Monday, July 28, 2014

ACA/Obamacare: Halbig v. Burwell Upon Further Review.

Consider these three statements regarding the legislation known as Obamacare:

'Max Baucus (D-Montana), chair of the Senate Finance Committee through which the health bill flowed, insisted that reading the law wasn't necessary. “I don’t think you want me to waste my time to read every page of the healthcare bill,” Baucus said, according to the Flathead Beacon. “You know why? It’s statutory language. ... We hire experts.”' (1)

'Tom Carper (D-Delaware), who also served on the Senate Finance Committee, insisted that the legislative language wasn't important: "I don't expect to actually read the legislative language, because reading the legislative language is among the more confusing things I've ever read in my life."' (2)

'“You’ve heard about the controversies within the bill, the process about the bill, one or the other. But I don’t know if you have heard that it is legislation for the future, not just about health care for America, but about a healthier America, where preventive care is not something that you have to pay a deductible for or out of pocket. Prevention, prevention, prevention—it’s about diet, not diabetes. It’s going to be very, very exciting. But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.”' - Nancy Pelosi (3)


Hence legislation passed without being closely read yields many unintended consequences one of which is:

“The statute clearly states that subsidies are available only through exchanges established by a state, yet the IRS, in its interpretation, expanded the availability of subsidies to all exchanges – state and federal.

Should the D.C. Circuit decision (ruling against the IRS) be upheld, the impact would have a ripple effect on the health care law. First, only individuals purchasing coverage through a state exchange would be eligibility for federal subsidies. Those individuals in the federal exchanges would likely face costly premiums and many as a result may be exempt from the individual mandate. Second, since the employer mandate penalties are linked to the availability of the subsidies, employers would not be subject to the penalty in those states that did not establish a state exchange.”

“Aside from amending the law through normal legislative processes, one obvious quick fix would be to get more states to set up state exchanges. But that may a heavy lift. Many states opted to not establish an exchange in part because by 2015 states are required by law to fund the operating expenses of the exchanges on their own. Furthermore, grant funding that was originally included in the law to help states establish state exchanges is gone, and it is highly unlikely Congress would be willing to appropriate additional funds toward this endeavor.” - (4)


One has unread legislation, language repeatedly used specifying subsidies linked to state based exchanges, “experts” and consequential legal proceedings resulting in unintended consequences. What response does one encounter from ACA/Obamacare supporters?

“We feel very strong about the sound legal reasoning of the argument that the administration is making,” White House spokesman Josh Earnest said. “You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health-care costs regardless of whether it was state officials or federal officials who are running the marketplace.” (5)


The problem with the above argument by Mr. Earnest is dissected nicely by Peter Suderman at

“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, but did not challenge tax credits within the federal exchanges until an amended version which was filed in late 2012.) 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.”

“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].”

“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.”

"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."

Update 2: The Cato Institute's Michael Cannon, who was instrumental in developing the arguments that laid the groundwork for the legal challenge in Halbig, responds to the video at Forbes:

I don’t mean to overstate the importance of this revelation. Gruber acknowledging this feature of the law is not direct evidence of congressional intent. But Gruber is probably the most influential private citizen/government contractor involved in that legislative process. He was in the room with the people who crafted this bill.

Update 3: Gruber says the statement in the video was "a mistake." Jonathan Cohn of The New Republic got a response from Gruber this morning. Here are a few snippets:

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.

Update 4: Gruber appears to have made a second "speak-o." In a separate speech, he spoke of the "threat" posed by states declining to build their own exchanges. And he once again explicitly ties the creation of state-based exchanges to the law's tax credits (its subsidies for private health insurance).” (6)


Upon further review, if one trumpets that reading legislation is a non-starter, legislative language is unimportant and that merely passing unread legislation and unimportant legislative language to see what is inside the legislation……then one should not be surprised by the never ending cascade of unintended consequences spawned by the ACA/Obamacare legislation. Political dupery and nitwitery has a price and cost.

A question to ponder regarding the never ending cascade of unintended consequences spawned by the ACA/Obamacare legislation is an old Thomas Sowell expression regarding notional propositions such as Obamacare: What next? Then what?

Updated 07/30/2014: The Flip-Flopping Architect of the ACA, Politico Magazine, 07/28/2014



(1) (2) Maybe Democrats Should Have Read Obamacare Before They Passed It,, 07/25/2014


(3) Nancy Pelosi: "We Have to Pass Our Bill So That You Can Find Out What Is In It",, 03/09/2010

(4) The Obamacare Employer Mandate Could Die in Some States,, 07/23/2014

(5) Federal appeals courts issue contradictory rulings on health-law subsidies, 07/22/2014

(6) Watch Obamacare Architect Jonathan Gruber Admit in 2012 That Subsidies Were Limited to State-Run Exchanges (Updated With Another Admission),, 07/24/2014









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