CMS Actuary: CLASS Act Would Not Work 

WASHINGTON BUREAU -- The chief actuary at the Centers for Medicare and Medicaid Services says a long term care provision in H.R. 3962, the House health bill, would not be financially viable.

In a report given to House Republicans Friday, CMS actuary Richard Foster says the Community Living Assistance Services and Support Act, or CLASS Act, program provision in H.R. 3962 would bring in $39 billion in new federal revenue during its first 9 years of operation, but then start to fall apart.

Foster predicts:

- Average premiums for the program would be $180 per month.

- By 2025, the program would start paying out more than it collected in premiums, resulting in a net federal cost.

- Despite assurances of actuarial soundness, there is a significant risk that the program would be unsustainable.

“Voluntary, unsubsidized and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants,” Foster writes in his report.

One of the reasons for that, he writes, is that individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to sign up than those in better-than-average health.

Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, which may lead to further premium increases, Foster writes.

“This effect has been termed the ‘classic assessment spiral’, or ‘insurance death spiral’,” he writes.

A similar provision is part of S. 1679, the health bill developed under the aegis of the late Sen. Edward Kennedy, D-Mass., at the Senate Health, Education, Labor and Pensions Committee, as well as H.R. 3962.

Senate Majority Leader Harry Reid, D-Nev., is melding S. 1679 with S. 1796, a health bill developed by the Senate Finance Committee that does not include the CLASS Act.

The CLASS Act provision calls for the government to set up a program that would provide a $50-a-day benefit to eligible people who pay premiums for at least 5 years before becoming eligible. The program would be financed by participant premiums, with no federal subsidy.

The CMS analysis was requested by Republicans, who are trying to kill the bill.

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For more coverage of the CLASS Act, see the following articles:

• ACLI Finds Shaky Support For LTC Option
• Concord Coalition: H.R. 3962 Costlier Than CBO Says
• AAA: CLASS Too Costly

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