CLASS’ Solvency Concerns Could Lead to Another Ill-Advised Mandate
The Hill reported yesterday that disability advocates hope a forthcoming report from HHS on the CLASS Act will allow the program to go forward. (HHS finally published a blog post late Wednesday that said its report on CLASS would be released next month – this nearly a full week after the CLASS Act’s actuary said he was leaving his job, and his office was being closed.) One advocate “acknowledged that the CLASS Act might not work, but said the Administration should give it a try…‘If it doesn’t work, try something new.’”
Suggested in the above comments is the implication that HHS should start the program now, even if it doesn’t have a clear path to keep CLASS solvent. Over and above the fact that the Administration has a statutory obligation to certify CLASS’ solvency BEFORE premiums get paid into the program, starting up a program without a clear path to sustainability is a recipe for further bad policy choices down the line. For instance, if CLASS is established and quickly faces solvency issues, the Administration could attempt to “solve” the problem by imposing a mandate on individuals to participate in CLASS. Former Obama Administration budget chief Peter Orszag, writing in Foreign Affairs in June, called for just such a mandate; in fact, he said one of the “only solutions” to make the CLASS program solvent may be “to make the purchase of such insurance mandatory.”
What’s more, in defending the individual mandate in a Pennsylvania court, the Justice Department recently admitted that Congress could force individuals to purchase long-term care insurance – meaning if the individual mandate is upheld by the Supreme Court, a CLASS Act mandate could be next:
To test the limits of Congress’s Commerce Clause authority, the court asked government counsel to assume that the “graying of America” and aging Baby Boomer population results in a dire shortage of affordable nursing home care. The court posed the following question: “[A]s a result, could Congress mandate the purchase of long-term care insurance?”
In response, the government conceded that Congress could: (1) determine that a market is faltering due to the failure of individuals to pay for the goods or services they receive in that market, and then (2) invoke its Commerce Clause power to require the individuals to pay for the goods or services in advance of seeking or obtaining them. Thus, supported with appropriate findings, counsel for the government posited that Congress could require the purchase of long term care insurance as a condition of lawful residency:
[I]t is possible that Congress at some point would determine that this is a crisis and that people have to pay for it, and there are various ways that they could do that.
Congress’ failure to vet the CLASS program – passing the bill to find out what’s in it – has already created one mess, a program even Secretary Sebelius has admitted is “totally unsustainable” as written. Many would argue that starting up such a fiscally dubious program and hoping it will become solvent eventually is a recipe for further bad policy choices – for instance, an unprecedented mandate to buy long-term care insurance – in the future.