Secretary of Health and Human Services Kathleen Sebelius today sent letters to Congress announcing that HHS would shelves its plans to implement the CLASS Act provisions of the Affordable Care Act, that is, the financially unsustainable Community Living Assistance Services and Supports Act. The Obama Administration's decision to call a halt before this new and actuarially unsound entitement program gained purchase in the bureaucracy was a wise one. Business groups and other associations, including Business Roundtable, had long called for a halt because of the inability to finance another expansion of long-term care services absent major tax increases or other sources of new revenues.
HHS Secretary Sebelius explained the decision in her letter and a column published at The Huffington Post, "The CLASS Program," describing the program's good intentions (never seemingly matched by financial or governmental reality):
It was with the hope of giving Americans better choices that Congress included a voluntary long-term care insurance program called CLASS in last year's health care law. The idea behind CLASS, which was championed by the late Senator Edward M. Kennedy, is simple: workers could sign up and pay a monthly premium, and in return, they would be eligible after a number of years for a daily benefit administered by our department that could help pay for long-term care services should they become necessary....
While some analysts predicted that the CLASS program's finances would be sustainable, others including the actuary for Medicare and Medicaid issued warnings to Congress and the public before the law was enacted that not enough young, healthy people would sign up. This could have led to a vicious cycle where premiums would have to be set higher and higher to cover the likely costs of benefits, leading fewer and fewer healthier people to sign up for the program. For this reason, the law required me to develop a benefit plan that, in addition to meeting other statutory requirements, would also be solvent for at least 75 years.
Since then, our department has worked steadily to find a financially sustainable model for CLASS. Over the last 19 months, we've examined the long-term care market, modeled possible plan designs, and studied the CLASS statute, consulting at every step of the way with outside actuaries, insurers, and consumer groups.
When it became clear that most basic benefit plans wouldn't work, we looked at other possibilities. Recognizing the enormous need in this country for better long-term care insurance options, we cast as wide a net as possible in searching for a model that could succeed. But as a report our department is releasing today shows, we have not identified a way to make CLASS work at this time.
This memo from Kathy Greenlee, CLASS Administrator, to Sebelius provides more background on the decision.
Business Roundtable and other major business and insurance groups joined in April this year in endorsing legislation to halt the program for being both actuarially unsound and including an objectionable automatic employee sign-up that business would have had to administer. As we wrote to the sponsors, "We applaud your efforts to repeal the entire provision in order to protect employees and Americans from losing their wages to fund an entitlement program which will never benefit them." (See also this letter.)
Regulatory implementation of the Patient Protection and Affordable Health Care Act proceeds, except when it doesn't. And when it doesn't, well, that can turn out to be the right thing for everyone concerned. Good move by the Obama Administration today.
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Topics: Health Care Reform.
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