The CLASS Act was the brainchild of the late Senator Edward Kennedy, intended to help cover home care costs for the disabled and those with long-term care needs. Because it was designed as a voluntary enrollment insurance plan, it has generated concern that it would experience serious adverse selection problems as it attracted those most likely to need home care in subsequent years.
This week’s news focused on HHS’s explanation of reductions in CLASS development staffing, including the departure of the program actuary. An HHS announcement denied that the program was being abandoned, but included words that may sound CLASS’s death knell: “As we have said in the past, it is an open question whether the program will be implemented. A CLASS program will only be implemented if it is fiscally solvent, self-sustaining, and consistent with the statute.”
Because premium collections would be much greater than expenditures in the initial years of the program (individuals must be enrolled for five years before they can claim benefits), CLASS was a major contributor to the CBO’s 2010 estimate of ten-year “savings” for the Affordable Care Act. The front-ended projected cash flow was estimated by the CBO as resulting in a $70 billion deficit reduction for the 2011-2020 decade. However, as critics pointed out, as insurance payments exceeded premiums in future years the planned program would eventually add to the deficit.
So, while HHS is denying that CLASS will be closed down, its insistence on fiscal solvency and self-sustainability indicates that the program is now on life support, and—in spite of its short-term positive cash flow—may not survive Congressional and administration deficit reduction efforts.