Did Scott Walker Just Deal an Obamacare Legal Challenge a Major Blow? An Architect of the Case Says No

Did a case challenging the administration's implementation of Obamacare just take a major hit?

That's how liberal pundits are framing a newly surfaced video of Wisconsin's Republican Governor Scott Walker saying in a Wall Street Journal video that "there's no real substantive difference between a federal exchange, or a state exchange, or the in between, the hybrid, the partnership."

The video is making the rounds today, and many of those highlighting it are arguing that it undermines an upcoming Supreme Court challenge to the law's implementation. Challengers in King v. Burwell, which the High Court is set to hear in March, argue that the text of the law does not allow subsidies to flow through the federal exchanges, pointing to language in the law that says that subsidies are only available in an "Exchange established by a State." The Internal Revenue Service, which manages the subsidies, wrote a rule allowing the subsidies in federal exchanges as well. 

The argument being made about Walker's quote, then, goes something like this: If Walker—an outspoken Republican critic of Obamacare—is right that there is no meaningful difference between the two types of exchanges then the administration's decision to allow subsidies in federal exchanges would be legally defensible.

Here's the full Walker quote:

When I looked — and I spent nearly two years looking at this . . . I visited [Washington DC], as a new governor in December in 2010. As part of that visit I met with Secretary Sebelius, the head of the federal department of HHS, and have spent the last two years with my team, my administration, my cabinet, working with the federal government trying to fully understand and comprehend what it meant to my state and other states. And it was clear! It's a SINO, "state in name only."

This really isn't an exchange that the states run or even run in a partnership. The federal government determines what's going to be covered. How it's going to be covered. And the only distinction is whether or not a state can say that they're running it, put up a sign that says they are running it. But, in the end, there's no real substantive difference between a federal exchange, or a state exchange, or the in between, the hybrid, the partnership. And so I said, if I can't run it, if I don't have control over it, why would I take the responsibility of explaining to people something that I don't have any control over. [emphasis added]

Ian Millhiser of Think Progress, who first posted the video, notes that Walker's conclusion was reached after a careful review of the evidence. "Walker lays out the breadth of his nearly two-year inquiry into the differences between federally-run and state-run exchanges," Millhiser writes. "He met with the most senior Obama Administration official entrusted with health policy, and he had an entire team of advisers working to determine whether there were practical differences between the two types of exchanges."

So is this a major blow to the challengers' case?

Michael Cannon, the Director of Health Policy at the Cato Institute and one of the architects of the legal challenge to the law's implementation, says the video doesn't undercut the challenge.

In an email, Cannon provided four reasons why Walker's quote won't damage the case. 

First, these comments could have been made by someone who agrees with the King plaintiffs' interpretation. Walker was talking about which option gave states more control. In that context, he said creating its own Exchange gave Wisconsin officials no more control.

Second, if Millhiser wants to argue that Walker shared(-es) the government's interpretation of the statute, all he needed to do was point to an (ill-advised) proposal Walker put forward years ago that was premised on the idea that he could move people off of [Wisconsin's state-created health program for low-income individuals] BadgerCare and into subsidized coverage through Wisconsin's federal Exchange.

Third, even that wouldn't necessarily tell us Walker shared the government's interpretation, because Walker could (plausibly) claim that he was (irresponsibly) hedging his bets.

Fourth, it is a little ironic and telling that Millhiser bolsters his claim of Walker sharing the government's interpretation of the statute by noting that Walker reached that conclusion after meeting "with the most senior Obama Administration official entrusted with health policy." Wait, you mean Kathleen Sebelius didn't tell him subsidies aren't available in federal Exchanges? I am shocked.

To that I would add that it's useful to note and recall the political context of Walker's remarks.

At the time, state governments were deciding whether or not to implement their own exchanges. There was a lot of pressure from Obamacare supporters and from the administration, who wanted states to run the exchanges themselves. One of the administration's main arguments was that if states ran their own exchanges, they would have more "flexibility" to configure the exchanges as they saw fit. In response, critics argued that the flexibility was mostly imaginary.

This is the debate that Walker was referencing in the WSJ.com video. When he says he concluded that there was no difference between a state exchange and a federal exchange, he's pretty clearly talking in terms of the flexibility and authority that state officials would have to manage and customize their own exchanges. 

Liberal backers of the administration's implementation of Obamacare are clearly hoping that this will be their version of the Jonathan Gruber recordings that surfaced last year.

In a video and an audio recording from 2012, Gruber, an MIT professor who worked with the administration and Congress on crafting the health law and has claimed to have written portions of it, stated explicitly that states that choose not to set up exchanges themselves would be cutting citizens off from subsidies. He said this at least twice, and he said it very clearly, elaborating on the consequences. There's really no way to explain it away; Gruber's own after-the-fact rationalization of his remarks doesn't make sense. Gruber's remarks were damaging enough that all reference to his work and name was removed from the government's briefs in King. 

Whatever you make of Walker's remarks, they're not really comparable to Gruber's.