Tuesday, October 18, 2011

Problems with Obamacare - Running into Reality

Obamacare is running into reality. It's effort, through government fiat, to expand access to healthcare without increasing costs won't actually work. The CLASS Act is one specific example.

One of the law’s more blatant gimmicks just died after the administration ran smack into the adamantine rules of basic accounting, and one of the law’s central provisions might be overturned by the Supreme Court. The Obama administration’s signature legislative accomplishment is a standing testament to the foolishness of saying and doing anything to pass a bill as complex and sensitive as one remaking the American health-care system.

The expiring budgetary gimmick is the Community Living Assistance Services and Supports, or CLASS, Act. This new entitlement for long-term care was going to collect premiums for five years before paying out benefits. In the highly theoretical bookkeeping of the Congressional Budget Office, this made it a deficit-reduction measure; the program would collect $70 billion over the first ten years of Obamacare, the window for CBO estimates. Thereafter, it would pay out benefits at an unsustainable clip.

Only in Washington could lighting a fuse on an exploding entitlement be considered an act of fiscal rectitude, but the CLASS Act accounted for almost half of the official deficit reduction of Obamacare. Everyone knew it was shameless legerdemain. In 2009, the Democratic chairman of the Senate Budget Committee pronounced the CLASS Act a “Ponzi scheme of the first order.” The actuary for Medicare warned during the drafting of the program, “Thirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue.”

The Obama administration persisted anyway. The long-term-care program had been a cherished priority of the late Ted Kennedy, and besides, it helped with the numbers. Obama’s Department of Health and Human Services wrestled to make the program workable before giving up last week. An HHS official with a gift for understatement explained that putting the program on a sound actuarial footing during the next 75 years and implementing it as written were goals in “some tension.”

To work, the CLASS Act needed a mandate. Otherwise, young and healthy people wouldn’t sign up for it, and the cost of premiums would spiral out of control. This is why, more broadly, the individual mandate is so important to Obamacare. Without it, the health-insurance system will experience the same “death spiral” that prospectively doomed the CLASS Act.
The basic problem is reality. Government is simply incapable of making the millions, billions of health care decisions individuals need to make. The only way to truly control costs is by having individual American's make these decisions. Government has distorted our health care market for generations through mandating services and expanding government health care programs. To dramatically expand government control of health care during a time of economic difficulties will only make the situation far worse.

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