Wednesday, October 19, 2011

Obamacare is Unraveling

Stanley Goldfarb at FrumForum:

doctorsupset1 Obamacare is Unraveling
Writing in The New Republic, Jonathon Cohn argues that the demise of the CLASS act in no way undermines the validity of the Affordable Care Act (surely a misnomer now). Unfortunately, his argument falls under the rubric of sophistry rather than analysis. CLASS, or the long term care component of Obamacare (even the President likes the name now), was an important part of the Act because it was an important mechanism to assure the apparent financial viability of Obamacare.

The plan was that for the first ten years, CLASS would accrue premium payments with no concurrent expenditures. Individuals would electively sign up for the program and their payments would accumulate.  Unfortunately, it was widely understood that the way the program was structured could not possibly work as an insurance plan. Individuals would not sign up to simply put money into a program that they did not then need until such a time as they did need it. This would cause the program to quickly go bankrupt as it would have too many utilizers of the benefit and insufficient supporters paying premiums.

Cohn makes the interesting argument that the Obama administration really did not want the CLASS program inserted because they knew it could not work. He writes that “skeptical administration officials took solace in the fact that, thanks to a provision inserted by Senator Judd Gregg of New Hampshire, the Secretary of Health and Human Services had discretion to modify the program if, upon further consideration, it appeared unlikely to remain stable. It’s precisely that authority that HHS Secretary Kathleen Sebelius exercised last week.”

But the Wall Street Journal today sees the argument a bit differently:
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.
So everyone knew it would not work but it was put in the plan anyway. Why? Because it led to an 86 billion dollar benefit to the overall budget of Obamacare.  I think this approach is called a “Bait and Switch” by some elements of society. There are several straw men here.

Cohn attacks conservatives for opposing the CLASS act, but let me point out that the opponents of the CLASS act, according to Cohn, actually included members of the Obama administration, not just conservatives. The problem with it is that it is unaffordable. The general problem with Obamacare is that it will be unaffordable.  It is unaffordable since its goal is to enroll another 40 million people into a health care system that is currently bankrupting the country and has been singularly responsible for the decline in real incomes in the US over the past decade.

Obamacare contains no proven mechanisms to control health care costs except to simply pay providers and hospitals less for the same care. That will be an unsustainable approach to the problem. Previous predictions about the cost of Medicare have proven to be absurdly deficient. Virtually every developed nation on the planet is experiencing the same rate of growth of health care costs as the U.S. Has anyone articulated a believable explanation for how this plan will be different? The demise of CLASS is a preview of the coming economic collapse of Obamacare.

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