Repealing CLASS Will Add to Budget Deficit

July 20, 2011

The Gang of Six deficit reduction plan calls for repealing the CLASS Act, the long-term care insurance program included in health care reform. They gave no reason, but the Bowles-Simpson deficit commission did when it called for the same thing. People who join the program in its early years will pay premiums well below their benefits (the program is slated to pay about $75 a day to help the frail elderly employ home health aides to stay out of nursing homes), the report said. “Sustaining the system over time will require increasing premiums and reducing benefits to the point that the program is neither appealing to potential customers nor able to accomplish its stated function,” the deficit commission report said. “Absent reform, the program  is likely to require large general revenue transfers or else collapse under its own weight.”

Yet that’s not what the Congressional Budget Office found when it analyzed the CLASS act. CBO director Doug Elmendorf said the insurance program would generate a $72 billion SURPLUS in its first ten years, and smaller SURPLUSES in its next ten years. It was only in the decade after 2029 that the bill would increase deficits. But, he said, “the magnitude of the increase would be fairly
small compared with the effects of the bill’s other provisions, so the CLASS program does not substantially alter CBO’s assessment of the longer-term effects of the legislation.”

If long-term budget neutrality is the issue, then the terms of CLASS insurance can easily be adjusted to meet that goal. It would make it a more expensive program, and less attractive to many of the lower income people who need it most. It also might make it less of a threat to the private long-term care insurance industry, which peddles over-priced products for the upper middle class and is at the root of the attacks on CLASS.

There is clearly a need for much broader insurance, as Howard Gleckman at the Tax Policy Center, who wrote a book on America’s pathetic system for providing care for the frail elderly, knows better than anyone. Yet in a blog post yesterday, he all but gave up on preserving CLASS, given the budget cutting fever gripping Washington. Instead of surrendering, he should have asked aloud why the Gang of Six felt the need to add $72 billion to the budget deficit . . . in the name of cutting the deficit.

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One Response to Repealing CLASS Will Add to Budget Deficit

  1. Jesse Slome on July 20, 2011 at 3:49 pm

    Currently all CLASS Act numbers are made up. So, why not go ahead and say that CLASS will totally eliminate the national debt by 2015 (it could if 98% of Americans sign up within the first 3 months). When are we going to tire of Congress (and entities that stand to profit from a new entitlement program) making up numbers to suit their needs?

    It’s been 16 months since healthcare reform was passed. HHS knows what CLASS will really be priced at. Someone force them to share that amount.

    Only then can we judge if the plan is worth offering … or worth scrapping to save taxpayers hundreds of millions in 2012 and billions in the years after.

    Let’s (for once) base a decision on reality not hyperbole.

    Jesse Slome
    Executive Director
    American Association for Long-Term Care Insurance

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