The Obama administration’s decision to drop a key program in the health care law that would have provided long-term care insurance has given fresh ammunition to critics who say the entire bill should be repealed.
Health and Human Services Secretary Kathleen Sebelius announced late Friday that the agency was shelving the Community Living Assistance Services and Support program, or Class, because it could not find a financially sustainable model for it.
The voluntary program was a critical part of the Affordable Care Act. It would have reduced the federal budget by $70.2 billion over 10 years, according to the Congressional Budget Office, and was intended to lessen the burden on Medicaid by providing long-term care to about 2.8 million people.
Proponents touted it as a novel scheme that, unlike Medicare and Medicaid, would sustain itself through participant premiums.
Its elimination is likely to dent the cost savings achieved from the Affordable Care Act, savings that critics say have been created by “accounting gimmicks.” The announcement has given fuel to critics — who say it’s a sign that the administration cannot live up to its promises — who want to repeal the health care law.
“You basically have a law that was drafted for the Congressional Budget Office’s 10-year window to make it look like it was revenue-neutral. … The numbers don’t just add up,” said Brian Darling, senior fellow for government studies at the Heritage Foundation. “The No. 1 issue is jobs. But the second issue is whether the Obama administration has been competent in implementing policies. This Class Act embarrassment speaks to the idea that the Obama administration hasn’t been successful in implementing legislation.”
Proponents of the Affordable Care Act argue that even without the Class program, the law would still result in cost savings and that the case for repeal is “nonsense.”
“According to the CBO, even without the Class Act there would be a surplus within the first 10 years. The elimination of the Class Act reduces that surplus by a significant amount, but you still end up with a reduction on the deficit,” said Ron Pollack, director of nonprofit group Families USA.
Even during the health care debate, questions were raised about the program’s long-term sustainability. HHS estimated that the initial premium would be between $235 and $391 per month, and participants would be eligible for cash up to $50 a day once they needed it.
But the program was likely to attract people with health problems, meaning that it would actually prove more burdensome to the federal government in the long-term.
“In general, voluntary, unsubsidized and nonunderwritten insurance programs such as Class face a significant risk of failure as a result of adverse selection by participants,” Richard S. Foster, chief actuary of Centers for Medicare and Medicaid Services, wrote in a memo last year. “Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health.”
Even the CBO said the program would eventually add to the budget deficit, even though the law required Sebelius and future HHS secretaries to set premiums that would ensure the program was solvent for 75 years.
“The Class program could be subject to considerable financial risk in the future if it were unable to attract a sufficiently healthy group of enrollees,” stated a letter from CBO to House members. “Attracting healthy enrollees could be challenging for several reasons.”
The elimination of the Class program is unlikely to have an impact on the rest of the bill. While it was designed to work in tandem with other parts of the law, it was not meant to replace an existing provision.
Health care is a key issue in the 2012 presidential campaign debate. Most Republican candidates support repealing the health care law. Even leading GOP contender Mitt Romney, who is on the defensive for helping enact a law in Massachusetts that served as the model for the Affordable Care Act, has said he would repeal the Affordable Care Act in its entirety as soon as he became president.
UPDATE: The CBO said this afternoon that repealing the Class Act would not have any impact on the budget deficit.