Thune: Stop CLASS Act Before It Adds to Budget Pains

Posted April 4, 2011 at 6:20pm

We recently reached the one-year anniversary of Obama-care, the president’s enormous health care spending law. That law was unpopular when Democrat majorities jammed it through Congress, and it remains unpopular today as people learn more and more about it. In a recent Rasmussen Reports poll, 54 percent of likely voters favored repealing the entire law.

One of the most dangerous parts of the law that people are starting to find out about is the Community Living Assistance Services and Supports Act. While it sounds benign, the CLASS Act has the potential to do incredible damage to federal budgets in the future. At a recent hearing before the Senate Finance Committee, President Barack Obama’s own Health and Human Services secretary, Kathleen Sebelius, admitted that the CLASS Act, as written, is “totally unsustainable.”

Not coincidentally, it is designed so that most of the damage will take place after its biggest supporters are no longer in office. In Washington, D.C., that is a sure sign that a policy is a bad idea, and the CLASS Act is no exception to the rule.

The act creates a new long-term care entitlement program to pay benefits to people who become disabled. All well and good, except that even before Obama-care became law, there were some prominent skeptics of the new program. These included Sen. Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee, of which I am also a member. He called the CLASS Act “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.”

The chief actuary for the Obama administration’s own Centers for Medicare and Medicaid Services agreed that the program was trouble. In January 2010, he declared that there is a “very serious risk” that the program would be “unsustainable.” That is because people with health problems will be more likely to sign up, and to accommodate that risk, the program will have to charge premiums that will make healthy people less likely to sign up. He referred to this as the “insurance death spiral.”

The American Academy of Actuaries voiced similar concerns. Because of who would be choosing to get the insurance, the expected premiums collected would be incapable of covering the expected payouts in the long run. That fact was irrelevant to the Democrats who crafted Obamacare. They wanted the CLASS Act to create the appearance of savings in the health care bill.

Because people would pay premiums for five years before anyone would be allowed to draw any benefits, it looks like a net moneymaker over the first few years. That situation quickly reverses, and the program starts to pay out more than it is collecting in premiums. The CMS predicts that will happen starting in 2025. After that, the general Treasury would have to begin making up any shortfall by using taxpayer dollars. But in the near term the CLASS Act would bring in cash, which allowed Democrats and Obama to claim their massive spending plan actually saved money.

Given all of the controversial pieces that the Obama administration shoved into its plan, it is no wonder that the American people have not embraced it. The law issued a constitutionally suspect mandate that people buy insurance and double-counted revenues to both pay for Medicare and offset other costs. All that was bad enough.

But by adding a new entitlement program that they knew was doomed to fail, just so they could claim credit for its short-term financial benefits, Democrats engaged in their most cynical ploy yet.

Saddling future generations with another costly entitlement program just to win a short-term political gain is irresponsible. If the CLASS Act cannot sustain itself in the long run without taxpayer dollars, we should shut it down now before it has a chance to get going. After people start paying premiums into the system, or start collecting benefits, it will be much more difficult to take it away.

I have introduced legislation that would repeal the CLASS Act provisions of the health care spending law so that we can avoid the inevitable train wreck when demands on the program exceed its income.

If we wait much longer, the wheels will be set in motion and all that will be left is to wait for the pain to show up in the federal budget. Our existing entitlements are well past the point of sustainability. We need to stop this bad program now before it makes things worse.

Sen. John Thune (S.D.) is chairman of the Senate Republican Policy Committee, as well as a member of the Budget and Finance committees.