The CLASS Act

I have not done anything like a thorough investigation of the CLASS Act. However, I just stumbled across the following. Given the source and references, I’m not as worried about the CLASS Act as some people seem to be. Naturally, I expect motivated, informed readers to share credible, relevant documents that may conflict with this.

From The Center on Budget and Policy Priorities:

Does CLASS create a big unfunded entitlement?

No. Unlike some other recent programs, such as the Medicare drug benefit, CLASS is fully paid for by beneficiary premiums, not deficit-financed . The law specifically requires the Secretary of Health and Human Services to design the program’s benefits and set the premiums to assure that the program takes in as much money as it pays out for each generation of workers. The Congressional Budget Office (CBO) has affirmed CLASS’s solvency over the long term. Based on conservative assumptions — an initial average premium of $123 a month and an average daily benefit of $75 — CBO estimates that CLASS will be fully self-financing over the next 75 years.[3]

Are premiums from CLASS being used to finance health reform?

No. By its very nature, a premium-financed program such as CLASS reduces the federal budget deficit in its early years, when many people are paying premiums and few have yet become eligible for benefits. Congressional leaders, however, crafted the health reform legislation so that it is fully paid for without relying on premiums from CLASS. The CBO estimate clearly shows that if one excludes the $70 billion in premiums from CLASS that are expected to be paid over the first ten years, health reform still reduces the deficit by $73 billion over this period. [4] The effects of CLASS are also excluded in determining whether Congress has met the new statutory pay-as-you-go requirement for legislation affecting mandatory spending and revenues.[5]

CLASS would begin to add slightly to the deficit after 2029, as the benefit payments made in those years would somewhat exceed the premiums collected in those years. The program is designed to be fully self-financing over 75 years without needing to have premiums precisely match benefit costs in each year. Moreover, CBO has determined that CLASS’s impact on the deficit after 2029 will be small and that the health reform legislation as a whole — including CLASS — will reduce deficits modestly in future decades. […]

[3] Douglas W. Elmendorf, Director, Congressional Budget Office, Letter to the Honorable George Miller, November 25, 2009.

[4] Douglas W. Elmendorf, Director, Congressional Budget Office, Letter to the Honorable Nancy Pelosi, March 20, 2010.

[5] Statutory Pay-As-You-Go Act of 2010 (Public Law 111-139), section 4(d)(6).

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