Morning Bell: The Latest Obamacare Implosion

September 23, 2011

Inefficient programs that don’t solve problems and are passed against the will of the American people seem to be the Obama Administration’s forte. Now their high-minded aspirations of a health care revolution are quickly unraveling as fatal glitches in Obamacare become apparent.


Next up for implosion? The Community Living Assistance Services and Supports Act, otherwise known as the “CLASS Act,” which creates a government-run long term care insurance program too costly to sustain. At a time when entitlement programs in America have spun out of control, liberal proponents of Obamacare were pushing a new one that had no hope of staying afloat. Now, they are trying hide the fact that they were wrong as another bungling layer of Obamacare is exposed.

From its creation, the CLASS Act was completely unsustainable as written into law. The problem? Due to the effects of adverse selection, the program would charge high premiums that would deter less risky individuals from participating. Indeed, participating in the CLASS program would only appeal to those in poor health expecting to need long-term care in the future, further escalating premiums.

Due to its design, it was clear to Medicare actuaries and even liberal Members of Congress that CLASS would fail before it began. Like so many other aspects of the struggling Obamacare law, this one’s flaws are abundantly clear. Brian Blase explains why the CLASS Act is broken and how its ill-conceived design would lead to its inevitable collapse or bailout:

The main problem is that the program’s design will result in a badly skewed pool of participants … This means healthy individuals are less likely to participate because they do not receive credit in the form of a lower premium, like they would if they purchased [long-term-care] insurance in the private market. Instead, CLASS participants are likely to be disabled individuals who are able to work part-time and individuals who anticipate future [long-term-care] needs.

Moreover, the adverse selection problem is exacerbated because individuals earning below the poverty line are subjected to only a $5 monthly premium, and less healthy people are much more likely to be below the poverty line. The artificially low premium for them means that premiums will have to be much higher for others, which will diminish overall enrollment in the program and worsen its long-run solvency. The poor design of CLASS almost guarantees that the program will collapse or need a bailout.

CONTINUED:  http://blog.heritage.org/2011/09/23/morning-bell-the-latest-obamacare-implosion/?utm_source=Newsletter&utm_medium=Email&utm_campaign=Morning%2BBell