Politics

Obamacare Architect Argued Years Ago That States Without Exchanges Can’t Get Subsidies

One of Obamacare’s authors said in 2012 that states that don’t set up their own Obamacare exchanges can’t offer residents subsidies, throwing heavy weight behind the argument that the billions in subsidies to federally-run exchanges are illegal.

Earlier this week two appeals courts heard arguments that the Affordable Care Act’s language doesn’t allow for subsidies in federally-run exchanges but answered the question differently. While the D.C. District Court of Appeals first found that the subsidies are illegal for the 36 states that didn’t create their own exchanges, the Fourth Circuit Court of Appeals said otherwise. (RELATED: Second Federal Court Rushes To Save Obamacare From Devastating Ruling) 

But Jonathan Gruber, an economics professor at MIT who worked closely with the Obama administration to create and draft the health-care law, said as far back as 2012 that states that didn’t step up to make their own exchanges wouldn’t be able to offer premium subsidies.

“In the law, it says if the states don’t provide [exchanges], the federal backstop will,” Gruber said in a newly unearthed 2012 presentation. “The federal government has been sort of slow in putting out its backstop, I think partly because they want to sort of squeeze the states to do it. I think 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.”

Gruber’s argument is important: the federal government wants to pressure states into building their exchanges, or they’ll be the ones responsible for keeping subsidies away from their constituents.

“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’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, and that they’ll do it. But you know, once again, the politics can get ugly around this.”

Obamacare supporters have argued that providing subsidies through the federal exchange is what Congress intended to do, but admit that there was a “drafting error” that called it into question.

But Gruber’s two-year-old explanation appears to back the plaintiffs’ case. Gruber was hired by the Obama administration to craft the law — and even worked with congressional staff to draft the legislation itself. And he suggests not that the law’s exclusion of federal subsidies is a “drafting error,” but a fully-intended incentive structure in order to convince states to take up the burden of creating their own state exchanges.

That said, since the lawsuits cropped up, Gruber has argued extensively in favor of the Obama administration in both cases regarding federal subsidies and joined amicus briefs to support the federal government’s position. These days, Gruber says it’s “absurd” that Congress didn’t mean to apply the subsidies to federally-run exchange states as well.

The D.C. circuit’s conclusion relied on the wording of the law: subsidies go to “exchanges established by the State,” choosing not to try to assume what Congress intended. Meanwhile, the Fourth Circuit’s decision that federal subsidies are permissible rested on their understanding that the law’s language is “ambiguous” and that Congress’s intent to provide subsidies to the whole country is clear.

The plaintiffs who brought the case, the court wrote, may not “rely on our help to deny to millions of Americans desperately-needed health insurance through a tortured, nonsensical construction of a federal statute whose manifest purpose, as revealed by the wholeness and coherence of its text and structure, could not be more clear.”

But the law’s architect apparently stating that Congress intended to withhold the subsidies in 2012 — before any court cases had put the subsidies in danger — suggests that congressional intent in this case may be anything but clear.

Gruber’s comments begin at 31:25:

Follow Sarah on Twitter