CLASS Dismissed

WP: The Obama administration cut a major planned benefit from the 2010 health-care law on Friday, announcing that a program to offer Americans insurance for long-term care was simply unworkable.

Last week, I wrote about the CLASS act. As you may recall, this long-term health insurance program was scored as a big 10-year deficit reducer because it combined early taxes with late expenditures. It was obvious that the late expenditures would quick overwhelm the early taxes but the CLASS act added some $80 billion to projected health-care savings which helped to pass the bill. Now the bill is passed, however, reality is setting in and the program has been scrapped. House Republicans are upset:

“Make no mistake,” Chairman Fred Upton (R-Mich.) said in announcing the hearing, “the CLASS program was tucked into the health care law to provide $86 billion in false savings, and this budget gimmick is a prime example of why Americans are losing faith in Washington. We plan to hold this hearing to get answers about why this sham was carried on for as long as it was, and what cancellation of the program means for the law’s growing price tag.”

Comments

Well, there goes Ezra Klein's prediction from three weeks ago, explaining why "there’s one big reason why the CLASS Act won’t disappear anytime soon," the CBO gimmick and how eliminating the CLASS Act would affect budget projections.

Silly Ezra, the CBO gimmick was only needed in order to get PPACA passed. Fewer people care about deficit projections once the law is already passed.

Damn, you beat me to it!!!

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Sarah Kliff, not Ezra Klein.

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but i'm certain that you et al wouldn't now try to have it both ways--after having screamed bloody mary about how class, a massive new spending plan, couldn't possibly decrease the deficit--now that Obama eliminated class, you'll come clean and say that Obama has now shrunk the deficit going forward? Or are we to assume that Obama *must* be growing government and deficit whether he implements OR eliminates any taxing/spending program depending on mood?

So the wife spend a grand on new shoes, and decides to take quarter of them back. What a peach, she just saved you $250!

And, according to the CBO, Obama is increasing the deficit by $86 billion, unless Obama was lying to begin with. You choose which.

I laughed out loud when I read mw's message. You are totally right Tom. Besides that, the point Alex makes at the end is important: since this was proven to be a gimmick who says the whole thing is not one as well? How could they even say at any point that CLASS would save any money?

BTW, what was the CBO's position on CLASS? Can we still trust these CBO's predictions?

Yeah, as I understand it, the program was designed to produce revenue to the program, but now it can't even fund itself. So, it appears they are killing it so that it doesn't produce greater deficits for the program.

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We can trust the CBO to make predictions based on their rules: They score laws based on how they are written, nothing more and nothing less.

So it's very easy to game the CBO's scoring, but on the other hand, the CBO itself doesn't try to sell its scores as what will actually happen, just what would happen in the fictional world where legislation is enacted exactly how it is written.

Though I think the director at the time had some pretty harsh words (for a CBO director) about how the PPACA was written to intentionally and obviously game the system and get a good score.

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Fred - that should be "losing faith in Obama and the Democrats". The Republicans did not pass this monstrosity.

Well, I'm a Republican supporter, but unfortunately they have used plenty of budget gimmickry in the recent past, too.

Another example of my government (and everything) always gets worse theory. People can run as whatever label will get them elected because the other side has been naughty. I didn't vote for them.

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Same folks who insisted braindead Terry Schiavo be kept alive want to undercut the program that would have funded it. Conservatives want to protect life, but they won't pay for it. It doesn't matter, we will all pay for it eventually in our rising health costs same way we're paying for the dregs who can't be turned away from the emergency room.

this begs the question... why can't the dregs be turned away from the emergency room? and the answer is government regulations!

Government regulation reinforced by near-universal public demand. Moreover ER's are incompetent to know who is a "dreg" and who is not. Health insurance alone is not a proxy for "dregness" or the lack thereof. Moreover it's easy to envision situations where it's impossible to verify even an ER patient's identity let alone his insurance status.

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This is a total non sequitur, as the Terri Schiavo case had nothing to do with funding medical care.

Schiavo was on the totally free version of CLASS - all you need to do is need long term care and spend down your assets and then the local government provides unlimited long term care, heavily funded with Federal spending. The funding comes from Social Security, bumped by the supplemental SSI, plus Medicare, plus Medicaid.

The question really comes down to what is the incremental cost of CLASS benefits. If its only millionaires buying CLASS, then the CLASS premiums are 100% of long term care costs to Federal government, but if my mother with her dementia or my grandmother with her stroke, had CLASS coverage, then the cost of CLASS premiums would have been slightly higher, given the greater freedom in allowed long term care, and the cost would be much more on the Federal government instead of the local government, but the incremental cost would have been a fraction of their total long term care costs because Federal and local governments paid 100% of their long term care costs.

Democrats want to protect life, they just want Republicans to pay for it.

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This is where the political psychosis comes in:

When presented with irrefutable evidence that the health care reform that the Democrats created is economically unsustainable and unworkable... you point out that Republicans are hypocritical on the Terry Schiavo issue.

The trouble is, no matter how hypocritical the Republicans, the health care reform your Democrats won't work. You can't make Democrats not stupid by pointing out stupidity of Republicans. Stupidity is not mutually exclusive, and won't cancel each other out. Snarky remarks aren't going to pay for healthcare.

Why doesn't anyone ask, why on earth can't we afford health care? Almost all the costs are local, so we're not losing any money and we should gain productivity through universal health care. The only economic benefit to our current system is making a lot of people rich, which, given marginal gains in utility, helps virtually no one.

Third party payment systems. And the essential uninsurability of many health risks.

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Good post Alex.

While they are at that, they can look at the pharma bill which was a godsend to the pharma corporations during the Bush II regime, and cut that down to size too.

The entire government, being germ infested, is where a lot of the medicine needs to be applied.

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"...the law's growing price tag"

Is that the price tag to the federal gov't he's talking about? If so, the ACA is still scored as net positive to the budget by the CBO. Or is the price tag to society as a whole? Yes, a badly designed insurance program is not a good business for anyone, including the government. But the evidence of the popularity and effectiveness of Social Security and Medicare certainly suggests that there is a central place for government run social insurance programs. Fred Upton seems to think so since he's said no cuts to SS are on the table in the "supercommittee" deliberations (http://www.huffingtonpost.com/2011/08/18/super-congress-deficit-committee-fred-upton_n_930519.html). Of course this is also the same Fred Upton who is busy looking into the "death panels" in ACA, since god forbid that insurance should cover end of life counseling.

What's the intention in this quote? Forgive me for thinking that it's entirely polemical and meant to mislead.

You're correct about the death panel business, but Fred quote does not here seem to be misleading at all.

Familiar with the political concept of the "trial balloon"?

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If so, the ACA is still scored as net positive to the budget by the CBO

Yes, in much the same way as CLASS itself was.

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I'm guessing that they tried to use it as a quid-pro-quo bargaining chip in the behind-closed-doors budget-deal supercommittee negotiations, but the Republicans simply called their bluff. It must have been truly untenable if they just discarded it like that and got no concessions at all in return.

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honestly, this is shocking -- House Republicans are opposed to budgetary gimmicks. who knew?

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Line item veto?

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Maybe CBO was using Herman Cain's actuary to make these projections.

When Cain is President, blame him; for problems with Obamacare, you really have to blame Obama to retain any credibility.

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Amazingly, I still run into people claiming PPACA is going to be deficit-neutral. And not just for the gimmicked 10-year window, but forever.

I don't know if you're actually a Republican, but if you are you have no standing - absolutely none - to complain about gimmicked 10-year windows. They were the heart of the justification for Bush's tax cuts. If you didn't complain then, don't complain now.

What a shallow cunt you are.

I'm a human. Therefore I have no standing to complain about murder because humans have murdered.

By the way, how does someone change a law that has already been passed?

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Is Obamacare set to expire in 10 years? Oh good.

Yeah, it's crazy. Having people buy insurance so their care is covered instead of just showing up at the hospital for free, government-paid treatment would never ever save money.

CBO consistently OVERestimated the cost of most health care legislation and underestimated savings from the policy changes in the last 25 years. Read up.

That's because they inflate the numbers who are in 'need'. Start off with BS, and you end up with BS.

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Okay, then why is the administration spit-canning this program? Because they are in thrall to the CBO?

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Alex, have you taken into account the cost of the "free" "CLASS" long term care coverage everyone has that is provided by the Federal governments in a half dozen different entitlements, plus the local entitlements paid for in State and local taxes?

By eliminating the "death tax", everyone can roll the dice and not buy any long term care insurance at all, even if you can afford to and are able to qualify for health reasons. The market for private long term care insurance is hardly functional, with most insurers only offering it on a term basis to employees of large corporations. If you become ill while working and must leave work, you can seldom continue that policy for long beyond termination, but if you fail to become reemployed, you must now apply for coverage with a preexisting health condition, and will pay very high premiums or be denied. In other words, 98% of people will not buy any long term care insurance. Thus one of three things happen:
1. you die quickly and easily, so you are able to pass 100% of any insurance on to heirs
2. you need long term care, but the length of time is shorter than your assets can cover, so you get free government long term care and a high death tax on your heirs inheritance.
3. you need long term care for far longer than your assets, so you get free government funded long term care and a 100% death tax on all your assets at the time you go into long term care.

Another government created problem requiring a half-assed government solution.

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Andrew "let 'em die" Apostrophe is what he's known as on the streets of Liberty. They are privately financed streets, of course.

Read up.

As in, take it up with the prez. I didn't start the dumb program and I'm not the one ending the dumb program. I'm just the one telling you it's dumb.

I'll be a little more direct. Your crappy little attack has been such a cliche that it almost didn't occur to me to retort. What's the point, really. But since the internet is forever, what the heck. You don't know whether I'm for "let 'em die" and you don't even know what that means. It was clear to me a long time ago that as soon as the details got even the least bit difficult your side started shouting "dying in the streets!!!" even though that is nonsense and a pathetic attack. Your side has no interesting in understanding or solving. You have no grasp of the actual issues and your simplistic views are likely to kill many more people than I ever could even if I were trying to. Your crappy little attack is transparent to me, and will soon be transparent to others, especially as Obama's plan continues to fall apart, not through resistance from me or Republicans, but from poor design and execution from Obama and your side. And that is on top of the fact that if he hadn't been so wrong about the economy, it would even be clear to the blind bats on your side that he should have been focusing on the economy rather than his ideological boondoggles.

Not that having him focus on the economy would have been encouraging to me. Doctor Obama can't seem to diagnose anything right. He wanted to shut down Citi. When Larry Summers is the voice of reason...yous in big doo-doo. Just as with Occupy Wall Street, where the problem is a government that has shirked one of it's main duties by failing to create an orderly bankruptcy process. They don't need any special power or legislation to resolve bankruptcies. Neither do you need special powers to fix Medicare/Medicaid. Just do your damn job. When you get the problem right, you can then think clearly about the right solution.

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Seven decades of federal interventionism in health insurance and healthcare markets has resulted in high medical inflation and millions of poor people being priced out of the market. We need to spread the federal subsidy for employer-based health care to individual purchases of health care. Deregulate the health insurance industry which will force insurance corporations to compete. Subsidize the poor people who are left without coverage with catastrophic or high deductible insurance coverage. And revamp the FDA process completely to reduce costs of innovation.

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I'm unclear why CLASS was deemed unworkable since both benefits and premiums were not detailed in the law. The premiums could have simply been set high and the benefits could have simply been set in terms of a LTC insurance voucher which would have paid whatever the market provides. If few people signed up, there would be no problem with the law being expensive. If lots of people signed up, Medicaid would have reaped the savings of at least a few nursing home stays paid for by private insurance rather than the infamous 'spend down'.

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Health care is my generations largest problem and the issue is that their needs to be universal coverage for our entire country. Maybe it’s just my young imagination at work, but what is wrong with having a program with the people who are morbidly obese and smoke two packs of cigarettes a day pay more for their coverage? Competition is great and it makes other companies work harder so if they have to compete with a government health plan they will serve the clientele with higher quality care. As far as a government health plan is concerned I don’t see the problem in having unhealthy people pay more for their insurance (should Obama implement some sort of national plan) and have those who are active and healthy pay a smaller amount for the same quality care. This can be regulated by having people go to their doctors for physicals and other health examinations needed and have it turned in to the government. It should be the job of this new health system to apply a formula to assign a charge for the health services BASED on the health of the individual, not just how much money they make (although I feel this should play some sort of a role in the equation.)

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As far as the universal health care plan is concerned, I am not at all surprised that it's beginning to fall through. Personally, I am quite skeptical of the plan. Why should anyone be forced to purchase health care that they cannot afford, do not need, or want? Health care CANNOT be universally standardized to create a cozy little fit for everyone in the country. We all have different needs.
In a capitalist economy, such heavy intervention from the government is not wanted, nor is it needed. Competition is what keeps prices low. If the government wanted to make health care available to everyone, all it would need to do is to stand back and let each company compete for its customers. By reducing this competition, businesses will also suffer higher expenses due to raised costs within the small businesses and eventually lead to a loss of jobs. Losing jobs that are already scarce as is will further cripple our weakened economy. Secondly, in order to provide this universal health care, taxes will have to be raised in order to create the necessary funding. So far, the economy has not taken any miraculous turns indicating that we may be able to begin lowering the national debt again. The American people simply cannot be taxed any more than they already have been. I know that taxes are necessary, however, what good will it do to raise the taxes when all the government is doing is spending money like it's going out of style?

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