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Emails Show Liberals Pushed CLASS Act Despite Experts' Warnings
Posted By Lachlan Markay On September 15, 2011 @ 12:07 pm In Obamacare,Scribe | Comments Disabled
Liberals in Congress pushed forward with an unsustainable new entitlement program, internal emails show, and dismissed repeated warnings from federal health care experts that it would be an “insurance death spiral,” as one official put it.
The emails, released by congressional investigators , reveal that proponents of the Community Living Assistance Services and Support (CLASS) program pushed to include it in the president’s health care bill despite warnings that it would require either a sizable federal bailout, or another insurance mandate. The program’s advocates publicly insisted, meanwhile, that it would be self-sustaining and completely voluntary.
The CLASS program was designed as a long-term care insurance program , which would provide a minimum of $50 per day for nursing home payments or in-home nursing care. In theory, the program would fund benefits with contributors’ premiums, rather than taxpayer dollars. But under the current structure, the program would need 234 million enrollees – more than the entire U.S. workforce – to be sustainable, according to Medicare’s chief actuary Richard Foster.
The Department of Health and Human Services has insisted that it has the administrative discretion to rework the class program so that it is sustainable in the long run (law requires that it be financially solvent over a 70-year window).
But the emails released as part of congressional Republicans’ investigation of the CLASS program suggest that CLASS cannot be fixed by any measure short of heavy federal subsidies, or yet another health insurance mandate, this one requiring all workers pay into the federal government’s new long term care entitlement program.
What’s more, these emails show that the program’s backers pushed for its inclusion in the Obamacare bill even though they were aware of its structural defects. One staffer admitted that even with HHS’s discretion in implementing the law, “it is possible that the authority in the bill to modify premiums will not be sufficient to ensure the program is sustainable.”
Sen. John Thune (R-S.D.), who is spearheading the investigation and has introduced legislation to repeal the CLASS program, said the information  is “further confirmation that the Obama Administration willfully chose to ignore the fiscal insolvency of the CLASS program in order to achieve a political victory by pushing the president’s health care bill through Congress.”
The chief problem with the CLASS program is what’s called “adverse selection”: since it’s completely voluntary, only those who expect to need long term care will likely enroll and pay the accompanying premiums. The resulting pool of beneficiaries will have large long term care expenses.
In an email sent in May 2009, Foster warned that adverse selection “could be a terminal problem for this proposal.” While “the intention appears to be that it would be financed solely through participant premiums and interest earnings,” he said, “this goal may be impossible” due to the adverse selection problem. There simply aren’t enough potential enrollees – indeed, enough members of the American workforce – to mitigate the problem, Foster added.
Liberals in Congress were aware of these problems and continued to push for CLASS’s inclusion in Obamacare. That suggests that they either had an ideological commitment to a long term care entitlement program that overrode any concerns about its actuarial soundness, or that they were determined to include the program as a means to game the bill’s budget score. Since premium contributions into the CLASS program are front-loaded, its inclusion in the health care bill meant that it would reduce the budget deficit over 10 years (the standard CBO measurement window). But as the program begins to pay out benefits, its budget will sink into the red.
In fact, an email exchange between Foster and a member of CMS’s legislative affairs team showed the latter trying to pitch Foster on the program’s 10-year budget score. “Bottom line, the CLASS Act was scored by CBO with a savings of $58 billion over 10 years, including a $2.5 billion savings in Medicaid.”
Foster responded that he had reviewed the studies on which the budget claims were based, but that “I remain very doubtful that this proposal is sustainable at the specified premium and benefit amounts.” He added this damning assessment: “Thirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue.”
The program was included in the final Obamacare bill despite these warnings, which were voiced long before the bill was signed into law. Even HHS’s ability to use its administrative flexibility to properly implement the law was called into question, raising doubts regarding HHS Secretary Kathleen Sebelius’s unequivocal insistence that the Department will be able to fulfill the law’s sustainability mandate.
Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2011/09/15/emails-show-liberals-pushed-class-act-despite-experts-warnings/
URLs in this post:
 released by congressional investigators: http://thune.senate.gov/public/index.cfm/files/serve?File_id=f03d8200-bfa4-4891-8a4c-aa78a54e2de0
 designed as a long-term care insurance program: http://www.humanevents.com/article.php?id=45147
 said the information: http://thune.senate.gov/public/index.cfm/press-releases?ID=ec41542f-47ae-483c-ac44-42c78cf96f9e
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