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July 20, 2011

Is This It for the CLASS Act?

Harold Pollack

Apparently the Gang of Six proposes to eliminate CLASS.

Howard Gleckman notes that this is a sadly missed opportunity. In my interview with Gleckman here, we discuss some of CLASS's programmatic challenges, as well as some really important reasons for the program. CLASS requires pretty high premiums given—wait for it—lack of an individual mandate. Other aspects of CLASS raise possibilities for adverse selection. Lengthening the vesting period and other approaches would have addressed these issues.

Given Kent Conrad and Max Baucus's dislike of CLASS, I'm not all that surprised by this outcome. The depth of opposition among fiscal conservatives is exemplified by Senator Conrad’s description of the CLASS Act as "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of." Conrad’s comment rightly infuriated CLASS supporters, but there it is.

I've written a lot about CLASS. Compared with (say) Medicaid expansion or the new health insurance exchanges, CLASS raises inherent uncertainties that hinder long-term budgetary forecasts. I wish that during the health reform debate I had covered the technical matters more extensively, and that I had access to some of the economic analyses that appeared within the past several months.

In a different political moment, CLASS would have greater chance of survival. Our current polarized environment prevents us from performing reasonable technical fixes when a challenges to complicated proposed programs become known.

This legislation deserved the chance at repair. CLASS seeks to address a huge need—helping disabled men and women live with dignity in their own homes. The hole in disability policy and long-term care just got bigger. This problem won't go away.

As Don Taylor tweets, it's too bad we can't repeal disability.


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Steve Schoonveld


Providing "technical fixes" to CLASS would barely scratch the surface of what Howard has called a "deeply flawed" program. The program did not know whether it was an insurance product or a social program and suffers through that identity into something quite different than the Senator and his staff imagined.

The key problem with CLASS is that it is a one-size-fits-all-for-some program that violates commonly understood insurance standards. American households do not address their risks in exactly the same manner. Public policy needs to consider and appreciate the variety of ways in which risk is mitigated and encourage individuals to plan.


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