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Right Turn
Posted at 10:00 AM ET, 10/16/2011

One entitlement down, one to go: CLASS goes kaput

In a typical Friday afternoon bad-news dump, the Obama administration let it be known that the Community Living Assistance Services and Supports (CLASS) program, one component of Obamacare, was going belly up. This was a voluntary disability insurance program. As Richard Foster, the chief Medicaid and Medicare actuary explained in 2010:

In general, voluntary, unsubsidized and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health. Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, thereby leading to additional premium increases. This effect has been termed the “classic assessment spiral” or “insurance death spiral.” The problem of adverse selection is intensified by requiring participants to subsidize the $5 premiums for students and low-income enrollees. Although Title VIII includes modest work requirements in lieu of underwriting and specifies that the program is to be “actuarially sound” and based on “an actuarial analysis of the 75-year costs of the program that ensures solvency throughout such 75-year period,” there is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable

Democrats insisted that not only was this problem sustainable but that it was going to make money and thereby offset the cost of the rest of Obamacare. This was ludicrous, and the administration finally came clean on Friday. The Post reported:

The Obama administration ended a major benefit in the 2010 health-care law on Friday, announcing that a program to offer Americans insurance for long-term care was simply unworkable. Although the program had been dogged from the start by doubts about its feasibility, its elimination marks the first time the administration has backed away from a key piece of what remains of President Obama’s signature legislative achievement. Republican critics of the law immediately said the decision proved that the legislation is unsound and unsustainable. Because the program had been projected to reduce the federal deficit by $86 billion over the next 10 years, terminating it complicates the nation’s budget picture. It is now estimated that the health-care law will cut the deficit by $124 billion from 2012 to 2021, according to the Congressional Budget Office.

But the CBO said that CLASS was going to save us money, CBO worshipers told us. Well, never was the phrase “garbage in, garbage out” so appropriate.

House Budget Committee Chairman Rep. Paul Ryan (R-Wis.) released a statement that read in part:

To hide the true cost of their health-care overhaul, the leaders of the Democratic party loaded it with gimmicks and double-counting. One of the most egregious of these gimmicks involved the CLASS Act, a new long-term care program that was scored as an offset against the ten-year, trillion-dollar cost of the Democrats’ new law . . . Even Democratic Senator Kent Conrad called the program ‘a Ponzi scheme Bernie Madoff would have been proud of.’
Today, the Obama administration finally surrendered to reality: Health and Human Services Secretary Kathleen Sebelius has informed congressional leaders that she ‘does not see a viable path forward for CLASS implementation at this time.’ The smoke and mirrors that the Democrats employed to sell their health-care overhaul are finally falling away, one broken promise at a time. When all of these gimmicks are stripped out, the new law would add hundreds of billions of dollars in red ink over the next decade, as health-care costs send the debt spiraling out of control. Now it is time for Congress to do the responsible thing: Repeal the disastrous new law and replace it with true, patient-centered reforms.

That sentiment was echoed by a slew of Republican leaders on the Hill. Senate Minority Leader Mitch McConnell reminded us that this is emblematic of the problems with the larger, gimmick-ridden health-care legislation: “The Obama administration . . . 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 but was destined to fail in the real world. However, it is worth remembering that the CLASS Act is only one of the unwise, unsustainable components of an unwise, unsustainable law. We should repeal the CLASS Act and the rest of the health spending law and replace it with the type of common-sense reforms that lower costs and [that] Americans support.”

To say that this is an embarrassment for the gang in the White House and the Democratic congressional leadership, who we already knew could not shoot straight, would be a gross understatement. The failure of CLASS, predicted by conservatives, sprang from the Democrats’ insistence to pass some “historic” health-care bill, any such bill, and deal with the consequences later. Well, later is now. You can be sure that this — along with the failed stimulus bill, the high unemployment rate and the massive debt — will be frequent features in Republicans’ 2012 ads.

By  |  10:00 AM ET, 10/16/2011

Categories:  2012 campaign, Budget, Obamacare

 
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