An internal Obama administration e-mail recently leaked to the press appeared to reveal that officials would shut down a controversial component of the health reform law the Community Living Assistance Services and Supports, or CLASS Act.
Long championed by the late Sen. Edward Kennedy (D-Mass.), CLASS would establish a federally chartered long-term-care insurance program. Its chief actuary, Bob Yee, claimed in his e-mail that the Department of Health and Human Services (HHS) was set to shutter the entire CLASS office.
The Obama Administration has vigorously denied the report. HHS called the allegation flat-out false and promised that it would release its recommendations for implementing the program in mid-October. And to perhaps minimize the likelihood of another embarrassing e-mail leak, the department last week banned staffers from speaking with reporters without seeking prior authorization.
American taxpayers should hope that Yees e-mail has some truth to it, as the program is a fiscal catastrophe.
Under the terms of CLASS, enrollees would pay a preset premium through their employer. After five years of remitting premiums, theyd qualify for cash benefits if they became disabled and needed long-term care or services whether in-home or in an institution.
While initially sold as a deficit reducer, CLASS will actually require tens of billions of dollars in taxpayer support within its first couple of decades to stay solvent.
Worse still, the White House appears to have willfully ignored warnings about the programs perilous fiscal status prior to its passage, according to a recently released report from the Repeal CLASS Working Group a cadre of congressional Republicans.
The report examined thousands of pages of internal documents sent between HHS analysts and Administration officials leading up to ObamaCares passage.
An archetypal e-mail comes from October 2009. In the message, a long-time HHS official described CLASS as a recipe for disaster.
In another e-mail, a top aging policy official points out that CLASS will create significant new burdens on the states by forcing them to make up for federal funding shortfalls. HHS personnel also called the state-level deadlines for implementing the program fatally flawed.
Ultimately, the problem with CLASS is that its not going to be popular enough. Officials estimate that only 2% to 6% of Americans will sign up for the program. Because CLASS is open to all and folks can sign up at any time, only those who believe that theyll need long-term care in the near future will sign up.
So most CLASS beneficiaries are going to be older and sicker. Very few will end up paying more in premiums than they receive in benefits. Once beneficiaries begin claiming their cash, the program will have to raise premiums for everyone else to compensate. Those elevated premiums will drive out relatively healthier patients, leaving the programs population even more disproportionately high-cost.
This death spiral will send CLASSs costs skyward. Premiums wont be sufficient to cover costs. And the government will undoubtedly have to bail out the program with taxpayer dollars.
Through an accounting gimmick, CLASS actually appears to reduce the deficit by $72.5 billion during its first decade of existence. Advocates of CLASS made much of its this figure during the health reform debate.
But because enrollees have to pay premiums for five years before qualifying for benefits, the deficit-reduction estimate is based on a decade of premiums, but only five years of payouts. After the initial 10-year budget window, CLASS will run up big deficits. The Congressional Budget Office has estimated that starting in 2029 the program will pile onto the federal debt on the order of tens of billions of dollars for each 10-year period.
Some officials have admitted that the program cant work on a voluntary basis, as currently structured. So theyre considering forcing all Americans to participate. Or as one HHS official described the move, moving to a mandated offer approach.
Officials hope to boost program participation rates and thus premium revenues by requiring businesses to provide CLASS benefits to employees.
But making businesses offer CLASS would strap them with new costs. The unemployment rate is already over 9%, so we can ill afford to saddle businesses with extra expenses that make hiring even more costly.
These new leaked e-mails are good news. The Administration despite its protestations appears ready to let CLASS die quietly. Its up to the public and Congress to make sure they follow through.