Whitehouse.govEarlier 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 states, quite clearly, that
subsidies are only available in
exchanges “established by a State,” which
the law expressly
defines as the 50 states plus the District of
Columbia. 

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.) 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]

Here’s the video, which according to YouTube’s date stamp 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 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.”

(Disclosure: From 2005 through early 2007 I worked at the
Competitive Enterprise Institute.)