Earlier this week, a three-judge panel in the
D.C. Circuit Court ruled that, contrary to the Obama
administration’s implementation and an Internal Revenue Service
rule, Obamacare’s subsidies for private health insurance were
limited to state-run health exchanges.
The reasoning for this ruling was simple: That’s what the
law says. The section dealing with the creation of state exchanges
and the provision of subsidies says, quite clearly, that subsidies
are available in exchanges “established by a
State.“
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 theory as fact back
in early 2012, and almost five months 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.)
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
law. He was widely quoted in the media. And during the crafting of
the law, the Obama administration
brought him on for 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
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, which has participated in the legal challenge to the
law. 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]
Here’s the video, which was uploaded by Noblis on January 20,
2012. The relevant passage starts around minute 31.
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 tax credits.
This is 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 this as one of the potential “threats”
to the law—that states won’t enact their own exchanges. He says
this with confidence and certainty, and at no other point in the
presentation does he contradict the statement.
In early 2013, Gruber
told the liberal magazine Mother Jones that the theory
advanced by the challengers in this case was “nutty.” But unless
this video is a fraud, it is quite clear that he understood it to
be the truth a year prior in 2012.
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 the argument
later made by the challengers to the IRS rule allowing
susbidies in federal exchanges.
(Disclosure: From 2005 through early 2007 I worked at the
Competitive Enterprise Institute.)
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