One of the real “sleeper” threats included in the recently passed health care reform bill is the Community Living Assistance Services and Support (CLASS) Act, which creates a voluntary -opt-out program to provide financial assistance to people with disabilities.
I first learned about the program from Senator Kennedy’s staff four or five years ago, and began warning people immediately. Now the chief actuary from the Centers for Medicare and Medicaid Service (CMS) has released an independent assessment—and he’s waving warning flags as well.
Here’s the problem. Because workers would be enrolled in the program unless they choose to opt out, Kennedy’s staff assumed that there would be a 90 to 95 percent participation rate. My recollection is they came up with that figure based on participation rates in other voluntary opt-out programs, like an employer providing a 401(k) program, and some surveys of young people.
I thought the estimate was wildly optimistic—like almost every other assumption in the final health care bill. But Kennedy’s staff was unpersuaded.
If there were a 90 percent participation rate, lots of healthy people would be subsidizing the relatively small number with disabilities, keeping the premiums low—an estimated $30 a month per person in the original plan. CMS is less optimistic; its actuaries think a mere 2 percent of the work force will stay in the program—about a 4,500 percent difference. But what’s a little rounding error among friends?
Of course, a large percentage of those will be the disabled who would benefit from the program.
Once you toss out the notion that almost everyone will remain in CLASS, the numbers fall apart. CMS estimates that the program will still have a surplus of $38 billion by 2019, but that’s only because people have to pay in for five years before they can get a dime. After 2019, the program begins to make Social Security look financially sound by comparison.
Oh, and CMS says the premiums would need to be $240 a month to be sustainable; double that for a couple.
So what does the government do with this new financially unsustainable “voluntary” entitlement? Why, make it an involuntary (i.e., mandatory) entitlement at some point in the future, but only after the CMS actuary is fired. Because the last thing government wants is honest numbers.