Associated Press –
Oct. 17: Washington – The Obama administration’s signature health overhaul law,
under relentless assault by Republicans, has suffered its first major casualty
a long-term care insurance plan.

The program, expected to launch in 2012, had been dogged from the beginning by
doubts over its financial solvency. Proponents, including many groups that
fought to pass the health care law, have vowed a vigorous effort to rescue the
program, insisting that Congress gave the administration broad authority to
make changes.

Long-term care includes not only nursing homes, but such services as home
health aides for disabled people.

“This is a victory for the American taxpayer and future generations,”
said Sen. John Thune, R-S.D., spearheading opposition in the Senate. “The
administration is finally admitting (the long-term care plan) is unsustainable
and cannot be implemented.”

Known as CLASS, the Community Living Assistance Services and Supports program
was a long-standing priority of the late Sen. Edward M. Kennedy, D-Mass.

Although sponsored by the government, it was supposed to function as a
self-sustaining voluntary insurance plan, open to working adults regardless of
age or health. Workers would pay an affordable monthly premium during their
careers and could collect a modest daily cash benefit of at least $50 if they
became disabled later in life. The money could go for services at home or to
help with nursing home bills.

But a central design flaw dogged CLASS. Unless large numbers of healthy people
willingly sign up during their working years, soaring premiums driven by the
needs of disabled beneficiaries would destabilize it, eventually requiring a
taxpayer bailout.

After months insisting that could be fixed, Health and Human Services Secretary
Kathleen Sebelius finally acknowledged Friday she doesn’t see how.

“Despite our best analytical efforts, I do not see a viable path forward
for CLASS implementation at this time,” Sebelius said in a letter to
congressional leaders.

The law required the administration to certify that CLASS would remain
financially solvent for 75 years before it could be put into place.

But officials said they discovered they could not make CLASS both affordable
and financially solvent while keeping it a voluntary program open to virtually
all workers, as the law also required.

Monthly premiums would have ranged from $235 to $391, even as high as $3,000
under some scenarios, the administration said. At those prices, healthy people
were unlikely to sign up. Suggested changes aimed at discouraging enrollment by
people in poor health could have opened the program to court challenges,
officials said.

“If healthy purchasers are not attracted … then premiums will increase,
which will make it even more unattractive to purchasers who could also obtain
policies in the private market,” Kathy Greenlee, the lead official on
CLASS, said in a memo to Sebelius. That “would cause the program to
quickly collapse.”

That’s the same conclusion a top government expert reached in 2009. Nearly a
year before the health care law passed, Richard Foster, head of long-range
economic forecasts for Medicare, warned administration and congressional
officials that CLASS would be unworkable. His warnings were disregarded, as
President Barack Obama declared his support for adding the long-term care plan
to his health care bill.

The demise of CLASS immediately touched off speculation about its impact on the
federal budget. Although no premiums are likely to be collected, the program
still counts as reducing the federal deficit by about $80 billion over the next
10 years. That’s because of a rule that would have required workers to pay in
for at least five years before they could collect any benefits.

“The CLASS Act was a budget gimmick that might enhance the numbers on a Washington
bureaucrat’s spreadsheet but was destined to fail in the real world,” said
Senate Republican leader Mitch McConnell of Kentucky.

Administration officials said Obama’s next budget would reflect the decision
not to go forward. Even without CLASS premiums, they said the health care law
will still reduce the deficit by more than $120 billion over 10 years.


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