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Key Obamacare Architect Said Subsidies Couldn’t Flow through Federal Exchanges

7:01 AM, Jul 28, 2014 • By JEFFREY H. ANDERSON
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The New York Times has described M.I.T. economist Jonathan Gruber as “a card-carrying Democrat” whose “position as an adviser to the influential Congressional Budget Office also left him perfectly positioned to advise the White House on health reform.”  Moreover, the Times writes, “After Mr. Gruber helped the administration put together the basic principles of the [Obamacare] proposal, the White House lent him to Capitol Hill to help Congressional staff members draft the specifics of the legislation.”  Now it turns out that, as the Competitive Enterprise Institute has unearthed, Gruber told audiences as far back as early 2012 that Obamacare’s taxpayer-funded subsidies couldn’t flow through federally established exchanges, but only through state-established ones.  More recently, Gruber has been singing a different tune, as legal challenges on that aspect of the law have proceeded

As Politico writes, “This matters not because it is an embarrassing deception for an academic to be caught in, but because it suggests the falsity of the administration’s claim that this was a glitch and not a feature.” 

Here’s Gruber, in a video that was uploaded in early 2012 (the relevant comments start around the 31:30 mark):

“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 your 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 and that they’ll do it.”

The legislative text of Obamacare speaks of the premiums as being available only “through an Exchange established by the State.”  But 36 states have not established exchanges and are instead relying on exchanges that have been established, and are being operated, by the federal government.  The IRS, apparently responding to pressure from Obama’s political appointees, is allowing subsidies to flow through such federally established exchanges as well as through state-established ones.  Last week, a 3-judge panel of the D.C. Circuit Court ruled that this was in violation of the legislation’s plain text.

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