As American workers struggle to make ends meet, it’s important to consider the many ways President Obama’s new health law creates uncertainty and limits American competitiveness.
Rising health costs, new taxes and coverage mandates only represent the tip of the iceberg. Workers and employers also face expensive reporting requirements and administrative burdens, hampering their ability to expand.
Congress should work to make it easier for Americans to create jobs, not more complicated. Jumpstarting our economy requires certainty, but Washington continues to push expensive new programs and anti-competitive policies.
Now, some Washington Democrats express growing concerns about how Americans will cope with the CLASS program, a new government-run disability program.
Congress used CLASS as a budget gimmick to fund unrelated parts of the new health law. Senate Budget Committee Chairman Kent Conrad (D.-N.D.), called CLASS a “Ponzi scheme of the first order. The kind of thing that Bernie Madoff would be proud of.”
According to the nonpartisan Congressional Budget Office (CBO), the program raises approximately $72 billion in its first 10 years. By 2025, the CLASS program will be bankrupt and unable to meet its obligations.
CBO also challenged the misleading claim that CLASS will save money for the federal government, noting that “the CLASS program would inevitably add to future deficits (on a cash basis) by more than it reduces deficits in the near term, even though the premiums would be set to ensure solvency of the program.”
Last year, Senators Nelson, Conrad, Lieberman, Lincoln, Landrieu, Bayh and Warner wrote a letter to the Senate majority leader opposing CLASS, warning:“We have grave concerns that the real effect of the provisions would be to create a new federal entitlement program with large, long-term spending increases that far exceed revenues.” During Senate debate on the new health law, 11 Democrat senators and one Independent senator voted for an amendment by Sen. John Thune (R.-S.D.) to eliminate CLASS from the final version of the bill.
Employer groups, including the Chamber of Commerce and the National Federation of Independent Business (NFIB), also worry CLASS will increase deficits and create new problems for both workers and employers.
Employers will feel mounting pressure to join CLASS under the deceptive campaign mounted by liberal advocacy groups and the Obama administration. To boost enrollment in CLASS, the law forces participating employers to auto-enroll all workers between 18 and 64—unless a worker opts out through a process yet to be specified by the federal government.
In other words, an employer can not auto-enroll just one worker—even if only one worker wants to participate. The company must withhold premiums from every worker’s paycheck, and these monthly premiums could run as high as $240 per month according to Medicare’s chief actuary.
Participating employers will spend significant time and resources processing paperwork, answering questions and dealing with new administrative hassles. Making matters worse, the law provides no refund for unsatisfied workers who will be auto-enrolled without their affirmative consent and want to leave immediately. Instead, the law forces employers to continue taking premiums from the worker’s paycheck until an annual disenrollment period—again yet to be specified by the federal government.
Workers and employers will also suffer because CLASS creates a new unfunded entitlement. This new hole in the federal budget will make it harder for Congress to address the looming bankruptcy of Medicare and weaken our economy.
Instead of setting money from CLASS premiums aside solely for promised benefits, politicians used the money to pay for other parts of the new health law. Writers of the law merely put an IOU in a new government trust fund. Taxpayers will be on the hook for promised benefits because Congress has already spent the money from expected premiums. Americans will also be required to repay these IOUs in the form of higher taxes.
To pass CLASS, liberal advocacy groups insisted the program would remain “voluntary,” “self-funded” and “actuarially sound.” Now that CLASS is federal law, these liberal advocacy groups agree with the Medicare Actuary, the Congressional Budget Office and the American Academy of Actuaries. They concede that CLASS will likely collapse under its current design and urge Congress to “make CLASS participation mandatory, just as it has done with health insurance.” They also argue for a taxpayer bailout from general revenues to save the program—before it even begins.
These coercive solutions directly harm workers and employers: If CLASS becomes mandatory, employers will be forced to deduct CLASS premiums from all workers and Washington will spend this money on other programs. If CLASS receives a taxpayer bailout with general revenues, Washington will need more tax revenue and place new burdens on workers and small businesses.
To protect American jobs, leaders from both parties should step back and reexamine CLASS before implementation. I introduced the Fiscal Responsibility and Retirement Security Act (H.R. 5853) to ensure the program will not begin if it will fail.
The bill would require the Medicare Actuary to report to Congress on the fiscal solvency of the administration’s CLASS final plan and require Congress to vote before it may be implemented. It would also sunset CLASS in the first year the Medicare Actuary finds it unsound over a 75-year period and provide a refund to those who paid into the new government trust fund established for CLASS.
Congress behaved recklessly when it used CLASS as a budget gimmick for an unpopular, massive health law. Our children and grandchildren cannot afford another unfunded entitlement program with unsound finances.
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