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What’s Been Said about the CLASS Program

January 18, 2012

Today, the Ways and Means Committee is considering H.R. 1173, “The Fiscal Responsibility and Retirement Security Act of 2011,” which repeals the Community Living Assistance Services and Supports (CLASS) Act, a program included in the Democrats’ health care law.  H.R. 1173 is supported by organizations across the country including Americans for Tax Reform, National Federation of Independent Business, the 60 Plus Association and the U.S. Chamber of Commerce.  Those organizations, as well as elected and Obama Administration officials, acknowledge that the CLASS program is an unsustainable budget gimmick that must be repealed.


Senator Kent Conrad, Chairman, Senate Budget Committee
“A Ponzi scheme of the first order, the kind of thing Bernie Madoff would be proud of.” (October 2009)

Richard Foster, Chief Actuary, CMS
“As you know, I continue to be convinced that the CLASS proposal is not ‘actuarially sound,’ despite Sen. Kennedy’s staff’s good intentions.  I assume you‘ve conveyed these concerns to the staff but, if not, let me know and we can express the concerns in a memo.”  (August 2009 email to CMS’ Office of Legislative Affairs)

“Thirty-six years of actuarial experience lead me to believe that this program would
collapse in short order and require significant federal subsidies to continue.” (June 2009)

“The program is intended to be ‘actuarially sound,’ but at first glance this goal may be impossible.  …While the 5-year vesting period would allow the fund to accumulate a modest level of assets, all such assets could be used just to meet benefit payments due in the first few months of the 6th year.  The resulting substantial premium increases required to prevent fund exhaustion would likely reduce the number of participants, and a classic ‘assessment spiral’ or ‘insurance death spiral’ would ensue.” (May 2009)

Health and Human Services (HHS) Office of the Assistant Secretary for Planning and Evaluation (ASPE)
“You can get a policy through the [Federal Long-Term Care Insurance Program] (albeit underwritten) with a higher benefit, better inflation protection, and lower premium [than CLASS].  I don‘t see any reason why anyone would opt for CLASS if they could pass the underwriting.  And if you couldn’t make it through underwriting, you could simply enroll in CLASS to cover some of your current or likely future  [long-term care] costs.  Seems like a recipe for disaster to me.” (September 29, 2009)


Health and Human Services Secretary Kathleen Sebelius
“[D]espite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.” (October 14, 2011)

“After all, if CLASS failed, no one would be hurt more than those who would pay into it and would be counting on it the most.” (October 14, 2011)

Office of the Actuary at the Centers for Medicare & Medicaid Services
“[T]here is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.” (April 22, 2010)

“In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants.  Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate 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, thereby leading to additional premium increases.  This effect has been termed the ‘classic assessment spiral’ or ‘insurance death spiral.’” (April 22, 2010)

HHS Report: “On the Actuarial, Marketing, and Legal Analyses of the CLASS Program”
 “We conclude that there is substantial uncertainty about what would follow if solvency or legal problems prevented the CLASS program, once operational, from continuing to implement the plan. We cannot with any confidence predict that the CLASS program would be able to honor its commitments to individuals who had already enrolled or entered beneficiary status in the program, or avoid leaving them worse off, or that such individuals would be able to recoup their paid premiums.” (October 14, 2011)