Once again for the Obama administration, lofty promises are giving way to hard reality. On September 22, 2010, in an informal discussion regarding the healthcare bill, the president contended that “as a consequence of the Affordable Care Act, premiums are going to be lower than they would be otherwise; health care costs overall are going to be lower than they would be otherwise. And that means, by the way, that the deficit is going to be lower than it would be otherwise.” That was then. Over the weekend it was revealed that MIT economist Jonathan Gruber, the chief architect of ObamaCare, backtracked on the analysis he performed two years ago. He told officials in Wisconsin, Minnesota and Colorado the price of insurance premiums will “dramatically increase” under the reforms.
Gruber didn’t merely rebut the president’s contention. He rebutted his own, made in 2009, after he reviewed a report by the insurance industry that contended premiums would rise sharply with the passage of the healthcare bill. At that time Mr. Gruber argued that the industry report failed to take into account government subsidies provided to help moderate-income Americans purchase insurance, or administrative overhead costs he predicted would “fall enormously” once insurance polices were sold through the anticipated government-regulated marketplaces, or exchanges. “If you literally take the data from the Congressional Budget Office (CBO) you can see that individuals will be saving money in a nongroup market,” he said.
The CBO was less sanguine, saying it couldn’t forecast what would happen to premiums because “so many uncertain variables come into play.”
Some of the so-called variables surrounding Obamacare have already come into play. First and foremost were the waivers to the plan, issued by an administration with a track record of doing favors for certain constituencies. The actual number of waivers granted remains in question. The Hill claims that as of January, 1,231 companies had received waivers from the plan. ABC News had the number at 1,471 in July of 2011.
Regardless, Republicans contended that the waivers were either politically inspired or represented a fundamental flaw with the legislation. “I think it is an understatement to say that these waivers have been controversial,” said Rep. Cliff Stearns, a Florida Republican, during an interview in March of 2011. “If they needed a waiver in 2011, won’t they need a waiver in 2012, 2013?” Steven Larsen, head of a section of the Health and Human Services department that oversees President Barack Obama’s health care law disagreed. “The annual limit waiver process has been carried out in a way that reflects a commitment to transparency and responsible implementation,” he said. “The overriding purpose of this waiver program is to ensure that Americans do not lose their health coverage before better health insurance options become available in 2014.”
Who’s right? On Friday June 17, 2011, the Obama administration announced it was ending the program as of September 22, 2011 in order to avoid what the Huffington Post characterized as a “potential political distraction ahead of next year’s elections.” Political albatross might have been a bit more accurate.
The next variable that came into play was the CLASS (Community Living Assistance Services and Supports) Act. The original premise of the CLASS Act, a government-sponsored long-term care plan similar to those available in the private sector, was that it would be self-supporting. Those who signed up for the voluntary program would have paid a monthly premium of about $100 for insurance coverage promising cash benefits averaging no less than $50 a day. Furthermore, the CBO, which scored the healthcare bill as reducing the deficit by $210 billion in the years 2012-2021, contended that $86 billion of these savings came from CLASS. Why? Because the program would have taken in premiums for five years, before it paid out claims, making it appear to be “deficit-reducing”–in the near term.
Yet there were doubts about the ability of the program to be self-sustaining from the start, especially if a smaller group of relatively unhealthy Americans were the majority of users. Naysayers also noted that once the program got beyond the ten-year window used to calculate the above CBO numbers, the program would be inundated by cost overruns. As a result, Congress voted that the Health and Human Services (HHS) Secretary had to ensure that the program would be sustainable for 75 years before certifying it.
The math, including the so-called savings, didn’t add up. On October 14, 2011, in yet another Friday afternoon news dump that is becoming a regular affair with this administration, a letter was released to Congress by HHD Secretary Kathleen Sibelius. “Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” it read. Rep. Phil Gingrey (R-GA) didn’t mince any words. “I feel justified and vindicated,” he said at the time. “The bottom line is: As people start to understand this bill, you are going to see more and more of a domino effect.” Sherry Glied, assistant secretary for planning and evaluation at HHS claimed CLASS was an isolated case. “There is a very clear difference between that kind of uncertainty and the rest of the law,” Glied argued.
Ms. Glied has a short memory. During a March 4, 2011 hearing on Capitol Hill, Kathleen Sibelius was asked by Rep. John Shimkus (R-IL) whether $500 billion in Medicare cuts were used to preserve Medicare or fund the health-care law. “Both” she answered. Yet despite what amounts to double-counting Richard Sorian, Assistant Secretary for Public Affairs, contended that the “scoring (CBO estimates) of the Affordable Care Act is entirely consistent with how legislation has been scored for the 30 years” and that “savings in programs like Medicare and Social Security are scored as improving the solvency of those programs and reducing the deficit.” Rep. Joe Pitts (R-PA) made far more sense. “The same dollar can’t be used twice, he said. “This is the largest of the many budget gimmicks Democrats used to claim Obamacare would reduce the deficit.”
There is also a “gimmick” that might be referred to as the Mother of All Variables with respect to the healthcare act. In their haste to pass the bill, Democrats didn’t bother with key details about how the new law would be implemented. Instead they left them up to HHS Secretary Kathleen Sibelius. As a result there are 700 instances where the language of the bill says that she “shall” do something, more than 200 instances where she “may” do something, and 139 occasions where the “Secretary determines” something as well. Due to the general ambiguity, how much power yet another unelected official actually wields remains unknown. Perhaps such ambiguity is what prompted then-House Speaker Nancy Pelosi’s immortal quote about needing to pass the healthcare bill “so that you can find out what is in it, away from the fog of controversy.”
As Jonathan Gruber reveals, the fog is still lifting. In backtracking on his original analysis Gruber noted that “even after tax credits some individuals are ‘losers,’ in that they pay more than before reform.” How much more? Gruber was blunt in a presentation to Wisconsin officials last August. “After the application of tax subsidies, 59 percent of the individual market will experience an average premium increase of 31 percent,” Gruber reported.
Minnesota’s numbers were no better. In a November, presentation, Gruber estimated that 32 percent of Minnesotans would face hikes similar to those in Wisconsin. People in that state have already experienced a 15 percent premium hike because the state is spending $100 million to subsidize high-risk pools. In Colorado, where Gruber delivered his analysis in January, he noted that, despite tax credits contained in the healthcare bill, “13 percent of people will still face a premium increase even after the application of tax subsidies, and seven percent will see an increase of more than ten percent.” Gruber explained to the Daily Caller that his reports “reflect the high cost of folding state high risk pools into the [federal government’s] exchange–without using the money the state was already spending to subsidize those high risk pools.”
How far we have come since that day in 2009 when the president also said that “the Congressional Budget Office…says that as a consequence of this act, the deficit is going to be over a trillion dollars lower over the course of the next two decades than it would be if this wasn’t passed.”
A majority of Americans have long viewed such pronouncements regarding “savings” in the healthcare bill with a great deal of skepticism. According to the Daily Caller, Gruber’s email to them “framed this new reality in terms of the same human self-interest that some conservatives had warned in 2010 would ultimately rule the marketplace.” Rule the marketplace it has. Yet it is quite understandable why so many progressives, whose ideology is based on the the triumph of hope over experience, cannot understand the growing unaffordability of the misnamed Affordable Care Act.
Chances are, they never will.
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