CLASS Act be Repealed

The Patient Protection and Affordable Care Act includes a provision to develop a federally sponsored long term care program known as the Community Living Assistance Services and Support Act(CLASS Act).  The law requires theDepartment of Health and Human Services to release details of the program by October 1, 2012.  The program will likely begin enrolling members in 2013.

Americans 18 and older and actively at work will be eligible to enroll.  Employers who elect to participate will automatically enroll workers but workers will have the ability to opt out.  With no exclusions for pre-existing conditions participation will be highly selective and the program will disproportionately attract unhealthy members.

The Congressional Budget Office estimated the monthly premium cost at $123 on average, yet according to a white paper released by The Cato Institute earlier this year premiums could actually be in the range of $180-$240.  Cost will dissuade participants as will a requirement that premiums be paid for five years before benefits become available.

Cash benefits will be paid directly to a qualified participant who experiences a loss of at least two activities of daily living (ability to eat, dress, bathe, etc).  Payments are expected to be no less than $50 per day on average and there is no provision to limit benefits on a lifetime basis.

Only 6% of the population is expected to enroll according to estimates provided by the American Academy of Actuaries.  This number could be much lower given the voluntary nature of the program, the expense, and the five year vesting period.

The CLASS Act is doomed.  Low participation and adverse selection will render the program unsustainable.  The CBO is concerned it becomes “a new federal entitlement program with large, long-term spending increases that far exceed revenues.” and the bipartisanCommission on Fiscal Responsibility and Reform suggests a repeal if the program cannot be “reformed” in short order.  Reform?  The healthcare law was supposed to be reform!  Repeal is better than reform, at least for the CLASS Act.