CLASS Act, round ad nauseum

It clearly has flaws and I think that it is true that many LTC types knew this and felt that CLASS needed a conference bill more than most parts of the ACA. However, CLASS could be easily fixed with a change in the definition of work, a simple one time underwriting (can you climb one flight of stairs would likely do it) and auto enroll procedures if anyone was actually interested in the policy. People can of course be opposed to the government trying to set up a self sustaining LTC insurance scheme as a matter of principle, but then how do they plan to insure long term care?

The thing that irritates me most about the debate is the singular focus on the deficit accounting angle. Even if CLASS succeeded in policy terms (it became a self sustaining LTC insurance program) it would reduce the deficit for the first 10-15 years and add to it later simply because of the accounting rules used by CBO and the need to pre-collect premiums if the program was to be self sustaining. This doesn’t mean the CBO’s rules are flawed—you need one set of rules with which to judge policy and CBO is easily my favorite institution. However, deficit reduction/increase estimates just can’t answer every important policy question.

It is easy to get rid of CLASS. It is hard to figure out how to provide long term care. And the baby boomers are coming….

Update: Sec. Sebelius announced today that HHS is suspending implementation of CLASS. Four page report here that I haven’t read yet and ~50 page actuarial analysis here. (h/t @sarahkliff).

Update 2, 5:30pm: After just a quick read, two thoughts. First, the memo and and the analysis is very clear in describing the challenges and this is not a sugar coated analysis at all. High marks to HHS for taking this seriously. Second, it boiled down to questions about whether policy changes undertaken to ensure solvency (e.g. increase definition of work, benefit structure changes, some type of underwriting) were consistent with the statute as written. The stronger/better the policy changes were to move toward self sufficiency of CLASS the more likely they were to not survive legal challenges that the changes were inconsistent with what passed in the ACA. If such additions were later stripped out by legal challenges that would be a huge mess. In short, CLASS needs another piece of legislation to make it sustainable and that would have to garner 218 votes in the House and 60 in the Senate and that is not going to happen. So, they have decided to not move ahead. More next week.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

11 Responses to CLASS Act, round ad nauseum

  1. AB says:

    The reason there was the singular focus on the deficit accounting angle is that the effects were oversold/misrepresented. The whole thing could have been avoided if proponents had just been more honest about it. The rules aren’t flawed, but they do create some strange quirks like calling those funds deficit reduction. And for every Don Taylor who was willing to acknowledge that in the bigger picture CLASS as designed was neutral and not a money-saving program, there was a Klein/Yglesias/Cohn who would cling to the CBO’s $130B deficit reduction number. There was a lot of trying to have it both ways, where people claimed to want to debate the bill on its merits, but always fell back to the $130B.

    So I agree, let’s move forward and figure out a sensible way to fund LTC. But let’s also stop citing phony savings.

  2. AB says:

    I haven’t read the report yet either, but the nerdy actuary in me is all excited to read it this weekend.

    I will admit feeling a small bit of vindication, since I’ve been beating the CLASS Act drum rather incessantly ever since the bill passed.

    • Don Taylor says:

      a quick read only…..haven’t taken in the details, but it is a fairly thorough report and no sugar coating. Bottom line analysis was that as they moved to add policies that could make CLASS sustainable (they talked of raising the definition of work determined by income nearly 10 fold, changing benefit structures and underwriting) they increased the risk of these changes being found to be inconsistent with what actually passed. If they put through changes that moved toward sustainability that were later stripped, they wouldn’t then be able to stop the program. CLASS needs another piece of legislation to make it fly and that is not going to happen, so they decided to stop.

    • AB says:

      Interesting. So any attempt a federal LTC program is going to have to start all over basically, and with a very different Congress than the one that passed PPACA.

      Seems like they could have tried to work something out with R’s, but this far along it’s probably too much of a political football. And relying on the CBO number all along backed them into a corner a little bit. Remaining consistent in how they counted the revenue means technically they just increased the deficit by $70B, which I’m sure R’s are happy to see them do from a purely political perspective.

      What could likely happen here, and would be kind of hilarious, is that both sides will flip-flop from their original stance. Dems can say “This program wasn’t going to work so we in fact saved money by shutting it down,” which would conflict with their claims of CLASS both being sustainable and helping the budget. Republicans will say “Democrats just increased deficit by another $70B,” despite their previous (and correct) position that the $70B impact over 10 years was merely timing/accounting and not real.

      And in the meantime we’re left with no solution to funding LTC.

      • Don Taylor says:

        They can flip like on tax v. penalty…..the memo says they want to work toward solution but I just don’t see how. 43% of NH costs in the US are paid by Medicaid, so it is actually a bit puzzling to me that more conservatives aren’t interested in trying to set up self financing LTC…but I think it is just that it is linked with ACA.

      • AB says:

        I’m sure it being linked with ACA is a pretty big reason. Getting LTC costs on a more sustainable path ought to be a big part of their agenda, but for now I think they’ll keep playing the party of no instead of working with Dems to get something done.

  3. Paul Van de Water says:

    The budgetary effects of CLASS were misrepresented primarily by its opponents. As a colleague and I wrote at the time (March 2010), “Congressional leaders crafted the health reform bill so that it would be fully paid for without relying on these additional Social Security payroll contributions or the CLASS Act premiums.” In fact, CLASS was explicitly excluded from the Statutory Pay-As-You-Go Act, enacted in February 2010 before health reform, just so its savings could not be counted as an offset. That’s why many of us described the effect of health reform on the budget both with and without CLASS. See, for example, the table here (, which excludes CLASS.

  4. Don Taylor says:

    @Paul Van de Water
    thanks for the link, and you guys were quite clear all along about budgetary impact of CLASS, and the CBO docs also made it easy to see the effect of CLASS (~ half of the 10 year deficit reduction they noted). We need to reorient to the problem of LTC, which has been nearly totally absent from the discussion of CLASS. I am going to do some focused blogging on that over the next few weeks. Does CBPP have any LTC briefs/white papers?

  5. Don Taylor says:

    @Paul Van de Water
    thanks for these links. Going to blog a bit on LTC over the next few weeks….maybe people will pay (a little) attention to the actual LTC policy needs.

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