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Administration Drops One Provision Of The Healthcare Reforms

We covered the debate over the healthcare reform bills extensively last year. Although Democrats failed to get agreement on all of the components that the President wanted, notably the public option, a new insurance option that would have made it possible for all Americans to have healthcare insurance, the reforms are still the most important made since the establishment of Medicare and Medicaid. Republicans vowed to repeal the bills as soon as they get back in office and managed to delay the onset of new benefits for as long as possible, knowing that it will be very hard to take the benefits back once voters understand their new entitlements. Oddly, they are prepared to add an estimated $320 billion to the deficit over the next ten years by repealing healthcare reform. So much for fiscal responsibility!

One provision of the healthcare reforms won’t make it to implementation though. Kathy Greenlee, Assistant Secretary for Aging at the Department of Health and Human Services (HHS), announced1 on Friday that the government has decided to drop the implementation of the Community Living Assistance Services Act (CLASS). The voluntary program was supposed to provide long term assistance to participants in much the same way that Long Term Disability insurance policies work. Participants would have paid around $100 a month into a fund that would be used to provide eligible beneficiaries with about $50 a day towards the cost of certain healthcare services. Enrollees would have to pay into the program of at least five years before becoming eligible of benefits.

The program was clearly flawed, as it depended on having a large number of young, healthy people paying into the fund in order to support the older people claiming benefits. If a person could put just $6,000 into the fund and then draw $1,500 a month forever it’s obvious that the scheme would soon require higher premiums, have to provide lower benefits, need revenue from other government sources or go broke. HHS Secretary Kathleen Sebelius wrote:

While some analysts predicted that the CLASS program’s finances would be sustainable, others including the actuary for Medicare and Medicaid issued warnings to Congress and the public before the law was enacted that not enough young, healthy people would sign up. This could have led to a vicious cycle where premiums would have to be set higher and higher to cover the likely costs of benefits, leading fewer and fewer healthier people to sign up for the program. For this reason, the law required me to develop a benefit plan that, in addition to meeting other statutory requirements, would also be solvent for at least 75 years…..So even as we suspend work on implementing CLASS, we are recommitting ourselves to the ultimate goal of making sure Americans can get the long-term care they need, whether it’s a working-age mom with disabilities who needs daily support right now or a young man at his first job who wants to protect himself and his family against the possibility of huge long-term care costs in the future.

Although we strongly disagree with the GOP’s policy of rolling back the whole of the healthcare reform act, perpetuating the wicked and unnecessary loss of life highlighted in “A Grim Reminder” at the top right of this page, it’s clear that the administration made a good call on not implementing the CLASS program. Let’s hope that they can come up with something better.

 1 A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program” – U.S. Department of Health and Human Services – October 2011

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