• CLASS act pushed over fiscal cliff

    One sad outcome of yesterday’s vote didn’t get much attention: The demise of the Community Living Assistance Services and Supports Act (CLASS).

    As many TIE readers know, CLASS was designed as a national voluntary insurance program for working adults who might someday face functional limitations. After a five-year vesting period, people with specific functional limitations would receive cash benefits, roughly on the order of $75/day. These benefits could be used to purchase specific services people require to live independently: a wheelchair ramp, maybe some direct care services, maybe modifications to a home or a vehicle to accommodate some disability:

    It was an appealing vision. I was planning to enroll myself. I guess I’ll need a backup plan. The fiscal cliff agreement, passed Tuesday night in the House, repealed CLASS.

    Yesterday’s vote made official what many people already knew. CLASS died because the financial numbers didn’t fully work, because the White House didn’t want to expend scarce political capital to fix it, and because our current polarized political environment so often thwarts efforts to repair complicated programs whose imperfections become known.

    CLASS was a worthy, imperfect effort. Its lack of an individual mandate undermined the policy. Lack of a mandate also made it incredibly hard to predict who exactly would sign up, what self-financing premiums would need to be, and whether  CLASS would prove financially stable as required under the Affordable Care Act.

    If CLASS went from a dead man walking to a dead man, it at least deserved a proper funeral with more than a few mourners. More from me here.

    As Don Taylor reminds us, we can repeal CLASS, but we can’t repeal disability.

    • We should all be thankful for the repeal of the CLASS Act. Although made with good intentions, the adverse selection issues surrounding this Act would have killed us financially. For those that disagree, even the Centers for Medicaid and Medicare Services (CMS) (1) acknowledged such. In 2010, Robert Foster, the Chief Actuary for CMS reported: “there is very serious risk that the problem of adverse selection will make the C.L.A.S.S. program unsustainable.” I know, I know, the Congressional Budget Office reported that it would have reduced the federal deficit by $70.2 billion over the course of ten years, but that’s because the first five years of the program was considered a waiting period and so all the government would have been doing was collecting monies, but once that five-year waiting period ended, individuals would have begun collecting, and without enough individuals contributing to the pot (since taxes were not to be used), the program would have quickly added to the deficit. Again, Robert Foster of CMS reported: “We estimate a net Federal savings for the C.L.A.S.S. program of $38 billion during the first nine years of operations—the first 5 of which are prior to the commencement of benefit payments. After 2015, as benefits are paid, the net savings from this program will decline; in 2025 and later, projected benefits exceed premium revenues, resulting in a net Federal cost in the longer term”. In fact, it was the inability of the program to be self-sustaining for the required 75 years that led to the Act being put on hold to begin with! In summary, the official repeal of this program is a good thing. For all the good that is in the ACA, this was one of its flaws. Even the bipartisan Kent Conrad, D-ND, called it “A Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.” (2) I couldn’t agree with him more.

      Foster, R. (2010): http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/downloads/PPACA_2010-04-22.pdf

      Washington Post article relaying Conrad’s comments: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/27/AR2009102701417.html

    • The CLASS act was on the shelf waiting for political will, need and innovative solutions to revive it. It’s promise lay in the future.

      I’m equally saddened by the defunding of future healthcare coops, a part of the fiscal cliff deal. I just like the idea of new-ish forms in the mix that could be game changers in time. This one hurts.

      Sad to lose the $1.9 billion but I have to believe that the insurance companies with their political influence were threatened by the emergence of the coops more than opponents cared about the savings.

      The already funded coops could still be a bellwether.