Gruber, State Exchanges, and the Easy Way vs. the Right Way

Last updated on: July 26, 2014 at 9:45 pm by Jane the Actuary

Gruber, State Exchanges, and the Easy Way vs. the Right Way 2014-07-26T21:45:00-06:00 Jane the Actuary

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Everybody’s talking about the statements of Jonathan Gruber in 2012 that have been unearthed and show him, a key architect of Obamacare, saying quite directly that subsidies are only for state exchanges as a carrot/stick (Ann Althouse here and here, and Megan McArdle here and here, for instance), but this article makes a key point that is even more of a “smoking gun” than the Gruber quotes.

The only statement anyone has found in the legislative history that addresses this point comes from the Act’s lead author, who affirmed that Congress did intend to withhold tax credits in federal Exchanges. During a September 23, 2009, mark-up of his bill, which ultimately became the PPACA, Senate Finance Committee chairman Max Baucus (D-MT) refused to consider a Republican amendment regarding medical malpractice on the grounds it fell outside the Committee’s jurisdiction. Sen. John Ensign (R-NV) protested, asking how Baucus’ bill could do other things that lie outside the Committee’s jurisdiction, like direct states to create Exchanges. Baucus responded the bill creates tax credits, which are within its jurisdiction, and makes eligibility for those tax credits conditional on states creating Exchanges. Conditional necessarily means that Baucus intended to withhold tax credits in states that did not create their own Exchanges.

This would seem to make it pretty hard to defend the claim that the “legislative intent” was to provide the subsidies to both state and federal exchanges. What’s left is the claim that the current implementation of Obamacare has to be maintained because (a) it would be too disruptive and (b) it would be unfair to move to a true implementation of the law.

Now, I can’t really provide a detailed parsing of the rulings and their legal reasoning, or lack thereof. I can’t really tell you whether the ACA defenders’ claim that it’s nonsensical that the law would withhold subsidies from federal-exchange customers, is their genuine perception of the situation, or, as this National Review article claims, a cynical attempt to rewrite history.

But here are a few examples to consider:

In my field, pension consulting, there is a substantial body of legislation around funding requirements and maximum (deductible) funding rules, as Congress tries to balance the competing interests of ensuring pension plans are well-funded, while preventing corporations from dodging taxes with excess tax-deductible contributions (honestly, this isn’t much of a problem these days), and not placing too heavy a burden on employers. The latest was “MAP-21” – that is, an infrastructure bill funded, in part, by lightening the funding requirements (hence increasing tax revenues) — or, as we say the the field, by providing “funding relief,” since the funding requirements are based on interest rates, and, every time the government bond rate drops, funding requirements become more onerous unless legislation is changed.

So what happens when it’s clear that movement in interest rates means that employers face the prospect of burdensome contribution requirements? Congress, in a bipartisan manner, pulls together new legislation.

And remember the agriculture bill? For quite a while we were told that if Congress didn’t act, we’d be seeing $7 milk because certain new provisions would expire and be replaced by some old provisions. To be honest, I don’t remember what happened any longer. It seems to me that there were some editorials on the fact that this farm bill was just as bad as prior ones, but the bottom line is that we’re not paying $7 for milk.

Now, surely Congress didn’t mean to create legislation that, upon its expiry, would produce $7 milk. But there was never any hint that, because the consequences of allowing the legislation to run its course would be extreme, it would be altogether permissible for the administration to reinterpret the law differently, to apply the existing law after its expiration date, for instance.

Now, of course, in any case in which the administration finds itself with an inconvenient law, it would always be easier to find a way to simply disregard the law, and they’re plenty willing to do that (and I really don’t know yet whether Obama will in fact carry out his threat to grant amnesty unilaterally, for example) — but that’s not the way a democracy governed by laws, not men, works.

Yes, it’s harder to come up with a compromise in which Democrats and Republicans agree on enough revisions to the ACA to make it palatable for the Republicans to vote on an “everybody gets subsidies” rewrite, but it’s necessary. Whining that “applying the law as written is too hard” might be easier, but it’s not right.

Of course, this makes it all the clearer that it’s just a really bad idea to push through legislation in a single-party manner, without a shred of bipartisanship, despite wide opposition, and with such monstrous complexity. But just because the law’s supporters are in a difficult position doesn’t mean that they get a pass on following the law. And the legislators who voted in 2010 do not some how have a sacred right to have their legislation preserved, by hook or by crook.

So, look, maybe it’s just because I we were at an Eagle Court of Honor today (“a Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent”), but I’m not buying claims that it’s necessary to preserve the administration’s implementation of the law because to do otherwise would be “too hard.” Sometimes doing the right thing is hard.

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