SOMETIMES A QUICK death is the best way. That is true of the Obama administration’s decision, announced Friday, to kill the Community Living Assistance Services and Supports Act, better known as the CLASS Act. The program, adopted as part of the larger health-reform bill, would have created a voluntary long-term care insurance program run by the federal government. Those who participated and paid in for at least five years would have become entitled to a cash benefit of at least $50 a day to pay for non-medical services they required to stay at home rather than enter a nursing home.
The problem, as numerous experts warned at the time, was whether the program could be run, as the law required, in a way that made it financially solvent for at least 75 years. The difficulty with the CLASS Act was ensuring that premiums could be set low enough to attract widespread participation but high enough to pay the promised benefits. The risk was that the program would attract the sickest participants, who thought they might need its protections, and thereby drive premium prices ever higher in a spiral of dysfunction. Once the program was underway and millions had paid their premiums, the temptation for a government bailout would have been significant.
At the time the measure was being debated, the Obama administration insisted that it could be implemented in a workable fashion. The administration was also happy to count premium revenue from the CLASS Act — it brings in money in the short term but pays it out later — as part of the projected “savings” of the health-care law. The CLASS Act accounted for $70 billion of the $143 billion in deficit reduction projected during the first 10 years.
On Friday, Health and Human Services Secretary Kathleen Sebelius announced that the department had decided to pull the plug on CLASS. “I do not see a viable path forward for CLASS implementation at this time,” she wrote in a letter to congressional leaders. This is the right conclusion. Although Republicans were quick to leap on the move as an illustration of the unworkable nature of the health-care law, that is an unfair dig. The CLASS program was conceived as a separate, standalone measure.
Meanwhile, as Ms. Sebelius noted in her letter, “The challenge that CLASS was created to address is not going away.” Only 2.8 percent of Americans have private long-term care coverage. By 2020, an estimated 15 million will need some form of long-term care. Medicare does not cover long-term care services; for many people, the alternative is essentially going bankrupt in order to become eligible for Medicaid. That is an imperfect solution and, for federal and state governments, an expensive one. Long-term care already accounts for about one-third of Medicaid spending. The CLASS Act may be gone, but the problem remains.