Smoking Gun: Obamacare Architect Admitted in 2012 Feds Couldn't Give Subsidies UPDATE: 'It was just a mistake'

A "smoking gun" has emerged in the legal and political debate over whether Congress intended health insurance subsidies to be available on the federal Obamacare exchange, even though the text of the Affordable Care Act says that subsidies are only available on exchanges "established by the State." Now a 2012 speech by one of the bill's drafters has surfaced in which he boasts that the bill was written to deny subsidies on federal exchanges.

In the speech, reported by the Competitive Enterprise Institute in a press release Friday, Jonathan Gruber of the Massachusetts Institute of Technology explains that the bill was drafted to make it impossible for subsidies to be available on the federal exchanges so that states would feel political pressure from low-income residents to create their own insurance exchanges. Formally, states could still say no; politically, he argued, they would not: 

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.

Gruber's remarks appear at 31:25 in this video of the speech:

This week, two federal appellate courts split on the question of whether the use of the word "State" excluded subsidies from federal exchanges, or whether, as the law's defenders argue, that was merely a "drafting error" outweighed by the overall intention of the law to provide subsidies throughout the country. Former legislative staffer Sean Davis wrote in The Federalist that the idea that the term "State" was a drafting error was ridiculous, and that in any case the error would have to be rectified by congressional legislation, not by executive fiat:

The deliberate creation of a separate section to authorize a separate federal entity is not a drafting error. The repeated and deliberate reference to one section but not another is not a drafting error. The refusal to grant equal authority to two programs authorized by two separate sections is not a drafting error. The decision to specifically reference section X but not section Y in a portion of a law that grants spending or tax authority is not a drafting error.

The clear text of the law repeatedly demonstrates that plans purchased via federal exchanges were never meant to be treated the same as plans purchased by state-based exchanges.

The reason the IRS interpreted "State" to mean federal exchanges also--and did so long after the law passed--was because the political pressure failed, Davis argued: most states declined to create exchanges anyway.

The newly-unearthed speech by Gruber--who was lent by the White House "to Capitol Hill to help Congressional staff members draft the specifics of the legislation"--settles the argument firmly in Davis's favor, and proves the case of those challenging the IRS in Halbig v. Burwell (the D.C. Circuit case that found against the Obama administration) and King v. Burwell (the Fourth Circuit case that supported the administration).

Update: Gruber now claimed that his remarks in 2012, like the language of the statute to which he referred, were "just a mistake," according to the (sympathetic) New Republic: ""I honestly don’t remember why I said that," he said, attempting to reconstruct what he might have been thinking at the time. "I was speaking off-the-cuff. It was just a mistake." 

Apparently he had to watch his own speech to find out what was in it.

Sam Kazman, general counsel of the Competitive Enterprise Institute, told Breitbart News that the "three-legged stool" analogy used by Gruber in Obamacare's design--the mandate to buy insurance, the subsidies to buy insurance, and the prohibition against denying coverage--was now falling apart: 

Prof. Gruber helped popularize the three-legged stool metaphor for Obamacare. That metaphor was actually used by the dissenting judge in the DC Circuit case, and its logic played a huge in the Fourth Circuit decision against us. But as this newly-discovered video of Jon Gruber shows, the argument---that Congress intended subsidies for everyone—is nonsense. The three-legged stool is defective and the metaphor needs to be recalled.


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