Was Fiscal Irresponsibility Part of ObamaCare's Plan?

In response to the Obama administration's decision to close the doors on ObamaCare's long-term care benefit, the CLASS Act, The Cato Institute's Michael Cannon wonders whether ObamaCare might have been intended to be fiscally irresponsible:

[Ezra] Klein writes, "One way of looking at the administration's [CLASS] decision is that it shows a commitment to fiscal responsibility." If so, then let's handle the rest of Obamacare exactly the same way. Congress should require Obamacare's health insurance provisions to be voluntary and self-sustaining, just like CLASS: no individual mandate, no taxpayer subsidies.

Or is fiscal irresponsibility part of the plan?

Perhaps it is. Is that too conspiratorial? In most cases I would say yes, but it's widely agreed that that was the plan with the Massachusetts health reform that became the model for ObamaCare. RomneyCare was passed under the buy now, pay later theory of health reform: coverage first, cost control later. And there's reason to believe that ObamaCare was passed with a similar M.O.

Romney's Bay State plan was passed with the intention of spurring politically difficult cost-controls by increasing health insurance coverage. With everyone invested and greater budgetary pressure on the system as a result, the thinking went, authorities would have no choice but to pass tough cost-control measures. A recent New York Times report explains:

Those who led the 2006 effort to expand coverage readily acknowledge that they deferred the more daunting task of cost control for another day. It was assumed then that the politics would pit doctors, hospitals, insurers, employers and consumers against one another, and obliterate the fragile coalition behind the groundbreaking coverage law.

Predictably, the plan did little to slow the growth of health costs that already were among the highest in the nation. A state report last year found that per capita health spending in Massachusetts was 15 percent above the national average. And from 2007 to 2009, private health insurance premiums rose between 5 and 10 percent annually, according to another state study.

So, thanks to RomneyCare, coverage levels in Massachusetts have increased, and the state is certainly suffering from increased budgetary pressure. Despite years of effort, however, it hasn't managed to pass those major cost-control measures. But it continues to try, and last year Gov. Deval Patrick went nuclear on the state's individual insurance market. 

ObamaCare's backers argue that unlike the Massachusetts health care overhaul, the federal reform package includes a variety of innovative delivery system reform measures intended to control costs. Here's what Jonathan Gruber, who helped design both the Massachusetts overhaul and Obama's plan, told The Washington Post in 2009:

Even if the bill did no cost control it would be an incredible thing for this country. But politically, it sets the stage for cost control in two senses. First, it puts in place all the things we can do now. It does comparative effectiveness and pilots and all the rest.

The best case for these reforms, however, is that they are risky bets on untested plans. As Congressional Budget Office director Douglas Elmendorf recently told Congress, the results produced by those sorts of government-driven health system innovations has often been "disappointing." The problem, as Elmendorf explained, is that it turns out to be pretty hard to take ideas that seem to work in certain contexts and proliferate that throughout the health care system. The results are discouraging." Gruber, however, also argued that the same plan that was supposed to help control spending in Massachusetts would eventually work nationally:

But second, once you get coverage off the table, the conversation gets more focused on cost control….People say you can't do coverage without cost control. I think it's the opposite. You can't do cost control before coverage.

In a smart piece for the think tank e21 yesterday, Mercatus Research Fellow and Social Security Trustee Charles Blahaus noted that without CLASS, the administration's repeated initial arguments that ObamaCare was somehow fiscally responsible fall apart. At this point, the only reason CBO still scores the law as reducing the deficit is because of Medicare payment reductions that are highly questionable. Here's Blahaus:

There's one main reason why the law—sans CLASS—now appears as a net budget positive in its out years. It is the assumption that future Congresses will sustain aggressive cuts in the growth of Medicare spending. Thus, our updated picture of the law turns rosier only when we bring 2020 and 2021 into the picture—and bring enormous projected Medicare cost reductions along with them. Unfortunately, this is precisely the point in time at which many experts, including Medicare's own actuary, have expressed skepticism that such savings will be realized…. The inclusion of CLASS was central to advocates' claims in 2010 that expanding federal health coverage would somehow improve rather than worsen the budget outlook. And had it not been for the CLASS gimmick, critics' arguments about the other budget gimmicks used to pass the law would have been substantiated as well.

The failure of CLASS reinforces what critics have said all along: ObamaCare's claims to fiscal responsibility were built on budget gimmicks and rosy assumptions. Now that CLASS is gone, we're left with untested pilot programs, double counting, payment reductions that will be difficult at best to sustain—and the close-your-eyes-and-jump hope that increasing insurance coverage on the taxpayer dime will somehow create enough buy-in and budgetary pressure to take more radical cost control steps. In other words, it looks a lot like Cannon is right: Fiscal irresponsibility was the plan all along.

*Post edited slightly for clarity.