Ethics & Public Policy Center

World CLASS Contortions

Published in National Review Online



Ever since the Obama administration announced last Friday—in the late afternoon—that it was “suspending” implementation of the CLASS (Community Living Services and Supports) Act, Obamacare’s apologists have been twisting themselves into knots to explain away this embarrassing episode as no big deal.

Leading the way has been Washington Post blogger Ezra Klein. In his account of CLASS’s demise, Klein suggests that the voluntary long-term-care-insurance program ended up in Obamacare pretty much by happenstance, and certainly through no fault of any living Democrat (he points the finger mainly at the late Sen. Ted Kennedy). Klein says the Obama White House was actually publicly cool to the program—and privately hostile. Indeed, according to Klein, the most important reason the program stayed in the final bill was Republican senator Judd Gregg’s amendment, offered in committee, which required the Secretary of HHS to certify that the program could be financed on a self-sustaining basis from participant premiums before it could be launched. Once that amendment was adopted, the budgetary arguments that had been raised against CLASS had been addressed, and then inertia and an unwillingness to undo Senator Kennedy’s final legislative initiative led to its eventual enactment.

Klein also suggests that last week’s White House decision to suspend CLASS implementation is not evidence of failure. Rather, it’s a sign of fiscal sobriety and an unyielding commitment to implementing only what works, and not what doesn’t.

Finally, with regard to the Congressional Budget Office, which estimated in March 2010 that CLASS would produce a $70 billion surplus over the first ten years of Obamacare, Klein again sees no reason for finding fault. Yes, CBO said there would be a short-term surplus from CLASS, but they said all along that there would be long-term deficits from the program too, which the administration has now confirmed. Therefore, Klein concludes, CBO was essentially right about CLASS all along, and the rest of its Obamacare estimate can be trusted to be accurate as well.

Based on Klein’s account of what transpired, one might be tempted to hold up the whole CLASS episode not as a failure, but as a perfect example of good liberal governance. Certainly the New York Times sees it that way. This week, the editors praised the administration for its “wise” but difficult decision to kill the program.

And yet, it’s hard to shake that nagging feeling that Klein and the New York Times haven’t quite gotten this story right. And why is that?

Perhaps it’s because there was never any shred of evidence that CLASS could ever be made sustainable. Not before enactment, and not since. Indeed, any fair reading of the analyses that were done on the concept prior to its passage would conclude that CLASS was hopeless. And it wasn’t a close call. The program was so far from being actuarially sound that it could never be fixed without fundamentally changing how it worked. It is simply not possible to pay a pay-as-you-go long-term-care benefit to the disabled unless millions upon millions of healthy Americans are forced to pay premiums somewhere in the range of $100 to $200 monthly—for a benefit none of them really wants. There was no way the Obama administration was ever going to propose this, because to do so would have been political suicide.

And so, instead, it chose to pretend that a solution might be out there, somewhere, despite all evidence to the contrary.

This was rather convenient for the White House because, as it happened, the $70 billion in supposed CLASS Act “surplus” was just what the doctor ordered for making the deceptive argument that Obamacare was good, not bad, for the federal budget. More than half of the deficit reduction claimed for the final bill came from those bogus CLASS savings. That turned out to be key in convincing the final wavering Democrats to vote yes on the legislation.

CLASS’s enactment was no accident of a chaotic and uncontrolled legislative process. It was a deliberate and cynical ploy to put a phony veneer of fiscal restraint on top of a massive tax-and-spend program. The administration and its allies certainly knew all along that a day of reckoning would come. But they didn’t care; they staked so much on the passage of Obamacare that they had a win-at-any-cost mentality. And now that they have admitted that tens of billions of dollars in deficit reduction that they promised will never materialize, they aren’t the least bit apologetic.

What remains most perplexing in this whole episode is why CBO played along with the CLASS charade. They had access to all of the same actuarial data as everyone else. Their own numbers showed the program was unstable beyond ten years. The Gregg amendment gave them the perfect excuse to conclude that CLASS would never be launched because it could never be viable without massive taxpayer subsidies. And yet they kept showing the $70 billion ten-year surplus in their estimate.

Among the many questions about this sorry episode that are worth pursuing, the role of CBO is surely one.

James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director at the Office of Management and Budget from 2001 to 2004.

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