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Obamacare's Fundamental Dishonesty

1:30 PM, Oct 19, 2011 • By MARK HEMINGWAY
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In yet another classic Obama administration Friday night news dump, the administration abandoned the CLASS Act last week. The progam was a major component of the Obamacare law, intended to address long-term care issues. While long-term care costs are a significant problem, the CLASS Act was a disingenous budget gimmick from the start.

It was designed as a voluntary insurance program run by the government. But the way the CLASS Act was to be implemented was problematic. The program was set to collect premiums for five years before it began paying out benefits, taking in a lot more money than it would pay out over the initial 10-year window the Congressional Budget Office (CBO) uses to determine how much a piece of legislation will supposedly cost.

The CLASS Act made no actuarial sense beyond that narrow budget window, and the White House was forced to concede as much and kill the program, along with the $53 billion in alleged deficit savings it was said to produce. Jonathan Cohn at the New Republic issues something of a mea culpa:

The official budget estimates for CLASS suggested it would save money in the first ten years, accounting for about half of the deficit reduction that the Affordable Care Act was supposed to yield during that time. But the estimates for CLASS were never that reliable. More important, after those first ten years, CLASS was likely to pay out more in benefits than it collected as premiums. For these reasons, conservatives like Peter Suderman who criticized CLASS as unsustainable were right to raise alarms, while liberals like me were wrong to ignore them.

Well, kudos to Cohn for forthrightly admitting his error, but don't worry about patting Cohn on the back too hard just yet -- here comes the pivot. To Cohn, the problem with the CLASS Act was not that it was a bad idea or that it undermines case for the whole health care law, but that the Obama administration should have rammed it down our throats harder:

But if the CLASS Act had a potentially fatal design flaw, shouldn’t we assume the Affordable Care Act has the same one? No – precisely the opposite is true. The sustainability of CLASS would not have been in such question if everybody had to sign up for it. In other words, if long-term care insurance were subject to an individual mandate, old and sick people would not have been the only people enrolling.

Right. Because Obamacare's one existing insurance mandate is a major constitutional question that may well invalidate the entire law, to say nothing of the fact Americans generally oppose the idea of insurance mandates, so why not just add another forced insurance scheme to the pile?

In any event, Cohn doesn't address the real problem with the CLASS Act's failure, and one that goes along way toward explaining why Americans hate the law -- the repeal of the CLASS Act is an implicit admission that Democrats were dishonest in making their case for the law.

One of the major arguments in favor of Obamacare was that it would save money. Buying into this mean you had to believe that the federal government was capable of remaking how a fairly large sector of the economy does business and producing a more cost-effective and efficient health care system. That this result would even be possible pretty much flies in the face of what the average American believes about the federal government's capabilities. And yet, the Democrats kept trotting out CBO numbers to make their case.

Of course, Republicans and Obamacare critics have been loudly attacked for suggesting that Democrats were using budget gimmicks to make the health care appear more fiscally responsible than it is. Let's take a trip down memory lane with Ezra Klein, who bemoaned "The Republican war on the CBO":

If the Democrats' legislation fulfilled its goal of covering almost every American and also managed to pay for itself, it was suddenly much harder to oppose. So last week, as the Republicans sought to make their case that the health-care bill should be repealed, a lot of their arguments were aimed at undercutting the numbers coming out of the CBO.

The agency's product is nothing more than "budget gimmicks, deceptive accounting, and implausible assumptions used to create the false impression of fiscal discipline," wrote conservative wonks Douglas Holtz-Eakin, Joseph Antos and James C. Capretta in the Wall Street Journal. Rep. Paul Ryan (R-Wis.) says the CBO's numbers are based on "smoke and mirrors." Rep. Louie Gohmert (R-Tex.), angry that the CBO thinks tax cuts reduce tax revenue - no doubt the agency has also been known to say that the sun rises in the east - has called for the CBO to be abolished....

You can play whack-a-mole with this stuff all day. But beneath it is something more insidious: an effort to discredit the last truly neutral, truly respected scorekeeper in Washington. The facts don't support the particular case the Republicans want to make, so they're trying to take down the people who supply the facts. But once that's done, it can't easily be undone. And the true loser will be the very thing Republicans claim to care most about: the deficit.

Now even the Obama administration says the single biggest source of Obamacare's deficit savings is unworkable, and it's tacit acknowledgement that they manipulated the CBO's scoring process by frontloading the revenue and delaying the costs. So I don't think Republicans are to blame for undermining the CBO's credibility. The fact that Democrats deliberately gamed the CBO system to claim the bill was cost effective when they knew all along they were engaging in fiscal prestidigitation strikes me what's really damaging to the integrity of the system, as opposed to GOP critics (rightly) pointing out that the numbers didn't add up.

Let's not forget that Senate budget committee chairman Kent Conrad, D-N.D., called the CLASS Act "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of." Yet the program was still included in Obamacare, Democrats proceeded to sell the bill on the basis of it's illusory deficit savings, and Conrad voted for it anyway.

Which brings me to Ezra Klein's more recent comments on the matter. Klein, again to his credit, concedes that those who argued the CLASS Act was unsound from the beginning "have a point." But then arrives at this baffling conclusion:

As I mentioned earlier, the problem with CLASS isn’t that it unexpectedly failed in practice. It’s that further analysis showed it worked exactly as the Congressional Budget Office predicted: it saved money in the first 10 years and cost money after that.

In other words, the motto here is “trust CBO.” And what does CBO say about the rest of the health-care law? They predict (pdf) that it saves some money in the first 10 years, and much more in the decades after that.

This is nonsense on stilts. For a long time the exact argument in support of the program was "trust the CBO." Majority leader Harry Reid stood Senate floor and said "[The CLASS Act is] fully paid for, CBO said, in the far future, decades and decades into the future." Maybe "further analysis" exposed the problems of the CLASS Act, but that came after lots of public statements by Democrats specifically citing the CBO in support of the program. If anything, the CLASS Act saga demonstrates how easily the CBO process was manipulated for political ends, and anyone who argues that the collapse of the CLASS Act should renew our faith in the CBO is either delusional or dishonest.

So many of the debates about Obamacare come down to arguing about numbers and policy details. But in the end, I suspect the real reason Americans have consistently opposed the law is that Americans felt all along that an effort to transfer massive power to the federal government to control huge portions of the health care system through a hastily cobbled together, 2,700 page piece of legislation full of pie-in-the-sky promises was about the last thing they wanted. It's bad that the government wanted this power, and it's much worse that Democrats were being disingenuous in their efforts to acquire it. And with each new Obamacare failure, it just confirms their Americans's suspicions that they were being lied to all along.

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