The Chief Architect of Obamacare Argued that the Law WAS Limited to State Exchanges

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Reason does a good job (un)covering some clips from 2012, which feature the Chief Architect for Obamacare, Jonathan Gruber. They come at an awkward time just as a Circuit Court judge panel ruled that Obamacare was limited to only providing subsidies in state exchanges, not federal, per the text of the law. The government unsuccessfully argued that everyone meant both federal and state exchanges, and the text was akin to a typo.

Back to the clips and the article. Apparently, in 2012, Jonathan Gruber described precisely the opposite of the government’s recent argument — that Obamacare was limited to state run exchanges and the threat was that, if states did not set up exchanges, the residents of those states would lose out on millions and billions in tax subsidies. Oops.

After being presented with the video, Gruber denied that position and suggested the bill really just contained a typo. And then, a second video was found, also from 2012, which Gruber again argues the same point — that Obamacare only meant to have state-run exchanges. Remember, Gruber was the “chief architect of Obamacare”. Oops again.

The government did not anticipate that a majority of governors would reject the carrot of tax subsidies dangled in front of them when presented implementing Obamacare in their states. They simply did not comprehend that most states would find Obamacare too expensive or too bureaucratic. That is why the bill never said “federal exchanges”. The allure of tons of tax subsides was supposed to woo all the governors to be enticed by this poorly-crafted-bill-that-was-rammed-through-Congress.

When the embarrassment emerged that only a handful of states chose to participate, they scrambled to create federal exchanges, even though that was never intended in the first place. Now the courts have to fight it out. Now we have courts who are split between the language and the spirit of the law.

That is why this unearthing of video footage of the handpicked Obamacare crafter is particularly awkward for the government’s defense.

From the Reason article: (also worthwhile to go there and check out the videos)

“Obamacare’s defenders have responded by saying that this is obviously ridiculous. It doesn’t make any sense in the larger context of the law, and what’s more, no one who supported the law or voted for it ever talked about this. It’s a theory concocted entirely by the law’s opponents, the health law’s backers argue, and never once mentioned by people who crafted or backed the law.

It’s not. One of the law’s architects—at the same time that he was a paid consultant to states deciding whether or not to build their own exchanges—was espousing exactly this interpretation as far back in early 2012, and long before the Halbig suit—the one that was decided this week against the administration—was filed. (A related suit, Pruitt v. Sebelius, had been filed earlier, but did not challenge tax credits within the federal exchanges until an amended version which was filed in late 2012.) It was also several months before the first publication of the paper by Case Western Law Professor Jonathan Adler and Cato Institute Health Policy Director Michael Cannon which detailed the case against the IRS rule.

Jonathan Gruber, a Massachusetts Institute of Technology economist who helped design the Massachusetts health law that was the model for Obamacare, was a key influence on the creation of the federal health law. He was widely quoted in the media. During the crafting of the law, the Obama administration brought him on for consultation because of his expertise. He was paid almost $400,000 to consult with the administration on the law. And he has claimed to have written part of the legislation, the section dealing with small business tax credits.

After the law passed, in 2011 and throughout 2012, multiple states sought his expertise to help them understand their options regarding the choice to set up their own exchanges. During that period of time, in January of 2012, Gruber told an audience at Noblis, a technical management support organization, that tax credits—the subsidies available for health insurance—were only available in states that set up their own exchanges.

A video of the presentation, posted on YouTube, was unearthed tonight by Ryan Radia at the Competitive Enterprise Institute, a libertarian think tank which has participated in the legal challenge to the IRS rule allowing subsidies in federal exchanges. Here’s what Gruber says.

What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits—but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges. But, you know, once again the politics can get ugly around this. [emphasis added]

There can be no doubt, based on his record, that Gruber is a supporter of the law. He says so in the presentation. “I’m biased, I’m in favor of this type of law, I won’t hide that,” he says. He also explains early on that his entire presentation is made of “verifiable objective facts.”

And what he says is exactly what challengers to the administration’s implementation of the law have been arguing—that if a state chooses not to establish its own exchange, then residents of those states will not be able to access Obamacare’s health insurance tax credits. He says this in response to a question asking whether the federal government will step in if a state chooses not to build its own exchange. Gruber describes the possibility that states won’t enact their own exchanges as one of the potential “threats” to the law. He says this with confidence and certainty, and at no other point in the presentation does he contradict the statement in question.

In early 2013, Gruber told the liberal magazine Mother Jones that the theory advanced by the challengers in this case was “nutty.” Gruber also signed an amicus brief in defense of the administration and the IRS rule. But judging by the video it is quite clear that in 2012 he accepted the essence of the interpretation advanced by the challengers.

Unless this video is a fraud or there are relevant details missing, there are only two options here: Either Gruber, a key influence on the legislation who wrote part of the law and who consulted with multiple states on setting up their own exchanges, was correct, and the law explicitly limits subsidies to state-run exchanges.

Or he was wrong in a way that perfectly aligns with both the clear text of the legislation and the argument later made by the challengers to the IRS rule allowing susbidies in federal exchanges.

Update: Earlier this week, Gruber was on MNSBC to address the Halbig ruling. He was asked if the language limiting subsidies to state-run exchanges was a typo. His response: “It is unambiguous this is a typo. Literally every single person involved in the crafting of this law has said that it’s a typo, that they had no intention of excluding the federal states.”

Update 2: The Cato Institute’s Michael Cannon, who was instrumental in developing the arguments that laid the groundwork for the legal challenge in Halbig, responds to the video at Forbes:

I don’t mean to overstate the importance of this revelation. Gruber acknowledging this feature of the law is not direct evidence of congressional intent. But Gruber is probably the most influential private citizen/government contractor involved in that legislative process. He was in the room with the people who crafted this bill.

Update 3: Gruber says the statement in the video was “a mistake.” Jonathan Cohn of The New Republic got a response from Gruber this morning. Here are a few snippets:

I honestly don’t remember why I said that. I was speaking off-the-cuff. It was just a mistake. People make mistakes. Congress made a mistake drafting the law and I made a mistake talking about it.

During this era, at this time, the federal government was trying to encourage as many states as possible to set up their exchanges. …

At this time, there was also substantial uncertainty about whether the federal backstop would be ready on time for 2014. I might have been thinking that if the federal backstop wasn’t ready by 2014, and states hadn’t set up their own exchange, there was a risk that citizens couldn’t get the tax credits right away. …

But there was never any intention to literally withhold money, to withhold tax credits, from the states that didn’t take that step. That’s clear in the intent of the law and if you talk to anybody who worked on the law. My subsequent statement was just a speak-o—you know, like a typo.

Update 4: Gruber appears to have made a second “speak-o.” In a separate speech, he spoke of the “threat” posed by states declining to build their own exchanges. And he once again explicitly ties the creation of state-based exchanges to the law’s tax credits (its subsidies for private health insurance insurance).

On January 10, 2012, in a speech at the Jewish Community Center of San Francisco, Gruber said that “by not setting up an exchange, the politicians of a state are costing state residents hundreds and millions and billions of dollars….That is really the ultimate threat, is, will people understand that, gee, if your governor doesn’t set up an exchange, you’re losing hundreds of millions of dollars of tax credits to be delivered to your citizens.”