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Here’s what an Obamacare architect actually meant when he said the law wasn’t transparent

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Ok, I know we said that our next post would be about how states and Congress might react if the Supreme Court does decide to kill Obamacare subsidies in 34 states. However, since the Internet has apparently decided that the most important thing in healthcare this past week was a year-old video clip of an MIT professor talking to a roomful of other health economists (aka “Grubergate”), we figured we’d take a look at that first.

For those who don’t know, Jonathan Gruber was an architect of the Massachusetts health reform effort (aka “Romneycare”), which served as the model for Obamacare, and an adviser on Obamacare itself. At the University of Pennsylvania’s Annual Health Economics Conference last year, Gruber said this:

This bill was written in a tortured way to make sure the CBO [Congressional Budget Office] did not score the mandate as taxes. If CBO scored the mandate as taxes, the bill dies. So it’s written to do that.

In terms of risk-rated subsidies, in a law that said health people are gonna pay in — if it made explicit that healthy people are gonna pay in, sick people get money, it would not have passed. Okay — just like the … people — transperen— lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really, really critical to get anything to pass.


It sounds an awful lot like he’s saying that the Obama administration secretly snuck some provisions into the bill that, if the American public knew about them, Obamacare never would have passed.

But if we’ve learned anything from the resignation of Shirley Sherrod and James O’Keefe’s takedown of ACORN it’s that if a conservative website has a video clip of an Obama supporter saying something that seems outrageous, chances are it was taken out of context. So we went back and watched the full video of Gruber’s remarks, and, sure enough, that’s exactly what happened.  

1. The individual mandate

This part is confusing because the Obamacare Supreme Court case hinged on something that sounds similar to what Gruber is talking about, but is actually a little different: whether or not the fine you’d pay for not having insurance under the individual mandate is a “penalty” or a “tax.” Democrats called it a “penalty” in the bill, mostly to avoid charges from Republicans that they were raising taxes, but in upholding the law, the Court said that it’s actually a tax, and thus constitutional.

Gruber’s comments though don’t make much sense if he’s talking about this semantic debate. Democrats preferred to call the fine a penalty, but regardless of what it was called, the Congressional Budget Office– which estimates the cost of bills– was going to score it the same; i.e., as money collected by the IRS (a tax basically).

What Gruber is talking about is something else. Early in the process of drafting the bill there was concern that the CBO would treat premiums paid to insurers under the individual mandate as a “tax,” and include them in the cost of the bill, which would have been a disaster. As Ezra Klein explained at the time:

In 1994, a pretty similar question was decided in the other direction. Robert Reischauer, then the director of the CBO, decided that the premiums that individuals were charged to purchase private insurance under Clinton’s plan would be included in the budget. This didn’t change the nature of the proposal. But it made its cost tag look huge.

Donna Shalala, Clinton’s secretary of health and human services, later termed the ruling “devastating.” And it was. It made health care reform look obscenely expensive. And the same thing could have happened this year. Rather than costing $100 billion per year or so, it could have cost a couple trillion a year. No change in the plan. Just a change in the budgetary treatment of the plan.

There was no way that Congress was going to pass a bill that the CBO said costs several trillion dollars a year– it sounds too scary. Most voters wouldn’t look into the details to see that “Oh this new ‘tax’ is really just the health premium I was paying anyways”– they’d just hear the enormous price tag.

In his comments, Gruber is not saying that these premiums really are taxes. Hardly anyone would argue that the $50 insurance premium you send to Aetna every month is actually a tax that goes to the government. But in designing a health reform law, there are all sorts of grey areas. For example, maybe it would have been better for people to send their premiums to the government, who would then pay insurers. Consumers would pay the same amount, but in that scenario, the CBO would call it a tax and the price tag of the bill would go from billions to trillions. So in the video, what Gruber is saying is that that writing the bill to meet the CBO’s specifications meant a bill that looked somewhat different than his ideal as an academic economist.

2. Transparency

Conservatives are trying to spin Gruber’s comments as an admission that Obamacare was passed non-transparently, which is, as New York Magazine’s Jonathan Chait puts it, “a bizarre description of one of the most drawn-out public and legislative debates in the history of Congress.” What Gruber is actually referring to, when he talks about transparency, is something his co-panelist, University of Pennsylvania economics professor Mark Pauly, said earlier in the discussion.

Pauly pointed out that Obamacare pays to cover people with pre-existing conditions in sort of a roundabout way. It says that insurers can’t charge more for pre-existing conditions, which meant insurers would have to raise premiums on healthy individuals to help cover the cost of sicker people, who were paying a lot more before. The problem is that there was no way to tell what your new premium would be– and thus how much Obamacare cost you or saved you– until the exchanges opened last fall.

A more transparent way to do basically the same thing– transfer money from healthy people to sick people– would be through direct taxation: you’d figure out how much it costs to provide coverage to people with pre-existing conditions and then institute a tax to pay for it. That way individuals would have known exactly how much more or less they’d be paying under Obamacare, before the bill was passed.

Gruber agrees that Pauly’s approach would be preferable, but says that if the law had this kind of transparency, it wouldn’t have passed. A lot of people have taken this to mean that if voters knew that young, healthy people were paying for old, sick people, they would have hated it. We disagree. People knew that young, healthy people would be paying more– heck, that’s the whole premise of the individual mandate–getting young, healthy people without insurance to buy in. If anything, it seems like being more explicit about costs would have helped Democrats. Many people didn’t realize how generous the subsidies would be– once they saw how much they’d actually be paying for coverage, they were often (though not always) pleasantly surprised.

Again, we think that Gruber was probably referring to the CBO when he said lack of transparency is a “huge political advantage.” If the government was collecting the tax directly and using that money to pay premiums for sick people, rather than insurers doing it through higher premiums for healthy people, the CBO again would have scored the bill as much more expensive, threatening its passage for the same reasons we mentioned above.

Stupidity

Gruber’s line about “the stupidity of the American voter” is offensive and arrogant, but again, he’s not saying this as someone who’s trying to pull one over on them. As Ezra Klein writes:

Gruber tried to make it a better bill than it is. He tried to make what was in it clearer and more known than it was. And then — and this is where all the tapes come from — he traveled the country trying to explain it to people. And Gruber, as is perfectly clear now, was not an experienced political operator who knew how to talk carefully in front of a camera.

Heck, he even wrote a graphic novel explaining what was in the bill. When Gruber talks about voter stupidity, keep in mind that’s coming from a man who wants them to know more about the law, not less.

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