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Dems Ignored Red Flags in Health Care Act

The Obama administration failed to heed numerous warnings from government experts that a long-term care insurance program included in the health care reform act was unsustainable, and continued to promote the initiative to the public, according to emails released by a Republican congressional working group today (read the full working group report here).

Republicans have questioned the solvency of the CLASS Act, a long-term insurance entitlement pushed by the late Sen. Ted Kennedy, since its inception. But the subpoenaed emails show the Center for Medicare & Medicaid Services and the Health and Human Services department staffers were also raising alarms about the program, only to be ignored by other administration officials and congressional Democrats.

“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,” said Sen. John Thune, a member of the working group investigating the issue, in a statement this morning. “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.”

On May 19, 2009, the CMS chief actuary sent an email warning Kennedy’s office the program in its current form would lead to an “insurance death spiral.”

“The program is intended to be ‘actuarially sound,’ but at first glance this goal may be impossible,” wrote the actuary. “Due to the limited scope of the insurance coverage, the voluntary CLASS plan would probably not attract many participants other than individuals who already meet the criteria to qualify as beneficiaries.”

In an email to members of his own staff, the CMS chief actuary was even more explicit. “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,” he wrote.

In August, 2009, a CMS official emailed the chief actuary and said that staffers at CMS and the Health and Human Services department had been “relaying your concerns about the actuarial soundness of the CLASS Act” to the Senate Health, Education, Labor and Pensions Committee, which was crafting the health care legislation. Yet shortly after, the chief actuary was cut out of the deliberations by Kennedy’s staff, according to the report.

Meanwhile, internal debate over the CLASS Act erupted at HHS, with the Office of the Assistant Secretary for Planning and Evaluation writing in an assessment on Sept. 25, 2009, the program “is still likely to create severe adverse selection problems.”

“Seems like a recipe for disaster to me,” another staffer wrote in an Oct. 22, 2009 email. “I can’t imagine that CLASS would not have high levels of adverse selection given the significantly higher premiums compared to similar policies in the private market.”

Around the same time, HHS officials praised the program publicly. At a Kaiser Family Foundation speech on October 20, 2009, Richard Frank, Deputy Assistant Secretary for Planning and Evaluation at HHS, said:

“We’ve, in the department, have modeled this extensively, perhaps more extensively than anybody would want to hear about [laughter] and we’re entirely persuaded that reasonable premiums, solid participation rates, and financial solvency over the 75-year period can be maintained.  So it is, on this basis, that the administration supports it that the bill continues to sort of meet the standards of being able to stand on its own financial feet. ”

CMS and HHS staffers continued to privately raise alarms about the program and its various provisions through the passage of ObamaCare, but these concerns were not relayed to the public. They also didn’t seek to make changes to the CLASS Act during reconciliation, according to the report.

“To advance the president’s healthcare agenda, it appears a deliberate effort was made by administration officials to hide CLASS’s true cost from lawmakers and the public,” Sen. Jeff Sessions, a member of the Republican working group that released the report, said in a statement this morning.

In light of the revelations, Sessions and other members of the group are calling for the CLASS Act to be repealed and a further investigation.

Coming around the same time as the Solyndra scandal, this latest report seems to indicate a troubling pattern within the administration of ignoring red flags in the pursuit of politically motivated projects.



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