[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

CLASS CANCELED: AN UNSUSTAINABLE PROGRAM AND ITS CONSEQUENCES FOR THE
NATION'S DEFICIT

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

AND THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

OCTOBER 26, 2011

__________

Serial No. 112-101

Printed for the use of the Committee on Energy and Commerce

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan
Chairman

JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

(ii)

Subcommittee on Oversight and Investigations

CLIFF STEARNS, Florida
Chairman
LEE TERRY, Nebraska DIANA DeGETTE, Colorado
SUE WILKINS MYRICK, North Carolina Ranking Member
JOHN SULLIVAN, Oklahoma JANICE D. SCHAKOWSKY, Illinois
TIM MURPHY, Pennsylvania MIKE ROSS, Arkansas
MICHAEL C. BURGESS, Texas KATHY CASTOR, Florida
MARSHA BLACKBURN, Tennessee EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California GENE GREEN, Texas
PHIL GINGREY, Georgia DONNA M. CHRISTENSEN, Virgin
STEVE SCALISE, Louisiana Islands
CORY GARDNER, Colorado JOHN D. DINGELL, Michigan
H. MORGAN GRIFFITH, Virginia HENRY A. WAXMAN, California (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
------

Subcommittee on Health

JOSEPH R. PITTS, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey
Vice Chairman Ranking Member
ED WHITFIELD, Kentucky JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois EDOLPHUS TOWNS, New York
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina LOIS CAPPS, California
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
PHIL GINGREY, Georgia TAMMY BALDWIN, Wisconsin
ROBERT E. LATTA, Ohio MIKE ROSS, Arkansas
CATHY McMORRIS RODGERS, Washington JIM MATHESON, Utah
LEONARD LANCE, New Jersey HENRY A. WAXMAN, California (ex
BILL CASSIDY, Louisiana officio)
BRETT GUTHRIE, Kentucky
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

C O N T E N T S

----------
Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Lee Terry, a Representative in Congress from the State of
Nebraska, opening statement.................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 5
Prepared statement........................................... 8
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 10
Prepared statement........................................... 12
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 14
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, opening statement..................................... 15
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 16
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 17
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 18
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 20
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 20
Hon. Donna M. Christensen, a Representative in Congress from the
Virgin Islands, opening statement.............................. 22
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 22

Witnesses

Hon. Denny Rehberg, a Representative in Congress from the State
of Montana..................................................... 25
Prepared statement........................................... 27
Hon. Theodore E. Deutch, a Representative in Congress from the
State of Florida............................................... 30
Prepared statement........................................... 32
Patrick J. Kennedy, a former Representative in Congress from the
State of Rhode Island.......................................... 39
Prepared statement........................................... 41
Hon. Charles W. Boustany, Jr., a Representative in Congress from
the State of Louisiana......................................... 45
Prepared statement........................................... 47
Kathy Greenlee, Assistant Secretary for Aging, Administration on
Aging, Department of Health and Human Services................. 49
Prepared statement........................................... 52
Answers to submitted questions............................... 193
Sherry Glied, Assistant Secretary for Planning and Evaluation,
Department of Health and Human Services \1\....................
Prepared statement........................................... 52
Answers to submitted questions............................... 194

Submitted Material

Statement, dated October 26, 2011, of Senator John Thune,
submitted by Mr. Pitts......................................... 23
Letter, dated November 25, 2009, from Douglas W. Elmendorf,
Director, Congressional Budget Office, to Senator Tom Harkin... 105
Subcommittee exhibit binder...................................... 114

----------
\1\ Ms. Glied did not present an opening statement. Ms. Greenlee
and Ms. Glied submitted a joint prepared statement for the
record.

CLASS CANCELED: AN UNSUSTAINABLE PROGRAM AND ITS CONSEQUENCES FOR THE
NATION'S DEFICIT

----------

WEDNESDAY, OCTOBER 26, 2011

House of Representatives,
Subcommittee on Oversight and Investigations,
joint with
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:05 a.m., in
room 2123, Rayburn House Office Building, Hon. Joseph Pitts
(chairman of the Subcommittee on Health) presiding.
Members present: Representatives Pitts, Stearns, Shimkus,
Terry, Myrick, Sullivan, Murphy, Burgess, Blackburn, Bilbray,
Gingrey, Scalise, Latta, McMorris Rodgers, Lance, Cassidy,
Guthrie, Gardner, Griffith, Dingell, Pallone, Green, DeGette,
Schakowsky, Gonzalez, Matheson, Christensen, Castor, and Waxman
(ex officio).
Staff present: Stacy Cline, Counsel, Oversight and
Investigations; Andy Duberstein, Deputy Press Secretary; Paul
Edattel, Professional Staff Member, Health; Julie Goon, Health
Policy Advisor; Todd Harrison, Chief Counsel, Oversight and
Investigations; Sean Hayes, Counsel, Oversight and
Investigations; Debbee Keller, Press Secretary; Ryan Long,
Chief Counsel, Health; Carly McWilliams, Legislative Clerk;
Monica Popp, Professional Staff Member, Health; Krista
Rosenthall, Counsel to Chairman Emeritus; Chris Sarley, Policy
Coordinator, Environment and Economy; Alan Slobodin, Deputy
Chief Counsel, Oversight and Investigations; Alvin Banks,
Democratic Investigator; Phil Barnett, Democratic Staff
Director; Brian Cohen, Democratic Investigations Staff Director
and Senior Policy Advisor; Alli Corr, Democratic Policy
Analyst; Ruth Katz, Democratic Chief Public Health Counsel;
Karen Lightfoot, Democratic Communications Director and Senior
Policy Advisor; Karen Nelson, Democratic Deputy Committee Staff
Director for Health; and Anne Tindall, Democratic Counsel.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. Pitts. The subcommittee will come to order.
The Chair recognizes himself for 5 minutes for an opening
statement. On October 14, 2011, after 19 months of review and
$15 million, HHS announced what most people, including many
Members of Congress, independent analysts, and CMS's own
actuary, have known about the CLASS program since before the
health care bill became law: It is completely unsustainable.
After determining that the CLASS program cannot meet the
law's 75-year solvency requirement, HHS has decided not to
implement this provision of the law. This shouldn't be a
surprise. Months before PPACA became law, the warning was being
sounded.
On July 9, 2009, CMS actuary Richard Foster wrote, ``36
years of actuarial experience lead me to believe that this
program would collapse in short order and require significant
Federal subsidies to continue.''
Also that month, the American Academy of Actuaries wrote to
the Senate HELP Committee, ``The proposed structure and the
premium requirements within the CLASS Act plan are not
sustainable.''
And Kent Conrad, the Democratic chairman of the Senate
Budget Committee famously called the CLASS Act ``a Ponzi scheme
of the first order, the kind of thing that Bernie Madoff would
have been proud of.''
All of this was before PPACA was signed into law. So why
was the CLASS Act included? Quite simply, PPACA's authors
needed savings, and the CLASS Act provided a convenient
budgetary gimmick. Since participants would have to pay into
the program for 5 years before becoming eligible for any
benefits, CBO estimated including the CLASS Act would reduce
the 10-year cost of the legislation by $70 billion.
By February 16 of this year, even Secretary Sebelius
publicly admitted that the CLASS Act is ``totally
unsustainable.''
The CLASS Act was doomed from the start. We have a very
serious long-term care problem in this country. Costs are
driving people into bankruptcy, and weighing down an already
overburdened Medicaid program. The CLASS Act should not only be
shelved; it should be repealed. And I would like to at this
time yield to the gentleman from Nebraska, Mr. Terry, the
remainder of my time.
[The prepared statement of Mr. Pitts follows:]

[GRAPHIC] [TIFF OMITTED] T6161.001

[GRAPHIC] [TIFF OMITTED] T6161.002

OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA

Mr. Terry. Thank you, Mr. Chairman.
And the failure of the CLASS Act really is of no surprise.
I think most people in this room knew that the CLASS Act, the
CLASS program was flawed from its inception. There is no way
that the incoming premiums could ever cover the benefits to be
paid out. Also, the unhealthy and disabled would have rushed
into this program in such great numbers that they would have
immediately increased premiums for everyone enrolled.
Health care policy analysts raised a red flag on CLASS
because they saw these flaws and understood the high likelihood
of taxpayers later financing a CLASS bailout. So the ultimate
question is, was that a purposeful ruse by HHS and the
administration to make the Affordable Care Act look better,
therefore passing? Or is this just plain old administrative
incompetence? Hopefully, we will get a clearer view on which
one of those it is.
Yield back to you, Mr. Chairman.
Mr. Pitts. The Chair thanks the gentleman, and now
recognizes the ranking member of the Subcommittee on Health,
Mr. Pallone, for 5 minutes for an opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY

Mr. Pallone. Thank you, Mr. Chairman.
On March 23, 2010, our government made a promise to the
American people to improve health care in this country by
enacting the Affordable Care Act, landmark legislation that
expanded and strengthened health coverage in this country.
This promise included the CLASS Act, which gives HHS the
authority to develop a voluntary long-term care insurance
option for working families. The goal of CLASS is to provide
Americans with an affordable method of obtaining long-term care
benefits.
Unfortunately, Secretary Sebelius has announced that HHS
will not move forward with implementing CLASS. But I am here to
tell you that if we do not move forward with the implementation
of the CLASS Act, we will be turning our backs on the millions
of Americans that are in need of a solution for finding long-
term care support.
An estimated 15 million people are expected to need some
form of long-term care support by 2020. Today, more than 200
million Americans lack long-term care insurance. And currently,
Medicaid pays 50 percent of the costs of long-term services.
And that price tag is quickly rising every year. Persons that
develop functional impairment are often forced to quit their
jobs or spend down their incomes in order to qualify for the
long-term care supports and services they need. The CLASS Act
program is designed to allow people to plan in advance, to take
personal responsibility for their own care, and obtain the
support that they need in order to potentially remain in their
communities and even remain active in their jobs.
Now, instead of allowing this population an opportunity to
remain self-sufficient, we are sentencing them to unnecessary
poverty to receive the care that they need. If we as a country
do not invest in fixing long-term care, people with functional
impairments will keep returning to costly acute settings to
address potentially preventible conditions. And I don't think
we can sit back and do nothing.
I do not agree that HHS has completed their work on trying
to implement CLASS. Mr. Bob Yee, whose dismissal last month as
the CLASS actuary, first signaled that HHS was abandoning this
program, gave the Department a path forward to implement CLASS.
His report to HHS states, ``That the CLASS benefit plan can be
designed to be a value proposition to the American workers as
the CLASS Act prescribed it.''
Mr. Yee has developed options that address adverse
selection and premium support. One of Mr. Yee's options is what
he calls phased enrollment, in which large employers offer the
plan first before individuals can sign up. Another option is
temporary exclusion, no benefits for 15 years if the need for
help arises from a serious medical condition that already
existed when someone enrolled.
Mr. Yee is an optimist. He explains how HHS should move
forward. So why does the Department take such a negative
approach and close the door on implementation when the work has
not been completed? The Affordable Care Act requires that the
CLASS Act implementation proposals be reviewed by the CLASS
Independence Advisory Council, which HHS has yet to establish.
This council should be convened immediately in order to better
inform the efforts of the Department and to represent the
interests of stakeholders that have been invested in CLASS for
over a decade. The Department is not supposed to unilaterally
abandon CLASS without convening the advisory council. The
council may reveal other workable options for long-term care
that the Department has not considered.
The CLASS Act is the first step towards improving our
Nation's long-term care problems. It provides an infrastructure
that can be implemented. And this was an important part of
health care reform. I refuse to give up on CLASS, just as I
refuse to give up on the health care reform.
Now, I know my colleagues on the other side want to give up
on it all. They want to repeal everything. They want to repeal
the whole Affordable Care Act.
But I have to say, Mr. Chairman, I am tired of the
Republican rhetoric that says Congress and the government in
general can't do anything. The last two speakers on the other
side, and I wrote it down, used terms like gloom, failure,
can't do, no way.
You know, why can't we do things? Part of what makes us as
Americans is that we are can-do people. We can have universal
affordable health insurance. We can provide long-term care
insurance. I certainly don't think that the Department should
play into the same negative theme that I keep hearing every day
from my opponents on the other side. And that is what is so
disappointing to me today, is to see HHS play the same negative
thing; we can't do this, we can't do that.
You know, I look on the floor today, Mr. Chairman, what are
we doing this week in Congress? We are not doing anything. And
this is the attitude that is pervasive around here, that we
can't do anything.
Well, I think we can do things. We can have affordable
health care. We can have a plan for long-term care. And I just
wish that we would understand that the American people expect
us to do something and not just sit back and say, we are
failures, we can't do this, we can't do that.
Let's do the CLASS Act. I would ask the Department go back
to the drawing board, be optimistic, and come up with a plan
that implements the CLASS Act.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Pallone follows:]

[GRAPHIC] [TIFF OMITTED] T6161.003

[GRAPHIC] [TIFF OMITTED] T6161.004

Mr. Pitts. The Chair thanks the gentleman and recognizes
the chairman of the Subcommittee on Oversight and
Investigations, Mr. Stearns, for 5 minutes.

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA

Mr. Stearns. Thank you, Mr. Chairman.
And I welcome this opportunity to have a joint hearing
between your subcommittee and mine.
And I would address the gentleman from New Jersey. He
refuses to give up. Of course, this is something that all of
his Democrat colleagues, many of his Democratic colleagues,
both in the House and Senate, all indicated they have grave
concerns about this new entitlement program. It is too much
spending. And I suspect that he wishes to continue this program
in light of the fact that it is going to be a budget buster.
And we are doing something here in Congress; we are trying
to balance the budget. So we convene this joint hearing of the
Oversight and Investigations and Health subommittees to address
the Energy and Commerce Committee's long-standing inquiry into
the circumstances under which the CLASS Act was passed, a
program that was recently pronounced dead by Secretary
Sebelius.
The Community Living Assistance Service and Support Act, or
the CLASS Act as we call it, is a long-term care program that
was included in the President's health care law. It was meant
to be self-funding. Individuals paying premiums into the
program would cover the costs of individuals receiving
benefits.
However, my colleagues, even before the passage of
Obamacare, Republicans recognized the CLASS Act had a critical
design flaw. CLASS would never be self-sustaining, and would
eventually go bankrupt. Some Senate Democrats even joined us,
saying they, ``had grave concerns that the real effect of the
CLASS Act would be to create a new Federal entitlement program
with large, long-term spending increases that far exceed the
revenues.''
Perhaps the most damning indictment came from Senate Budget
Chairman Kent Conrad, who characterized the CLASS Act as a
``Ponzi scheme of the first order,'' as the gentleman from
Pennsylvania mentioned when he was quoting him, ``the kind of
thing that Bernie Madoff would have been proud of.''
As with other provisions of Obamacare, Democrats didn't
bother to fix the CLASS Act. They had every opportunity, and
they didn't work with Republicans to find common ground. They
were too busy using procedural tricks to cram through a law
before even the public could realize what was in it. But they
didn't just quietly sneak the CLASS Act in. They had the
audacity to claim that it would provide $70 billion in deficit
savings. Democrats brazenly stated, even though they knew
better, that the CLASS Act would actually, actually save the
American people money.
They were deliberately ignoring the truth about the CLASS
Act. Democrats overstated the fiscal conditions of this program
intentionally. The $70 billion in alleged savings from the
CLASS Act was crucial, crucial to passing the health care law.
And this administration promised the American people that the
bill would result in $140 billion in savings. Half of those
savings were from the CLASS Act, and the other half were from
tax increases and cuts to Medicare.
So after 19 months of trying, Secretary Sebelius announced
she does not, ``see a viable path forward for CLASS
implementation at this time.''
Now, the question is, why did it take the administration so
long to figure out what everybody else, even the CMS chief
actuary, has known for many, many years? HHS and the
administration seem to have gone to extraordinary lengths to
ignore the truth so that they can continue to sell the false
savings on this program to the American people. Even staff at
HHS knew long ago that the CLASS Act was a financial disaster
and that it would cost money and simply not save it.
This committee conducted a comprehensive investigation with
Senator Thune, Congressman Rehberg, and a working group of
other Republicans from both the House and the Senate. We
discovered 150 pages of emails and documents from HHS
questioning the sustainability of the CLASS Act as early as May
2009. Staff and officials within HHS called the program a
``recipe for disaster'' that would ``collapse in short order.''
Now, this is going back to 2009. These are 150 pages of
detailed documents and emails.
But while voices of reason questioned the program
privately, Secretary Sebelius and other administration
officials publicly proclaimed their support. As we have seen
before, first with the waivers, now with the CLASS Act, the
Obama administration overpromises, underdelivers, and waits
until implementation to admit its policy failures.
Under CBO rules, the CLASS failure will cost the American
taxpayers $86 billion, the most recent CBO projection of the
supposed savings from the CLASS Act. If CLASS had gone into
effect, it would have increased our deficit by the third
decade. How much will the rest of Obamacare cost us? What are
the hidden long-term costs? And when will the administration
tell us the truth about that?
[The prepared statement of Mr. Stearns follows:]

[GRAPHIC] [TIFF OMITTED] T6161.005

[GRAPHIC] [TIFF OMITTED] T6161.006

Mr. Pitts. The Chair thanks the gentleman.
Now recognizes the ranking member of the Subcommittee on
Oversight and Investigation, Ms. DeGette, for 5 minutes.

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO

Ms. DeGette. Thank you very much, Mr. Chairman.
I particularly want to welcome our colleagues present and
past here today, in particular our friend Patrick Kennedy. It
is so good to see you here today. And I know we all feel that
way.
I hope this hearing will help us to find a path forward to
develop a plan to provide and pay for the ongoing burden of
long-term care. Millions of seniors, disabled individuals, and
their families face this challenge today, and tens of millions
more will face it in the future. The CLASS Act was an effort to
address these burdens. The program was added to the health care
bill in this committee on a bipartisan voice vote. It was
designed as a voluntary insurance program to provide
beneficiaries with a cash benefit to help pay for institutional
care or assistance to live independently in the community. Now,
as we have all been discussing, the administration announced
last week that it would not move forward with the
implementation of the CLASS program because it was currently
unable to do so in an actuarially sustainable fashion.
I am interested in hearing from the administration's
representatives about how they came to this conclusion and what
potential they have for moving forward.
Now, from this side of the aisle the reaction has primarily
been one of disappointment. We understood the scope of the
Nation's long-term care problems and the impact that these
problems had on seniors and the disabled and their families.
And we were hopeful, when we passed the Affordable Care Act,
that the CLASS program would be the solution.
Now, as you can hear from today's opening statements, some
on the other side of the aisle seem positively gleeful that
this CLASS program has been set aside. And that view, in my
opinion, is really shortsighted because we have got to keep
looking for solutions to the long-term care problem, and we
have got to do it in a bipartisan way. We cannot and we should
not give up.
Ten million Americans need long-term care right now. And
this number is expected to grow by 50 percent over the next
decade. Long-term care, as we also know, is expensive. It wipes
out seniors' savings, and it forces many to go on Medicaid,
which in turn costs States and taxpayers billions of dollars.
So the present situation is both fiscally and morally wrong.
Mr. Chairman, many opponents of the health care law are
using this CMS announcement about CLASS as an opportunity to
attack the entire law. In the context of those claims, I want
to set the record straight on two important subjects. First,
with or without CLASS, the health care reform bill continues to
be a financially responsible law that will reduce the Nation's
debt. When we passed that bill, CBO told us it would save about
$200 billion over the next decade. CLASS was responsible for
about $70 billion of that savings. That means, even without
CLASS, the numbers still add up. The health care law will save
taxpayers over $120 billion over the next decade and even more
in the decade after that.
Second, I want to address the myth that the administration
announcement somehow hobbles the health care law. It does not.
The CLASS program was an important part of the law that
provided a new and important long-term benefit. But even though
the administration has decided not to move forward with this
program, the rest of the bill's benefits continue to pile up.
Millions of seniors are enjoying discounts on prescription
drugs in the part D doughnut hole. Young adults are able to
retain their health insurance through their parents' plans.
Taxpayers are saving money because of the bill's initiatives to
cut Medicare and Medicaid fraud, waste, and abuse. Millions of
Americans are protected from the worst abuses of the insurance
industry. Small businesses are receiving valuable tax credits
to provide health care coverage. And by the time the health
care bill is fully implemented, over 30 million otherwise
uninsured Americans will have access to good, affordable health
care law--or health care coverage.
Now, I am disappointed about the outcome of CLASS. But even
without this part, the health care law will continue to provide
critical benefits for tens of millions of Americans. My hope
was that CLASS would solve our growing problems in providing
and paying for long-term care. And I still hold out hope that
it can be part of the solution. It really has to be. I want to
hear from the administration today exactly where we are. But
more importantly, I want both of these subcommittees and the
full committee to explore together how we move forward. Can the
administration ultimately find a way to make CLASS a workable
solution? Are there legislative solutions that can help make
CLASS a workable and sustainable program? The committee and the
Congress have a responsibility to help the elderly and disabled
in our society who need long-term care. I hope this hearing
will help us meet this responsibility.
Mr. Pitts. The Chair thanks the gentlelady and now
recognizes the gentleman from Georgia, Dr. Gingrey, for 5
minutes.

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA

Mr. Gingrey. Mr. Chairman, thank you.
And I will admit to being gleeful this morning. It is hard
not to be gleeful when we just rescued $80 billion from a
Democratic sink hole and now are returning that money to the
American taxpayer. Yes, indeed I am gleeful.
But to quote the President of the National Coalition on
Health Care in a Politico story yesterday, ``The best strategy
is to keep CLASS Act on the books until health reform takes
hold and hope the political environment changes enough so that
the program can be tweaked into shape.'' That, frankly, sounds
like a recipe for disaster.
Mr. Chairman, when a pharmaceutical drug does not work as
intended it isn't kept on the market with the hope that one day
it might be tweaked. It is recalled, clean and simple. And this
CLASS program is not unlike a defective drug. And its repeal is
a necessary step toward successful long-term care reform. And I
agree with Ms. DeGette on that.
CLASS does not work. The administration cannot fix it
without massive taxpayer bailouts. And as long as it survives
and is still on the books, it is a threat to the current
entitlement programs and especially to Medicare. Additionally,
a congressional report released last month on CLASS presents
evidence that former Senator Kennedy's senior staffers and
administration officials ignored CMS actuary Rick Foster's
repeated warnings on the insolvency of the program. They also
ignored studies conducted by the American Academy of Actuaries
and the Society of Actuaries supporting Rick Foster's concerns.
According to the report, the Kennedy staff response was,
``decided she doesn't think she needs additional work on the
actuarial side.'' And then allegedly told administration
staffers she had a score from CBO on CLASS that was actuarially
sound. And yes, it kept going.
One month later, Richard Frank, Deputy Assistant Secretary
for Planning and Evaluation at HHS stated publicly that we in
the department have modeled CLASS extensively, and we are
entirely persuaded that financial solvency over the 75-year
period can be maintained. Yet to my knowledge, no model from
CBO or the administration suggesting that CLASS is solvent has
ever been produced publicly, even after repeated requests made
by this committee, Mr. Chairman.
That is simply unacceptable. If the warnings of CMS
actuaries were ignored, this committee and the American public
need to know why they were ignored. We simply cannot afford to
let this administration hide behind any backroom deals and
secret handshakes any longer.
Mr. Chairman, I believe that this committee must continue
to seek the truth from the Obama administration on the economic
modeling used to sell us on the CLASS Act and Obamacare and,
indeed, on the entire bill that was sold to the American
people.
And further, I would once again call on this Congress to
pass H.R. 1173, a bill that my good friend and fellow physician
Dr. Boustany has introduced to repeal the CLASS Act.
And Mr. Chairman, with that, I would like to yield the
balance of my time to my colleague from Tennessee, Ms.
Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE

Mrs. Blackburn. Thank you, Mr. Chairman.
And I thank the gentleman from Georgia. We appreciate
having the hearing today and reviewing what is taking place
with the CLASS Act. I think that it is apparent that, despite
the best efforts of the Federal Government, it is very clear to
all of us that there is no way that the Federal Government more
effectively or efficiently runs a health care program than the
private sector.
Indeed, as we went through this entire debate--and for my
colleagues across the aisle, I will remind you--there is no
example in the United States of where the Federal Government
has run this effectively, has saved money. Indeed, when you
look at TennCare, you see cost overruns. There is no example
where these near-term expenses yield you a long-term savings.
It has not happened, not in Tennessee, not in Massachusetts,
not in New Jersey with guaranteed issue.
And it does bring up other problems that exist with the
CLASS Act, indeed the budget gimmickry that was there
throughout the entire Obamacare bill. What else is within this
bill that would be gimmickry that was there to yield a savings?
This is something that we need to look at as a committee, get
to the bottom of. I think also the other thing that it
highlights is the red flags that many of our colleagues have
mentioned, indeed this being called a recipe for disaster,
which now it is quite apparent that it is.
And then I think that another concern that we will want to
address is the lack of transparency that existed in HHS as they
moved forward with discrepancies in public statements and
private statements. And we will want to get to the bottom of
that. Indeed, they have spent 19 months trying to implement an
unworkable problem--program. And I appreciate that we are
having a hearing to get to the bottom of it.
I yield back.
Mr. Pitts. The Chair thanks the gentlelady and now
recognizes the ranking member of the full committee, Mr.
Waxman, for 5 minutes for an opening statement.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Waxman. Thank you very much, Mr. Chairman.
Well, the Republicans are gleeful, and they are happy to
admit that. If they are gleeful, it is because they want to
repeal the Affordable Care Act and this particular provision,
which attempts to deal with the issues of long-term care.
A lot of people around the country don't realize that if
they have health insurance, even Medicare, it doesn't pay for
their assistance when they need what is called long-term care.
And if they repeal the CLASS Act, they will have the following
status quo continued.
Right now, over 10 million Americans are in need of some
form of long-term care, and this number is expected to increase
to 15 million by 2020. Seven in 10 people in the country will
need help with basic daily living activities at some point in
their lives because of a functional disability.
The cost of long-term care is astronomical. The average
nursing home bill currently stands in excess of $70,000 a year.
Monthly charges for home health services averages out at
$1,800. Private health insurance, which my Republican
colleagues says is the way to solve the problem, a lot of those
private insurance policies often are too expensive or difficult
to purchase. As a result, less than 10 percent of the
population holds these policies.
By far and away, the largest spender for long-term care
comes through the Medicaid program. In fiscal year 2010 alone,
the combined Federal and State price tag for these services was
some $120 billion. That is a publicly-financed program.
So the Republicans would allow this program that is
publicly financed to be the only hope for seniors that can't
afford a policy to cover them for their long-term care needs.
They started off this year by saying, we want to repeal the
Affordable Care Act, and then we will replace it. We have never
heard what their replacement is.
They have no idea how to deal with this problem, only to
tear down the attempts to make the problem more manageable for
the millions of Americans who face the dilemma of how to pay
for their long-term care or the long-term care costs of their
family.
Well, it was for this problem that Congressman Pallone and
Congressman Dingell and Senator Kennedy worked to establish an
effort to meet the long-term care needs of our elderly and
disabled citizens and their families, as well as to provide
fiscal relief to the Medicaid program. The Community Living
Assistance Services and Supports initiative, which is the CLASS
program, was made part of the Affordable Care Act. This
represented the first real attempt at the national level to
tackle the country's long-term care puzzle. And it has eluded
us for decades because of the complexity and the expensive
price tag. We should not lose sight of all this, even as the
program struggles to get off the ground.
Now, no doubt the CLASS program is not crafted perfectly.
No piece of legislation is, especially one that is as novel and
as unique as CLASS. Everyone acknowledges that. But
regrettably, Republicans have called this hearing today to
dwell on the problems that have stymied implementation of
CLASS, not how to fix those problems to deliver the promising
future that could and should lie ahead for the CLASS program.
Ten days ago, Secretary Sebelius announced she is putting
CLASS on hold. That is because of unintended flaws in the
statutory authority. She feels she could not at this time fully
implement the law. I find that disappointing. But until she
finds a path forward, the action she has taken is the
responsible thing to do, fiscally and otherwise. But calling
for a timeout is not the equivalent of throwing in the towel,
as Republicans would have the public believe.
Contrary to the Republican title this hearing, CLASS has
not been canceled; rather, it simply stands in recess.
The Republicans complain we are ignoring the truth. Well,
they are ignoring the truth of the plight of millions of people
to finance their long-term care. They talk about the financial
disaster. What about the financial disaster for those families
facing this issue? Recipe for disaster. Doing nothing and
repealing the CLASS Act is a recipe for disaster.
They talk about overpromising and underdelivering. They
have promised to repeal and replace, and they have never told
us what they would do. All they have done is pass a law that
would make the Medicare program not a guarantee, but something
that may be available in the future, but for most people, it
may not.
I want to put all this in perspective, and look forward to
the hearing today.
Mr. Pitts. The Chair thanks the gentleman, and now
recognizes the vice chairman of the Health Subcommittee, Dr.
Burgess, for 5 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS

Mr. Burgess. I thank the chairman for yielding.
Welcome to our panelists this morning. A great bipartisan
group of Members and former Members.
And I also want to welcome the second panel from the
agencies. We certainly look forward to hearing your testimony
this morning.
I am a believer in long-term care insurance. And really,
this hearing is more about the budgetary gimmicks that were
used to force through the Affordable Care Act, which really if
I can't remove the Affordable Care Act, I would like to at
least remove the word affordable from the title. But
nevertheless, this is a hearing about the classic Washington
whodunit; what did you know, and when did you know it?
But I am a believer in long-term care insurance. I
purchased a long-term care insurance policy long before I came
to Congress, after I turned 50, on the advice of my mother. And
I encourage other people to do the same.
Now, Mr. Waxman says that it is going to be too expensive
for seniors to do that. My premium is a little less than $100 a
month. I don't know what the premiums would have been in the
CLASS Act, but they certainly would not have been benefits as
substantial as the ones that I have purchased in the private
sector. And I am not always dependent upon the Federal
Government to end up doing the right thing.
We heard Mr. Pallone talk about a 15-year exclusion. Well,
I didn't have a 15-year exclusion on the policy that I bought.
Now, Congress could do something to make it easier. You could
let me pay for that with pretax dollars, full deductibility of
long-term care insurance. Why don't we do that? You could let
me pay for it out of my health savings account. Why do don't we
do that? These are simple things that are within our reach and
grasp that I frankly do not understand why we won't tackle.
And Mr. Pallone talked a little bit about some of the words
that were used. I was encouraged to hear him use the word
premium support. Yes, that is a good idea, Frank. We have got
some place to talk about there. But he also referred to us as
opponents.
And I remember that night in July of 2009 when the CLASS
Act first appeared in this hearing room. The CLASS Act appeared
at the last minute as a placeholder language that Mr. Pallone
brought to the markup, never had a hearing on it, never called
a witness on it. We were just presented with this information,
and oh, well, we will fill in the details later. Well, now it
is later, and we are filling in those details. And some of
those details don't look too encouraging.
It looks like the CLASS Act was a budgetary deception to
mask the actual cost of the Affordable Care Act. And people are
rightly asking now, would we have passed the Affordable Care
Act had the true extent of the budgetary impact been known?
Again, what did they know, and when did they know it? Because
in the spring of 2009, May 19 to be precise, the chief actuary
for the Center for Medicare and Medicaid Services talked about
the financial structure of this program would be ``a terminal
problem.'' So he knew that in May 2009.
Why didn't we discuss that in July of 2009 when we were
doing the markup on H.R. 3200? I think that would have been a
service to the committee and a service to the people if we
could have had those hearings, but we didn't. So here we are.
It is a fact of life. We all age, and at some time, we are
going to rely on some form of long-term care insurance. I will
just say, again, I can think of no more loving gift for parents
to leave for their children than to take care of their needs if
that need were to arise and relieve the children of that
burden.
We never got a chance to fully debate this.
Mr. Waxman, I would say CLASS dismissed, and then we need
to work on canceling.
I am going to yield the balance of my time to Mr. Murphy of
Pennsylvania.

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. Murphy. Thank you.
You know, I have been for some time concerned about the way
this program was double counting premiums as both funding long-
term care insurance and contributing to the so-called savings
in the health care law. As far back in March, I said if any
insurance company began collecting premiums, then tried to
spend $86 billion before paying out a single penny in benefits,
they would rightly be prosecuted as a Ponzi scheme.
What is of particular concern here today is the lack of
forthrightness on the behalf of HHS and the administration
regarding the insolvency of the program. Throughout the debate
over the health care bill, I, other Republicans, and even some
Democrats, again and again questioned the long-term solvency of
this program. But the administration insisted that long-term
solvency was not in question, and that the program would
significantly reduce the deficit.
In fact, the original CBO score of the CLASS Act projected
savings of $70 billion, accounting for almost half of the total
deficit reduction we were told the bill would achieve. And now
Secretary Sebelius tells us it is totally unsustainable and the
promised savings have evaporated.
But even of greater concern is that this committee's
investigation has uncovered evidence that the administration
knew the program was not sustainable as early as the spring of
2009, prior to the passage of the health care law. We are left
with serious questions about what the administration knew and
when they knew it. It certainly appears that the administration
knowingly promoted the CLASS Act as a cost saver when they knew
those savings would never be achieved.
I yield back.
Mr. Pitts. The Chair thanks the gentleman, and now
recognizes the gentleman from Texas, Mr. Green, for 5 minutes.

OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS

Mr. Green. Thank you, Mr. Chairman.
And I thank my colleagues for the time.
First, I want to welcome our colleagues here. I know three
of them we see all the time still.
But I want to particularly welcome our former colleague
Patrick Kennedy.
And Patrick, we worked together on lots of mental health
issues over the years. And I want to thank you for your service
to the American people, and particularly to your district in
Rhode Island. But also I want to thank you for the service of
your father. Without your father's work in the Senate, I don't
have enough fingers and toes to list the issues that would not
be in the law today, including the CLASS Act. And just,
generally, thank you for the service of your family. And I
think all of us thank you for that, and particularly knowing
you and your service in the House.
I think it is correct the CLASS Act was added by voice vote
when we were working on the Affordable Care Act. But I don't
want to use the CLASS Act as a reason to oppose the Affordable
Care Act. There are thousands of people in our country who do
not have the same opportunities that Federal employees have, or
State employees, or bar association members, or American
Medical Association members to purchase a long-term care plan.
And that is what the CLASS Act was supposed to be about, to
give a lot of people to do what Dr. Burgess talked about, to
give a gift to our children, so we have that opportunity. It is
difficult to fund it. And I know we have heard the quote of a
Ponzi scheme. I thought up until today I heard a Ponzi scheme
was only what the Republicans thought about Social Security.
But insurance could be considered a Ponzi scheme, because you
hope you pay these premiums for all these years and you will be
able to collect it.
But that is not what this is about. It was to give people
an opportunity who may not have the same opportunity as we do
as Federal employees, or State employees in the State of Texas
I know have that opportunity. And a lot of businesses have
that. But most people don't through their employer. And that is
what the CLASS Act was about.
Is it perfect? Nothing in the Affordable Care Act is
perfect. In fact, I continue to disagree with calling it
Obamacare because this committee drafted that bill. The
President didn't send us up a bill. Now, I know it is popular
to call it Obamacare because it is a good message. But we are
the ones that drafted that bill in this committee after a lot
of markup, late night markups, that was not dissimilar to what
we went through in 2003 when we had the prescription drug plan
that the majority now pushed, that a lot of us didn't support
because of problems in the bill. But you haven't seen us
repealing that prescription drug plan. We want to perfect it.
And I know we need to perfect the Affordable Care Act. And
so that is what we need look at. If we can perfect the
Affordable Care Act and make it better, then let's sit down
across the aisle.
But for 10 months in this Congress, all we have seen is
repeal. I guess that happened after Social Security was passed
in 1935. There were a lot of people who said, we need to repeal
Social Security. Thank goodness the Congress in 1935 and 1936
didn't do that.
I would like to yield the rest of my time to my colleague,
Dr. Christensen.

OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A
REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS

Ms. Christensen. Thank you, Congressman Green.
I want to welcome my colleagues.
And it is good to see you, Patrick.
A lot of claims have been made about a proposed repeal of
CLASS saving taxpayer dollars. But it is my understanding that
the CBO director has reported that repealing CLASS would have
no impact on the Federal budget. So to claim otherwise is just
not true.
But repeal would have a profound effect, as Howard Glickman
at The Urban institute recently wrote, and I agree, while the
CLASS Act is deeply flawed, it is an opportunity to transform
long-term care from the means-tested Medicaid program to an
insurance-based system. If CLASS is repealed, that opportunity
will be lost, and millions of Americans will find themselves
with only a shrinking Medicaid benefit to support them in their
frail old age or if they become disabled at a younger age.
So our seniors and our disabled need this amended, not
ended.
And I would like to yield the balance of my time to
Congresswoman Schakowsky.

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Ms. Schakowsky. Thank you so much.
We don't have a long-term care policy in the United States
of America. The only thing we really have is finally Medicaid
when people run out of all their money. And so the 10 million
Americans who are in need of long-term care and services and
support really need a program like this.
And it is disturbing to me that when my colleague says,
CLASS dismissed. No, if there are some problems with this
legislation, we are all willing to sit down and figure out how
to perhaps do it better. But the very idea that we are going to
take away better choices for Americans--you know, already one
out of six people who reach the age of 65 will spend more than
$100,000 on long-term care. In this country, that is really a
disgrace. We need a long-term care policy. The CLASS Act is a
good start.
I yield back.
Mr. Pitts. The Chair thanks the gentlelady.
That concludes the opening statements.
The Chair has a unanimous consent request to enter into the
record a statement by Senator John Thune. The ranking member
has looked at this.
Without objection, so ordered.
[The information follows:]

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Mr. Pitts. Our first order of business today will be our
Members panel.
I would like to welcome our Members and former Member, and
all the witnesses today.
But our first panel includes Congressman Rehberg from
Montana. Congressman Rehberg is the chairman of the
Subcommittee on Labor, Health, and Human Services, Education,
and Related Agencies at the House Appropriations Committee.
Next is Congressman Boustany from Louisiana. As we all
know, Congressman Boustany is a doctor. So he will have plenty
of company here at the Energy and Commerce Committee.
Also with us is Congressman Ted Deutch from the great State
of Florida.
And finally, the former Congressman from Rhode Island, and
no stranger to the Energy and Commerce Committee, Patrick
Kennedy.
Welcome.
We are happy to have each of you here today. And we will
start with Chairman Rehberg. You are recognized for 5 minutes.

STATEMENT OF HON. DENNY REHBERG, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MONTANA

Mr. Rehberg. Thank you, Chairman Pitts, and members of the
House Energy and Commerce Committee for the invitation to
testify here today. I also want to thank the members of the
CLASS Act working group, especially Chairman Stearns,
Representatives Burgess and Gingrey, Chairman Pitts, and I see
Mr. Upton is not here. He probably has something else on his
mind at this time. Senator Thune's leadership has also been
extraordinary.
This hearing is really the culmination of a lot of hard
work. And if you think about it, it has unfolded a lot like an
episode of Law and Order. Those shows always begin with a
mystery. Well, on March 23, 2010, the American public was
handed a mystery when President Obama signed the so-called
Patient Protection and Affordable Care Act. Weighing in at more
than 2,500 pages, it calls for thousands of pages of more
regulatory rulemaking. Even the bill's authors didn't read it.
We were told we had to pass the bill before we could find out
what was in it. That is what the CLASS Act working group was
all about. We followed clues, questioned witnesses, and used
the oversight authority of the Congress to track paper trails.
As the chairman of the House Appropriations Committee that
oversees the Department of Health and Human Services, I
requested internal HHS documents that revealed the insolvent
nature of the program. When it passed, we were told that CLASS
is a true insurance program where the premiums collected would
cover the benefits paid out. But as we dug deeper, that cover
story began to fall apart. New facts came to light. Every
actuarial expert, including HHS staff and the chief actuary
himself, agreed that, as currently written, CLASS simply won't
work. It won't pay for itself.
So the government is exposed to tens of billions of dollars
of costs, according to the CBO. And then earlier this month, we
got the equivalent of a full confession. The Department of
Health and Human Services has rightfully decided to cancel the
program. This was a profound development. Once we stripped away
the political spin, brushed off budget gimmicks, and cut
through the bureaucratic jungle, we saw a foundational pillar
of the President's health care law for what it really was,
truly a Ponzi scheme that apparently was included in the bill
solely to help the bill appear deficit neutral.
But there is a problem. CLASS is not gone, not yet. The
Secretary can claim that she has the authority to, in effect,
rewrite it. There will be temptation for some in Congress to
simply slip additional authority into an unrelated bill to turn
CLASS into something it was never intended to be. And that is
why we are here today. The facts are out. Now we have to decide
what is to be done.
I am here because I don't think CLASS should be rewritten
or redesigned by the bureaucracy. At a time when we are
struggling to save the entitlement programs we already have,
good programs like Social Security and Medicare, we simply
can't afford massive new government programs like CLASS. The
potential costs to the government and the employers is so great
that any consideration of a program of this type needs to be
fully considered in a transparent and open way by the public
and by Congress. And just as with the other entitlements in
PPACA, a new program of this type makes the task of saving
existing entitlement programs for existing beneficiaries even
more difficult.
This week I introduced a bill to repeal CLASS and other new
entitlement programs in PPACA, as well as cosponsoring Mr.
Boustany's CLASS repeal bill.
Colleagues, the most important responsibility Congress has
today is to create an environment for the economy to thrive, to
do what we must do to reduce government spending and onerous
regulations. Out-of-control government spending leads to higher
taxes, lower government debt ratings, and uncertainty. And
onerous regulations lead to higher costs of doing business and
barriers to business growth.
We have come to the final act in any Law and Order episode.
We have seen the crime. We have uncovered what happened. We
have got the confession. Now it is time to pass sentence.
Congress has a chance to act decisively to protect the
hardworking American taxpayer from the consequences of an
unsustainable new government program.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rehberg follows:]

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Mr. Pitts. The Chair thanks the gentleman.
We will just go in the order in which you are seated.
And the Chair recognizes Congressman Deutch for 5 minutes
at this time.

STATEMENT OF HON. THEODORE E. DEUTCH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA

Mr. Deutch. Thank you, Chairman Pitts, Chairman Stearns.
Thank you for the opportunity to discuss the CLASS Act. I
am privileged to be joined on this panel with our former
colleague, Mr. Kennedy.
I am also grateful to Mr. Pallone for his commitment to
making the late Senator Kennedy's dream of dignity and hope for
elderly, sick, and disabled Americans a reality.
Senator Kennedy so eloquently captured the failure of our
long-term care system when he said, too often, they have to
give up the American dream, the dignity of a job, a home, and a
family so they can qualify for Medicaid, the only program that
will support them.
CLASS brought so many Americans hope because it was the
first real path to delivering real, affordable long-term care.
Just 10 percent of Americans over age 50 have long-term care
insurance, yet 70 percent of them will need long-term care at
some point.
The remaining 90 percent of Americans rely on Medicaid.
That is why over a third of its dollars go toward long-term
care, and why cuts to Medicaid at the Federal and State levels
demand that we make affordable, cost-effective long-term care
insurance available to the American people.
The current system incentivizes poverty. It forces seniors
to blow through their life savings and spend down in order to
qualify for Medicaid. This perverse incentive forces struggling
families into unthinkable positions. Take, for example, a man
in his 50s with early-onset Alzheimer's. He is ineligible for
long term care through Medicaid due to his wife's salary as a
teacher. At $50,000 a year, her salary is too high for Medicaid
but not nearly enough to pay for the nursing home care that can
cost up to $90,000 annually in Florida. She could leave her job
so they could fall into poverty. She could divorce her sick
husband, leaving him destitute but eligible for expensive long-
term care through Medicaid.
These choices are not unique. These are the current
system's incentives. Save nothing, pass what you do have onto
your children before you get sick, own little property, do not
purchase long-term care insurance. Follow this plan, and you
will be eligible for expensive long-term care through Medicaid.
Triumphant statements from opponents of health care reform
at the suspension of CLASS do nothing for the grandmother in my
district who must choose between helping her grandson pay for
college or paying her own tuition at a nursing home. Cheering
the halted implementation of CLASS does nothing for working
families I represent with no way of paying for the long-term
care their elderly loved ones need.
I visit nursing homes in Florida and am pained to hear
constituents tell me they miss their homes in Century Village,
Kings Point, and other retirement communities. Sadly, Medicaid
steers them into institutional care, despite their preference
for less costly in-home care and other community-based options.
I have heard from seniors facing foreclosure due to a
spouse's exorbitant nursing home bills. I have heard from young
families who cannot afford quality care for the ailing parents
they love, yet long-term care insurance remains out of reach
for most Americans.
No one is immune from the frailty of old age. Anyone can
fall ill or become disabled. Take, for example, the case of
Alan Brown, a 20-year-old in 1988, when he was struck by a
strong ocean wave that severely damaged his spinal cord,
leaving him a paraplegic. From wheelchairs to transportation to
long-term care, his costs are astronomical. Even with two jobs,
he struggles to get by.
Those who are young and healthy may not always be. Any one
of us could become disabled like Mr. Brown. And if that is not
compelling enough, the inevitability of aging should be.
Critics of CLASS primarily focus on sustainability. If that is
a concern, let's fix it. HHS was given statutory latitude. And
I join the CLASS actuary and CLASS advocates in believing that
the Secretary has enough authority to make the program work.
Others disagree and imply that a legislative fix is needed.
So let's fix it. Just as Social Security succeeded as a wage
insurance, reducing elderly poverty from 50 percent to 10
percent, Americans should have an affordable way to finance
long-term care.
For the 200,000 seniors I represent, the jovial reaction to
the suspension of CLASS was both disheartening and predictable.
Mr. Chairman, my constituents, our constituents deserve
more. We must seize this opportunity to get long-term care
right in America. Together, I believe we can improve upon an
incredibly promising idea: Reduce entitlement spending and
ensure Americans' greater financial security.
Thank you, Mr. Chairman, and I yield back.
[The prepared statement of Mr. Deutch follows:]

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Mr. Pitts. The Chair thanks the gentleman and is pleased to
welcome our former colleague, Congressman Patrick Kennedy, for
5 minutes.

STATEMENT OF PATRICK J. KENNEDY, FORMER REPRESENTATIVE IN
CONGRESS FROM THE STATE OF RHODE ISLAND

Mr. Kennedy. Thank you, Chairman Pitts and Chairman
Stearns, and Ranking Members Pallone and DeGette, and all of my
colleagues who welcomed me back today. I appreciate the
opportunity to testify.
Let's just think for a moment and step back and use our
common sense. All of our family members are going to need
supportive living services. And the question is not how and
what program we are going to put those costs on. Is it going to
be at the State level, the local level, or the Federal level?
The notion is you can't turn away from this problem and think
that the problem is going to go away. Someone is going to have
to be there for our people and our families who are going to
need supportive living services.
So the question for Congress is really, how are they going
to address this problem? And so you can say that actuaries say,
oh, CLASS Act is going to cost money, but the whole point of
health care reform is that we take a broader look at all the
costs associated with health care and really see the forest
from the trees.
So we are well aware that our health care system has been
about cost shifting. You take the uncompensated care and you
put it on the private pay and you hope that someone pays for
the bills of those who can't afford to pay. When are we going
to start to be realistic about this? Because just turning away
from the problem is not going to make the problem go away. So
people will say, oh, this is a program that costs money. You
know, in my father's case, who needed supportive living
services, and my Uncle Sarge Shriver's case, who needed it when
he had dementia, it was nonmedical supportive living services
that helped them in their lives. It was the guy that helped my
Uncle Sarge up from the living room and into the dining room,
and who helped him, you know, get transported around. This was
someone who didn't have a medical degree, doesn't have big
student loans because they went to get a doctor's degree or a
nursing degree. But they were the most essential person in my
Uncle Sarge's life in giving him dignity and giving him a life.
And guess what? It is the least expensive. I should be
getting all the chorus of support from my Republican friends.
If you want to reduce medical costs, try using nonmedical
support services. So you will hear a lot about, oh, you know,
this is going to cost money. Let's just step back and
understand, someone is going to pay. Someone is going to pay.
And so let's be realistic here. Let's also do the right thing
by our family members, and give them the kind of lives of
dignity that they deserve, that we would want for any one of
our family members.
And I hope that we get away from this notion that, let's
place the blame game, because Washington is good at that.
But at the end of the day, our country is facing a
demographic tsunami. It is going to bury this country in red
ink. And the question is, do you want to take all of your tools
out of your toolbox now? Because CLASS Act can be one of the
tools that you use to help address the overall costs of trying
to take care of long-term care. And in my mind, you can either
pay high-priced acute care, institutionalized care costs, or
you can pay for nonmedical supportive living service costs that
will keep people out of acute care settings. The whole notion
of health care reform was to move us from a sick care system to
a health care system. Because it is less expensive at the end
of the day to keep people independent and not dependent, if you
will, on our medical system, which is costly. CLASS Act is a
tool. And let's make it work for all of your constituents who
are going to need the supportive services that are going to
give them the human dignity that each of us would want for our
own family members.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Kennedy follows:]

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Mr. Pitts. The Chair thanks the gentleman and now is
pleased to recognize Dr. Boustany for 5 minutes.

STATEMENT OF HON. CHARLES W. BOUSTANY, JR., A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF LOUISIANA

Mr. Boustany. Thank you, Chairman Pitts and Ranking Member
Pallone, members of the Energy and Commerce Committee, for
allowing me to testify today.
Chairman Pitts, I ask unanimous consent that my full
statement be made a part of the record.
Mr. Pitts. Without objection, so ordered.
Mr. Boustany. I appreciate you allowing me to testify in
support of H.R. 1173.
The bill is really simple. It repeals the CLASS Act, as the
program has been shown to be fatally flawed, fiscally
irresponsible, and irreparable. I opposed the CLASS Act and
have worked to highlight the problems and fatal flaws of the
program.
And I can tell you as chairman of the Oversight
Subcommittee on the House Ways and Means Committee, the
bicameral congressional oversight efforts were vigorous,
extensive, committed, and necessary to expose the truth about
this program.
In fact, Mr. Chairman, this is a victory, a congressional
oversight victory on behalf of the American taxpayer.
Leaving the statute on the books is irresponsible, and it
must be removed. Keeping the law on the books gives bureaucrats
a creative license to keep trying to implement it. And it is an
opening for Congress to keep trying to tweak a failed program.
CLASS is unsustainable and a new unfunded entitlement that we
cannot afford. I agree with employer groups and taxpayer
advocates who have no doubt CLASS will return if Congress fails
to strike it from the books.
Liberal special interest groups insist that HHS has the
broad legal authority to fix the program by excluding eligible
Americans from the program.
Mr. Chairman, I have to say that I am deeply disappointed
that Secretary Sebelius refused to testify today. She should
come here. She should explain why she ignored warnings of the
insolvency of this program and falsely claimed that she had the
authority to change the program.
Lawmakers consistently ignored warnings by the
Congressional Budget Office, the chief Medicare actuary, and
the American Academy of Actuaries when they inserted this
budget gimmick in the Affordable Care Act. After months of
refusing to answer questions, HHS finally--finally--conceded it
lacks the legal authority to make CLASS sustainable. Congress
should repeal it instead of waiting for bureaucrats to change
their mind.
Mr. Chairman, CBO's credibility should also be called into
question for scoring the program as a saver when they knew it
would need a bailout. And in fact, I want to quote from former
CBO official Jim Capretta. Capretta wrote, ``What remains most
perplexing in this whole episode is why CBO played along with
the CLASS charade. They had access to all the same actuarial
data as everyone else. Their own numbers showed the program was
unstable beyond 10 years. The Gregg amendment gave them the
perfect excuse to conclude that CLASS would never be launched
because it could never be viable without massive taxpayer
subsidies. And yet they kept showing the $70 billion, 10-year
surplus in their estimate. Among the many questions about the
sorry episode that are worth pursuing, the role of CBO is
surely one.''
Mr. Chairman, as a physician who has dealt with many, many
patients--I was a cardiac surgeon, and I saw a lot of these
very complex conditions, and saw the entire spectrum of care
and the needs that are out there. I can surely tell you as a
physician there are many, many other options that are much more
responsible, fiscally responsible and sustainable than what
this program was.
My colleague Dr. Burgess mentioned a number of options that
were never entertained as we went through this process. So
beyond CLASS, we must continue to encourage middle class
Americans to plan. That is the fundamental issue here, is
planning ahead, starting at an early age and planning for these
kinds of things. You can't do this at a late stage.
Planning for retirement security, purchasing long-term care
insurance policies. We can do a number of things to make that
even better if we look at these options very carefully.
And finally, on a personal note, I can tell you, from
having dealt with my own father and my wife's stepfather, there
are viable ways to deal with this. And what we need to do now
is be responsible. Let's repeal this failed program. Let's move
forward and come up with responsible policies and move the ball
forward in health care.
[The prepared statement of Mr. Boustany follows:]

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Mr. Pitts. We will call the second panel to the witness
table, and the Chair will turn over the chair to Mr. Stearns
for the second panel.
Mr. Stearns. We have the Honorable Kathy Greenlee, who is
assistant secretary for aging, the Administration on Aging,
U.S. Department of Health and Human Services. The other
individual is the Honorable Sherry Glied, assistant secretary
for planning and evaluation, U.S. Department of Health and
Human Services.

STATEMENTS OF KATHY GREENLEE, ASSISTANT SECRETARY FOR AGING,
ADMINISTRATION ON AGING, DEPARTMENT OF HEALTH AND HUMAN
SERVICES; AND SHERRY GLIED, ASSISTANT SECRETARY FOR PLANNING
AND EVALUATION, DEPARTMENT OF HEALTH AND HUMAN SERVICES.

Mr. Stearns. Good morning. You are aware that the committee
is holding an investigative hearing and, in doing so, has had
the practice of taking testimony under oath.
Do you have any objection to testifying under oath?
No, OK.
The Chair then advises you that under the Rules of the
House and the rules of the committee, you are entitled to be
advised by counsel. Do you desire to be advised by counsel
during your testimony today? In that case, if you would please
rise and raise your right hand, I will swear you in.
[Witnesses sworn.]
Thank you. You are now under oath, and subject to the
penalties set forth in Title 18, Section 1001 of the United
States Code. You are now welcome to give your 5-minute summary
of your written statement.
Please begin, Ms. Greenlee.

STATEMENT OF KATHY GREENLEE

Ms. Greenlee. I apologize, I was expecting questions for
the first panel.
So I thank you, Chairman Pitts, Chairman Stearns, Ranking
Members Pallone and DeGette, and members of the subcommittees.
Thank you for the opportunity to discuss with you today the
CLASS Act. I'm pleased this morning to be joined by my
colleague, Sherry Glied, who serves as assistant secretary for
the Office of Planning and Evaluation for the Department of
Health and Human Services.
As our population ages, there is an increasingly urgent
need to find effective ways to help Americans prepare for and
finance their individual long-term care needs. Almost 7 out of
10 people turning 65 today will need help with daily living
activities at some point in their remaining years. And many
younger people, particularly those living with significant
disabilities may also need assistance.
But this care is expensive. Nationwide, the median annual
cost of a nursing home in 2010 was $75,000. An attendant who
provides home care and no medical tasks, like the dispensing of
medication, is paid approximately $19 an hour.
As this committee knows well, Medicare only covers short-
term and limited long-term care services, and the Medicaid
safety net is only available to those who have depleted
virtually all of their resources. And long-term care insurance,
by and far the most popular private option, can be costly and
difficult to purchase, particularly for those people who have
preexisting health conditions or disabilities.
The status quo is unacceptable, which is why Congress
created the CLASS program. The program's distinguishing
features include an offer of lifetime benefits, a prohibition
on underwriting, and availability of a cash benefit.
Congress also made clear that no taxpayer funds could be
used to pay those benefits and the program must be solvent over
a 75-year period. Over the last 19 months since the passage of
the CLASS Act, HHS has worked steadily to find a financially
sustainable model for CLASS. We conducted substantial analysis
of a wide variety of possible implementation options. We
examined the long-term care market, modeled possible plan
designs, and studied the CLASS statute, and consulted with
actuaries, including an in-house actuary and two outside
actuarial firms, insurers and consumer groups.
On October 14, as you know, we submitted to Congress a
report indicating that we have not identified a way to make
CLASS sustainable, legal, and attractive to potential buyers at
this time. For all of us working on this urgently needed
program, it was a very difficult conclusion, but one we had to
make.
It's crucial to recognize that this does not affect the
Affordable Care Act. Our Department continues to work across
the administration to implement the provisions of the law that
will provide coverage for millions of Americans and will
eliminate the worst of abuses of the insurance industry and
work to control health care costs.
Even without the CLASS programs upfront revenue, the
Affordable Care Act will reduce the deficit. And we will also
continue our work to improve America's long-term care choices.
By 2020, we know that an estimated 15 million Americans will
need long-term care. If we want our family members, friends,
and neighbors to be able to live with the maximum amount of
freedom and independence, we need to make sure they have access
to the long-term supports that make that possible.
In addition to the CLASS Act, to the Affordable Care Act
included other policies to strengthen the choices for long-term
care, such as Community First Choice, the new home and
community based options and an extension of the successful
program of Money Follows the Person.
We believe that our CLASS implementation has shed valuable
light on long-term care challenges. And in the months to come,
we look forward to having a healthy and substantive dialogue
with all interested stakeholders as we continue to seek real
solutions to those challenges.
For that reason, we welcome the opportunity to discuss this
important topic with you today. Thank you for the opportunity
to testify. Assistant Secretary Glied and I are prepared to
answer your questions.
Mr. Stearns. Thank you.
Dr. Glied, you are welcome.
Ms. Glied. I have no statement.
[The prepared statement of Ms. Greenlee and Ms. Glied
follows:]

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Mr. Stearns. That is fine.
OK, I will start with my opening questions.
I guess the first question we are all just waiting with
baited breath is, has the CLASS activity been shut down?
Ms. Greenlee. If I may respond by first describing what
that activity has consisted----
Mr. Stearns. No, no, I am just asking. You answer the
question. The way we work in O&I, we ask a question, and
hopefully, you can give a yes or no.
Ms. Greenlee. We are moving to stop implementation and
reassign the staff that have been working on implementing the
program.
Mr. Stearns. Could I interpret that to mean that you have
shut down the program?
Ms. Greenlee. The program that remains within the CLASS
office is a long-term care awareness campaign. That project----
Mr. Stearns. So it is now shut from the actual CLASS Act to
now an awareness program? Would that be a fair statement?
Ms. Greenlee. That was continued both in the CLASS program
and the deficit reduction act----
Mr. Stearns. Dr. Glied, the question to you, have we shut
down the CLASS Act program?
Ms. Glied. We don't have a CLASS Act program in ASPE.
Mr. Stearns. Right now, we do not have a CLASS Act program.
Ms. Glied. We never had a CLASS Act program at ASPE.
Mr. Stearns. So when we passed the legislation for the
CLASS Act, you didn't interpret that as legislation that for
implementation of the----
Ms. Glied. We don't implement programs within ASPE, so we
conduct analysis of all sorts of things, but we don't actually
implement programs.
Mr. Stearns. So can I interpret your answer as--will the--
is the CLASS Act shut down now in your opinion?
Oh, would the clock start to make sure my time is moving.
Yes, I am sorry.
So we heard from Ms. Greenlee.
Dr. Glied, the question is, has the CLASS Act been shut
down as a program? Just your answer.
Ms. Glied. Secretary Greenlee runs the CLASS Act office.
Mr. Stearns. So she has interpreted that way.
To follow up, another area that I am concerned about is the
very high level uncertainty that was surrounding assumptions in
the actuarial models.
Were you familiar with those back in 2009, Dr. Glied?
Ms. Glied. I was not familiar with them in 2009.
Mr. Stearns. Are you familiar with them now?
Ms. Glied. Yes, sir.
Mr. Stearns. And Ms. Greenlee, were you familiar with
those, the uncertainties surrounding those assumptions back in
2009?
Ms. Greenlee. No, sir. I did not begin working until 2010
in May on the CLASS program.
Mr. Stearns. When you came in May, how soon afterwards were
you aware of the uncertainty surrounding those assumptions? Or
are you aware of them today?
Ms. Greenlee. I am aware of them now. It was several months
after I began working on them that I got up to speed on the
activity prior to enactment.
Mr. Stearns. OK, 2011 was more than a year after--in June
of 2011, more than a year after Obamacare passed and 2 years
since initial concerns were raised about the CLASS, what did
HHS do to make the public aware of this uncertainty when
projecting $70 billion in saving before the bill was passed?
Now you were not there, but Dr. Glied, perhaps you can
answer that question?
Ms. Glied. I was not there either. I would just point out
that the HHS actuary, the CMS actuary, Mr. Foster, published
three separate analyses of the CLASS Act before and during the
time that it was passed. Those were publicly available on the
HHS Web site. They were frequently quoted in the news media,
and in fact, several of the statements already this morning
have referred to them. So the uncertainty about the estimates
was very evident before the legislation passed.
Mr. Stearns. Do you know of any other government actuaries
that discussed this and when, and in your opinion, do you know
of any other besides Rick Foster?
Ms. Glied. The Congressional Budget Office also conducted
analyses of the program, and they came up with a different--
they used different assumptions and had a different result.
Mr. Stearns. Now, as I understand, they made those
assumptions before the Obamacare passed. Is that your
understanding?
Ms. Glied. So, both Mr. Foster and the CBO actuaries and
analysts analyzed various versions of the CLASS Act and other
provisions as the legislation was moving along.
Mr. Stearns. I think, as you have pointed out, Rick Foster
raised concerns about the $70 billion in savings, and you said
other sources did, too, so I guess the question perhaps is
difficult for you to answer, but how is it possible that Health
and Human Services didn't figure out the problem with the CLASS
Act until 2 month after passage of the law?
Is that a question either one of you posed while you were
working there, while you were going forward with the bill in
which Rick Foster and other government agencies indicated that
it was not sound financial, long term, kind of make it
actuarial is not there? Were you aware of that after you were
working there?
Ms. Glied. There was robust and vigorous debate about the
assumptions and the modeling behind CLASS before it passed with
very respected analysts arguing that it was viable and other
respected analysts arguing that it was not viable. That is a
quite common occurrence when you talk about a program that is
as novel and unique as the CLASS Act.
What was different about the CLASS Act and I think special
is that included in it this twin test that required that the
Secretary only proceed if she could show that it was solvent
over 75 years and that it was entirely self-sustaining. So I
think----
Mr. Stearns. So if I can interrupt you, Dr. Glied, what you
are saying is that after the bill passed, based upon Rick
Foster's analysis as well as CBO and others, you started an
analysis of your own. Is that correct to say?
Ms. Glied. As we've--we've sent over documents.
Mr. Stearns. You started doing an analysis to see if it
would pay for itself?
Ms. Glied. We actually had done analyses in the fall as
well.
Mr. Stearns. Did your analysis show anything different than
Rick Foster or----
Ms. Glied. Yes, our analysis was completely consistent with
the CBO estimates.
Mr. Stearns. So, actually, it became apparent to you that
this was not actuarially sound?
Ms. Glied. No. CBO actually thought the program was sound,
and the estimates that we had conducted in the Department that
we sent over to you already, sir, are completely consistent
with the CBO.
Mr. Stearns. Do you state here today that you think it is
financially sound, too?
Ms. Glied. No. I state here today that at the time, in the
fall of 2009, based on the models that we had available at that
time, we believed the program was actuarially sound. We were
dealing in the area where there was considerable uncertainty.
Mr. Stearns. From our standpoint, at least, I would say,
from this side, we are a little concerned that it appears that
there was sort of a deliberative effort on the part of HHS
before passage of the law to avoiding these unpleasant
realities. And of course, as pointed out on our side, Senator
Gregg and Senator Conrad were very concerned and indicated the
whole thing wouldn't work. Was Secretary Sebelius aware of the
uncertainty in the models during the Obama debate for health
care? Were they aware before we passed it of these
uncertainties in your opinion?
Ms. Glied. I think that Mr. Foster's analyses had been
published very widely. I wasn't here, so I can't say precisely,
but his analyses were published very widely in the news media
and spoken about in Congress. It seems unlikely that people
were not aware of them.
Mr. Stearns. All right. My time is up.
The ranking member of the subcommittee, Mr. Pallone, is
recognized for 5 minutes.
Mr. Pallone. Mr. Chairman, without undue respect, I mean, I
know the clock didn't start until almost a minute after you
started your questioning, and then you went 30 seconds over. So
just keep that in mind in terms of the rest of us as we proceed
here with the time.
You know, I just, again, I heard from my colleague, the
chairman from Florida, again, all of this negative stuff: Let's
shut down. Shut down. Repeal. Gloom, failure, can't do.
I have to tell you, when I go home--and we just had another
one of these recesses because the Republicans never meet. We
meet for two weeks, and then we go home for a week, and then we
come back, and they don't have anything to vote on. But when I
go home, I hear this over and over again: Why doesn't
Washington do something? Why are you guys so negative? Why
don't you take action?
I am not going to beat up on you guys today. But I do want
to say that I am looking for a path forward. I don't want to
accept this doom and gloom that we can't do it, OK? And I am
trying to find a way through my questioning to get to actually
move forward and not go into recess or hold or whatever it is
that is being described here today.
So, Secretary Greenlee, my hope is that this CLASS
Independence Advisory Council, which is established under the
statute, can be a way to move forward and implement the CLASS
Act. The law stipulates that members of the council are to be
appointed by the President; the council is to be comprised of
important stakeholders, people with expertise in long-term care
insurance and actuarial science and those who may participate
in the program, to name a few.
Now you testified that the Department wants to have
dialogue with stakeholders like these as you continue to seek
solutions. I understand that HHS has received over 140
nominations for this 15-member council. Yet the council members
have not been appointed. Why hasn't that been done? And is this
a pathway forward? You seem to say you are putting this in
recess or on hold. Can we appoint this council, and let them
look at the methods of implementation, so that we don't just
put this on hold?
Ms. Greenlee. Congressman, you are correct in your
statement that we are very interested in working with
stakeholders of all types, with Congress; with the consumer
advocates, who fought so hard for this bill; with employers,
who are critical to a success. We do want broad engagement and
recently met with the advocates and made that most sincere
gesture and overture to them that we do want to have broad
conversation.
Mr. Pallone. Yes, but can we move----
Ms. Greenlee. The Secretary has announced that we are
suspending implementation. The Independence Advisory Council
because it is a part of the CLASS act has not been implemented.
At this point, when we seek broad dialogue, we would like to
discuss both CLASS and issues broader, more broadly than CLASS.
I don't see right now moving the Independence Advisory Council
because we want to discuss this in a more broad perspective.
Mr. Pallone. Well, see, I disagree with you completely
because you seem to be suggesting that you are going to decide
whether to move forward, and if you decide not to, then you
don't need to have this council because they would look at what
you are proposing.
But the way I see this council, they are charged--and I am
now quoting directly from the statute--with advising ``the
Secretary on matters of general policy in the administration of
the CLASS program.'' So it seems to me that this council could
be not just there to implement what you decide or not to decide
but actually a way of looking at alternatives and coming up
with suggestions and come back to you or the President and say,
look, maybe HHS doesn't think we can move forward, but we have
got some ideas, and we can show you the way to move forward.
I think that the President--and you make that suggestion
that this is the way we move forward. We maybe right now don't
think we can do anything. I disagree. But let this other group
take another look and take a try.
Let me just ask you, would you agree that this expert group
could be useful in helping the Secretary looking at options for
moving forward, even though you now feel that there aren't any?
Ms. Greenlee. Congressman Pallone, we are most sincere in
saying that we have suspended implementation. I do not want to
send a mixed message by saying we are continuing to work on
CLASS when we are not. We do want to engage with stakeholders.
All of the type of stakeholders that were mentioned in the
statutory section that you read we would be glad to have
further conversation with.
Mr. Pallone. I don't think it is going to be very effective
engaging us or engaging everyone, based on what you said today.
I really would urge this administration to move forward with
naming the members of this panel and using this panel as a way
to move forward. I personally and many of us do not agree with
your decision to put this on hold. And I think if you have this
advisory council in place, hopefully they can look at
alternatives and come back and make some additional
suggestions.
I am just looking for something here, Madam Secretary. I am
not trying to be difficult, but too many of us have worked too
hard on this, and we feel very strongly that this can be
implemented. And we don't want to give up. And I am not just
speaking for myself. And I have got to be honest: The American
people want this Congress to take action on long-term care and
on so many other things. And it is not a good thing to simply
say, we are going to put it on hold. Let this advisory council
meet and find a way forward. And I will follow up further on
that.
Mr. Stearns. Thank the gentleman.
I recognize the chairman of the Subcommittee on Health, the
gentleman from Pennsylvania, Mr. Pitts.
Mr. Pitts. Thank you.
Secretary Greenlee, why did it take until 11 months after
PPACA passed for the Secretary to publicly acknowledge that
there were flaws with CLASS?
Ms. Greenlee. Chairman Pitts, I believe that Secretary
Glied has acknowledged that there was broad discussion at the
time the law was passed about both the opportunities and the
potential problems with the law. What the Department began to
do immediately after the law was passed was further develop
models that truly modeled the law as it was presented, because
there were various options before the law was passed.
It took some time for us to put those models together, and
we began what was an iterative process to look at the basic
plan, the bare law, the natural reading, and to begin from
there finding if there were other methods that could help us
achieve solvency and legality. It took just a matter of time to
do that detailed and very thorough work.
Mr. Pitts. You testified before the committee in March. Why
didn't you indicate at that time there were significant
problems with the program?
Ms. Greenlee. Mr. Chairman, at the time I testified in
March, we, in dialogue with the committee, discussed the degree
that the Secretary may have some discretion to modify the
program. That is a good reflection of where we were at that
point in time. We had done the basic analysis and knew that the
statute, the bare bones statute, would produce a premium that
was unworkable.
We were at that point exploring the degree to which the
Secretary had discretion to make a few modifications. Following
that work, we did additional developmental work that led us to
this conclusion. So what I had explained at that point in time
was very accurate with regard to the work that we were doing
last spring.
Mr. Pitts. Now, at our last hearing on CLASS, you and
Chairman Emeritus Dingell had the following exchange, and I
will quote:
``Dingell: I begin by welcoming the Secretary, and I ask,
do you have all of the authority you need in the Department to
ensure that this program gets off to a start in an actuarially
sound manner?''
Ms. Greenlee: ``Yes, we do.''
Mr. Dingell: ``And you lack nothing?''
Ms. Greenlee: ``No. We can make it solvent. We have the
authority.''
Why did you think that the Secretary had the legal
authority to make the CLASS program solvent?
Ms. Greenlee. At that time, we were looking at three
different items that we discussed, that I testified about in
front of the committee: The anti-gaming provisions; the need to
possibly index premiums; and the need to raise the earnings
level. We felt that in that area, the Secretary had some degree
of flexibility or discretion. And I was truthful when I talked
about that we were exploring that and felt very positive.
We did further analysis that led us in a different
direction after we made those initial changes to the model. We
found that even with those, we would still produce a premium
that we felt like was higher than could produce a reasonable
take-up rate.
Mr. Pitts. This question is--and when did the legal
analysis come?
Ms. Greenlee. The final legal analysis was prepared earlier
this month as we did the final report. We had been engaged with
our legal counsel all along as we have surfaced different
ideas, such as the three that I just explained, and asked them
for initial guidance. We didn't get the full guidance until we
did the final report.
Mr. Pitts. Now, for both of you, can you please provide an
overview of how much has been spent by the Department during
this administration to review, analyze and implement the CLASS
program to date?
Ms. Greenlee. Yes, sir, I can respond to that.
The Department in fiscal year 2010 and 2011, between the
two offices that Assistant Secretary Glied and I run spent just
under $5 million. That is a reflection of the work from both
endeavors.
Mr. Pitts. Now according to the e-mails, Secretary Glied,
and other documents obtained by a bicameral working group, the
Office For Planning and Evaluation, which you now run, had
prepared technical comments on the CLASS program in December of
2009 for congressional consideration.
During your time at HHS, have you been briefed by your
colleagues or staff regarding ASPE's 2009 analysis of CLASS and
the process under which the ASPE comments were received and
reviewed by congressional offices, and what happened with these
technical comments?
Ms. Glied. I am somewhat aware of what happened. I was not
here at the time. And I don't know the precise details of what
happened. I have seen some of the of documents that were turned
over to you, sir.
Mr. Pitts. Were any of the 75-year actuarial analyses
conducted before PPACA passed?
Ms. Glied. Before the legislation passed, we had a
contract, an ongoing contract, with Actuarial Research
Corporation, and we sent over to you the estimates of premiums
and prices that they calculated at the time. They did not have
a full model with which to calculate 75-year solvency. In fact
those were the models that were developed in the subsequent 19
months. They had a model to calculate premiums, and that was
the model that we were using to provide technical assistance.
We were focused on looking at how different changes in the law
would affect those premiums over time.
Mr. Pitts. And finally, the $5 million you mentioned, does
that include contract work?
Ms. Glied. Yes, it does.
Mr. Stearns. The Chair recognizes the gentlelady from
Colorado, the ranking member of the Oversight and
Investigations Subcommittee, Ms. DeGette.
Ms. DeGette. Secretary Greenlee, you testified that it is
urgent to find effective ways to help Americans prepare for and
finance their long-term care needs. And I think it is safe to
say that all of us agree with that statement.
Now, I believe that you stated that 15 million Americans
will need long term care by 2020 is that correct.
Ms. Greenlee. Yes.
Ms. DeGette. And there are a range of long-term care
options now, nursing homes, assisted living, and home health
care to name a few. The previous panel talked about some of
those. But most of Americans with long-term care needs live at
home. And so, in your testimony, you talked about the
importance of Americans with disabilities living the maximum
amount of freedom and independence. Can you briefly describe
some of the benefits of receiving long-term care services
within the community?
Ms. Greenlee. Congresswoman, I certainly can.
I would also like to say that I thought Congressman Kennedy
did also an excellent job of framing the two critical issues.
One is it is less expensive to provide services in the
community. Regardless of the payer source, whether it is the
individual, the family, Medicaid, it is cheaper in the
community. It is also the setting that overwhelmingly people
desire, regardless of age. It helps most preserve a quality of
life, dignity, independence, connection to their families and
communities, the important things in life and that is why
community service is so critically important to people.
Ms. DeGette. Right. Now, you were the former administrator
of Kansas' Medicaid program, so I know you have some experience
on the topic of Medicaid, which is the primary payer of long-
term care in this country. And I am assuming that you have
experience in the impact of long-term care spending on State
and Federal governments; is that correct?
Ms. Greenlee. Yes.
Ms. DeGette. So if we rely on--and I agree with you. I
thought former Representative Kennedy and also Representative
Deutch spoke quite eloquently about the impact of having to
rely primarily on Medicaid for funding long-term care on
families. In other words, middle class families having to make
these terrible decisions about having to get divorced or
putting themselves in poverty or something. Did you see some of
that when you were the--when you were administering this
program in Kansas?
Ms. Greenlee. Yes, ma'am.
As you mentioned, currently Medicaid pays for half of the
long-term care services in this country. This has a very
significant effect on State budgets that many are just really
laboring under at this point. Not just State budgets but the
Federal budgets in terms of the Medicaid program.
But the opportunity that CLASS presents is a way for people
to take responsibility for some of their own long-term care
financing, a way to help working Americans so that they can
afford to provide some protection, so that they are not in a
situation where they have to spend down and impoverish
themselves in order to get care.
Ms. DeGette. So the concept of the CLASS system is that
people will buy long-term insurance and be able to take care of
their needs without making these terrible decisions, right?
Ms. Greenlee. Yes. It will provide additional cash
assistance so that they have more flexibility for their needs.
Ms. DeGette. So it seemed to me from listening to the
testimony on the last panel, from what my colleagues on the
other side are saying, is we don't need CLASS to do that. We
would just have everybody go out and buy long-term health
insurance. Is that the sense you get?
Ms. Greenlee. The private long-term care insurance market I
believe is an option for some individuals, but the private
long-term care insurance market will not be the solution for
everyone.
Ms. DeGette. Why not?
Ms. Greenlee. There are some of their premiums that are not
affordable, and the private long-term care market underwrites
their product, meaning many people with chronic conditions or
disabling conditions do not qualify to purchase the insurance.
Ms. DeGette. I was just telling the staff I have had two
hip replacements myself, and when I went to buy long-term
health insurance for myself, the insurer said, well, we will
sell it to you, but we are going to exclude anything from your
hips, which, you know, if someone has a preexisting condition
and that is excluded, then they are going to end up either
having to pay out of their own pocket for care related to that
or go on to Medicaid, right?
Ms. Greenlee. Yes. And that is why I think we are all
looking for broad options----
Ms. DeGette. Right.
Ms. Greenlee [continuing]. Single options, so that we can
tailor to each person.
Ms. DeGette. Now, let's go back to the States' budgets.
Let's say we don't have something like the CLASS Act, some kind
of a viable solution to helping people get long-term health
insurance that they can afford and that doesn't exclude
preexisting conditions, what is going to be the impact on the
States' budgets?
Ms. Greenlee. Well, you mentioned that I had worked in
Medicaid in Kansas. I have not seen recent kind of trends in my
home State. But I know that we continue to pay half of the
long-term care costs through Medicaid. We have increasing
numbers of seniors in this country which will help drive up
further demand for Medicaid services, whether they are in
institutions, like nursing homes, or in community, that we need
to have other options so people have somewhere else to go to
help finance long-term care.
Ms. DeGette. Thank you. Thank you very much.
Mr. Stearns. Recognize the gentleman, Mr. Shimkus, for 5
minutes.
Mr. Shimkus. Thank you, Mr. Chairman. It's kind of good to
follow my friend from Colorado with my line of questions. But
first, I want to say that I am not gleeful that CLASS got
shelved, but I am kind of relieved because of the--it was
actuarially unsound that the Secretary even agreed to. And I
agree. So I am actually pleased that HHS and Secretary Sebelius
did make what I thought was the proper decision.
But following up on long-term care, I do believe that if
you incentivize individuals early in the system, like any
insurance product, you have effective costs. But we don't have
a system right now to adequately reinforce long-term care
insurance. And that is, I think, something that would be
beneficial to all of the questions my colleague from Colorado
asked.
So I would be willing to work with anyone on this
issue.Congressman Deutch and Congressman Kennedy both noted
that HHS had studied scenarios to make the problem solvent. And
of course, in the report that I have would kind of identify
some of these, so I am going to go on a question of three,
which I think is pretty telling just about the whole actuary
process and on insurance itself, is that, is it true that the
Department looked into a 15-year waiting period for the receipt
of benefits for enrollees with certain health conditions or
what can be classified as preexisting conditions?
Ms. Greenlee. Congressman, that proposal that you are
mentioning had been presented and developed by the CLASS
actuary, Mr. Yee. It was contained in the overall document as
well as in his report. It wasn't an idea that he suggested as a
way to mitigate or manage the adverse selection. We never
modeled it extensively because we had concerns about the
legality of being able to use a preexisting condition.
Mr. Shimkus. Right. And in the report here, I mean, it does
identify this as an option but was ruled that you had no legal
authority to implement this.
Ms. Greenlee. That is correct.
Mr. Shimkus. So my point is, there was consideration of
using preexisting conditions as an enrollment process to make
CLASS affordable. And for, you know, my friends on the other
side to say, don't do preexisting conditions, and then
actuarially, in a government-run program, we can't do it, then
obviously there is a reason why the insurers do that.
Let me go to another question. Is it true that the
Department looked into providing lower benefit amounts for
individuals who become eligible in the first 20 years of their
enrollment in the program? Yes or no.
Ms. Greenlee. Yes.
Mr. Shimkus. And another way to adjust and modify--and
these are the same practices that insurers do that we get--that
the private insurance markets get attacked for. What about, is
it true that the Department looked into a possible plan with
premiums nearing $400 a month? Yes or no.
Ms. Greenlee. Yes, that reflects the basic CLASS program
un-amended any in any way.
Mr. Shimkus. That is correct. And it says here, with full
waiver of premium, while in the claim ranging from $235 a month
to $391 a month. So I guess, you know, the point is, to make
this financially sound, you had to actuarially do adjustments
that many times a private insurance market is attacked for. And
it is just a statement. And the report, in essence, supports
that.
The $70 billion of savings when passed, when we passed H.R.
2, it was up to $86 billion. Now, to my friends who say that
the health care law still has real dollar savings, go back to
our first hearing this year with Secretary Sebelius when she
admitted that we had double counted Medicare. The $500 billion
Medicare cuts were scored for health care and they were scored
for extending Medicare solvency.
Now you add the $70 billion double counting or that is
going to be revenue to help make this affordable--now, you are
at the $570 billion of money that was planned to help fund
Obamacare that isn't available. Then you talk about the $800
billion in tax increases. You get 1.37 and that is where we are
moving with the health care law today. I appreciate your time.
I yield back.
Mr. Stearns. The gentleman yields back. I recognize the
ranking member of the full committee, Mr. Waxman, the gentleman
from California.
Mr. Waxman. Let me follow up with the last questioner's
comments.I understand the health care reform bill cuts the
long-term debt. I know that is hard for the Republicans to
accept, but it is the facts. The new benefit of the bill--the
new benefits of the bill are entirely paid for and more by new
revenues and by improvements that cut the overall cost of
health care, cut waste, fraud, and abuse from the Medicare and
Medicaid programs.
When the health care reform law passed, the CBO said it
would save $200 billion over the next decade. About $70 billion
of this savings was from the CLASS program, savings that
obviously will not materialize.
Dr. Glied, the Republicans have stated if the $70 billion
in savings was crucial to the passage of the health care law.
Let me ask you, even without the CBO-scored savings from the
CLASS program, do you still anticipate that the health care
reform law will cut the debt over the next decade.
Ms. Glied. Absolutely, sir. We anticipate that the health
care reform law, without the CLASS program, will save $127
billion in the next decade and over a trillion dollars in the
decade following that.
Mr. Waxman. Now critics of the CLASS program have also
raised the fact that the program's costs will explode in future
years and that CLASS will set saddle taxpayers with future
debt. Those worst-case scenarios obviously will not happen if
the program does not go into effect; isn't that correct?
Ms. Glied. That is correct, sir.
Mr. Waxman. Of course, the benefits of having something in
place for long-term care won't happen either.
We are going to hear a lot of rhetoric complaining about
budget gimmicks and budget deficits today, but there is a
difference between the Republican rhetoric and the facts. The
facts are that even with the news about the CLASS program, the
health care reform law will cut the long-term deficit and save
taxpayers money.
As you know, the Republicans' bicameral CLASS working group
released a report last month which included documents obtained
through an investigation of the CLASS program. The report
asserts that the administration supported the CLASS Act because
the Congressional Budget Office or CBO scored the program as
reducing the deficit over the first 10 years. I would like to
ask you a few questions about this decision.
Secretary Glied, why did the Obama administration support
the CLASS program during the health care reform debate?
Ms. Glied. The administration supported the program because
of the indisputable need to protect people from the cost of
long-term care services, to allow them to buy themselves
protection, and to ensure that disabled people would have
opportunities to work and to get themselves the services to do
that, and because the law included this twin test that required
that it be entirely self-financing and fiscally solvent over 75
years, so that it was also fiscally prudent for us to do so.
Mr. Waxman. What role of any about the CBO score play in
the administration's analysis of the program and ultimate
support for the program?
Ms. Glied. It was certainly encouraging that the CBO
analysts also believed that the program would be viable,
fiscally viable, fiscally solvent and therefore able to address
the needs that we had set forth to address with the program.
Mr. Waxman. Without the Affordable Care Act, people with
preexisting medical conditions can't get insurance, or they
have to pay an extraordinary amount for their insurance, which
means that many people with preexisting conditions don't have
insurance.
One of the purposes of the Affordable Care Act was to say
that we are not going to allow that discrimination against
people with preexisting conditions. The way the act handled
that matter is to say if everybody got insurance, then we could
spread the costs and not have those with preexisting medical
conditions as a group charged so much that they can't afford
it. My colleague on the other side of the aisle raised this
issue. Wasn't that the approach that we took in the Affordable
Care Act for insurance? Either one of you.
Ms. Glied. Yes.
Mr. Waxman. Now that solved the problem for people who want
to get acute care insurance, medical insurance as we know it.
But medical insurance, even Medicare, doesn't cover the long-
term care needs of people who are disabled. It may for a short
while if they go to a nursing home after some spell of illness,
but that is only for a short period of time. After that, if
they need to be in a nursing home or they need home health
care, the Medicare doesn't pay for that assistance that they
may need. Isn't that correct?
Ms. Glied. Yes.
Mr. Waxman. Well, one of the problems people have in trying
to buy insurance for long-term care is that if they had any
kind of preexisting condition, they can't buy it.
Ms. Glied. That is right.
Mr. Waxman. That is the issue, isn't it?
Ms. Glied. Yes, sir.
Mr. Waxman. That was never solved--and the Republicans have
offered no solution to it, except to say, isn't it a terrible
problem? But that wasn't even solved by the CLASS Act, except
it would have allowed people to buy into a program even with
their disabilities. Isn't that correct?
Ms. Glied. Yes, sir.
Mr. Waxman. So we still need to address this long-term care
insurance?
Ms. Glied. Very much, sir.
Mr. Waxman. Thank you.
Thank you, Mr. Chairman.
Mr. Stearns. Thank the gentleman.
And the gentleman from Nebraska, Mr. Terry, for 5 minutes.
Mr. Terry. Thank you, Mr. Chairman.
Thank you, Secretary Greenlee and Glied, whichever, the ACA
included money. I think your testimony is that that money has
stayed in for the provisions on educational efforts on long-
term care, that CLASS has been shelved, but you said the
educational component is still going forward, right?
Ms. Greenlee. That is correct. The Deficit Reduction Act in
2005 first provided money so that we could do public outreach
and education about the need for long-term care, long-term care
awareness campaign. Many States have used this to provide kind
of an own-your-futures campaign. That was picked up.
Mr. Terry. Is that what this awareness program is? Since
CLASS doesn't exist or isn't going to be rolled out, the only
thing left to become aware of would be private long-term health
care plans. Is that what the campaign is doing, is telling
people that they should get a policy for long-term health care?
Ms. Greenlee. I think there are two issues. One is to
educate the people about the need as well as the misconception
that Medicare covers long-term care when it doesn't, and then
provide education about how individuals may take responsibility
for meeting that need.
So it covers all of the different options and really raises
awareness.
Mr. Terry. So it does include the private sector.
Ms. Greenlee. Yes.
Mr. Terry. Which right now is the only thing that, if the
person becomes aware, that they can go out and purchase. So--
well, other than Medicaid, buying down your assets or purging.
So you plan to continue to go forward with the awareness
campaign.
Ms. Greenlee. Yes, sir.
Mr. Terry. All right. How much is put aside per year this
year?
Ms. Greenlee. Just about $3 million a year set aside for
the long-term care awareness campaign. That was provided for
separately in the Affordable Care Act.
Mr. Terry. And you were moved, as I was, in Patrick
Kennedy's testimony, especially it hit--was his testimony about
his uncle, Sargent Shriver, and the companion care that he was
given at home, which is different than skilled nursing care or
a nursing facility; you know, the person that would help him
get from the living room to the dining room so he could eat.
Was companion care part of CLASS?
Ms. Greenlee. The cash benefit that was provided in CLASS
would have allowed the consumer to direct their own choice of
services. We fully anticipated that that type of companion care
or attendant care would be one of the primary items that
someone would----
Mr. Terry. That is good, and I really believe that
companion care can keep somebody like Sargent Shriver out of a
skilled nursing facility that would be on a daily basis
probably 20 times more expensive.
Ms. Greenlee. I agree with you, sir.
Mr. Terry. Are you aware, have you had any contact or work
with the Department of Labor, who is trying to pass a rule to
make all caregivers subject to the FLSA, therefore making it
unaffordable for many middle class families to use caregivers?
Ms. Greenlee. No, sir. I have not engaged with the
Department of Labor on that issue, either in my role as
assistant secretary with the Older Americans Act or----
Mr. Terry. I would think that the Department of Labor, if
they are going to affect senior care so dramatically, that they
would have reached out to your Department. I think that is odd
that they haven't.
Ms. Glied, have they asked you to run any models about how
FLSA will make the companion care more expensive, therefore
making it unaffordable?
Ms. Glied. I am not sure, but we can get back to you on
that.
Mr. Terry. I would appreciate that.
Also, then, I agree with home health care. My personal--my
mother battled cancer, and she was always bouncing between
hospital to skilled nursing when my father and I felt that she
would be better off at home with some home health care, but
Medicare wouldn't pay for those health home care, changing IVs,
those types of things. So we had to go with the more expensive
option. So home health care, unfortunately, though, has been--
costs for home health care and access--has actually been cut
over the last 2 years. And within the savings in Medicare from
the ACA, home health care has been diminished. Have you been
working with the administration, the White House, to champion
home health care?
Ms. Greenlee. I am looking at Dr. Glied. The main
conversations I have had in this area are actually not
Medicare-related but Older Americans Act-related because that
has also been another critical support.
Ms. Glied. There have also been substantial increases in
Medicaid programs that provide home and community based
services. So those have been a major focus within the
Affordable Care Act. We have got more money going to Money
Follows the Person, and we have new community first choice
options for Medicaid programs that are all intended to help
people stay in the community. So we have actually expanded
access to home health care for most people.
Mr. Stearns. The Chair thanks the gentleman, recognizes the
ranking member emeritus, Mr. Dingell, for 5 minutes for
questions.
Mr. Dingell. Mr. Chairman, I thank you for your
courtesy.Madam Secretary, long-term care insurance helps
American workers to prepare for future long-term care needs. Do
you believe that the private market is currently providing
long-term care options for working Americans? Yes or no.
Ms. Greenlee. Primarily, no. It is very limited.
Mr. Dingell. All right. As you know, the CLASS Act is
designed to be a voluntary insurance program to help American
workers to pay for long-term care services that they will need
in later years.
The program was created to help address the needs of ailing
Americans, both young and old, because alternatives can be
impossibly costly to American families. And Medicaid is only
accessible after they have exhausted all of their savings.
Do you agree that the CLASS Act was intended to help fill a
need in affordable options for long-term care for working
Americans? Yes or no.
Ms. Greenlee. Yes, sir. Definitely.
Mr. Dingell. Now. Madam Secretary, when you testified
before this committee, you will recall I asked you whether you
had all of the authority you needed in the Department to ensure
the program gets off to the start in an actuarially sound
manner. At the time you answered you did.
However, the report issued on October 14th tends to
indicate that the Department does not have the authority it
needs to develop a program that will meet the solvency tests. I
would like to ask you again, then, whether you have the
authority you need in the Department to implement the CLASS Act
so that it is actuarially sound and provides a an affordable,
long-term care to working Americans? Yes or no.
Ms. Greenlee. Mr. Dingell, may I respond other than yes or
no----
Mr. Dingell. All right. If you please, but quickly.
Ms. Greenlee. My statements were correct at the time I made
them in March, that we were very optimistic about the types of
flexibility through the discretion that the Secretary might
have----
Mr. Dingell. I am not coming down. I just want the answer.
Ms. Greenlee. After we did further analysis, we found that
that was not the case. We do not have the authority we need at
this point.
Mr. Dingell. All right. Then, if you would, please, tell us
what additional authority do you need to implement the CLASS
Act in a fashion that results in an actuarially sound plan?
Ms. Greenlee. Sir, I would need to refer you back to the
reports to look specifically at the type of actuarial modelling
we were looking at as well as the legal issues that were raised
as we continued to model the program.
Mr. Dingell. All right.I would ask you, along with my
friend Mr. Pallone and others, that you submit to me a list of
the authorities that the Department needs to properly implement
this plan.
Ms. Greenlee. We do not currently have a list. I will take
your request back, so we can be responsive. We don't have a
list at this time.
Mr. Dingell. OK.
Madam Secretary, in your memorandum on the CLASS program to
Secretary Sebelius stated, quote, you do not see a path to move
forward with CLASS at this time, close quote. Until a list of
needed authority is provided to this committee, will you commit
to working with the Congress, industry, and the consumers to
continue to work to find options for affordable long-term care
options for Americans? Yes or no.
Ms. Greenlee. Yes, we are committed to working with you.
Mr. Dingell. Now, Mr. Chairman, I want to make a couple of
observations here.I heard my Republican colleagues in this
committee, on the floor, and in speeches in and outside the
Congress, tell everybody what an evil thing the health
insurance bill, Affordable Care Act, is. And I, quite frankly,
don't agree.
But I am curious. What is it that our Republican colleagues
suggest to us we ought to do? What should we do, my dear
friends, about the CLASS Act, so that we provide long-term care
programs for Americans who desperately need it? So that they
won't be destitute, and so that they can have an actuarially
sound program which will enable them to have a program of long-
term care to take care of themselves and their families.
What is it my Republican colleagues want to do to see to it
that we get ourselves a program which addresses problems like
preexisting conditions and all of the other things that they
have been introducing legislation to repeal, to strip the
American public of the rights and opportunities we have given
them in a piece of legislation which they opposed with enormous
vigor and which they continue to oppose, without any particular
apparent care, other than that we continue the reliance on the
same unworkable situation that we have.
Mr. Gingrey. Will the distinguished gentleman yield?
Mr. Dingell. I will be happy to yield if I have time. But I
want to make this observation. We have a serious problem that
the American people confront. All we hear from my Republican
colleagues is no, no, no, no. They sound like----
Mr. Gingrey. Mr. Chairman, the gentleman's time has
expired, but he did ask a specific question of members on this
side of the aisle, and if you would allow me 10, 15 seconds to
respond to that.
Mr. Stearns. Any objection? Do you have any objection?
Mr. Pallone. Why doesn't he use his own time?
Mr. Dingell. I would love to have it if it can be done.
Mr. Gingrey. The gentleman is requesting that we respond to
that.
Mr. Stearns. The gentleman seeks unanimous consent for what
15, 30 seconds.
Mr. Gingrey. Sure.
Mr. Stearns. To respond to Mr. Dingell.
Without objection.
Mr. Gingrey. Sure. I thank all members for the unanimous
consent.
You know, in regards to the question, what could we do, Mr.
Pallone earlier in his line of questions asked about the
advisory council on long-term care. Secretary Greenlee talked
about that and said that implementation has been stopped, and
therefore, we are not going to go forward with that advisory
council. I think that was my understanding. I don't see any
reason in the world not to have Mr. Dingell and Mr. Pallone to
come forward, make a standalone bill creating an advisory
council on long-term care and let us look at it and essentially
start over and get it right this time.
Mr. Stearns. The Chair thanks the gentleman.the Chair
yields to Dr. Burgess for 5 minutes for questions.
Mr. Burgess. I thank the chairman for yielding.let's just
for a moment go back, Ms. Greenlee, to Mr. Dingell's
questioning. He talked about--he had questioned you and your
previous appearance here and you said you had everything you
need. Then, apparently, you didn't. And he asked, what did you
lack as far as being able to provide the tools? Really there
are only two variables you have to manipulate, and that is the
premium and the benefit. Is that correct? When you are
structuring a program, when Richard Foster was looking to
provide the actuarial information as to whether this was sound
or not, you can alter the premium. You can restructure the
benefit. Mr. Pallone said you can have a 15-year vesting period
as opposed to 5. But really those are the variables that you
have got to manipulate. Is that correct?
Ms. Glied. As you can see in our report, sir--I am sorry.
Is it oK--I mean, we actually considered a lot of different
options, and they varied----
Mr. Burgess. Maybe this is--perhaps this is how I need to
ask the question. Ms. Greenlee, did you do modeling to look at
what the premium point would have to be to support the CLASS
Act?
Ms. Greenlee. Yes, sir.
Mr. Burgess. And what is that number?
Ms. Greenlee. It depended, depending on the different model
that we were running. The CLASS Act, as modified----
Mr. Burgess. Give us a range. Can you give us a range?
Ms. Greenlee. May I refer to Ms. Glied. I mean, the
modeling numbers are really something that she is more equipped
to answer for you correctly I think.
Ms. Glied. So I would like to emphasize that there isn't a
single number out there that we know.
Mr. Burgess. Great. Look, my time is very limited. I don't
mean to be rude. I am not allowed extra time, like other
members are. Can you get this for me?
Ms. Glied. There is not a number.
Mr. Burgess. There is not a number?
Ms. Glied. There is not a single number. There are a lot of
numbers in the report----
Mr. Burgess. Now, initially, when Mr. Pallone brought this
to us, the number was $60 a month. Is it likely to be higher
than $60 a month for the premium?
Ms. Glied. If you could look at the report, the premiums
are in there. They are all higher than $60 a month.
Mr. Burgess. Let me ask you this. Let me ask you a couple
of questions. You referenced $5 million in money that has
already been spent in the implementation of this program. And
please, if it is information that you need to get back to us
with, I am going to ask that you do that. But how--of that $5
million, does that include the money that has been spent on
outside contractors?
Ms. Greenlee. Yes, sir.
Mr. Burgess. And will you be willing to provide us a
balance sheet showing how and when and for what purpose the
money was expended?
Ms. Greenlee. Certainly.
Mr. Burgess. The figure of $5 million is helpful, but it is
not all that useful in understanding where the expenditures
occurred.
Ms. Greenlee. We will be glad to. We think we may have
provided it already, but we are willing to provide if we have
not.
Mr. Burgess. Then how much money has ASPE itself expended
in this regard? Is it different from the $5 million?
Ms. Glied. It is included in that figure.
Mr. Burgess. How much money is available for further
planning in ASPE?
Ms. Glied. ASPE doesn't have a separate budget for CLASS.
We have a Division of Aging and Long-Term Care Policy. We have
had it for 30 years, and that continues.
Mr. Burgess. Do you have a budgetary line item for CLASS?
Ms. Glied. No, we don't.
Mr. Burgess. Let me ask you this: We talked--Mr. Terry
talked some about the informational aspects of long-term care
insurance. And in 2005, when the Deficit Reduction Act was
being debated in this committee, I think we got information
that if one-third of the projected seniors moved off of
Medicaid into a private long-term care product, that the
savings would be substantial. I think $160 billion was the
figure this committee received over 10 years. I guess that
would be even larger now a few years later. $160 billion is,
even today, a significant amount of money. Have we harmed the
long-term care, the private long-term care market with the
activities of the CLASS Act over the last 19 months? Has it
made it more difficult for companies to develop these products
and market them?
Ms. Greenlee. Sir, I don't think so in any way.
Mr. Burgess. Would it not, if someone were developing a
product in the private market, and they are looking over their
shoulder at what is occurring within the administration,
wouldn't that alter their thinking on what type of product to
offer?
Ms. Greenlee. Because you have acknowledged that you have
private insurance, I know you are aware that the private market
offers a comprehensive product, which is far different than
what the minimum benefit is, the minimal support that CLASS
would provide. I don't believe we have, in any way, hampered
the ability of the market to learn from what we have learned
and modify their products. They also have other tools available
to them that we would not have had in the CLASS program.
Mr. Burgess. Let me just ask you this, Ms. Glied. Did you
serve on President Clinton's health care task force?
Ms. Greenlee. I did not.
Ms. Glied. I did.
Mr. Burgess. You did. And as I recall, when President
Clinton had his comprehensive health care reform, there was a
long-term care piece to that. Is that correct?
Ms. Glied. Yes, there was.
Mr. Burgess. Did you encounter any of these same questions
or concerns during the development of that product for the
Clinton administration?
Ms. Glied. I was not involved in that part of the reform
proposal at all.
Mr. Burgess. But you have been involved in these
discussions before. Did any of the information you got during
that time inform any of the decisions that are being made now?
Ms. Glied. I am quite sure they did, but I don't--can't
point to specifics.
Mr. Burgess. Mr. Chairman, I hope we have time for a second
round. I will yield back at this point.
Mr. Pitts. The Chair thanks the gentleman, and recognizes
the gentleman from Texas, Mr. Green, for 5 minutes for
questions.
Mr. Green. Thank you, Mr. Chairman. It is no secret that
our colleagues on the other side of the aisle don't like the
historic health care reform law that we passed in 2010. And
they have been eager to jump on the problems of the CLASS Act
to imply that the entire health care reform law is a failure.
Dr. Glied, can you offer us some perspectives here? And I don't
want to minimize the CLASS Act. It was an important part of the
bill. And whether the CLASS Act or another approach, we need to
find a solution for long-term care in our country. With the
huge increase in Alzheimer's, with dementia, that needs to be
part of the solution, even though the CLASS Act may not be that
solution. But my understanding is there are many critical
benefits of the health care law that have nothing to do with
CLASS. And I would like you to walk through with me on the
benefits. My first question is how are seniors benefiting from
the health care reform law now?
Ms. Glied. We have made many changes already that have
benefited seniors. For one thing, we are working on closing the
doughnut hole in Medicare part D. And already about 4 million
seniors have benefited from that.
Mr. Green. I will just interrupt you. I probably would have
voted for the 2003 plan if it hadn't been for that doughnut
hole in there. So I am glad we are closing it.
Ms. Glied. We are also providing seniors with new
preventive benefits that are free of cost sharing. There is a
new annual wellness visit in the Medicare program thanks to the
Affordable Care Act. We have taken aggressive steps to reduce
fraud in the Medicare program. And that is a benefit to
everyone. And as we mentioned earlier, in the Medicaid program,
we have also expanded opportunities for home- and community-
based services.
Mr. Green. How about small businesses? We hear a lot about
that. In fact, having helped manage a small business, outside
of basic payroll, our insurance costs was one of our biggest
issues in a 13-employee company. Can you say how the health
care reform law deals with small business?
Ms. Glied. We have already put in place a small business
tax credit to help small businesses provide health insurance to
their workers. And that tax credit is actually going to expand
beginning in 2014.
Mr. Green. How about young adults?
Ms. Glied. So one of the very, very first provisions in the
Act to take effect was a provision that allowed young adults to
stay on their parents' health insurance coverage. We have now
got back responses from three separate national surveys. And
they all show that the number of young adults in this country
who are uninsured has dropped by a million because of that
policy.
Mr. Green. Well, and I am getting calls, how about
Americans with insurance? Because I know we heard this last
week that WalMart was increasing their premiums. We all get
calls every day saying my insurance premium from my company
insurance is going up. What are the new protections that we
have under the health care reform law to protect Americans who
actually have insurance?
Ms. Glied. So some of the provisions that have already
taken effect will eliminate some of the most egregious
behaviors of the private insurance industry like rescissions.
So that has already taken effect. As well, there are now
provisions that allow States to take a very careful look at
unreasonable rate increases and negotiate with insurance
companies to keep those down.
Mr. Green. OK. And I know the uninsured and how they
benefited from the new health care law. And let me give you
some perspective. In the 2000 census, I had 33 percent of my
constituents who had insurance through their employer. Forty-
three percent of them worked and didn't qualify for Medicaid,
but they were uninsured because their employer did not provide
insurance coverage. How will the health care reform law help
that 43 percent in my district?
Ms. Glied. So we are expecting that over 30 million people
will gain health insurance coverage when full implementation of
the Affordable Care Act starts in 2014.
Mr. Green. Are there any of these benefits by the
administration's decision on the CLASS program?
Ms. Glied. No, the CLASS program is really a stand-alone
and distinct part of the health care reform bill. It addresses
a very important need, but it is quite distinct from the rest
of the legislation.
Mr. Green. So whether it is the decision of the Department
or decision of Congress, everything else in the law is working
and functioning and going into effect as we are moving?
Ms. Glied. Absolutely, sir.
Mr. Green. I am disappointed that the new CLASS program as
currently constructed will not be in effect because we have to
have a solution. And I hope we can reach across the aisle
legislative-wise and come up with something that will deal with
long-term care. Because like I said earlier, a lot of my
constituents don't have the same opportunities that Federal
employees have, State employees have. I don't know of many
companies except very large ones that apply some long-term--
allow for long-term care for their employees. It means that we
have to continue to work to address the solution of our long-
term care needs. But it does not have the impact on the success
of the health care reform law that you just expressed. Millions
of Americans, young and old, will continue to benefit from this
law even though the CLASS Act may not be part of it.
Ms. Glied. Yes, sir.
Mr. Green. Mr. Chairman, I actually yield back my 23
seconds.
Mr. Pitts. The Chair thanks the gentleman, and recognizes
Dr. Murphy for 5 minutes for questions.
Mr. Murphy. Thank you, both Secretaries. It is good to meet
with you. Particularly, Assistant Secretary, I appreciate your
forthrightness during our hearing last March, where you and I
discussed this, and discussed the administration was double
counting funds from the CLASS program as funding both the CLASS
program and the health care bill. And I appreciate your
forthrightness at that time we had that discussion. I want to
ask you a couple questions, though. Did members of the CLASS
working group or the CLASS office ever discuss the CLASS Act
with the White House, including White House Office of Health
Reform, the White House Counsel's office, or the Office of
Management and Budget about the problems with resolving the
program within your authority? Was there any discussions that
took place like that?
Ms. Greenlee. As typical with large policy issues,
especially those as important as health reform, we are in
contact with the White House as policy issues arise. This is no
exception.
Mr. Murphy. Can you tell us who was involved with those
conversations and what was said?
Ms. Greenlee. Sir, over the 19 months that we have been
working on the program, I honestly don't have a list.
Mr. Murphy. Is that something you can get to the committee?
I wouldn't expect you to remember all that. I appreciate that.
I wasn't trying to quiz you on that part of it. If you could
let us know, I would really appreciate that. Thank you.
Ms. Greenlee. I will see how to follow up, sir.
Mr. Murphy. Thank you. Do you have any idea who at the
White House was consulted before Secretary Sebelius decided
that, as was cited before, she didn't see a path forward for
implementation at this time? Do you have any idea who she met
with or consulted with at the White House?
Ms. Greenlee. No. As I mentioned, this is a major policy
decision. So it is something that we would want to talk to the
White House and get their guidance. I can't tell you who
specifically the Secretary has spoken to.
Mr. Murphy. When you say it was a major policy decision,
who made the decision?
Ms. Greenlee. The Secretary did.
Mr. Murphy. The Secretary did. And it was also a decision
she had in consultation with the White House?
Ms. Greenlee. They certainly needed to be informed of this
decision, and involved as she was making it.
Mr. Murphy. And who at the White House agreed with her
decision?
Ms. Greenlee. Sir, I would have to--I can't answer that
specifically, because it was the Secretary's decision. And
her--she was the primary one who would have been involved.
Mr. Murphy. What I am trying to find out, and again I
appreciate your forthrightness here, I mean something of this
magnitude on which the health care bill really hinged on in
terms of trying to balance the books on it, of which the CBO I
think told us--I think when you were here before I think this
is the number, correct me if I am wrong--that withdrawing it
from the health care bill would leave a gap in the health care
bill of $80 or $85 billion or something like that. It is a
decision of some magnitude. And so I am wondering if there were
someone else in the White House very high up that would have to
say, OK, well, we are going to pull the plug on this.
Ms. Greenlee. It clearly was the Secretary's decision. That
is what it lines up in the law. She is the one that has
submitted the report, based on my recommendation. I can't
respond to or be responsive with regard to else she may have
consulted as she was making that decision.
Mr. Murphy. Thank you very much. Mr. Chairman, I have no
more questions. But I would be glad to yield to my colleague,
Dr. Burgess.
Mr. Burgess. And I thank the gentleman for yielding. Just
to follow up on some of the budgetary questions, the committee
staff does not believe that they do have the breakdown of the
expenditures. That may have gone to the Appropriations
subcommittee. So would you be sure to work with our staff to
make certain that we have that? And really, we are kind of
looking for some of the fine detail. Even the money that was
spent on staples and staplers, we would like to see that.
And again, a breakdown or a breakout of the dollars that
were expended for outside contracting. Because my understanding
is there was, some of this work that had to be done on the
modeling did require the participation of outside contracts. Is
that correct?
Ms. Greenlee. Yes, sir. And we are willing to provide that
information to you.
Mr. Burgess. Now, Ms. Greenlee, I think you mentioned that
both Chief Actuary Foster and Doug Elmendorf at the CBO
performed an analysis on the cost of the total health care bill
that included, of course, the offset that was going to be
provided by CLASS. It has been said that in the last Congress
we didn't do a lot of oversight over the implementation of the
health care law. But there were two resolutions of inquiry that
were heard by this committee, and one of them dealt with
exactly this set of facts, that is, was the Congress provided
accurate financial information before the actual vote on the
bill that became law occurred March 21 of 2010?
Now, in retrospect, to me at least, it does not seem like
Congress had all of the information. And now with the
information that we are getting out of the documents provided
that Mr. Foster, in fact, questioned himself in June of 2009.
So do you see why some of us are uncomfortable with the notion
that you couldn't have known until after the bill was signed
into law how much it actually was going to cost?
Ms. Greenlee. Congressman Burgess, as Secretary Glied has
said, the work that was done by Mr. Foster was publicly
available before the bill was passed, as was work done by other
outside professionals such as the American Academy of
Actuaries. So the information was in the public domain at the
time the law was passed.
Mr. Pitts. The Chair thanks the gentleman, and yields to
Dr. Christensen for 5 minutes for questions.
Ms. Christensen. Thank you, Mr. Chairman. Good morning----
Ms. Greenlee. Good morning.
Ms. Christensen [continuing]. Secretaries. Ms. Greenlee, as
you have heard, I am not the only person in this room who is
disappointed by the HHS announcement that you will not be
moving forward at this time to implement the CLASS program. It
has been 18 months since the Affordable Care Act was passed,
and we were really hoping that this part of the legislation
would allow the Nation to begin addressing the burden of long-
term care. That is not the case. But I hope that we can at
least say that the amount of time and the money that we have
spent on CLASS to date has not been wasted.
And we have had a lot of questions about how much money you
have spent, and you are supposed to supply documents on even
the staples that you bought and all of that. So can you tell us
a bit about the expenses? And in particular, can you assure
this committee that you have used those funds in a manner that
is consistent with the statute and in a way that has advanced
our understanding of long-term care?
Ms. Greenlee. Yes. I am certainly willing to provide the
information that Congressman Burgess has requested. We have
been prudent and practical, very responsible, and also done at
the same time a very thorough analysis of the law that we think
will help advance the conversation about how a voluntary
insurance program could work, what the problems are with the
law that we have seen. We have learned a lot, and have gained
from this investment in a positive way.
Ms. Christensen. That is what I thought. Because just the
information that you have gathered going through this has been,
I am sure, worth the expenditure. What are some of the lessons
that we have learned as we have sought the solutions to the
Nation's long-term care problems? Are we back at square one, or
can we build on the CLASS framework and the work and the
analyses that you have done?
Ms. Greenlee. I don't think we are back at square one. I
think we can continue to move from here. There is much to be
learned by looking at the report as well as the different
modeling exercises. There are real critical needs that this
program is meant to address. And as we move forward, one of the
reasons we are suggesting that we have as broad a conversation
as possible is that the CLASS program would serve a lot of
different kind of people. And we want to make sure that we as a
Nation cover the waterfront in terms of having solutions and
options for all of those individuals.
Ms. Christensen. Thanks. Mr. Chairman, the HHS announced
that last week was not the end of this story. And I would say
that to my colleagues as well. The burden of long-term care, as
was said very clearly by our colleague Congressman Kennedy, it
is not going to go away. Millions of Americans will need long-
term care, and we have to figure out a way to help them. So I
wish the CLASS Act had not been the final answer. But to the
extent it is not, we need to work as a committee and as a
Congress to find out how to provide and pay for long-term care.
And I just want to add that one of the reasons that I am so
much in support of the CLASS Act is as a family physician, we
have the opportunity to take care of patients in many different
ways. And one of those is when they are chronically disabled or
at end of life. And I always encourage my patients to stay at
home if that was at all possible. And the benefits of that to
the individual who was sick, to be able to be cared for in
familiar surroundings with their family, and with the proper
support, the family really got a lot of satisfaction out of
taking care of their loved ones at home. And so I am looking
forward to working with the Department and my colleagues to
find a way forward. Thank you. I yield back the balance of my
time.
Mr. Pitts. The Chair thanks the gentlelady, recognizes the
gentleman from Georgia, Dr. Gingrey, for 5 minutes for
questioning.
Mr. Gingrey. Mr. Chairman, thank you. And my colleague, Dr.
Donna Christensen's line of questioning and comments kind of
segues into what I am going to say. I want to, at the outset,
tell you that I am for closing this office down and not leaving
a remnant, a crack in the door, if you will. And I am going to
ask you a few questions to show you why I feel that way.
Secretary Glied, you testified earlier that your office had
conducted studies in 2009 that were consistent with the CBO's
findings that the program was actuarially sound. Were those
studies modeled just on the first 10 years of the program, or
were there any studies you modeled on, say, the 50- or 75-year
estimates?
Ms. Glied. We did not have a model at that time that could
estimate fiscal solvency over a 75-year period. We only had a
model that could calculate premiums. That is the information
that we have provided to you. So what we were able do was
calculate premiums based on different takeup rates. And what
was reassuring to us at that time was that we got premiums that
were very similar to the ones that CBO was reporting. We did
not have a full actuarial solvency model.
Mr. Gingrey. Not modeled out 75 years. Because Richard
Frank, the deputy assistant for planning and evaluation, I
guess someone who works under you, stated publicly that we in
the Department have modeled CLASS extensively, and we are
entirely, entirely persuaded that financial solvency over the
75-year period can be maintained. That is a direct quote from
him.
Ms. Glied. Correct. And I think that he was--I was not
there yet, but I think that what he was saying was that the CBO
had run a very similar model with the 75-year projection and
came up with very similar premiums so that the consistency----
Mr. Gingrey. Well, if that modeling is available, and you
didn't see it, but I would very much appreciate it if you would
get that to this Member or Members on both sides of the aisle.
Ms. Glied. We provided those to you, they are actually in
your report.
Mr. Gingrey. Let me go to the second question. IOS,
Immediate Office of Secretary of HHS, cited in the working
group report as stating that Senator Kennedy's staffer, and
this is a quote, ``had CBO do lots and lots of runs out to 50
years to ascertain solvency. She is going to send to me to
forward on.'' Have either of you ever seen such a report from
CBO on the 50-year solvency of the CLASS program?
Ms. Greenlee. I have not.
Ms. Glied. No.
Mr. Gingrey. Are you aware that any such CBO report ever
existed? Because this is a quote from a senior staffer in
Senator Kennedy's office in regard to seeing those studies,
those models.
Ms. Glied. It is quite possible they existed. I wasn't at
HHS at the time, so I do not see them.
Mr. Gingrey. OK. Secretary Greenlee, you stated in
testimony before this committee on March 17, 2011, that we
should not repeal CLASS until we have made every effort to
reform the program. Just this month, HHS concluded in a report
that the administration has, quote, ``not identified a way to
make CLASS work at this time.'' In light of this announcement,
will HHS now support repeal of the CLASS program?
Ms. Greenlee. Congressman Gingrey, we feel that repealing
CLASS would serve no useful purpose at this point.
Mr. Gingrey. Would you say that again?
Ms. Greenlee. We feel that repealing the law would serve no
useful purpose at this point. We have stated publicly we do not
intend to implement, and have no plans to move forward on
implementation.
Mr. Gingrey. Let me then suggest a useful purpose to you
that you may want to take under consideration. Section 3203 of
the Patient Protection and Affordable Care Act requires the
Secretary to designate a benefit plan as the CLASS Independence
Benefit Plan no later than October 1, 2012. That is a year from
now. Absent repeal, if the Secretary cannot find a way to make
CLASS work by October 1, 2012, I am concerned that some private
citizen or interest group, for instance, one very vocal in the
press lately, could sue the Secretary for not following the
statute.
Has the Secretary of Health and Human Services created any
contingency plans in case she can not make CLASS solvent and is
sued for not following the statute? Now, before you answer
that, obviously if we repeal CLASS, that would not be a
problem.
Ms. Greenlee. As you know, the statute requires that the
Secretary determine that the program could be solvent over 75
years. She can not make that determination, so she will not be
moving forward. So even though the law states the October 2012
date, she does not have a way to achieve that, and will not be
working to implement.
Mr. Gingrey. That is my point, Madam Secretary. You are
saying exactly what I said, that she can't do it. So why leave
this statute on the books there just almost begging someone to
come forward and sue the Department and the Federal Government
for not providing something that we have a law that has been
passed and has been pledged by a date certain? It would be a
lot safer to just go ahead and have a very clean like 1173, Dr.
Boustany's bill, and repeal the CLASS Act.
Ms. Greenlee. Again, I don't think that serves a helpful
purpose. We need to talk with people about the broader issue
instead of focusing on repealing the law.
Mr. Gingrey. I know my time has expired. Mr. Chairman,
thank you for your patience.
Mr. Pitts. The Chair thanks the gentleman. And recognizes
the gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for
questions.
Ms. Schakowsky. Thank you, Mr. Chairman. To me this
conversation is so incredibly unrelated to the real lives of
real Americans. As former Representative Kennedy said,
repealing the CLASS Act doesn't mean that the widespread
financial and physical and emotional suffering of older and
disabled Americans goes away. Somebody is going to pay. And we
can talk about actuarial tables, and we can talk about staples
and staplers all we want to, but it seems to me that we would
be a heck of a lot better talking about how we address this
problem. And if we want to talk about actuaries, by the way, we
can go back to 2003 when the Republicans shut down the actuary
when we were talking about the prescription drug bill, and
actually said if the actuary puts out the costs that he has
actually estimated for the program, there were threats that
were made on that person. Some of us actually remember that.
But I actually want to quote some of the conversation that I
think would be more productive of some of our Members.
Chairman Pitts, you said, I believe we can all agree that
we do have a serious long-term care problem in this country, as
the costs are driving people into bankruptcy and weighing down
the Medicaid program. We do need to address this issue.
Chairman Emeritus Barton said long-term care is a serious
issue. I believe myself and all Republicans are very willing to
support some sort of program for long-term care, but it must be
one which is sustainable and fiscally responsible. And
Congressman Shimkus, my colleague from Illinois said, but if we
would like to work on Medicaid dollars following the individual
and not incentivizing institutional care, and freeing up the
disabled to choose the areas where they want to live and how
they want to live, I am willing to work with you. That is the
kind of conversation that we need to have. Because the status
quo, does it not, Ms. Greenlee, say that we end up with the
most expensive possible way to fund long-term care, and as you
point out, the least desirable for most Americans?
Ms. Greenlee. That is correct. If people have only the
choice of nursing home care, it is the most expensive setting,
and their least preferred setting. We need to explore all the
options.
Ms. Schakowsky. In the time I have remaining, my
understanding, and I think you just mentioned it about the 75-
year solvency that you want, so are private long-term care
insurance companies required to meet the same standards that
the CLASS Act required? Are they required to be actuarially
sound and financially solvent for 75 years to ensure that those
who pay for this insurance and who count on it most have access
to long-term care services when they need them? The way I see
it, so in other words, in the status quo now, if you have long-
term care insurance, you pay all the way, and then somehow the
company disappears, there is no recourse. Am I right about
that?
Ms. Greenlee. Congresswoman, of course the rate setting for
the private long-term care insurers would be handled at the
State level. So I can't answer your question specifically with
regard to the length of time. You mentioned 75 years. Certainly
as a former insurance regulator, I can tell you they are
required, when they seek approval, to demonstrate that their
models are actuarially sound. I can't give you the specific
State by State or the length of time.
Ms. Schakowsky. And is that by law?
Ms. Greenlee. Yes, it would be the individual State laws.
Ms. Schakowsky. OK. It seems to me that we have, at hand, a
number of things that are in the CLASS Act that we don't want
to repeal it and throw out every single piece of the CLASS Act,
and that we need to continue to have this conversation. How do
we do that if the CLASS Act is not implemented? How do we go
forward?
Ms. Greenlee. I believe that, as I mentioned to
Congresswoman Christensen, we have learned a lot from the
investment that we have made. And now is the best opportunity
that we have possible to talk to as many different people from
every sector, to share with what we have learned, and figure
out if there is more solution that people want to explore from
Congress with CLASS, if there is other kinds of proposals that
would meet this need. That this is the time to broaden our
approach rather than to narrow it. The need continues.
Ms. Schakowsky. Let me just say from 1985 to 1990, I was
the director of the Illinois State Council of Senior Citizens.
And the number one issue that we were dealing with then was
long-term care and the failure of our country to have any kind
of policy that made it possible for people to live their lives
in dignity and get the kind of care that they needed, persons
with disabilities and all of those of us who are going to age,
we hope. And I think the time is long past that we do that.
Thank you.
Mr. Pitts. The Chair thanks the gentlelady, recognizes the
gentleman from Ohio, Mr. Latta, for 5 minutes for questions.
Mr. Latta. Thank you, Mr. Chairman. And thank you very much
for appearing before us today. I really appreciate you being
here and hearing your testimony today. If I could just go back
to our last hearing, one of the things that I had asked, and
this was a statement that was in your testimony at that time,
you said President Obama and Secretary Sebelius have
acknowledged the CLASS program needs improvement. Many of the
changes proposed to the Senate health reform bill that would
have improved the CLASS program's financial stability were not
included in the final legislation reflected in the
Congressional Budget Office assumptions that scored the CLASS
program. If I could, I heard you a little bit earlier, if I
understood it correctly, that about $5 million has been spent
on the CLASS to date. Is that correct?
Ms. Greenlee. That is correct.
Mr. Latta. From the time of our last hearing until, I
believe it was October 14, do you have any idea how much of
that $5 million was spent in that period of time?
Ms. Greenlee. I would have to go back and break it down.
Our expenses, they were primarily staffing.
Mr. Latta. But it is still $5 million of taxpayers' money.
What was the date that it was actually determined that the
CLASS Act could not go forward?
Ms. Greenlee. I don't have a specific date. The final
report was October 14. So it was----
Mr. Latta. Wasn't there something before that that somebody
had to make a determination before the 14th? Before October 14,
didn't there have to be a determination?
Ms. Greenlee. We received the final report from Mr. Yee on
September 20, began working on the comprehensive Department
report, including finalizing the legal analysis. I can't give
you a specific date, but because we produced the report on the
14th of October, I would say earlier this month, the Secretary
made her final decision so we could prepare a report to present
to you.
Mr. Latta. OK. Let me ask this either to either one of you.
On page 14 of your report you say that HHS contractor ARC began
preliminary modeling of CLASS in late 2009. Did the CBO see the
preliminary work from ARC?
Ms. Greenlee. I am sorry, would you just said that again?
Mr. Latta. Did the CBO see the preliminary work of your
contractor ARC, A-R-C?
Ms. Glied. I was not there, but I doubt it. I don't know. I
can get back to you. I don't think so.
Mr. Latta. You say you don't think they saw it?
Ms. Glied. It would be unlikely that they would, but I
wasn't there, so I could get back to you on that.
Mr. Latta. OK. If I could find that out, because my
question would be why didn't CBO see the report? OK. Let me
just go on. Following passage of the ACA, ARC began to
systematically review previous assumptions and premium
calculations for accuracy, and made major revisions to the
model. Question. Whose previous assumptions and premium
calculations were reviewed?
Ms. Glied. So ARC had a long-term care insurance model that
they had been using for other purposes. And I think, I am not
actually sure exactly what purpose, some State programs, I
believe. And we didn't have any model in house, so we asked
them if we could use that model, they could use that model to
do some preliminary technical assistance for us.
Mr. Latta. OK. If I may, did they find any problems as they
were doing their calculations, do you know?
Ms. Glied. So at the end of the day--they revised their
model comprehensively. And at the end of the day last June, we
had a technical expert panel that reviewed both their model and
a separately contracted model with Avalere Health, and actually
pronounced that the parameters were pretty good, in their view.
Mr. Latta. Let me go on, if I may. On page 12 of your
report you state, that by April 2010, it became clear that
existing actuarial models that had been used before enactment
of the CLASS Act would be insufficient to provide CLASS
estimates, and new models would have to be developed. Which
models were insufficient?
Ms. Glied. At that point we only had the ARC model. And I
think we had the ARC model----
Mr. Latta. I am sorry, could you say that again, please?
Which model?
Ms. Glied. At that point we had the ARC model. And that was
the one that needed revision. I am not sure, I think Avalere
might have done something already. I am not sure.
Mr. Latta. Do you know why they were insufficient?
Ms. Glied. Well, one of the reasons that we have come to
realize is the challenge of a program like CLASS is actually in
the details of the program. And those models didn't have enough
granularity to capture all the details of the program.
Mr. Latta. Let me ask this: Did anyone warn the Secretary
that the models were insufficient? Was the Secretary brought
into the loop?
Ms. Glied. We were doing modeling. I don't know that we
ever told her anything--I mean, modeling is an iterative
process. You are always improving the models. The actuary's
office improves their models all the time. We were doing it
too. I don't think it would have been a special conversation.
Mr. Latta. So what you are saying is she was not informed
of this?
Ms. Glied. There wasn't some fatal flaw in the model. We
were improving the model consistently over time. I don't think
we briefed her on that.
Mr. Latta. Thank you. Mr. Chairman, my time has expired,
and I yield back.
Mr. Pitts. The Chair thanks the gentleman, and recognizes
the gentlelady from Florida, Ms. Castor, for 5 minutes.
Ms. Castor. Thank you, Mr. Chairman. And thank you both for
being here today. And I would really like to urge my colleagues
to use this as an opportunity for all of us to work together to
tackle this very daunting challenge of how we can become
smarter in addressing the long-term care needs of American
families. Our goal really should be to work together to design
better solutions, and not give up. I mean, we have this, under
the CLASS Act, this voluntary initiative, not based on taxpayer
dollars, but on the health care dollars of American families.
It faces some challenges. The Department doesn't have all the
authority it needs to make it work.
Fortunately, we have leaders like Frank Pallone and John
Dingell who have been at this for some time, and I can tell
from their remarks today they are not going to let us give up.
And really that should be a call for all of us to work
together, because the demographics are daunting, particularly
coming from the State of Florida.
I am going to borrow Patrick Kennedy's language of a
demographic tsunami because here comes the baby boom
generation. And if we don't get in front of this, he is
absolutely right, we are going to be paying on the back end on
Medicaid. And that is not entirely smart. In the State of
Florida alone right now, we already have $3 billion of our
State budget that goes to long-term care. And we have heard a
lot of testimony today, and I know my colleagues appreciate
this, that that skilled nursing is very expensive. It is
necessary for many who are disabled who need that. But let's
turn this system around and begin to invest maybe a portion of
those dollars, and I know we have had testimony that we are
doing more on in-home care and providing families with the
tools they need so that their family members can stay in the
home at a much more cost-effective rate. But we can't just play
ostrich on this and turn it into a political football and say
this isn't going to be a problem. We have got to work together
constructively to address it.
And just, if we can, come up here in the near term with
some other plan of action to give families this modest bridge
to be able to live their lives in dignity when they are
disabled or elderly, that would be the best-case scenario. But
I am concerned that it has been turned into a political
football because some of my Republican colleagues on the
committee released a report last month that made some very
alarming allegations, charging that the administration ignored
and silenced the HHS actuary when he raised concerns about the
financial viability of the CLASS program. And Ms. Greenlee, I
would like to provide you with an opportunity to address those
allegations head on.
In the report that was released in September, the
Republicans published a series of internal CMS emails
describing concerns that the actuary and other CMS staff had
about the financial sustainability of the CLASS program as it
was being drafted. But that didn't strike me as unusual in the
legislative process. Is it unusual for these kind of concerns
to arise as legislation is being drafted and debated?
Ms. Greenlee. Congresswoman, as Secretary Glied and I have
testified, we were, neither one, at the Department at the time
the bill was being considered. But the work that you are
referring to did occur in the Department section that she
leads. So if I could have her respond to kind of the pre-
decisional pre-passage issue.
Ms. Glied. Mr. Foster's actuarial analyses were actually
publicly released. They were posted on HHS's own Web site. They
were widely reported in the news media. They were discussed in
Congress. He was in no way silenced.
Ms. Castor. And is it unusual, you all have been around the
legislative process for many years, is it unusual that during
the debate over legislation, there are discussions over
financial viability of certain programs and that changes are
made?
Ms. Glied. Not at all. There is frequently robust and
vigorous debate around programs. And I think as the
Congresswoman from Illinois pointed out, in some cases,
especially with novel programs, the CMS actuary and CBO can
have very, very different estimates, which was the case in this
situation as well, where the CMS actuary had one set of
assumptions, and the assumptions at CBO were different. That is
not at all unusual.
Ms. Castor. Did you all review that report that my
Republican colleagues sent out? It struck me that there were a
lot of unfair allegations. I think they understand the
legislative process just as well as we all do, and they
understand that legislation changes as it is drafted. Do you
have any other comments on that report?
Ms. Glied. So I think it is also important to note that the
CMS actuary released those reports over time, and there were
changes made to the CLASS Act over time in response to his
concerns.
Ms. Castor. Ms. Greenlee?
Ms. Greenlee. No, nothing further.
Ms. Castor. OK. Well, I just wanted to allow you all an
opportunity to address that. Because, you know, in the
legislative process changes are made, updates, financial
reviews are a natural part of the legislative process. And I
thought their allegations that something untoward was happening
because changes were being made simply was not accurate.
And again, I really want to urge everyone to work together
to address the real challenges facing every family across
America, and urge us all to develop some solutions for the
elderly, folks with Alzheimer's, the disabled, and how they are
cared for in a dignified, cost-effective manner. Thank you.
Mr. Stearns. [presiding.] Thank the gentlelady. Mr.
Guthrie, the gentleman from Kentucky, is recognized for 5
minutes.
Mr. Guthrie. Thank you, Mr. Chairman. Thank you for coming
today. It has been good testimony, I think. I have enjoyed
listening and trying to learn more, because I do think we have
a long-term care issue that we are going to have to address
this in country, and what it is doing to families. But one
thing first, Secretary Glied, when you were talking with Mr.
Green from Texas, he went through a list of benefits. And I
think I heard, I am not sure that I heard, but I think it was
like the policy, you are 26, preexisting conditions for
children, and the end of the caps, that that hasn't been
reflected in premiums? Did you say premiums haven't increased?
Ms. Glied. I don't think I spoke to premiums at all.
Mr. Guthrie. He said something about WalMart and premiums.
That is what I wanted to clarify, that those mandated benefits,
you didn't say they haven't reflected premium increases in the
private market. I thought I heard him say something about
WalMart's premiums.
Ms. Glied. I don't think I said anything about that.
Mr. Guthrie. OK. OK. I just wanted to clarify then. All
right. So the issue isn't whether or not we want people to have
long-term care insurance, it is the issue of how you pay for
it. And that was concerning if you look at different things in
the health care bill, that people were paying into this program
for 5 years, and that was just going to offset other costs in
the health care bill before it was going to be recouped on the
back end.
And so my concern, as you look into the third decade, this
is just kind of overall, it showed that this was going to be an
unsustainable program, which I appreciate you all making that
declaration and saying we can't go further with the way that we
have. I think that was the right way to go. Because I am 47, my
daughter is 18, she will be 48 in 30 years. And 30 years, if
you look at all the CBO projections if we don't change, is when
100 percent of Federal revenues will be Social Security,
Medicare, and Medicaid.
And so if you are putting a new policy in place, which you
are not doing, I understand that would be unsustainable, that
was the concern that a lot of us were raising. It is not that
we are gleeful that we are not going to have long-term care
insurance. And that is not the case at all. But if you create a
program that people pay into that is not sustainable, and they
believe they are going to get a benefit in the end, and then we
are here 30 years from now, or somebody that follows me is
trying to make it balance and trying to take benefits away from
people with plans, we do have to come up with a way that is
sustainable that people know the money is going to be there
when they get there. Because I think Secretary Greenlee, you
said that you were in Kansas? Is that where you were the
insurance commissioner?
Ms. Greenlee. The Secretary was the insurance commissioner.
I was her general counsel.
Mr. Guthrie. OK. When you were in the insurance
commissioner's office, that you make sure plans are sustainable
before you approve a private plan. And I think that is probably
what we got into with this, is that unless you can mandate
people purchase at a young age, all the different things, there
is no way to make it affordable. Or it didn't appear like you
could come up with a premium that you would consider
affordable, given the conditions that you had. That is kind of
what drove the final decision?
Ms. Greenlee. Yes. There were three factors at play that we
kept circling as we made the final decision: An actuarially
solvent program or plan that we could market so that there
would be takeup rate that complied with the statute that was
passed and the intent of Congress. And we needed all three of
those factors to line up together in order to be able to move
forward, and could not find the right alignment of those three.
Mr. Guthrie. But when you mandate benefits--I am from
Kentucky, and was in the general assembly. And we always
wrestled with benefit mandates to the insurance policies,
health insurance particularly. And as you allow more coverage,
which everybody wanted, you also drove up the price, which left
more uninsured. And so I think you saw--and you are an expert
at this, in wrestling with how to come up with the proper
benefits versus the costs, that that is another thing that, at
least from my perspective and some of the health care benefit--
the laws with benefits, one of the things we mentioned is that
is going to drive more and more people, or make health
insurance more unaffordable. Because I do think premiums--I am
not sure what he said about WalMart. I am sorry if I implied
that you said that. But I thought I heard a discussion with
what he said about WalMart's premiums.
But that is the problem that we look at. And it is what
Representative Kennedy said, who is going to pay in the end?
And it is a question of who is going to pay. And as we drive up
insurance policy rates, that is my concern. More people are
going to fall out of the market, therefore they are they are
going to end up in the exchange, and it is going to be a more
expensive bill on them than we think. But you all have had a
forthright conversation. I appreciate you coming here and
sharing what you have done today. I have 20 seconds. Mr.
Burgess, you are looking for 20 seconds?
Mr. Stearns. Dr. Burgess, we are going to do a second round
here.
Mr. Guthrie. I will yield back.
Mr. Stearns. You will yield back. OK. We will keep moving
Mr. Griffith from Virginia is recognized for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman. Your report says on
page 12, ``By April 2010 it became clear that existing
actuarial models that had been used before enactment of the
CLASS Act would be insufficient to provide CLASS estimates, and
new models would have to be developed.'' I am guessing that,
based on the report, that the new models would be all of the
things other than the basic model. Is that correct? Looking at
the report, there were like seven or eight different models
that were looked at. Is that not correct?
Ms. Glied. I just want to clarify two things. The word
``model'' is used in two different ways in the report. And I
think the way that you are referring to it is talking about an
actuarial model, which is like a mechanical Excel spreadsheet
sort of thing, whereas the plan options, those were developed
over the full 18 months.
Mr. Griffith. All right. I guess what I am trying to get at
is that you all developed over the 18 months you spent a sum of
money, what did I hear, about $5 million working on putting
together these various options. And I heard you say earlier
that the full, and I am speaking to Secretary Greenlee, that
the full legal opinion wasn't known until fairly recently. I
guess I am wondering why you would pursue models, referring to
options, why you would pursue options that you hadn't had fully
cleared as to whether or not those options would be legal under
the bill?
Ms. Greenlee. I had addressed this briefly in a prior
question, that as the Assistant Secretary said, we had to build
the models based on the law that actually passed, not on
iterations that were there before. And after those were built,
we started with the basic design of the law. And then knew,
because those premiums were so high, that we would need to make
adjustments.
As we began surfacing ideas of possible adjustments, we did
engage with counsel internally to talk to them about what our
ideas were, and continued to talk to them until the final
product. The final product is the culmination of all of those
different ideas pulled together in one place for final
analysis. But we did need to consult with counsel about things
that were very important to us. What is absolutely prohibited?
No underwriting. It must be cash. Some of those things are well
known. Where might we have some flexibility or discretion so we
could additional work. It was a dynamic process that involved
various experts within the Department to come to a final
conclusion, and over a course of time.
Mr. Griffith. But at least some of those things, I know
that some of them are questionable, but some of those things,
in reading the report, legal counsel says, well, there is no
authority at all for the Secretary to do that. I am just
wondering why that some of those options would have been
pursued even for a brief period of time if there was no legal
basis in the statute for them.
Ms. Glied. I mean both of these things had to happen. We
had to figure out whether it would be solvent, and we had to
figure out whether it was legal. So sometimes we figured out
whether it was legal before we figured out whether it was
solvent, and sometimes we figured out whether it was solvent
before we figured out whether it was legal. Both of those tasks
had to be completed. And so I am not sure why it would have
mattered which way we went at it.
Mr. Griffith. Here is why it matters to me. If it is not
legal and you make that determination first, then you don't
spend the money finding out whether they are solvent.
Ms. Glied. Once we built the model--it costs money to build
the model, which allows to you test many different things. Once
you have the model, it costs almost nothing to test a different
option. So it makes fiscal sense to do it in the direction we
did it.
Mr. Griffith. All right. Having asked that, earlier--I
forget which one of you said it, and I apologize for that--you
said that you didn't have some of the tools that were available
to the private sector. What tools that are available to the
private sector did you not have that you would have liked to
have had?
Ms. Greenlee. I can respond. I can't respond in saying I
would have liked to have had them. I mean, the primary
difference that is generally known is that the private sector
uses underwriting, which was not available to this program.
They have a mechanism, by doing so, to address adverse
selection that was not available as we developed the CLASS
program. So we needed to look for other types of options to
deal with adverse selection. And that is reflected in the
various ideas that we have about different models. That is, and
there may be others, that is the clear distinction between what
the private market can do and what we could not.
Mr. Griffith. All right. And because of that, doesn't it
make some sense to go with the option that the doctor mentioned
earlier in regard to having private pay long-term care be paid
for with pretax dollars or allowed to use your medical account?
Doesn't that make sense? Because it looks like even though the
products are substantially different, and I understand that, it
looks like that the government can't compete with the private
sector because you have to take on so many people. I understand
that. But wouldn't it make sense then to enhance the ability of
the private sector?
Ms. Greenlee. As we move forward with more conversations
and pull insurers in, I think a component of that is, with
support, what could the private market do? But because they use
these mechanisms, like underwriting, they will never be able
to, with that mechanism, serve all of the people that CLASS was
designed to serve. So not everyone will be taken care of. I
don't know better how to say that. So we need to move forward
on multiple options, coming back to who are we trying to serve
and what is the best solution for those individuals. It may not
be one thing for every single person. There may need to be
different options.
Mr. Griffith. I yield back.
Mr. Stearns. I thank the gentleman. Dr. Cassidy is
recognized for 5 minutes.
Mr. Cassidy. Thank you, Mr. Chairman. Really the question,
one, everybody agrees we need to come up with a solution for
the problem of long-term care. I don't think any of us argue
that. But as a physician who works in a public hospital caring
for the uninsured on the receiving end of poorly planned
programs enacted by posturing politicians, a nice alliteration
there, I am aware if we don't come up with something
sustainable, we end up worse off.
Now, clearly, this was not sustainable. Secretary
Sebelius's letter said that you ended up testing premiums of
$3,000 a month, and still clearly it was not sustainable if you
are looking at that. The question before us isn't whether or
not we need to do something about long-term care. We all agree.
The question before us is whether or not the American people
were almost duped into thinking that this was $70 billion of
revenue that folks, reasonable folks would have assumed not.
Now, that is the question before this committee. Now, I note--
and by the way, this is more than just a partisan issue. I am
looking here at a book, Fresh Medicine, by Phil Bredesen,
Democratic former Governor of Tennessee, which goes on to say
in our government it is as important to have honest work
presented to the American people.
He goes on to say the CLASS Act is a great example of how
that was not done. Now, this is a Democrat casting aspersions
upon this. Now, that said, it is clear, as you mentioned,
before the CLASS Act was passed that there were concerns. I
note that Ezra Klein recently--Ezra Klein, the liberal--
recently had a blog in which he said the administration was
concerned that the CLASS Act was not fiscally sustainable. As
Secretary Sebelius points out in her testimony, or in her
letter, even before PPACA was passed, there was concerns
regarding the CLASS Act's fiscal responsibility. You point out
that actuaries were there. Frankly, the fact that Klein is
saying that it was internal debate in the administration and
the Secretary is acknowledging concerns, Paul Ryan pointed it
out in February of 2010, why did the administration insist that
this was fiscally responsible? Why does Phil Bredesen have to
write a passage in his book saying this is a great example of
how the American people were deceived in terms of how an
important bill was financed?
Ms. Glied. Sir, we had every reason to believe it was
fiscally responsible when we moved forward. And indeed, it was
fiscally responsible. After we did our analysis----
Mr. Cassidy. Wait a second. We just heard from your
associate that without the ability to medically underwrite,
that inevitably there would be anti-selection, as Mr. Foster
said, and that you would end up with something without an
individual mandate would not be sustainable. Now, this was a
first-pass read. You are telling me, you are telling me now
that the very construct of it meant that it was unsustainable.
So tell me why, in retrospect, it was sustainable.
Ms. Glied. Actually, if you--first of all, there was
considerable differences of opinion at the time that the
legislation passed about whether it was possible to make this
model work. But at the same time----
Mr. Cassidy. Let me ask you, your colleague, I don't mean
to interrupt, but we have kind of been covering this, and yet
when I hear your testimony, that without the ability to have an
individual mandate and without the ability to have a medical
underwriting, it is a nonsustainable model.
Ms. Glied. Actually, our report shows that there are
sustainable models that don't have medical underwriting and
that don't have an individual mandate.
Mr. Cassidy. OK. What I read from Sebelius is that you had
to test premiums up to $3,000 a month.
Ms. Glied. That was not one of those, but there are eight
options in there.
Mr. Cassidy. And that the only way it would be sustainable
if premiums were less than $100 a month, I am reading your
material, and yet it could not be done for anything less than
$300 a month.
Ms. Glied. That is not the case, sir. If you read our
report, you can see that some of those options would have been
actuarially sustainable, but they were not viewed as being--the
legal counsel informed us they were not consistent with the
statute. That is not the same thing as saying that it would be
impossible to do this.
Mr. Cassidy. Now, Mr. Foster apparently knew this before
the bill was passed. The Moran report said the only way it
worked basically is with an individual mandate. Others were
pointing it out. It was kind of a critical issue to come to the
answer that was apparent to so many so long after the fact.
Again, going back to what Bredesen says, this really is a
concern regarding how honest we are with the American people.
Ms. Glied. As Joe Antos testified before this committee----
Mr. Cassidy. I am sorry, I didn't hear you.
Ms. Glied. Joe Antos testified before this committee last
March, and he pointed out the difference between the CBO and
CMS estimates of the cost of this bill. And he noted that that
was a good reflection of the tremendous uncertainty----
Mr. Cassidy. CBO actually said, though, it was only
sustainable in the first 10-year window because you didn't
pay--you collected premiums for the first 5 years. And so that
was clear that their $70 billion-plus was only because they
could only grade for the first 10 years. It is a little
disingenuous to suggest that they thought that long term that
was a viable model.
Ms. Glied. They made a projection that it was--I believe
they made a projection it was fiscally sustainable.
Mr. Cassidy. No, they did not. Would you show me that? I
don't mean to be rude, but please, if you can show that to me,
I don't see evidence for that.
Ms. Glied. I will have to follow up, because I do not have
the CBO analysis memorized.
Mr. Cassidy. Let me ask one more thing. I am out of time. I
apologize. Thank you very much. I didn't mean to be hostile,
but it is such an important issue, and again, the American
people frankly do feel duped. I yield back.
Mr. Stearns. The gentleman yields back. Mr. Bilbray from
California is recognized for 5 minutes.
Mr. Bilbray. Thank you, Mr. Chairman. Mr. Chairman, let me
just say this to my colleagues on both sides of the aisle. I
hope that we address this issue and remember the bigger picture
here. As somebody who just went through 25 years of home
services to a grandparent, and then my mother who just passed
away, I think we have got to remember that people like Mr.
Pitts talks about the family unit being essential in this
Nation, we talk about it like it is an abstract.
Here is a situation where family units really do matter.
And the breakdown in those family units are creating crises not
just for the individuals in those families, but also the
community at large. And so maybe when we talk about how
important the family is, we remember it is just not an
abstract, it is dollars and cents and quality of life. And
maybe we ought to be reminding all of us that we have just as
much responsibility to take care of our mother and father in
their later years as they had to take care of us in our early
years. And we approach that as being some strange antiquated
concept. And that is why I always remember be nice to your
children, they are going to choose your retirement home. And
hopefully, they won't choose a retirement home, they will allow
you to live like I did.
I moved in with my--actually, my wife and I moved in to
take care of my mother as part of a not only a responsibility,
but a privilege of being a child. That aside, addressing that,
Ms. Greenlee, don't we have the answer to this problem right in
front of us? And that is all we have to do, rather than suspend
the program, is go back to the basic assumption that all we
have to do is mandate that every able-bodied young person in
this country pays $100 to $200 a month and we can finance this
program, be able to guarantee the program within 75 years?
Ms. Greenlee. Congressman, if I could make two points. What
you described with your family is actually very typical. In
addition to running a CLASS program, of course, as the
Assistant Secretary, I know that 80 percent of long-term care
is still provided by family members. We did not have the
option, it was clear to us in this law, that mandates for
individuals or employers were not options.
Mr. Bilbray. But Congress does have the option of
revisiting, if we maintain this program and not put it on ice,
if we do not eliminate it, Congress does have the option to go
back and revisit this and modify the law to allow or to require
that every able-bodied person in the United States be required
to contribute a portion of their salary, $100 to $200, to
guarantee this program will be available whenever they need it.
Ms. Greenlee. Well, of course, if Congress passes a law
Congress can revise the law. I don't want to make a commitment
on any particular revisions that you may consider. That is why
I believe we need to all keep talking. It was clear to us that
a mandate was not an option, and it is not something that we
have developed or pursued in any way.
Mr. Bilbray. Wait a minute. When you said that, when you
say that it was not an option, the issue was the law didn't
allow that option. But I will allow you to jump in on this.
Then that was the law, the law limited you there. Why wasn't
that identified as being the Achilles heel in this before we
were asked to vote on this legislation, before we were asked to
assume this huge amount of revenue generation? Why wasn't that
up front that this was a desperately needed mandate if you were
going to have the system work?
Ms. Greenlee. As we both testified, we weren't at the
Department when the debate was happening. In the conversation
about adverse selection the reason why that conversation was so
important, regardless of perspective, is that this is a
voluntary program. So adverse selection is different. You must
overcome it with large participation, how to achieve large
participation if there is no mandate. All of those components
work together. They can't be separated.
Mr. Bilbray. I don't understand, though, the big picture of
the law. This is one small section, but it was a huge part of
the savings. The rest of the bill was built on the assumption
that if you mandate every able-bodied person in the United
States to participate in a program, there will be such huge
savings, and now--and then we were sold that this small little
side one was not going to have the mandate that the rest of the
program had and was going to be 50 percent of the savings. That
doesn't sound like somebody really doesn't follow a continuum
of thought and reason. It's sort of going over that the great
secret of the Affordable Care Act was mandate everybody had to
play and participate and pay in except for a part that was 50
percent of the savings.
Ms. Greenlee. It was voluntary. That is correct. I can't be
more responsive than that. That's different from other sections
of the law. This law always was designed to be a voluntary
program.
Mr. Bilbray. Do you think that that was a reason why it had
to be put on ice is because you don't have the mandatory
revenue flow to be able to support the long-term commitment.
Ms. Greenlee. With the voluntary program, the key to
participation is having a price that will sell in the market so
you can get high participation. And that's the way to achieve
the law of large numbers.
Mr. Bilbray. Wouldn't a mandate eliminate the problem if we
just mandate that able-bodied people had to pay into a
requirement and eliminate the voluntary program?
Ms. Greenlee. I can't take a position on a specific change
because we've not identified specific changes. You can
certainly go back and look at the problems that we have
identified, and then have a conversation about which of those
might be the most approachable, but we have not done that. We
knew that this was not something we could pursue.
Mr. Bilbray. Thank you very much, Mr. Chairman. I would
just point out there is an answer here. It is an answer that
nobody wants to talk about. And we should be up front. The
mandate could avoid this problem, but it also eliminates the
selling point for the program. I yield back.
Mr. Stearns. I thank the gentleman, and I would say to our
witnesses we have a few more people with questions. We
appreciate your forbearance here. So we are going to go a
second round. There is a few of us who would like to ask
questions. So we should be through shortly. So I will start
with my questions.
Secretary Glied, and I guess also Ms. Greenlee, the
question is, our investigative report from September 15
uncovered e-mails in which the Health and Human Service staff
discussed the possibility of using employer mandates to make
certain employers offer enrollment in the CLASS program. Is
that an option you are still considering, yes, or no.
Ms. Greenlee. No. It was never considered.
Mr. Stearns. Dr. Glied?
Ms. Glied. No.
Mr. Stearns. Was this option discussed among the people
modeling class and drafting its regulations ever?
Ms. Greenlee. No. In the draft regulation, it is always
very clear that this was an option for employers and employees
both. We never pursued a different path.
Mr. Stearns. And during and after the bill passed, you
never discussed that? Yes or no?
Ms. Greenlee. No.
Mr. Stearns. Dr. Glied?
Ms. Glied. I never discussed it.
Mr. Stearns. You never discussed it. Did your staff ever
discuss it?
Ms. Greenlee. I am not aware of any discussion that took
place. I think there was a working group. I don't know what
they talked about.
Mr. Stearns. Did Secretary Sebelius ever talk to you or do
you know if she understood that discussing employer mandate as
an option for the CLASS program?
Ms. Glied. I don't believe she did.
Mr. Stearns. You say no?
Ms. Greenlee. I have no other reason otherwise.
Mr. Stearns. Let me read an email to you that we actually
have. It is in the book here. HHS explain this in December
2009. ``One possible alternative is to move to a mandated offer
approach where employers over a certain size, for example, 50
employees, would be required to offer enrollment.'' Had you
ever heard of that?
Ms. Glied. Before I saw that that email went to you, I
hadn't seen it at any other time, but I know that many, many
options were considered as a robust policy.
Mr. Stearns. Many options is one thing. But this is a
distinct departure that I think many Americans don't realize--
--
Ms. Glied. But we didn't pursue it, Mr. Stearns.
Mr. Stearns. No, but I have an email that it is discussed
here in an email.
Ms. Glied. Mr. Stearns, we discuss all sorts of things all
the time.
Mr. Stearns. So your position is this morning that this was
never, after the bill passed, it was never discussed in your
opinion?
Ms. Glied. In my opinion, it was not discussed after the
bill passed. The bill did not include a provision for an
employer mandate.
Mr. Stearns. Ms. Greenlee, is that true that it was never
discussed by you or anyone else?
Ms. Greenlee. It was never discussed unless it was
inapposite. We don't have this option, so we must do this
instead. It was never a viable option to us once the bill was
passed. It was always very clear that we were working with a
program that was voluntary. To the degree that it was
discussed, it was discussed as a door that was closed to us,
not something that we could pursue.
Mr. Stearns. Let me just ask--I have a little extra time
here and just talk to you a little briefly. I am a little
concerned in our discussion about Rick Foster and his release
of his analysis which came after the bill was passed. I think
many of you were aware of his concern before the bill passed.
And then coincidentally, almost 30 days after the bill passed,
his analysis came.
Did you or anyone on your staff, either one of you know
about his analysis, shall we say, he projected in 2025 that
expenditures would exceed premium receipts. Did all of you know
that from his analysis? Did you read and fully understand that?
Ms. Glied. He made various analyses. He published them in
December of 2009. He published several before the bill passed.
He also published a comprehensive analysis of the entire bill
after it passed. That is what I think you are referring to.
Mr. Stearns. I think his analytics were not that definite
back before the bill passed. It just seems coincidental to us
that what he projected for 2025 were the expenditures would
exceed premium receipts was clear, but it came 30 days after,
and the question would be, did anyone on your staff know about
this analysis before April 22, 2010?
Ms. Glied. Before he published it? No. I don't believe so.
Mr. Stearns. So part of his concern, never a draft of this
before was ever provided?
Ms. Glied. He had expressed many concerns. He had not
shared the last analysis he did with us before he published
them. He certainly vocally shared his concerns with many
people.
Mr. Stearns. In your opinion then, Rick Foster was not
asked to hold off his analysis publishing?
Ms. Glied. Not only was he not asked but he actually
responded to a reporter and said he was not silenced in any
way.
Mr. Stearns. OK. Well, it is obvious if we had his analysis
before the bill passed I think that would have had a big
impact.
Ms. Glied. He didn't have that analysis either, that April
analysis wasn't done until after the bill was passed. It was
actually reflecting what was in the bill.
Mr. Stearns. On April 22, barely after a month the bill
passed, he released this report saying the CLASS program
projected savings are due to the initial 5-year period during
which no benefits would be paid. Over the long run expenditures
would exceed premiums, receipts, and he projected in 2025
expenditures would exceed premium receipts.
Ms. Glied. He disagreed with CBO. He had a very different
estimate.
Mr. Stearns. OK. My time has expired. And with that, the
gentleman from Pennsylvania, Mr. Pitts.
I need to go to a Democrat. I thought you told me you folks
didn't want to participate. But if you want to, we are very
glad to have you.
Mr. Pallone. Mr. Chairman, you asked if we wanted to have a
second round. We said no. But that doesn't mean if you have
one, that we don't speak?
Mr. Stearns. Absolutely, you get every opportunity. We
recognize the gentleman from New Jersey for 5 minutes.
Mr. Pallone. I think part of my problem here with the panel
is that I just disagree with I guess HHS counsel or whoever is
advising you both with regard to the CLASS independence
advisory council and also with regard to what authority you
have under the law. So maybe at some point, I will have an
opportunity to meet with the counsel and talk to them, because
I simply disagree with whatever recommendations they are
making.
Secretary Greenlee, you said that because you suspended
implementation of the CLASS program, that the council could not
be appointed. But in the statute it says the CLASS Independence
Advisory Council shall advise the Secretary on matters of
general policy in the administration, and I stress ``in the
administration'' of the CLASS program, and then it talks about
the various categories of the administration.
So it doesn't say that they are only there for
implementation once you decide that the program is sustainable
and can be implemented. It says in the administration. So you
are still administering the CLASS program. So why would you say
that the council couldn't be involved in the administration and
the development of the benefit plan and the determination of
monthly premiums and the financial solvency.
It just seems to me that precluding this council which
exists under the law is wrong, and I don't understand if they
are supposedly involved in the administration, you are still
administering the program, why they can't be convened?
Ms. Greenlee. Mr. Pallone, this is similar to the concern
you raised earlier. I am willing to go talk to the Secretary
about your concern. Like I said, she has been very clear that
we have suspended implementation of the CLASS Act. The only
item that is in the CLASS Act that we will continue to work on
is what I have referred to as the long-standing, long-term care
awareness campaign. So to the degree that you are talking
about----
Mr. Pallone. I understand what you are saying.
Ms. Greenlee. I don't want to be contrary to what the
Secretary is saying. I will take to her your concern.
Mr. Pallone. My point is that it seems that since you are
still administering the program, there is an obligation to
start this council and get it moving. I would ask and you have
now said, and I appreciate that, you will go back to the
Secretary and ask that, because that is one way for us to look
at alternatives and keep this alive.
Now, the second thing is, I know that Ms. Glied mentioned
the models that were outlined in the report and there were
several that I think you said in response to some of my
Republican colleagues that were sustainable, but for legal
counsel saying there was insufficient authority. Now again I
disagree with the legal counsel about the sufficiency of
authority.
But could you tell us, in terms of those models that you
outlined were sustainable, was there one or more that you felt
were preferable, that you thought would be the most
sustainable, if you, in fact, had the authority and the council
said you had the authority, leaving that aside for the time
being, what would you have recommended? Which one of those
would be best, or maybe talk about one or two that would be
best, because we are not even getting that opportunity now, if
you would. Just tell us a little bit about one, and if there is
one that you think was better, or one or two that you think
would be better than the others, I would like to know what you
thought.
Ms. Glied. Several of them looked like they might be
actuarially solvent, they usually had many changes from the
natural language of the statute, generally increasing the
earnings requirement, altering the benefit design, phasing in
benefits over time so that only some people could participate
in the program initially. Those were all options that were
incorporated in the programs that seemed to be more actuarially
solvent.
Mr. Pallone. Did the counsel ever explain why he thought
there wasn't sufficient authority to move on some of these? Did
they explain that?
Ms. Greenlee. The report actually describes the legal
opinion. I am not a lawyer, so I can't speak much more to it
than what is in the report.
Mr. Pallone. I think at some point if you could ask the
Secretary, I would like to also meet with the counsel because I
simply disagree with those recommendations. I think it can--
that some of those options would meet the legal authority. If
you could meet with the Secretary, I would like an opportunity
to meet with the Secretary.
Ms. Greenlee. I will convey your request, sir.
Mr. Pallone. Thank you.
Mr. Stearns. The gentleman yields back the balance of his
time, and the gentleman from Pennsylvania is recognized for 5
minutes.
Mr. Pitts. Your report says that in December of 2009 and
January of 2010, Senate staff asked HHS to begin developing a
list of technical corrections to the bill. We have seen drafts
of those technical corrections and none of your corrections
made it into the final bill. Do you know why?
Ms. Greenlee. My understanding is there was a procedural
mechanism that allowed them not to be amended. But again, I was
not here. I am telling you second-hand information. It was
offered, but I can come back and tell you.
Mr. Pitts. And provide us the information, provide the
committee the information?
Were the concerns of career HHS staff that were raised in
2009 and early 2010 over the sustainability of the CLASS
program ever relayed to Congress prior to the passage of the
PPACA?
Ms. Glied. I am not sure exactly what you are referring to,
but I believe the concern about adverse selection in the
program that was raised by a member of the staff in the ASPI
office, and that was the same concern that Rick Foster had
raised many times in his published report as well. So that was
a concern that had been very vocally voiced.
Mr. Pitts. That was relayed to Congress?
Ms. Glied. I believe Mr. Foster published his reports and
Congress was well aware of them and he actually raised exactly
that point. So the concern about adverse selection had been
very widely discussed prior to passage of the legislation.
Mr. Pitts. The recommendations, the American Academy of
Actuaries, were these recommendations provided to Congress?
Ms. Glied. I believe the American Academy of Actuaries
published those recommendations, and they were discussed in the
committee, I believe. I am not sure. I wasn't here.
Mr. Pitts. They weren't adopted, these technical
corrections. Was your office ever given an explanation as to
why these recommendations were not accepted?
Ms. Greenlee. Again, Mr. Chairman, I will get back to you
on that. My understanding is it was a procedural issue with
regard to the offering of the amendment and not being able to
move it. But we can certainly answer that.
Mr. Pitts. Your report said that ``Many of the regulations
related solely to operational aspects of the CLASS program have
been drafted.'' Why did you have staff do the work of drafting
regulations before you had determined whether it was possible,
or it would be possible to implement the program?
Ms. Greenlee. In order to meet the time line set out in the
statute that the Secretary would designate a final benefit plan
in October 2012, we needed to begin the initial analysis of how
we would operationalize the program and do that at the same
time as we were exploring the models and benefit designs in
order to have a chance of being able to meet the statutory
deadline. That is also very well described in the report that
we, aside from the policy issues, needed to issue or look at
potential regulations, how we would bill an assessment system,
an IT system. These were the other functions that the staff
were initially looking at as required by law in order the meet
the deadline.
Mr. Pitts. Can you send us a list of the offices to which
you forwarded, or the offices that received the technical
corrections? Can you send us a list of those offices that
received those from you?
Ms. Greenlee. I want to make sure I am clear. Are we
talking about the technical corrections to the statute, not the
regs that you just asked me about?
Mr. Pitts. Yes.
Ms. Greenlee. I will go find out. This is an area that I
don't know. So I will tell you what I can about the procedural
and how that was presented.
Mr. Pitts. You have talked several times, you have
mentioned long-term care awareness campaign. I think we can
agree that the long-term care market is a vulnerable one; as to
the long-term insurance product is difficult to sell, and it
can often be expensive and more commonly attracts the most
sick.
Implementation of the CLASS program may have been a lesson
for the Federal Government in how not to meddle with the
private industry. What impact do you believe the mishandling of
the CLASS program implementation and the suspension of all
CLASS program activity will have on consumer confidence in
long-term care insurance overall?
Ms. Greenlee. Mr. Chairman, I do just note that I don't
agree with the mishandling characterization, but I would like
to be responsive. I believe that there is great opportunity
through the long-term awareness campaign to continue to work
with private insurers, and that the investment that we make to
tell the American people about this issue benefits that private
market, as well as the general public. So I don't find that
there is a negative or chilling impact on the private market at
all because of our studied look at the CLASS program.
Mr. Pitts. OK. Thank you, Mr. Chairman.
Mr. Stearns. And the gentleman from Texas, Dr. Burgess. I
am sorry.
The gentlelady from Colorado is recognized for 5 minutes.
Ms. DeGette. Here is what I have been sitting here thinking
about as we have been having this discussion today, and I want
to ask both of you your honest opinion about this.
My colleagues on the other side of the aisle have talked
about kind of two ways we can help older Americans get, and
also disabled Americans get long-term care. One of them is if
we somehow do what I help my children do, which is have some
kind of moral and familial responsibility towards aging parents
or disabled relatives, and I think that is a noble hope that we
would have, but not one--I don't think anybody in this room
would think that we should legislate some kind of personal
mandate that individuals provide those care responsibilities.
So then that leaves us with a second alternative, which is
to try to encourage people to purchase long-term care
insurance. And this is one thing that the agency is trying to
do right now.but the issue with the long-term care market is
two-fold. Number one, since it is not widely--since people
don't widely take advantage of it, premiums are very expensive
because only the more risky population is involved in this
market. And the second problem is people with preexisting
conditions under current law are excluded from that market.
So long-term care insurance solely through private
insurance really isn't an option.
And then I get to the report that the Department prepared
that said that the CLASS plan option is not going to be
sustainable from an actuarial standpoint because it is not
going to attract a broad enough population because of the high
estimated monthly premiums. And also because it is not a
mandatory program.
So as I sit here and think about what our options are, I
guess I would ask the both of you to just tell me what you
think we can do to enroll more people either in private
insurance or some kind of insurance program because we do see,
all of us, on both sides of the aisle, see this tsunami coming
towards us, and I haven't heard any real good practical
solutions suggested here in the last 3-1/2 hours we have been
sitting here.
Ms. Greenlee. Congresswoman, to me it makes sense to
explore, if there is a way, for the private market to do more.
I am not someone who is opposed to the private market. It will
never solve the whole need. If there is things we can do and
continue to talk to Congress about the private market, then we
are certainly willing to have that conversation. But we must
understand that there will be a group of people for whom that
is not the right solution for a number of reasons, from
affordability to preexisting conditions to the fact that that
is a product that is different than what the CLASS product. It
is comprehensive in the private market. CLASS is a more minimal
benefit. We need to analyze how everything could blend together
to meet the whole range of needs. And I think we are willing to
have that conversation.
Ms. DeGette. Thank you. I yield back.
Mr. Stearns. The gentleman from Texas, Dr. Burgess, is
recognized for 5 minutes.
Mr. Burgess. Let's keep on that same line of thinking. How
do we enhance the availability of this type of insurance to the
private market? I talked about tax consequences in my opening
statement. Certainly in the Deficit Reduction Act of 2005, we
expanded the partnership program so that those people who do
spend their own money on their own private long-term care
insurance product, if they outlive their benefit, which is
rare, but if they do, then they don't have to spend down to get
into the Medicaid program. I am oversimplifying it. But States
now have the option of opting into that long-term care
partnership, and I think that is certainly something if we want
to work on the awareness side, to work on the awareness at the
State level.
I do think, and Mr. Pitts brought it up again, I think the
activities of the CLASS, the implementation of the CLASS Act, I
think that has had, if not a chilling effect, at least caused
some stagnation in the private market, because if I am working
on a long-term care product or I have got one on the market, I
am kind of holding back to see what you guys are going to do.
I would be interested to know did you ever talk with any of
the larger players in this market to see if there was a way to
also partner with those products that are already out there,
those projects that are already offered?
Ms. Greenlee. We are both nodding because we did.
Ms. Glied. One of the options in the report actually
includes an option for CLASS that would involve a partnership
with the private market. So that was something that we did
actively pursue.
Mr. Burgess. What happens now in that, and again, I am
concerned that the people that do provide this in the private
market, again, they are going to be waiting for Congress or the
agencies to do something, and they are kind of frozen in time
while that happens.
Ms. Greenlee. I was just looking at data on sales of long-
term care insurance recently, it doesn't look like beyond the
effects of the weak economy that there has been any particular
effect of the CLASS.
Mr. Burgess. Maybe it is a positive aspect for us doing the
hearing today, and maybe someone out there will recognize that
perhaps this is an activity that they should undertake for
themselves.
Just a couple of things to tie up some loose ends we are
getting asked from the other side. Losing half of the savings
from the CLASS Act for the Affordable Care Act, but there were
still savings. The savings, of course, come from Medicare cuts,
certainly cuts in the Medicare Advantage program and the Home
Health benefit that was cut in Medicare, the device tax, which
is likely to be problematic for our device manufacturers, the
changes in the income tax law where people have a lower
deductability of their actual medical expenses, the Cadillac
tax, and then always my favorite, the tanning tax. And the
recent evidence that the tanning tax receipts are lower than
expected because people do behave in a rational fashion and if
you tell them you are going to tax your tanning activity,
sunlight is free and people will go that route.
On the issue of the premiums, and I have asked you for a
premium range, I did find it in your HHS report, the premium
range, $235 a month to $391 a month, this was under the
assumptions designated as scenario two, average premium of--for
$50 a day with the two-plus activities a day living trigger,
that is a pretty stout premium for what really isn't a really
long-term care policy.
So I can certainly understand that people would be
reluctant to voluntarily opt into that program. That is going
to be an enormous barrier to participation.
Now, the issue of pre-existing conditions came up, and
honestly, I think the whole concept of the individual employer
mandate for the CLASS Act would be wrong. But I honestly don't
see how you get there without that because unless you coerce
people to spend what is that multiply up to $4,700 a year,
unless you coerce that purchase, I can't see anyone in the
world making that purchase, particularly when you can go to one
of the large insurers and buy an individual policy, middle of
the road as far as its benefits and get that for just a little
over $1,000 a year.on the issue of the independent advisory
council, has that been named?
Ms. Greenlee. No, sir.
Mr. Burgess. Do you have a list of people from which you
are expecting to draw, or were expecting to draw on their
expertise to name for that?
Ms. Greenlee. We had quite a number of people respond to
the Federal Register notice. A final--a list was never
finalized. We looked at those names when they first came in. I
have not looked at them for a while.
Mr. Burgess. You didn't have a preferred list of people
that were going to be contacted?
Ms. Greenlee. We had looked at the list. There are some
specific requirements in the law that different interest groups
or sectors be, I guess that is a better description, sectors be
covered, but I don't have a final list that this was narrowed
down to.
Mr. Burgess. Do you think that if this program is unfunded,
but still in existence, will you still proceed with naming
those people?
Ms. Greenlee. I just refer back to my conversation with Mr.
Pallone. The Secretary said very clearly that we are suspending
implementation of the program. We want to have a broad
conversation with a wide range of individuals. I will carry Mr.
Pallone's request back to the Secretary. I believe we can do
that in a number of fashions. I don't know that she wants to
set up an advisory committee when she has already said we are
not going to move forward to implement.
Mr. Stearns. The gentleman from Virginia, Mr. Griffith, is
recognized for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman, I appreciate that. A
couple of things just in comment to some of the things that
have been said. I notice that in reading the legal counsel's
opinion that while they may have been conservative and there
were areas where they were definitely said you can't go, they
also had some of the options they said you might be able to
make an argument, but I appreciate the fact they were
conservative in the sense that they said, but it is clearly
challengeable and if it goes to court, and the court rules that
the program is not set up correctly, it could void the program.
And that one of the options the court might have is to just say
whatever moneys are not yet expended get returned to the people
who bought in, but obviously, a big chunk of the money would
have already been expended.
So I do appreciate that because we have had some other
situations in front of this committee where folks just charged
in and didn't come back to Congress to get the legal changes
necessary. And while we may agree or disagree on some of those
legal changes, if we are going to go forward with something, I
think it needs to come back to Congress. So I appreciate the
legal counsel taking a position that recognizes the position of
Congress.I did also notice that in one of the options, at
least, there was a preexisting condition requirement that if
you had a preexisting condition, you had to wait, I think, 15
years. Seems like an awful long time. And again, it is just, I
recognize the Secretary's frustration because it is going to be
hard to get there from here, even if we change some of that
law.
I did note one thing in some of the notes that are in front
of me, and that is, that it appears that ASPI's analysis is
that the administrative costs should run somewhere between 6
and 20 percent, with the code on after 3 percent. I would have
to assume--would I be correct in assuming that that is part of,
even if it is a small part, that is a part of what makes the
financial models, the actuarial models not work is that there
is not a large enough administrative component?
Ms. Glied. It was a concern that the Federal actuaries
raised when they met and reviewed the various options that the
3 percent was not going to be sufficient.
Mr. Griffith. And then one thing that I might suggest that
you all take a look at in various programs. I just came from
the Virginia legislature about a year ago, and just before I
left, I patroned a bill that allowed us to have Statewide
zoning ordinances for med cottages. As we look at this issue
and work together, this is a facility that you put in the
backyard of a family member for somebody who has two tasks that
they need assistance on for daily living requirements. It kind
of is a mix for the person that doesn't have the ability to
stay in their own home and their family member doesn't have
room in their home. This gives you kind of a mix. There are
certain requirements that are required by the Virginia
Statewide zoning that we got through.
But needless to stay, it brings jobs to Virginia because we
are manufacturing these items. And it does it at a lower cost
than a permanent assisted living facility can do and keeps the
individual close to their loved ones. So I would recommend that
maybe not on this program, but on other programs that you all
keep that in mind or take a look at that as an option. As I
understand it, North Carolina, with minor exceptions, adopted
the Virginia law this year. It may be a way that we can save
money and provide quality care for people, if not in their own
home, at least in the yard of a family member. I thank you, Mr.
Chairman, and I yield back.
Mr. Stearns. And Dr. Cassidy is recognized for 5 minutes.
Mr. Cassidy. Yes. First, for the record, I would like to
submit the testimony from Richard Foster, I believe--from the
CBO, at least--to Tom Harkin's committee dated November 25,
2009, and I think there was a little bit of an issue as to----
Mr. Stearns. By unanimous consent, so ordered.
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Mr. Cassidy. Thank you. I think there were some concerns,
some questions as to whether CBO had concerns.
And technically you are right. In the second decade, it
said it might be cost neutral, but if I go on, and again in the
spirit of what Governor Bredesen is saying how forthright are
we being with the American people. The CLASS program would add
to the budget deficit in the third decade and succeeding
decades by amounts on the orders of tens of billions of dollars
for each 10-year period, and the CLASS Act would inevitably add
to future deficits on a cash basis by more than it reduces
deficits in the near term, etc., etc.
Ms. Glied. Is that Mr. Foster speaking?
Mr. Cassidy. This is the CBO. In my mess of papers, I have
lost the last page, but it came out of CBO. And this is
November 2009. So again, were you--I don't know this. I am
asking. Were you part of the deliberation as to include the
CLASS Act in the final?
Ms. Glied. No. I hadn't come to Washington.
Mr. Cassidy. So you wouldn't know whether Mr. Klein was
correct in saying that the administration was initially opposed
to including it, perhaps on the basis of fiscal concern?
Ms. Glied. I do know that the fact there was this twin test
in legislation was something that certainly gave the
administration more reason to go ahead. We were not going to
proceed. I am struck by the fact that everyone agrees this was
an enormous need, and that we passed a piece of legislation
that said given a great deal of uncertainty, we are going to
let you explore this, figure out if you can make it work and
then go ahead and address this need. We realize we can't do
that.
Mr. Cassidy. The only thing that gives me pause on that is
that I heard you speak, Ms. Greenlee in times past, very
impressed with your body of knowledge, as I am with yours, and
you clearly know what is key to what is a successful program,
and it is not just us. The GAO has a report that for fiscal
solvency, you need to have an accrual basis of accounting, not
a cash flow basis. That is GAO talking about entitlements in
general.
We have here on page 39 of your report on the Actuarial
marketing and legal analysis of the CLASS program, a list of
the things that would make the program viable as it turns out
they are everything that the private sector employs, and yet
you are not allowed to do. So I think that CBO and CMS's
initial concerns were so kind of grounded in practical
experience, that it concerns me that that practical experience
was ignored as a credit of $70 billion was counted towards the
overall cost of the President's health care bill. That is just
an aside.
That said, my concern about that leads me to a concern
about other things. Clearly a way that insurance is provided to
others is by an expansion of Medicaid. Ms. Greenlee, I think
you are from Kansas?
Ms. Greenlee. Yes.
Mr. Cassidy. And I think I heard you earlier that you work
in the Medicaid program?
Ms. Greenlee. Yes.
Mr. Cassidy. And I saw that it is bipartisan, that we know
that there is a problem here. Mr. Deutch, in his testimony,
spoke about Medicaid being on the chopping block on State
budgets and stressing Federal, somebody else spoke about the
labor of the budgets under the cost of Medicaid. What is it
going to do to the State of Kansas' budget to expand Medicaid
as the President's health care plan does, and knowing that many
more people potentially go on long-term care because of this
expansion. Will that be positive or negative for the State of
Kansas' budget?
Ms. Greenlee. Mr. Cassidy, I have been here now for over 2
years, so I can't give you current information about the impact
on the State of Kansas. The lieutenant governor from the State
visited me several months ago, and I know that they, like other
States, are looking at a managed care option for Medicaid in
the State of Kansas. I don't have a current budget information.
Mr. Cassidy. So knowing that you have to be careful in how
you speak, but let's just again kind of resort to common sense.
If already, I think as Deutch said, it is on the chopping block
because of the fiscal strain Medicaid is playing, specifically
the long-term care aspect of Medicaid, if we are about to
expand the eligibility thereof, knowing that we also have, as
former Representative Kennedy said, a tsunami of people who are
going to qualify, so older population, more people and more
people eligible, can that do anything but further strap a
budget which is laboring under the cost of Medicaid?
Ms. Greenlee. I am sorry, sir, I really can't be responsive
to the current Kansas situation.
Mr. Cassidy. I keep on thinking about what Breseden said.
It is hard to get the American people an honest answer. Not
that you are being dishonest. Lastly, you are just being so
totally honest that it is a little disingenuous, I must say. I
am sorry. That is just my impression.
Lastly, let me ask--I am out of time. I yield back.
Mr. Stearns. We have finished our hearing. By unanimous
consent, I would like to put the document binder in the record.
Any objection? If not, so ordered.
[The information follows:]

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Mr. Stearns. Also I would say to the gentleman from New
Jersey if indeed he meets with the council as he requested from
Ms. Greenlee, perhaps we can assume that the Republicans will
be invited and will be part of that conference. Is that fair to
say?
Mr. Pallone. First of all, I would like to see whether or
not we are even going to have a meeting. I know today I struck
an optimistic note. So we will see if the optimism holds and we
actually have a meeting, and then I will get back to your
question.
Mr. Stearns. With that optimism, we will close the hearing.
And I thank you very much for your testimony.
[Whereupon, at 11:42 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]

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