Wednesday, October 26, 2011

What We Learned About the CLASS Act Today

This morning the Energy and Commerce Committee held a hearing regarding the demise of the CLASS Act Ponzi scheme.  Here’s just some of what we learned about the program, and the regulatory and actuarial debacle the Administration announced earlier this month:

Robust Debate on Scoring:  Assistant Secretary Glied attempted to defend the Administration’s decision to disregard the warnings of the many independent experts regarding CLASS’ solvency by saying that there is always a “robust debate” about modeling and scoring issues related to any piece of legislation.  If that’s the case, and there’s always a significant margin of error when it comes to fiscal scorekeeping, then why are Democrats so absolutely certain that the rest of the law will reduce the deficit…?

Administration Misinformation:  Assistant Secretary Greenlee announced that HHS has in fact closed the CLASS Act office, and ceased all CLASS-related implementation activities.  This admission comes one month after a White House official called a report that the CLASS office was closing “flat-out false” and a “false rumor.”

Wasteful Government Spending:  Assistant Secretary Greenlee testified that HHS spent $5 million in taxpayer dollars in 2010 and 2011 attempting to implement what even Democrats called a “Ponzi scheme of the first order.”  This is a more than 100% increase in spending over the last three months; in August, HHS said in a letter to Senators Thune and Shelby that HHS had spent only $2.2 million on CLASS.

Timing is Everything:  Assistant Secretary Greenlee admitted that CLASS actuary Bob Yee’s report was received on September 20 – and two days later, Yee announced in a now-famous e-mail that he would be leaving the Department.  The timing raises obvious questions about whether Yee was forced out due to his report, along with why the CLASS actuary left the Department at a time when all other CLASS employees were merely re-assigned.

Sebelius Asleep at the Switch?  Assistant Secretary Glied declined repeated requests to admit that Secretary Sebelius was ever informed about the inadequacies of her own Department’s modeling of CLASS.  If that’s the case, why did HHS officials publicly claim in October 2009 that HHS was “entirely persuaded that…financial solvency over the 75-year period can be maintained?”  Just as important, how can Secretary Sebelius implement a 2,700 page law if she was so detached from fundamental questions about whether or not an $86 billion program was actually solvent?

Hiding Internal Dissent:  Assistant Secretary Glied declined repeated requests to admit that the concerns of HHS staff about CLASS’ solvency were relayed to the public or to Congress prior to PPACA’s enactment.  In other words, no one told Congress prior to the bill’s passage that the career employees trying to implement CLASS thought the program was a “recipe for disaster.”

More Mandates Ahead?  In one exchange, Assistant Secretary Glied and former Chairman Waxman agreed that the reason several proposals to “fix” CLASS would have imposed pre-existing condition exclusions was because all Americans would not be covered – in other words, individuals could opt-out of CLASS.  The implicit “solution” to that problem would be another unprecedented – and constitutionally dubious – mandate requiring all Americans to participate in the program, a step which former Obama Administration Cabinet official Peter Orszag has endorsed.  Of course, Glied herself has written that a mandate would be largely “symbolic,” meaning that any impact of a mandate to participate in CLASS – or to buy health insurance – would be largely ineffective.

The hearing as a whole did not answer the fundamental questions about what the Administration knew, and when, regarding this massive debacle – particularly given that experts have been predicting the program’s failure for years.  Moreover, the frequent bureaucratic bungling regarding the CLASS Act outlined this morning raises broader questions about how HHS can effectively and efficiently implement the sprawling $2.6 trillion health care law.