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CLASS - The Inevitable Fall of Health Care Reform's Chief Budget Gimmick

by Brandon Greife / /

The CLASS Act, a long-term care entitlement tucked deep in Democrats’health care reform bill, has officially been scratched. From the get go, it wasclear that the program was little more than the political equivalent of a deusex machina – a contrived plot device that abruptly solves what otherwise wouldbe an impossible situation.

It’s generally the sign of a bad writer. In this case it wasthe sign of a bad bill.

The Democrats’ proposed health care reform bill was a budgetbuster. At a time when government deficits and the national debt were becomingmajor concerns to the American electorate, this wasn’t going to help its’chances for passage.

It appeared Democrats’ had written themselves into a corner.The stimulus bill had done little to justify its exorbitant cost, discretionaryspending was soaring, and government-run health care programs were hemorrhagingmoney. The Patient Protection and Affordable Care Act, despite its name, wouldnot have made a tidy ending to that story. The political narrative was quicklygoing off the rails. Rather than do some significant editing to the plot, Democratsdecided to introduce a deus ex machina.

Namely, they started stuffing the health care bill with allsorts of unrelated or tangentially related things in an attempt to improve itsbottom line. While student loan reform was probably the most egregious example,the CLASS Act, was perhaps the most dishonest.

CLASS was doomed to fail. The way it was structured made an “insurancedeath spiral” inevitable – high premiums and a short vesting period would discourageall but the sickest Americans from signing up, this would drive premiums evenhigher, further discouraging the young, healthy people needed to keep costsmanageable.

It’s not as if nobody foresaw these problems.

“This program is intended to be “actuarially sound,” but atfirst glance this goal may be impossible,” wroteCenter for Medicaid and Medicare Services’ chief actuary in May 2009 “Seemslike a recipe for disaster to me,” William Marton, a senior Obama policyofficial, wrotein October 2009.

Thelist goes on, but suffice it to say that CLASS’ problems weren’tunexpected.

The troubling part is that Democrats’ threw it in the billanyway because it provided them an opportunity to game the Congressional BudgetOffice’s (CBO) scoring rules and make the health care reform package appearmore budget friendly than it was. The way CLASS was written it included a fiveyear vesting period, a time in which the government would be collectingpremiums, but would be paying out no benefits. Given that the CBO uses a10-year budget window to calculate deficit projections, the whole thing came upsmelling like roses.

This plot artifice served its purpose admirably. Theseemingly inextricable problem had been solved. In large part due to budgetarygimmicks like the inclusion of CLASS, the Democrats’ health reform billreceived a favorable CBO score, providing an important talking point to useagainst those concerned about the deficit.

Now, after the final chapter has already been written, theObama Administration is dismantling his deus ex machina. “Despite our bestanalytical efforts, I do not see a viable path forward for CLASS implementationat this time,” wrote Health and Human Services Secretary Kathleen Sebelius inan email to Congress.

Which leaves us with a very bad ending, to an already uglystory.