The Obama health care bill’s key insurance program for long-term care has been dropped, after a 19-month study by the administration concluded it was unable to create a fiscally solvent program within the parameters of the law.
“Despite our best analytical efforts, I do not see a viable path forward for (CLASS Act) implementation at this time,” said Kathleen Sebelius, secretary of the Department of Health and Human Services, in a letter to Congress on Friday.
Speculation of the program’s demise exploded last month when the office in charge of implementing the program closed down and the Senate Appropriations Committee allocated no money to it in its fiscal year 2012 budget.
The CLASS (Community Living Assistance Services and Supports) Act, a major priority of the late Senator Edward Kennedy, required the Department of Health and Human Services to devise a program allowing individuals, through their employer, to pay into a federally run long-term health care insurance program to provide cash benefits for assistance with daily activities, such as dressing, bathing and eating. These services are not covered by Medicare, rarely covered by private insurers and unavailable to many people through Medicaid, which provides services for low-income individuals.
The legislation required the program to be run entirely through its customer’s premiums and be solvent for at least 75 years, as well as pay a minimum of $50 a day in benefits for recipients.
According to a memorandum sent Friday from CLASS Administrator Kathy Greenlee to Sebelius, the program would be unable to offer premiums at a low enough rate to attract healthy people to pay into the system, damaging its long-term viability. The report recommended a number of ideas – such as phased enrollment and higher earnings requirements for enrollees – to create a federally run long-term insurance program, but said these potential fixes would not allow the program to pay out the benefits required by the legislation.
Many of the program’s cost estimates projected tens of billions of dollars flooding in the program in its first few years, especially because individuals would be required to pay into the program for five years before receiving benefits. However, the program’s long-term estimates always projected the program would begin losing money soon after, making it a favorite target of Republicans who dismissed the Obama Administration’s cost saving estimates.
Upon passage of the health care bill, the Obama Administration touted the health care bill’s saving measures as cutting $210 billion from the federal budget deficit during the next decade. This initial influx in revenue generated through the CLASS Act represented nearly 40 percent of those savings.
The House Energy and Commerce Committee, which released a report last month slamming the program’s projected cost savings, announced late Friday it will hold a hearing October 26 regarding the CLASS Act.
“Make no mistake, the CLASS program was tucked into the health care law to provide $86 billion in false savings, and this budget gimmick is a prime example of why Americans are losing faith in Washington,” Chairman Fred Upton (R-Mich.) said in announcing the hearing, according to an article in the Hill.
Sebelius said the administration will continue to look at ideas to provide long-term care. At some point in there lives, seven of 10 people over the age of 65 will have some form of disability and need some paid or unpaid help with basic daily living activities, according to Greenlee’s letter. However, about 40 percent of long-term care users are between ages 18 and 64.
“It doesn’t mean that we’re giving up our efforts to improve Americans’ long-term care choices,” she wrote in a column for the Huffington Post on Friday. “In fact, one of the main reasons we decided not to go ahead with CLASS at this point is that we know no one would be hurt more if CLASS started and failed than the people who had paid into it and were counting on it the most.”