Perils of incrementalism: the demise of the ACA's promise of affordable insurance for long-term care

Oct. 19, 2011 — The abandonment of the element of the Affordable Care Act (ACA) that was designed to provide insurance against the staggering costs of long-term care, announced by the Obama administration last Friday, can be filed under an increasingly familiar category of news: appalling, but not surprising.

Appalling because the lack of affordable long-term care — both for people who need such care as they age, and for people who need it as a result of disabilities — makes life intolerable for millions of Americans and their families, precisely at the moment when they are most vulnerable.

Unsurprising on a general level because of the administration’s track record of retreating on a wide range of matters (remember last month’s rejection of the more protective ozone standard the EPA had proposed on the basis of actual science); unsurprising as a matter of the specific program in question — the “Community Living Assistance Service and Supports” program, commonly referred to as the CLASS Act — because the groundwork for interring the program was already laid by the Department of Health and Human Services (HHS) almost eight months ago.

The dénouement raises important questions about the wisdom of having a strategy of always going for a legislative “half a loaf,” especially when doing so obliges you both to understate the real costs of dealing with problems and to oversell the promise and potential of your solutions.

Long-term care shouldn’t be a luxury item

Having access to quality long-term care for a grandmother who has Alzheimer’s or for a spouse who has suffered a stroke may be seen by some as unnecessary “Cadillac care” that should not concern or burden our society. My own view is that it is hard to describe a society that fails to provide such care as anything other than a brutal one.

It is true that the care, such as it is provided today, is enormously expensive. HHS Secretary Kathleen Sebelius was herself quoted in The Times, at the same moment she ditched the CLASS Act, as acknowledging that “Americans still had an ‘enormous need’ for long-term care insurance,” and that ‘At $75,000 a year for a nursing home and $18,000 a year for home health care, most families cannot afford to pay out of pocket.’”

Would it be better if the provision of quality care were magically less expensive? Yes, of course. But it isn’t. Nevertheless, for those in the administration who like to pride themselves as understanding what it means to “live in the real world,” the first instinct was to reject the obvious solution — single payer — that would have costs and benefits shared among everyone.

At least we can “get something”

Proceeding incrementally is not always a bad idea; indeed, there are historically a number of social safety net programs that became significantly more robust after the initial enactment of a more modest set of benefits.

But it is a mistake — both as a matter of integrity and as a matter of strategy — to sell something on false premises.

The plan the administration got through was a long-term health insurance program that was voluntary for potential participants but required to be financially self-sustaining. As such, the program faced a fairly obvious insurance problem known as “adverse selection.” Potential participants who do not see themselves as being at high risk for needing the services (that is, those who are younger and healthier) decline to join in, leaving a program with beneficiaries who have higher than average need for services, and thus a program that requires higher premiums to sustain itself.

The Administration not only downplayed the problem: when it toted up the projected deficit-reducing impact of the ACA overall, it counted the CLASS Act as a significant contributor to that result, utilizing the Congressional Budget Office’s estimate that the CLASS Act would save over $70 billion in its first decade of operation (see full text of CBO letter here and the relevant paragraph here). A rosy projection may have been true if everyone (including young and healthy employees) were eager to participate, but the wishful thinking did not accord with actual behavior.

This past February, when Sebelius was not yet ready to announce the abandonment of the CLASS Act, she said that the program would have to be revamped, including in the potential list of changes enhanced work requirements. Those requirements, of course, would have effectively screened out many people with disabilities — the opposite of the goal behind the law.

Implications for the rest of the Affordable Care Act

The result on insurance for long-term care is bad enough on its own terms. But it also represents a lost opportunity to educate people as to why it is important to create a sustainable, universal program notwithstanding the high expense of doing so. (The short version of that argument: Do we really want to be a society that treats the vulnerable around us so shabbily?)

The episode also provides ammunition for those ready to denounce any government effort to make life better for Americans as unrealistic, and casts doubt on the veracity of cost estimates deployed in support of a stronger social safety net.

And the strategy was not unique to the CLASS Act; the administration has set itself (and the rest of us) up with similar problems in respect to the rest of the ACA.

There is a fundamental reality that the administration has not and will not acknowledge: quality health care for all is a very expensive proposition. That is not to say that are not unnecessary tests given (nor that there is not a lot of money wasted on aggressive, quality-of-life-ruining care in what turns out to be the last three or six months of life).  But ultimately the price tag will be high if you actually want to provide everyone with true, quality care.

Instead, the administration — never willing to fight for single payer — locked itself into cost-saving arguments that can only come true by pruning the care that is made available under the ACA, a phenomenon reflected in the recent report from the Institute of Medicine that recommends weighing cost heavily and limiting what is considered an essential medical service by reference to that which will be offered in an average small business plan in 2014. Translation: Do not figure out the services that are needed and make them affordable, but ratchet down what is going to be required to meet an already-constrained status quo. (Actually, given the clear trend, the average small business package available in 2014. will be worse than that available today.)

We face, therefore, an ACA whose apparent gains will likely continue to be eroded by the administration’s choice of playing field — one that defines its achievements not on the basis of whether all Americans get high quality health care but on the basis of saving money.

It is, of course, possible that Americans — when the ACA fails to solve the problems of universal, quality care that need to be solved — will appreciate the fact that the villain was not “big government,” but rather a government not prepared either to think big enough or to advocate forcefully enough for its citizens.

But the administration’s failure to lay out the real costs of effective action and the real costs of inaction — its being missing-in-action, as it were — has made the prospects for effective change infinitely more difficult over the course of at least the next several years.

With the ACA generally, as with the CLASS Act specifically, the path of incrementalism turns out to be no miracle cure.