Monday, February 28, 2011

Class Warfare

At a time when the long term solvency of Social Security is very much in question it is revealing to shed a little light on one provision of PPACA which is publicized far to Little and that is The CLASS Act (Community Living Assistance Services and Support Act). Yes, it seems Obamacare included a voluntary taxpayer optional long term care program that owes its origins to Ted Kennedy.

Whats wrong with that you might ask? Well for starters the design more or less mirrors the group guaranteed issue approach to LTC which has failed miserably for over 20 years in the private sector to the point where John Hancock has exited the group market along with MetLife and anyone else with a board or stockholders because its simply not profitable. Not only is it not profitable it is financially unsustainable. Imagine a wave of baby boomers faced with financial ruin from outliving their bodies ability to perform acitivities of daily living like bathing, dressing, eating, and transferring. All they have to do is enroll and pay premiums for 5 years and be actively at work for 3 years and they can receive a cash LTC benefit. And hey, the premiums are only expected to be $123 per month! What a deal!  You see the exact benefits costs and program details are all being designed by the Secretary of Health and Human Services at this juncture. think we will see an LTC trust fund established like the SS Trust fund to keep Congress from spending the proceeds sorta like the SS Trust Fund?

But it gets better. Check out this "wisdom" from CBO emphasis mine;

Q: Are there any estimates now of what those premiums might be?

A: During the long course of the CLASS Act plan’s development, a number of estimates were made of the premiums that could be required for a financially sound plan. These estimates vary widely depending on the version of the law (which changed as it went through the legislative process) analyzed, the data and the assumptions used. Many commonly cited estimates reflect studies of much older versions of the CLASS Act. No analysis to date exactly matches the complete details of the CLASS plan that will be implemented, as these details have yet to be determined. As Congress debated the version of the CLASS Act that is now the law, the non-partisan Congressional Budget Office (the official “score-keeper”) provided estimates of average premiums. The Congressional Budget Office (CBO) estimated that average premiums would be $123/month (lower for younger people, higher for older people). Naturally, the CBO estimate included assumptions about some detailed elements of the program that might be different when the final plan is ultimately determined. In addition, the CBO assumed, among other things, that the CLASS Act plan would have relatively low enrollment, such as that found with private long-term care insurance.

To again use a parable from popular culture examine the picture above closely. This time its not a Baby Ruth. It is an actual turd. No amount of chlorine can sanitize a pool contaminated with feces. It must be drained and sanitized every time. Now notice what the CBO said about the CLASS risk pool in the 2nd to last sentence;the CLASS Act plan would have relatively low enrollment, such as that found with private long-term care insurance. I am certain CBO meant relatively low enrollment like group LTC on a guaranteed issue basis of the type that is not even marketed anymore due to adverse selection. Which means the pool will ultimately be a septic tank unfit to dip a toe into much less to swim in and every time the septic is collected the taxpayers get to replenish the pool with tax dollars in order to allow allow Americans to have access to LTC. There is not a reinsurer who would ever insure such a risk but there is on the other hand a Democratic Party in America who did on a party line reconciliation vote sign taxpayers up to insure the risk which is not voluntarily insurable on a guaranteed issue basis. And its means tested, so low income Americans get subsidized until every taxpayer is low income and then what?

I think CLASS is actually an acronym meaning Clueless Liberals Accessorizing Social Security. It is a mind numbing subsection of PPACA stupidity to be implemented by bureaucrats at HHS. This is not even what Pelosi meant when she said we would have to read the bill to know whats in it because the final regulations are not due until October 1. 2012. At a time when we have the President & DNC carefully orchestrating union protests over collective bargaining rights and historic Federal, State & Local deficits we now have a  law created by politicians with a cognitive deficit that will insure all Americans go broke. Tell me this is not the same logic that brought us to a broken Social Security system? Why would we expect a different result this time? Remember that one difinition of insanity is repeating the same behavior and expecting a different result. Yet every time feces goes into the pool its contaminated so just keep Bill Murray in mind and remember this time its not a Baby Ruth.

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