Comparing Obamacare Scams


Speaking on the Boston Herald’s “morning drive” radio show several days ago, MIT economist Jonathan Gruber called the Republicans’ Obamacare “repeal and replace” plan “a scam.” That’s an interesting accusation coming from one of the architects of Obamacare, who helped “sell” the plan to the American people by misleading them.

As British Prime Minister Benjamin Disraeli is credited with saying: “There are three kinds of lies: lies, damned lies, and statistics.” Gruber seems to have mastered all three, using his knowledge of economics to twist things so the less-well-informed would believe his lies. And he has repeatedly bragged about it.

For example, Gruber has admitted that the 40 percent excise tax on company health plans that are deemed overly generous under the Affordable Care Act—the so-called “Cadillac” tax—is really a tax on the affected workers, though their employers theoretically “pay” the tax.

Gruber, like every other economist, knows that the party legally taxed, in this case, employers, is not the party that necessarily bears the burden. Those who would bear the burden under Obamacare are the employees, who would either see their coverage reduced, so their employers could avoid the Cadillac tax, or they would see their future compensation reduced, to help finance the tax. Either way, they lose. Gruber knew this but promoted the fiction that someone else would pay.

Gruber and others also used their insider knowledge of the Congressional Budget Office’s “scoring” procedures to deceive the public.

Obamacare’s design was manipulated to look as good as possible in the CBO’s eyes. This is the genesis of Obamacare’s mandates.

As Gruber admitted at a March 2014 conference of the Workers Compensation Research Institute in Boston, “The bill was written in a tortured way to make sure the CBO did not score the mandate as taxes. If the CBO scored the mandate as taxes, the bill dies. OK, so it’s written to do that”: to hide the fact that the “penalty” for not buying insurance is really a tax, taking advantage of what he called “the stupidity of the American voter.”

This sleight-of-hand had two particularly notable implications. First, it allowed the CBO to ignore the tax implications, since they weren’t called taxes, but penalties. Yet the only reason Obamacare was deemed Constitutional by the Supreme Court was that Chief Justice John Roberts said the penalty was really a tax, not a penalty, and Congress has the authority to impose taxes.

The manipulation of the CBO also extended to Obamacare’s timing, since CBO cost estimates only project 10 years into the future. Gruber and the Obama White House knew that. So they slowed down Obamacare’s implementation. The first four years would cost very little; the next six years would cost significantly more. Together, however, the 10-year total was made to look pretty good: “just” $848 billion.

By 2014, however, when the CBO took another look, the ten-year CBO cost estimate of $848 billion had ballooned to $2 trillion. Two trillion and counting.

Similarly, Gruber also has admitted—this time in a 2013 panel discussion at the University of Pennsylvania—that Obamacare, through regulations designed to “limit premium variation based on age,” was designed so that those who are young and generally healthy subsidize those who are older and less healthy. It’s what we call a transfer program. As he told the Penn panel, “if you had a law which said that healthy people are going to pay in—you made explicit that healthy people pay in and sick people get money—it would not have passed.”

Gruber also has admitted that the claim that Obamacare would reduce costs was disingenuous. As he told an audience at Holy Cross College in March 2010, “all you ever hear people talk about is cost control. How it’s going to lower the cost of health care,” but “we don’t know how,” he said, adding that “a politically feasible way right now to bend the cost curve ... just doesn’t exist.”

Given his track record, Gruber’s assertion that the Republican “repeal and replace” effort is a scam would be laughable if it wasn’t so tragic.

Gary M. Galles is a Research Fellow at the Independent Institute, Professor of Economics at Pepperdine University, and Adjunct Scholar at the Ludwig von Mises Institute.