CLASS Act Demise Raises Further Doubts about the Affordability of the Affordable Care Act

Federal Health Care Reform

With the Administration closing down the CLASS Act program, PPACA lost a theoretical $70 billion source of funding.  One of the tenets during the debate over PPACA was that it would be deficit neutral.  Indeed, the bill as passed was advertised as reducing the federal deficit by $124 billion over 10 years.  The CLASS Act was hailed by the Administration as part of this supposed deficit reduction scheme because the government would collect premiums for five years (2012-1016) before it would pay out any benefits, which allowed the CBO to originally score it as a revenue generator.  Yet many, including CMS actuary Richard Foster, recognized early on that the CLASS Act was financially unsustainable in the long-term, and the program’s termination surprised few.  This, coupled with other recent reversals, including the repeal of the 1099 reporting requirement, has adversely impacted the original CBO scoring of PPACA, adding as much as $244 billion to the federal deficit over the next 10 years according to an estimate by Applied Economic Strategies.  Meanwhile, other revenue generators and cost control measures under PPACA are under attack.  For example, the U.S. Supreme Court is about to determine whether the individual mandate, which was scored to generate $17 billion over 10 years, is constitutional.  Moreover, there is bipartisan support in Congress for measures that would repeal the prohibition against employees using tax-advantaged medical savings accounts to purchase over-the-counter medications.  Also on the chopping block is the Independent Payment Advisory Board (IPAB), which was established by PPACA to rein in Medicare spending.  Meanwhile, HHS issued final regulations this week weakening cost containment measures for Accountable Care Organizations.  (See separate story.)  These developments raise further questions whether the Affordable Care Act will be affordable.