The Washington Post editorial board writes on the Community Living Assistance Services and Supports (CLASS) Act tucked into Obamacare:
But both the Congressional Budget Office and the chief actuary for the Medicare program have expressed misgivings. The Medicare actuary, Richard S. Foster, cited “a very serious risk”: Adverse selection — sicker people signing up for the program and the healthier staying away — “would make the CLASS program unsustainable.” He said that even beginning premiums would have to be $240 a month. Likewise, CBO director Douglas W. Elmendorf warned that “the CLASS program could be subject to considerable financial risk in the future if it were unable to attract a sufficiently healthy group of enrollees.”
The Washington Post is dead on. Here is how Heritage’s health care team analyzed the CLASS Act portions of Obamacare:
The True Costs of the CLASS Act. The Senate bill, like the House bill, includes the Community Living Assistance Services and Supports (CLASS) Act, which would create a new government health care program for long-term health insurance. This provision creates a national insurance trust that would provide benefits for seniors and the disabled by creating a payment update in Medicare for skilled nursing facilities and home health care providers.
The CLASS Act is intended to pay for itself with collected premiums. The premiums would produce positive revenues for the government for the first 10 years, appearing to reduce the federal deficit during this time. However, as the CBO points out, while “the program’s cash flows would show net receipts for a number of years, [this would be] followed by net outlays in subsequent decades.” Thus, the CLASS Act appears self-sufficient for the first 10 years but starts running a deficit soon thereafter.
Read Heritage’s full analysis here.