or offices 

regarding (the cost sharing reduction] program."26s 

u.s See, e.g., id. 

124 
150 


23194A.134

Similar to OMB, HHS relied on this letter to prevent each HHS witness from answering 

the committees' substantive questions about the sourc.e of funding for the cost sharing reduction 

program. HHS counsel did not allow witnesses to provide purely factual iJJfomJation, such as 

the names of individuals involved in various dec isions, and did not allow witnesses to atlswer 

substantive questions about the source of funding. Further, the broad testimonial restrictions 

imposed by this memorandum are inconsistent with 5 U.S.C. § 7211 . On no occasion did 

counsel for tbe Administration provide the committees with a valid legal basis for restrictiJJg the 

testimony of witnesses appearing before Congress. 

5. Lawyers for the Administration Did Not Allow Witnesses to Answer 

Substantive Questions about the CSR Program 

From the start of this investigation, the committees were clear that they sought to 

understand the basis for the Administration's decision to fund the cost sharing reduction program 

through the p=anent appropriation tor tax refunds and credits, including who made relevant 

decisions about the source of funding. When the Departments refused to voluntarily produce 

documents to the committees, the committees sought to il1terview relevant fact witnesses. Each 

letter requesting interviews provided infonnation on the scope of U1e illlerviews. For example, 

the committees' December 2, 2015 letters to Treasury and HHS each stated: 

The Committees seek to fully understand the facts that led to the 

administration's initial request for au annual appropriation to fund the 

CSR program payments to insurers, and the administration's subsequent 

actions, after Congress had rejected the appropriations request, to 

nevertheless pay insurers with funds from the pennaneot appropriation for 

tax refi.mds and credits

266 

The committees' March 22, 2016 letter to Secretary Lew requesting additional transcribed 

interviews included the same statement, using nearly identical language, regarding the scope of 

the interviews.267 The committees' letters to fanner Administration officials also asked that they 

"participate in a transcribed interview about the CSR program."268 There was no question that 

the committees sought substantive infonnatioo on the rationale for the Administration's 

decisions on the source of funding, including who made those decisions. 

Yet, Urroughout every interview, counsels for the Administration consistently sought to 

prevent the witnesses from answering questions posed by the conlfllittees, effectively claiming 

some fonn of the deliberative process privilege in withholdmg large swaths ofinfonnation from 

Congress. 

2 

.. Letters from Hon. Pat~ Ryan. Chairman, H. Con~u. on Ways & Means, and Hon, fred Upton. Chairman, H. 

Coltlln. on Energy & Coltllnerce. to Hon. Jacob Lew, Sec 'y, U.S. Dep 'I of the Treasury, and Hon. Sylvia BuiWell, 

Sec'y, U.S. Dep't of Health & Hwnan Serv. (Dec. 2, 2015). 

,., Letter from Hon. Pat~ Rya•~ Chairman, H. Collllll. on Ways & Means, and Hou. Fred Upton, Chainuao, H. 

Comm. on Energy & Commerce, to Hon. Jacob Lew, Sec 'y, U.S. Dep 't of the Treasury (Mar. 22, 20 16). 268 LcttCJ'S from Hon. Paul Ryan, ChainlliiJJ, H. Corum. on Ways & Means, and Hon. Fred Upton, Chairman, H. 

Conuu. on Energy & Commerce, to Geovette Washington. Marilyn Tavemter, & David Fisher (J'vlar. 22, 2016}. 

125 
151 


23194A.135

A proper invocation of the deliberative process privilege involves two prongs: (I) the 

infonnation must be predecisional, or created prior to the agency or department reaching a final 

decision, and (2) the infom1ation must be deliberative269 To be deliberative, a document or 

communication must relate to the thou;aht processes or opinions of relevant officials-the 

information cannot be purely factual.2 This privilege, when applicable, protects only 

predecisional documents- infonnation about a final decision, including the rationale for the 

decision, cannot be withheld. 

TI1e deliberative process privilege is not absolute; it can be overcome by a showing of 

need.271 Moreover, the privilege "disappears altogether when there is any reason to believe 

government misconduct (has) occurred." 272 TI1e actions of the Administration in illegally 

making CSR payments from the pennanent appropriation- as recent! y decided by a federal 

court- make the privilege inapplicable. Further, the testimony withheld by the Administration 

in this investigation far exceeds the bounds of the deliberative process privilege, even if it were 

to be applicable in this instance. 

a. Comtsel for HHS Instructed Witnesses Not to Answer Substantive 

Questions About the Source of Ftmdittg for the CSR Program 

FINDING: HHS counsel prevented witnesses from answering substantive questions 

regarding the cost sharing reduction program, citing the need to protect 

" internal deliberations" and " confidentiality interests" as justification to 

withhold information from Congress. 

HHS counsel repeatedly instructed witnesses not to answer substantive questions 

regarding the source of funding for the CSR program. Despite numerous inquiries from 

Committee counsel, HHS counsel refused to provide a valid justification for restricting the 

witnesses' testimony. The reasons provided- that the Department can withhold information that 

seeks internal or interagency deliberations, or seeks information it deems protected by a vague 

and undefined "confidentiality interest," or "embeds a deliberative fact" into a question the 

Department does not want a witness to answer- are not legally cognizable bases on which the 

Administration can withhold infonnation from Congress. 

Nearly every topic regarding the source of funding for the CSR program was deemed off 

limits by HHS counsel. For example, Ms. Murray could not answer questions about OMB 's 

involvement in the initial request for an a.nnual appropriation: 

Q. Do you recall when OMB did pass back its decision to HHS, what 

its decision was, with regard to the request for an annual 

appropriation for the Cost Sharing Reduction Program? 

HHS Counsel. So just to be clear, from out· perspective that that 

''" In reScaled Case (Espy). 121 F.3d. 729 (D.C. CiJ·. t997). ,,. ld. 

211 Id. 

zn Jd. 

126 
152 


23194A.136

question calls for the witness to reveal intemal interagency 

deliberations and so Ms. Murray is not in a position to be able 

to answet· that question today. 

Committee Counsel. Are you instructing her not to answer the question? 

HHS Counsel. I'm explaining to the committee that obviously we are 

working bard to accommodate your interests in this investigatioo 

consistent with our interests in the executive branch's deliberative 

interests. 

And so she 's not - consistent with the letter that we sent you last 

night - prepared to answer that question today, but we'd be haEfY 

to talk about ways to address your interests after this interview. 

Or on whether any budget appeals during l-UiS' FY 2014 budget process implicated the CSR 

program: 

Q. Do you recall whether there was any appeals that involve the Cost 

Sharing Reduction Program? 

HHS Counsel. And, a gain, b ecause of the confidentiality interests of 

the executive branch, Ms. MutTay is not prepared to answer 

that question today. 

Committee Counsel. Are you instructing the witness not to answer that 

question? 

HHS Counsel. I am explaining that at this moment in this interview today, 

for the reasons laid out in our letter, consistent with the scope for 

this particular interview, that Ms. Murray is not prepared to answer 

that question today. 274 

Or on when HHS detetmined it d id not need an rumual appropriation for the CSR 

program: 

Q. When did HHS determine that it didn't need an annual 

appropriation for the Cost Sharing Reduction Program? 

HHS Counsel. So to the extent that that question requires you 

to disclose the contents of internal deliberations relating to this 

issue, then I would caution you not to include those in you•· 

answer. 

m Murray Tr. at28 (emphasis added). 21' ld. at 30-31 (emphasis added). 

127 
153 


23194A.137

I would also caution you that this is a question about what HHS 

knows and that you should only answer as to your personal 

knowledge2 75 

Or on whether HHS requested an allllual appropriation for the CSR program in the fiscal year 

2015 budget: 

Q. At that point, did HHS request allllual appropriations for the Cost 

Sharing Reduction Program? 

HHS Cow1sel. For the reasons that we talked about, answering that 

question would require- would implicate the deliberative 

confidentiality i.nterests that we have talked about, so Ms. 

Murray is not in a p osition to answer that question today. 

Committee Counsel: It is a factual question, it calls for a yes-or-no 

answer, we believe the answer to this question is distinguishable 

from any communications that may have taken place during that 

time. 

HHS Counsel. I think the issue is that what we are ta lking about here is l11e 

communication between HHS and OMB, that is an interagency 

communication prior to the release of the President's budget. And, 

so, that is a pre decisional d eliberative communication.276 

In addition, HHS counsel did not consistently apply the agency's own detem:Unations as to whether or not a question called for "internal deliberations." Ms. Murray testified: 

Q. Did HHS request an annual appropriation for the Cost Sharing 

Reduction Program when it submitted its request to OMB? 

HHS Counsel l. I'm going to caution the witness not to reveal the 

substance of internal interagency deliberations. 

Committee Counsel. This is a factual question. It's a yes or no answer 

whether it was included. It doeso 't speak to internal de liberations. 

HHS Counsel I . Do you think it's okay? 

HHS Cow1sel 2. Yes. 

HHS Counsel I. Okay. The witness can answer. 

m /d. ar 38 (emphasis added). 116 Jd. al 67-68 (emphasis added). 

128 
154 


23194A.138

Witness: We did. We did request an appropriation.277 

Almost immediately thereafter, however, HHS counsel decided that Ms. Murray should not have 

answered that question because it was an " internal deliberation." The interview continued: 

Q. Do you recall when OMB passed back its decision to HHS's 

budget request? 

A. You know, I do not. That was a year where we were on a CR and 

there was not a final CR, I don't believe, until March of2013. My 

memory is that the process was late, so I don't remember when 

OMB passed back. It could have be.en later than regular process 

would dictate. 

HHS Counsel. I'm just going to interject here. We're sort of 

working through the process and the scope issues relating to this. 

Ms. Mun·ay provided an answe1· at my direction to that 

question, but I just want to make sure that the record reflects 

that from our pe1·spective the question did ask for an answe1· 

relating to intemal deliberations relating to the budget 1·equest. 

So I just want to make sure that the record reflects that from our 

pe1·spective that question was within the scope of a question 

about intemal delibc1·ations relating to the budget process. I 

just want to be clear for the record going forward. 

Committee Counsel. The question was a factual question. It called for a 

yes or no answer. It didn't call for any internal deliberations. 

HHS Counsel. But it called for the contents of an internal 

deliberation of an internal deliberative document between two 

agencies, between HHS and OMB. I'm happy to continue. I j ust 

wanted to make sure in order not to prejudice our sort of interests 

going forward. I just wanted to make sure that the record reflected 

that.278 

At various times, HHS counsel explained that a witness could not answer a question 

because it "embedded a deliberative fact." For example, Commillee staff asked Ms. Murray how 

she learned ofHHS' detenuination that it did not need an an.nual appropriation for the CSR 

program: 

Q. How did you learn of this decision? 

m /d. at 26-27 (emphasis added). 218 ld. at 26- 28 (emphasis added). 

129 
155 


23194A.139

HHS Counsel. Again, so I'm going to caution the witness that to the extent 

that you're going to answer something that is going to reveal - I 

actually don't think that you can answer tl1at question without 

revealing the substance of the determination because of the way 

the question is phrased. 

Committee Counsel. Who told you? 

HHS Counsel. Then we have the same problem. If the question embeds 

the deliberative fact, then she wouldn't be able to •·eveal the 

identity of the pe•·son with whom, if anybody, she had the 

conversation because the delibera tive fact is embedded in the 

question. 

Committee Counsel. To the extent the deliberative process even 

applies, and, obviously, we disagree on thatHHS Counsel. I appreciate that. 

Committee Counsel. - you know, the witness has to segregate out 

facts. Not evcryt.hing is deliberative just because it involved 

individuals at HHS. So in ou•· opinion, facts that can be 

segregated out from any internal deliberations must be 

answered. 

HHS Counsel. I appreciate that. And I think the problem that we're 

having here is when the question embeds a deliberation, when the 

question is so specific as to what the conversation was about then 

she's in a situation where answering the question would reveal the 

deliberation.279 

In another interview, committee staff asked Mr. Schultz whether the CSR program was 

discussed at a meeting that White House visitor records indicated be attended: 

Q. Do you know whether the Cost-Sharing Reduction Program would 

have been discttssed at this meeting. 

HHS Counsel. He's not going to get into specifics of White House 

meetings. 

Committee Counsel. I'm asking him a yes or no question, whether be 

knows if a particular policy was discussed at the meeting. 

HHS Counsel. I understand. 

m ld. at 39-40 (emphasis added). 

130 
156 


23194A.140

[Witness confers with counsel.) 

HHS Counsel. Again, the witness is here to voluntarily answer questions, 

but he's not going to get into the specifics of what was discussed at 

meetings involving White House ofticials. 

C01mnittee Counsel. Jessica is not asking for substance. She's asking if 

he recalls whether the Cost-Sharing Reduction Program was 

discussed. 

HHS Counsel. Understood, but that embeds a deliberative fact when 

you're asking him. 

Committee Counsel. Well, I mean, if the answer is yes, then it's either, 

yes, he recalls that it was discussed or, yes, he recalls that it was 

not discussed. If the answer is no, then he doesn't recall, but I 

don't understand bow that embeds a deliberative fact. 

HHS Counsel. He is here voluntarily. He's answered a number of your 

questions, but, again, we are not to going to get into specifics of 

White House meetings, going meeting by meeting. He's said he 

had meetings at the White House on CSR, but that's as far as he's 

going to go. 

Committee Counsel. Can you identify the dclibe..ativc fact that is 

embedded in the question so we can try to rephrase it? 

HHS Counsel. As I said, he is not going to get into specifics of White 

House meetings.280 

When committee staff directly asked HHS counsel to identify the "deliberative fact" embedded 

in the question, HHS counsel would not, or could not, do so. 

The position of HHS counsel that the Administration can block from disclosure to 

Congress the answer to any question that seeks internal or interagency communications, or an 

undefmed "confidentiality interest," or "embeds a deliberative fact," exempts the entire 

executive branch from congressional oversight. Accordingly, during Ms. Murray's interview, 

committee counsel asked HHS counsel to clarify the position. Counsel stated: 

Committee Counsel. So it is the Department's position that aU 

communications and all documents would be subject to this 

privilege that you are claiming? 

HHS Cow1sel. Again, and we have talked about on a nwnber of occasions, 

we are working very hard to be in a position where we cru1 

zso Schultz Tr. at 51 - 53 (emphasis added). 

131 
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23194A.141

accommodate your interests consistent with our executive branch 

confidentiality interests. 

Committee Counsel. I understand that. Can you provide an answer to the 

question, please, whether this would apply to all documents that 

went through HHS and other agencies? 

HHS Counsel. I think that we need to take this on a question-by-question 

basis, and a document-by-document basis, and sitting here 

today-- and also, to some extent, this is for the purposes of this 

interview today. We agreed to come here as a significant 

accommodation to your interests, subject to certain scopes, and we 

can certainly continue to have these conversations. But today for 

today' s interview, the particular question that you have asked is 

not a question that Ms. Murray is prepared to answer today. 

Committee Counsel. I will just note, again, for the record, that the scope 

is one that was set by the Department, not set by the committee, 

and we very much disagree with that scope.231 

Committee counsel explained the concerns with HHS' position that no internal or 

interagency communications could be disclosed to Congress: 

We obviously disagree with the letter the Department sent last night. The 

Department does not get to set the tenus and conditions of congressional 

oversight. That's something that this committee gets to do. 

We also have severe concerns with the scope limitations the Department 

has placed writ large. Tha t scope would exempt the entit·e executive 

branch from congressional oversight and obviously we think that's a 

bit of an extreme position. \Ve have a number of questions with 

t·espect to what appears will be deemed internal deliberations by the 

Department? 82 

HHS counsel did not relent and did not allow Ms. Murray or any subsequent witnesses to answer 

the committees' substantive questions about the CSR program. HHS' unilateral decision- made 

without any valid justification- to instruct witnesses not to answer substantive questions about 

the source of funding for the CSR program effectively exempted all decisions about the source of 

funding from the committees' investigation. 

281 Mwtay Tr. at 68. 

Ztl /d. at 28- 29 (emphasis added). 

132 
158 


23194A.142

b. Witnesses Were Not Permitted to Answer Questions about the Names of 

Individuals Involved in Decisions about the Source ofFrmdingfor the CSR 

Program Employed at the Department of Justice and the White House 

FINDING: Witnesses were instructed not to reveal to Congress the names of White 

House and Department of Justice officials involved in decisions regarding the 

cost sharing reduction program. 

HHS counsel did not permit witnesses to identify the names of individuals involved in 

decisions about the source of funding for the CSR program who work or worked at the White 

House. For example, Ms. Murray testified that she spoke with someone in the Executive Office 

of the President about the CSR program between April and July 2014. HHS counsel, however, 

did not penni! her to tell Congress with whom she spoke. Ms. Murray testitied: 

Q. Do you recall when the conversation with the Executive Office of 

the President took place? 

A. I do not. 

Q. Was it after the Senate report was released in July? 

A. It was before. 

Q. Do you recall who the conversation was with? 

HHS Counsel. You can answer that. 

Witness. Yes, I do. 

Q. Who was the conversation with? 

HHS Counsel. Again, because of our deliberative interests in maintaining 

executive branch confidentiality, Ms. Murray is not prepared to 

answer that question today.283 

HHS counsel also instmctcd Mr. Schultz not to reveal the names of individuals at the White 

House involved in decisions regarding the CSR program. He testified: 

Q. Do you recall who those conversations were with at either the 

White House or OMB during this time period? 

A. Well, I recall some people they were with, yeah. 

Q. Who were these people? 

zu !d. at 63-41. 

133 
159 


23194A.143

HHS Counsel. He's not going to get into participants in White House 

meetings. 

Committee Counsel. Why? 

HHS Counsel. We have certain Executive Branch confidentiality 

interests. 284 

Committee c.ounsel asked HHS counsel to explain what barred Mr. Schultz from 

identifying individuals he worked with at the White House. HHS counsel only answered that the 

Executive branch has "confidentiality interests" in withholding the names of White House 

employees involved in decisions regarding the CSR program from Congress. HHS counsel 

explained: 

Committee Counsel. Okay, but before we go to that, what specifically 

bars him from telling us which White House officials? 

HHS Counsel. We have certain confidentiality interests. They are only 

heightened by lawsuit brought by the House. This is an 

accommodations process. As you've seen, he has answered a lot 

of questions, but be is not prepared at tbis time to talk about White 

House participants. 

Committee Counsel. Can you identify those confidentiality interests 

for usHHS Counsel. We have certain confidentiality interests. We've 

articulated them in our letters and we've had conversations with 

you. 

As I say, he bas answered a number of questions. He's here 

voluntarily, and if we could proceed, he's happy to answer 

questions on a question-by-question basis. 

Committee Counsel. Those confidentiality inter·ests have not been 

specifically identified. It's been very vague and overbroad. 

Specifically, with regard to this, what is the specific confidentiality 

interest, the identity of who these people are? 

HHS Counsel. I mean, we're talking about the development of the 

President's budget and that whole process. So that's something the 

Executive Branch has a longstanding interest in protecting the 

nature of those confidential communications. 

Committee Counsel. We appreciate your position. We disagree with it, 

2

" Schul!z Tr. a1 33- 34 (emphasis added). 

134 
160 


23194A.144

but we understand in part what you're saying, but I'm just a little 

confused about why the identity of the people would also be 

protected by this. Is there a specific pt·ivilege that you're 

asset·ting to withhold these names'! 

HHS Counsel. What I can say is the confidentiality interests arc 

particularly strong when we're talking about presidential 

advisors and presidential staff, and that's what we're talking 

about here. 

Committee Counsel. Even the names of the people involved? 

HHS Counsel. Con ect.28S 

HHS counsel refused to provide additional information to the committees on why it 

would not permit witnesses to reveal tbe identity of White House stall" involved in discussions 

about the CSR program. Committee staffsougbt to clarify from HHS counsel on the basis for 

which they were withholding the names of these individuals: 

Committee Counsel. Aie you saying that because these are intemal 

deliberations? Is that why you don't want to disclose tbe names of 

these individuals? 

HHS Counsel. I'm saying, again, we have confidentiality interests. 

They are particularly strong when we're dealing with presidential 

sta1f and advisors. 

Committee Counsel. Aie these staff that aren't known to work at the 

Wbite House? I mean, they're federal employees. 

HHS Counsel. As we've articulated to you iJl our letters and, again, we 

have confidentiality interests. They are heightened by the 

lawsuit. What you're talking about, we are getting into areas 

that involve pt·esidential advisot·s and staff and the 

confidentia lity interests are only heightened. 

This is an accommodations process. We're happy to continue 

these discussions. 

Committee Counsel. Can you tell us what the decision involved in this is 

that you don't want to reveal the identity of individuals? I can 

only assume that this is some of sort of deliberative process 

privilege that you're seeking to invoke here. Can you tell us what 

U1e decision is specifically that prevents the department from 

identifying ilie names of the individuals who participated in the 

l*l ld. at 34-36 (emphasis added). 

135 
161 


23194A.145

conversations, not the substance? 

HHS Counsel. As we said, we are not going to get into internal 

deliberations about the President's budget. We are not prepared 

today to talk about these participants. We're happy to continue the 

conversation, but at this point in time, we're not prepared to get 

into that. 

Committee Counsel. When you're seeking to withhold information 

from Congress because it's deliberative, the1·e a1·e a couple 

p•·ongs the department has to meet to make a valid showing on 

that issue. The information must not only be deliberative, but 

it must also be predecisional. 

So can you identify for us what the decision is that you are 

holding this info•·mation back from the Congress? 

HHS Counsel. You know, Mr. Schultz is here voluntarily. He's answering 

your questions. We're not prepared today to go further than 

this, but, again, we a•·e happy to continue these discussions. 

This is an accommodation process between the agency and the 

committee. 

Committee Counsel. So then it sounds like you are not willing to 

identify the decision for us today; is that con·ect? 

HHS Counsel. We are telling you that we have confidentiality inteJ·ests 

heightened by the lawsuit b•·ought by the House.286 

The Administration cannot withhold factual infonnation such as the names of individuals 

involved in various meetings or decisions from Congress. Counsel explained: 

Committee Counsel. We have, as Jessica mentioned at the start of the 

interview today, we have grave concerns about the scope that has 

been set by the department. I'm not awa1·e of a privilege that 

would aUow someone to withhold the names of people who 

pa•·ticipated in conve•·sations o•· meetings. 

For instance, when you're creating a privilege log of infonnation 

that you are withholding from the Congress or from parties in 

litigation, that log includes the names of people involved on the 

E-mail or in the conversation. You know, the fact that you a•·e 

not even willing to answer some simple foundational questions 

about the g•·ounds on which the depa•·tment is withboldi.ng this 

information is very conce•·ning and it's something that this 

2 

.. !d. at 36-38 (emphasis added). 

136 
162 


23194A.146

committee does not agree wit b. 

HHS Counsel. Understood, and Ibis is an accom.modationsJ?rocess. We're 

happy to continue the conversation going forward.2 

OMB counsel similarly refused to allow Ms. Washington to identify the names of 

individuals she met with or otherwise spoke to at the Department of Justice and the White House 

who were involved in decisions related to the source of funds for the CSR program. At no time 

did OMB claim any privilege or provide any clear reason for refusing to permit Ms. Washington 

to disclose this infonnation to Congress. Ms. Washington testified: 

Q. Exhibit 7 is another \!.'bite House Visitor Record Request from 

November 27th at 11 a.m. with Mr. Choe, Mr. Delery, Mr. 

Gonzalez, Mr. Meade, Mr. Schultz, Mr. Verrilli. Do you 

remember attending a meeting on November 27, 2013 at the White 

House with those persons I just listed? 

OMB Counsel. As I mentioned, the Executive Branch has 

significant confidentiality interests in intemal discussions or 

interagency deliberations and Ms. Washington is not going to 

discuss interagency deliberations today. 

Q. The committee disagrees that the question has called for any kind 

intemal deliberations at all, just merely the existence of the 

meeting. Are you willing to answer whether or not you attended a 

meeting with those individuals listed? 

A. I am not authorized to answer that question today. 

Committee Counsel. 11JaJlk you. 

Q. Have you ever met with Kathy Ruemmler or talked with Kathy 

Ruemmler about the Cost-Sharing Reduction Program? 

OMB Counsel. Ms. Washington is not going to discuss any 

interactions she may 01· may not have ba d with any White 

House personnel. 

Corrunittee Counsel. A few minutes ago, you suggested that if we asked 

specific names and asked if she's ever talked to them about the 

Cost-Sharing Reduction Program, she could answer that question, 

but that does not apply to White House personnel? 

2

*' Jd. a1 38- 39 (emphasis added). 

137 
163 


23194A.147

OMB Counsel. Ms. Washington is not going to discuss any 

convenations tbat sbe may bave bad with. Wbitc House 

pet·sonnel. 

Q. Ms. Washington, did you have any conversation with Roberto 

Gonzalez about the Cost-Sharing Reduction Program? 

A. I believe I previously testified that I did. 

Q. Do you believe those -

A. To the extent that that is the person who was the deputy general 

counsel at Treasury .... 

Q. Do you remember having conversations with Don Verrilli about 

the Cost-Sharing Reduction Program? 

OMB Counsel. Again, Ms. \Vashington described that she bad 

conversations generally with the Department of Justice, but 

she is not going to discuss the specifics of those conversations. 

Committee Counsel. So, previously, you allowed her to answer whether 

she talked about the CSR program with Kem1eth Choe, I believe 

Stuart Delery, Robert Gonzalez, Chris Meade, William Schultz. 

We're asking about one more person on this list of people, and I 

don't see the distinction between Mr. Verrilli versus these other 

individuals on this list that you allowed her to answer the same 

questions. 

OMB Counsel. I don 't think she answered the question with respect 

to Stuart Delery or a Department of Justice official. 

Q. Ms. Washington, with whom did you speak at the Department of 

Justice about the Cost-Sharing Reduction Program. 

OMB Counsel. Again, Ms. Washington is not going to discuss 

convenations that she may have had with Department of 

Justice officials, pat·ticular officials, if, in fact, she had those 

conversations.

288 

Neither HHS nor OMB counsel provided a justification for why witnesses could not 

disclose the names of White House or DOJ officials involved in decisions regarding the source 

of funding for the CSR program. Further, even if HHS or OMB bad asserted a legal privilege 

over the names of individuals involved- which neither did- no privilege exists that would 

protect the names of individuals involved in a conversation. 

m Washington Tr. at 87- 90 (emphasis added). 

138 
164 


23194A.148

c. OMB Cou11sel Refused to Allow an OMB Witness to Answer Questions 

Regarding the Dates or Times of Meetings or Conversations with Other 

Administra.tiott Officials About the CSR Program 

FINDING: OMB prevented a witness from answering factual questions r egarding the 

d ates o•· times of a meeting or conversation, refusing to invoke a legal 

privilege to justify withholding the information f•·om Congr ess. 

Understanding who participated in what meetings or conversations, and when, was a 

critical component of the committees' investigation. Setting out a clear timeline of when the 

Administration made decisions regarding the source of funding is necessary to understand why 

and how the Administration decided that it did not, in f.1c1, need an annual appropriation to make 

CSR payments after it initially requested one in fiscal year 2014. 

Ms. Washington played a central role in providing the lega l justification for the source of 

funds used to make CSR payments. Yet, OMB counsel prevented Ms. Washington from 

answering questions about meetings and conversations she had about the source of funding for 

the CSR program. For example, OMB counsel allowed Ms. Washington to answer that she met 

with Treasury's General Counsel in 2013,

289 and that she did not meet with anyone from the IRS 

in 2013,290 but refused to allow her to answer questions regarding when she met with Mr. 

Schultz, ID·IS's General Counsel. OMB counsel justified preventing the witness from answering 

these factual questions not by invoking any sort of legal privilege- she explicitly refused to do 

that- but by citing the "confidentiality interests" of the Executive Branch. Ms. Washington 

testified: 

Q. AI what point did you have conversations with Mr. Schultz at 

HHS? 

OMB Counsel. Ms. Washington i.s not going to get into like 

p articula•· - the time period of particular discussions or 

convel'Sations th at she may have bad with individuals in the 

d evelopment of this issue. She's just spoken generally that she 

had a conversation with Mr. Schultz about this issue. 

Committee Counsel. We're not asking deliberative - the content of the 

conversations. We are asking about the timing of when issues 

became - were brought to the attention of OMB or when issues 

were brought to the attention of Ms. Washington. Just basic 

factual question of time are not at all deliberative. 

OMB Counsel. Can you repeat your question? 

189 !d. at 24 (Ms. Washington testified tluu she worked with Chris Meade, t.he General Counsel of the Department of 

the Treasury). 

mid. 

139 
165 


23194A.149

Committee Counsel. Sure. 

Q. At what point did you have conversations with Mr. Schultz? 

We just talked about when she spoke with Mr. Berger and when 

she spoke with people at the IRS. It's the same question pertaining 

to Mr. Schultz. 

OMB Counsel. Well, but it pertains to interagency deliberations, 

not something internal to OMB or just, you know, a general 

discussion that she may have had with her staff, but when you talk 

about interagency deliberations about a particular topic, there's a 

heightened sensitivity there. So, therefore, Ms. Washington is 

not going to discuss the individual interactions that she had 

with a particular person about this subj ect. 

Committee Counsel. With all due respect, this is not asking for any 

deliberative infonnation. It's just at what point did she have a 

conversation with Mr. Schultz, just a month. 

OMB Counsel. On a patticular topic. 

Committee Counsel. And she's already acknowledged that she had 

conversations with Mr. Schultz. 

OMBCounsel. That's right. 

Conunittee Counsel. I don't think the time period of that is going to 

implicate any sort of deliber ative issue. 

OMBCounsel. She has discussed that she has had conversations 

with Mr. Schultz about this topic, and, you know, the 

pa r·ticulars or the specific conver·sations and when those might 

have occurred is not something we're going to discuss today. 

Committee Counsel. I'm sorry. Ther·e is absolutely nothing 

deliber·ative about the date in which a conversation took place. 

We're asking very high-level process questions about the 

development of one issue. We are not asking about the substance 

of the interagency deliberations or even at the point about the 

internal deliberations that would have happened at OMB. 

The factual existence of a conver·sation is not pr·otected by any 

legal pr·ivilege and never bas been. We're just asking for facts. 

140 
166 


23194A.150

OMB Counsel. So we're not a sserting a legal pl"ivilege, to b e 

clear, but we are saying that there ue heightened sensitivities 

and confidentiality interests in paa·ticular conversations that 

Ms. Washington may have had. If you'd like to speak generally 

and ask her, you know, was it in 2013, then I think that's 

something we could discuss, but in tem1s of zeroing in on a 

particular conversation that she may have had with a particular 

person on a particular topic, that, we believe has a heightene-d 

sensitivity.

291 

Committee counsel asked OMB counsel to explain these "heightened sensitivities." OMB 

counsel, however, could not do so. The interview continued: 

Committee Counsel. Could you explain the heightened sensitivity? 

hope that we can have a fn•itful interview and that this can 

continue, but I'm very nervous based on the statements that you're 

makiJlg right now that we'll be able to make any actual progress. 

OMB Counsel. Well, it seems like you 're trying to zero in on a 

particular meeting that she may have had or may not have had, 

depending on the nature of the answer. Particular specific 

conversations that she bad with resp ect to this topic and the 

interagency delib erations that she may have bad on this topic 

have a heightened sensitivity. 

Committee Counsel. Can you articulate what that heightened 

sensitivity is? You articulated when we began that she was aware 

of the January meeting that we were going to ask questions about 

and was prepared to talk about it. 

OMB Counsel. I mentioned that we would talk about the January 

meeting in particular because I knew that the committee had an 

expressed interest and has articulated an interest in that meeting. 

So as a result, we are willing to be extra accommodating to the 

committee and to aUow Ms. Washington to discuss that general 

meeting given what we understand to be a significant interest to 

the committee; however, a s you know, conversations between 

attorneys on a particulaa· mattea· is an institutional i.nterest of 

the Executive Branch and, as a a·esult, that is why she will not 

be discussing paa-ticular conversations that she had with those 

attorneys. 

Committee CounseL T he committee does not recognize that heighten 

sensitivity, and I do not, frankly, fuUy understand the 

heightened sensitivity that you aa-e trying to articulate; but, 

"' !d. a1 24- 27 (emphasis added). 

141 
167 


23194A.151

again, we arc not asking about the substance ot· interagency 

deliberations between Ms. Washington or any of the people 

that we have named so far. We at·e merely asking for when, 

fo•· dates and times and facts, which at·e absolutely not 

delibet·ative. 

So I think we'll just continue with the questions. 

Q. Ms. Washington, did you speak with Mr. Schultz in 2013? 

A. Yes, about cost-sharing reductions. 

Q. About cost-sharing reductions. What timeframe in 2013 did these 

conversations or conversation happen? 

OMB Counsel. Again, I think we just went over that we't·e not 

going to get into pat·ticular conversations and particulu dates 

and pat·ticular conversations between attom eys of the 

Executive Branch to address this specific issue.292 

Shortly thereafter, OMB counsel refused to allow Ms. Washington to answer if sbe met 

Mr. Schultz in person: 

Committee Counsel. Ms. Washington, did you ever meet in a 

face-to-face meeting with Mr. Schultz to discuss cost-sharing 

reduction payments? 

OMB Counsel. As I said, because you're asking her a specific 

question about a particular meeting on a particular topic, we think 

that thai is something that she should - that she will not discuss 

today. She already acknowledged that she discussed cost-sharing 

reductions with him. 

Conunittee Counsel. I asked if she had met with him face to face. 

OMB Counsel. 

particular topic.293 

So you're asking her about a particular meeting on a 

OMB counsel did, however, allow Ms. Washington to answer whether she talked with him on 

the telephone. 

Q. Did you ever speak with him on the phone about the Cost-Sharing 

Reduction Program? 

"' Jd. at 27- 29 (emphasis added). 

l.'ll Id. at 34. 

142 
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23194A.152

When confronted with this inconsistency, OMB counsel could not articulate why she pennitted 

Ms. Washington to answer questions about whether and when she spoke with Mr. Schultz on the 

phone, but not in person. Instead, OMB counsel stated that she could have prevented the witness 

from answering questions about the telephone calls if she so desired. Counsel stated: 

Q. Did he ever come to OMB to meet with you about the 

Cost-Sharing Reduction Program? 

OMB Counsel. Again, Ms. Washington is not going to talk about 

particular meetings that she had with -

Committee Counsel. So you will let her answer questions about 

telephone conversations because those don't count as meetings, but 

you will not let ber answer conversations about face-to-face 

meetings? 

OMB Counsel. Well, Ms. Washington will not talk about particular 

meetings that she had with respect to cost-sharing reductions, and I 

was -

Committee Counsel. The line seems to be a little bit inconsistent here. 

OMB Counsel. Well, we couJd have easily cut it off with respect 

to those calls as well, but in an effort to be accommodating, she 

answet·ed those questions. 295 

Throughout the interview, OMB counsel could not articulate why she pennitted Ms. 

Washington to answer questions about conversations or meetings with some individuals, but not 

others. She further could not articulate why she did not allow Ms. Washington to answer 

questions about the dates or times on which various meetings occurred. At no time during the 

interview did OMB counsel provide a legally-cognizable reason for the extreme limitations 

placed on Ms. Washington's testimony. 

,... /d. at34. 

m !d. at35- 36 (emphasis added). 

143 
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23194A.153

d. T/1e Administration Failed to Provide Any Valid Legal Grounds for 

Instructing Witnesses Not to Answer Substantive Questions Posed by tlte 

Committees 

FINDING: The Administration sought to withhold information from Congr ess by 

effectively claiming the deliberative process privilege. That privilege does 

not apply in this instance. 

Throughout the interviews, the Administration repeatedly instmcted witnesses not to 

answer substantive questions about the source of funding for the CSR program. At no time 

during the course of the investigation did any lawyer for the Administration invoke or otherwise 

provide any legally-recognized basis upon which the infonnation was withheld. Instead, 

Administration lawyers provided excuses such as the need to protect internal deliberationsincluding interagency communications- and unspecified "Executive branch confidentiality 

interests." That position allows the Administration absolute discretion over what it will and will 

not provide to Congress and fundamentally undennines the principles of congressional oversight. 

The Administration effectively sought to cloak itself in the deliberative process privilege 

without actually invoking the privilege- because it was not applicable. Even if one were to 

assume that the Executive branch could use this privilege to withhold information from 

Congress, the nature of the infonnation sought by the committees and the Executive branch's 

actions would make it inapplicable in this situation. 

Even if it were applicable here, the deliberative process privilege is a privilege that may 

be invoked by the Executive in response to a request for internal, or deliberative, documents or 

testimony. A proper invocation of the privilege involves two prongs: (I) the documents and 

communications must be predecisional, or created frior to the agency or department reaching a 

final decision, and (2) they must be deliberative.29 To be deliberative, a document or 

communication must relate to the ou~ht processes or opinions of relevant officials- the 

information cannot be purely factua l. 29 TI1e Executive branch is required to disclose factual 

information that can be segregated from other material potentially protected by the deliberative 

process privilegc.298 

Because factua l information is expressly not protected by the deliberative process 

privilege, the Administration cannot withhold infonnation such as the names of persons involved 

in decisions or the dates and times of meetings. Further, no other legal privilege would protect 

purely factual information of this sort. 

Additional!l, the deliberative process privilege is not absolute; it can be overcome by a 

showing of need? Moreover, the privilege dis~pears altogether when there is any reason to 

believe government misconduct [has) oceurred. "3 Overcoming the privilege carries such a low 

296 In r• S•aled Cas• (Espy), 121 F.3d. 729 (D.C. Cir. 1997). 297 /d. 

298 /d. 

, .. /d. 

)<)0 /d. 

144 
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23194A.154

bar because, otherwise, agencies could withhold internal or deliberative material from Congress 

for any reason imaginable. The Administration could use the privilege to protect discovery of 

actual misconduct, shield infonnation that shows flaws or limitations in an agency's position, or 

simply hide an embarrassing c-omment. 

Finally, the deliberative process privilege cannot be used to withhold information about a 

final decision, including the rationale for that decision. The Supreme Court made this clear in 

NLRB v. Sears, Roebuck & Co., dismissing the Administration's argument that such rationales 

cannot be provided to the committees.301 

Given the Administration's illegal actions to fund the CSR program without a 

congressional appropriation, it cannot now withhold key testimony from Congress by effectively 

claiming that the information is protected by the deliberative process privilege. Thus, the 

Administration, without any legal grounds to do so, instructed witnesses not to answer 

substantive and other factnal questions. 

6. Lawyers for the Department of the Treasury Pressured at Least One 

Witness into Following Restrictions Set Forth in his Testimony 

Authorization 

FINDING: The Department of the Treasury pt·essured at least one witness into following 

the restrictions set forth in his Testimony Authotization afte•· the witness 

questioned Treasury's ability to limit his testimony. 

The Admillistration successfttUy limited the testimony of most of their current and former 

employees by sending Administration counsels to attend the interviews. These counsels 

instructed witnesses not to provide full and complete answers to the Committees' questions. The 

c-ounsels who attended- from Treasury, HHS, and OMB-all represented their Department or 

Office. At no point in time did they represent the interests of the individuals appearing before 

the Committee. 

One witness, however, did not want agency counsel to accompany him. Former IRS 

Chief Risk Officer David Fisher spoke by telephone with Ways and Means Committee staff at 

approximately 4:00p.m. on April 28, 20 16 to con finn the date, time, and location of his 

transcribed interview, as well as discuss logistics of the interview proce.ss?02 During that call, 

staff informed Mr. Fisher that he had the right to invite counsel-either agency counsel or 

personal counsel- to attend the interview with him.303 Mr. Fisher told Committee staff that he 

did not believe that Treasury counsel represented his interests and did not wish for them to attend 

the interview.304 Mr. Fisher also stated that he had already spoken to Treasur6: counsel and told 

them he did not want representatives from that office to attend his interview .

3 5 

}Oo NLRB v. Sears, Roebuck & Co., 421 U.S. 132. 161 (1975). 102 Fisber Tr. at 23. 

}OJ Phone call belween David Fisher and Maj. S1aff, H. Comm. on Ways & Means (Apr. 28, 20 16). 

"" /d. 

)OS /d. 

145 
171 


23194A.155

After Mr. Fisher's conversation with Ways and Means cow1sel, Mr. Fisher received an 

email from IRS Counsel Jolm McDougal. Mr. Fisher testified: 

Q. Mr. Fisher, when did you first see this testimony authorization? 

A. Timrsday, again, late afternoon or early evening 

Q. Was that before or after the telephone call that you had with 

Machalagh Carr and myselC? 

A. After. In fact, almost immediately after, as I recall. 

Q. Who sent tllis testimony authorization to you? 

A. Jolm McDougal, counsel for IRS.306 

The Testimony Authorization was one of four documents Mr. Fisher received from Mr. 

McDougal "almost immediately after" his phone call with Ways and Means staff. Mr. Fisher 

testified: 

Q. Other than the testimony authorization fonn, did you receive any 

other documents from the Department of the Treasury? 

A. Yes. 

Q. What were they? 

A. So most explicitly, I received a cover letter that came along with 

the authorization and I received copies of two regulations, 

Treasury Department regulations, covering this topic of 

deliberative process. 

Q. Who sent you the documents? 

A. All four documents came in the E-mail from Mr. McDougal on 

Thursday. 

Q. Who had written the cover letter or who signed it? 

A. Drita Tonuzi, Associate Chief Counsel, Procedure and 

Adnlinistration, which I believe is at the IRS. It could have been at 

Treasury. The letterhead is Office of Cllief Counsel, Internal 

Revenue Service. 307 

,.. Fisher Tr. at 14-15. 30' ld. at 19. 

146 
172 


23194A.156

The cover letter states:308 

Dear Mr Fisher 

DEPARTMENT OF THE TRE ASURY IHTIRHAL. RGY iiNUC SERVICI 

WASHINGTO.N, D.C. ton• 

Apr\123. 2016 

I wMe regardll\g tile request or the House Commruee on Ways and Means and the 

House Committee on Energy end Commerce to Interview you regarding your 

employment as an offiCial of the Into rna I Revenue Sernce (IRS) I understand that you 

have acheclulecl a voluntary !!an scribed inteMeW w4h the Commfttees on May 3. 2016, 

to cltseuss facts relating to cosl·sharing recluC1ion payments made undorlhe Alfordabkl 

Care Acl TM leiter l)<ovutes lnlormat•on in response to questions that you have raised 

wtlh IRS counsel 

As we have describod 10 you, when current or !ormer IRS employoos are scheclulecl to 

appear for interviews related to their agency employmen~ the IRS's standard praeltoe, 

consistent w,th that of other Executive Branch depallments and agencies, Is to assist 

them In preparing for lheirll\tervi&Ws. Slmtal'ly, agency counsel are avaBabla 10 

accompany current and Iormor omployees to the lnteMe<.vs to auppon them in any way 

they can. IRS and Treasury counsel remain willtng to provide this type of assistance to 

you d.-ectly, or tiYough your pnvato couOlel, If you are tntereslod in tlleir ssaistanec 

In conversations w.th IRS Dlftdals, you have asked about t~e polleoes and regulations 

IRS follows when former oH~ei ~ and &flllloyees are asl<ed to testily about matters 

related to tlleJ< IRS employment. Und<lr the General HOu$ekeeplng Statute. 5 U.S.C 

§ 301, heads of erecutlve agencies may prescllbe regulations governing the custody. 

use. and preseM tlon of their records and lnfonnallon. These regulations. usually 

referred to as 'Touhy regulations• after the Supreme Courfs decision In United States 

ex rel Touhy v. Ragen, 340 US 482 (195t), govern the cond>llons and procadurt>S by 

which agency employees may testify abOUt wortHelated Issues. The IRS. like other 

Executive Blllnellago!lQes, has promulgated Touhy regu!abons apl)flcable to your 

interview wuh the Commtttees These regulattons pro'<lde that IRS employees, 

including former employoes. shal not 'testify OC' disclose IRS records or Information to any coun. admlnrs1retive agency or other authority. or to the Congress, ot to a 

"" Letter from Drita Tonuzu, Associate Chief ComlSCI, Procedure and Admin .. lmemal Rev. Serv., U.S. Dep't oft he 

Treaswy. to David Fisher (Apr. 23, 2016). 

147 
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23194A.157

committee or subcommittee of the Congress wkhout a tcsumony authonza11on: 26 

C.F.R. §§ 301.9000·3(a); 301.900G-1(b) The regulations define 'IRS onklrmauon• to 

include •any information acquired by an IRS ofrtcer or employee, while an IRS officer or employee. as part of the perfonnance of official dulles." 26 C.F.R. § 301.9000· 1 (o). 

Thus, as the Internal Revenue Manual describes !his rejjulation, "former employees and 

contractors who recerte a request or demand for IRS recOtds or 1nrormalion . musl 

receove authorization to diSclose such lnformatiall." Internal Revenue Manual 

34 9.1.3(4). For your convenience, we have enclosed a copy of lh8$& materials. 

So that you may doscuss IRS information w~h the Committees in your upcoming 

Interview consistently with the IRS's Touhy regulations, we have also enclosed a 

teatimony authorizatiOn This document identifies the IRS information you are 

authorized to discuss with the Committees and Is identical In substance to those 

received by the other current and Iormor IRS employees who have been interviewed by 

tho Committees In this matter. In particular. ihe testimony authorization e1anfies that 

you are not aulhorl%ed Ia dlscloae information about Internal IRS deliberations. or 

deliberations between IRS and Treuury or other Executive Branch agencies or offices. 

regardong the cosl·shanng reduction payments under the Affordable Care Act. 

Consistent •lith longstanding practices across administrations. the Executlw Branch 

has &ognlficant oonfidentialrty interests in sueh deliberations, based on the chilling effect 

on future deliberations I hot would lneviuobly result from their disclosure 

You nave also asked about executive privilege. Ttte Supreme Court has emphasized, 

In Cheney v. U.S Oisttlct Cou~ for tho Oistncl of Columbia, 542 U.S. 367 (2004), that 

executive privile{je is 'an eX1raordonary .. sertion of power 'not to be Ughlly invoked" and 

that k should be •avo4ded whenell9r possible." As recognrzcd by President Reagan's 

1982 Memorandum on Procedures Governing Responses 10 Congressional Requests 

for lnfonmation (which continues 10 govern lhe Execul!Ve Branch's responses to 

congressional oversight), "(hJstorically, good faith nejjoliations between Congress and 

the E~ecubVe Branch have minimized lho need for Invoking executive privRege, nnd this 

tradition of accommodation should conbnue as the primary means of resolving confilcll 

between the Branches." Treasury and lhe IRS are engaged In an ongoing 

accommodation process with the Committees with respect to the matter that is the 

subject of your Interview 

Please let us know if you or your counsel has any questions regarding the polocoes and 

regulations of the IRS described above, Including the enclOsed testmony aulhorlzallon, 

or questions about your upcoming interview. As noted above, IRS and Treasury 

counsel remain available to assist you In this process. Tl'oey would be happy to meet 

wilh you 1n edv~oce of the Interview to answer your queshons or as.slst you in anyway 

thay can, and they are wt!Yng to accompany you 10 the ontervlew If you feel it would be 

bcnofldat You or your counsel mny d~eel (\uestlons to Charles Pilrtten at IIIII 

Soneerety. 

TonuzlOrita.-

Orita Tonuti 

Assoclato Chief Counsel 

Procedure & Mmrnistratron 

Wl1at the IRS' letter did not state is that 5 U.S.C. § 721 1 specifically provides that no one may 

interfere with a federal employee's right to speak to Congress. Although the IRS claims here 

that its restrictions are just like other agencies that have issued Touhy regulations, other agencies 

specifically exempt congressional information requests from their regulations' restrictions like 

148 
174 


23194A.158

HHS' regulations, or make clear that the regulations apply only in litigation, as OMB's do. 

Here, however, the IRS makes plain that it forbids its employees and former employees from 

speaking to Congress without explicit pennission from the IRS. 

Further, while Treasury lawyers told Mr. Fisher over the telephone that a "deliberative 

interest" protected the information Mr. Fisher had to share about the CSR program, Treasury 

suggested in its letter to him that they were in fact not asserting a legal privilege. Once again, 

the Department sought to avail itself of a legal privilege without explicitly claiming it. 

In addition to the cover letter and Testimony Authorization, Mr. McDougal had 

previously provided Mr. Fisher with a White House Office of Legal Counsel opinion and other 

regulations and opinions about restrictions on agency employees sharing information with 

Congress. 309 

Three days after Mr. Fisher asse11ed to Committee staff that he did not wish for Treasury 

counsel to accompany him because they did not represent his interests and Treasury sent him the 

cover letter and Testimony Authorization, on Monday, May 2, a Deputy Assistant Secretary for 

Legislative Affairs at the Department of the Treasury emailed Committee staff about Mr. 

Fisher's interview. Attaching a Testimony Authorization for Mr. Fisher, she wrote, "In addition, 

Mr. Fisher has asked Treasury counsel to attend the interview tomorrow to provide advice 

regarding the scope of the autborization."310 

Between April 28 and May 2, Mr. Fisher had two telephone conversations with Treasury 

counsel regarding his interview. In those calls, Treasury counsel provided instructions on the 

upcoming interview, including about how to respond to questions that asked about deliberative 

discussions. Mr. Fisher testified: 

Q. Did you receive any oral instructions from Treasury or the IRS 

about what you were or were not allowed to say today? 

A. Yes. 

Q. What were they? 

A. It was guidance on bow to confom1 to the restnct•ons in the 

authorization, and so we had a little role play yesterda y on the type 

of questions that could be answered and the type of questions that 

could not be answered per the authorization. 

Q. What are some examples of the questions that could not be 

answered? 

309 Fisher Tr. a! 20. 

" 0 Elllllil from Deputy Assis1an1 Sec'y, Legis. Affairs, U.S. Dep'l ofrhe Treasmy, to Maj. Oversight SraffDir., H. 

Corum. ou Ways & Means (May 2, 2016, 12:08 p.m.). 

149 
175 


23194A.159

A. So in addition to, again, the list of items here, the one that we 

spent the most time discussing was BuUet 6, which was on 

disclosing information about internal ms deliberations or 

deliber·ations between ffiS and Tt·easury or othet· Executive 

Br-anch agencies or offices regarding cost-sharing reduction 

payments undet· the Affordable Care Act. So the deliberative 

process portion was the main portion of our discussion about what 

I could or could not talk about. 

Q. How were the limitations on what you could disclose about the 

deliberative process described to you? 

A. Could you be more specific? 

Q. What was said to you about deliberative process? 

A. So, li.mdamentally, that it's the Executive Branch's position that 

communication that is delivered in a deliberative fashion that 

ultimately leads to some decision is, in essence, not authorized for 

discussion at this particular hearing, and that includes my 

recollections of wbo said what to wbom as well as my own 

recollection.s of what I might have said during tbose discussions 

!hal ultimately led up to a decision. 

Q. Who gave you these instructions? 

A. The Treasury counsel to my right. 

Q. Mr. Crimmins? 

A. And - both. 

Q. When did !hey give you these instructions? 

A. Yesterday.3 11 

As part of his conversations with Treasury, Mr. Fisher also discussed the constitutionality of 

Treasury restricting his statements to Congress. He testified: 

Q. Was that the only conversation that you had about deliberative 

process with Treasury or IRS counsel? 

A. No. 

Q. What were the other discussions? 

l ll FisherTr. at 15-17 (emphasis added). 

150 
176 


23194A.160

A. We had discussions about the - we had discussions about the 

constitutionality of the authorization. 

Q. What did you say about the constitutionally of the authorization? 

A. I expressed some doubt as to whether 0 1· not these •·cstrictions 

were not an infringement upon my own constitutional rights. 

Q. What was their response? 

A. They gave a reasoned explanation as to why and some history 

about why the Executive Branch has historically at times served to 

protect its own deliberative interest to allow people to have fre-e 

and open discussion without fear of being pointed out later on 

down the road and has embraced this - again, I'm reluctant to use 

the word "privilege", but to me, privilege of not allowing its 

employees, fom1er employees, or contractors to sort of breach that, 

which is the essence of what I see in the authorization. 312 

During the course of the phone conversations, Treasury counsel also implied that there would be 

repercussions if Mr. Fisher did not follow the Testimony Authorization instructions. He 

testified: 

Q. To your understanding, are there any repercussions if you do not 

abide by the authorization? 

A. There certainly would be repercussions or could be repercussions 

if I was still an employee. It's unclear to me what, if any, 

repercussions would occur for a former employee. 

Q. Did anyone a rticulate any repercussions tha t could be 

imposed? 

A. Not explicitly. 

Q. - if you did not abide -

A. I apologize. Go ahead and finish. 

Q. If you did not abide by the instructions. 

A. No explicitly. 

Q. Did they implicitly articulate any repe•·cussions? 

m !d. at 17- 18 (emphasis added). 

151 
177 


23194A.161

A. They represented the Executive Branch's position that the 

regulations that were in effect when I was an employee still 

cover· me and, therefor·e, if nothing else, I would be violating 

those regulations, which in and of itself is a repercussion to be 

per·baps breaki ~ a rule tbat I was under·, constitutional 

objections a side.

3 

Concerned by the pressure Treasury exerted on Mr. Fisher, and heightened by the 

discussion between Mr. Fisher and Treasury counsel about the implications of not following the 

Department's instructions, Committee counsel asked him to explain what happened betwe.en 

Thursday, April 28, when he told Conm1ittee staff that be did not believe Treasury represented 

his interests, and Monday, May 2 when Treasury staff informed the Committee that Treasury 

counsel would appear with Mr. Fisher. Mr. Fisher testified: 

Q. Will you tell this committee what changed between 5:00 on 

Thursday and 12:08 on Monday when Treasury informed the 

committee that you had asked them to attend? 

A. What changed was shortly after our phone call, I received the four 

documents that I've mentioned, the cover letter, the two 

regulations, and the testimony authorization, and I needed to 

decide the degree to which that authorization would impact my 

ability to answer some or all of your questions. 

I spoke with Treasury about this, as I mentioned on Friday. 

spoke with additional counsel. I weighed the diflerent equities 

involved between the two branches of govermnent and the two 

very different opinions that I had received in my more infonnal 

conversations with you all as well as with the Treasury counsel. 

I weighed the responsibilities associated with the regulations which 

were in effect when I was an employee, even though I, honestly, 

was not aware of them, against the First Amendment 

Constitutional protections, I think that Amanda just alluded to, and 

my conclusion was while I may have an opinion on the merits of 

those arguments, I am not in a position to be the arbiter of that 

dispute. 

If at some point in the future that the acconunodation process 

comes to some sort of different conclusion, if there is a third-party 

finding of some sort that would provide some other definitive 

interpretation of which of these conflicting pieces of guidance 

actually trumps the other, then I would be in the position again to 

take a look at that additional information and I'd always weigh 

new infonnation if it came along to see if that would change my 

m !d. at!S-19 (emphasis added). 

152 
178 


23194A.162

position; but right now, I'm not in a position to be the arbiter of 

that dispute. So I need to be conservative in my apfroach, whjch 

is to abide by the authorization I've been provided3 

Mr. Fisher was put in an untenable situation: Congress requested infom1ation from him, and he 

was willing to provide it, but Treasury threatened him with an overly broad, inapplicable 

regulation. 

Ultimately, the Ways and Means Committee subpoenaed Mr. Fisher to testifY at a 

deposition the following week. Under the Procedures for Staff Deposition Authority issued by 

the House of Representatives Committee on Rules, Treasury counsel would not be allowed to 

attend. At that deposition, Mr. Fisher spoke freely and provided detailed information regarding 

ills and Mr. Kane's concerns about paying for the CSR program from the§ 1324 permanent 

appropriation. In the time between the transcribed interview and the deposition, Mr. Fisher 

asked Treasury if it plalllled to invoke a specific privilege to protect the infonnation. He 

received no reply. Mr. Fisher testified: 

So I followed, as we all recall, the Treasury's guidance last week based on 

tills testimony authorization, which had clear limitations associated with it, 

and was unable to answer questions consistent with that and the 

administration's guidance at the transcribed interview. 

The purpose of the phone call that I initiated last week with Treasury was 

to inquire, after reading the House rules, receiving the subpoena, and 

being aware that the only restriction - or the only reason to restrict 

answering questions under the subpoena would be privilege, and posed 

that to the administration, of whether or not they were plallllillg to go to 

court and assert executive privilege around the deliberative process. 

I posed that. I did not receive an answer. I still have not gotten any 

answer back. I sent Treasury a note yesterday, so we didn' t talk, but I sent 

them a note simply identifying that I had not heard from them. I'm 

assuming or deducing that no pri vilege is being asserted and have no 

furtl1er guidance from them regarding this. 

So I'm here under subpoena. It would have been far preferable to me for 

the executive branch and legislative branch to resolve this dispute 

independently and not sort of put me in the middle of being the arbiter of 

what to say or what questions to answer and what not to answer. 

But we are here under subpoena. I have no privilege assertion from the 

executive branch, willch is the reason why I'm here to answer any of your 

questions without limitation. 

3

" ld. at 24-25. 

153 
179 


23194A.163

I wanted to walk through my thought process in trying to balance the 

equities here on the backs of an individual who should not be balancing 

those equities. Yet the admiJ~ strati on had an opportunity to try to move 

forward on some other step along the lines of privilege. They clearly have 

chosen not to do that. I'm in no position to do that. I'm here to answer 

your quest ions.'1 5 

Treasury went to great lengths to prevent Mr. Fisher from providing full and complete 

answers to the committees' questions about the CSR program- and the reasons for the 

Administration's obstmction became clear during his deposition. The answers he gave in 

provided more insight into the Administration's decision-making processes than those of any 

other individua l the committees interviewed with agency counsel present. His answers also shed 

light onto why the Administration has restricted the testimony of every other witness- going so 

far as to not letting witnesses answer questions about the names of individuals involved in the 

decision-making process- and why the Administration has failed to comply with the 

committees' document subpoenas. 

In summary, the Administration has undertaken numerous specific actions to obstruct the 

committees' investigation. The Administration has: 

• Failed to comply with the committees' subpoenas; 

• Failed to timely deliver subpoenas issued by the Committee on Ways and Means to 

Administration employees; 

• Relied on an overbroad regulation inconsistent with federal law to limit infonnation 

provided to Congress; 

Unilaterally restricted the scope of the testimony that current and fonner employees 

provided to Congress; 

• Instructed witnesses who appeared before the committees to not fully answer questions 

posed by Congress; and 

Pressured at least one witness who questioned the Administration's testimonial 

restrictions. 

The Administration took the position that all information- be it in the form of documents 

or testimony- not already publicly available are somehow shielded from congressional 

oversight without any basis in law, precedent, or fact. The Administration did so while refusing 

to assert any claim of privilege-to the extent any even apply--Qver the documents sought by 

the committees. Yet, despite refusing to assert a privilege, the Administration effectively 

m Fisher Depo. at 14- 15. 

154 
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23194A.164

asserted the deliberative process privilege in withholding documents and restricting witness 

testimony implicating, in the Administration's opinion, " internal Executive branch 

deliberations," among other purported justifications. 

Congress' oversight prerogatives would be severely undennined if an agency could 

unilaterally decide to block disclosure of intemal deliberations to Congress. This practice 

encourages agencies to withhold any documents that show flaws or limitations in the agency's 

position. Under the position advanced by the Administration here, agencies could withhold 

internal or deliberative documents from Congress for any reason imagjnable-even if they 

simply included an embarrassing comment. It is for this precise reason that the deliberative 

process privilege can be so easily overcome. And the privilege is clearly overcome here, where a 

federal district court has already ruled the actions of the Administration to be unconstitutional. 

The actions of the Administration- the self-styled most transparent administration in 

history- to conceal information about the CSR program from Congress and the American people 

are unacceptable. They may also be illegal. Obstructing a congressional investigation is a 

cnme: 

Whoever corruptly ... or by any threatening letter or communication 

influences, obstmcts, or impedes or endeavors to influence, obstmct, or 

impede . . the due and proper exercise of the power of inquiry under 

which any inquiry or investigation is being had by either House, or any 

committee of e ither House or any joint conunittee of the Congress, shall 

be fined under this title, imprisoned not more than 5 years or . .. both.316 

It is also against the law to hinder federal employees in providing infom1ation to Congress.317 

Taxpayer dollars may not be used to pay the salaries of federal officials who deny or interfere 

with federal employees' rights to furnish information to Congress in collllection with any matter 

pertaining to their employment. 318 

Tbe federal obstruction laws reflect the fact that Congress' constitutionally based right of 

access to infonnation is critical to the integrity and efficacy of its oversight and investigative 

316 18 U.S.C. § 1505. 

ll1 5 u.s.c. § 721 I. 

"' Div. E, § 713 ofP.L. 11 3-235 ("No pan of any appropriation contained inrbis or any other Act sb.all be available 

for the paymenr of the salary of any onlcer or employee of I he Federal Govenunent, who-

( I) prohibits 01' prevenrs, or anempts 01' threatens to pl'Ohibir or prevem, any other officer or employee oftbe Federal 

Govenuuent fi·om having any direct oral or written communication or contacr with any Member, committee, or 

subcommittee of the Congress in com1ection with any maner pertaining to the employment of such orber officer or 

employee or pe11aiuing to I he department or agency of such other officer or employee in any way, in·espective of 

wberher such communication or con1ac1 is at the initiative of st1ch other officer or employee or in response to the 

request or inquiry of such ~<(ember. committee, or subcommittee~ or, (2) removes. suspends from duty without pay, 

demores, reduces iu rauk, scuiol'iry, status, pay, 01' perfonnance or efficiency rating, denies prolllOtiou to, relocates, 

reassigns, transfers, disciplines or discriminates in regard to any employment right, entitlemem. or beuefil, or any 

reno or condition of employmeur of, any other officer or employee of the Federal Governmeut, or attempts or 

threatens lo commit any of the foregoing actions with respect to such other officer or employee. by reason of any 

conllllllnication or courac1 of such other officer or employee wiU1 any Member, coouuittcc, or subcommittee ofU1e 

Congress as described in paragraph (I)."). 

155 
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23194A.165

activities. Without e!Iective oversight, Congress cannot be an effective steward of the taxpayers' 

dollars. 

VIII. Conclusion 

The Patient Protection and Affordable Care Act did not- and still does not-provide 

funding for the cost sharing reduction program. The Administration knew that. Internal 

Administration memoranda acknowledged that fact. Actions taken by the Administration in 

2012 and 2013 demonstrated that tact. And iudeed, the Administration initially requested an 

annual appropriation to fund the CSR program, knowing that the ACA did not provide a source 

of funding for the program and thus necessitated further Congressional action. 

Yet, for reasons still unclear, tbe Administration informally withdrew that request by 

surreptitiously calling the Senate Committee on Appropriations, leaving no paper trail and biding 

its actions from tbe public, before Congress denied it. The Administration then concocted a post 

hoc justification to raid the premium tax credit account- which was lawfully funded through the 

31 U.S.C. § 1324 pennanent appropriation- to pay for the CSR program. It memorialized this 

legal justification in an OMB memorandum reviewed by very senior Administration officials at 

multiple departments, including tbe Attorney General himself. IRS officials expressed concerns 

about funding the CSR program through this permanent appropriation. How could the 

Administration fund the CSR program this way without violating appropriations law? But when 

they expressed those concerns, they were essentially told that the decision had been made. Like 

it or not, the Administration was going forward with funding the CSR payments through the 31 

U.S.C. § 1324 pem1anent appropriation. And it did so knowing that it would violate 

appropriations law, the Antideficiency Act, and ultimately, the United States Constitution. 

The committees persistently pursued tbe facts underlying the Administration's decision to 

illegally rund tbe CSR program through a pe•manent appropriation. Because oftbe 

Administration's obstruction, however, many questions remain unanswered. When exactly did 

the Administration decide to pull its request for the annual appropriation? Did OMB 's April I 0, 

2013 sequestration report affect that decision? Who decided that the Administration should pull 

the appropriation request and find a different source of funding, and why that was deemed 

necessary? Who instructed HHS Assistant Secretary for Financial Resources Ellen Murray to 

call the Senate Committee on Appropriations to withdraw the request? What does OMS's 

memorandum say? What did the Treasury Department redact from the final Action 

Memorandum that Secretary Lew signed? 

These questions and others remain because the Administration has ren1sed to cooperate, 

going to great lengths to obstruct the committees' investigation at every step. The 

Administration has refused to produce documents, despite lawfully-issued congressional 

subpoenas. The Administration has refused to allow witnesses to answer questions- even 

factual questions such as who and when. It has attempted to cloak its obstmction by essentially 

clainling an inapplicable legal privilege, yet insisting at every tum that it has not, in fact, claimed 

such a privilege. And in at least one instance, the Administration has intinlidated a witness to 

chillltis willingness to answer Congress' questions. 

156 
182 

f 


23194A.166

This is unacceptable. The Executive branch should not be pennitted to shield how, when, 

and why it makes decisions from the American public- especially in this instance, in wl1ich the 

Administration decided to unconslilutionally spend taxpayer dollars that Congress did not 

appropriate. Congress is a co-equal branch of govemment and the branch most accountable to 

and representative of the American people. As such, the Executive branch must respect the 

constitutional powers and duties assigned to Congress, including the power to appropriate funds 

and the duty to conduct oversight over the laws it enacts. Unfortunately, the Administration has 

failed to do so here. The American people need and deserve better from their representative 

government. 

157 
183 

Chairman BRADY. Second, Congress is always about distraction. 

So let’s knock down a couple of them right away. The distraction 

is that we can’t be doing oversight because there is litigation involved. Our Founding Fathers didn’t write in the Constitution the 

power of the purse for Congress unless a lawsuit is filed. Our 

Democratic colleagues did recognize that when they led this Committee into oversight; and Republicans who, who lead this Committee today, recognize that constitutional power of the purse and 

oversight trumps litigation every day of the week. 

Third, this is not about health care. In my view, the Affordable 

Care Act is failing 2 years in advance, but that is not this issue. 

This is about whether any White House, not just this one, any 

White House can ignore repeatedly the explicit directions of Congress that no dollars will be spent on a specified program. That is 

what is at the heart of this. And whether you are Republican or 

Democrat, you ought to be interested in this report and in this 

power because at that point there is no need for a legislative 

branch. Any White House—any White House can just pick or 

choose which programs to fund and which to ignore. 

Finally, there is still this—this investigation will continue until 

it gets to the complete truth. We have sent subpoenas for documents to every agency representative here today. Every one of your 

agencies are out of compliance with those subpoenas. You have not 

asserted a single legal privilege that protects these documents, so 

you have absolutely no reason not to hand them over. 

So Mr. Mazur, beginning with you, Treasury is months overdue 

on document subpoenas. Yes or no, you do intend to comply with 

subpoenas by the end of next week? 

Mr. MAZUR. Mr. Brady, I understand that your staff and the 

staff of the Treasury Department have been in contact to determine 

how best to respond to those subpoenas. I suspect those will be ongoing and hopefully they will be a success. 

Chairman BRADY. You know, we have been very patient and are 

trying to be accommodative to it, but it is time to deliver those documents. 

Ms. Wakefield, HHS is also months overdue on the document 

subpoenas. Does HHS intend to comply by the end of next week? 

Ms. WAKEFIELD. Sir, we have provided information and documents, and we will continue to work with the Committee to review 

the Committee’s request. 

Chairman BRADY. Mr. Deich, OMB is also months overdue on 

the document subpoenas. We have only asked for one from you. 

One. One. It shouldn’t be that hard. So does OMB intend to comply 

by the end of the week? 

Mr. DEICH. We are committed to providing the information 

sought by the Committee, and we look forward to working with the 

Committee to find a way to accommodate its interests. 

Chairman BRADY. I am going to take all of that as a yes for 

each of the agencies. 

In my view, the level of obstruction has been astonishing. This 

is a fairly direct issue. The Administration should not be hiding the 

ball on this. And the sooner we get to this and to the public scrutiny of this, the better all around. And I would encourage you to 

do that. 

184 

With that, Chairman Roskam, I yield back. 

Chairman ROSKAM. Thank you, Mr. Chairman. 

Mr. Lewis. 

Mr. LEWIS. Thank you very much, Mr. Chairman. 

Thank each of you for being here. Thank you for your testimony. 

My question is for the panel. Please explain what for us the costsharing reduction program is that was established by the Affordable Care Act? 

Ms. WAKEFIELD. Thank you for the question, sir. 

The cost-sharing reduction program was established by the Affordable Care Act to help to defray the costs of healthcare coverage 

for individuals and families, particularly—not particularly, but specifically for those that are low income up to about 250 percent of 

the Federal poverty level. And, in fact, what it does is it allows the 

defraying of costs that are out-of-pocket costs, so those costs that 

an individual would need to pay as part of a copay or a deductible, 

different from the advance premium tax credits that focus explicitly 

on helping to offset the costs of premiums. 

So this is the place, the cost-sharing reduction component, that 

for low-income people can have such a significant impact; that is, 

it can be the difference between a mom who feels comfortable taking their child to an urgent care center because they know in advance that the copay or the deductible is not going to be prohibitive 

in terms of their ability to pay. 

So the point is that this provision in this statute is really designed to help individuals offset or defray their costs so that they 

can get access to doctors, nurse practitioners, when they need access to health care. It is a really important part of the Affordable 

Care Act, particularly for those populations that are lower income. 

Mr. LEWIS. Does this program benefit the average person, the 

average Joe? 

Ms. WAKEFIELD. Yes, as a matter of fact, the program benefits 

over 6 million individuals as of about March of this year. That is 

the data that we have, that there are millions of individuals that 

are able to access physicians and other healthcare providers without what has historically been a barrier to getting health care pre 

the Affordable Care Act. That is the out-of-pocket cost that people 

would have to pay. And so about 6.4 million people, about that 

number, are currently benefiting from this provision. 

Mr. LEWIS. That is the number that are participating in this 

program at this time? 

Ms. WAKEFIELD. Approximately 6.4 million individuals across 

the United States, and States, and congressional districts all over, 

are benefiting from this program as of this year. And prior to the 

Affordable Care Act, it wouldn’t be uncommon to see individuals 

having to choose between getting healthcare coverage or paying 

rent or being able to pay for food because of the associated costs 

of coinsurance or deductibles, as I mentioned, and copays. 

So this removes that barrier for individuals that are often working families, but families that are low-income. It is a really important provision to help ensure that people have access to health 

care. 

Mr. LEWIS. Thank you very much. 

Mr. Chairman, I yield back. 

185 

Chairman ROSKAM. Thank you, Mr. Lewis. 

Dr. Wakefield, just for the point of clarification, you are 

conflating two issues: The premium tax credit directly benefits individuals; the cost-sharing reduction program benefits insurance 

carriers. That is the direct beneficiary. 

I will yield to Mr. Meehan. 

Mr. MEEHAN. I think that gets right to the issue, and this is 

the whole heart of what is disturbing about the way these representations are being made. 

Let me just start with—Mr. Koskinen, could you please get exhibit 7. You will see it up on the screen right here. And I don’t 

know if you are able to read from the screen, but you are able to 

read from the documents in front of you. Would you please read the 

yellow parts of section 1324 that has been cited by just about everybody today in the testimony? 

Mr. KOSKINEN. I cannot quite see that, but which—— 

Mr. MEEHAN. Let me read it for you then so we don’t waste 

time. ‘‘Necessary amounts are appropriated to the Secretary of the 

Treasury for refunding Internal Revenue collections as provided by 

law, including payments of’’—and then we go to 34(b), the section 

that states, ‘‘Disbursements may be made from the appropriations 

made by this section only for’’—and then it highlights number one, 

‘‘refunds for the limit of liability,’’ and number two, ‘‘refunds from 

the credit provisions of the Internal Revenue Code.’’ 

So that is the authority for the credit provision reimbursements. 

Is that not correct? 

Mr. KOSKINEN. That is the authority, yes. 

Mr. MEEHAN. So from that, you make those tax credit reimbursements. Are you able to choose to do anything else? Can you 

give any of the people there the ability to have other kinds of benefits? Let’s say they all need cars to get to appointments. Can you 

give them cars out of that account? 

Mr. KOSKINEN. No. We basically rely on legal advice as to what 

is included—— 

Mr. MEEHAN. Well, no, you rely on the legal language, correct, 

of the statute? 

Mr. KOSKINEN. Well, actually, the language, you know, there 

is a piece of litigation going on about what the language means. 

Our role—— 

Mr. MEEHAN. Well—— 

Mr. KOSKINEN. Our role is to administer the Act. And we 

made, as you know—— 

Mr. MEEHAN. Where is there ambiguity here where—because I 

am looking at the part that articulates tax credits as being specifically given. But where is the part in the appropriation that says 

that you are entitled to do cost sharing? 

Mr. KOSKINEN. Well, as you know, we have not been involved 

directly in that discussion. We are not involved in the litigation. It 

is not—— 

Mr. MEEHAN. Then let me ask Ms. Wakefield, where is the language that allows you to do the cost sharing? 

Mr. KOSKINEN. With all due deference, I am not in a position 

to enter into that legal debate about whether—— 

186 

Mr. MEEHAN. No, I am not asking you, Mr. Koskinen. Thank 

you. I am asking Ms. Wakefield now. Thank you. You have told me 

the authority for what you are enabled to do. I am asking Ms. 

Wakefield where she believes she has the authority to do that now. 

Mr. KOSKINEN. I have not done an analysis of what is included. 

Mr. MEEHAN. Ms. Wakefield, did I address you with a question, 

please? Please answer my question. 

Thank you, Mr. Koskinen. 

Ms. WAKEFIELD. It is our interpretation that the Affordable 

Care Act requires the executive branch through this section to 

make advance payments for the payment of premium tax credits—— 

Mr. MEEHAN. This is a process question. Can you point to me 

where you are entitled to do that? 

Ms. WAKEFIELD. Sir, I cannot. I am not an attorney or a lawyer. I can say that for the specific interpretation of that language, 

I would refer you to the briefs that have been filed by the Department of Justice. 

Mr. MEEHAN. No. Ms. Wakefield, we are talking about a process here, not the briefs in a legal filing. You can’t refer me to it 

because it doesn’t exist. Where in that language does it say you are 

entitled to make payments for cost sharing? Read it. 

Ms. WAKEFIELD. What I can say is that our interpretation of 

that section—— 

Mr. MEEHAN. Interpretation of what? What are you interpreting? What is—tell me—Mr. Mazur, what are you interpreting? 

Show me the point that says cost sharing is entitled to be paid for. 

This is not a complex issue. 

Mr. MAZUR. Mr. Meehan, we are not trying to make this hard 

for you, but if you look at the Affordable Care Act as a whole, there 

are cost-sharing payments that are authorized in the program. 

They are an integrated part of the program with the premium tax 

credits. And the legal briefs, as has been pointed out, filed make 

that point of how the interpretation is done. 

Mr. MEEHAN. Where do they point to the authority? This is a 

process—no, no, no, Mr. Mazur, you are in front of me. 

Mr. MAZUR. Yes, I refer you to the legal briefs to take a look 

at them. They are available. 

Mr. MEEHAN. Well, why don’t you refer to the legal briefs and 

tell me where they are. 

Mr. MAZUR. Because I don’t have the legal briefs in front of me 

at the moment, sir. 

Mr. MEEHAN. Why did you come not prepared to answer the 

very question that relates to the point that each and every one of 

you made relying on this specific provision and yet completely unprepared when I pointed out the specific language that does not 

give you that authority? 

Mr. MAZUR. Sir—— 

Mr. MEEHAN. Could you speak to the issue that it does? You 

have each used it as the basis upon which you have justified this 

decision. It clearly does not exist in statute, and arguably, Mr. 

Koskinen, you appreciate people could be criminally prosecuted for 

spending money they are not authorized to spend. I am not suggesting we go there. Where does this authority emanate from? 

Mr. MAZUR. Sir—— 

187 

Chairman ROSKAM. Mr. Crowley. 

Mr. CROWLEY. Mr. Chairman, thank you. 

First of all, I just want to clarify a point that the Chairman and 

Mr. Koskinen made, that the CSR program benefits insurers is 

misleading. That is what he alluded to, that it somehow doesn’t 

benefit the insurers. CSR directly benefits the patients by reducing 

out-of-pocket costs at the point of care. 

To make an analogy, I know my Republican colleagues love the 

Medicare Advantage program. The Federal Treasury pays the insurance company. Is that correct, Ms. Wakefield? 

Ms. WAKEFIELD. Yes. 

Mr. CROWLEY. Not the patient, correct, in a similar way in 

which the CSR is operated as well? Is that correct? 

Ms. WAKEFIELD. Yes. 

Mr. CROWLEY. But no one would say—I don’t think my Republican colleagues would say that the Medicare Advantage program 

doesn’t benefit patients. So I think you really have to be under a 

rock not to understand that the 6 million people who are getting 

a benefit today that they didn’t have before the Affordable Care 

Act, are getting that benefit because of that subsidy of the costsharing reduction program that helps them afford that coverage. Is 

that not correct, Ms. Wakefield? 

Ms. WAKEFIELD. Yes, that is correct, and it does so using a 

sliding-fee scale. That is correct. 

Mr. CROWLEY. I think it is a shame we are here today. And a 

shame and sham are very closely related. I think it is a sham as 

well. The Majority claims today’s hearing is somehow needed to 

‘‘investigate’’ the implementation of a program that helps people 

with healthcare costs. But their minds were made up well before 

they embarked on this fool’s errand to find wrongdoing where none 

existed. They started out believing that what was happening was 

illegal. They made that determination and then they filled in the 

blanks. 

I have been wondering why this hearing was needed, since after 

all, our Republican colleagues are engaged simultaneously and are 

in the middle of a lawsuit on this very matter, which I know Mr. 

Mazur and others have alluded to. But the Majority kept insisting 

that this hearing is needed to hear from all of you today, taking 

you away from important work. 

And then this morning, hours before the hearing even started, 

the Majority issued their own partisan, biased report, full of, in my 

opinion, false conclusions. And, in fact, we were asked not to—my 

understanding is when the report was given to the Committee Minority side we were asked not to—the Ranking Member was asked 

not to share that report with anyone in terms of open process. I 

guess they were so eager to hear from the witnesses they couldn’t 

even wait for you all to testify before they came to the conclusion 

and claimed the wrongdoing. 

So it’s clear to me this hearing today is only about attacking the 

Affordable Care Act and in many respects embarrassing the witnesses and the Administration and interfering with the public servants, you all, who are helping to implement this Act. 

But let’s take this opportunity to clear some things up. I am 

troubled by the charges the Majority has thrown around that the 

188 

Administration has somehow not cooperated with the investigation. 

As my colleague, Mr. Lewis, has referred to, the Administration 

has made available 13 former and current employees to talk about 

the implementation of the health reform laws cost-share program. 

I also understand the Administration has made these individuals 

available despite being sued right now by the House Republicans 

over the very same subject matter that they are engaged in, and 

now are simultaneously holding this so-called investigation on. 

Let me just ask a couple of questions, Ms. Wakefield, if I could. 

Are you aware of the fact that not a single Republican on this Committee supported the Affordable Care Act? 

Ms. WAKEFIELD. No, I wasn’t aware of that. 

Mr. CROWLEY. Would you be surprised if I told you that not a 

single Member of the Republican caucus supported the Affordable 

Care Act? Would you be surprised if I told you that? You don’t have 

to answer that. 

Would you be surprised if I told you that the Republican caucus 

has tried 60 times to overturn the Affordable Care Act? 

Ms. WAKEFIELD. No, I wouldn’t be surprised of that. 

Mr. CROWLEY. Do you know that they actually have attempted 

60 times to overturn the Affordable Care Act? You know that. Is 

that correct? 

So I think I have an understanding where they are coming from 

here in terms of this morning. They had a predetermined outcome. 

They determined what you did was wrong and then they just filled 

in the blanks in this report. I think a first grader could do that, 

but they would probably get an F from the teacher for trying to do 

something just like that. And I think the American people understand what this is. It is a sham. 

And with that, I yield back the balance of my time. 

Chairman ROSKAM. Just for the point of clarification, the Administration stipulated in the lawsuit that has been frequently 

cited here that notwithstanding the cost-sharing reduction program, it is the insurance carriers that are on the hook. So my declaration earlier is without repute. 

Mr. Holding. 

Mr. HOLDING. Thank you, Mr. Chairman. 

Mr. Mazur and Commissioner Koskinen, in preparing for this 

hearing, discussing the issues, I am going to assume that you have 

talked with people at IRS and Treasury who have been involved in 

funding the cost-sharing reduction program. Correct? 

Mr. KOSKINEN. No, I have not talked to anybody at the Treasury Department about it. As noted earlier, David Fisher’s deposition discusses the time we had a discussion about this. I had been 

at the IRS about a month, and going to Congressman Meehan’s 

point, the question was raised in terms of what was the authority, 

did we have the authority to administer the plan. 

Mr. HOLDING. Well, let me ask a little bit more specifically. So, 

Commissioner, do you know Charles Messing? 

Mr. KOSKINEN. Pardon? 

Mr. HOLDING. Charles Messing. 

Mr. KOSKINEN. Charles? 

Mr. HOLDING. Messing. 

Mr. KOSKINEN. I do not know. 

189 

Mr. HOLDING. He is the former IRS CFO. 

Mr. KOSKINEN. I am not aware of him. 

Mr. HOLDING. You don’t know him? So Mr. Messing, who is the 

former IRS CFO, gave this document here. I think it is exhibit 1, 

if we could put it on the screen. If you all could turn in your binders to exhibit 1. Each of you has it in front of you, and each of you 

will need to look at it. So Mr. Messing, the former IRS CFO, gave 

the document, which is exhibit 1, to the Treasury Inspector General when they asked for information about the premium tax credit 

program. 

Mr. Mazur, do you know who Michael Briskin is? 

Mr. KOSKINEN. I do not. 

Mr. CROWLEY. Mr. Mazur. 

Mr. KOSKINEN. Oh, sorry. 

Mr. MAZUR. It is Mr. Mazur. 

Mr. HOLDING. Mazur, excuse me. 

Mr. MAZUR. Yes, I do know who Michael Briskin is. 

Mr. HOLDING. He is the Treasury Special Counsel to the Assistant General Counsel for General Law Ethics and Regulation. And 

the metadata of the document that we are looking at show that he 

was the last person to edit this document. 

Now, the document shows that Mr. Briskin, a Treasury counsel, 

was the last person to edit the document. And the Treasury wrote 

this memo in July 2012 to OMB. And it talks about whether HHS 

could use a Treasury allocation account to make the advance premium credit payments. 

So if you are taking a look at the highlighted passage there in 

the document, this passage is contrasting the funding, the appropriation Congress gave for the premium tax credit program to the 

lack of funding for the cost-sharing program. 

Mr. Mazur, would you read the highlighted passage, please. 

Mr. MAZUR. It is not possible for me to read that highlighted 

passage. 

Mr. HOLDING. You have it in your document there. 

Mr. MAZUR. Is it highlighted in there as well? 

Mr. HOLDING. It is the last paragraph, exhibit 1. 

Mr. MAZUR. The last paragraph of the memo? 

Mr. HOLDING. Yes, exhibit 1. 

Mr. MAZUR. Sure. It says—the memo as written says, ‘‘Such a 

reading, of course, would not be applicable to the largely parallel 

language in section 1324(c)(3); there is currently no appropriation, 

to Treasury or anyone else, for purposes of the cost-sharing payments to be made under that section. However, this does not suggest that section 1412(c)(2)(A) should be read to require certification of payments by Treasury; such a reading would be equally 

inapplicable to section 1412(c)(3).’’ 

Mr. HOLDING. All right. I will stop you there. 

Mr. Mazur, are you aware that in July of 2012 Treasury’s legal 

department wrote this memorandum stating that the account the 

Administration currently is using to make the cost-sharing reduction payments was not available to make those payments and that 

there was no appropriation for the CSR payments? Were you aware 

of that in July? Were you aware of that? 

190 

Mr. MAZUR. Sir, I was not aware of this memorandum until 

today, until you brought it up. I have been in my current job since 

August 2012, when the Senate confirmed me. 

Mr. HOLDING. Okay. Mr. Deich, do you know who received this 

memo at OMB that is exhibit 1? 

Mr. DEICH. I do not. 

Mr. HOLDING. Do you know who would know who received that 

memo at OMB? 

Mr. DEICH. I do not. I arrived at OMB last year. 

Mr. HOLDING. Would you be able to find that out for us and report back to the Committee? 

Mr. DEICH. I will take that back, yes. 

Mr. HOLDING. Thank you. 

So based on this memo, OMB was aware that Treasury believed 

that there was no appropriation for CSRs in 2012. Would you consider that to be accurate, having looked at this memo and what we 

have read here, Mr. Mazur? 

Mr. DEICH. I don’t know. I don’t know who at OMB received or 

read the memo. 

Mr. HOLDING. Mr. Mazur. 

Mr. MAZUR. So I look at this as one input into a decision process not dispositive by itself, and I haven’t seen this memo before 

today. 

Mr. HOLDING. Thank you, Mr. Chairman. 

Chairman ROSKAM. Thank you. 

Mr. Rangel. 

Mr. RANGEL. Thank you. Thank you, Mr. Chairman. 

I didn’t follow that line of questioning, but is there any question 

that the four of you believe that you are following constitutionally 

the letter of the law as relates to the Affordable Care Act? Have 

you any problem with it that you are trying to follow the law? 

And in the course of reaching a conclusion of how the law should 

be enforced, from time to time there are disagreements, I assume, 

among lawyers; and that is what lawyers are for, to make certain 

this agreement so that we can get paid. So the fact that there is 

not unanimity in memos does not distract from the unanimity of 

your testimony today. Does it in any way? 

Mr. MAZUR. Correct. 

Mr. RANGEL. Do you have any doubts at all about the positions 

you have taken as it relates to the constitutionality and legality of 

the Affordable Care Act and how we are funding it right now? 

Mr. MAZUR. I have none. 

Mr. RANGEL. And, obviously, the court is a separate branch of 

government. And you, I, and Republicans and whoever will be relying on them to determine who is right and who is wrong. 

What I don’t understand and I hope some of my political friends 

on the other side of this aisle can explain is that—and I hope I 

don’t get in trouble with Reverend Lewis, but it just seems like—— 

Mr. LEWIS. Well, it will be good trouble. 

Mr. RANGEL [continuing]. Every moral concept that civilized 

countries have is you are supposed to take care of the darn sick— 

is you have a commitment to take care of the sick. And there is 

no reason for me to believe that Members of Congress don’t have 

that same compassion. 

191 

And I do believe, before the Affordable Care Act, that you received calls from people saying that my dear relative has cancer 

and the insurance company claimed they had a precondition and 

they are not going to pay for it. And I always was successful to say, 

you don’t mean to tell me that the premiums weren’t paid so you 

are not going to give the service. And we had all hoped that the 

Federal Government could take that responsibility off of us legislatively and have a program that a sick person can either get care 

or prevent themselves from getting sick. 

Now, what are we talking about? We are talking about how a 

person is eligible for care. And if they say that you need insurance 

to do it, you are talking about how they get the resources to pay 

for the insurance; but if they don’t have it, they can die. They can 

absolutely die if they don’t have the money to pay for care. 

I can see how you can disagree with Obama and Democratic majorities, but for God’s sake, if you think we are doing it wrong, you 

should have an alternative to do it right. But you just can’t say 

that people are not entitled because you don’t like the method in 

which it is being funded. 

So I just hope that, as we go through these things, that the voters would recognize that somebody cares for how they are being 

treated, in terms of their need for health care. And if they don’t 

like the way we are doing it, they certainly should come up with 

a plan to say, ‘‘We can do it better.’’ I don’t think that is asking 

too much since our offices know how many people, because of the 

inability to pay these doctors and hospitals, die because they can’t 

do it. 

So I want to thank all of you for doing your job. We write the 

law, you interpret it, and they take us to court. I wish somebody 

would say, if you don’t do it this way, at least show us how these 

people can get health care. 

Thank you, Mr. Chairman. 

Chairman ROSKAM. Thank you, Mr. Rangel. 

Let me accept your invitation, as I look over to recognize the next 

Member, the invitation to explain it from the viewpoint of one of 

your political friends—and we are political friends, and I am on the 

other side of the aisle. It goes like this. Here goes the thinking: 

Number one, you used a great phrase, ‘‘you don’t mean to tell 

me.’’ And so we have the same thing going on. You don’t mean to 

tell me that you have to violate the Constitution in order to get this 

done. You don’t mean to tell me that you are going to come before 

Congress and say one thing and go to a Federal court and say another thing, come to Congress and say this is about poor people— 

and that is the representation here. And that is what has your attention. And I respect that. 

But let’s be really clear. The Administration, in the lawsuit, stipulated that the insurance companies are going to do this regardless. They are going to get the money regardless. In other words, 

this is a subsidy for insurance companies. And so that is the scandal. 

And if this is such a great idea, then, to go back to Chairman 

Brady’s point, come clean and say: Here, here is how we came to 

this information, here are these witnesses. 

192 

And to characterize this group of people, frankly, as being helpful 

and forthcoming? They are coming up with new legal standards 

here that don’t even exist in the law. Heightened interest in confidentiality, something like that? That is a complete fiction. That 

is made up. That is nonsense. 

So that is the part that animates me, and I am inviting you to 

be animated by that, as well. Because when it all comes down to 

it, your point is, look, people need help. Our argument and what 

we are trying to drive today is, ‘‘Yes, and there is a way to do it.’’ 

And don’t tell me that you are telling a Federal judge one thing 

and you are coming before the Ways and Means to hear another 

thing. 

Let me yield to Mr. Smith. 

Mr. RANGEL. I just want to join with you. If you are going to 

sue somebody, sue the insurance company. I will join in with that 

suit and encourage the Democratic leadership. But you don’t take 

away the right and the ability of a sick person to get well. That 

is wrong—— 

Chairman ROSKAM. Great point. 

Mr. RANGEL [continuing]. Morally wrong. 

Chairman ROSKAM. And, Mr. Rangel, they have admitted in 

court that the insurance company is on the hook. 

I yield to Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

I want to follow after that conversation. 

Mr. Deich, when Congress writes an appropriations law, what 

does that law have to say in order to legally give money to that 

program? 

Mr. DEICH. I am not a lawyer. My understanding is that an appropriation has two components. One is directing that a payment 

be made, and the other, designating the source of funds that are 

used. 

Mr. SMITH. That is exactly what I think most Members of Congress believe, that when you do appropriations that is what is necessary. 

And, Ms. Wakefield, does HHS ever decide to take money from 

one program and give it to another for convenience? 

Ms. WAKEFIELD. No, sir. Sir, we follow the expectation—— 

Mr. SMITH. Wait, was your answer ‘‘no, sir’’ at the beginning? 

The mike wasn’t on. 

Ms. WAKEFIELD. Yes. 

Mr. SMITH. Okay. 

Ms. WAKEFIELD. That was my answer. 

We follow the expectations that are laid out in the statutes that 

are associated with the programs that HHS has responsibility for 

implementing. And so our actions derive from our interpretation of 

the statutes, and that is the basis for our implementation of our 

programs. 

Mr. SMITH. Your actions rely on the statutes. 

Ms. WAKEFIELD. That is correct, on our interpretation—— 

Mr. SMITH. And based on the appropriations, that is how you 

distribute money. And if you distributed money any other way, that 

would be against the law, correct? 

193 

Ms. WAKEFIELD. So our actions are based on our interpretation 

of the statute, and that is associated with authorizing language as 

well as with appropriations language. 

Mr. SMITH. So if appropriations are passed saying money will 

be disbursed out of this fund for this purpose, if you disburse it any 

other way, that would be a violation of that appropriation, correct? 

Yes or no. 

Ms. WAKEFIELD. We interpret the statutes—— 

Mr. SMITH. It is a yes-or-no answer. Is it yes or no? 

Ms. WAKEFIELD. Well, sir, we interpret the statutes—— 

Mr. SMITH. So it depends is what you are telling us? Just yes 

or no or it depends, one of the three. 

Ms. WAKEFIELD. Our responsibility is to—— 

Mr. SMITH. Okay. 

Let me read this letter, okay? In a letter, Senators Cruz and 

Lee—this was a letter to Senator Cruz and to Senator Lee from 

Secretary Burwell. 

And it says, ‘‘To improve the efficiency and the administration of 

the subsidy payments made pursuant to the ACA for insurers as 

well as the Federal Government, the cost-sharing subsidy payments are being made through the Advance Payments program and 

will be paid out of the same account from which the premium tax 

credit portion of the advance payments for that program are paid.’’ 

Secretary Burwell did not give a statutory basis for using the account. She just said it was for efficiency. 

Mr. Deich, have you ever seen any other situation in which the 

executive branch used money appropriated for one program to pay 

for a different program and justified it solely because of the convenience or for efficiency? 

Mr. DEICH. Congressman, thank you for your question. 

In the present instance, the Administration made the payments 

based on the existence of an appropriation. 

Mr. SMITH. Have you ever seen Congress make an appropriation determination based on the efficiency or based on their convenience? 

Mr. DEICH. I am sorry, I didn’t hear the question. Say it again. 

Mr. SMITH. Let me repeat the question again, because you 

didn’t answer it. 

Mr. Deich, have you ever seen any situation in which the executive branch used money appropriated for one program to pay for a 

different program and justified it solely because of convenience or 

efficiency? 

Mr. DEICH. I have not. And, as I mentioned earlier, in the 

present instance, it is our belief—— 

Mr. SMITH. Today you have. 

Thank you, Mr. Chairman. 

Chairman ROSKAM. Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. 

I am going to read from a letter to the editor of Newsweek from 

the Cook County president, Toni Preckwinkle, as she responds to 

Newsweek magazine’s March 4, 2014, article, ‘‘How Obamacare 

May Lower the Prison Population More Than Any Reform in a 

Generation.’’ 

194 

And she says, ‘‘Cook County, home to 130 municipalities, including the city of Chicago, is the second-largest county in the United 

States. As president of Cook County’s Board of Commissioners, I 

am charged with overseeing an overburdened criminal justice system, which includes one of the Nation’s largest jails. I commend 

Newsweek for recognizing the vital connection between Obamacare 

and safer communities.’’ 

How Obamacare May Lower the Prison Population More Than 

Any Reform in a Generation, March 4, 2014. 

‘‘In November 2012, Cook County was granted a Medicaid waiver 

that has already allowed us to provide health insurance to over 

86,000 low-income residents, including 2,600 formerly detained individuals. For the first time, many of these people are now receiving mental health and substance abuse treatment, supported by 

preventive physical health care in their communities. 

‘‘These efforts mean those with criminal records are less likely to 

return to our jail, while others will never make the first trip into 

detention. When a young person struggling with depression gets 

treatment instead of access to street drugs, it puts him or her on 

the path to a productive life. We can realize lower rates of incarceration and recidivism in 2014 by seizing the opportunity Obamacare 

has created.’’ 

Deputy Secretary, do these individuals receive the benefit from 

shared-cost reductions? 

Ms. WAKEFIELD. Thank you for the question. 

Individuals with an income between 100 and 250 percent of the 

Federal poverty level are eligible for the benefits associated with 

the cost-sharing reduction provisions of the statute. And it is a provision that is really important for low-income individuals and families, because it helps to offset and defray the costs that are out-ofpocket costs when individuals access healthcare services. 

So, certainly, no doubt, some of the individuals in the population 

you have just described, sir, would be probably eligible for that particular benefit. 

Mr. DAVIS. And if we did not provide care for them, would they 

have any other recourse, any other place, any other source, or any 

other way to do anything except, as Representative Rangel suggested, die? 

Ms. WAKEFIELD. So those out-of-pocket costs can be a barrier 

to individuals getting access to health care services. Individual 

families will make decisions on occasion about whether or not the 

money they have available would be used to pay for a deductible, 

for example, or a copay to see a doctor to have their child taken 

care of, for example, or that that money would be stipulated in that 

family’s budget for use for some other purpose. 

So choices would, historically, before the Affordable Care Act, for 

families, many families, would have needed to have been made, especially those families that are—well, the families that are lowerincome families. So those were tough choices that impacted individuals. 

And I can tell you, as a nurse, as a registered nurse, it is really 

important, from my vantage point, that people are able to access 

care when they need it. And this provision helps to remove what 

has been a barrier for many individuals to access health care when 

195 

they need it because of their low-income status and limited funds 

that they have to pay for healthcare services versus some other 

choice. 

Mr. DAVIS. Thank you very much. 

I yield back, Mr. Chairman. 

Chairman ROSKAM. Thank you, Mr. Davis. 

Mr. Reed. 

Mr. REED. Thank you, Mr. Chairman. 

Deputy Secretary, I want to focus in on some of the decisionmaking processes that happen at the Department of Health with 

this issue. 

Are you aware that in fiscal year 2014 there was an appropriations request made to the Senate for reimbursement of the costsharing payment? 

Ms. WAKEFIELD. It is my understanding that in the fiscal year 

2014 budget there was a request for appropriations to fund the 

cost-sharing reduction provisions. 

Mr. REED. So that request was made by the Administration to 

the appropriations process, to have it funded through the discretionary appropriations process that we deal with here in Congress, 

correct? 

Ms. WAKEFIELD. I believe that is correct—— 

Mr. REED. I think you are accurate. 

Ms. WAKEFIELD [continuing]. I believe. 

Mr. REED. Then, 2015, that appropriations request did not seek 

reimbursement for the cost-sharing reduction payment. Isn’t that 

correct? 

Ms. WAKEFIELD. I believe that for fiscal year 2015, in the 

President’s budget, that the conclusion was made that the executive branch was required to make cost-sharing reduction payments 

using permanent appropriations and to fund CSR. 

Mr. REED. So isn’t it fair to say, then, 2014, the Administration 

requested an appropriations request for this cost-sharing payment; 

2015, they did not make that request for the appropriations payment and they went a different route, they went down this mandatory spending, this provision that we are relying upon that is in the 

lawsuit? That is where we are at, correct? 

Ms. WAKEFIELD. As I said, the conclusion that was drawn for 

fiscal year—the conclusion that was made, it is my understanding, 

for fiscal year 2015’s President’s budget was that the executive 

branch was required to make appropriations available to fund the 

cost-sharing reduction provisions of the law. 

Mr. REED. Because the appropriation was denied in 2014. 

The other question I have then for you is, you have in your testimony asked us to look at the briefs, to get to some of the details 

here. And are you aware that in the briefs the court asked the 

question of the Administration lawyers, what caused you to withdraw that appropriations request from 2014 to 2015? Are you 

aware of the court asking that in the litigation? 

Ms. WAKEFIELD. No, I am not aware of that. 

Mr. REED. They did. They did. 

And then the Administration’s lawyers responded to that request 

of the court and said, ‘‘The reference of withdrawal is to OMB’s 

submission of the fiscal year 2015 budget, which did not request a 

196 

similar item. Defendant’s counsel did not intend to suggest that 

there was a separate formal withdrawal document and apologizes 

for being unclear on that point.’’ That was the representation of the 

Administration to the court. 

Now, are you aware of an Ellen Murray? 

Ms. WAKEFIELD. Yes. She is the Assistant Secretary for Financial Resources at the U.S. Department of Health and Human Services. 

Mr. REED. And are you aware she made a phone call to the Senate Appropriations Committee asking them to withdraw or to not 

provide that cost-sharing payment? 

Ms. WAKEFIELD. I was not in the position that I am currently 

in, as the Acting Deputy Secretary, during the fiscal year 2014– 

fiscal year 2015 budget process that you described—— 

Mr. REED. So you weren’t there. 

Ms. WAKEFIELD. I wasn’t there, so I can’t speak to conversations. 

Mr. REED. I anticipated you saying that. But the question is— 

the record is very clear. Ms. Murray made that phone call. She 

made that phone call to the Senate Appropriations Committee to 

withdraw that request. I think that is going to be—that is undisputed, as to what happened there. 

The question I am going to ask you is—I am going to give you 

an opportunity to come clean. Do you know who directed her to 

make that call? 

Ms. WAKEFIELD. Sir, I wasn’t in my current position at that 

time. I was the Administrator for the Health Resources and Services Administration. I have no knowledge of a call that was made 

or—I have no knowledge of a call that was made. 

Mr. REED. Have you ever had any conversations with anybody 

at the Department of Health about Ellen Murray’s phone call to 

the Appropriations Committee? 

Ms. WAKEFIELD. I have no knowledge of a call that was made 

by Ellen Murray. 

Mr. REED. Have you talked to anybody at the Department of 

Health about that phone call? 

Ms. WAKEFIELD. No. I have no knowledge of that call. 

Mr. REED. Okay. So this is the first time you have ever had a 

conversation about Ellen Murray’s phone call, with me here today. 

Ms. WAKEFIELD. I have no knowledge of that call, Congressman. I have—— 

Mr. REED. No, no, no, not that you don’t have knowledge. Have 

you had a conversation? Other than our conversation right here 

today, have you had a conversation in the Department of Health 

about Ellen Murray’s phone call to the Appropriations Committee 

to withdraw the request? 

Ms. WAKEFIELD. In coming into the Committee today, Congressman, I was informed that there was the possibility of a call. 

Somebody mentioned in passing to me, Congressman, that there 

was a conversation that had—I am sorry, I am trying to catch it 

exactly correct. 

I was, I think, informed that a conversation had been made by 

Ellen Murray with an Appropriations staffer. I have no knowledge 

of—— 

197 

Mr. REED. Who did you have that conversation with? 

Ms. WAKEFIELD [continuing]. The details of that call. 

Mr. REED. Who told you that? Who told you that? 

Ms. WAKEFIELD. Oof. 

Mr. REED. In preparation for your Committee testimony 

today—— 

Ms. WAKEFIELD. Yes, that is right. So this was in preparation 

for the Committee. 

Mr. REED. Who told you that? 

Ms. WAKEFIELD. I am trying to remember. 

Mr. REED. You don’t even remember who told you that in preparation for the Committee? 

Ms. WAKEFIELD. Congressman, we do a lot of prep with different individuals coming into the—— 

Mr. REED. So who did you prepare with in preparation for today’s testimony? 

Ms. WAKEFIELD. Sure. So I prepared—— 

Mr. REED. Give me names. 

Ms. WAKEFIELD. Excuse me? 

Mr. REED. Give me names. 

Ms. WAKEFIELD. Yes. So I prepared with individuals from different parts of the—— 

Mr. REED. Names. 

Ms. WAKEFIELD. Well, the individuals that I prepared with included Kevin Barstow—bear with me, please, because this is over 

the course of the last few days—Hannah Bumsted. Let’s see—— 

Mr. LEWIS. Mr. Chairman, I am going to object. The Member’s 

time is over. I don’t think he should be harassing—— 

Mr. REED. This isn’t harassment, Mr. Lewis. 

Chairman ROSKAM. I mean, I was just letting her complete her 

statement, and then I was going to interrupt. 

Ms. WAKEFIELD. Yes. And sorry, there are just a number of 

individuals. So, in preparation for this meeting—Congressman, I 

am not trying to obfuscate. I am actually trying to remember the 

names of the individuals. There—— 

Mr. REED. That is the problem. 

Ms. WAKEFIELD [continuing]. Are a number of them. 

Mr. REED. You obfuscated to the court, and you are not being 

truthful here today. 

Chairman ROSKAM. The gentleman’s time—— 

Mr. LEWIS. Mr. Chairman? 

Chairman ROSKAM. I got it. I got it. 

The gentleman’s time has expired. 

Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

I always like to come to a session of the theater of the absurd. 

It is an old period in the theater in which things are very strange 

on the stage. 

What I find interesting in the theater of the absurd today is that 

we have Mr. Koskinen here as a witness. Now, he is the guy that 

this Committee and this Congress, on the Republican side, is trying 

to get rid of or dismiss as the IRS head, but he is good enough to 

come here and testify. 

198 

So I am glad to see you here, Mr. Koskinen. I appreciate your 

public service. 

Now, what is the theater of the absurd here is that he sits as 

an administrator in which people argue in front of about what decision he should make, about how money should be spent, or how 

money should be spent in a particular program that is in law, and 

there are disputes. 

I sat in a deposition and listened to some employee of the department say that there was a big dispute. And then he went on to say 

that Mr. Koskinen made the decision that 99 percent of the people 

would make—that is, to pay out these payments. 

The witch hunt that is going on here is really about discrediting 

the IRS. Because the Speaker himself has said we care about poverty, we really care, we Republicans are really worried about poverty. This was a program to help poor people get health care. It 

was to give them the ability to buy and deal with some of the problems that come up for folks that don’t make $170,000 a year like 

we do. Everybody on this dais does not have problems with healthcare payments, but there are a lot of people out there in the world 

who do. 

And we put a program together, and instead of coming in here 

to fix it—if it was an appropriation, then fix it. That would be a 

simple bill, almost a consent calendar bill, if people were serious 

about fixing it. But this is not about fixing it. This is about a witch 

hunt for somebody in the IRS who sent a letter or made a phone 

call or did something. 

Now, I find it very hard to see how a public administrator—have 

you ever had any decision, Mr. Koskinen, before you that did not 

have people on both sides of it? 

Mr. KOSKINEN. As a general matter, the only decisions that 

come to me are where there are close questions or arguments on 

both sides of the question. 

Mr. MCDERMOTT. And what is the process you go through in 

dealing with those kinds of things? 

Mr. KOSKINEN. Well, as Mr. Fisher noted in his deposition, 

from the day I started—and the meetings involved here were in my 

first month—I have always said that at any meeting everyone in 

the meeting should feel comfortable and, in fact, obligated to raise 

any questions or concerns they have. 

And, in fact, Mr. Fisher and I were setting up an enterprise risk 

management program, where my goal was to have every IRS employee view themselves as a risk manager who not only should feel 

comfortable raising concerns or issues but really has an obligation 

to let us know. 

So my way of running meetings is everybody in the meeting 

should feel comfortable—if they have a question or an issue to be 

raised, they should be comfortable raising it, and, in fact, it is their 

obligation to raise it. 

Mr. MCDERMOTT. And then, when that process is done, you 

have listened to all of them, you make a decision. 

Mr. KOSKINEN. That is correct. 

Mr. MCDERMOTT. And the buck stops at your desk, more or 

less, is how it would be put in Harry Truman’s terms, correct? 

Mr. KOSKINEN. That is correct. 

199 

Mr. MCDERMOTT. Now, has there ever been a decision you 

made where you think, well, I could have gone the other way, but— 

maybe I should have gone the other way? Have you ever questioned yourself afterward? 

Mr. KOSKINEN. Well, if you run meetings the way I have been 

running them for my 45-year career and you see all of the issues 

before you, as a general matter, I have not then felt that I had to 

make second choices or a concern about that, because I have heard 

from very smart and able people on both sides of the issue. There 

is usually a consensus that develops. 

And that is what happened in this meeting, as Mr. Fisher noted. 

By the time we got through analyzing it and looking at the legal 

advice we had, the consensus was the IRS was authorized to go forward with its administrative responsibilities, which we did. 

Mr. MCDERMOTT. Thank you for your service as the Director 

of the IRS. 

Mr. KOSKINEN. Thank you. 

Mr. MCDERMOTT. I yield back the balance of my time. 

Chairman ROSKAM. Thank you. 

Part of the challenge in coming into act three of the theater is 

that you missed the two previous acts. The point I made in my 

opening statement was that this decision was largely made at the 

time the Commissioner showed up at the IRS. So this was basically 

a done deal. 

Let me also point out that the Commissioner is the only person 

who accepted our invitation to be here. He was invited, he accepted 

the invitation, and here he is as a witness. The other three witnesses are here basically by threat of subpoena, and it was like 

passing a kidney stone to get these people to come here. So the 

Commissioner is in very much a different posture, and that was 

very clear in my opening statement. 

Let me yield to Mr. Rice. 

Mr. RICE. Thank you, Mr. Chairman. 

And I am going to follow up on Mr. Reed’s questions to Mrs. 

Wakefield. 

Did you know that the Administration’s lawyers in the ongoing 

litigation regarding this matter wrote that the Administration did 

not withdraw its request for the appropriation, but later on, in the 

process of preparing for this, in our investigation, Ellen Murray in 

fact said that she was directed by somebody—that is unclear, who 

that was—to call Senate Appropriations and say that we no longer 

needed the money, the Administration no longer needed the 

money? Were you aware of that? 

Ms. WAKEFIELD. No, sir. I have no knowledge of the circumstances that you just described. I do not. 

Mr. RICE. Okay. Well, so if the Administration’s lawyers in the 

course of this litigation said that there was no withdrawal but, in 

fact, Mrs. Murray did actually call Senate Appropriations and withdraw, that would be somewhat of a misrepresentation to the court, 

wouldn’t it? 

Ms. WAKEFIELD. I am unaware of the context or the specific 

circumstances that you have just described. Sorry. I was not in my 

position at the time of—— 

Mr. RICE. Thank you, Mrs. Wakefield. 

200 

I want to talk to you, Mr. Mazur. You know, we work for the 

same people, the American people. And President Obama promised 

the American people the most transparent Administration in modern history. But experience has proved exactly the opposite. 

With a string of lies and scandals and coverups in the IRS and 

in other areas of government, from Lois Lerner and Jonathan 

Gruber, to things that you said to this Congress, Commissioner 

Koskinen, to Susan Rice, to Hillary Clinton, Eric Holder, James 

Clapper—it goes on and on—it is just not surprising that the 

American people have lost faith in our government. 

Mr. Mazur, I am trying to understand—I am looking at your 

memo of January 15, 2014, which I assume you have in front of 

you, and I am trying to understand your justification for using 

1324(b). What I don’t understand is why you can’t clearly answer 

that question, why it has to be confused, duck and cover. I want 

to know—this memo, you prepared it, right? Your name is on it. 

Mr. MAZUR. Correct. 

Mr. RICE. How many memos do you do, action memorandums, 

for Secretary Lew? How often do you do that? 

Mr. MAZUR. I have probably written hundreds of memorandums 

to Secretary Lew over the time that I have been there. 

Mr. RICE. Whose initials is that where it says ‘‘approved’’ there? 

Mr. MAZUR. Excuse me? 

Mr. RICE. The initials where it says ‘‘approved’’ on the memo, 

is that Secretary Lew’s? 

Mr. MAZUR. Those would be Secretary Lew’s initials, yes. 

Mr. RICE. That is Secretary Lew’s? All right. 

When it gets down to the part of justifying why you believe that 

the payments are appropriate under section 1324(b), that entire 

paragraph is redacted. Why would that be redacted? 

Mr. MAZUR. Really, that is—— 

Mr. RICE. Is there some privilege that you want to assert? Is 

this a top-secret matter of national security? Why would that be redacted? Why wouldn’t you share that with the Congress and the 

American people? 

We both work for the same people. All we are asking for is what 

President Obama promised, and that is transparency. Why would 

that be redacted? 

Mr. MAZUR. Sir, I agree we all work for the same American people. I also think that the Treasury Department has been working 

with your Committee to give you the information you need—— 

Mr. RICE. Oh, really? So here we sit, a year and a half later, 

and we still don’t know the justification in this memorandum for 

why you believe these cash payments should be taken out of 

1324(b). 

You say you have been working with us, but yet you redact the 

very crux of it in this memorandum. The most important paragraph is taken out of this memo. Why would you hide that from 

us? Why is it a constant, constant stream of scandals and coverups and obfuscation? Why is that? 

Mr. MAZUR. Sir, first, I am going to respectfully disagree with 

you on the scandals part. I don’t think there has been a set of scandals in this Administration. 

201 

Mr. RICE. Well, I mean, the Congress had to take the unprecedented action of suing the Administration to get to the bottom of 

this because of continued ducking, covering, hiding, obfuscation. 

Why do we have to go to the courts to get these answers? 

Why are we sitting here today, a year and a half into this investigation, and you still won’t lay out the specifics of your memorandum of January 15, 2014, which—the public has the right to 

know this information. Why is it that we continuously are faced 

with these lies and coverups? 

Mr. MAZUR. Sir, the House of Representatives has taken the unprecedented action of suing the Administration over this political 

disagreement. And that is where it stands right now. It—— 

Mr. RICE. Political disagreement? We don’t even know what we 

are disagreeing about because you won’t even tell us your position. 

Chairman ROSKAM. Mr. Marchant. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

I would like to ask the panel today if any of you consider the tax 

refund account a slush fund. 

Mr. MAZUR. Sir, no. It is used for appropriate purposes. 

Mr. MARCHANT. Okay. So is there any precedent, is there any 

other time in history where the tax refund account—and, Mr. 

Koskinen, Mr. Commissioner, you certainly don’t view that tax refund account as a slush fund that can be tapped for political reasons. 

Mr. KOSKINEN. Absolutely not. We would only—— 

Mr. MARCHANT. I think—— 

Mr. KOSKINEN. We only run a program with—— 

Mr. MARCHANT. I think that every member of the panel can 

agree that that is not the intent of that fund. And all of you should 

be concerned that that is the way it was actually, in effect, used. 

The Administration had a real clear choice to come to the Congress and ask for that money. It is in the legislation. It allows the 

Administration, or Health and Human Services, to come to the 

Congress, get that appropriation so that they can make those payments to the insurance company. Is that correct? Yet they chose 

not to do it this year. Why? 

Well, I can tell you. Back in my district, Obamacare is one of 

the most unpopular programs the Federal Government has ever 

printed. And it is my opinion that the Administration knew that 

if it came to Congress for that appropriation it was going to have 

trouble getting it. 

So, Ms. Wakefield, if those insurance companies don’t get that 

amount of money, what do they do to recoup the money? 

Ms. WAKEFIELD. Congressman, it is our intent that, through 

the litigation, that the—— 

Mr. MARCHANT. No, not the litigation. Just from a practical aspect, don’t the insurance companies have to raise their premiums 

if they do not get that reimbursement? 

Ms. WAKEFIELD. Sir, it is our view that the Administration will 

prevail in the position that we have taken in litigation—— 

Mr. MARCHANT. No. I am talking about, just from a practical 

standpoint, if those insurance companies don’t get that amount of 

money, they are going to have to raise their premiums to recoup 

their costs so they don’t go broke. 

202 

So my opinion is that there was no appropriation sought. The 

money was available in this fund. It was readily available through 

a—looks like a very complicated process. They got everybody on the 

same page and got this money, tapped this money, and sent it to 

the insurance companies, primarily so that the insurance companies would not have to go up on their premiums so that the program would not be—it would not be disclosed earlier than it is 

being disclosed this year and next year, where in Texas I think 

Blue Cross-Blue Shield has said that in some areas they are going 

to have to go up as much as 60 percent on the premiums just so 

they don’t go broke. 

So this was all political. This was all done for political expediency, to keep the insurance companies from going up on the premiums so that the Obamacare program would not appear to be insolvent and not working and going broke. 

So is there any precedent in government for these kinds of funds, 

this fund particularly, being used this way? Do any of you know 

of another instance in your career where the tax refund account 

was used for this purpose? 

Mr. MAZUR. Sir, the Administration’s position is that it is an integrated system of the premium tax credits and the cost-sharing 

payments, and it is appropriate to make them out of the permanent 

appropriation. That is what the law—the law is very clear that 

these payments shall be made. And so, interpreting that statute, 

that is the conclusion that we came to. 

Mr. MARCHANT. And of all the thousands of Federal programs 

out there, has the Administration—has any Administration ever 

reached the conclusion that the tax refund account was the place 

to go to fund a program that it did not want to go to Congress and 

get its appropriation for? 

Mr. MAZUR. Sir, again, this is an integrated system of payments 

that are made to the insurance companies on behalf of individuals, 

and the Administration believes it is appropriate they come out of 

the same account. 

Mr. MARCHANT. So, as a public policy moving forward, I would 

just challenge the witnesses from your standpoint and the positions 

that you hold. We consider, Congress considers this a breach of 

faith, not just an illegal, unconstitutional act, but a breach of faith 

of what your duties are. 

And I would urge you, if you are ever presented with this situation again, whether the courts rule one way or the other, to take 

this kind of action very seriously. 

Thank you. 

Chairman ROSKAM. Mrs. Black. 

Mrs. BLACK. Thank you, Mr. Chairman. 

Mr. Mazur, so let’s just establish, first of all, you are the Treasury Assistant Secretary for Tax Policy, correct? 

Mr. MAZUR. That is correct. 

Mrs. BLACK. Okay. And is it fair to say that you are familiar 

with how tax credits and refunds work? 

Mr. MAZUR. I am familiar with a lot of parts of the tax law, yes. 

Mrs. BLACK. Okay. So the ACA premium tax credit is paid out 

of a permanent appropriation given to the Treasury at 31 U.S.C. 

1324, right? 

203 

Mr. MAZUR. I believe that is correct. 

Mrs. BLACK. Okay. And that appropriation is set up to pay for 

other tax refunds and credits, as well. Is that correct? 

Mr. MAZUR. I believe it is a permanent appropriation to do so, 

yes. 

Mrs. BLACK. Okay. 

Are cost-sharing reductions a tax credit? 

Mr. MAZUR. Ma’am, again, you need to go back to the Affordable 

Care Act as a whole and look at the cost-sharing payments and the 

premium tax credits as an integrated set of payments that are 

made. 

Mrs. BLACK. Can you show me in the bill, in section 1402, 

where the cost-sharing reductions or tax credits are—excuse me? In 

CSR, in 1402, is where the cost-sharing is actually talked about. 

Can you show me in there—because you keep using this word ‘‘integrated,’’ and that is an assumption, because I have read that section over? And I would like to know—maybe I am not reading it 

correctly—can you show me in there where it actually says that 

that is a cost-sharing reduction that goes back to a tax credit? 

Mr. MAZUR. Ms. Black, I don’t have that in front of me right 

now, so I really can’t point to the language. 

Mrs. BLACK. But if you keep on saying it is integrated, then you 

have to be able to report—you have to somewhere show me that 

there is not an assumption made here. Because you keep using this 

word, ‘‘integrated.’’ I can’t find the word ‘‘integrated’’ anywhere in 

this section. So you keep using that word, ‘‘integrated,’’ when it is 

not in the law. Do you not have to abide by the law? 

Mr. MAZUR. Ma’am, we are looking at the Affordable Care Act, 

and the intent of the law is that these payments are made to insurance companies, much like the premium tax credits are made. 

Mrs. BLACK. Yes. The intent is that the insurance companies 

would reduce the cost. That is the cost-sharing reduction piece of 

this. It does not say in here—and, again, I want you to point somewhere in this section that actually says that. Because if that 

doesn’t say that and it is not clear, then what it does say is that 

it should be an annual appropriation and not an appropriation that 

is a mandatory appropriation. Is that not—— 

Mr. MAZUR. Congresswoman Black, I mean, I think you can 

look at this in a somewhat different way. If Congress doesn’t want 

the moneys appropriated, they could pass a law that specifically 

said, do not appropriate the moneys from that account. 

Mrs. BLACK. That is not my understanding, sir. And you are an 

expert in this area. So what you are saying is, if it is left without 

direction, that it can just be made a mandatory? Is that what you 

are telling me? 

Mr. MAZUR. I am saying that the Affordable Care Act—and I 

think the legal piece we referred to goes to this. The Affordable 

Care Act directs the executive branch to make these cost-sharing 

reduction payments. And these payments are of a piece with the 

same payments that are made to the insurance companies under 

the premium tax credit. And that is the justification for using the 

same account. 

204 

Mrs. BLACK. So the justification comes because the Administration then decides that that is the way they want to do it, even 

though it is not stipulated in the law. 

Mr. MAZUR. And, frankly, if you would like to make the law 

clearer, you could pass an appropriation law that said, do not make 

them. 

Mr. MEEHAN. Would the gentlewoman yield for one second? 

Mrs. BLACK. I would yield. 

Mr. MEEHAN. Mr. Mazur, we discussed this point. It clearly articulates, ‘‘Disbursements may be made from the appropriations 

made by this section only for refunds due from credit provisions in 

the Internal Revenue Code.’’ That is section 1324. What is ambiguous about that? 

Mr. MAZUR. Again, sir, as we were talking about earlier, the 

legal interpretation of the Administration is that section 1324 of 31 

U.S. Code allows for these cost-sharing payments to be made. 

Mr. MEEHAN. ‘‘Only for.’’ And it points out, you asked Congress 

to give you direction. Congress gave you direction. And it said ‘‘only 

for’’ and then told you what you could spend it on. 

Mr. MAZUR. Sir, Congress gave—— 

Mr. MEEHAN. And then you went beyond and spent it, because 

you determined that you could spend it in an area that was not authorized by Congress. 

Mr. MAZUR. Sir, Congress gave direction to the executive branch 

in the Affordable Care Act to make these cost-sharing reduction 

payments—— 

Mrs. BLACK. I am reclaiming my time. 

Mr. MAZUR [continuing]. To help low-income individuals pay for 

their healthcare insurance. 

Mrs. BLACK. And reclaiming my time, can you—and I know we 

are going to be out of time, but can you specifically show me where 

that authority is? Because I don’t see that authority in this bill. 

Mr. MAZUR. Congresswoman Black, I don’t have that in front of 

me, but I can take that back and get back to you. 

Mrs. BLACK. Thank you. 

Chairman ROSKAM. Mr. Renacci. 

Mr. RENACCI. Thank you, Mr. Chairman. I want to thank you 

for holding this hearing and allowing me to attend and participate. 

I do believe one of Congress’ most important roles is oversight and 

that it is important we have this hearing. 

I am trying to get a timetable here, and I am noticing that, in 

going back to some of the testimony, that HHS had actually requested almost $4 billion in funds at some point in time, early 

2013, as part of the budget process. So it looks like they were looking to fund these dollars through the appropriations process. 

But, at some point in time, OMB released a report—actually, it 

was the 2014 sequestration report—that said that these funds 

would be subject to sequestration. 

And then I noticed that HHS Assistant Secretary for Financial 

Resources Ellen Murray testified that she withdrew the request before the Senate Appropriations Committee released its appropriations bill in July of 2013. 

So, at some point in time, the Administration was looking for 

money. At some point in time, the Administration realized it 

205 

couldn’t get the money they needed through the appropriations 

process so it would be through sequestration. So then, all of a sudden, at some point in time, the Administration decided to look elsewhere. And it also appears, then, late in 2013 is when they started 

looking toward the premium credit account. 

The Committee also heard testimony that the IRS Deputy CFO 

raised red flags about the Administration’s plan to make the costsharing reduction payments from the premium tax credit account 

in late fall. So there were red flags going up in late 2014. 

Mr. Mazur, did you personally know that the people at the IRS 

were concerned about this plan in the fall of 2013? 

Mr. MAZUR. Not at that time, no. 

Mr. RENACCI. You found out later? 

Mr. MAZUR. I am aware—you have gone through the timeline 

right now. 

Mr. RENACCI. Okay. Was anybody else in the Treasury aware 

of it at that time? Because, again, the IRS was throwing up red 

flags. 

Mr. MAZUR. I can’t speak for other people at the Treasury Department, sir. 

Mr. RENACCI. We also understand that the former Chief Risk 

Officer was also concerned. He was worried the payments would 

violate the Constitution—wow, violate the Constitution—and the 

Antideficiency Act. You all know the Antideficiency Act is a criminal law that prohibits government officials from making payments 

without an appropriation. So people were getting concerned. 

So the IRS General Counsel and OMB General Counsel arranged 

for seven IRS officials to come to OMB and view the memo. The 

OMB General Counsel told them that they were not allowed to 

take notes or take the memo with them. 

Mr. Deich, is this common, to have meetings like this where, you 

know, you can’t take notes and you can’t take the memo? It just 

seems unusual. Red flags were flying, we are going to have this 

meeting, can’t take any notes, don’t take the memo. Is this normal? 

Mr. DEICH. I wasn’t here at the time, and I can’t speak to the 

specifics of the circumstance. But, as a general matter, I don’t 

think it would be highly unusual for issues that are still under discussion to be considered by sharing the information in a memo but 

not allowing materials to be brought—— 

Chairman ROSKAM. Mr. Deich, just—I didn’t hear. Did you say 

‘‘highly usual’’ or ‘‘highly unusual’’? 

Mr. DEICH. It would not be highly unusual to share information 

in this way. 

Mr. RENACCI. You are right, it wouldn’t be highly unusual, because it was an issue that was concerning people. You had red 

flags all over the place. The IRS was concerned. 

We have testimony the IRS officials got back to the IRS; the 

Chief Risk Officer and others still worried about the payments violating the Constitution. Keep going back to ‘‘violating the Constitution,’’ which is really important about this hearing. So they asked 

to speak with Commissioner Koskinen. 

Commissioner, do you remember that meeting? 

Mr. KOSKINEN. I do. 

206 

Mr. RENACCI. Do you remember the IRS officials at that meeting told you that they thought the payments may violate the Constitution and the Antideficiency Act? 

Mr. KOSKINEN. We had a full discussion of concerns about the 

appropriation, the appropriate Appropriations Act, as well as our 

ability to monitor the payments and ensure there was an appropriate audit trail. The CFO’s concern was as much about, if we had 

the authority, how would we make sure that there would be a sufficient audit trail. 

And all those issues were vetted. Chief Counsel reported on the 

meeting at OMB—I did not realize that David Fisher had gone to 

that meeting—and that we had legal advice from OMB and we had 

just received authorization and, in effect, a directive from Treasury 

to go forward. 

Our job is to administer the Tax Code, and we felt that, on balance, when we got through with the discussion, that we had the 

appropriate authority to proceed. 

Mr. RENACCI. So, at that meeting, there was also this action 

memorandum put in that I know one of my colleagues talked 

about, the memorandum between Mr. Mazur and Mr. Lew. 

And I am not sure I got the answer from you—— 

Mr. KOSKINEN. I would just note that that memorandum was 

not at the meeting. It had just been issued. The Chief Counsel reflected that he had received the memo. But I have never seen the 

memo until today. 

Mr. RENACCI. Okay. 

So, getting back to what my—so, Mr. Mazur, you authored this, 

and then you approved using these funds—based on this memo, 

you approved using these funds then, correct? 

Mr. MAZUR. If you read the text of the memorandum, I recommended that that account be used for those funds. Yes, that is 

true. 

Mr. RENACCI. So who made the final decision? Who approved—— 

Mr. MAZUR. Again, if you look at the memorandum, which you 

are holding in your hand, you can see that Secretary Lew approved 

the course of action. 

Mr. RENACCI. So, Mr. Deich, you said earlier you are familiar 

with the Antideficiency Act. If someone approves an authorized expenditure of funds without appropriation, is that person in violation of the Antideficiency Act? 

A pretty simple question. Yes or no? 

If somebody—I am going to ask—— 

Mr. DEICH. The Administration believes that there—— 

Mr. RENACCI [continuing]. It one more time. 

Mr. DEICH [continuing]. Is an appropriation for this—— 

Mr. RENACCI. If someone approves and authorizes the expenditures of funds without the appropriation, is that person in violation 

of the Antideficiency Act, yes or no? 

Mr. DEICH. I am not a lawyer, but it is my understanding that 

an appropriation is needed in order to make payments, and, in the 

absence of the appropriation, it would be a violation of the Act. 

Mr. RENACCI. Thank you. 

I yield back. 

207 

Chairman ROSKAM. Thank you all. 

Let’s do a little bit of cleanup. I would like to talk a little bit 

about the legal justification—that is, the 2013 memo. 

And you have sort of put us in a trick bag, in a way, in that you 

have talked about the totality of a system, an integrated system— 

I think that was your word, Mr. Mazur, I am not sure, but a holistic theme, basically. And yet you have said we have all this, it is 

all written down, and it is all in a memo; we are just not going to 

share this integration, this revelation, this legal theory that came 

to us. 

Do you understand, sort of, the nature of the trick bag that you 

are putting the Congress and the American people in because you 

have not disclosed that information? 

Mr. MAZUR. Sir, which 2013 memo are you talking about? 

Chairman ROSKAM. I am talking about the OMB memo. 

Mr. MAZUR. I am not aware of that memo. 

Chairman ROSKAM. All right. How about your memo? Let’s go 

to the one that you were just talking about, the January 2015 

memo. What is in the redacted part? 

Mr. MAZUR. I don’t recall what is under the redacted part, sir. 

Chairman ROSKAM. Come on. You don’t recall that? 

Mr. MAZUR. Come on. I write hundreds of memos. 

Chairman ROSKAM. Okay. 

Well, yesterday, you were on full display before the Senate Finance Committee and the House Ways and Means Committee, Mr. 

Mazur. And, in that Committee, I was very impressed by your 

independent recollection of section 385, your ability to wax eloquent on chapter and verse and this and that. ‘‘We have done this, 

Congressman. We have done that, Mr. Chairman. We have taken 

on this responsibility.’’ You had details of process that were very, 

very impressive. 

And now, on an issue that is absolutely pivotal, that is a fulcrum 

between the executive and the legislative branch, you say in this 

memo ‘‘I don’t remember’’? Is that your testimony today? 

Mr. MAZUR. That is correct, sir. 

Chairman ROSKAM. Is there anything that would refresh your 

recollection? 

Mr. MAZUR. Not that I could think of, sir. 

Chairman ROSKAM. Did you prepare in any way for this hearing? 

Mr. MAZUR. Sir, as you know—— 

Chairman ROSKAM. Did you prepare in any way for this hearing? 

Mr. MAZUR. Yes, I had some brief preparation. 

Chairman ROSKAM. What was the nature of your preparation, 

brief as it was? 

Mr. MAZUR. I reviewed this memorandum. 

Chairman ROSKAM. You reviewed the memorandum? 

Mr. MAZUR. With the redacted portion, the one—— 

Chairman ROSKAM. Oh, so that is all you did? Tell me what 

else you did. 

Mr. MAZUR [continuing]. The one that was provided to your 

Committee. I also reviewed the 10-page—— 

208 

Chairman ROSKAM. When is the last time you saw the memorandum as you wrote it? 

Mr. MAZUR. I really can’t remember, but it probably would have 

been 2014. 

Chairman ROSKAM. So there has been nothing in 2 years that 

has prompted your recollection about your reasoning about the 

ability to move forward on a program that brought a great deal of 

consternation and anxiety all throughout the Administration. 

Based on your own testimony, based on the red flags, based on one 

thing after another, there is nothing that you have done to refresh 

your recollection about that in the past 2 years. Is that right? 

Mr. MAZUR. That is correct, sir. 

Chairman ROSKAM. Wow. That is remarkable. And that is in 

stark contrast to the hard work you have been doing on section 

385, where you had independent recollections. Is that right? 

Mr. MAZUR. Sir, section 385 regulations are proposed regulations. That is something that is ongoing. This is something that 

was done 2-plus years ago. 

Chairman ROSKAM. How delightful to be able to move from one 

work product to another so quickly and so effortlessly. 

Let me turn everyone’s attention, just so we are clear, on section 

1402, following up on what Mrs. Black was focusing in on. This is 

the exact language. So let’s knock down this straw-man argument 

that this is about poor people. This is not about poor people. This 

is about an insurance subsidy. And this is an insurance subsidy 

that the Administration argued before the Federal court. 

Here is the plain language, section 1402. In this section, the Secretary shall notify the insurer of the plan of such eligibility. And 

the issuer—that is, the insurance carrier—shall reduce the costsharing under the plan at the level of the amount specified in subsection C, period, paragraph, end of letter. 

What that tells us is this is not about poor people; this is about 

making sure an insurance carrier gets a subsidy. So let’s debunk 

the straw-man argument. You can make a poor-person argument 

as it relates to premium tax credit. You cannot with any credibility 

couch this, cloak this, masquerade this in some way as it relates 

to poor people on cost-sharing reduction. It is an absurdity. 

Mr. Deich, let me ask you a couple of questions. OMB wrote a 

memo to try to justify making the cost-sharing reduction payments 

from the premium tax credit appropriation. That is right, isn’t it? 

Mr. DEICH. That is my understanding, yes. 

Chairman ROSKAM. And you are aware that the Committee has 

subpoenaed that memo. Isn’t that right? 

Mr. DEICH. I am. 

Chairman ROSKAM. And you are aware that OMB has not produced that. Isn’t that right? 

Mr. DEICH. I am. 

Chairman ROSKAM. And you are also aware—tell me you are 

aware of this, restore my hope that you are aware of this—that 

OMB has not given any legal justification for withholding the 

memo. You are aware of that, aren’t you? 

Mr. DEICH. My understanding is that OMB continues to look for 

ways to provide the Committee—— 

209 

Chairman ROSKAM. No, no. That is not my question. And let’s 

just—listen, I will be here all day. So let’s just get right to the 

point. 

There has not been a legal justification that has been articulated 

by the Office of Management and Budget based on a legitimate 

subpoena from the United States Congress. There has been no 

privilege asserted. Is that right? 

Mr. DEICH. There has been no executive privilege asserted, that 

is correct. 

Chairman ROSKAM. So there is no legal justification, based on 

your own admission, for withholding that information. Isn’t that 

right? 

Mr. DEICH. I am not a lawyer, and I can’t address—— 

Chairman ROSKAM. I am not asking you to be a lawyer. 

And, by the way, you are here, you are representing—so this ‘‘I 

am not a lawyer’’ laminated hall pass that people want to use 

today? It is completely ridiculous. Then send a lawyer. Then send 

somebody who is equipped to answer these questions. These are 

not questions that are unanticipated, Mr. Deich. It is the nature of 

the conflict that is between us. 

So do you have any other information today about the nature of 

the assertion that you are making? In other words, is there something that you know that is a legitimate reason as to why this information should be denied to the American people through their 

elected representatives in Congress? Do you have anything new? 

Mr. DEICH. OMB is committed to providing the information that 

the Committee—— 

Chairman ROSKAM. Your commitment is waning and underperforming. Good grief. 

Mr. DEICH. There are many instances in which the Congress 

and the executive branch—— 

Chairman ROSKAM. There is one memo. There is one memo, 

Mr. Deich. There is one memo. It can’t be that hard to find. And 

it seems to me you have either of two choices. Either you say, 

‘‘Here is the memo,’’ or you say, ‘‘We are not going to give it to you, 

and here is why we are not going to give it to you. Because you 

don’t have the legal justification to do it.’’ 

You are being passive-aggressive. You are being an obstructionist 

agency. And it is outrageous. 

Do you know who wrote the memo? 

Mr. DEICH. I do not. 

Chairman ROSKAM. You didn’t prepare to even understand who 

authored a memo? And you are here today representing OMB? 

Mr. DEICH. That is correct. 

Chairman ROSKAM. Are you aware that the Attorney General 

signed off on the memo? 

Mr. DEICH. I am not. 

Chairman ROSKAM. Mr. Mazur, what happens at Treasury 

when you receive a document request from Congress? 

Mr. MAZUR. I believe it goes to our Office of Legislative Affairs 

and then to our General Counsel’s Office to respond. 

Chairman ROSKAM. Is that the same thing that happens when 

you receive a subpoena, or is a subpoena treated differently? 

210 

Mr. MAZUR. I am not aware. I think it is the same treatment, 

but I am not aware of the exact—— 

Chairman ROSKAM. Do you recognize the distinction between a 

letter, let’s say, that Mr. Lewis and I would write together to the 

Department making an information request and a subpoena that is 

formally issued? Do you understand a legal distinction or appreciate the distinction between those two? 

Mr. MAZUR. I believe there is a distinction, yes. 

Chairman ROSKAM. What is the distinction? 

Mr. MAZUR. I believe the subpoena is more of a compelling document. 

Chairman ROSKAM. What is your understanding of what the 

Department’s obligation is upon the receipt of a subpoena? 

Mr. MAZUR. Sir, I understand that our staff has been working 

with your staff on these issues to try to give you information you 

need. 

Chairman ROSKAM. If what you are hearing from your staff is 

that your staff is doing a good job, your staff is misrepresenting 

what is happening. Because what we are hearing from our staff is 

that your staff is not doing a good job, because you have not met 

a single deadline that the subpoena has put forward. 

And these are not unreasonable deadlines. I mean, let’s be real. 

These are requests for documents, they are requests that the Congress is entitled to, and they are requests that you are denying. 

Isn’t that right? 

Mr. MAZUR. Sir, we have provided you with numerous pages of 

documents and—— 

Chairman ROSKAM. Numerous pages is not zip. 

Mr. MAZUR [continuing]. Made many people available for transcribed—— 

Chairman ROSKAM. Numerous pages is meaningless. You know 

that, and I know that. 

What is your commitment today to comply with—in other words, 

you have an opportunity to give a resounding ‘‘yes’’ to Chairman 

Brady on his request. Are you prepared to do that? 

Mr. MAZUR. No. 

Chairman ROSKAM. And you are not willing to do that. 

Mr. MAZUR. No. I will take back the request to the Department. 

Chairman ROSKAM. You will take it back. To the same staff, 

presumably, that has been representing what a great job they are 

doing. Is that who you are going to take it back to? 

Mr. MAZUR. I will take it back to the relevant staff who are responsible, sir. 

Chairman ROSKAM. Let me just make one final point. 

Mr. LEWIS. Mr. Chairman? 

Chairman ROSKAM. Yes, I will come to you. I will make one 

final point. 

Mr. LEWIS. We have been here for a while—— 

Chairman ROSKAM. Listen—— 

Mr. LEWIS [continuing]. And you are going over. 

Chairman ROSKAM. We are going to be here for a while. So—— 

Mr. LEWIS. Mr. Chairman, I don’t plan to stay here, and I 

don’t—— 

Chairman ROSKAM. Listen, you don’t have to stay here. 

211 

Mr. LEWIS [continuing]. And I don’t think it is fair for the witness to stay here. 

Do you want to subpoena all of them? Do you want to hold them 

in contempt? 

Chairman ROSKAM. Listen, I want to get answers; you want to 

get answers; everybody wants to get answers. So let me just make 

one final point. 

There has been a lot of discussion at a high level today about the 

nature of the Constitution and what it means. And, look, there are 

complicated issues that we are all dealing with and we are all 

walking through. 

But there is a real danger that I perceive as being on full display 

here. And the danger is a level of presumption that says, we will 

not be limited by the plain language of a statute, as Mr. Meehan 

was pointing out and as Mrs. Black was pointing out. 

The limitation, when we were invited by Mr. Mazur to correct 

the statute, Mr. Meehan pointed out, look, it says ‘‘only.’’ ‘‘Only’’ 

means ‘‘only.’’ There is not more than one way to interpret ‘‘only.’’ 

And there is this feeling, and I think it is in full bloom and on 

full display today, and the feeling is this: That it is okay to cut 

down laws, it is okay to cut through things in cloaking ourselves 

in good intentions. 

It is a dangerous game. Because if we accept this, then mark my 

words, there will come a day when there is going to be a different 

Administration or a different disposition or a different attitude and 

we are going to say, ‘‘Where were the people who should have stood 

up for these things at the time?’’ 

My friends on the other side of the aisle, God bless them, the 

ACA is now orthodoxy, and it is jarring to them when it is challenged. This is not about the ACA. This is about a constitutional 

responsibility. 

The Committee stands adjourned. 

[Whereupon, at 12:08 p.m., the Subcommittee was adjourned.] 

[Questions for the Record follow:] 

212 


23194A.167

Rep. Peter Roskam (IL-6) Questions for the Record 

Committee on Ways and Means 

Oversight Subcommittee 

Hearing on " Defying the Constitution: The Administration's Unlawful Implementation of 

the Cost Sharing Reduction Program" 

July 7, 2016 

For the Internal Revenue Service: 

1. During the hearing, Commissioner Koskinen testified that he had never seen the 

Action Memorandum authored by Mark Mazur and initialed by Secretary Lew 

accepting Mr. Mazur's recommendation that Treasury administer the cost sharing 

reduction payments in the same manner in which it administers the premium tax 

credit payments. Commissioner Koskinen also testified that at the meeting he 

held with top-level IRS officials in mid-January 2014 to discuss the cost sharing 

reduction program funding, " we had legal advice from OMB. And we had just 

received authorization and in effect a directive from Treasury to go forward." 

a. If not through the Action Memorandum, how was Commissioner 

Koskinen made aware of the " authorization" and "directive" from 

Treasury to move forward with making the CSR payments from the 

premium tax credit account? 

As I indicated during the hearing, I was advised by the IRS Chief Counsel of the determination described 

in the Department of Treasury's Action Memorandum. 

b. Provide all records regarding Treasury's decision to make the CSR 

payments from the PTC account, including, but not limited to, memoranda 

and drafts thereof, internal and external correspondence, and notes. 

The IRS implemented the determination described in the Department of Treasury's Action Memorandum; 

the IRS did not make that determination. With respect to your request for Treasury records relating to the 

source of funding for cost-sharing reduction payments, I understand that Treasury staff is handling 

requests for records relating to that issue, and I understand that your staff has been working with 

Treasury staff on oversight inquiries in this matter. 

2. Provide: 

a. All documents that were distributed at Commissioner Koskinen's meeting 

with the IRS employees who attended the January 13, 2014 meeting at 

OMB to review the OMB's memorandum regarding the cost sharing 

reduction program; 

As I testified during the hearing, the IRS's role in the CSR payment process is to provide administrative 

support to ensure proper payment of, and accounting for, the CSR payments. On January 15, 2014, I 

met with IRS personnel to discuss, among other things, activities necessary to monitor the payments and 

ensure there is an adequate audit trail. The agenda for that meeting had three topics: (i) advanced 

premium tax credit and cost-sharing payments, (ii) OMB guidance; and (iii) an update on other regulations 

implementing the Affordable Care Act. To the best of my recollection, no materials were handed out at 

this meeting. I understand that Treasury staff is handling all requests for records relating to this issue, 

and I understand that your staff has been working with Treasury staff on oversight inquiries in this matter. 
213 

f 


23194A.168

b. The name and title of each individual who attended the meeting with 

Commissioner Koskinen; and 

To the best of my recollection, personnel from lhe following offices were invited to the January 15, 2014 

meeting lo which your question refers: the Commissioner's office, the Office of the Chief Counsel, the 

Office of the Chief Financial Officer. the Office of the Chief Risk Officer. and the Office of the Deputy 

Commissioner for Operations Support. 

c. All records regarding Commissioner Koskinen's meeting with the IRS 

employees to discuss the January 13, 2014 OMB meeting. 

As described above, the agenda for this meeting contained three items relating to the Affordable Care 

Act. Those topics were: (i) advanced premium tax credit and cost-sharing payments, (ii) OMB guidance; 

and (iii) an update on other regulations implementing the Affordable Care Act. Again, to the best of my 

knowledge, no materials were handed out relating to these topics. I understand that Treasury staff is 

handling all requests for records relating to this issue, and I understand that your staff has been working 

with Treasury staff on oversight inquiries in this matter. 
214 


23194A.169

Questions fr·om Repr·esentative Roskam: 

Question 1: 

During the bearing, the Subcommittee showed an e:~: bibit of a memorandum sent by 

Treasur-y's General Counsel's Office in 2012 to 0Ml3. Please provide the following: 

a. The memorandum's authors; 

b. All r·ecor·ds regarding the memorandum, including, but not limited to, drafts, 

notes, and communications regarding the memor·andum both internal to Treasury 

and with exter·nal par·ties; and 

c. The name and title of each individual to whom the memorandum was shown or 

provided at OMB and the date(s) upon which it was shown or provided to each 

individual. 

Answer: 

This question asks tor inforu1ation and documents relating to internal Executive Branch 

deliberations on a matter that is currently the subject of ongoing litigation between the House of 

Representatives and the Executive Branch. I understand that Treasury staff is engaged in an 

ongoing accommodation process with Committee staff regarding requests for such documents 

and infonnation. 

Question 2: 

During the bearing, Mr. Mazur said with regar·d to the per·manent appropriation 

established under 31 U.S.C. § 1324, " If you - if Congress doesn't want the monies 

appr·opriated, they could pass a law that specifically said do not appropriate the monies 

from that account." 

o Is it Treasur·y's under·standing of appr·opriations law that ever·y appropriation must 

specifically state what the Administration may use the funding for· and also 

specifically state ever·y single thing for which the Adminisn·ation may not use the 

funding? 

Answer: 

The Administration's interpretation of31 U.S. C.§ 1324, as amended by the ACA, and its 

understanding of the pertinent background principles of appropriations law are set forth in the 

Department of Justice's briefs in the ongoing litigation brought by the House of Representatives. 

As refle-cted in those submissions, the text, structnre, design, and history of the Affordable Care 

Act (ACA) demonstrate: (I) that eligible individuals are entitled to have cost sharing reduction 

payments made on their behalf to insurers; and (2) that§ 1324 provides a pem1ane11t 

appropriation for both interrelated components oft he ACA's insurance subsidy programpremium tax credits and cost-sharing reductions. The Department of Justice has observed in its 

litigation filings that Congress has never sought to prevent the Executive Branch's use of the 

permanent appropriation or to otherwise prohibit the usc of federalli.mds to make the costsharing reduction payments mandated by the ACA. 
215 


23194A.170

Question 3: 

During the hearing, Rep. Black asked M1·. Mazu1· to specifically show her where in the 

ACA Congress appropriates funds f01· the cost shadng reduction prognlm. l\lh·. Mazur 

promised to get back to her. 

o Whe1·e in the ACA does Congress approp1·iate funds fo1· the cost sharing reduction 

program? 

Answer: 

As explained more fully in the Department of Justice's (i(ings in the ongoing litigation and in 

Treasury's prior correspondence with tbe Committee, the text, structure, design, and history of 

the Affordable Care Act (ACA) demonstrate that 31 U.S.C. § 1324, as amended by the ACA, is 

available to fund all components of the Act's integrated system of subsidies for the purchase of 

health insurance, including both the premium tax credit and cost-sharing reduction portions of 

the payments under the Act. 

Question 4: 

Provide all •·e.cords •·egarding Tn•asm·y's receipt of and •·espouse to this Committee's 

subpoena to Treasury fo•· documents, dated Januuy 20,2016, including, but not limited to, 

all intemal and external communications, memo1·anda, and notes 

l understand that Treasury staff has worked with Committee staff to address the Committee's 

questions regarding Treasury's responses to the Committee's January 2016 document subpoena. 

I also understand that Treasury staff stands ready to work with Committee staff to respond to any 

additional questions the Committee may have on this topic. 

Q uestion 5: 

Provide aU •·ecords regarding Treasm·y's receipt of and response to the three deposition 

subpoenas directed to thn~e current and former IRS employees, dated Janua1·y 20, 2016, 

including, but not limited to, aU internal and external communications, memo1·anda, and 

notes. In this •·espouse, provide the date, time, and manne1· in which T•·easu•-y p1·ovided the 

subpoenas and their attached documents to each subpoenaed individual. 

Answer: 

I understand that Treasury staff has worked with Committee staff to address the Committee's 

questions regarding the Committee's January 20 16 deposition subpoenas. I also understand that 

Treasury staff stands ready to work with Committee staff to respond to any additional questions 

the Committee may have on this topic. 

2 
216 

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23194A.171