It says something about the brazen attitude of American politicians that Congress enacted a measure to create a program that was impossible to implement — and named it the CLASS Act. CLASS stands for Community Living Assistance Services and Support, a program that was supposed to offer voluntary long-term care insurance to workers who are 18 or older; its initials are about the only classy angle to the scheme.
Last February, Health and Human Services Secretary Kathleen Sebelius told the Senate that the CLASS Act, as written, was “totally unsustainable.” In October, Sebelius announced that she could not implement the act and suspended the program. Even with the help of the best experts, her department could not design an actuarially sound and financially solvent plan.
Problem: Even though Sebelius said that the plan is unworkable, President Obama doesn’t support repealing the law.
On Wednesday, the House voted 267-159 — 28 Democrats joined all 239 Republicans — to pull the plug on the program. But the White House and Senate Majority Leader Harry Reid do not want to repeal the CLASS Act. They apparently think they can score political points by hanging on to a comatose program.
The sorry fact is that Congress never should have passed the CLASS Act. The late Sen. Ted Kennedy, D-Mass., long had championed a voluntary plan that would allow seniors to receive federally subsidized long-term care without spending down their assets in order to qualify for Medicaid. So Democrats slipped CLASS into the Affordable Care Act, also known as Obamacare. Then they patted themselves on the back for being the only people who really care about seniors.
It’s a shame they didn’t care enough to draft a realistic plan. Richard S. Foster, the chief actuary for Medicare and Medicaid, warned lawmakers that the program faces “a very significant risk of failure.” The fiscal watchdog Concord Coalition called it a poorly designed “gimmick.” Sen. Kent Conrad, D-N.D., called it “a Ponzi scheme of the first order.” Sen. Ben Nelson, D-Neb., warned that CLASS would be “financially upside-down in a very short period of time.”
Because the CLASS Act promised to pay for not only institutional care but also a “panoply of desirable home-care benefits,” the Concord Coalition warned that the program essentially invited “induced demand — or what is sometimes called the ‘out of the woodwork’ phenomenon.”
Then-Sen. Judd Gregg, R-N.H., inserted language into the bill that required the plan to be actuarially sound for 75 years. It was the Gregg amendment that drove the Sebelius announcement.
With voluntary enrollment for workers 18 or older, the government insurance would have to charge higher premiums than private insurers, which can cherry-pick their customers. Then, to balance the books, the government plan would have to reduce benefits. Foster described the likely fallout as a classic insurance “death spiral,” as high premiums drive away healthy consumers and the remaining customers drive up costs.
When the experts crunched the numbers, they found that premiums would have started at $354 per month — far more than the $123 forecast by the Senate — for a benefit less generous than those offered by private insurers. They even looked at cutting benefits to $10 a day.
In short, Congress had created a huge new government program that would be a drain on federal coffers for dubious benefit.
But Reid and Obama want to keep the CLASS Act on the books anyway. Reid and Obamaland think they can use the House repeal vote as evidence of a do-nothing mentality in the Republican-led body. As Sen. Jay Rockefeller, D-W.Va., wrote in Politico, “in our charged partisan environment, too many people … view repealing CLASS as a tactical step toward undermining health care reform — without putting forward any real alternatives.” That’s a very exalted way of defending a willful decision not to correct an avoidable error.
On Thursday, Sen. John Thune, R-S.D., called for the Senate to vote on the House bill. “My fear has been all along that if we don’t get this program off the books,” said Thune, “that at some point there will be an attempt to resurrect it.”
That seems like a reasonable fear. Nonpartisan watchdogs warned Congress about the perils of the CLASS Act, yet Congress passed it. The Obama administration has admitted that CLASS is not sustainable, yet the White House wants to keep the law on the books.
If the Obama administration won’t support eliminating a health care initiative that it knows cannot work, why should Americans trust the rest of Obamacare?
Debra J. Saunders is a San Francisco Chronicle columnist. Her email address is dsaunders@sfchronicle.com.
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