Update – October 27 2011 – The CLASS Act has officially been declared dead. News coverage can be found on our site, at NY Times, and WaPo.
For 95% of our client base, the proposed CLASS-Act is a nonstarter government-run health care plan. However, it is still of interest, as anyone who has studied economics realizes that when the government enters a business, things can change quickly.
Enter the Congressional Budget Office
The CBO is tasked with the accounting of congress’s sometimes wild-hare projects and running the numbers. In it’s latest budget and economic outlook projections it announced that due to some implementation snags (which we predicted) the plan won’t roll out until 2013 in most cases. (Courtesy of The Hill)
Will the CLASS-Act Survive?
First, as a brokerage that sells LTC Insurance, it is very much in our interest for the CLASS Act to survive, and thrive. It will create Long Term Care awareness on a scale never seen before. After all, people don’t just wake up and say, “hey, I want to spend $2-$3k/year on Long Term Care Insurance!” When it’s offered in the workplace, we expect lots of clients to come to us searching for answers, which will be a good thing. So yes, we want this to last. But it probably won’t.
The problem is, the US is facing a budget crisis that is going to continue to surface its head on a regular basis until something is done to control entitlements. CLASS-Act is designed to be self funding but even the Medicare chief actuary admits that the program in its current incarnation is not sustainable. With no mandate to purchase, and no medical pre qualification, anyone but the most disabled of folks can be accepted for coverage. For the sick, this is a Godsend. For the healthy, a private plan with healthier peers is a more stable long-term plan. You simply cannot have open enrollment, yet no requirement to balance the sick with the healthy, and have a sustainable insurance plan. Moral hazard is real, and this plan oozes of it.
