ObamaCare Starts to Unravel
The real story behind the Class program failure, and what to do now.
Now that one of ObamaCare's major new benefit programs has been scrapped, liberals are trying to make stone soup by claiming that the Obama Administration merely committed an act of "good government." They claim that when this long-term care insurance program proved to be unworkable, the Administration conceded as much, and now it's gone. So let's review the evidence, not least because it so perfectly illustrates the recklessness that produced the Affordable Care Act.
When Democrats were pasting it together in 2009 and 2010, the immediate attraction of the program known by the acronym Class was that its finances could be gamed to create the illusion that a new entitlement would reduce the deficit. Ending the complicated Class budget gimmick erases the better part of ObamaCare's purported "savings," but it's also worth focusing on the program's long-run political goals.
For decades Democrats have been trying to put government on the hook for middle-class costs like home health services ($1,800 a month on average) and nursing homes ($70,000 to $80,000 per year). On paper, Class was supposed to be like normal insurance, funding benefits through premiums with no subsidy. But since the budget gimmick and the program's larger structure meant that premiums could never cover benefits, Democrats were trying to force a future Congress to prevent a Class bankruptcy using taxpayer dollars.
As the costs to the federal fisc continued to climb, the Democratic gambit was that Class would gradually morph into another part of Medicare. Insurance depends on younger, healthier people signing up to cross-subsidize the older and sicker, but under the Class program as written almost all of its enrollees would soon also be beneficiaries.
So to fix this "adverse selection," the plan was for Congress to eventually make participation mandatory, with the so-called premiums converted into another payroll tax and the benefits into another entitlement. Former White House budget director Peter Orszag has been writing that the long-term care insurance market can't function without a mandate, while HHS Secretary Kathleen Sebelius declined to rule one out at a Senate hearing in February. Now they tell us.
The only reason the Health and Human Services Department pre-emptively called off this scheme is that former New Hampshire Senator Judd Gregg succeeded in inserting a proviso that required the Class program's reality to match Democratic promises as a matter of law. If HHS couldn't provide "an actuarial analysis of the 75-year costs of the program that ensures solvency throughout such 75-year period," it couldn't be legally implemented.
In other words, HHS had to prove that the Class program wouldn't go broke the way it was designed to—and actuarial analysis is a matter of math, not politics. In a 48-page report that HHS submitted to Congress Friday, the department concedes that it is literally impossible to create any kind of long-term care program under the law's statutory text in which revenues match expenditures. Such a plan would cost as much as $3,000 per month, which no one would ever buy.
The HHS gnomes even considered "features deviating from or going beyond a plain reading of the statutory language" that its lawyers didn't think could pass legal muster, and they still couldn't avoid violating the known laws of mathematics despite 19 months of trying. HHS lawyers also said the government would have to warn enrollees that the promised benefits weren't contracts and could be abrogated to "dispel any claims that the Class program had misled the public or had encouraged reliance on its programs under false pretenses."
Those pretenses have been obvious all along, with outside analysts and internal Administration experts saying Class wasn't viable. President Obama was a mask of indifference with no response when Paul Ryan took Class apart at the 2010 White House health summit. Democrats included it anyway, but now that the Administration itself has vindicated its critics, Republicans have a new political opportunity to make real health-care legislative progress.
At a minimum the GOP could begin by repealing the Class program altogether, since its legal authority is still intact. "One should never leave a partly loaded gun on the table, even if most of the chambers are empty or just house blanks," writes the American Enterprise Institute's Tom Miller. He also suggests attaching a few of the more destructive provisions and forcing Democrats to defend them, such as Mr. Orszag's Independent Payment Advisory Board of 15 political appointees who have broad unaccountable powers to control health-care markets and health care.
Our suggestion is for a Gregg-like amendment that applies to the entire health law and not simply Class. If reality can't match the rhetoric that accompanied the bill—about fiscal responsibility, bending the cost curve, keeping your health care if you like your health care and all the other false promises—then, legally, it should be repealed like Class. Call it a truth-in-advertising clause. ObamaCare would collapse in a heartbeat.
View article at The Wall Street Journal online here.