Obamacare

Was Fiscal Irresponsibility Part of ObamaCare's Plan?

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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. 

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  1. That demotivator made me think of another one: None of us is as stupid as all of us.

    1. Some years ago, my friends were out with Larry Niven at a fast food restaurant. There was a considerable number of people, and because everyone was assembling a single large order, this had the effect of delaying its placement. Finally, in exasperation, Larry said to the woman behind the counter, “We’re smarter individually.” I often wonder whether this isn’t also true as a general matter.

      (Aside: one of the friends who related this to me used to use it as a .sig for many years, until an online dork attacked her for making up the quote because he had read all Niven’s books and wasn’t able to find it, etc. No, really, she was there.)

      1. A lot of people seem to forget or discount that writers are people too. Maybe they think they’re all recluses; a few are, but most are actually easy to get to know.

  2. 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.

    “Starve Stuff the beast.”

  3. The nice thing about RomneyCare is now those north of Boston won’t have to drive so far to get to a good casino.

    1. Also happy hour might come back.

  4. not intended to be IRRESPONSIBLE; intended to bring about the transformation change that the now-ward-boss-in-chief promised. Fools believed that he meant change in a positive way. The question of how much of this is intention stopped living in the minds of conspiracy nuts long ago.

    His actions made a bad situation worse. Someone interested in improvement would change; Obama has instead upped the ante in continuing down a path whose outcome is known.

  5. With enough government intervention distorting the market, eventually you can declare the health care system a market failure, leaving the government no choice but to take it over. That IS the plan, right ?

    1. i would say the goal has always been a single payer system. extend medicare to everyone.

    2. Exactly. The inevitable failure would be blamed on not enough government, and single payer would be the “obvious” solution.

    3. If you recall there is a video where Obama claims that a single payer government solution is the ultimate plan. Funny how it was mostly ignored as preposterous back then and he really didnt mean it…the more you learn about this guy, the more dangerous he becomes. Sort of reminds me of someone in biblical history…just sayin’

  6. “and fiscal irresponsibility was the plan all along”

    Well, Duh!

  7. I think you flatter them needlessly when you accuse them of “planning” this.

    1. I don’t. I think their ultimate goal has always been a complete federal takeover.

      When it became clear they couldn’t get that in one bite even with complete control of Congress and the Executive, they went for incremental change in that direction. That their incremental step was inherently flawed, unstable, and unsustainable I think was pretty much a given, but that was OK, since its failure would, itself, be a step toward their ultimate goal.

      1. I should read the entire thread before commenting…. What R C Dean said.

  8. Suderman, just when I had moved on from you, you went back to no alt-text. Is constant commenter pestering part of your plan?

  9. Fiscal Irresponsibility – It’s a feature, not a bug.

    1. Fiscal Irresponsibility is pervasive in Washington DC.

  10. Only the kindest of the kind could continue to call these disasters unintended. I still can’t believe the insurance companies couldn’t see that they would be toast if they signed on to the bill.

    1. IMO, they think they will be able to control the process transforming themselves into utilities companies.

  11. “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 other words, you pass a universal welfare benefit that instantly becomes politically sacrosanct. It predictably blows a gaping hole in the budget, creating the “emergency” or “crisis” needed to force through an endless series of measures that could never be passed otherwise. This is Rahm Emmanuel applied to health care. It is national policy driven by an unending series of totally predicable crises.

    Not to mention that it’s bullshit to suggest that you get coverage and then control costs without affecting coverage later on. Limiting coverage is what the IPAB is for, isn’t it? As universal coverage rockets the debt ever upward, more and more medical procedures will be deemed “ineffective” and hence forbidden. But hey, it’s better for everyone to have shitty healthcare than for anyone to have world-class care.

  12. “Fiscal irresponsibility was the plan all along.”

    I am sorry, but who was so deeply impaired that he did not understand this obvious fact?

    Can’t anyone do basic math anymore??

  13. Last night a friend from the Conservative Party made me dinner. He’s done everything: military, cop, caterer, real estate, I forgot what else, as well as being a political activist who’s had some degree of success at it. He keeps working even though he has a good deal of pain and debility.

    Despite his generally conservative pollitical ideas, he thinks medicine in the USA should be fully socialized along the lines of the British National Health Service. It bothers him that he pays so little for health care now and that taxpayers are stuck with so much of the bill, even though he himself paid so much in taxes over his lifetime. But it also bothers him that so many doctors have Mercedes Benzs, and that although they do deserve to charge a lot for their special knowledge, they don’t deserve as much as they’re getting because their training was usually paid for by their parents or others. He thinks the drug firms charge too much too. he thinks that socializing medicine along those lines (i.e. monopsony) will eventually be required to keep Medicare and Medicaid from bankrupting the country, and that it should be done sooner rather than later, to cut costs.

    It also bothers him that someone with as much knowledge and aptitude as me is broke.

    1. he thinks medicine in the USA should be fully socialized along the lines of the British National Health Service. It bothers him that he pays so little for health care now and that taxpayers are stuck with so much of the bill,

      Cognitive dissonance much?

      I’m curious: How does somebody who wants to nationalize so much of the economy, and is also apparently prone to class envy, have “generally conservative views”?

    2. “It bothers him that he pays so little for health care now and that taxpayers are stuck with so much of the bill,”

      No, it doesn’t. If it did, he would pay more. There is no law preventing him from paying what he thinks he should.

      He just refuses to pay. Tell him to stop running his mouth and do so already.

    3. @Feral Dog:
      It is a crime for participating Medicare and Medicaid providers to accept more than Medicare and Medicaid allowed amounts for their services. There are those who would like to pay more for their services — there are a number in our little practice that have asked to do so. Once they have presented their insurance cards, they cannot.

  14. I too accede to the inevitable socializ’n of medicine. You see countries around the world that have denationalized communications (phone, mail, wireless) and many other public sectors. Nowhere do you see medicine being generally de-statified. You do see a few reforms loosening controls in some places, but not a general desocializ’n of medicine, in stark contrast to the trends in other spheres of business.

  15. I think that the real thought is more likely to be that you cannot have cost control before you have control, not coverage. The coverage is a mechanism to get control.

  16. Obamacare is physically irresponsible, regardless of intent. No cost us $5 trillion over the next 10 years. As employers dump employees onto the shop exchangees and refuse to hire new employees thanks to the penalty on a per employee basis, subsidies will spike. And employers layoff quickly to reduce their penalties, more marketable qualify for the subsidies. But you can’t eat free healthcare. People pay your rent with free healthcare. Don’t make logical rosy promises without a way to pay for them. Competition with consumers directly paying for healthcare will reduce the cost. For doctors, hospitals, nurses and drugs will prices down. Japan has the longest life expectancy in the world 400% percent more hospitals.

    Obamacare is full of more problems and no answers.

  17. Let’s be honest. Cost control equals rationing. Cal it what you want, but ultimately the lack of free market mechanisms acting on the health care industry will mean the bureaucracy will need to artificially control costs. That means they will control the amount and type of care in some way. Even price controls will ultimately result in ration indirectly as providers begin offering fewer services in order to produce a profit.

    Yeah, this was designed to be irresponsible. The only question is was it malicious or just ignorance on the part of the politicians that wrote that bill? Honestly, I think it’s a little of both.

  18. It will result in a shortage of doctors because no one will want to take on the enormous cost of becoming an M.D. especially in the specialty fields (like cardiology, etc,) because it won’t pay off in income.

  19. Thank you for a very small picture of some of the machinations to come. Of course.

    When has a government program ever come in on budget? From the start, responsibility has had nothing to do with this. It is simple raw politics.

    Obama, Schumer, and Biden all told us the truth about this at its passage: “This is only a foundation”, “This is just the beginning. It finally gives us real power”, and “THIS is a Big F-ing Deal.”

    Does the expression “run amok” ring any bells, now?

  20. No Peter, this is not conspiratorial thinking. You have voiced what a lot of people have known for quite some time but for various reasons cannot say: this emperor has no clothes!

    Even the proponents of the bill know it is unsustainable, but that has never been a concern. What they have wanted all along is a forced single payer system, aka national healthcare, but they had to disguise it to sell it. Did they lie? No they did something worse than lie; they deceived. Lying is way to get what you want; deception is a way to control others. It is more dangerous. The only way to sidestep the democratic process is to deceive. They did what they had to do to force a terribly flawed piece of legislation through an even-reluctant Congress. What you call gimmicks are worse than that.

    Our only hope is that the SC justices truly will make a judgement based on what is Constitutional and in the best interest of the American people. I pray for that every day. It is the last safety check in the system of checks and balances to prevent exactly what the Obama-wing wants: to force their dark policies on the unwitting and the powerless. Conspiratorial? Sometimes it takes a child to say it: Are you serious? The dude is naked. I’m willing to be that child.

  21. Obamacare was never intended to work. It was intended to make private insurance untenable and thereby make a single payer government system a “necessity”. Anyone who knows the first thing about the insurance industry and human nature could see that from the start.

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