Top Budget Cutters Target CLASS Act, Group Health Exclusion

Affordable Care Act.

The CLASS Act is supposed to create a voluntary worksite LTC benefits program. Insurance groups and actuaries at the Centers for Medicare & Medicaid Services have criticized the program and argued that it will be actuarially unsound.

Budget analysts say the CLASS Act would reduce the cost of implementing the Affordable Care Act up until 2014 but then would add $76 billion to the deficit from 2015 to 2020.

The CLASS Act program addresses “an important public policy concern, but is viewed by many experts as financially unsound,” Bowles and Simpson say in the Moment of Truth draft.

The program’s earliest beneficiaries will pay modest premiums for only a few years and receive benefits many times larger, and “sustaining the system over time will require increasing premiums and reducing benefits to the point that the program is neither appealing to potential customers nor able to accomplish its stated function,” Bowles and Simpson say.

The CLASS Act program should be “reformed in a way that makes it credibly sustainable over the long term,” and “to the extent this is not possible, we advise it be repealed,” Bowles and Simpson say.

In a section on Medicare, Bowles and Simpson suggest replacing the current deductible, coinsurance and co-payment rules with a single combined annual deductible of $550 for the Part A (hospital) and Part B (medical care) programs, along with 20% uniform coinsurance for health care spending above the deductible.

The co-chairman suggest providing catastrophic protection for seniors by reducing the coinsurance rate to 5% after costs exceed $5,500 and capping total cost sharing at $7,500.

They also propose discouraging Medicare supplement plans, which are also known as Medigap plans, from covering the first $500 of an enrollee’s costs, because “Medigap plans cover much of the cost-sharing that could otherwise constrain over-utilization of care and reduce overall spending.”

The provision would limit Medigap coverage to 50% of the next $5,000 in Medicare cost-sharing.

Bowles and Simpson are recommending similar treatment for TRICARE for Life, the Medigap program for military retirees, which would save money both for that program and for Medicare, as well as similar treatment for federal and private employer retiree benefits programs.