- The Foundry: Conservative Policy News Blog from The Heritage Foundation - http://blog.heritage.org -
The CLASS Act: Obamacare’s Other Public Option
Posted By Kathryn Nix On August 5, 2010 @ 7:00 pm In Health Care | 6 Comments
The American people made it clear during the recent health care debate that they were leery of a public option.
But included in the Patient Protection and Affordable Care Act (PPACA) passed by Congress is the CLASS Act, a public option of a different sort: a government-run long-term care entitlement.
In recent research , Heritage analyst Brian Blase lays out why the CLASS program will not offer a better alternative to plans available in the private market but will instead suffer from severe adverse selection, either necessitating a taxpayer bailout or resulting in mounting premiums or reduced benefits for those who participate.
The CLASS program wasn’t included in the PPACA because it’s good policy—it was included to make the legislation look $70 billion cheaper . The program will require beneficiaries to pay premiums for five years before receiving any benefits, so it’s only a revenue raiser in its initial years.
But later down the road, the program will add to the deficit, primarily due to its actuarial unsoundness. Blase explains , “The problem is that programs, such as CLASS, that are guarantee issue and that ban medical underwriting are likely to unravel from severe adverse selection. Healthy individuals who desire [long-term care] insurance will find better quality products at lower prices in the private market, leaving a risk pool for CLASS that will overwhelmingly consist of the working disabled. This places American taxpayers at great risk of paying for a future bailout.”
Senator Kent Conrad (D–ND) called the CLASS Act “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.” Before passage of the PPACA, he and six other Senators who ultimately supported PPACA wrote to the Senate majority leader: “We have grace concerns that the real effect of the provisions would be to create a new federal entitlement with large, long-term spending increases that far exceed revenues.”
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2010/08/05/the-class-act-obamacare%e2%80%99s-other-public-option/
URLs in this post:
 Image: http://www.foundry.org/wp-content/uploads/capital_drawing0202107.jpg
 recent research: http://www.heritage.org/Research/Reports/2010/07/No-CLASS-How-Congress-Saddled-Taxpayers-with-Another-Costly-Entitlement
 here: http://www.actuary.org/pdf/health/class_july09.pdf
 here: http://burgess.house.gov/UploadedFiles/4-22-2010_-_OACT_Memorandum_on_Financial_Impact_of_PPACA_as_Enacted.pdf
Copyright © 2011 The Heritage Foundation. All rights reserved.