Secretary Sebelius Will Not Find the Right Formula to Fix CLASS

“Sebelius began her remarks by stating that taxpayer funds will not be used to bail out CLASS in the event of insolvency. But a taxpayer bailout is a real possibility for several reasons. First, premiums may be set lower than the actuarially correct amount. This is because there isn’t a useful model for actuaries to determine premiums, especially given the uncertainties of enrollee make-up. Second, within the law’s provisions, if benefits paid out are larger than anticipated, then either premiums will have to increase or benefits will have to be cut. This is a move that would be vigorously opposed by interested parties. Beneficiaries with a vested interest in preserving their CLASS payment will likely lobby vigorously to spread the pain through broad-based tax increases.”