Obamacare's Smoking Gun Fires Again
Last night, the Competitive Enterprise Institute broke a heck of a story: A video showed Jonathan Gruber, one of the architects of the Affordable Care Act, supporting the plaintiff's argument in Halbig v. Burwell.
For those who haven't been obsessively reading this blog, this was the case in which the U.S. Court of Appeals for the District of Columbia Circuit just ruled that premium subsidies could only legally be made available on state exchanges, not exchanges established by the federal government. Liberals have been arguing that this is a clearly ridiculous view of the law and one no reasonable person could endorse. Yet in the video, Gruber, a highly regarded economist who has done extensive work on the law for both the Barack Obama administration and state agencies, stated this as a fact. Moreover, he said that this would give states a clear incentive to establish exchanges -- which is, coincidentally, exactly why the plaintiffs in Halbig have argued that Congress restricted subsidies to states.
Jonathan Cohn of the New Republic reached Gruber for comment, and Gruber explained that this was a "speak-o" -- like a typo, but for speaking:
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.
There are few people who worked as closely with Obama administration and Congress as I did, and at no point was it ever even implied that there'd be differential tax credits based on whether the states set up their own exchange. And that was the basis of all the modeling I did, and that was the basis of any sensible analysis of this law that's been done by any expert, left and right.
I didn't assume every state would set up its own exchanges but I assumed that subsidies would be available in every state. It was never contemplated by anybody who modeled or worked on this law that availability of subsides would be conditional of who ran the exchanges.
This wasn't the most compelling response I'd ever read. For one thing, if you watch the video, he doesn't look as if he's generating an argument off the cuff; it comes out concise and polished, like something he's said, and thought about, before. At least when I have a new thought in the middle of Q&A, there tends to be a bit of hemming and hawing and verbal wandering before I get to the concise version. And while I've certainly said the wrong thing by accident in a Q&A, I didn't give a detailed, wrong, one-minute explanation of my verbal misfire.
But now John Sexton at Breitbart has uncovered what appears to be another January 2012 speech in which Gruber makes exactly the same point. The Official Blog Spouse has provided a transcript of the relevant bits:
The third risk, and the one folks aren't talking about, which may most important of all, is the role of the states. Through a political compromise, it was decided that states should play a critical role in running these health insurance exchanges. And health insurance exchanges are the centerpiece of this reform, because they are the place that individuals can go to shop for their new, securely priced health insurance. But if they are not set up in a way which is transparent, and which is convenient for shoppers, and which allow people to take their tax credits and use them effectively by health insurance, it will undercut the whole purpose of the bill.
Now a number of states have expressed no interest in doing so. A number of states -- like California, has been a real leader -- one of, I think it was the first state to pass an exchange bill. It's been a leader in setting up its exchange. It's a great example. But California is rare. Only about 10 states have really moved forward aggressively on setting up their exchanges. A number of states have even turned down millions of dollars in federal government grants as a statement of some sort -- they don't support health care reform.
Now, I guess I'm enough of a believer in democracy to think that when the voters in states see that by not setting up an exchange the politicians of a state are costing state residents hundreds and millions and billions of dollars, that they'll eventually throw the guys out. But I don't know that for sure. And 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. [emphasis added]
Like the Official Blog Spouse, I listened to the audio to make sure that, first, it wasn't simply the audio from the earlier video, and second, that the new clip wasn't taken out of context. It's clear that the audio is from an entirely different event; though Gruber repeats himself a lot from speech to speech (not surprising, because Gruber was on book tour for his cartoon book on Obamacare), the questions in the Q&A period are not the same. It's also quite clear that this was not snipped out of context; we now have evidence of Gruber twice making the same argument about subsidies in January 2012.
MSNBC's Adam Serwer reached him for a comment on the second clip: "A second recording has surfaced showing Gruber making similar statements about subsidies not being available on federally run exchanges. Asked over e-mail whether those remarks were a mistake, too, Gruber wrote back, 'same answer.' "
I believe that Gruber sincerely does not remember making these remarks. Memory is fallible; at some point, Gruber probably changed his mind and forgot that he had ever believed otherwise. People show a strong tendency to edit their recollections of prior beliefs to reflect the "correct" answer, and even brilliant economists are not immune to this common cognitive bias.
But though I do not fault his honesty, I also think that in January 2012, Gruber did believe that premium tax credits would only be available on state-created exchanges, and that this would give states a strong incentive to create exchanges.
We can draw two conclusions from this: First, the reading of the law by Halbig's plaintiffs is clearly not ridiculous or dishonest; if it is a mistake, it is a mistake that one of the law's chief architects could make. And second, we should be very skeptical of people who are now telling us, four years later, what the legislative intent was. Memory really is extraordinarily unreliable, and as we see here, it's very easy to forget what you believed even a couple of years ago. This is one reason that courts ignore post-facto statements about intent and concentrate on the legal text and the legislative history.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Megan McArdle at email@example.com
To contact the editor on this story:
James Gibney at firstname.lastname@example.org