Health Law to Be Revised by Ending a Program

By Robert Pear for the New York Times –

The Obama administration announced Friday that it was scrapping a long-term care insurance program created by the new health care law because it was too costly and would not work.

Kathleen Sebelius, the secretary of health and human services, said she had concluded that premiums would be so high that few healthy people would sign up. The program, which was intended for people with chronic illnesses or severe disabilities, was known as Community Living Assistance Services and Supports, or Class.

“We have not identified a way to make Class work at this time,” Ms. Sebelius said. She said the program, which had been championed by Senator Edward M. Kennedy, Democrat of Massachusetts, was financially unsustainable.

Kathy J. Greenlee, the assistant secretary of health and human services in charge of the program, said: “We do not have a viable path forward. We will not be working further to implement the Class Act.”

The administration’s decision was another setback for the new law, which is under attack in court, in Congress and in many state legislatures. Ms. Sebelius said her decision “does not affect the rest of the health care law,” which is supposed to provide coverage to more than 30 million people who are uninsured.

But the Senate Republican leader, Mitch McConnell of Kentucky, said the long-term care program was “only one of the unwise, unsustainable components of an unwise, unsustainable law.” He and other Republicans in Congress want to repeal the entire law.

Advocates for older Americans and people with disabilities expressed disappointment at the decision, and Ms. Sebelius said Americans still had an “enormous need” for long-term care insurance. “At $75,000 a year for a nursing home and $18,000 a year for home health care, most families cannot afford to pay out of pocket,” she said.

The program was intended for people with severe disabilities who wanted to live in the community, though benefits could also have been used to help pay for nursing home care or assisted living. It would have been financed with premiums paid by workers, through voluntary payroll deductions, with no federal subsidy. Premiums were supposed to have ensured the solvency of the program over 75 years.

But Ms. Sebelius said she agreed with actuaries who feared that “not enough young, healthy people” would enroll. “This could have led to a vicious cycle where premiums would have to be set higher and higher to cover the likely costs of benefits, leading fewer and fewer healthier people to sign up for the program,” Ms. Sebelius said.

Two early critics of the Class program — Senator John Thune of South Dakota and Representative Charles Boustany Jr. of Louisiana, both Republicans — said they had been vindicated.

“The Obama administration ignored repeated warnings about the financial solvency of this massive new entitlement and suppressed information on the viability of the program,” Mr. Thune said.

In an interview, Mr. Boustany said that “in their haste to get the bill passed,” President Obama and Congressional Democrats ignored warnings about the program’s financial risks.

When Congress was developing the program in late 2009, Senator Kent Conrad, Democrat of North Dakota and chairman of the Budget Committee, described it as “a Ponzi scheme of the first order” because it required an ever-increasing stream of premiums to cover the cost of benefits. Connie Garner, who helped devise the long-term care program as an aide to Mr. Kennedy, said she was “very, very disappointed” by the decision. “The program could have been made to work” if the administration had tried harder, Ms. Garner said.