CLASS Act – Was it just a budgetary gimmick?

Friday (10/14/11) afternoon, the traditional government embarrassing news dump time, HHS Secretary Sebelius announced that the CLASS Act portion of the ACA would not be implemented because it could not be made to be financially self-sustaining. That this would happen should not have been surprising to anyone.

The program was originally proposed as a tribute to the late Senator Edward Kennedy who had championed a long term care program of sorts being incorporated into Medicare.

From the beginning, critics pointed out that a voluntary program, such as this, was actuarially unsound. The only people that would sign up for the program would be those that anticipated a need for it – the definition of anti-selection in insurance parlance. In order to get this portion of the legislation inserted into the ACA, the supporters of it agreed to a formulation where the HHS had to prove that it would be actuarially sound before implementation could begin. That is why Secretary Sebelius had to make her announcement.

Since the announcement, there has been minimal defense of the CLASS Act with the exception of those that stood to gain from implementation work. Republicans have floated the idea of formally repealing this part of the ACA and the White House has given a half hearted defense with a suggested veto. Considering that this was a major piece of the ACA it is curious the low level of attention this has received.

It appears that the major benefit of the CLASS Act to the entire ACA was its contribution to the budgetary scoring done by the CBO. CBO scoring is done over a 10 year period. The way the CLASS Act was written, it was to be implemented 5 years after the passage of the ACA, and was to collect premiums for 5 years prior to paying out any benefits, i.e. income only for the scoring period. This amounted to $86b of the scored $210b savings attributed to the ACA.

So the question remains, has the CLASS Act already done its work by inflating the savings claim to gain support for the ACA?