Consumer Power Report: What Does the End of CLASS Mean?

Published October 18, 2011

The formal announcement came on Friday:

HHS can’t make the CLASS program work, no matter how much they fudge the numbers. Normally this sort of thing doesn’t matter – the program still gets implemented, and the costs come later.

But thanks to Judd Gregg (left), this time, it does:

The only reason the Health and Human Services Department pre-emptively called off this scheme is that former New Hampshire Senator Judd Gregg succeeded in inserting a proviso that required the Class program’s reality to match Democratic promises as a matter of law. If HHS couldn’t provide “an actuarial analysis of the 75-year costs of the program that ensures solvency throughout such 75-year period,” it couldn’t be legally implemented.

In other words, HHS had to prove that the Class program wouldn’t go broke the way it was designed to—and actuarial analysis is a matter of math, not politics. In a 48-page report that HHS submitted to Congress Friday, the department concedes that it is literally impossible to create any kind of long-term care program under the law’s statutory text in which revenues match expenditures. Such a plan would cost as much as $3,000 per month, which no one would ever buy.

As Avik Roy writes , “There’s one reason, and one reason alone that CLASS made it into Obamacare: fiscal chicanery. The Congressional Budget Office, by convention, only scores the impact of legislation for its first ten years. And CLASS accounts for $86 billion of Obamacare’s claimed $210 billion in deficit savings from 2012 -2021.”

As CBO pointed out at the time:

Beyond the 10-year budget window, the effects of the program could be quite different, and CBO expects that the HHS Secretary would need to reduce benefit payments and increase premiums to maintain the program’s solvency…Overall, CBO estimates, if the Secretary did not modify the program to ensure its actuarial soundness, the program would add to future federal budget deficits in a large and growing fashion beginning a few years beyond the 10-year budget window.

This morning brought a follow-on email from the CBO regarding any legislative repeal of the CLASS program, which Congressional Republicans are currently considering:

To Interested Hill staff:

On Friday, the Secretary of Health and Human Services (HHS) announced that the department does not plan to implement the Community Living Assistance Services and Supports (CLASS) long-term care insurance program under current law. Therefore, in its next baseline budget projections (which will be issued in January), CBO will assume that the program will not be implemented (unless there are changes in law or other actions by the Administration that would supersede Friday’s announcement).

Furthermore, following longstanding procedures, CBO takes new administrative actions into account when analyzing legislation being considered by the Congress—even if it has not published new baseline projections. Beginning immediately, therefore, legislation to repeal the CLASS provisions in current law would be estimated as having no budgetary impact.

We hope you find this information helpful.

Indeed we do, helpful CBO staffer! The takeaway here is that CLASS fallout makes it much easier to repeal Obama’s law through the reconciliation process, since the deficit savings number – while still based on magic unicorn math – is $86 Billion smaller without the program. This also could hold ramifications for the court cases currently levied against the law, but the nature of them is as yet unclear.

In the meantime, followup on how something this unsustainable was ever thought otherwise will be on the docket. Hearings on CLASS are expected in the House from Fred Upton’s committee, and Senate Republicans have requested them as of CLASS-critic Kent Conrad as well.

–Benjamin Domenech



According to Douglas Holtz-Eakin:

The American Action Forum, led by former Congressional Budget Office Director Douglas Holtz-Eakin, said the drug industry would likely shed thousands of jobs if Congress cut federal payments for prescription medicines.

Some congressional Democrats want Medicare to receive the same rebates that drug makers pay in Medicaid. It’s a long-standing priority for many lawmakers, including Rep. Henry Waxman (D-Calif.) that was kept out of the healthcare reform law but has seen new focus as the supercommittee looks for at least $1.2 trillion in deficit reduction.

According to the Congressional Budget Office, a similar proposal in President Obama’s jobs bill would save the federal government about $135 billion over 10 years. But Holtz-Eakin’s report says those cuts to drug makers’ revenues would cause them to shed jobs.

He said Obama’s proposal would endanger roughly 230,000 jobs in pharmaceutical companies and the other businesses they support.

The PDF of the report is here.




Wyoming Republican Gov. Mead joins the very short list of GOPers implementing Obamacare:

Gov. Matt Mead strongly supports a recommendation to pursue components of a state-run health insurance exchange, he wrote in a letter to lawmakers.

Mead said he backs the recommendations of the Wyoming Health Benefits Exchange Steering Committee, which advocated the state-run option in a preliminary report to the Legislature. The committee has been studying various models for exchanges.

Wyoming must submit its plan for an exchange by January 2013. If it doesn’t, the federal government will move to operate an exchange on the state’s behalf, Mead noted in his letter.

“We have many small businesses and citizens who will be subject to federal regulations,” the governor wrote. “If we fail to act, we subject people to the operations of a federal bureaucracy ill-suited to understand or respond to their needs.”

Elizabeth Hoy, the governor’s health care policy adviser, presented the letter Monday at a meeting of the Legislature’s Labor, Health and Social Services Committee.

Arkansas is engaging in similar conversations.


I spoke on the exchange issue in Indiana on Tuesday.


A dicey political issue:

The problem for the super committee is that the 10-year cost of fixing the “sustainable growth rate” Medicare pay formula is about $300 billion and growing. The panel would have to make up that difference through additional spending cuts or tax increases beyond the $1.2 trillion goal.

The Medicare doc fix could help the panel sell its final package of recommendations to healthcare advocacy groups and a medical community who are worried about additional Medicare cuts on top of the $500 billion that were included in President Barack Obama’s healthcare overhaul last year.

Dozens of doctors’ groups, including the American Medical Association, have urged the super committee of six Democrats and six Republicans to repeal the current Medicare payment formula.

One healthcare industry lobbyist said if the super committee fails to tackle the Medicare payment issue, it will be all the more difficult to get Congress to act by the end of the year. In the current fiscal environment, every spending increase has to be offset by a spending cut or tax hike elsewhere in the budget.

“After this (super committee) process is over, there won’t be anything to pay for the doc fix in terms of coming up with offsets,” said one industry lobbyist.

More on this question at The Hill.




Breaking ranks on block grants?

Sen. Olympia Snowe, the most moderate Republican on the Senate Finance Committee, parted ways with her GOP colleagues over their calls for tighter Medicare eligibility and Medicaid block grants, according to aides.

Snowe was one of two GOP committee members who didn’t sign onto the Finance Committee Republican recommendations to the deficit supercommittee. The other was Jon Kyl of Arizona, and his absence was less notable because he’s a member of the debt panel.

The recommendations — part of a series of letters that congressional committees sent to the deficit reduction panel — call for repealing the health care law, tightening Medicare eligibility and turning Medicaid into a block grant.

The last two proposals, however, proved a sticking point for the Maine Republican, whose state has a high percentage of Medicare-aged seniors, and a higher than average Medicaid enrollment.

It was Snowe’s concerns over the potential for block grants, stricter Medicare enrollment requirements, and possibility for cuts to Social Security benefits — and not the threat of repealing the reform law — that precluded her from signing onto the committee’s proposals.

“I spent a great deal of time reviewing the proposals and agree with many of them,” Snowe said in a written statement supplied by her office.

SOURCE:Kaiser Health News


A handy chart of current numbers:

The federal government has recovered more than $1.84 billion from Medicaid fraudsters in fiscal year 2010, according to Office of Inspector General (OIG) data updated this week. The recovery amount reflects how much defendants are required to pay as a result of settlement and judgments and may not reflect actual collections, according to the OIG.

The five top offending states with the greatest Medicaid amounts recovered in 2010 are New York, Texas, Florida, California, and Ohio.

SOURCE:Fierce Healthcare


Matthew Boyle reports:

Rep. Denny Rehberg, the chairman of the House appropriations subcommittee on Labor, Health & Human Services and Education formalized the rumors by asking about them in a letter to HHS Secretary Kathleen Sebelius on Thursday.

“Specifically, I have been told that HHS has already procured a contractor to build a database and that this contractor has already taken steps to acquire personal health care data from a large claims database,” Rehberg wrote. “I would like to know if these reports are, in fact, true. If so, it would represent an egregious violation of the privacy rights that the American public rightfully demands.”

Rehberg’s question relates to an Obamacare implementation rule which HHS officials proposed recently but haven’t yet formally implemented. HHS spokeswoman Erin Shields told The Daily Caller that these rules aren’t final, and added that the Obama administration has “outlined proposals that will help keep premiums down for the American people.”

“In all cases, patients’ privacy will be protected and any suggestions otherwise are false,” Shields said. “These proposals have not been implemented and we look forward to hearing comments from the American people about these proposals and our work to help make insurance affordable for the American people.”

HHS is denying the rumors.

SOURCE:Daily Caller


My latest at the OC Register:

DeParle also claimed the $2,500 savings figure is still true – but that families won’t see those savings for another eight years, in 2019. She also scaled the figure back to “around $2,000” in savings.

For families increasingly challenged by the rising costs of health care premiums in a stagnant economy, this is too little, far too late. A promise delayed is a promise broken, Mr. President.

To understand how significant these costs are for the average household, consider a recent study published in Health Affairs, which found that for the average family the rising costs of health care have effectively wiped out the income gains of the entire past decade. Just bringing the cost of health care premiums in line with the pace of inflation would be like a $545 increase in monthly income.

All these trends are likely to continue under Obama’s law, assuming it survives its current political and legal challenges. The president is essentially asking us to accept his assurance that these trends will change, even while he goes back on the extravagant promises he made in order to gin up public support.

The question for the American people now is whether we are really willing to wait until 2019 to see whether Obama can keep his latest revised promises. And what if we do wait that long, and find out he was wrong?

SOURCE: Orange County Register