Government Soliciting Contracts for Dubious CLASS Program

Government Soliciting Contracts for Dubious CLASS Program
by Lachlan Markay
07/28/2011

The U.S. Department of Health and Human Services is soliciting bids to promote the Community Living Assistance Services and Supports (CLASS) program, a controversial long-term care insurance program established by ObamaCare.

Two contracts are up for grabs: one to create a “strategic brand” for CLASS, the other to develop a CLASS “awareness campaign.” The kicker: The CLASS program has yet to be created, and there is considerable doubt that it ever will be.

The program is, as Health and Human Services Secretary Kathleen Sebelius put it, “totally unsustainable” due to inherent faults in the law. President Obama’s debt commission called for it to be repealed or radically reworked. Senate Budget Chairman Kent Conrad (D.-N.D.) has dubbed it "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of."

Despite those concerns, Sebelius claims the law grants Health and Human Services (HHS) enough “administrative flexibility” to rework the program so it meets the law’s requirement that it be solvent over the next 75 years. The department is not expected to roll out the CLASS program details until October, but already there is doubt as to whether some of the means by which it plans to restructure the statute are beyond the department’s authority.

Why then is HHS offering to pay contractors to sell a program to the public before it has even been formed, especially when the final product may either require changes the department is not authorized to make, or fail to meet the program’s 75-year solvency requirement?

The CLASS program is a voluntary, federally administered program designed to aid individuals should they need long-term care services. Americans who pay in for at least five years can receive cash payments to help pay for services such as nursing home, assisted living, and other non-medical support.

CLASS was conceived as a federally administered alternative to Medicare and Medicaid for the roughly 12 million Americans in need of long-term care. The White House boasts on its website that “no taxpayer funds will be used to pay benefits” for the program, but in its current form, CLASS “would not meet the requirement that [it] be self-sustaining and not rely on taxpayer assistance,” Sebelius told the Senate Finance Committee in February.

That concern has spurred criticism from opponents of the President’s new health care law, who claim that CLASS was included as a means to game the Congressional Budget Office’s (CBO) deficit projections for the law. “They were cobbling together everything they could possibly cobble together to come up with the money, so they could get CBO to score this as anything that didn’t cost anything over a 10-year period,” Sen. Bob Corker (R.-Tenn.) told HUMAN EVENTS recently.

Corker, and other critics of the program, noted that CLASS requires individuals pay into the system for five years before they begin to draw benefits. Thus, over its first 10 years, the program is banking more premiums than it has to pay out. But over time, as outlays increase, the program becomes unsustainable.

When contacted by The Heritage Foundation, an HHS spokesman insisted the department would be able to implement a solvent CLASS program. Even though the administration has not published the details on the program, it is now soliciting contracts for two marketing efforts, which would be funded by taxpayers.

Neither solicitation lists the expected price tag of each contract, though the strategic branding contract uses funds appropriated for the $1 billion ObamaCare implementation fund authorized by the 2010 Health Care and Education Reconciliation Act. HHS would not say how much it expected to pay out.

Sen. John Thune (R.-S.D.) summed up concerns about the contract solicitations by calling for “honest accounting of where the administration is in the implementation process of the CLASS Act, and why they continue to ignore all of the red flags raised about the massive new entitlement program that is being created.”

A spokesman for the department would not be specific about the measures under consideration, insisting that HHS “continues to examine a range of program design options available under the statute.”