BOOM: The Historic Proof Obamacare Foes Are Dead Wrong On Subsidies

The story of whether Congress ever intended to limit Obamacare subsidies to state-based exchanges begins and ends with the Congressional Budget Office. And what it reveals about the latest legal threat to Obamacare dramatically undercuts the arguments against the law.

No one person or institution was more central to the debate over Obamacare than the CBO. Every tweak to the law was funneled through the accounting brains of the non-partisan congressional scorekeeper to determine how much it would cost. Passage of the entire law hinged on its reports. Votes were delayed until CBO could finish its scoring. Specific provisions lived or died by its decrees. It is safe to say that the health care reform law we have today is in large part the result of the CBO’s work.

But like everybody else on Capitol Hill in 2009 and 2010, from legislators to the journalists who covered them, the CBO’s quants never even considered the scenario that Obamacare faces today. A federal appeals court has ruled in Halbig v. Burwell that the law’s crucial subsidies are not available on the federal insurance exchange, HealthCare.gov, putting coverage for nearly 5 million people in 36 states at risk. That outcome, as bad as it would be for the uninsured, would dramatically lower the cost of Obamacare — but the CBO never entertained that possibility for the same reason no one else did: It was not how the law was supposed to work.

Remember: Billions of dollars were at stake and everybody was watching. If the costs of Obamacare subsidies could shift by billions of dollars depending on whether a state built its own exchange or instead used the federal exchange, the CBO would have been the one to know about it. And you can bet that the nervous Obama White House, wavering Democrats, and eager-to-pounce Republicans would have responded if the CBO had interpreted any provision of the bill as putting subsidies at risk to state decision-making and put a figure on the financial fallout of that possible scenario. But that alternative picture of the law’s costs was never created because nobody at the time understood the law to work that way.

Many of the journalists who followed the debate have retraced their steps, Jonathan Cohn of The New Republic and Sarah Kliff of Vox to name just two, arguing that their experiences, particularly talking with members and their staff during the legislative debate, shows that this legal challenge has no basis in reality and history. But it’s even more than that. Not only did the legislators themselves never intend to cut out subsidies for the federal exchange, the CBO, that all-important arbiter of the law’s costs, never once factored it into its analyses.

“It definitely didn’t come up. This possibility never crossed anybody’s mind,” David Auerbach, who was a principal analyst for the CBO’s scoring of the ACA, told TPM on Thursday. “If we started to score it that way, they would have known that, and they would have said, ‘Oh, oh my gosh, no, no no,’ and they probably would have clarified the language. It just wasn’t on anybody’s radar at all.”

Obamacare protesters before an appearance by President Obama in Colorado on Saturday, Aug. 15, 2009. (AP Photo/Ed Andrieski)

To understand how crucial Obamacare’s price tag was to passage of the bill in March 2010, you have to remember the political conditions in late 2009 and early 2010 when the debate over the bill was raging. The hugely controversial stimulus bill had passed in early 2009, and the tea party freakout began in August 2009 at town hall meetings during the congressional recess. Austerity fever was starting to take hold, and even the Obama White House was catching it. In February 2010, under pressure from Congress, Obama created the ill-fated Simpson-Bowles commission to try to address the deficit.

In this era of belt-tightening, Obamacare had to be deficit neutral to have any chance of passing Congress. That cemented the CBO’s central role as the ultimate authority of what the bill would cost. And the subsidies were a huge piece of that. In the CBO’s final analysis, the subsidies comprised $350 billion out of the $938 billion in the bill’s gross outlays over 10 years, which were offset by spending cuts elsewhere and new revenue to make the overall package deficit neutral.

The CBO itself has said, in a December 2012 letter to House Oversight Chair Darrell Issa (R-CA), that it never considered limited subsidies to only state exchanges, and it aligns with what other people who were involved with modeling the law’s impact have said. MIT professor Jonathan Gruber, a top Obamacare architect who sparked a small firestorm last week after a 2012 video surfaced in which he appeared to endorse the legal challengers’ view of the subsidies, pointed in an interview with TNR’s Cohn to his economic modeling as evidence that he always thought the subsidies would be available everywhere, no matter what kind of exchange was being used.

As Auerbach says, Congress surely would have noticed if the CBO ever modeled the law with the assumption that some states wouldn’t have access to the subsidies because they were using the federal exchange. Every analysis that the CBO released during the debate became a must-read headline on the Hill and throughout the country. The version of Obamacare that the legal challengers are advancing would have covered fewer people and cost less. That’s what the whole debate was about and why the CBO was so important.

“The consequences of what they said in terms of the costs and the impacts were heightened because we were under even greater scrutiny,” Yvette Fontenot, who was a health policy staffer for Senate Finance Chair Max Baucus (D-MT) at the time and helped draft the bill’s language on subsidies, told TPM on Thursday. “The expectations were even higher for this law, so the CBO and their estimates took on an even greater importance.”

CBO director Doug Elmendorf testifies on health care reform before the Senate Finance Committee on Oct. 13, 2009. (AP Photo/Charles Dharapak)

It cannot be overstated how influential the CBO was during the debate over Obamacare. Members of Congress would refuse to pledge their vote until they had seen the latest CBO estimate, while journalists and fact-checkers relied on its analysis for an unbiased accounting on what the bill would do. Every new report was awaited with “bated breath,” as TPM’s Brian Beutler put it at the time.

In fact, one of the first stumbles for the bill came when the CBO projected in June 2009 that the initial Senate Finance bill would cost $1.6 trillion but cover only 16 million people. Sen. Olympia Snowe (R-ME), considered one of the few Republicans who might vote for the bill, though she ultimately did not, called it a “jolt of reality,” according to the Washington Post.

“That was a wake-up call that we have to approach this reform with some caution,” Snowe said. Some of her colleagues were less reserved. Sen. John McCain (R-AZ) called the cost estimate a “body blow,” according to the New York Daily News.

“The CBO estimates were a death blow to a government-run health-care plan,” Sen. Lindsey Graham (R-SC) said at the time.

Senate Minority Leader Mitch McConnell (R-KY) during a health care news conference on Capitol Hill on Wednesday, Dec. 16, 2009. (AP Photo/Harry Hamburg)

From there on out, the CBO acted as the word of God as the legislative debate lurched forward. Its colossal first estimates became a routine talking point for Republicans. Then-House Minority Leader John Boehner (R-OH) referred to the law as a “$1.6 trillion monstrosity,” the Cleveland Plain Dealer reported at the time. Democrats, meanwhile, relied on updated estimates to show that they were making progress toward their goal of covering millions of people without sending the nation’s deficit soaring.

Nothing moved without the CBO’s say-so. For example, in early October 2009, Baucus delayed a Finance Committee vote on the bill, so members would have more time to look over the CBO’s latest report. Every controversy over the law, from the public option to the Medicare savings to abortion coverage, crossed through the CBO’s office.

“The House plans to vote on the health reform bill within days. Sen. Reid has committed to the president that as soon as the Senate has the information back from the CBO, they will move expeditiously to pass health reform,” White House spokesman Reid Cherlin said in November 2009, the Associated Press reported, underscoring the agency’s central role.

Then-Speaker Nancy Pelosi (D-CA) before Congress is set to vote on Obamacare on Sunday, March 21, 2010 (AP Photo/Lauren Victoria Burke)

And in the legislative process’s final days, every new CBO analysis became more and more important. Sen. Joe Lieberman (I-CT) refused to commit to voting for the final Senate bill in December 2009 before seeing a final CBO score. “We really can’t move forward until we have a CBO score,” Nadeam Elshami, a spokesperson for then-House Speaker Nancy Pelosi (D-CA) told the Christian Science Monitor in January 2010 as the two chambers were trying to merge their two bills.

“With the release yesterday of the CBO figures, now people have seen the bill, have seen the score. The list of supporters grows,” Pelosi said just a few days before the bill finally — after much turmoil — cleared Congress in March 2010.

But under all that scrutiny and after all its familiarity with the law, the CBO never did one thing: It never considered that subsidies would be unavailable in some states if they didn’t set up an exchange, as Auerbach told TPM this week. In all its iterations of the law, the idea that the subsidies would be available nationwide permeated all of them.

So what many of the current legal challenge’s proponents ask us to believe then is that Congress somehow pulled one over on the agency tasked with understanding the law as well as anyone — and on which they relied for the entire legislative debate.