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Has the CLASS Act been dismissed?

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There’s a lot of chatter in the health policy world this afternoon about whether the Obama administration has given up on the CLASS Act, the health reform’s long-term health insurance program. The CLASS Act is meant to cover home care costs for the disabled and those with long-term care needs. And it’s no stranger to controversy: earlier this month, the Republican Policy Committee put out a report that cited an Obama administration official calling the program a “recipe for disaster.”

The concern has always been over the CLASS program’s long-term stability. The long-term insurance program relies on voluntary enrollment. If only a small group of unhealthy people — those who anticipate using the services — sign up, the program could quickly destabilize.

Speculation that the Obama administration had given up on CLASS altogether started with an e-mail sent by departing CLASS Act Office actuary Bob Yee. “I'm leaving my position as the CLASS Office actuary as HHS has decided to close down the CLASS Office effective tomorrow,” Yee wrote in an e-mail addressed to his colleagues. An administration official quickly called the CLASS office’s closure “flat out false.” HHS then followed up to say that while the office wouldn’t close, its staff was being reduced:

While the staff of the CLASS office has been reduced, reports that the CLASS office is closing are not accurate. We are continuing our analysis of this program. As we have said in the past, it is an open question whether the program will be implemented. A CLASS program will only be implemented if it is fiscally solvent, self-sustaining, and consistent with the statute.

What does this all mean for the CLASS Act? Certainly, it’s not good news. As I’ve written before, the Obama administration has never been a big booster of the CLASS Act. The late Sen. Ted Kennedy was always the driving force behind the program during the health reform debate, not the White House. Another ominous sign: as the National Journal’s Meghan McCarthy points out, the Senate Appropriations committee passed a bill last night zeroing out any funding for CLASS Act implementation. The administration had requested $120 million for the program.

But there’s one big reason why the CLASS Act won’t disappear anytime soon: $70.2 billion. That’s how much the Congressional Budget Office estimates the insurance program will save in the next decade. The reason is that CLASS enrollees have to pay premiums for five years before they ever receive benefits, meaning a surplus will emerge in the CLASS Act’s infancy. “That $70.2 billion, incidentally, amounts to slightly more than half the entire CBO estimated budget savings of the ACA (Affordable Care Act) in the first ten years,” former Kennedy advisor John McDonough writes in his new book, “Inside National Health Reform.” Until CLASS Act opponents are able to find a $70 billion offset for repealing the program, it’s hard to see the program being wiped off the books right away.

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