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Another Obamacare Failure

Posted By Nina Owcharenko On October 17, 2011 @ 4:45 pm In Featured,Obamacare | Comments Disabled

On Friday, Secretary of Health and Human Services Kathleen Sebelius admitted that the CLASS program can’t work [1]. After months of insisting that it could meet a 75-year actuarial soundness test and keep with the statutory requirements, Sebelius acknowledged that “despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.”

The CLASS Act was a key provision included to pass Obamacare. It would have established a new, government-run long-term-care insurance program. But it was also used to claim that the health care law was paid for and would help bring down the deficit. From the beginning, Heritage warned [2] that it was poorly designed and was included in the legislation primarily as a budget gimmick.

  • Completely unworkable. As designed, the CLASS program is entirely unworkable. The AP’s Ricardo Alonso-Zaldivar reports [3] that “a central design flaw dogged CLASS from the beginning. Unless large numbers of healthy people willingly sign up during their working years, soaring premiums driven by the needs of disabled beneficiaries would destabilize it, eventually requiring a taxpayer bailout.” The result would be a classic insurance “death spiral,” where high premiums discourage healthy, low-risk individuals from participating. If high-risk individuals alone enroll, premiums would rise even higher.
  • A new and unaffordable entitlement program. CLASS would have created another entitlement program. Its broad eligibility standards would have made the impact of adverse selection even worse, further increasing premiums. Though Obamacare barred the use of general revenue to fund CLASS, eventually taxpayers would likely be left picking up the program’s growing tab under these conditions. Since Congress has yet to address the trillions in unfunded obligations under existing entitlements like Medicare, Medicaid, and Social Security, the last thing American taxpayers need is another insolvent entitlement program.
  • One of Obamacare’s many budget gimmicks. Finally, it is well documented that the CLASS program was included in Obamacare to reduce the impact that the law would have on federal deficit spending [4]—on paper, at least. The final CBO score showed CLASS reducing Obamacare’s impact on the deficit by $70 billion over its first 10 years. But the revenues raised through CLASS premiums were double-counted. The revenues were seen as offsetting new spending, including a massive Medicaid expansion and a costly new subsidy program for health insurance. But these revenues were also intended to pay for CLASS enrollees’ benefits. Once beneficiaries begin to draw down the benefits, the premium revenues would quickly dry up.

The Secretary’s letter carefully included the phrase “at this time,” leaving many to speculate what the Administration will do now. Those on the left are already gearing up to “fix” the statute [5] to make CLASS work. But, Obamacare cannot be fixed. It must be repealed.


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URL to article: http://blog.heritage.org/2011/10/17/another-obamacare-failure/

URLs in this post:

[1] admitted that the CLASS program can’t work: http://www.hhs.gov/secretary/letter10142011.html

[2] Heritage warned: http://www.heritage.org/Research/Reports/2010/07/No-CLASS-How-Congress-Saddled-Taxpayers-with-Another-Costly-Entitlement

[3] The AP’s Ricardo Alonso-Zaldivar reports: http://www.msnbc.msn.com/id/44913586

[4] to reduce the impact that the law would have on federal deficit spending: http://www.heritage.org/Research/Reports/2011/01/Obamacare-and-the-Budget-Playing-Games-with-Numbers

[5] “fix” the statute: http://www.tnr.com/blog/jonathan-cohn/96332/class-act-obamacare-long-term-care-mandate-cost-foster

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