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Public Statements

Joint Hearing of the Health Subcommittee and the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee - "CLASS Cancelled: An Unsustainable Program and Its Consequences for the Nation's Deficit"

Statement

By:
Date:
Location: Washington, DC

On October 14, 2011, after 19 months of review and $15 million, HHS announced what most people -- including many Members of Congress, independent analysts, and CMS' own actuary -- have known about the CLASS program since before the health care bill became law: it is completely unsustainable.

After determining that the CLASS program cannot meet the law's 75-year solvency requirement, HHS has decided not to implement this provision of the law.

We didn't need to waste 19 months of time and $15 million of taxpayer money to arrive at this conclusion. Months before PPACA became law, the warning was being sounded.

On July 9, 2009, CMS Actuary Richard Foster wrote: "Thirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue."

Also that month, the American Academy of Actuaries wrote to the Senate HELP Committee:

"Our actuarial analysis demonstrates that the proposed structure and the premium requirements within the CLASS Act plan are not sustainable."

In October 2009, Senators Kent Conrad, Joe Lieberman, Blanche Lincoln, Mary Landrieu, Evan Bayh, Mark Warner, and Ben Nelson asked Harry Reid to strip the CLASS Act out of the pending health reform legislation.

And Kent Conrad, the Democratic Chairman of the Senate Budget Committee, famously called the CLASS Act "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of."

All of this was before PPACA was signed into law. So why was the CLASS Act included? Quite simply, PPACA's authors needed savings, and the CLASS Act provided a convenient budgetary gimmick.

Since participants would have to pay into the program for five years before becoming eligible for any benefits, CBO estimated including the CLASS Act would reduce the 10-year cost of the legislation by $70 billion. (Incidentally, CBO also estimated massive deficits for the program outside the 10-year window.)

By February 16th of this year, even Secretary Sebelius publicly admitted that the CLASS Act is "totally unsustainable."

The CLASS Act was doomed from the start. It should not have been included in PPACA, and it should not have taken eight months after the Secretary publicly discredited the program for the Department to pull the plug.

We have a very serious long-term care problem in this country. Costs are driving people into bankruptcy and weighing down an already over-burdened Medicaid program.

The CLASS Act should not only be shelved; it should be repealed.


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