A presidential spokesman says the Administration does not support new legislation that would repeal the long term care insurance program in health reform, legislation that is backed by Sen. John Thune (R-SD).
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However, not supporting repeal is one thing. The language of the health reform law, which says the White House may not be able to do anything about this, is quite another. The new law says if the federal government can't make this new federal entitlement program fiscally sound, then it cannot be implemented.
A White House spokesman said: “We do not support repeal. Repealing the CLASS Act isn’t necessary or productive. What we should be doing is working together to address the long-term care challenges we face in this country.”
Here's what happened. The White House wanted a new long term care insurance program in health reform, to cover individuals if they get disabled or the elderly. But the Administration wanted to sell it at such dirt-cheap premiums that it would have made just another insolvent entitlement program that taxpayers would be on the hook for.
So former Republican New Hampshire Senator Judd Gregg inserted a provision in health reform that forced Health and Human Services to deliver an actuarial analysis of this new program which had to ensure its “solvency throughout" a "75-year period,” the law reads.
Specifically, according to section 3203 of the health reform act, the law said that the HHS “secretary shall establish all premiums to be paid by enrollees for the year based on an actuarial analysis of the 75-year costs of the program that ensures solvency throughout such 75-year period.”
This new federal long term insurance program is called the “Community Living Assistance Services and Supports” or CLASS program.
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If HHS could not ensure solvency, then the CLASS act couldn't be implemented.
And that's what Health and Human Services Secretary Kathleen Sebelius concluded in a letter letter to Congress sent last Friday. The HHS secretary said that, after nearly two years of careful analysis, her department did not see a way to make a new long term care insurance program in health reform sustainable.
“The law passed by Congress required me to design a plan that would be actuarially sound and financially solvent for at least 75 years,” Secretary Sebelius wrote, adding, “I do not see a viable path forward for CLASS implementation at this time."
This throws a wrench in the White House's claims that health reform would not add "one dime" to the deficit. The new long term care insurance program in health reform would have charged premiums at just $65 a month to cover individuals if they became disabled or for the elderly who need nursing care.
The Administration went even further, and said the premiums from this new program would have helped pay for health reform, delivering an estimated $86 billion in cost savings over ten years, $70 billion over ten years when you knock out add-ons for things like education in the bill. That's an estimated 40% of the health law's $210 billion in total estimated deficit reduction over the next decade.
But the Gregg amendment then replaced the $65 monthly premium written into the legislation that forces on a 75-year actuarial analysis of the costs of the program to ensure solvency throughout this entire period.
Moreover, the new law said that after 10 years, the HHS secretary had to go even further. The secretary had to prove via another actuarial analysis that all of the premiums paid to support the CLASS program were sufficient and that “accumulated reserves in the CLASS Independence Fund would not decrease in that year,” the tenth year. Meaning, the program had enough of a capital cushion in the form of reserves to back it up.
After the amendment was inserted, Sen. Gregg’s office put out a statement for the senator, quoting him as saying “By setting an overly optimistic premium of $65 per month, the CLASS Act would have made the entitlement crisis worse rather than better. My amendment ensures that instead of promising more than we can deliver, the program will be fiscally solvent, and we won’t be handing the bill to future generations.”
So the HHS secretary got to work and found all of that was undoable. Already, the federal Centers for Medicare & Medicaid Services said two years ago that the new CLASS program would actually result in a "net federal cost in the longer term" and that the CLASS program would prove to be “unsustainable."
Another problem: Government supporters of the CLASS program had made a bet that healthy workers would pour into the program--if it only attracted sicker workers, then the program could not afford the pay outs.
But the federal government couldn't insure that the program would attract a lot of healthy workers. The most likely people to be participating would be individuals who are very sick and would have higher claims. So, what does this mean for the reform act's new health insurance exchanges?