The Agony of Jonathan Gruber, Redux

Published November 13, 2014

Consumer Power Report #444

As you’ve probably heard by now, Jonathan Gruber, the architect of Obamacare, has stepped in it again – and loudly. Mollie Hemingway responds:

“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO scored the mandate as taxes, the bill dies.” He explained, “Lack of transparency is a huge political advantage. And basically, you know, call it the ‘stupidity of the American voter’ or whatever, but basically that was really, really critical to getting the thing to pass.”

This is not minor news. To set the stage, let’s go back to July, when a D.C. Circuit Court ruled that the Patient Protection and Affordable Care Act does not authorize subsidies if insurance plans aren’t part of a state-based Obamacare exchange. This “Halbig” ruling has now been taken up by the Supreme Court.

When the first “Halbig” ruling came down, progressive fans of Obamacare continued to argue that it was insane to think that this was a clear reading of the legislation. Then video came out showing legislation author Gruber making exactly the same argument made by the attorneys fighting this issue. He made those comments at a time when Obamacare proponents were trying to force states to set up exchanges and before most states declined to. Gruber responded by claiming he’d had a “speak-o,” which is like a typo but in verbal form. The full video shows a strikingly extensive and thought-out discussion, but the speak-o claim was much easier to swallow before yet another video came out showing him making the exact same “speak-o,” this time in prepared remarks.

And so now Gruber is videotaped saying that deception was a key factor in tricking stupid American voters into allowing their members of Congress to narrowly pass the controversial bill.

More here on Gruber’s defense of deception. What exactly is he referring to? At the Washington Examiner, []Tim Carney explains:”>

The deceptions Gruber was admitting can be explained this way: First, Obamacare’s authors gamed the CBO to make the bill’s cost look a lot smaller. Also, Obamacare’s authors disguised a middle-class tax hike as a non-tax provision. Finally, Gruber admitted that Obamacare was made so complex in order to hide one of its central purposes: redistributing money from the healthy and low risk to the unhealthy and high-risk – from the young to the old.

These deceptions were crucial to Obamacare’s passage. In September 2009, as the Obamacare push hit full stride, ABC’s George Stephanopoulos called the individual mandate “a tax increase.” Obama glowered at Stephanopoulos: “No, no. That’s not true, George. The – for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.” Keeping the price tag of the bill under a trillion dollars was also crucial to getting wary Democratic senators. The CBO gaming got the bill under that threshold.

What this kerfuffle really demonstrates is the arrogance of technocratic liberals like Gruber who truly believe they know best what the people need, and are intent on giving it to them, whether they want it or not. The irony of it: Had the process of Obamacare been more transparent, it’s possible more voices would’ve weighed in, leading the drafters to reconsider the possibility of state-level opposition to exchange creation and thereby lead to a change in the legislative language. Had Gruber gone through a more transparent process, King v. Burwell might not be headed to the Supreme Court at all.

Of course, the whole reason that any deception was necessary was that Gruber was pursuing a policy people would not like and the CBO could not score the way he wanted it to … so lies had to be made. On that point, Keith Hennessey weighs in:

When you strip away all the complexity, economic policy is ultimately an expression of elected officials making difficult value choices. If over time these officials make value choices that do not reflect the values of the people whom they represent, they can, should, and will be replaced.

When these same elected officials, and those who advise them, deliberately construct policies to hide value choices that would be unpopular were they transparent and explicit, we end up with two terrible outcomes. We get policies that do not reflect our values, and we re-elect representatives who are lying to us.

— Benjamin Domenech



One problem with debating and discussing the issue in King is that many folks (pundits, bloggers, etc.) have very strong views about questions they clearly do not understand. Things that seem obvious to one side or the other are often wrong or legally irrelevant. People that are otherwise expert on health care policy become enamored with arguments that don’t actually prove their case because they are not responsive to the other side’s claims. For instance, those Gruber videos are fun, and make a point, but they don’t prove the plaintiffs are correct on the merits. Professor Ziff, with whom I disagree on the underlying issue, had a thoughtful post on this problem that advocates on both sides would do well to consider.

For an example of someone making arguments that are not nearly as strong as he thinks they are it would be hard to do better than Paul Krugman’s most recent column. In this piece, Krugman makes basic mistakes – e.g. the plaintiffs’ case is not based on just “one clause” in the statute – and insists that only an “incredibly hostile reader” could read “established by the State” to mean, well, “established by the State.” This would be news to the folks at CRS or those at the IRS who initially drafted implementing regs that tracked the statutory language. Even some folks on Krugman’s side have conceded that the statute’s words “clearly say” credits are only authorized in state-established exchanges, even if they believe this is “what Congress clearly did not mean.”

The one appellate court to agree with Krugman conceded “there is a certain sense to the plaintiffs’ position.” Yet, according to Krugman, only those who are “hostile” and “corrupt” could reach such a conclusion. In ruling for the government, the panel majority in King concluded “the defendants have the stronger position, although only slightly,” and ultimately held for the government because it found the statutory language sufficiently ambiguous to support the IRS rule as a reasonable interpretation. I find the Fourth Circuit’s opinion reasonable but unconvincing. See this post for some of the reasons why the Fourth Circuit was wrong (or see my co-authored amicus brief for the Halbig en banc). There are serious arguments here on both sides, but Krugman can’t see them.

According to Krugman, the claim in King is based upon an “obvious typo.” In other words, Krugman thinks this is a case of sloppy legislative drafting that should be corrected by the courts. This is a popular argument among pundits, but it’s not made by the government or more knowledgeable legal experts – and for good reason: It’s a weak argument. In order for the government to prevail in arguing that a statute does not mean what the plain text says – that, there is a “scrivener’s error” or a statute would produce “absurd results” – the government has to show that there is no conceivable possibility that the text was deliberate. For reasons I explained years ago (literally) this argument fails, as most thoughtful commentators on the other side have conceded. The government’s strongest argument is not that there is a typo, but that the entire statute, construed as a whole, allows for what the IRS did, even if only because the text is sufficiently ambiguous to allow for the IRS’s interpretation.

SOURCE: Jonathan Adler, Volokh Conspiracy


Delaware and Illinois have plans to work around a potential Supreme Court ruling that could block millions of Americans from receiving subsidies to buy health insurance, providing a potential road map for other states.

State officials around the country are formulating plans in case of a ruling next year against the Obama administration, which would eliminate billions of dollars in health insurance subsidies for more than 4 million people. The court said Nov. 7 it would hear a case arguing that insurance subsidies in the Patient Protection and Affordable Care Act should only be available in a handful of states.

A verdict against the Obama administration would largely unravel the law in as many as 37 states that don’t operate their own health insurance marketplaces. To keep subsidies intact, Delaware officials are contemplating a technical work-around, while Illinois’ outgoing governor is seeking to push through a legislative fix in the final months of his term.

The Supreme Court case turns on a four-word phrase in the Affordable Care Act. The law says people qualify for tax credits to help pay insurance premiums when they buy a plan on an exchange “established by the state.”

Democrats who wrote the law say it was never their intent to keep people in federally run exchanges from getting subsidies. The Congressional Budget Office, which analyzed the cost of the law including its subsidies before it was passed, always assumed tax credits would be available nationwide.

SOURCE: Alex Wayne, Bloomberg


The regulations governing Obamacare exchanges have reduced the quality of insurance plans. To cover the cost of the regulations and keep premiums even remotely reasonable, insurers had to increase people’s out-of-pocket costs and reduce provider networks. A National Center for Public Policy Research study found an average of 33 policies for a 27-year-old on the individual market in 2013 had both lower premiums and lower or equal out-of-pocket costs than the cheapest policy on the exchange. There were ten such policies for a 57-year-old couple. A Health Pocket study found that deductibles were, on average, 42 percent higher than plans that were on the individual market in 2013.

The pejorative term “skinny network” came to describe the networks of physician hospitals and other providers available through exchange plans, and for good reason. An Associated Press survey found that only four of the top 19 cancer centers in the country said they “have access through each of the insurance companies in the state exchanges.” Dr. Scott Gottlieb of the American Enterprise Institute examined exchange policies in nine states and found that access to specialists was up to 65 percent lower than in comparable preferred provider organization (PPO) plans. A recent Avalere study found that, on average, only 32 percent of the top ten cardiologists, neurologists, and diagnostic radiologists in ten major cities were available through the three cheapest silver plans on the exchanges. The National Center study found that the average number of PPO plans on the exchange declined when compared to the individual market while the number of plans with more restrictive health maintenance organizations (HMO) increased considerably.

In short, people who lost their plans in 2013 and had to go on the exchanges were extremely likely to face both higher out-of-pocket costs and a harder time finding heath care providers who would take their insurance.

SOURCE: David Hogberg, The Federalist


Voters wouldn’t mind seeing states have more control over their Medicaid programs without federal meddling, according to the results of a new Morning Consult poll.

Polling data show that when voters are told about how states and the federal government generally share the costs of Medicaid programs, 63 percent of respondents say states should be allowed to administer the programs on their own, without federal oversight over things like which benefits are offered and how much states are spending on them. Twenty-four percent say federal oversight is still needed.

Those views were almost identical to those who weren’t told about the shared cost between states and the feds. Sixty-four percent in that group said states should have the green light to administer Medicaid programs as they see fit, while 24 percent preferred federal involvement.

The poll comes a week after the midterm elections put control of the Senate in GOP hands starting next year, paving the way for potential changes to the Affordable Care Act and how Medicaid is administered. Furthermore, Republicans will occupy the governor’s mansion in Florida, Wisconsin, Kansas and Georgia, tempering any hope of Medicaid expansion in those states.

Sen. Orrin Hatch (R-Utah), who’s slated to become chairman of the Senate Finance Committee, has been vocal about reforming Medicaid. In 2013, he teamed up with House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and put forth a plan that would give states more control over their Medicaid programs. The proposal would eliminate the formulas used by the feds to determine Medicaid funding in favor of a per-capita system. This year, Hatch helped introduce legislation, along with Republican senators Richard Burr of North Carolina and Tom Coburn of Oklahoma, that would replace the Affordable Care Act. The measure included significant changes to Medicaid.

SOURCE: ][”>Marissa Evans, Morning Consult


Call it drugs for the departed: Medicare’s prescription program kept paying for costly medications even after patients were dead.

The problem was traced back to a head-scratching bureaucratic rule that’s now getting a second look.

A report coming out Friday from the Health and Human Services Department’s inspector general says the Medicare rule allows payment for prescriptions filled up to 32 days after a patient’s death – at odds with the program’s basic principles, not to mention common sense.

“Drugs for deceased beneficiaries are clearly not medically indicated, which is a requirement for (Medicare) coverage,” the IG report said. It urged immediate changes to eliminate or restrict the payment policy.

Medicare said it’s working on a fix.

Investigators examined claims from 2012 for a tiny sliver of Medicare drugs – medications to treat HIV, the virus that causes AIDS – and then cross-referenced them with death records. They found that the program paid for drugs for 158 beneficiaries after they were already dead. The cost to taxpayers: $292,381, an average of $1,850 for each beneficiary.

Medicare’s “current practices allowed most of these payments to occur,” the report said.

Of 348 prescriptions dispensed for the dead beneficiaries, nearly half were filled more than a week after the patient died. Sometimes multiple prescriptions were filled on behalf of a single dead person.

SOURCE: Ricardo Alonso-Zaldivar, Associated Press


The Journal of the American Medical Association (JAMA) has just published a new study on the ability of price transparency to lower costs.

The study, by Christopher Whaley et. al., was very large, involving over 500,000 individuals in 253,000 households. They were covered by 18 large self-insured employers, which adopted the Castlight Health price transparency platform sometime between 2010 and 2013. The employers represented a wide range of industries and offered a variety of health benefit designs. Every state in the country was represented.

The population was split into two groups – those who searched the Castlight platform prior to getting services, and those who did not. Each searcher could get estimates of personalized out-of-pocket costs based in their own plan design. They could also get non-price information such as provider qualifications and patient satisfaction ratings. The services studied were limited to three frequent but elective categories – lab tests, advanced imaging (MRIs and CT scans), and clinician office visits. The two population groups could be compared both before and after the Castlight platform became available to them.

The results were interesting.

Before either group had access to the price transparency platform, the study group (those who eventually became searchers) had higher costs than the control group in two categories – 4.11% higher for lab tests, 5.57% higher for imaging, but 0.26% lower for office visits.

After the search tool became available, the study group’s costs went down – 16.93% lower than the control group for lab tests, 14.97% lower for imaging, and 0.76% lower for office visits. These are for situations where the patient had cost sharing responsibilities. When there was no cost sharing, the results were 14.13% lower for labs, 13.63% lower for imaging, and 2.26% lower for office visits.

Looking at both the before and after comparisons, the savings were significant – in the 20% range for labs and imaging, but not as much for office visits.

SOURCE: Greg Scandlen, Real Health Reform