Obamacare is Unraveling

October 18th, 2011 at 1:10 pm | 35 Comments |

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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.

Recent Posts by Stanley Goldfarb



35 Comments so far ↓

  • baw1064

    Let’s hear Dr. Goldfarb’s idea for funding long-term care.

    • Graychin

      Exactly what I was going to ask.

      Of course he doesn’t have any such ideas. The goal is to work for the repeal of Obamacare, so that…

      Because…

      Well, just because.

      • armstp1

        This guy does not care about finding solutions regarding costs. All he cares about is keeping the system a big for-profit system. Doctors do very well in this big for-profit system.

    • scienceFirstAlways

      I’m disappointed that this article is even on this blog. He’s using CLASS as an analogy for the Health Access portion of the plan and claiming the analogy as evidence for it.

  • Xunzi Washington

    Typed a whole comment, disappeared. Are we being moderated now? What’s the deal? If this doesn’t get fixed quickly, I’m going to just stop commenting.

    • armstp1

      I think they have new software. I think if your comment goes over a certain size it gets axed or if you use certain words. Easy way to get around that is to just initially post the comment as one word, say “Test”, then go and type in or paste your entire comment through the Modify function. Seems like their Modify function does not check the email in the same way.

      They must also be censoring the posts, as my one sentence post just disappeared. Maybe they are going the way of all other “conservative” websites and just censoring those on the left…

      • balconesfault

        I’ve been using a similar workaround. Thank God for Firefox – when I hit return in Firefox after my comment doesn’t appear, I still have a reply box with what I wrote in it. If I do the same in IE, when I hit return everything that I wrote will have disappeared.

    • nuser

      Happened to me too.

  • balconesfault

    It is unaffordable since its goal is to enroll another 40 million people into a health care system that is currently bankrupting the country …

    Soooo … is “screw the lower middle class” really your final answer?

    and has been singularly responsible for the decline in real incomes in the US over the past decade.

    Yeah … that, and not that workers just aren’t sharing in Corporate profits the way that the CEO and investment classes are?

  • Watusie

    It is interesting that the author references Judd Gregg twice, but somehow fails to mention Gregg’s stance vis a vis the relationship between CLASS and the ACA as a whole. Afterall, the entire premise of this piece is that the White House pulling the plug on CLASS indicates that the whole program is unworkable, right?

    Well, here is Judd Gregg on that very point. First, he describes how CLASS got into the bill in the first place, from his point of view as a Republican Senator:

    I knew we weren’t going to kill the CLASS Act because it was Sen. Ted Kennedy’s proposal, and he was very sick, and most of us were very sensitive to the fact he was sick. This was his last hurrah, legislatively. I knew we were going to implement it, although I didn’t think the concept was sound…My thought was, let’s put in an amendment that would be hard to oppose, that in effect would either make the proposal sound or would kill it.

    He then addresses the question of “does the end of the CLASS Act say anything about the rest of the health law?

    This was a sidecar. This was not a core element of the overall bill…you can separate off the CLASS act as not having an effect on the underlying bill…
    http://www.washingtonpost.com/blogs/ezra-klein/post/meet-the-senator-who-killed-the-class-act/2011/10/18/gIQAhe7huL_blog.html#pagebreak

    In short, the entire premise of this piece is bs.

    • Watusie

      Thanks armstp1, I used your workaround to post the above comment.

    • Ray_Harwick

      How many times do you suppose Dr. Goldfarb read Ezra’s report before he decided not to mention it here?

  • Stan

    You’re generalizing too much. One part of the Affordable Care Act was dropped. That doesn’t invalidate the whole thing. But that isn’t the dumbest part of your post. This is:
    “Obamacare contains no proven mechanisms to control health care costs except to simply pay providers and hospitals less for the same care.”

    I suggest you Google “It’s the prices, stupid.” If you do you’ll come up with an article in Health Affairs by several authors, including Uwe Reinhardt, a specialist in medical economics at Princeton. Reinhardt and his colleagues were interested in finding out why medical care costs so much more than abroad, particularly because our medical statistics – infant mortality, life expectancy at birth, stuff like that – are so poor in comparison with other developed countries. The article finds that Americans consume less medical care in terms of contact hours with physicians and time spent in hospitals, but the prices here are much higher. Vaginal deliveries, MRI’s, you name it, they’re all much more expensive here than abroad. To explain this, the article notes first that the organizations that pay for medical care in other OECD countries enjoy more monopsony power than here, in the same way that Walmart has an advantage over your neighborhood mom and pop store when it comes to buying supplies, and second, that these organizations are much more efficient than our private insurance industry. Other articles support this study, and the Congressional Budget Office used a similar analysis when it analyzed the Affordable Care Act. Medical inflation isn’t due to an act of God. It’s caused in large part by providers charging more because they can. This has to be stopped.

    And no, I don’t have anything against doctors. I have several family members who are doctors and who earn, I’d guess, five times the median family income. I’m glad they do. But I don’t want them to earn ten times as much, and if the government doesn’t step in, who will?

    • think4yourself

      As to your point about doctors, here’s info about a recent study that American doctors earn about twice as much as those from other Industrialized nations and our specialists are paid much higher than our primary care doctors as compared to other countries were the pay between specialists and primary care is much closer. http://www.nytimes.com/2011/09/08/us/08docs.html?_r=2

  • dugfromthearth

    Obamacare does not add 40 million people to the system. It simply attempts to to plan and pay for them. They are already in the system – being bankrupted by it or dying from it. One percenters like the author closing their eyes to the 99% does not make them go away, it simply makes the one percenters more ignorant about the world.

    That said, pointing out that a part of the plan which would temporarily help balance the budget was really never intended to be implemented is important. That is bait and switch.

  • Bruce Brittain

    “Virtually every developed nation on the planet is experiencing the same rate of growth of health care costs as the U.S.”

    I’m sorry, Mr. Goldfarb, but even a cursory review of healthcare inflation in the other developed countries refutes this statement. You must think that readers do not have access to data or, more probably, that they won’t bother to fact-check your claims.

    • Traveler

      Thanks for pointing that out Bruce. I know that was not the case in the past, but I was willing to suspend disbelief that it could have somehow caught up for some bizarre reason.

      The reason, as you point out, is pure mendacity. Goldfarb has a pretty low batting average for truth and sensibility. He is occasionally on the money. Not this time. More of the same.

    • Rick123

      Yes! Obamacare is unraveling! Success! All in the land rejoice!

      Well, except for those with preexisting conditions. And the working poor. And college students. And small business owners. And the rest of us who already pay for the uninsured through higher premiums and Medicare and Medicaid.

  • Southern Populist

    Unless the SCOTUS completely overturns Obamacare, it is here to stay. There is about 0.0% chance it will be repealed even if Romney wins and the GOP captures the entire Congress. History shows that since WW2 no major government entitlement program has ever been totally repealed. A GOP president might tinker around the edges a bit, but that’s all he will do.

    - DSP

    • indy

      The ACA is a major entitlement? I must have my definitions mixed up because it seems more like some moderate industry reform and/or a few bits of consumer protection.

      • baw1064

        It’s an entitlement for the insurance companies. ;)

      • Southern Populist

        An entitlement is a guarantee of access to a benefit. The ACA is premised on the idea that access to healthcare should be universal and it supposedly guarantees such access, so I do think it’s a form of an entitlement.

        My point, though, is that however it is defined, the GOP is unlikely to repeal Obamacare.

        • armstp1

          SP,

          Why don’t you use your head once and a while?

          The word “entitlement” is complete BS. Medicare, Social Security and especially healthcare are not entitlements. They are EARNED BENEFITS. You pay for them. Nothing is for free. The term “entitlement” makes it sound like you are getting something for free or are entitled to get it. That is not true at all. If you do not pay into SS or Medicare or pay your private healthcare insurance premium you are NOT entitled to anything.

        • indy

          The ACA is premised on the idea that access to healthcare should be universal

          Access to healthcare has been universal for quite some time, at least in the major event sense. The ACA attempts (rather poorly) to restructure how the cost is distributed and also attempts (again rather poorly) to reduce the number of major events by encouraging a system of more constant care. Whether it ends up being for ill or good, it still seems ‘major entitlement’ is newsmax-type rhetoric.

          We can, however, agree the ACA won’t be repealed.

      • balconesfault

        I’d say that the ACA does have some “entitlement” provisions. To wit, someone who is working, and earning enough to no longer be eligible for Medicaid, will be entitled to have the Federal Government subsidize some portion of the cost of buying insurance on the private market.

        As baw points out … this is also somewhat of a subsidy for the insurance companies as well – it would have been considerably more efficient to have just allowed these workers to have bought into Medicare, and big insurance will certainly be the beneficiary of that inefficiency.

        For that, I thank Senators Nelson, and Lieberman, and Bayh … and of course the entire GOP caucus.

        • indy

          I guess I would agree one could view that as a new entitlement. But again once those people get seriously sick they already are ‘entitled’ to care so is it really? Debatable but I can see the argument.

        • balconesfault

          Well, right now they’re basically entitled to spend themselves into bankruptcy if they can’t afford to buy insurance.

          The new entitlement creates a means for government helping them out with the money to purchase insurance to keep them out of bankruptcy (as well as to afford routine care without worrying about how they’ll pay the electric bill that month).

          While I personally don’t like the term ‘entitlement programs’, since I believe they have a lot more to do with how I think we preserve a sane, stable, healthy society rather than with anything anyone is ‘entitled’ to, it fits the way the term is used.

    • Southern Populist

      It would be interesting to know what Anthony Kennedy is thinking. One man, probably, is going to decide the fate of millions one way or the other.

      • balconesfault

        If Kennedy wants to cause trouble, he only votes in favor of a ruling that the mandate is illegal, but that it can be severed from the rest of the ACA leaving the rest of the act standing.

        Then again, such a ruling would screw over a multi-billion dollar industry, which is why Justice Roberts would never let it happen.

  • LFC

    “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.

    I thought it was going to create a board of physicians who would look at the actual medical studies being done to determine which treatments were efficient and which were not. It sure seems to me that refusing to pay for procedures proven to be ineffective would reduce healthcare costs.

    And why isn’t paying providers less a sustainable approach? The problem is that the medical field n this country operates with horrendous efficiency. Many (most?) providers still don’t have computerized records, putting them over 20 years behind other industries. Many (most?) have not adopted the simple and extremely inexpensive protocols developed by Johns Hopkins to prevent in-hospital infections. Why? Inertia. Time for this industry to become efficient and provide higher quality services. Time to join the 20th century at least, and hopefully the 21st eventually.

    “Virtually every developed nation on the planet is experiencing the same rate of growth of health care costs as the U.S.”

    This statement shows an obvious ignorance of compound growth. Even if it’s true (and I don’t believe it is) that other nations are experiencing the same cost growth as the U.S., it would take well over a decade for them to reach the cost level we now experience. Look at the chart below and see how long it would take other nations to catch up even if we managed to freeze our costs.

    [img=http://en.wikipedia.org/wiki/File:International_Comparison_-_Healthcare_spending_as_%25_GDP.png]http://en.wikipedia.org/wiki/File:International_Comparison_-_Healthcare_spending_as_%25_GDP.png[/img]

  • NRA Liberal

    The comment system here is absolutely maddening. I keep trying to comment, I keep getting redirected to the log-in page, I keep logging in…around in circles.

    Frum, you need to fix this. It’s not good for your brand.

  • think4yourself

    Stanley Goldfarb (and other conservatives) are arguing that ACA “Obamacare” will not work because CLASS has been dropped and it was originally bait and switch and that CLASS is an example that ACA has no price controls. He also argues that no one would pay into a plan with no benefits for many years.

    Yes, CLASS contributed the financial wellbeing of ACA in the first 10 years – those numbers ought to be recalculated to address that. And, yes I agree that ACA is not about cost controls (and it should have that component) it is about coverage (I also argue that “lack of coverage” also contributes to cost, but because it’s not apart of the health insurance industry, the current costs are being ignored).

    Goldfarb argues that “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.”

    Please. Isn’t that the classic definition of any insurance policy? I purchase auto insurance now, not because I need it now but because I might need it in the future (oh, and it’s mandated :) ). It is well understood by senior care experts that we have an enormous problem with costs associated with elder care. Nursing home care at $4,000 per month, or at home nursing care, or basic assistance (which also comes into play in the event of disability that may occur even if someone is not older). As noted in the Jonathan Cohn article, the current system is people spend all the cash they have and when it’s exhausted (you can only have $2,000 to your name), then medicare steps in with a barely subsidence program. A long term care program, whether private or gov’t sponsored is a way to deal with that problem. LTC insurance is VERY expensive unless you get it very young, which most don’t unless they had to care for a parent and grandparent and watched all their resources slip away – both of the person needing care and the caregiver.

    Stanley has never liked ACA. Yes, it should have had cost controls as a part of it. However, the GOP resisted everything associated with this bill so the final product was not ideal. LFC talked about provisions to study which treatments were efficient, protocols to reduce infection, and create greater efficiency – the GOP labeled that as death panels and restricting free choice. Goldfarb and the rest of the GOP have no credibility when the only plan the offer is one designed to ensure that only the wealthy have coverage and “the market” will create cost savings cause individuals will be able to negotiate oh so well with the big insurance and health companies – kinda like they do now.

    There are things that need to be done to health care. Until Goldfarb and his ilk have solutions that don’t end up increasing the number of Americans without coverage, I ain’t listening.

  • redmanrt

    The only solution is for us to take better care of ourselves and reduce our burden on the health care system. It’s not a bad idea to serve 4 years in the military, because then you can fall back on the VA. To anyone who doesn’t want to do either one, I say – Tough.