Secretary of Health and Human Services, Kathleen Sebelius, has now had a chance to look at certain sections of Obamacare, and has decided that there are serious problems with the provisions creating federal disability insurance.
This portion of the law, known as the Class Act, seems to have been included for two reasons, First, it was the creation and pet project of Senator Ted Kennedy, and, second, it made Obamacare appear to be deficit neutral over a ten year period.
Ms. Sebelius has now determined that the program is designed to, well, go broke somewhere between 2020 and 2025. It’s too bad that she didn’t read the November 13, 2009 report from Richard Foster, the Chief Actuary for Medicare and Medicaid, or, for that matter, a post we did here in March, 2010 before Obamacare was passed. Both explained that Class was doomed to failure.
The problem is that for the first 5 years, Class will take in premiums, and pay out nothing. Thereafter, those who meet the definition of disability will start to collect benefits. However, during the first 5 years, the premiums collected will be spent to pay for other aspects of Obamacare, leaving little or nothing in the “pot” when people actually make a claim.
The law also calls for the program’s insurance premiums to remain flat while benefits would increase with inflation. That could lead to premiums being set so high in the beginning that they would discourage people from participating. But if premiums are set too low, they will be eclipsed by rising benefits.
The administration is concerned that [the]minimum income level [anyone making more than $1100 per year] may be too low and would result in so many workers drawing benefits that the financial viability of the program would be threatened.
All of the above probably explains why President Obama’s bipartisan Deficit Reduction Commission recommended late last year that this piece of Obamacare be repealed.
Undaunted, however, Ms. Sebelius has stated that she intends to, as they say, make it work. She’ll just ignore what Congress wrote, index premiums to inflation, raise minimum income levels, and do whatever else she feels like doing.
Wouldn’t it be nice if we could ignore Obamacare as well?