Report: Administration ignored high costs in healthcare bill

Amanda Carey Contributor
Font Size:

In the thick of the debate over President Barack Obama’s health care reform bill, administration officials ignored warnings that one of its most controversial provisions was financially unsustainable and could leave taxpayers on the hook for billions of dollars.

According to a report released Thursday by a working group of congressional investigators, officials inside the Department of Health and Human Services ignored numerous red flags about the Community Living Assistance Services and Supports program (CLASS) — and in some cases the officials went to work figuring out how to hide them.

Now, those same officials are scrambling to come up with the financing of the long-term care insurance program — the brainchild of the late Democratic Sen. Edward Kennedy of Massachusetts — which Republicans on Capitol Hill are trying to repeal.

When the Congressional Budget Office scored the program, analysts said it would account for $70 billion in deficit reduction over ten years. However, that was because those enrolled in the program won’t be able to start receiving benefits until five years into that ten-year period.

The program’s architects assumed it would take in more money than it paid out. And the $70 billion in savings became a crucial selling point that helped secure the bill’s passage.

The congressional working group, however, found that since the program is voluntary it would likely see more unhealthy participants than healthy ones. That means more payouts and less revenue. In the long run, that imbalance puts the CLASS program on a path to financial disaster.

In May 2009, Center for Medicare and Medicaid Services chief actuary Rick Foster wrote an email about that exact sticking point, saying it could be a “terminal problem for this proposal” and “a classic ‘assessment spiral’ or ‘insurance death spiral’ would ensue.”

“The program is intended to be ‘actuarially sound,’ but at first glance this goal may be impossible,” Foster added.

In the summer of 2009, Foster and a legislative staffer exchanged emails. At that time, the actuary’s doubts about the program hadn’t changed.

“I’m sorry to report that I remain very doubtful that this proposal is sustainable at the specified premium and benefit amounts,” read one email, according to the report. “Thirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue.”

Another email, dated September 10, 2009, suggests that a senior aide from Sen. Kennedy’s office tried to derail Foster from further discussions on the proposal. The email was sent from the Director of Policy Analysis in the Immediate Office of the Secretary of HHS to the Deputy Assistant Secretary for Planning an Evaluation (ASPE). It read that a Democratic staff member “got back to me, and decided she does not think she needs additional work on the actuarial side.”

But then in October 2009, a staffer from ASPE wrote an email saying the program “seems like a recipe for disaster to me…”

Later documents show that the program’s architects relied on flawed modeling and underestimated administrative costs, and that HHS officials decided to address the issues by writing in a fail safe that would give the Secretary authority to modify the program during implementation so it would be fiscally sound.

Yet as the report points out, neither HHS Secretary Kathleen Sebelius nor any other staffer made these concerns public in the debate leading up to the eventual passage of the bill.

“To advance the president’s healthcare agenda, it appears a deliberate effort was made by administrative officials to hide CLASS’s true cost from lawmakers and the public,” said Sen. Jeff Sessions of Alabama, who was a Republican member of the congressional working group. “The unsustainable CLASS program should be immediately repealed, and with a doubt, this troubling evidence warrants further inquiry.”

“This report is further confirmation that the Obama Administration willfully chose to ignore the fiscal insolvency of the CLASS program in order to achieve a political victory by pushing the president’s health care bill through Congress,” added GOP Sen. John Thune of South Dakota. “The CLASS Act is a ticking time bomb that will place taxpayers’ money at risk due to fatal flaws in the entitlement program’s design and structure.”

“The American people had a right to know the information revealed in our report before they were put on the hook to pay for this massive new entitlement program,” said Thune.

Follow Amanda on Twitter