Yesterday, we discussed a controversy involving Jonathan Gruber, a Massachusetts Institute of Technology economist who played a major role the ACA, or “Obamacare.” He told MSNBC recently that “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.” However, a libertarian group uncovered a video showing Gruber saying quite clearly after the passage of the law that this provision was a quid pro quo device: state exchanges for tax credits. Conservative sites have lit up over the video below showing Gruber essentially describing the very tradeoff identified in Halbig. He told MSNBC recently that “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.” However, a libertarian group just uncovered a video showing Gruber saying quite clearly after the passage of the law that this provision was a quid pro quo device: state exchanges for tax credits. Conservative sites have lit up over the video below showing Gruber essentially describing the very tradeoff identified in Halbig. Indeed, Gruber later signed on amicus briefs supporting the White House interpretation and even joined the counter spin from the White House and denouncing that very interpretation as “nutty.” Gruber responded to critics showing the video below by that “I was speaking off-the-cuff. It was just a mistake.” However, now another response has been raised in which Gruber gave the same interpretation during this presentation. In my view, the point is again to ask why both sides have to denounce each other as nuts or extremists when there are good-faith arguments can be made on both sides.

As I explained in my testimony, at issue is the express language of the statute that ties the creation of state (as opposed to federal) exchanges to the availability of tax credits. Congress established the authority of states to create their own exchanges under Section 1311. If states failed to do so, federal exchanges could be established under Section 1321 of the Act. However, in Section 1401, Congress established Section 36B of the Internal Revenue Code to authorize tax credits to help qualifying individuals purchase health insurance. However, Section 1401 expressly links tax credits to qualifying insurance plans purchased “through an Exchange
established by the State under 1311.” The language that the qualifying exchange is “established by the State” seems quite clear, but the Administration faced a serious threat to the viability of the Act when 34 states opted not to create exchanges. The Administration responded with an interpretation that mandates: any exchange – state or federal – would now be a basis for tax credits. In adopting the statutory construction, the Administration committed potentially billions in tax credits that were not approved by Congress. The size of this financial commitment without congressional approval also strikes at the essence of congressional control over appropriation and budgetary matters.

Around the 31 minutes mark on the video below, Gruber addressed the issue:

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 later insisted that his support for the interpretation was the result of an off-the-cuff comment and a mistake. However, now a second answer is being highlighted where Gruber gives the very same interpretation embraced in Halbig.

Q: You mentioned the health implementation exchanges in the states, and it’s my understanding that if states don’t provide them, then the federal government will provide them. What do you say to that?

GRUBER: Yeah, so these health-insurance Exchanges, you can go on ma.healthconnector.org and see ours in Massachusetts, will be these new shopping places and they’ll be the place that people go to get their subsidies for health insurance. In the law, it says if the states don’t provide them, the federal backstop will. 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. 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.

The point is not to hammered Gruber on this but to address his later criticism of the court and commentators who have embraced this interpretation as simply “nutty.” I happen to agree with the interpretation of the D.C. Circuit as a matter of legisprudence. I believe that the statute is clear and that it is dangerous for a court to read out such express language as “a typo” — just as I believe that it is dangerous for a president to read out such language.

As I noted before, it will be interesting to see if both the Fourth Circuit and D.C. Circuit opinions go to en banc review. You could have the D.C. Circuit flip the result in favor of the Administration and the Fourth Circuit flip in favor of the challengers — preserving the split in the circuits. Even without such a split, however, there is a strong argument for Supreme Court review. It will be equally interesting to see if briefs bring in Gruber’s statement since he has signed amicus briefs in favor of the Administration’s interpretation. After all, Gruber received almost half a million dollars from the Obama Administration to consult on the ACA and clearly maintaining (at one time) that the provision meant what it says: that states with federal exchanges would not fall under the tax credit benefit.

When confronted on the second discussion, Gruber simply said “same answer.”