Reform doesn’t address soaring health costs

Published 12:01 am Friday, October 21, 2011

In keeping with the Halloween tradition, CLASS, the federal government’s new long term health care insurance program, has been zombified — not dead, but not really alive, either. Kathleen Sebelius, secretary of Health and Human Services, announced in her blog that, “… we have not identified a way

to make CLASS work at this time.”

It is not totally accurate to describe the Community Living Assistance Service and Supports program as a zombie. Technically it has been placed in what the experts call a bureaucratically induced coma. But its haunting power remains.

The only surprising thing about the announcement was that it took so long. The truth is that Secretary Sebelius had been assigned an impossible task by a willful Congress. There is no way this side of Charles Ponzi or pixie dust to create a financially sound insurance system that pays out more than it takes in.

The secretary’s blog announcement provided a summary of the underlying reasons why the assistance program wouldn’t work, and the details and the numbers are included in her report to Congress. That is where the program’s money problems are clearly stated.

The underlying reason is eerily similar to the one that has been haunting the administration’s new health care system from the very beginning: Not enough people will sign up voluntarily for this kind of insurance unless they get sick or get old. That would force premiums higher — too high, as a practical matter, to sustain the program.

The administration recognized this problem when it drafted its Patient Protection and Affordable Care Act, known by some as “Obamacare.”

For the main Obamacare system, the drafters’ solution to the actuarial problem was to make the insurance system mandatory, which would guarantee a large number of healthy, young people in the premium-paying base. It was not a solution to the rising health care costs as such, but it would probably provide enough cash to the new system to pay its bills, at least at the beginning.

For some reason, though, mandated insurance premiums were not included in the CLASS program for long term care and eventually Sebelius, who had been tasked by Congress with designing a system that would be both voluntary and actuarially sound for 75 years, had to admit that it couldn’t be done.

The mandated health care premiums in Obamacare have been challenged in federal courts, and the U.S. Supreme Court will now decide whether the law requiring them is constitutional. The outcome in that case will probably also determine the fate of the zombified CLASS program. If mandated premiums are okayed by the court, the program could be brought back to life. Otherwise, its haunting days are over.

From an economic standpoint, both Obamacare and the CLASS program for long term care reveal structural problems in the way we are addressing the health care problem, and offers a hint of what deeper government involvement will be like.

Structural problems usually don’t get people excited — until things start to fall apart. Most of us are content to let the architects, designers, engineers and other specialists worry about structural issues.

Whether they occur in airplanes, buildings, bridges, business organizations, or economies, structural failures are always a disaster. When they occur in government they are no less so.

The question of whether mandated health insurance is constitutional is certainly an important one, and interesting in its own right. However the harsh truth is that neither Obamacare nor the CLASS long term care program addresses the more important issue: the relentlessly rising costs of health care.

Mandatory participation and taxing individuals for health care insurance would not change the eventual outcome of continually rising costs. Health care is becoming unaffordable, not just for individuals but for our economy.

The Health and Human Services Department did a remarkably thorough study of the important economic dimensions of the long term care issue and how the CLASS program might fit into the picture. Let’s hope that Congress and the White House actually look at it.

The Congress that passed Obama care and launched the CLASS program earned considerable notoriety for its focus on promises and neglect of facts. But as far as health care goes, this simply carried on a tradition honored by many previous Congresses and several administrations.

The creation of a “supercommittee” to dish off budget responsibility was a belated recognition of concern about the structure of how Congress works.

Structural issues in an economy or in government are generally uninteresting for most people — until a structural failure demands our attention. This would be a good time to fight off our natural inclinations and get involved in fixing the structural problems of our government and our economy … before they become so interesting that they’re painful.

James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.