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Obama Administration Nixes the CLASS Act

The Obama Administration announced that they will not implement the CLASS Act, a voluntary long-term care insurance program that was a key priority of the late Ted Kennedy, and which was instituted as part of the Affordable Care Act.

The initiative, known as the Class Act, was included in the law to help Americans cover the cost of aid for daily-living needs such as bathing and using the toilet if they became unable to care for themselves. Mounting concerns that the program was too costly over the long run had prompted officials at the Department of Health and Human Services to re-examine the program in recent months. Last month, it fired the program’s chief actuary and reassigned other staff.

HHS Secretary Kathleen Sebelius told Congress in a letter that she doesn’t see a viable path forward at this time.

The Administration was always a foe of the program, doubting that it could achieve long-term actuarial balance. However, in deep-sixing the CLASS Act, the Administration just forfeited $86 billion in savings on the Affordable Care Act. That’s because the CLASS Act was a net revenue positive in the ten-year window of the legislation, because it collected more in premiums that it paid out in the early years, according to CBO scoring.

So the effective nullification of the CLASS Act costs $86 billion. But it’s unlikely that $86 billion will be made up in any other way. If Congress repealed the CLASS Act, they might have to find offsets. But since the White House just isn’t going to implement the program, the savings won’t be realized but nobody has to worry about paygo or anything. It just blows a hole in the medium-term budget.

But more important than that, long-term care is in a state of crisis, and the CLASS Act offered a way forward to ameliorate that. People of modest incomes cannot afford help over the long term without some program of in-home assistance. Medicaid pays for some of these benefits for the truly indigent, but the system is breaking apart. Budget bean-counters decided that the outlook of the CLASS Act 20 and 30 years down the road was more important than this crisis, so they decided not to work toward fixing it.

More from National Journal… and Sarah Kliff.

…Just to be perfectly clear here, Judd Gregg put an amendment on the ACA that said that CLASS had to be self-sustaining without taxpayer funds for 75 years. HHS had to work within those guidelines, and altering that by reducing benefits, at least, would require further changes from Congress. There were probably ways to bargain for lower prices to obtain services or charge a higher premium. But HHS opted to throw the program out instead, judging that a voluntary program would attract more sick customers and cause a death spiral.

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David Dayen

David Dayen