The Obama administration announced Friday that it has suspended one piece of the landmark health care law which the president signed last year.
Secretary of Health and Human Services Kathleen Sebelius told Congress in a letter that the CLASS Act, which was supposed to provide a new voluntary long-term care insurance program, was unworkable since no actuarially sound way could be figured out to run the program.
“I do not see a viable path forward for CLASS implementation at this time,” Sebelius said in her letter.
CLASS stands for “Community Living Assistance Services and Supports.”
The CLASS Act was a significant piece of the health care bill because it helped make it deficit neutral over the first ten years after enactment, as estimated by the Congressional Budget Office. Thus CLASS helped garner the votes to help the bill pass.
According to the CBO, the CLASS program would have reduced federal deficits by $86 billion in first 10 years, partly offsetting the increased federal spending due to the other parts of the health care bill. In the first years of CLASS, enrollees would be paying premiums into it but would not be able to collect benefits until 2016.
In a memo to Congress in April of 2010, Medicare’s chief actuary Richard Foster warned that the program would “face a significant risk of failure” because sicker people would tend to sign up for it and the costs would soon exceed the premium payments. The program, he said, would likely be “unsustainable.”
In her letter Friday, Sebelius seemed to have reached the same conclusion as Foster did in 2010.
One of the Republicans who led the opposition to the CLASS Act, Sen. John Thune of South Dakota said Friday, “The administration is finally admitting the CLASS Act entitlement is unsustainable and cannot be implemented. Simply setting aside the program for the near-term is not enough. Repeal is the only solution to ensuring American taxpayers will not be on the hook in the future for this disastrous entitlement.”
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