Long term care insurance; great expectations likely unfulfilled by the Affordable Care Act and a good thing too

8 Oct

The Wall Street Journal reports in an editorial that HHS has effectively shut down the planning process and office that was to implement the CLASS Act section of the Affordable Care Act. You remember the CLASS Act don’t you? That is the provision in PPACA that allows Americans to buy long-term care insurance from the government, begin paying premiums immediately but wait five years before any benefits are payable. At one point employers were going to be required to take payroll deductions for the premiums but that idea was scrapped.

Take a look at the HHS website about the CLASS program.

Experts and actuaries warned from the start that the program was not sustainable. However, to make the numbers work during the first ten years of health care reform, politicians needed to count the premium revenue from CLASS even while no claims were possible until at least 2018 (assuming the program was implemented on January 1, 2013). Beyond the first ten years disaster loomed because premium revenue would not cover long-term care costs.

Now it appears HHS has come to the same conclusion and is trying to avoid implementation of the program without actually changing the law. You see, if the CLASS program is repealed, health care reform is underfunded by about $86 billion (WSJ figures) and the federal deficit goes up.

Talk about creative accounting, you would think these bureaucrats and politicians were getting a big bonus for manipulating earnings per share. On the other hand this is a plus because the short-term deficit is increased in favor of lowering long-term liabilities and isn’t that what all the experts say should be done? The only problem is the real CLASS Act liabilities (beyond the first ten years) were never actually accounted for.

Don’t you wish you could operate a business this way?

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