Maggie's Farm

The major media has neglected to examine one of the major sections of ObamaCare, its long term care program CLASS, the Community Living Assistance Services and Supports Act.

The New York Times’ chosen "New Old Age" guru, wrote on March 24 that,

I’ve read so little about the Class Act in recent weeks that when President Obama signed the health care bill yesterday, surrounded by a gaggle of happy Democrats, I had to call the National Council on Aging to reassure myself that yes, this often overlooked but potentially transformational program remained part of the package.

Of course, the Wall Street Journal did manage an op-ed, last December, “Congress’s Long Term Care Bomb,” written by a professor of health-care management and insurance and risk management at the University of Pennsylvania's Wharton School.

But CBO and the Centers for Medicare & Medicaid Services (CMS) have identified parts of the program that will subject it to considerable financial risk.

First, those who enroll would likely be more apt to need care and will be more expensive to cover than those who buy private insurance. To cover its costs, the program would have to charge more than private insurers.

The best objective and factual summary and analysis of CLASS I’ve found is that by one of the preeminent global consulting firms on benefits, Towers Perrin.

The Senate version is projected to bring in $72 billion, with an average monthly premium of $123. The initial positive cash flows come, of course, from the five-year period before participants vest, when premiums are paid but benefits are not. Tens of billions are foreseen to flow into the trust fund during those five years. In later decades, however, the flows would turn negative and increase the federal deficit.

(Note that $72-billion is over half of the highly doubtful supposed first 10-year federal budget deficit reduction of ObamaCare, which itself ignores the tens of $billions of mandates in Medicaid imposed on the states from the majority of ObamaCare’s increased coverage of the uninsured and the tens of $billions of extra costs imposed on private firms that continue retiree prescription benefits.)

Let’s look closer at that estimated 2011 average premium of $123 per month, or $1476 per year.

I checked the standard risk premiums charged in most states by one of the largest top-rated long term care insurers for an individual to have a lifetime benefit period, as in CLASS.

Insurers cover working and non-working applicants. CLASS will only enroll working participants, who are more likely to be of reasonable health if working.  As the CBO points out, non-working spouses are more likely to have impaired health and are more likely to enroll than are workers, which increases the actuarially required premiums. Insurers will cover seriously impaired risks at about a 50% higher premium than standard risks, and only for a 6-year benefit period versus the lifetime benefit period in CLASS (average benefits actually needed by all insurer claimants is about 3-years), while insurers reject some applicants with severely impaired health. The CBO did not reveal the details of its analysis, but one may expect that these factors and others were considered.

To get at an apples-to apples comparison of a $50 dollar a day benefit, I further adjusted the insurer rates downward by 30%, as would be charged for a joint policy with spouse from that insurer, to estimate efficiencies of marketing and administration to a larger pool mostly garnered via the workplace in CLASS. Further, CLASS will not be paying commissions to agents as does insurers, so I subtract another 5% from the adjusted insurer premiums below, for a total reduction of 35%. The elimination period, or time to have the qualifying inabilities to manage activities of daily living, by the insurer is 30-days. In parentheses I include the insurer’s annual premium for a preferred risk. CLASS has substantially more liberal reinstatement provisions for non-payment of premiums than this or any insurer, for example, along with other provisions which increase the cost of the program. CLASS subsidizes those of low income, but claws back part of their benefit if qualified for Medicaid, which private insurers don’t.

CBO estimate of average premium for CLASS in the Senate version enacted: $1476

Adjusted Insurer Premium: Age 25 $373.93 ($317.84); Age 40 $483.91 ($411.33); Age 60 $978.82 ($832.00).

Unadjusted Insurer Premium: Age 25 $575.28 ($488.99); Age 40 $744.48 (632.81); Age 60 $1505.88 ($1280)

An $80/day benefit insurer premium is higher, but still below the CLASS initial estimated premium, which includes a $75/day benefit for nursing home care which is much less preferred or used by claimants than the $50/day for home health care.

The House version of CLASS included non-working spouses, according to the CBO more likely to have impaired health and more likely to enroll than are workers, at the following estimated annual premiums: Age 18-39 $1632, Age 40-49 $1728, Age 50-59 $1824, Age 60-69 $2772. The actuaries estimate anticipates that those older are much more likely to enroll than those younger.  One may expect political pressure in coming years to open CLASS to non-working spouses.

So, first of all, it does seem that CBO and actuaries did a reasonable job of estimating initial CLASS premiums, though the Medicare chief actuary did warn that, as the WSJ op-ed indicates,

[P]remiums would be set so high they would discourage healthier people from buying in. As the healthy stayed on the sidelines, the program would have to charge more to those who did enroll. This in turn would price more people out of the program, risking what the memo called an "insurance death spiral."

An insurance death-spiral occurs as due to adverse selection, when the healthier don’t join or leave the program, and the costs of the remaining less healthy escalate future premiums, leading even more of the healthier to leave or find other alternatives. The death-spiral leads to the program’s costs rising to bankruptcy, otherwise.  Although CLASS says they won’t have to, one may expect a future Congress to bail it out with taxpayer funds rather than abandon this new entitlement.

Private long term care insurers have not opposed CLASS.  Of course, they expect that the added consciousness of the need for long term care insurance prompted by CLASS marketing at workplaces will, together with insurers’ lower premiums, increase their own sales.  Similarly, life and annuity insurers may expect increased sales of their products that contain a long term care component.

That just leaves taxpayers on the future financial hook for CLASS, and disappointed ObamaCare supporters on the hook for letdown.

As Ed Morrissey points out from the latest Washington Post poll on ObamaCare, opposition continues to mount.  Relatively few are aware of the details of the CLASS failure, so more should be expected to become disappointed in the non-classy failure of Democrats to be responsible.

Why believe in a conspiracy when stupidity is explanation enough?  With that at the front of my mind as a major caveat to my and others’ conjecture, aside from not knowing what is going on in the privacy of White House meetings, there may actually be a secret purposeful plan behind President Obama’s public undermining of Israel.

Stupidity isn’t enough of an explanation:

First off, there’s every reason to believe Obama’s pledge to be a “transformative” president.  Nearly every policy, law and appointment from him and his allies have been distinctly left of those from previous Democrat and Republican administrations.

Second, there’s every reason to believe that Obama and his counsels are aware, how can they not be, of the past refusals by Palestinian leaders to accept offerings, to obstruct negotiations, to foment violence, to foster corruption, to be divided between the violently hostile and the very violently hostile, and that repeated and continuous Israeli concessions and withdrawals have encouraged more of the same from the Palestinians.

Third, there’s every reason to believe that Obama and his advisors are aware of Iran’s impending nuclear status (even the IAEA has finally publicly woken up) and that other MidEast nations are accommodating themselves to Iran, they seeing little likelihood that the US will push for severe enough sanctions in the face of Russian and Chinese opposition and European profits or the US striking Iran’s nuclear installations.

Fourth, there’s every reason to believe that the US has more influence upon Israel, given that Israel has heavily depended upon the US as a bulwark of support, than upon the Palestinians, MidEast nations, Russia, China or even Europe.

Fifth, there’s every reason to believe that President Obama and advisors, some of whom are Jewish, depend upon the Democrat’s base supporters, some of whom are Jewish, to at worst weakly react to the Obama administration undermining Israel. (See this post.)

Sixth, there’s a big difference between occasional ignorance or mistakes and a consistent pattern of such, particularly when the facts and errors are so well known.

Secret Plan:

Yesterday, I had a brief conversation with a very liberal, very smart friend who visits Israel several times a year to study.  I shared my conjecture in an email to another very knowledgeable MSM friend:

My theory is that the O master plan, if there is one, is to force Israel to bomb Iran, then disavow Israel and further isolate it, and maybe even let it be overwhelmed.

It very well may not be true, but it does explain a lot.

This morning, Glenn Reynolds similarly conjectured:

WHY HAS BARACK OBAMA TREATED NETANYAHU SO RUDELY? “Obama would never treat the president of Equatorial Guinea that way.”

Possibly Obama just hates Israel and hates Jews. That’s plausible — certainly nothing in his actions suggests otherwise, really.

But it’s also possible — I’d say likely — that there’s something else going on. I think Obama expects Israel to strike Iran, and wants to put distance between the United States and Israel in advance of that happening. (Perhaps he even thinks that treating Israel rudely will provoke such a response, saving him the trouble of doing anything about Iran himself, and avoiding the risk that things might go wrong if he does). On the most optimistic level, maybe this whole thing is a sham, and the U.S. is really helping Israel strike Iran, with this as distraction. The question for readers is which of these — not necessarily mutually exclusive — explanations is most plausible.

About half of those touted by the Democrats to gain more medical care coverage will be in Medicaid.

In California, per the Los Angeles Times, that's estimated to add $3-billion to its budget spending, already $20-billion in deficit.  Former Governor Moonbeam, now Attorney General, Jerry Brown, now running for an encore as governor, has not joined other states' attorney generals in challenging ObamaCare.

In South Carolina, it is estimated to add 10% to its budget spending, reports its capital's newspaper The State.

In my small California town, the PTA is urgently asking parents to kick in an extra $25-thousand to support non-core but valuable instruction slated for state funded cuts.  No mention of cutting teachers' rich benefits, or the staff protected by unions from being cut by being slotted into useless holding posts.  I wonder how long it'll be before my neighborhood's very involved Moms and Pops, and those elsewhere, will connect the dots.

Michael Yon's independent dispatches from the war fronts are invaluable, and worth hitting his tip jar to support.

His latest, for example, addresses the political economics of suicide bombing:

Suicide attackers come in different “grades.”  Some are illiterate, unsophisticated people, unsuited for complex targeting.  A plotter could not expect to select an illiterate village boy from the hinterlands of Zabul Province to move to Florida, obtain a place to live and begin flight training to crash airplanes into buildings.

Young boys and women come cheaper, used for tactical targets. The college-educated are reserved for the more strategic. Some are strapped into locked vests or their families held hostage, but most are part of a cult.

Dogs have been trained to carry bombs to attack enemies for decades.  The Soviets and others have used dogs as low-tech smart bombs.  Yet canine platoons likely would rebel if they caught scent they were being duped to die.

Today, more sophisticated people employ men (mostly) to deliver bombs in Afghanistan.  Gullible souls are selected, conditioned, trained and deployed.  Malleable minds are identified then loaded with psychic software that uses their minds to create a vision.  Evil persons of superior intellect identify the raw material—that raw material might be an engineer from a stable family—and trains them to fetch myths.

But, even cults have their limits of utility.  The Taliban are Jim Jonesing themselves.

The impact of their KoolAid on Americans backfired:

There was a time when Americans seemed to view suicide attacks as a sign of the complete conviction of the enemy, an immutable dedication to their cause that many people found terrifying and cause for soul-searching.  “What could we have done to provoke such anger?” Yet with time, American views of suicide attacks have matured and become more grounded....Overuse of suicide attackers does not appear to cause Americans to cower, but to evoke Americans to want to kill the perpetrator.

As it is did on Iraqis and now Afghans:

The Taliban’s efforts at repackaging themselves as kinder, gentler mass-murderers is failing.  Their suicide bombing campaign is backfiring.  The Taliban are losing their cool.  Something is in the air.  The enemy remains very deadly, yet the scent of their weakness is growing stronger while our people close in.

$3-trillion of actual public pension liabilities on top of $trillions of actual ObamaCare costs and $trillions of ObamaCare taxes.

All private and public pension funds took a shellacking over the past few years.  Tougher accounting rules are leading private pension funds to decrease risk, and thus the required contributions, by reducing their percentage of funds in stocks.  Public pension funds, by contrast, are increasing the risks they are taking, to reduce voting taxpayers’ sticker shock at the unsustainable promises made to government employees.

Greenwich Associates, one of the top investment research firms, calls it a “swing-for-the-fences” attempt to avoid fiscal realities.

Public funds appear to be banking on the fact that the investment strategies they are implementing will help shore up solvency ratios by generating returns that far outpace the market. Municipal pension funds last year said they expect their investment portfolios to beat relevant benchmarks by 160 basis points — up from a 132 bps expectation in 2008. Public funds with assets of $500 million or less increased their stated expected outperformance to a staggering 180 basis points in 2009 from an already aggressive 135 bps in 2008. "These are very aggressive expectations," says Greenwich Associates consultant Chris McNickle. "Most investment managers struggle to generate the levels of outperformance expected by institutional investors; it would be rarer still for an entire portfolio to achieve that level of outperformance for any number of years." [Note: bps = 1/100^th of 1%, so 180bps = 1.8%]

The American Enterprise Institute’s study says that, contrary to public pension funds’ official accounting that they are about $½-trillion in actuarial deficit, their actual deficit is closer to $3 trillion.

The problem is fundamental: According to accounting rules adopted by the states, a public sector pension plan may call itself "fully funded" even if there is a better-than-even chance it will be unable to meet its obligations….

Public pension plans are hiding behind unrealistically low deficit figures. This allows policy makers to dodge difficult choices today at the cost of a much heavier burden on taxpayers in the future.

Today’s California Field Poll cooperates in the sham. In the face of a projected $20-billion shortfall, expected to continue in future years, Californians are more likely to support budget cuts than two-years ago, but still only two areas gain even marginal majority support for cuts, prisons and parks. Notably lacking from the poll questions of areas to cut is public employee pensions.

Some states and localities are trying to make adjustments to future pension liabilities to their employees, but the adjustments are relatively minor in comparison to the burden on and cuts to other government services.

Top that off with the new huge budget burdens upon the states mandated by ObamaCare’s expansion of Medicaid eligibility. Fourteen states are already suing to block ObamaCare’s effects on the states. For example, the Christian Science Monitor reports:

The suit says that, under the new law, Medicaid rolls in Florida are expected to increase dramatically. The corresponding soaring costs [already 26 percent of Florida’s annual budget] will fall increasingly on the Florida treasury, but state officials will have less authority to set priorities….

The lawsuit says this amounts to an unconstitutional exercise of federal power that violates principles of federalism protected in the 10th Amendment. It says the healthcare reform bill commandeers the states and their employees as agents of the federal government’s regulatory scheme, and that it does so at the state’s own cost.

Actually, at the cost of schools, roads, policing, and other high-priority government services.  The number of government employees, however, keeps increasing while the number of taxpaying workers decreases and their taxes increase.

Wake up and smell the tea.

The best-named blog in the blogosphere is gone: "The Conspiracy To Keep You Poor And Stupid" by my friend Don Luskin.

Don got me started in blogging in October 2004, when he posted a long, documented  piece by me about the Swiftboat hypocrisy of the New York Times and its then ombudsman (also erroneously called its public editor).

I just received the following two emails from Don:

#1: Bruce, after 8 years at it, I’ve made the decision to stop blogging. It was great at the beginning when blogging was new and I had a lot of time on my hands. But since then my business has expanded dramatically, and I now have media platforms with the WSJ, NRO, SmartMoney and CNBC. Also, Google has announced various technology changes to the software that would require a lot of work to adapt to, so I just decided to let it go.

#2: [Reply to what happens to the blog name]: I guess if someone made me an offer I couldn’t refuse then I wouldn’t refuse, but…

Don Luskin (bio) knows a thing or three about making money.

The bidding is open.  Or, will Don contribute the proceeds to a cause that works to end the Conspiracy?  Or, will Don designate a heir?

There’s no replacing Don Luskin’s blog.  But, there is carrying on to end the Conspiracy To Keep You Poor And Stupid. The conservative and libertarian sides of the blogosphere have come a long way forward over the past years, so I can see Don’s logic, always sound.  But while losing Don, his contributions have been seminal.  Thank you Don.

So much for President Obama’s virtual colonoscopy, not approved as cost-effective for ordinary folks’ coverage.  But, then Obama would have had to been out during a routine colonoscopy and VP Biden would have been President for an hour or two.  Imagine how much worse that would have been!  Senator Grassley tries to set matters right.

Grassley said, “It’s only fair and logical that top administration officials, who fought so hard for passage of this overhaul of America’s health care system, experience it themselves.  If it’s as good as promised, they’ll know it first-hand.  If there are problems, they’ll be able to really understand them, as they should.”

Grassley said the motivation for his amendments is simple:  public officials who make the laws or lead efforts to have laws changed should live under those laws.

“This is the same principle that motivated me to pursue legislation over 20 years ago to apply civil rights, labor and employment laws to Congress,” Grassley said.  Before President Clinton signed into law Grassley’s long-sought Congressional Accountability Act of 1995, Congress had routinely exempted itself.

The senior Congressional Committee and leadership staff who wrote the ObamaCare bills are also exempt from it.