Obamacare’s architect agrees: Healthcare law subsidies were supposed to apply only to state-run Exchanges

The Obama administration’s claim that Congress never intended for Obamacare subsidies to apply only to states that implemented their own Exchanges looks much, much weaker this morning. Reason’s Peter Suderman has passed along some video gold, in which the architect of the law says it was worded to place political pressure on states.

Jonathan Gruber, the MIT economist who worked on Romneycare in Massachusetts, helped the administration craft Obamacare and, in January 2012, stated pretty clearly that consumers in states that opted out of the law would be denied subsidies.

“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,” Gruber told an audience. “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,” he said, “and realize there are billions of dollars at stake here in setting up these exchanges.”

Here’s the clip (the original is almost an hour long) via Phil Kerpen:

This completely undermines the argument the Department of Justice made in the Halbig case. The administration has insisted that Congress didn’t intend to limit the subsidies only to states that created Exchanges and that the Internal Revenue Service be given space to, basically, rewrite the law to include the federal Exchange. But the D.C. Circuit Court of Appeals this week rejected that argument.

“[W]hat he says is exactly what challengers to the administration’s implementation of the law have been arguing—that if a state chooses not to establish its own exchange, then residents of those states will not be able to access Obamacare’s health insurance tax credits,” Suderman notes. “Gruber describes the possibility that states won’t enact their own exchanges as one of the potential ‘threats’ to the law.”

For his part, however, Gruber claimed this week that this “this is a typo” in the law. “Literally every single person involved in the crafting of this law has said that it’s a typo, that they have no intention of excluding the federal [Exchange] states, and why would they?” Gruber told MSNBC’s Chris Matthews. “It’s just simply a typo, and it’s really criminal that this has even made it as far as it has.”

Speaking of “criminal,” Gruber should be glad that he was just giving speech and answering questions to a friendly audience, rather than a congressional committee, when he said that the law was worded to put political pressure on states, because he completely contradicted himself on MSNBC.

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