The House of Representatives just voted to wipe a major part of President Obamas healthcare law from the books the Community Living Assistance Service and Supports Act. This CLASS Act wouldve established a federally run long-term-care insurance program.
The Senate should continue the Houses work and repeal CLASS right away. If the august body does not, then this ill-conceived entitlement could, at any time, spring back to life and resume its quest to devour the federal budget.
CLASS is designed to give disabled or elderly beneficiaries who have trouble performing basic activities like dressing or bathing, cash assistance to help them pay for an in-home caregiver or adult day care.
The program is supposed to be self-sustaining, with premiums automatically deducted from the paychecks of enrollees. However, no one could claim benefits until theyd paid premiums for five years.
But CLASS is also voluntary and open to everyone. So only those who think they might need the cash would sign up. Indeed, even government analysts predicted in 2010 that only 2 to 6 percent of the population would sign up for the program.
Theyd likely be older and sicker workers who anticipate needing long-term care. If everyone in the insurance pool drew more benefits than they paid in, then the programs finances would rapidly become unsustainable.
Incredibly, the CLASS Act would allow low-income Americans to purchase long-term care insurance for as little as $5 a month. After paying into the fund for just five years a $300 investment they could become eligible to collect benefits worth $18,000 a year for the rest of their lives.
The Congressional Budget Office (CBO) recognized this disconnect and stated that the program would cost taxpayers tens of billions of dollars for each 10-year period following 2029.
Democrats were repeatedly warned prior to the passage of Obamacare that CLASS would cost, not save, billions of dollars. Thirty-six years of (professional) experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue, said Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, in July 2009.
Its no wonder, then, that CLASS has been called a Ponzi scheme of the first order and not a well-done solution. And thats by two Congressmen who voted for it!
So why did Democrats in Congress approve such an obviously flawed measure? It appears they were either completely ignorant or dishonestly trying to make Obamacare appear cost-effective.
When tallying the laws cost, the CBO used a 10-year budget window. But beneficiaries had to be enrolled in CLASS for five years before claiming benefits. So the program would actually collect premiums for 10 years while only distributing cash for five.
Consequently, the CBO found that CLASS would reduce the overall budget deficit by $72.5 billion in its first decade. In fact, the programs premiums were responsible for more than half of Obamacares purported $143 billion in savings.
Never mind that these savings would have to eventually be paid out to beneficiaries.
The Obama Administration has not yet figured out how to stave off the multibillion-dollar catastrophe that the CBO has predicted for CLASS. So its decided to suspend implementation of the program.
But such promises should not satisfy Members of Congress or the American people. As long as the CLASS Act is officially on the books, a lawsuit could force the executive branch to implement it, according to a study by the Congressional Research Services.
CLASS could return A federal judge could bring it back, warns Rep. Charles Boustany (R-LA), the sponsor of the bill to repeal the measure.
Thats why the White House has threatened to veto any attempt to repeal CLASS. Right now, interest groups such as the AFL-CIO and Alliance for Retired Americans are fighting to keep the CLASS Act. Successful legal action by the measures supporters could compel the Obama Administration to implement the program apace its catastrophic fiscal projections notwithstanding.
As Thomas Miller, a former senior health economist for the congressional Joint Economic Committee, puts it, failing to repeal the CLASS Act is like leaving a partly loaded gun on the table.
If Congress doesnt formally scrap the CLASS Act, taxpayers will end up bleeding.