The Corner

One Obamacare Disaster Averted, Lots More To Go

The editors have it just right on the CLASS Act. The administration’s latest Friday night bombshell was really no surprise at all. (The massive deficit announcement tonight surely couldn’t have surprised anyone either, though I certainly have to admit that getting involved in a war in Uganda is one I didn’t see coming.)


Just about every conservative critic of Obamacare pointed to the irrational design of the CLASS Act before the legislation’s enactment. In fact, the administration’s own CMS actuary said it would never work. He was ignored by his employers not because they disagreed with him, but because they needed to pretend their legislation would reduce the deficit. The CBO’s scoring methodology could be manipulated to accept a lot of implausible assumptions, but even with those the legislation needed help, and by designing the CLASS Act to start collecting premiums five years before it would start paying benefits (and counting those premiums as deficit reduction even though they would eventually need to be paid out in benefits) they were able to make the program seem to be in the black by $70 billion in its first ten years, which accounted for about half of the overall “deficit reduction” the Democrats claimed.


Of course, administration officials can’t acknowledge that they always knew the program’s finances could never work, so rather than admit to cynicism they are pleading incompetence. And who knows, maybe they really are that incompetent. Having assured Congress for over a year that the program could be made to work, HHS Secretary Sebelius said today that “Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.” In essence: We tried our best, but the statute makes no sense.


Get used to that excuse. This confirmation that Obamacare cannot in fact defy the laws of mathematics and accounting should serve as a warning regarding the implementation of the broader law, most of which would begin in 2014 if it is not repealed by then. The other major provisions of the statute are also grossly ill-designed. If it is permitted to take effect in full, the law will cause premiums to rise rapidly in the individual market and create major dislocation in the employer market, driving people into vastly overregulated exchanges that would push premiums higher still, and then initiate a program of subsidies whose only real answer to the mounting costs of coverage will be to pay them with public dollars and so inflate them further. It aims to spend a trillion dollars on subsidies to large insurance companies and the expansion of an unreformed Medicaid system, to micromanage the insurance industry in ways likely to make it even less efficient, to cut Medicare benefits without using the money to shore up the program or reduce the deficit, and to raise taxes on employment, investment, and medical research. CBO does not expect it to make a real dent in the inflation of health-care costs or to avert the fiscal implosion of Medicare. Instead, it will double down on price controls and centralized administration and make a real reform of our system much more difficult. These outcomes are nearly as predictable as the fiscal collapse of the CLASS Act (and have been predicted by the same people who saw that the CLASS Act would never work, including the CMS actuary). But in the case of the CLASS Act, the Secretary of HHS was required to certify in advance that her actuaries believed it could be sustained, and at the end of the day there was no way around the fact that it couldn’t. The rest of the law has no such requirements, so the “we tried our best” excuse will come only after disaster strikes.  


But none of this has to happen. It seems we will avert the fiscal disaster of the CLASS Act. Now let’s find a way to avert the even greater disaster of the rest of Obamacare by repealing the law and enacting in its place a set of market-based reforms of Medicare, Medicaid, and a private insurance sector badly distorted by decades of ill-conceived federal policies. American voters will have one chance, next November, to correct the terrible mistake made by their leaders last year before it fully takes effect. Let’s hope we do.

Yuval Levin is the director of social, cultural, and constitutional studies at the American Enterprise Institute and the editor of National Affairs.