Devastating: HHS abandons part of ObamaCare as fiscally unworkable

posted at 6:27 pm on October 14, 2011 by Allahpundit

A total debacle. And the punchline is, everyone saw it coming — including the Democrats who went ahead and voted anyway to bring this Frankenstein to life.

Congrats to the mad scientists responsible for choosing late Friday afternoon to break the news.

Known as CLASS, the Community Living Assistance Services and Supports program was a longstanding priority of the late Massachusetts Democratic Sen. Edward M. Kennedy.

Although sponsored by the government, it was supposed to function as a self-sustaining voluntary insurance plan, open to working adults regardless of age or health. Workers would pay an affordable monthly premium during their careers, and could collect a modest daily cash benefit of at least $50 if they became disabled later in life. The money could go for services at home, or to help with nursing home bills.

But a central design flaw dogged CLASS. Unless large numbers of healthy people willingly sign up during their working years, soaring premiums driven by the needs of disabled beneficiaries would destabilize it, eventually requiring a taxpayer bailout…

“Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” Sebelius said in a letter to congressional leaders.

Social Security’s Ponzi scheme is sustainable — not forever, but for now — only because it forces new workers to pay in and keep funding benefits for retirees. CLASS tried to build the same pyramid without using compulsion to create that revenue base on the bottom. The result, soon enough, would have been an upside-down pyramid that inevitably toppled over. Look for the left to try to salvage this disaster on that grounds — that it goes to show the absolutely necessity of a mandate if you want to expand health-care coverage. True enough, I suppose. If you want a robust entitlement state, you had better be prepared for a lot of government coercion.

But wait. We haven’t touched on the real disgrace here yet. Philip Klein:

One reason why the Obama administration has been reluctant to officially shut down the program is that it was one of the main accounting gimmicks they used during the health care debate. Because the CLASS Act was supposed to collect five years of premiums before paying out any benefits, the Democrats have been claim $80 billion in short-term surplus from the program as deficit reduction, ignoring the obvious fact that the money would eventually have to pay for benefits. It’s been called a “budget zombie.”

Here’s the detailed HHS report prepared concluding that the CLASS program couldn’t work. One of the fears raised is that if it were implemented and failed, it would be problematic to shut down.

That’s another key lesson to take away about entitlements: If you want to prevent fiscal hemorrhaging later, your only option is stop the program before it’s up and running and the public’s dependency forms. I’m amazed that Sebelius was responsible enough to pull the plug on this now instead of letting it begin and roll on inexorably towards insolvency.

But never mind that. Look again at that $80 billion figure. How did a program so obviously unsustainable that the White House had no choice but to shut it down produce an $80 billion surplus for ObamaCare accounting purposes? Very simply, actually. The Democrats designed the first five years of CLASS to be a “vesting period” in which enrollees would pay into the program but receive no benefits yet. In other words, for the first five years, the program would have been pure profit for the government — and then, when benefits finally kicked in, the hemorrhaging would begin. The reason they did it that way is the same reason they delayed the start of ObamaCare until 2014: They knew that CBO “scores” new legislation based on its first 10 years of operation, so the more they could game the numbers during those first 10 years, the better the “score” for ObamaCare would look while Democrats were trying to sell it to the public. It was a massive accounting fraud designed to make health-care reform seem much less expensive than it really was. According to Klein, CLASS’s phony “savings” accounted for fully $70 billion of ObamaCare’s supposed $143 billion in deficit reduction. According to WaPo, using a slightly different baseline, CLASS accounted for $86 billion in savings. All of that is up in smoke now. Or rather, it was always smoke. Only now is the White House finally acknowledging it.

But even that’s not the real disgrace here. This is the real disgrace, from Andrew Stiles’s post at the Corner written on September 15:

Long after Obamacare was passed and signed into, even prominent supports of the bill acknowledged that the CLASS Act was a financial disaster waiting to happen. Senate Budget Committee chairman Kent Conrad (D., N.D) called it “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would be proud of.” Health and Human Services secretary Kathleen Sebelius admitted it was “totally unsustainable” in its current form. But again, that was after Obamacare had been enacted. In fact, under the new law, HHS has until Oct. 1, 2012 to finalize the program’s requirements, to be imposed through regulation. Because the law (no doubt intentionally) left vague many of the plan’s key provisions, there is currently no way to reliably assess the program or estimate its potential cost.

As the [Republican] investigative report reveals, administration officials had been warning about the program’s long-term sustainability in the months before the law was passed, yet ignored, and in some cases marginalized these concerns as the White House pushed ahead with its landmark legislation. E-mails uncovered by the working group show that such concerns were first raised back in May 2009, nearly a year before Obamacare’s passage, by Medicare chief actuary Richard Foster. “At first glance this proposal doesn’t look workable,” he wrote in an e-mail to other HHS officials. “Due to the limited scope of the insurance coverage, the voluntary CLASS plan would probably not attract many participants other than individuals who already meet the criteria to qualify as beneficiaries.” Even so, Foster estimated that the CLASS program would have to enroll about 234 million people, which is greater than the entire U.S. population aged 20 and above, in order to sustain itself.

They knew all along, just like they knew all along that Solyndra was a bad bet. And yet in both cases they went ahead anyway because their agenda was more important to them than taxpayer money. Take five minutes and read all of Stiles’s post, which goes on and on — and on — from there. See for yourself just how transparent this fraud was, and yet no one on the Democratic side was willing to halt it before the bill passed because their fiction about “bending the cost curve” was too precious to ObamaCare salesmanship. Byron York is reporting that the GOP’s not going to let this rest with Sebelius withdrawing the program but instead will move to repeal CLASS entirely. That’s excellent. Force all the Democrats who rubberstamped this fraud last year to eat it in a highly public vote, and then let them explain to independents why they’ve gone from “this law will save America” to “this law can’t possibly work” in the course of 18 months. Can’t wait.

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Comment pages: 1 2

Someone please put AP out!
He is on fire!

carbon_footprint on October 14, 2011 at 11:50 PM

CLASS is totally sustainable. Just print and borrow more money to keep it going. That’s the way we’re running the whole government to the tune of a cool couple of billion every day. Why should the cost-saving ObamaCare CLASS program be any different. We are the 99% and we want it. Damn the torpedoes, full speed ahead! On Obamacrats! Onward and downward to oblivion!

stefano1 on October 15, 2011 at 1:05 AM

Technically, we are borrowing about 4 billion a day.

karenhasfreedom on October 15, 2011 at 1:17 AM

But we live in an age where to many people, all that matters.. in fact, the only truth they can comprehend is the truth of the moment. The young and many adults have totally lost the ability to think.

For the life of me.. why would they pull this? It makes no sense. They can just keep repeating “it’s working fine.” Just print the money.

JellyToast on October 15, 2011 at 7:10 AM

Horrors! If this was a “longstanding priority” of Teddy boy, it had to be good.

ncborn on October 15, 2011 at 7:18 AM

Conservative: “ObamaCare will be a disaster and only lead to louder and more aggressive calls for single-payer, which would be an epic nightmare, as proven by human history here & around the world.”

Leftist: “You’re paranoid and cynical!”

Breaking: ObamaCare will not work and is a disaster

Leftist: “The solution to fix this mess is single-payer!”

Conservative: -sigh-

visions on October 15, 2011 at 8:02 AM

Amateurs in charge.

CW on October 15, 2011 at 8:16 AM

Remember when the donations were flowing into the fund for the WTC after 9/11 and the Red Cross got caught skimming money for themselves? Goes to show you what the thirst for money will do as you now think of the politicians that do this on a daily bases and they scream at us and say we are wrong and they know what’s best for us. Look at the mess we are in now with this attitude.

mixplix on October 15, 2011 at 8:25 AM

In other news:

“The theory of alchemy has been proven to be scientifically unsound”

eyesky on October 15, 2011 at 8:37 AM

If CLASS can’t be funded or implemented, won’t this affect some other portions of this pyramid? There is already private insurance for what class would have provided. If it’s only open to working adults, they have a bigger problem than workability. They need to support more employment and everything will be alright.

Kissmygrits on October 15, 2011 at 9:05 AM

He may no longer have CLASS, but Obama Cares.

PackerBronco on October 15, 2011 at 9:12 AM

… Can’t wait.

Mancrushin’ on AP.

BobMbx on October 14, 2011 at 7:55 PM

Won’t happen.

I don’t have any idea what the spin will be, but “oops” is just not in their vocabulary, let alone “I apologize for doing something shady.” Before Pelosi is finished, they will all have been attempting a little heavy lifting with God on their side, and all this accounting-shmaccounting stuff is just too darn unfair and clearly Republican.

And that will make sense.

On MSNBC.

— twinkle fingers —

Axe on October 15, 2011 at 9:59 AM

Amateurs in charge.

this wasn’t done by amateurs. this was done by those very experienced in lying by fraud.

katablog.com on October 15, 2011 at 10:30 AM

F.U.B.A.R.

Jocundus on October 15, 2011 at 10:48 AM

Look for the left to try to salvage this disaster on that grounds — that it goes to show the absolutely necessity of a mandate if you want to expand health-care coverage.

A micro-study in what Obamacare’s designed to do on the macro level. Democrats never had any delusions that the entire thing would actually work. Indeed, it’s supposed to fail, driving insurance prices through the roof, forcing providers out of the market, putting doctors out of work (either by choice or through bankruptcy), and causing the quality and availability of care in this country to fall off a cliff. When all of that happens there’ll be a real health-care crisis, not a purely political one, and Democrats will be blindingly quick to put themselves front-and-center shouting “See? We tried to let the free market work, but now it’s clear that only the government can provide effective health care!” It’s the single most cynical–and given its both predictable and likely costs in terms of human suffering and even loss of life, evil–political move in the history of this nation.

Remember what the lady said: “This is not a principled fight.”

Blacklake on October 15, 2011 at 11:23 AM

May the Assoc. Press all suffocate in Obama’s azz.

What a subjective report they wrote.

Schadenfreude on October 15, 2011 at 12:14 PM

Devastating: HHS abandons part of ObamaCare as fiscally unworkable
Well, duh.

chewmeister on October 15, 2011 at 3:31 PM

Amateurs in charge.

this wasn’t done by amateurs. this was done by those very experienced in lying by fraud.

katablog.com on October 15, 2011 at 10:30 AM

I agree, though I recognize I earlier wrote that Obama and Pelosi didn’t know what they are doing…I now think that they did and do know what they’re doing. Except that by accepting that, we the people would need to then identify and understand Obama, Pelosi, et al. as truly despicable people with decrepit, destructive plans for us and our nation. So it’s just easier to think of them (Obama, Pelosi, etc.) as flim-flam charlatans or con artists or nincompoops or some combination of those, rather than admit that they’re really, really, really awful people with terrible plans and intents.

Lourdes on October 16, 2011 at 12:10 AM

Given the unemployment that BHO has worked tirelessly to create, how would anyone afford a possible $3,000 monthly premium?

Idiots.

madmonkphotog on October 16, 2011 at 4:46 PM

Back to basics. Would you hire a drunken bum, dragged in out of some alley, to perform delicate brain surgery. Then, why on earth, would you hire a group of Democratic lawyers to engineer a super-complicated health care plan? That like having a drunken bum performing delicate brain surgery while wearing boxing gloves!

MaiDee on October 17, 2011 at 9:55 AM

Workers would pay an affordable monthly premium during their careers, and could collect a modest daily cash benefit of at least $50 if they became disabled later in life. The money could go for services at home, or to help with nursing home bills.

Does anyone really think that a disabled person could be cared for on $50 per day, or $18,250 per year? If the care-giver works 8 hours per day, that’s not even minimum wage!!!

Steve Z on October 17, 2011 at 10:32 AM

Comment pages: 1 2