CBO Predicts Delay in Start of CLASS Program

The Congressional Budget Office (CBO) anticipates a one-year delay in implementation of the Community Living Assistance Services and Supports (CLASS) Act in the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148).  The CLASS program has been under close scrutiny since the health reform law was enacted. The budget plan approved by the House of Representatives earlier this year included a provision to repeal it.

In its latest periodic update to Congress on the federal budget, the CBO notes that based on the pace of implementation of the CLASS program so far, the program will start collecting premiums in fiscal year (FY) 2013, not FY 2012, as previously estimated.

Under the program, cash benefits paid into a Life Independence Account of an eligible beneficiary could be used to purchase non-medical services and support that the beneficiary needs to maintain his or her independence at home or in another residential setting of his or her choice in their community, services that are not covered by Medicare. The law clearly states that the program must be able to pay for benefits with the premiums it takes in and that no taxpayer dollars may be used to pay for CLASS benefits.

Joseph R. Antos, Ph.D., the Wilson H. Taylor Scholar in Health Care and Retirement Policy American Enterprise Institute, testified at a hearing on CLASS before the House’s Energy and Commerce hearing in March 2011, that CLASS is unsustainable and will add substantially to the budget deficit in the coming years. Antos pointed out that “warnings about defects in the design of CLASS have been raised by CBO, the CMS chief actuary, the President’s Fiscal Commission, the American Academy of Actuaries, and the Secretary of Health and Human Services.”

President Obama and HHS Secretary Sebelius have acknowledged that the CLASS program needs improvement.  HHS has advocated the following changes to CLASS be adopted:

  • 1) changing the employment and earnings requirements for the program so that participants are required to earn a certain amount of money in order to participate, thereby preventing instances where enrolles will quickly make claims on program benefits threatening CLASS’s financial viability;
  • 2) closing loopholes that could allow people to skip premium payments and then re-enroll in the program without paying any penalty;
  • 3) exploring options for indexing premiums for inflation so they would rise along with benefits.

These changes are similar to recommendations made by Allen J. Schmitz, Member, Joint Academy/Society of Actuaries, CLASS Act Task Force for American Academy of Actuaries also made at the House’s Energy and Commerce hearing in March 2010.  Dr. Schmitz recommended:

  • 1) developing an actively-at-work definition with a minimum requirement of 20 to 30 hours of scheduled work or a comparable requirement;
  • 2) placing restrictions on the ability to opt out and subsequently opt in with the use of either a long second waiting period for benefits or an alternative underwriting mechanism(s);
  • 3) an initial premium structure that provides for scheduled premium increases for active enrollees at either a consumer price index or alternative rate.

The need to develop a way to pay for services which Medicare does not cover is apparent. According recent data from the CMS Office of the Actuary, In 2009 Medicaid spent $111.2 billion on long-term care services, services not covered by Medicare, and spending growth on these services is projected to accelerate as the population ages.