WASHINGTON (AP) — The Obama administration Friday
pulled the plug on a major program in the president's signature health overhaul
law — a long-term care insurance plan dogged from the beginning by doubts over
its financial solvency.
Targeted by congressional Republicans for repeal,
the program became the first casualty in the political and policy wars over the
health care law. It had been expected to launch in 2013.
"This is a victory for the American taxpayer
and future generations," said Sen. John Thune, R-S.D., spearheading
opposition in the Senate. "The administration is finally admitting (the
long-term care plan) is unsustainable and cannot be implemented."
Proponents, including many groups that fought to pass
the health care law, have vowed a vigorous effort to rescue the program,
insisting that Congress gave the administration broad authority to make
changes. Long-term care includes not only nursing homes, but such services as
home health aides for disabled people.
Known as CLASS, the Community Living Assistance
Services and Supports program was a longstanding priority of the late
Massachusetts Democratic Sen. Edward M. Kennedy.
Although sponsored by the government, it was
supposed to function as a self-sustaining voluntary insurance plan, open to
working adults regardless of age or health. Workers would pay an affordable
monthly premium during their careers, and could collect a modest daily cash
benefit of at least $50 if they became disabled later in life. The money could
go for services at home, or to help with nursing home bills.
But a central design flaw dogged CLASS. Unless
large numbers of healthy people willingly sign up during their working years,
soaring premiums driven by the needs of disabled beneficiaries would
destabilize it, eventually requiring a taxpayer bailout.
After months insisting that could be fixed, Health
and Human Services Secretary Kathleen Sebelius, finally admitted Friday she
doesn't see how.
"Despite our best analytical efforts, I do not
see a viable path forward for CLASS implementation at this time," Sebelius
said in a letter to congressional leaders.
The law required the administration to certify that
CLASS would remain financially solvent for 75 years before it could be put into
place.
But officials said they discovered they could not
make CLASS both affordable and financially solvent while keeping it a voluntary
program open to virtually all workers, as the law also required.
Monthly premiums would have ranged from $235 to
$391, even as high as $3,000 under some scenarios, the administration said. At
those prices, healthy people were unlikely to sign up. Suggested changes aimed
at discouraging enrollment by people in poor health could have opened the
program to court challenges, officials said.
"If healthy purchasers are not attracted ...
then premiums will increase, which will make it even more unattractive to
purchasers who could also obtain policies in the private market," Kathy
Greenlee, the lead official on CLASS, said in a memo to Sebelius. That
"would cause the program to quickly collapse."
That's the same conclusion a top government expert
reached in 2009. Nearly a year before the health care law passed, Richard
Foster, head of long-range economic forecasts for Medicare warned
administration and congressional officials that CLASS would be unworkable. His
warnings were disregarded, as Obama declared his support for adding the
long-term care plan to his health care bill.
The demise of CLASS immediately touched off speculation
about its impact on the federal budget. Although no premiums are likely to be
collected, the program still counts as reducing the federal deficit by about
$80 billion over the next ten years. That's because of a rule that would have
required workers to pay in for at least five years before they could collect
any benefits.
"The CLASS Act was a budget gimmick that might
enhance the numbers on a Washington bureaucrat's spreadsheet but was destined
to fail in the real world," said Senate Republican Leader Mitch McConnell
of Kentucky.
Administration officials said Obama's next budget
would reflect the decision not to go forward. Even without CLASS premiums, they
said the health care law will still reduce the deficit by more than $120
billion over 10 years.
Kennedy's original idea was to give families some
financial breathing room. Most families cannot afford to hire a home health
aide for a frail elder, let alone pay nursing home bills. Care is usually
provided by family members, often a spouse who may also have health problems.
"We're disappointed that (Sebelius) has
prematurely stated she does not see a path forward," AARP, the seniors'
lobby, said in a statement. "The need for long-term care will only
continue to grow."
Sebelius said the administration wants to work with
Congress and supporters of the program to find a solution. But in a polarized
political climate, it appears unlikely that CLASS can be salvaged.
Congressional Republicans remain committed to its repeal.
Copyright
2011 The Associated Press.
