The Community Living Assistance Services and Supports program, known as CLASS and a legacy of the late Sen. Edward M. Kennedy, D-Mass., was envisioned as a way for workers to pay a monthly premium during a vesting period and eventually become eligible for a daily benefit from HHS that would defray costs of a nursing home or assisted home care. Current Medicare and Medicaid benefits include little for nursing home stays, and the health care and insurance industries have long struggled to find ways to provide long-term care that is affordable and reliable.
"Over the last 19 months, we've examined the long-term care market, modeled possible plan designs and studied the CLASS statute, consulting at every step of the way with outside actuaries, insurers and consumer groups," HHS Secretary Kathleen Sebelius wrote in a blog published Friday as she submitted a report to Congress. "When it became clear that most basic benefit plans wouldn't work, we looked at other possibilities. Recognizing the enormous need in this country for better long-term care insurance options, we cast as wide a net as possible in searching for a model that could succeed . . . We have not identified a way to make CLASS work at this time."
Sebelius added that a chief reason for suspending the program and reassigning its staff was that "we know no one would be hurt more if CLASS started and failed than the people who had paid into it and were counting on it the most."
Republican opponents of the health care law they call "Obamacare" pounced. "This announcement is a canary in a coal mine," said Sen. Orrin Hatch, R-Utah. "The CLASS Act's budget gimmicks, which secured its inclusion in the $2.6 trillion health law, have finally been exposed as a program that was deeply flawed and unsustainable. Today's abandonment of the program is just the latest evidence demonstrating Obamacare's devastating effects and ill-conceived policies."
The Wall Street Journal on Monday published an editorial titled "Obamacare Starts to Unravel."
But Jack Meyer, a professor of public policy and public health at the University of Maryland who writes regular reports on HHS' implementation of health care reform told Government Executive "the heart of the law is intact." He gave HHS credit for "not being insistent and stubborn but instead saying, 'Let's cut our losses and take our hits now.' "
Framers of the Affordable Care Act, Meyer said, knew that designing a successful long-term care benefit would be a "huge lift for the country" because of the difficulty in selecting adverse risks and creating actuarially sound federally administered insurance coverage. "In this climate you can't do mandates, so rather than doing nothing, they did something" by writing into the law the makings of a voluntary program, he said. "But the current system of welfare tied to nursing homes is terrible, so the day of reckoning is going to come."
In its report, HHS reviewed its 19 months of work pursuing CLASS, making the case that the possibility of insurmountable obstacles was known. The effort included analytical work by HHS' 30-year-old Office of Disability, Aging and Long-Term Care Policy in the Office of the Assistant Secretary for Planning and Evaluation. Agency officials met with House and Senate staff even before passage of the health care bill, as well as staff of the Congressional Budget Office, the Social Security Administration and the American Academy of Actuaries.
HHS then established a Long-Term Care Work Group and reviewed a memo from the chief actuary of the Centers for Medicare and Medicaid Services. In April 2010, the actuary concluded that a prospective CLASS insurance program would produce "an estimated total net savings of $38 billion through fiscal year 2019. This effect, however, is due to the initial five-year period during which no benefits would be paid. Over the longer term, expenditures would exceed premium receipts, and there is a very serious risk that the program would become unsustainable as a result of adverse selection by participants."
The agency continued to study the program's potential while setting up administrative divisions focusing on actuarial integrity and benefit design, benefits administration and enrollee services, regulatory affairs, information systems, marketing and employer outreach, program integrity, evaluation, and compliance. It situated the CLASS Office within the Administration on Aging. In Sept. 2010, it assigned the first of what would be 14 full-time employees working on CLASS, a number that was trimmed to seven by the time HHS announced it was suspending the program.
On Oct. 17, CBO issued a statement explaining how it would adjust its long-term projections to reflect the absence of a CLASS program originally intended to pay for itself and save on other health care expenditures. In its coming January 2012 baseline budget projections, "CBO will assume that the program will not be implemented (unless there are changes in law or other actions by the administration that would supersede Friday's announcement)," the nonpartisan office wrote. "Following long-standing procedures, CBO takes new administrative actions into account when analyzing legislation being considered by the Congress -- even if it has not published new baseline projections. Beginning immediately, therefore, legislation to repeal the CLASS provisions in current law would be estimated as having no budgetary impact."
The political debate, meanwhile, goes on as Republicans seek to repeal the Affordable Care Act even as legal challenges to the law's constitutionality are working their way toward the U.S. Supreme Court.
Bills to officially repeal CLASS are backed by anti-tax crusader Grover Norquist, who greeted the HHS announcement with a statement saying, "Those involved in the passage of Obamacare knew that the true costs of the bill were being hidden from the American people by the inclusion of the CLASS Act. Everyone knew that after Obamacare became law, the Obama administration would simply rescind the CLASS Act and increase the cost of Obamacare. There needs to be accountability on the part of those who did this."
Many Democrats appear unalarmed. "Providing nursing home insurance was always the weakest part of health care reform," former Rep. Martin Frost, D-Texas, said Monday in an online forum hosted by Politico. "Scrapping it only recognized economic reality and is not a major blow to health care reform."