The following editorial first appeared in the Chicago Tribune:
The picture keeps getting darker for the Obama administration’s health care reform program. Last Friday, one big part of it got eliminated — not by Congress and not by the courts, but by the Department of Health and Human Services. Secretary Kathleen Sebelius, abandoning a new program to provide long-term care for the elderly, announced, “I do not see a viable path forward.”
That may sound like a sensible admission, and it is. But the administration’s decision to scrap the effort is still a couple of years late. This is not a problem that emerged only recently, as a consequence of unforeseen developments. On the contrary, it was obvious all along.
The initiative, known as Community Living Assistance Services and Supports (CLASS), was supposed to cover services needed to let the elderly live at home, as well as nursing home stays. But it ran up against a harsh reality: Young and healthy people are generally uninterested in buying such coverage, and the people likely to buy it are also likely to take advantage of it.
So the money going out would eventually exceed the money coming in. Or, as one administration official wrote in an internal email in October 2009, “Sounds like a recipe for disaster to me.”
President Barack Obama pressed on anyway. Worse yet, the administration pretended that the program would actually help pay for the rest of its health insurance plans. About $70 billion of the savings from the health care overhaul would allegedly come from the CLASS program.
That, however, was a cynical accounting gimmick. Because premiums would be coming in for the first few years, while no benefits would be paid, there was a stream of revenue that could defray other expenses. But over time, this provision was clearly destined to be a huge money-loser.
The administration would have liked to preserve the fiction it had relied on, but the law required that the program pay for itself over the next 75 years, and HHS officials couldn’t find a way to accomplish that.
If the premiums were set low enough to attract entrants, it seems, they wouldn’t capture enough revenue to cover expenses. If they were set high enough to cover expenses, they would run as high as $3,000 a month, and few people would participate.
The Obama administration announced the demise of CLASS late on a Friday, the traditional burial ground for bad news. But this is not a one-day-and-be-done-with-it story. CLASS was just one example of the smoke-and-mirrors approach that the White House and Democrats in Congress took to national health care. This was an expensive new entitlement, undertaken without a reliable funding mechanism. It was a big overreach on the part of the administration, which was too intent on expanding access to health insurance and not intent enough on containing costs.
As a result, the champions of national health care failed to create a system that was fiscally prudent and sustainable. The collapse of the CLASS program is the first casualty of that failure, but probably not the last.