This week, the House of Representatives moved further towards repealing the largest gimmick in President Obama’s health care law, the Community Living Assistance Services and Supports (CLASS) Program. CLASS was billed as a program that would help disabled individuals pay for long-term care services.
In typical government fashion, the measure was rushed through without any substantive effort to examine its consequences, resulting in a population in need being misled to believe that their health care problems would be solved.
It turns out that CLASS was so badly designed that the individuals most likely to need long-term care would disproportionately sign up. Since the law also limited premiums, actuarial experts concluded CLASS was unsustainable and would lead to a massive taxpayer bailout.
While the administration publicly lauded the CLASS Program, the entities responsible for its implementation were bracing for what they already knew was a bureaucratic disaster waiting to happen.
The chief actuary at the Centers for Medicare and Medicaid Services (CMS), Richard Foster, sent an email to Health and Human Services (HHS) staff 10 months before the president’s health law passed warning that “[t]he program is intended to be ‘actuarially sound,’ but at first glance this goal may be impossible.”
Eight months before passage of the health law, Foster wrote to the director of the CMS Office of Legislation and the CMS deputy administrator, stating “[t]hirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant Federal subsidies to continue.”
Five months before the passage of the health law, William Marton, an employee in the HHS Office of the Assistant Secretary for Planning and Evaluation, wrote in an internal email that CLASS “[s]eems like a recipe for disaster.”
These warnings were ignored by the administration.
For instance, Richard Frank, the assistant secretary in planning and evaluation, told a public gathering at the Kaiser Foundation on October 20, 2009 that “we’re entirely persuaded that reasonable premiums, solid participation rates, and financial solvency over the 75-year period can be maintained.” To date, there is no evidence to support Mr. Frank’s claim.
Why did the administration decide to bundle the fiscally irresponsible CLASS program into the health care law? For the simple reason that doing so made the law appear less costly. CLASS improved the 10-year budget estimate of the law because the government collects premiums for five years before the program pays any benefits. Everyone knew that CLASS would significantly add to the deficit outside the 10-year budget window.
About a year after the president’s health care law passed Congress, HHS Secretary Kathy Sebelius expressed concerns about CLASS for the first time. In March 2011 she testified that “[CLASS] was unsustainable as the legislation was crafted.” Sebelius continued that she “was given considerable flexibility and we are in the process of making, I think, the changes that will meet the criteria outlined in the law, which is, that it be sustainable without taxpayer support.”
In October, after Republican members of the House and Senate issued numerous reports and letters explaining that Sebelius lacked this authority, the Obama administration announced that it was shuttering CLASS. The HHS CLASS report released in October admitted that Secretary Sebelius did not have the legal authority to change the CLASS framework. The report also indicated that even if the secretary had the authority to make many of the changes she suggested, there was still a high probability that the program would have failed.
A considerable amount of time and money could have been saved if the administration asked what was legal before it asked what changes could theoretically make CLASS solvent. Of course, this whole CLASS fiasco would have been avoided if the president and Democrats in Congress were truthful about the real cost of the health care law in the first place.
While the administration’s decision to halt the implementation of the CLASS program is a welcome development, Congress must now take steps to repeal it. If we fail to act, America’s taxpayers will face two dangers. The first is that the courts will compel the bureaucracy to restart the program. The second is that this administration or a future administration will decide to throw fiscal caution to the wind and implement the program, paving the way for a taxpayer bailout.
Given that the administration has admitted CLASS is a failure and a significant risk to both taxpayers and potential beneficiaries, there is indeed bipartisan support for its repeal. We must take advantage of this opportunity. There are many different ideas on how to best implement health care reform; we should all agree that CLASS isn’t it.