The decision to abandon the CLASS Act announced Friday is a sharp U-turn for an administration that ? just a few weeks ago ? claimed it was not giving up on the long-term care insurance program.
When reports surfaced last month that the CLASS office at the Department of Health and Human Services was closing down, the Obama administration pushed back hard. It claimed that it was paring back staff but continuing to study how to implement the program created by President Barack Obama?s health reform law.
Continue ReadingNow, three weeks later, CLASS is dead, supporters are devastated, and critics are dancing on its grave.
Republicans on Capitol Hill, none of whom supported the final versions of the health reform legislation, hailed Friday's announcement as a victory on both a policy and political level.
It's clear that GOP lawmakers want to build on this momentum, using the latest setback to Obama's complex reform law as an entryway into other parts of the package.
?The Obama administration today acknowledged what they refused to admit when they passed their partisan health bill: The CLASS Act was a budget gimmick that might enhance the numbers on a Washington bureaucrat?s spreadsheet,? Senate Minority Leader Mitch McConnell said in a statement.
House Budget Committee Chairman Paul Ryan declared that ?the smoke and mirrors that the Democrats employed to sell their health care overhaul are finally falling away, one broken promise at a time. ? Now it is time for Congress to do the responsible thing: Repeal the disastrous new law and replace it with true, patient-centered reforms.?
The Obama administration was quick to disavow any implications for the rest of the health reform law.
?The CLASS program is a unique, stand-alone program,? an administration official said. ?Long term care is important, and it?s something we are committed to addressing, but drawing conclusions between this and other parts of the law simply doesn?t make sense.?
But the fallout from the CLASS decision is not just political, but practical as well.
The Congressional Budget Office had scored CLASS as achieving $86 billion in savings over the next decade, because it would have collected premiums for five years before paying any benefits. In a conference call with reporters, Assistant Secretary for Aging Kathy Greenlee said the Office of Management and Budget would "likely reduce" the baseline budget for 2013 by taking CLASS out of the mix.
She emphasized that even without CLASS, the health reform law ? the Affordable Care Act ? would still save $127 billion over the next decade.
But after 19 months of research, the actuaries trying to make CLASS fiscally solvent decided that it was not possible within the framework provided by the law.
HHS Secretary Kathleen Sebelius was required to certify that the program would be fiscally solvent for 75 years before it could be implemented. "She could not meet that threshold," Greenlee said.
The decision was a bitter disappointment to the program?s advocates.
?The president of the United States promised to implement this program, and until we hear something different directly from the White House, we will expect him to keep that promise,? Connie Garner of Advance CLASS, Inc. and William L. Minnix of Leading Age said in a statement.
CLASS was designed as a voluntary long-term care insurance program, to be supported by premiums paid by people who join it ? without any infusion of tax dollars.
The department was ultimately stumped on how to stop the program from attracting a pool of beneficiaries that had unsustainably high needs, Greenlee wrote in a memo. Actuarial models showed that premiums could climb as high as $3,000 per month if adverse selection ? in which the program would attract only the people with health problems ? ?were particularly serious."
Such premiums would only cover the minimum benefit allowed in the statute ? $50 per day. Such low benefits, Greenlee warned, could make the risk selection problem even worse.
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