Health reform is one of the most intricate and wide-ranging laws in recent American history. It transfers billions of dollars down the income scale. It alters the operation and regulation of private and public insurance markets. It creates new structures such as health insurance exchanges and pre-existing condition insurance plans.
Amidst all of this change, one thing is certain. The new law will need repairs and fixes along the way. There will be glitches. Specific legislative and regulatory provisions will require adjustment once they are tested. None of this means that the measure is a bad law, or one that should be repealed. I believe the opposite is true. That’s just the nature of overhauling a system that affects one-sixth of the U.S. economy.
Unfortunately, our currently polarized politics makes it hard to address or even to acknowledge this basic reality. In their pursuit of an unrelenting “repeal and replace” effort, health reform critics have created a climate in which the possibilities for bipartisan pragmatic compromise are so limited that it’s hard to imagine Congress implementing a negotiated legislative fix beyond small and obvious matters such as the current effort to abandon the law’s 1099 business reporting requirement.
The new Community Living Assistance Services and Supports program underscores the dangers of political gridlock. CLASS — a bold attempt to address some of our nation’s long-term care and disability challenges — will provide participants and their families with daily cash payments for needed support in the event of disability. It is particularly valuable because it provides concrete help for disabled people who wish to remain in their family homes. CLASS is not an entitlement. It is a voluntary contribution program, required by law to be fiscally balanced over the next 75 years, with projected costs financed through participant premiums.
Because CLASS is voluntary and does not charge higher premiums based on individual health status, it includes several provisions to guard against the possibility that only people who face high risks of disability will sign up. Most important, individuals become eligible for benefits only after they have paid monthly premiums for at least five years and have been employed during three of those five years. The success of such measures in minimizing adverse selection — and thus the program’s required monthly premiums — will play a huge part in determining CLASS’s long-term fiscal balance.
During the health reform debate, the Congressional Budget Office gave CLASS a favorable budget score. CBO analysts also estimated that CLASS’s average monthly premiums will be about $123. (For further details regarding CLASS, see this Kaiser Family Foundation brief, as well as Howard Gleckman’s columns for KHN.) Actuaries from the Center for Medicare and Medicaid Services were far more dubious, projecting that the required monthly premiums would be about twice as large. Why the difference? The CBO predicted that CLASS would attract about 3.5 percent of the adult population. CMS actuaries predicted that the program would attract only about 2 percent — and this 2 percent would be a sicker and more costly group.
Now, 10 months after health reform passed, some serious budget analysts — including some respected Democrats — worry that projected monthly premiums will prove too low to meet CLASS’s long-term obligations. Most recently, Boston College’s Alicia Munnell and Josh Hurwitz produced a concerning policy brief: What is “CLASS”? And will it work? These authors estimate that “an average premium of $194 is required to ensure solvency to the year 2087.” That’s about halfway between the CBO and the CMS estimates.
Such 75-year extended forecasts are both necessary and inherently tragicomic. When one looks under the hood at the data and analytic models used by Munnell and Hurwitz and by others, it’s obvious that there are big uncertainties regarding the program’s expenditures and enrollment 10 years from now, let alone the challenges it will face 66 years after that. Researchers have reasonable data to describe and forecast the nation’s distribution of disability over the next decade or two. But the impact of monthly premiums and individuals’ disability risk on enrollment are inherently uncertain, as are long-term forecasts of the price of disability services. Also, Medicaid will undergo significant changes between 2011 and 2030, which will alter CLASS’s financial impact on government expenditures and individuals’ incentives to participate in the program.
The secretary of Health and Human Services has broad discretion to modify CLASS to maintain actuarial balance. Will firms participate in the new program? Will they aggressively market it and advise employees to join? Unlike private policies, CLASS benefits are backed by the full faith and credit of the United States. Will that sway hitherto reticent consumers? None of these factors are explicitly considered in the above models.
You might ask who is right: CBO, CMS actuaries, or Munnell and Hurwitz? In one sense, probably no one is exactly right. The uncertainties are just too great. And that’s the wrong question anyway.
One should forecast now as best one can, design CLASS to be as effective as possible given current predictions and to be as flexible as possible in accommodating new information.
One should also consider how the program could be designed to maximize the chances for success. If employers’ attitudes and marketing are critical to CLASS’s success, working closely with employers to maximize these opportunities will be critical, especially regarding younger or healthier workers. The program also could by tightened — perhaps by lengthening the benefit vesting period, and revisiting certain aspects of eligibility or premium costs.
I’m not terribly confident that we’ll see pragmatic compromise resulting from the secretary’s signal. Republicans have pledged to repeal CLASS rather than sand down its rough edges. Democrats, for their part, face little incentive to open this program up for fundamental revision before creating political facts on the ground to ensure its survival.
On CLASS, and surely on other matters, there is just too little political space to implement midcourse corrections or enact programmatic improvements. That’s a price Democrats paid by achieving their dream of near-universal coverage on a party-line vote. That was a price Republicans paid, too, through their implacable opposition to just about everything Democrats proposed, including many ideas Republicans traditionally supported.
Each side had plausible strategic and ideological reasons to pay that price. For now, anyway, our politics give us the choice between health reform that is less flexible and less carefully crafted than it really needs to be, and no reform at all. If this is the political choice presented to us, I strongly prefer the first option. I still wish we had a better way.