Commentary: “Drafting Error” May Wreck Obamacare (August, 2014)

By John McClaughryJohn McClaughry

What Obamacare’s backers dismissed as a “drafting error” may wreck it in the courts – and the self-styled architect of the bill, Shumlin consultant Jonathan Gruber, is on the hot seat for telling the truth and then trying to explain it away.

*          *          *

The future of Obamacare is hanging by a legal thread, thanks to what its supporters have passed off as a mere “drafting error”. Now MIT professor Jonathan Gruber, selected by Gov. Shumlin to receive yet another juicy contract to try to make sense out of Green Mountain Care, finds himself uncomfortably in the spotlight of the legal issue.

The Affordable Care Act of 2010 (ObamaCare) contemplated the creation of health insurance exchanges in every state. An earlier version in the Senate mandated states to create such exchanges, through which federal tax credit subsidies would flow to persons buying government-approved insurance.

But somebody in the Senate realized that the Federal government cannot just mandate the states to do whatever Congress wants. So the final Senate bill, that became law, offered incentives to the states to create their own exchanges. It also authorized the federal government to create a backup exchange in case states declined to create their own.

The incentive was the availability of billions of subsidy dollars to insurance buyers in “exchanges created by the state under section 1311”. However the law did not provide for such subsidies to flow through a backup federal exchange created under section 1321.

To the dismay of the Obamacare backers, only fourteen states attempted to set up exchanges. (Vermont Health Connect – $170 million – remains an inoperable disaster.)

Undaunted, the Obama IRS simply rewrote the law to allow the subsidies to flow through the federal exchange (Healthcare.gov) as well as through what the law allowed: “exchanges created by the state”.

In Halbig v. Burwell, decided July 22 in the DC Circuit Court of Appeals, the judges emphatically held that the law plainly says “exchanges created by a state”.  The Obama administration cannot revise it to read “exchanges created by a state or anybody else”.

If individuals can’t get credits because there is no state exchange, they can’t be penalized for not having insurance. Similarly, if no employee of a large (more than 50 employee) company can receive a credit, the company can’t be penalized for having employees claiming credits.

Concurring, Judge Raymond Randolph quoted the great progressive Justice Louis Brandeis: “What the government asks is not a construction of a statute, but, in effect, an enlargement of it by the court, so that what was omitted, presumably by inadvertence, may be included within its scope. To supply omissions transcends the judicial function.”

The Obama White House predictably denounced the Halbig decision. It argues that the President and Congressional Democrats intended to create a vast scheme to subsidize health insurance, so never mind what the law they passed actually says.

Ultimately the legal issues will be settled by the Supreme Court. It’s notable that even some liberal justices on that Court have written powerful opinions refusing to allow the executive branch to redefine the plain language of the law as enacted. The result may well be that the economic framework supporting the act will crumble if the credits are not available on federal exchanges.

Now back to Jonathan Gruber. He has made himself a consulting money machine by claiming to be the leading authority on Romney Care and ObamaCare. He was also the co-author of the 2011 Hsiao Report to the Vermont legislature ($300,000) that underlies  Act 48 (Green Mountain Care).

Just after the Halbig decision, a researcher unearthed a January 2012 videotape of Obamacare authority Gruber explaining to an audience that “If you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits” – which corroborates exactly what the Obamacare opponents have been arguing in the courts.

Gruber is now mightily embarrassed for having been caught blurting out the truth. In a subsequent New Republic interview, Gruber pleaded the equivalent of temporary insanity, but the damage is done. But fortunately for him, Peter Shumlin has dished out another $400,000 contract that may ease his pain.

- John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

{ 1 comment… read it below or add one }

jim bulmer September 2, 2014 at 3:03 pm

How much longer will Vermonters put up with Shumlin and his stupitity? We’ve got too much of that in the White House and our steller three in Congrss

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