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HR 1173, the Fiscal Responsibility and Retirement Security Act of 2011
April 4, 2011
The Honorable Phil Gingrey, M.D.
Dear Representative Gingrey,
On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write in support of a bill you co-authored with Representative Boustany, H.R. 1173, the “Fiscal Responsibility and Retirement Security Act of 2011.” This legislation would repeal the Community Living Assistance Services and Supports (CLASS) Act which created yet another underfunded entitlement program for the sole purpose of cosmetically improving the 2010 health reform law’s enormous bottom line.
The CLASS Act is a new government-run, long-term care entitlement that would provide a cash benefit for the purchase of nonmedical services. Though perhaps well-intentioned, its actuarial foundation is unsound. The CLASS Act is a guaranteed issue plan that bans medical underwriting, ensuring that premiums for younger and healthier individuals would be uncompetitive with the private market. As the healthy drop out, a process of adverse selection takes hold, leading to spiraling premium costs that may ultimately translate into a taxpayer bailout of the program. It is little wonder that Senator Kent Conrad (D-ND) called the CLASS Act “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.”
Many Democrats and Republicans shared Senator Conrad’s concern, but the CLASS Act nevertheless remained part of the health care bill to obscure its stunningly large cost. The CLASS Act accomplished this fiscal sleight of hand by requiring a five-year vesting period during which premiums would flow into the program but no benefits would be paid out. Revealing this cynical ploy is as easy as looking beyond the false-construct of a ten-year budget window, after which the program quickly veers into permanent deficits.
Your legislation would fully repeal the CLASS Act and remove the looming threat it poses to taxpayers. The CLASS program is an actuarially and fiscally irresponsible nightmare that will inevitably lead to future budget deficits or a taxpayer bailout. We commend your efforts to protect taxpayers from these adverse outcomes by eliminating the CLASS Act and pledge to work with you in making certain it becomes law. Any roll call votes on H.R. 1173 will be significantly weighted in NTU’s annual Rating of Congress.