Before passage of the new health-care law, former House Speaker Nancy Pelosi told an audience, “We have to pass the bill so you can find out what is in it.” Unfortunately, that statement continues to ring true today, perhaps even for Secretary of Health and Human Services (HHS) Kathleen Sebelius.
On Feb. 16, the HHS secretary dismissed concerns at a Ways and Means Committee hearing that some workers will find themselves automatically enrolled in a new disability-entitlement program known as the “Community Living Assistance Services and Supports (CLASS) Act.” As a result of the massive health law, these workers will have CLASS premiums taken from their paychecks, even though they never joined the program. These premiums could reach $240 a month, according to Medicare’s chief actuary.
Despite the evidence, the secretary disagreed. “There is no mandate for auto-enrollment,” Sebelius insisted at a hearing before the House Ways and Means Committee.
Yet the part of ObamaCare creating the CLASS program clearly tells the HHS secretary to establish procedures for Americans to be “automatically enrolled in the CLASS program by an employer.” Has Sebelius read the law she helped write?
The massive new law requires participating employers to automatically enroll all workers in CLASS—unless a worker pays careful attention and takes the time to opt out. If CLASS were truly voluntary, President Obama would have allowed all American workers to explicitly opt in to CLASS rather than automatically enrolling them. HHS officials have defended “nudging” workers into CLASS by “default,” arguing, “behavioral economics has frequently smiled on the creative use of defaults.”
These officials compared CLASS auto-enrollment to the practice of auto-enrolling workers in 401Ks, but they’ve missed a critical distinction. In general, money placed in these accounts has continued to be owned by the worker. The law prevented cash from CLASS premiums from being set aside solely to pay future benefits. The law directed the federal government to account for the cash with an IOU in a government trust fund before spending it on unrelated parts of government, including Medicaid expansions in ObamaCare. That’s why the Washington Post called CLASS a $72 billion budget “gimmick … designed to pretend that health care is fully paid for.” Senate Budget Committee Chairman Kent Conrad called the program a “Ponzi scheme.” Even HHS officials have questioned the wisdom of “defaulting large segments of the population into choices that may be costly and may not be in their interest.”
Supporting evidence for CLASS repeal continues to build. The nonpartisan Congressional Budget Office warned of the long-term risks for taxpayers: “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.”
The President’s own deficit commission recommended repeal of CLASS for that reason. Alice Rivlin, a former Congressional Budget Office director whom President Obama placed on the commission, wrote: “Since the CLASS program is a new unfunded entitlement, it should be repealed because it will increase the deficit over the long term.” Even Medicare’s chief actuary agreed: “There is a significant risk that the problem of adverse selection would make the CLASS program unsustainable.”
During the hearing, Sebelius conceded, “As written into the law, the framework of the program was not sustainable.” She disagreed with calls for CLASS repeal but neglected to clarify what authority she holds to change the law “as written.”
She would not agree to include any of the above-mentioned warnings about CLASS within her $93.5 million taxpayer-funded campaign to boost employers’ participation (and automatic enrollment) in the program.
It’s no surprise HHS excluded these warnings when it praised CLASS in a government-funded education piece sent to millions of seniors. The Government Accountability Office concluded most recipients of the piece were “likely to be ineligible” for CLASS benefits.
The American people deserve more transparency and forthright answers from the Obama administration on the implementation of the new health law. To protect workers and taxpayers, Congress should repeal CLASS along with the rest of the new health law and replace it with common-sense solutions. I will soon introduce CLASS repeal legislation as part of a comprehensive strategy to repeal and replace the massive health–care overhaul. Our children and grandchildren cannot afford another unfunded entitlement program with unsound financing.
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