If anyone can claim responsibility for the CLASS Act’s demise, it’s probably Sen. Judd Gregg. During the health reform debate, the former Republican senator from New Hampshire secured an amendment requiring the Department of Health and Human Services to certify that the long-term insurance program would be fiscally sound.
On Friday, HHS announced it couldn’t meet that requirement: no matter how the program was modeled, actuaries could not find a way to get the premiums paid in to cover the benefits paid out. The CLASS Act would have to come to halt.
“I expected that, at sometime it would implode because of the amendment,” Gregg told me in an interview earlier today. “I am surprised at how quickly they came to that conclusion.”
Gregg resigned from the Senate last year and now serves as an international advisor at Goldman Sachs. We spoke this morning about the future of long-term care insurance, why he offered the amendment and what the halt to CLASS Act means for the rest of health reform. What follows is a transcript lightly edited for grammar and length.
Sarah Kliff: The White House announced last week it would stop implementing the CLASS Act. Did you expect this?
Sen. Judd Gregg: I expected that, at sometime, it would implode because of the amendment. I didn’t think it was a desirable program. I’m surprised at how quickly they came to that conclusion. It took a year of them working on it. I presumed they would probably take a couple of years [to work on CLASS], so they could offset [other health reform] spending, and then run into a wall. When I put that amendment in, it was sort of a torpedo in the midshift because I didn’t think the program would be actuarially sound. I just didn’t see this happening so quickly.
SK: Tell me more about why you decided to offer that amendment.
JG: I knew we weren't going to kill the CLASS Act because it was Sen. Ted Kennedy’s proposal, and he was very sick, and most of us were very sensitive to the fact he was sick. This was his last hurrah, legislatively. I knew we were going to implement it, although I didn’t think the concept was sound. Conceptually, it makes sense to prefund long-term care insurance.... but what this bill did was just the opposite. It was totally unsound.
My thought was, let’s put in an amendment that would be hard to oppose, that in effect would either make the proposal sound or would kill it.
SK: Did you expect the Democrats to accept the amendment?
JG: Well, we had a very intense debate that went on for a few days over soundness. At the end, I think, we sort of won the day and decided this thing has got to be actuarially sound. I wasn’t overly surprised that it was accepted. I was appreciative that Chris [Dodd, the former Connecticut Senator] took it and that members on the other side valued having actuarial soundness.
It was a win-win for us. I didn’t like the idea of setting up the program. But with this, it was either going to have to work or come down as a result of the amendment.
SK: There’s been a debate over how well the White House has handled ending the CLASS Act. Some have argued that it did the right thing by ending the program, after it was determined unworkable, while others have said the administration should have come to the conclusion faster. Where do you fall on that?
JG: I don’t think they really had a choice in the matter. The actuaries couldn’t come up with a way to implement it. And under the terms of the amendment, the secretary of HHS had to certify its actuarial soundness. I thought they would get some sort of actuarial treatment to get through the first few years. The actuaries didn’t even give them that.
SK: You mentioned earlier you support the idea of long-term care insurance. How would you set up such a program?
JG: You’d have to use some kind of personal account, and the person, every year, would get an investment statement on that account. It would actually be vested, just like if you you’re paying into a pension at work. There’d be vested interest which you could theoretically set up to cover the cost. These programs exist now, programs to buy long-term health care.
SK: Does the end of the CLASS Act say anything about the rest of the health law? Or is this an isolated incident?
JG: This was a sidecar. This was not a core element of the overall bill. It was put in as a courtesy to Sen. Kennedy. I do happen to think the overall bill is going to massively fail on the fiscal side and probably fail on the substantive side too. But you can separate off the CLASS act as not having an effect on the underlying bill, even though the underlying bill will also fail.