Kathleen Sebelius


The CLASS Act Fraud

Those who conducted the campaign to force Obamacare through Congress in 2009 and 2010 made a whole series of fraudulent arguments. “You can keep the plan you have today if you like it.” “Premiums will go down, not up — by $2,500 per year for those with existing coverage.” “We can cover 32 million people with heavily subsidized and expansive third-party insurance, and it won’t cost the American people anything.” “The only people who will pay the $800 billion of Obamacare’s new taxes over the next decade are the rich.”

All of that is plainly false, of course, and most Americans know it, which is one reason the November 2010 election turned out the way it did.

But of all the deceptive arguments and tactics Obamacare’s apologists employed to jam their government takeover of health care through Congress, none was more egregious than the CLASS Act fraud.

CLASS — for Community Living Assistance Services and Supports Act — was one of the late Senator Ted Kennedy’s pet projects. It was sold as a miraculous twofer: the new program would provide both a self-financing, voluntary long-term care insurance program for those needing continuous assistance with daily living, and it would reduce the deficit to boot! What’s not to like?

Indeed, of the supposed $210 billion in deficit reduction over ten years that the Congressional Budget Office assigns to Obamacare, $86 billion is expected to come from CLASS Act operations.

But it’s all a dangerous and cynical game. CLASS is expected by CBO to produce deficit reduction over the next ten years only because the program’s rules require participants to pay premiums for five years before they become eligible for benefits. So, at start up, there is the illusion of a “surplus” as participants begin paying premiums but very few of them qualify for any benefits. But, very quickly, those “excess” premiums will be needed to liquidate the entitlement obligations that participants will be earning. It’s another example of Obamacare’s shameless double-counting.

What’s worse, the CLASS Act is a ticking entitlement time-bomb. Every expert who has looked at it — see here — reaches the same conclusion: it’s a poorly designed and ill-advised program that will suffer from severe adverse selection. Because it is voluntary, it will mainly attract enrollees who are at a higher risk of actually needing the benefit. Consequently, the premiums will need to be set very high, which will only make it even less attractive to healthy workers who generally aren’t that interested in long-term care insurance anyway.

Very quickly after the first decade, CLASS’s finances will become untenable. The premiums, though very high, will still be insufficient to cover all of the entitlement benefits earned and expected by participants. As the program rushes toward insolvency, the only options will be to cut promised benefits, raise premiums even more, or — surprise! — bail the program out with taxpayer subsidies. So, far from being a program that eases budgetary pressure, CLASS is actually a perfect example of all that is wrong in federal budgeting. It was sold under false pretenses as short-term deficit reduction when, in reality, it puts American taxpayers at great risk of another expensive bailout.

Stunningly, the Obama administration, after spending months defending CLASS’s virtues, now says it agrees with the program’s critics. How convenient. Now that it has served its main purpose, which was to create the false impression of deficit reduction from Obamacare, the administration is willing to “pivot” — in that all-too-familiar Washington way — and pretend that they have just now discovered the program’s flaws.

This is absurd. The Obama administration and its congressional allies knew all along that CLASS was an ill-advised risk to taxpayers. But they defended it every step of the way during legislative consideration in Congress because of the convenient and deceptive “score” it produced from CBO.

Now, Health and Human Services Secretary Kathleen Sebelius says she has the administrative flexibility to essentially rewrite the program herself from scratch, with no input or changes necessary from lawmakers. This too is absurd. Her lawyers no doubt have an expansive view of her discretion. But they are between a rock and hard place here. The only way CLASS works is if millions of healthy workers sign up for a program (though it will almost surely be a bad deal for them) even as sick workers who are likely to benefit are screened and kept out.

In one more sign of their shamelessness, the administration wants funding to conduct an “education campaign” to browbeat reluctant workers into signing up for a voluntary program that should never get off the ground.

The most serious threat to the nation’s long-term prosperity is runaway federal entitlement spending, and the CLASS Act is the perfect example of how not to go about starting and running a federal entitlement program. And yet the Obama administration is doing whatever it can to salvage it. It’s yet another example of the president’s complete detachment from budgetary reality.

posted by James C. Capretta | 4:30 pm
Tags: CLASS Act, Obamacare, CBO, Kathleen Sebelius
File As: Health Care

The Private Insurance Boogeymen

I have a new article at Kaiser Health News on the efforts of Kathleen Sebelius and the Obama administration to shift attention in the health care debate to private insurance companies as antagonists:

On Sept. 9, [Health and Human Services Secretary Kathleen Sebelius] sent a letter to the trade group representing the nation’s health insurers expressing her displeasure with stories in the press that quoted insurers that blame a portion of their looming premium increases on the mandates in the new health law....

[T]o apparently show how serious she is about getting the industry to toe the line, the secretary’s letter issued a plainly stated threat: Any insurer that dared to utter the truth about why premiums are rising might be banned from the government-managed "exchanges" through which the administration hopes most individual and small-group purchasers of insurance will eventually get their coverage. For many insurers, if the law gets implemented as planned, banishment from these exchanges could very well mean going out of business....

It is not every day that a cabinet secretary issues a threat aimed at controlling the speech of an entire industry for plainly political reasons.

But it does fit a pattern. For more than a year, the administration has sought to frame the health care debate as primarily a fight between advocates for consumers and the private health insurance industry, and Secretary Sebelius has been leading the way in this regard.

Read the whole article here.

posted by James C. Capretta | 5:53 pm
Tags: Kathleen Sebelius, exchanges
File As: Health Care

The Anatomy of a Hostile Government Takeover

During the long national debate over the future of American health care, President Obama frequently chastised his opponents for launching exaggerated attacks on his plan for “reform.” He took particular exception to the criticism that the changes he was pushing amounted to a government takeover of the whole health sector. He knew full well that this kind of criticism might derail the entire effort in Congress, because most Americans recoil at the thought of a distant and bureaucratic federal government running the health-care system for everyone. So Obama vigorously denied that his program would lead to any such thing. In his August 8, 2009 radio address, he described the “takeover” accusation as “outlandish” and characterized his approach as a mainstream and moderate attempt simply to reform the nation’s private health-insurance system.

It’s now been six months since Congress passed Obamacare — not a long time given the sweeping nature of the legislation and the long phase-in schedule for its most significant provisions. Even so, it is already abundantly clear that Obamacare’s critics were dead right: The new health law has set in motion a government takeover of American health care, and a very hostile one at that. The Obama administration’s clumsy and overbearing behavior since its passage proves the point.

First, there are the heavy-handed statements coming out of the Department of Health and Human Services (HHS). Two weeks ago, HHS secretary Kathleen Sebelius sent a letter to the nation’s insurers with a plainly stated threat: Either the insurers conform to the political agenda of the administration and describe the reasons for premium increases in terms acceptable to the Democratic party, or they will be shut out entirely from the government-managed insurance marketplace. What could possibly have provoked a cabinet secretary to launch such an indiscriminate broadside against an entire industry? Simple: A handful of insurers had dared to utter the truth, noting that the new law has imposed costly insurance mandates that will raise premiums for everyone. For that offense, the federal government has essentially threatened to put the truth-telling insurers out of business. And what’s truly astonishing, and telling, is that the new law almost certainly gives the HHS secretary the power to do so if she really wants to.

Then there is the matter of Dr. Donald Berwick. Recall that President Obama took more than a year to settle on Dr. Berwick as his nominee to head the Centers for Medicare and Medicaid Services (CMS) — and then moved in a matter of weeks to put him in place without Senate confirmation. The president tried to blame Republicans for this blatant end-run around constitutional checks and balances, even though Democrats control the Senate and could have held a hearing and a vote if they had wanted to. The truth is that Democrats didn’t want Dr. Berwick to be confirmed in the Senate. They wanted him on the job, for sure, because he is an ardent government-takeover enthusiast, and is prepared to use all of the levers at his disposal to advance that objective. The president and his Democratic allies just wanted to get Dr. Berwick in place without the public’s really noticing. So they chose to circumvent the normal process and put him in the CMS position with a time-limited recess appointment. For the next year and a half, Dr. Berwick is free to use CMS’s enormous new powers to force doctors and hospitals to conform to his vision of effective health care, and he is essentially accountable to no one but the president.

To distract the public from these power plays, the administration decided to launch a series of “information” campaigns that are plainly political and filled with all manner of distortions. HHS sent a letter to the nation’s Medicare beneficiaries supposedly explaining what the new law will mean for them. Somehow, it failed to mention that the law will cut Medicare by half a trillion dollars over a decade, and cut the value of Medicare Advantage by an average of 27 percent by 2017. HHS followed this up by putting the same distortions on television, in the form of an expensive advertising campaign featuring Andy Griffith.

In the meantime, busy beavers in various corners of the federal bureaucracy are laying plans for new fiefdoms. Thousands of new employees are planned for various offices in HHS, including the new office to regulate private health insurance nationwide. The IRS is gearing up both to enforce with tax penalties the requirement that everyone carry government-approved insurance, and to help administer the massive new entitlement program that will require income verification on tens of millions of applicants. States will also be forced to build new bureaucracies to carry out the scores of tasks the federal government will be ordering them to perform.

Massive bureaucracy. Disinformation campaigns. Blatant power plays. The politicization of decisions that should be made with a focus on patient care. The use of government power to threaten citizens and their livelihood.

This is what Obamacare has brought us. And that’s just in its first six months.

[Cross-posted at NRO here.]

posted by James C. Capretta | 11:48 am
Tags: Kathleen Sebelius, Donald Berwick, Andy Griffith, Medicare Advantage
File As: Health Care

The Shameless Medicare Propaganda Continues

Today, the Department of Health and Human Services (HHS) issued what it is calling a “report” on the supposed improvements to Medicare passed as part of Obamacare.

The first thing to note here is that this so-called “report” isn’t really a report at all. It provides no new information. By all rights, it shouldn’t generate any news, as it contains no news. It’s just a rehash of administration talking points, half-truths, and deceptive arguments, repeated many times previously, based on cost estimates produced by the chief actuary of the Medicare program in April and by the Congressional Budget Office (CBO) in March.

So why is HHS Secretary Kathleen Sebelius touting this so-called “report” today, four months after the law’s passage, including scheduling a conference call about it with reporters?

Perhaps it has something to do with the fact that another Medicare report — the Medicare trustees’ report — is also scheduled to come out later this week. The trustees’ report always generates news because it is the once-a-year update to the long-term cost projections for the Medicare program. The report must be approved by the Medicare Board of Trustees, which is made up almost entirely of political appointees from the Obama administration. But the report itself is largely written by the chief actuary, Richard Foster, and his staff, who are civil servants in the executive branch but, by longstanding tradition, are given much more independence than other federal workers because of the importance and sensitivity of their estimates and judgments.

That independence was on full display when the chief actuary released his cost projections for Obamacare on April 22, including a separate memorandum directly addressing the issue of Medicare trust fund solvency.

On the surface, the chief actuary’s findings would seem to confirm one of the administration’s main talking points — which is that the new health law will postpone depletion of the Medicare hospital insurance (HI) trust fund by a dozen years, to 2029. But a full reading of both memoranda makes it clear that the apparent good news on trust fund solvency is nothing but a mirage.

The problem is that the administration is trying to count the same Medicare cuts and tax increases twice, once to pay for a massive entitlement program to expand insurance coverage to low and moderate income households, and then again to fill the coffers of Medicare so future benefits can be paid.

That of course seems fishy to commonsense Americans, and for good reason. Even the federal government hasn’t found a way to spend the same money twice — a point both the chief actuary and CBO confirmed in their separate analyses of Obamacare. As stated by the chief actuary’s office, “In practice, the improved [Medicare hospital insurance] financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the [the new health law]) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.”

In other words, because Congress spent the Medicare savings on a new entitlement program, when Medicare’s bills mount in 2017 and beyond, the federal government is in no better position today than it was before enactment of Obamacare to pay them. On paper, Medicare’s HI trust fund has new reserves, but those reserves are not backed by real assets. When Medicare’s costs rise, the federal government is still going to have to borrow more money, raise new taxes, or cut spending elsewhere to meet its obligations. The administration and its allies in Congress could have improved the government’s ability to pay Medicare’s bills in the future by devoting all of the Medicare cuts and taxes to deficit reduction. But that’s not what they did; consequently, we now have more government obligations and much less flexibility to find ways to pay for it all.

The HHS “report” released today also continues to ignore another important finding by the chief actuary about Obamacare, which is that the deep, arbitrary, and across-the-board payment-rate reductions for hospitals, nursing homes, and other providers of medical services are highly unlikely to be sustained because they will harm access to care for Medicare’s enrollees. The largest cut enacted by Congress would impose an annual reduction in the inflation update for many institutional providers of care. This cut would occur every year, in perpetuity, thus driving payment rates down well below what private payers will be forced to pay. These kinds of arbitrary price controls always drive out willing suppliers of services. The chief actuary expects about 15 percent of the nation’s hospitals would lose so much money from Medicare patients that they would have to drop out of the program. And yet the HHS “report” continues to argue that Obamacare will “strengthen” the program on behalf of beneficiaries.

Similarly, the HHS paper glosses over the deep reductions in the Medicare Advantage program (some $150 billion over ten years), arguing in Orwellian fashion that the Medicare Advantage cuts will somehow be good for seniors. As the chief actuary has noted, Obamacare will push millions of seniors out of the health insurance plans they voluntarily selected, and millions more will now pay hundreds if not thousands of dollars more for their health care every year as a result the new law’s cuts.

The administration is clearly in full campaign mode now. Seniors are a critical voting bloc in an off-year election. Democrats have now targeted them with taxpayer-funded mailings that are blatantly deceptive, a taxpayer-funded television campaign featuring Andy Griffith that FactCheck.org has said uses “weasel words” to avoid telling the truth, and now a Medicare “report” that is a rehash of Team Obama’s stale and discredited talking points. Unfortunately for the administration, no matter how much money they throw at the problem, it’s unlikely to work. America’s seniors have enough common sense to know that down is not up, and up is not down, no matter how many times the president says otherwise.

posted by James C. Capretta | 5:10 pm
Tags: Kathleen Sebelius, Medicare Board of Trustees, CBO, chief actuary, Medicare Advantage
File As: Health Care