Congressional Working Group Releases Investigative Report on Unsustainable CLASS Act

September 15, 2011

WASHINGTON, D.C.--The bicameral Repeal CLASS Working Group today issued "CLASS' Untold Story: Taxpayers, Employers, and States on the Hook for Flawed Entitlement Program," a report detailing the insolvency of a massive new entitlement program included in the new health care law called the Community Living Assistance Services and Supports (CLASS) Act.

Documents obtained through a bicameral Congressional investigation reveal that the Obama Administration's Department of Health and Human Services (HHS) was acutely aware that the program was unsustainable and suppressed this information from Congressional leaders and the American people prior to the passage of the law, all in the effort to achieve phony savings to offset the bill's massive spending and taxpayer-funded price tag.

The Repeal CLASS Working Group is comprised of Republican leadership in both the House and Senate charged with overseeing implementation of the new health care law.

The Working Group's key findings include:

-Senior HHS officials publicly pronounced the CLASS program solvent in the fall of 2009, even as their own employees were calling CLASS "a recipe for disaster" in internal emails.

-Secretary Sebelius and other HHS officials have claimed through much of 2011 that the Department has sufficient authority to modify the CLASS program to make it solvent, yet internal HHS documents from 2010 cast significant doubt on those assertions.

-HHS has already discussed requiring employers to participate in CLASS as a remedy for low participation, which forces a fiduciary responsibility on employers to collect premiums that could open the door to a blizzard of litigation.

-In addition to the $118 billion in unfunded Medicaid mandates from the health care law, the administration of the CLASS program will largely fall on the shoulders of the states.

"It is no secret that the CLASS program is fiscally unsound and was used as a budget gimmick in the health care law. However, 'CLASS' Untold Story' reveals that during the program's development,... high-level officials within HHS were already aware the program was likely to collapse and privately expressed their own doubts, but continued to publicly tout the program's benefits and savings," said Rep. Fred Upton (Mich.-06), co-chair of the Working Group.

"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 (R-S.D.), co-chair of the Working Group. "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. The American people had a right to know the information revealed in our report before they were put on the hook to pay for this massive new entitlement program."

"The CLASS Act is an ocean liner that was put to sea with a giant hole in the hull," said Rep. Joe Pitts (Pa.-16), co-chair of the Working Group. "This report clearly shows that the authors of last year's health care bill were aware of the flaws, and launched the program anyway. What we see here is legislative malpractice. When the CLASS program fails, the taxpayer will be left to foot the bill. The time to terminate this program is now, before it begins enrolling participants and taking premiums. The government has to stop making promises that it can't keep."

"The CLASS report reveals that the American people are not the only ones skeptical of the president's health care reforms, so are officials at HHS," said Rep. Cliff Stearns (Fla.-6), co-chair of the Working Group. "According to the 185 pages of internal emails we've uncovered, HHS officials expressed numerous concerns about the structure and viability of the CLASS program. And still, they continued to claim it would result in deficit savings. This is yet another example of a less-than-transparent administration burdening the American taxpayer with a new, unfunded entitlement program."

"While President Obama's health care law is full of new government programs, budget tricks and accounting gimmicks, the CLASS Act may take the cake for government at its worst," said Rep. Denny Rehberg (Mont.-AL), co-chair of the Working Group. "As if creating a massive new health entitlement at a time when we're struggling to save Medicare and Medicaid isn't enough, there's evidence to suggest the program was created with full knowledge that it was unworkable and unsustainable. The CLASS Act's sole purpose appears to have been a budget gimmick. In a nut shell, hard working Americans are being forced to pay into the CLASS Act program for five years - to the tune of $70 billion -- and then their money is immediately taken out to be spent elsewhere. This kind of boiler-room trick shows exactly how out of touch Washington is with the American people."

"This report on the CLASS Act demonstrates the Obama administration's willingness to inflict harm on taxpayers and the economy in order to advance its political agenda," said Sen. Richard Shelby (R-Ala). "It is particularly troubling that the administration wants to start a new and unsustainable entitlement when we are already struggling to put existing programs and our national finances on the path to stability."

"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," said Sen. Jeff Sessions (R-Ala.). "The deception exposed in this report paved the way to imposing additional financial burdens on taxpayers, businesses, and cash-strapped states--at a time when they can least afford them. The unsustainable CLASS program should be immediately repealed and, without a doubt, this troubling evidence warrants further inquiry."

"The CLASS Act is billed as an insurance program for long-term care, but really it's just a huge and very costly government accounting trick," said Sen. Lindsey Graham (R-S.C.). "Remember Enron accounting? Well, I believe even Enron executives would be embarrassed by the accounting gimmicks created by the CLASS Act."

"The CLASS Program was one of the many ill-advised provisions contained in President Obama's health care law," said Rep. Darrell Issa (Calif.-49). "The Chief Actuary at CMS and numerous private sector actuaries publicized their belief that CLASS would suffer from severe adverse selection and place taxpayers at risk of a substantial bailout. This report provides evidence that the Administration was well aware of their concerns, but ignored them for political reasons as it pushed the health care law through Congress."'

"The Working Group's report will further exacerbate the public's lack of trust in their government," said Rep. Trey Gowdy (S.C.-04). "The Obama Administration continues to ignore reality. The American people deserve to know the facts behind this expansive entitlement."

"There is near unanimous agreement among experts that the CLASS programs will add billions to our nation's debt in the coming years. Congress should repeal CLASS before implementation.... Our children and grandchildren cannot afford another unfunded entitlement program," said Rep. Charles Boustany, Jr., M.D. (La.-07). "The Obama Administration and Senator Harry Reid disregarded independent actuaries' concerns when slipping the flawed CLASS program into the new health law. They did so knowing revenue from CLASS premiums could be diverted to fund unrelated parts of the law."

"The CLASS Act was a budgetary deception included in the Patient Protection and Affordable Care Act as an attempt to mask the actual cost of the law," said Rep. Michael C. Burgess, M.D. (Texas-26). "From the beginning we knew this program was structured in a way that would not allow the program to be properly paid for and would only add even more to the deficit. Complaints about the insolvency of the program have come from both sides of the aisle as well as from the administration's own Chief Actuary. Instead of focusing on reducing the costs of long term care insurance for Americans, the president's health care law exploits tax payer confidence through creating another program that is poorly structured and will cost taxpayers even more money."

"This report proves that the CLASS Act is nothing more than a new entitlement nightmare created by ObamaCare," said Rep. Phil Gingrey, M.D. (Ga.-11). "Adding another entitlement is the last thing we should do, especially when we are struggling to maintain programs already in place, like Medicare and Medicaid. The CLASS Act is wholly irresponsible and blatantly ignores the economic crisis our country is in. By eliminating this program, we will prevent an unnecessary bureaucratic ordeal from further burdening the American taxpayer."

The Working Group's full report can be found HERE.

###