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





      THE IMPLEMENTATION AND SUSTAINABILITY OF THE NEW GOVERNMENT-
ADMINISTERED COMMUNITY LIVING ASSISTANCE SERVICES AND SUPPORTS (CLASS) 
                                PROGRAM

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2011

                               __________

                           Serial No. 112-23






      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov





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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                  MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan                ANNA G. ESHOO, California
SUE WILKINS MYRICK, North Carolina   ELIOT L. ENGEL, New York
  Vice Chair                         GENE GREEN, Texas
JOHN SULLIVAN, Oklahoma              DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
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             ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky              Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____

                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    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   ANTHONY D. WEINER, New York
LEONARD LANCE, New Jersey            HENRY A. WAXMAN, California (ex 
BILL CASSIDY, Louisiana                  officio)
BRETT GUTHRIE, Kentucky
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)












                             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...........................................     2
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     3
Hon. Frank Pallone Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    10
    Prepared statement...........................................    10
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    11
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................    12
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    13
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   130
Hon. Edolphus Towns, a Representative in Congress from the State 
  of New York, prepared statement................................   135

                               Witnesses

Kathy Greenlee, Assistant Secretary, Administration on Aging.....    25
    Prepared statement...........................................    28
Allen J. Schmitz, Principal, Consulting Actuary, Milliman, 
  American Academy of Actuaries..................................    70
    Prepared statement...........................................    73
Joseph Antos, William H. Taylor Scholar in Health Care and 
  Retirement Policy, The American Enterprise Institute...........    78
    Prepared statement...........................................    80
Mark J. Warshawsky, Social Security Advisory Board, Director of 
  Retirement Research, Towers Watson.............................    95
    Prepared statement...........................................    97
William Lawrence Minnix, Jr., CEO, LeadingAge, Chair, Advance 
  CLASS, Inc.....................................................   104
    Prepared statement...........................................   106
Anthony J. Young, Senior Public Policy Strategist, NISH, 
  AbilityOne.....................................................   112
    Prepared statement...........................................   114

                           Submitted Material

``Running Out of Time, Money, and Independence?,'' article dated 
  January 2011, by Michael Ogg, Health Affairs, submitted by Mr. 
  Pallone........................................................     6
Statement, undated, from The Jewish Federations of North America, 
  submitted by Mr. Waxman........................................    15
Statement of AARP, dated March 17, 2011, submitted by Mr. Dingell    18
Report, undated, from the National Council on Aging, submitted by 
  Ms. Schakowsky.................................................    51
Report, dated March 15, 2011, from Congressional Research 
  Service, submitted by Mr. Gingrey..............................    61

 
      THE IMPLEMENTATION AND SUSTAINABILITY OF THE NEW GOVERNMENT-
ADMINISTERED COMMUNITY LIVING ASSISTANCE SERVICES AND SUPPORTS (CLASS) 
                                PROGRAM

                              ----------                              


                        THURSDAY, MARCH 17, 2011

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:30 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Joseph R. 
Pitts (chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Burgess, Shimkus, 
Murphy, Gingrey, Latta, Cassidy, Guthrie, Barton, Pallone, 
Dingell, Towns, Capps, Schakowsky, Weiner and Waxman (ex 
officio).
    Staff present: Clay Alspach, Counsel, Health; Howard Cohen, 
Chief Health Counsel; Brenda Destro, Professional Staff Member, 
Health; Paul Edattel, Professional Staff Member, Health; Julie 
Goon, Health Policy Advisor; Debbee Keller, Press Secretary; 
Ryan Long, Chief Counsel, Health; Jeff Mortier, Professional 
Staff Member; Katie Novaria, Legislative Clerk; Monica Popp, 
Professional Staff Member, Health; Heidi Stirrup, Health Policy 
Coordinator; Kristin Amerling, Democratic Chief Counsel and 
Oversight Staff Director; Phil Barnett, Democratic Staff 
Director; Alli Corr, Democratic Policy Analyst; Ruth Katz, 
Democratic Chief Public Health Counsel; Purvee Kempf, 
Democratic Senior Counsel; Karen Lightfoot, Democratic 
Communications Director, and Senior Policy Advisor; Karen 
Nelson, Democratic Deputy Committee Staff Director for Health; 
and Mitch Smiley, Democratic Assistant Clerk.
    Mr.Pitts. The subcommittee will come to order. The chair 
will recognize himself for an opening statement.

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

    The Community Living Assistance Services and Supports 
program, the CLASS program, a government-run long-term care 
insurance entitlement, was included in last year's health 
reform law, seemingly as part of a budget process to make the 
law look less expensive than it really is. Since participants 
will have to pay into the program for 5 years before becoming 
eligible for any benefits, CBO estimates including the CLASS 
Act in Obamacare reduced the 10-year cost of the legislation by 
$70 billion. With CBO estimating that the CLASS program will 
begin running a deficit by 2030, and CMS' own actuaries 
estimating that the program will go into deficit in 2025, a 
taxpayer bailout may look very attractive to future Congresses, 
when premium increases and benefit cuts can no longer make up 
the shortfall.
    While Obamacare specifically prohibits using taxpayer funds 
to finance CLASS, Congress can always pass a new law to allow 
the practice. Additionally, Congress can redirect funds from 
general revenue into the CLASS Independence Fund, if it needs 
to.
    The concerns about this program are not limited to 
Republicans. In October of 2009, Senators Kent Conrad, Joe 
Lieberman, Blanche Lincoln, Mary Landrieu, Evan Bayh, Mark 
Warner and Ben Nelson sent a letter to Senate Majority Leader 
Harry Reid asking him to strip the CLASS Act out of the pending 
health care reform legislation. They argued ``We have grave 
concerns that the real effect of the provisions would be to 
create a new Federal entitlement with large, long-term spending 
increases that far exceed revenues.'' 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.''
    More recently, on February 16, Secretary of Health and 
Human Services Kathleen Sebelius testified before the Senate 
Finance Committee and admitted in an exchange with Senator John 
Thune that the CLASS Act is ``totally unsustainable.'' Those 
are her words.
    It seems the concerns with the CLASS program are 
widespread, and 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 the issue, and the private 
sector, which already offers long-term care products, must be 
at the center.
    [The prepared statement of Mr. Pitts follows:]

               Prepared Statement of Hon. Joseph R. Pitts

    The Community Living Assistance Services and Supports 
(CLASS) program, a government-run long-term care (LTC) 
insurance entitlement, was included in last year's health 
reform law, seemingly as part of a budget gimmick to make 
Obamacare look less expensive than it really is.
    Since participants will have to pay into the program for 5 
years before becoming eligible for any benefits, CBO estimates 
including the CLASS Act in Obamacare reduced the 10-year cost 
of the legislation by $70 billion.
    With CBO estimating that the CLASS program will begin 
running a deficit by 2030; and CMS' own actuaries estimating 
that the program will go into deficit in 2025, a taxpayer 
bailout may look very attractive to future Congresses, when 
premium increases and benefits cuts can no longer make up the 
shortfall.
    While Obamacare specifically prohibits using taxpayer funds 
to finance CLASS, Congress can always pass a new law to allow 
the practice. Additionally, Congress can redirect funds from 
general revenue into the CLASS Independence Fund, if it needs 
to.
    The concerns about this program are not limited to 
Republicans. In October 2009, Senators Kent Conrad, Joe 
Lieberman, Blanche Lincoln, Mary Landrieu, Evan Bayh, Mark 
Warner, and Ben Nelson sent a letter to Senate Majority Leader 
Harry Reid, asking him to strip the CLASS Act out of the 
pending health reform legislation.
    They argued ``We have grave concerns that the real effect 
of the provisions would be to create a new Federal entitlement 
with large, long-term spending increases that far exceed 
revenues.''
    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.''
    More recently, on February 16, Secretary of Health and 
Human Services Kathleen Sebelius testified before the Senate 
Finance Committee and admitted in an exchange with Sen. John 
Thune that the CLASS Act is ``totally unsustainable.''
    It seems the concerns with the CLASS program are widespread 
and I believe we can all agree that we do have a serious long-
term care problem in this country as LTC costs are driving 
people into bankruptcy and weighing down the Medicaid program.
    We do need to address the issue, and the private sector, 
which already offers LTC products, must be at the center.

    Mr.Pitts. I now yield to my distinguished vice chairman, 
Dr. Burgess, for the remainder of the time.

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

    Mr.Burgess. I thank the chairman for yielding.
    I too have concerns with the CLASS Act. I feel it is not 
sustainable as presently drawn, and perhaps my biggest concern 
is that it gives people the wrong impression of what they now 
have under the Patient Protection and Affordable Care Act. We 
heard multiple people testify back in 2005 when we last looked 
into this that there was a concern that people were 
anesthetized as to their requirements for having some type of 
long-term care insurance, and I fear that this CLASS Act does 
again give people the false impression that now the government 
is going to pick up this expense, and in fact, nothing could be 
further from the truth. And then of course from the standpoint 
of employers, yet again another Congressional mandate placed 
upon them.
    The CLASS Act is not an answer in search of a problem. We 
all know the problem exists. Unfortunately, this committee last 
really debated long-term care and long-term care issues in 
2005. We never really got a chance to cover it during the 
debates on the Patient Protection and Affordable Care Act. It 
is just a fact of life: Some of us are going to get older. As 
we get older, the likelihood that we will need some type of 
long-term care assistance grows, and I have to tell you, I have 
got a long-term care insurance policy. I bought it just after I 
turned 50, long before I ever ran for Congress, and I didn't 
buy it because I read an article in Health Affairs, I didn't 
buy it because I saw something on C-SPAN that impressed me that 
I ought to have it, I bought it because my mother told me if I 
didn't want to be a burden on my children, I would attend to 
that while I could.
    So for some people, unexpectedly early in life, an injury 
happens and well over 4 million people under age 65 are in need 
of such care. Nine million Americans over 65 need some type of 
long-term care. The care can be costly and the segment that the 
government picks up through Medicaid is an impressive number. A 
figure that was produced back in 2005 when we had hearings on 
this that if we could move a third of projected seniors off of 
Medicaid into long-term care insurance in the latter 5 years of 
the 10-year budget window, which would be now, the Federal 
Government would save in excess of $150 billion, something that 
in fact could be quite useful today.
    The problem is hard. The answer is elusive. Market 
knowledge is important but it can be confusing for the 
consumer, but I believe with the CLASS Act, we have taken a 
step in the wrong direction because we have given people the 
impression that they now have something which in fact they may 
not have.
    I thank the chairman for the consideration. I will yield 
back the balance of my time.
    Mr.Pitts. The chair thanks the gentleman and yields 5 
minutes to the ranking member, Mr. Pallone, for an opening 
statement.
    Mr.Pallone. Thank you, Mr. Chairman.

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

    You know, Mr. Chairman, I have a great deal of respect for 
you and also for Dr. Burgess, but I have to start out by 
dispelling some of the things that both of you said. I mean, 
first of all, I have to say, I am getting very frustrated 
because it seems like almost every hearing is an effort to 
repeal or debunk or defund something that is in the Affordable 
Care Act and suggest that somehow it is not real, and this is 
just another example of it. I mean, the CLASS Act is very real. 
It is providing community-based services, cash so that people 
can actually get community-based services. It is real. It is 
not something that is fiction that we are kidding people about. 
They will be paying into a trust fund. They will get the money 
back when they become disabled and need to go out and use that 
cash to buy community-based services so they can stay in the 
community.
    The other thing that really bothers me is that I don't hear 
any alternatives coming from the other side. I mean, Dr. 
Burgess correctly said that there is a real need for long-term 
care and support services, and this he says is no good. Well, 
what is the alternative? I don't hear it.
    We made a concerted effort, myself, Mr. Dingell and the 
late Senator Kennedy, who was the Senate sponsor of this bill, 
to come up with a program that offers an alternative to provide 
services for disabled Americans so they can remain in their 
homes and in their communities. It was not put in as an effort 
to try save money for the health care reform. We have been 
advocates for this for many years. You talk about three people, 
I am the youngest of the three. I have only been here 23 years. 
Mr. Dingell and the late Senator Kennedy were here for a lot 
more years advocating for this legislation. It just happened to 
be that there was an opportunity to move this in the context of 
the Affordable Care Act, and we did it because we know that 
there are 10 million Americans in need of long-term services 
and that number is expected to increase to 26 million by 2050. 
Meanwhile, more than 200 million adult Americans lack any 
insurance protection against the cost of long-term services. As 
a result, nearly half of all funding for these services is now 
provided through Medicaid, which is a growing burden on States 
and requires individuals to become and remain poor to receive 
the help they need, which is a terrible way to operate.
    So as Americans continue to age, we are faced with an 
impending crisis in long-term care. The implementation of CLASS 
offers a new approach that builds upon our existing safety-net 
system and helps our elderly and disabled finance the long-term 
care they need to remain active and productive members of their 
communities for as long as possible. Now, I know this doesn't 
address nursing home care. I am fully aware of that. But the 
need for community-based care is just as important as a method 
of financing long-term care in the nursing home. The nursing 
homes are paid for by Medicaid but a lot of these services that 
people would be able to access through the CLASS Act are not 
even provided by Medicaid. That is why it is necessary. It is a 
voluntary self-financed program designed to assist Americans 
who choose to participate to proactively prepare for their 
future. People are taking on responsibility, basically saying I 
want to prepare myself, I am willing to take the 
responsibility. It focuses on personal responsibility, ensures 
as many choices as possible are available to those needing 
future services.
    I know my Republican colleagues have concerns about the 
program's sustainability and its impact on the budget deficit, 
but to them I would say that the Secretary has the tools she 
needs in the bill to make sure this program does not grow into 
a new entitlement. The chairman said it is an entitlement. It 
is not. In fact, the law requires that she certify the program 
to be actuarially sound and deficit-neutral. If anything, this 
program helps alleviate deficit problems. As the CBO noted in 
its analysis, CLASS could save Medicaid $2.5 billion in the 
first 10 years, possibly additional savings after that, and 
conversely, the CBO estimates that repeal of CLASS would add 
$86 billion to the Federal deficit. I continue to remind my 
Republican colleagues, if you start repealing the provisions of 
the Affordable Care Act, CLASS or some of the others, you are 
going to increase the deficit, and I strongly believe CLASS is 
an important step in the evolution of public policy because it 
is a framework based on the principles of independence, choice 
and empowerment. CLASS is about ensuring you have the services 
and support you need to remain independent members of society, 
which is what all of us want.
    Now, I was going to yield to Mr. Dingell but I think he is 
going to come later, so let me ask unanimous consent, Mr. 
Chairman, to enter into the record a narrative essay by Michael 
Ogg from New Jersey titled ``Running Out of Time, Money and 
Independence?,'' which I think powerfully illustrates the 
realities of the current long-term care environment.
    Mr.Pitts. Without objection, so ordered.
    Mr.Pallone. Thank you.
    [The information follows:]



    
    Mr.Pitts. The gentleman's time is expired. The chair 
recognizes the chairman emeritus of the committee, Mr. Barton, 
for 5 minutes.

 OPENING STATEMENT OF JOE BARTON, A REPRESENTATIVE IN CONGRESS 
                    FROM THE STATE OF TEXAS

    Mr.Barton. Thank you, Mr. Chairman. I am going to yield 
some of that time to Dr. Gingrey.
    Last April, a month after PPACA was signed into law, the 
Centers for Medicare and Medicaid Services' chief actuary, 
Richard Foster, released a report entitled ``Estimated 
Financial Effects of the Patient Protection and Affordable Care 
Act.'' He estimated that by 2025, 15 years after PPACA was 
signed into law, projected benefits of this program would 
exceed revenues. CBO has estimated that benefits paid out will 
exceed premium payments by 2030, and Health and Human Services 
Secretary Kathleen Sebelius deemed the program as being totally 
unsustainable. Let me repeat that, totally unsustainable. 
Regardless of when this program is expected to become 
insolvent, we need to examine the CLASS Act to ensure that we 
are not creating another Federal entitlement program which will 
simply be a burden on our Federal budget. Last Congress, as the 
ranking member of this committee, I asked then-Chairman Waxman 
to bring Mr. Foster in to testify regarding this report and the 
sustainability of the program. Chairman Waxman was not able to 
do that, so I am very glad that Chairman Upton and Chairman 
Pitts have agreed to do it in this Congress.
    With the state of our economy being what it is right now 
and the massive debt that we are incurring, I think it is 
imperative that we rein in spending in order to protect our 
country's financial stability. Long-term care is a serious 
issue, and I believe that myself and all Republicans are very 
willing to support some sort of a program for long-term care 
but it must be one which is sustainable and which is fiscally 
responsible. The program that we have in current law is not 
sustainable and it is not fiscally responsible. Therefore, we 
need to review it and hopefully reform it.
    [The prepared statement of Mr. Barton follows:]

                 Prepared Statement of Hon. Joe Barton

    Mr. Chairman, thank you for holding this important hearing. 
Last April, a month after PPACA was signed into law, the 
Centers for Medicare & Medicare Services' chief actuary, 
Richard Foster, released a report entitled ``Estimated 
Financial Effects of the ,Patient Protection and Affordable 
Care Act.'' He estimated that by 2025, 15 years after PPACA was 
signed into law, projected benefits of this program would 
exceed revenues. The Congressional Budget Office (CBO) has 
estimated that benefits paid out will exceed premium payments 
by 2030. And the Health and Human Services Secretary, Kathleen 
Sebelius, has deemed the program as being ``totally 
unsustainable.''
    Regardless of when this program is expected to become 
insolvent, we need to examine the CLASS program now to ensure 
that we are not creating another Federal entitlement program 
that will overwhelm our Federal budget. Last Congress, I asked 
then-Chairman Waxman to bring Mr. Foster in to testify 
regarding this report and the sustainability of this program. 
I'm glad Subcommittee Chairman Pitts has decided to examine 
this program.
    With the state of our economy right now, and the massive 
debt we are incurring, it is imperative that we rein in 
spending in order to protect our country's financial stability. 
Long-term care is a serious issue and should be addressed. But 
it must be addressed in a fiscally responsible manner, one 
which creates a solvent program which benefits those who need 
care, and does not just create another massive entitlement 
program.

    Mr.Barton. With that, I would like to yield 3 minutes to 
Dr. Gingrey of Georgia.
    Mr.Gingrey. Mr. Chairman and the gentleman from Texas, I 
thank you for yielding.
    Mr. Chairman, if we could stop the clock just for a second 
to let me ask you a question? Are we each going to get 2 
minutes for an opening statement or not?
    Mr.Pitts. No, we were just----
    Mr.Gingrey. OK. Thank you, Mr. Chairman, and I thank the 
gentleman from Texas.

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

    The CLASS Act attempts to address an important public 
policy concern, the need for non-institutional long-term care, 
but that is not why we are here today. We are here today 
because the CLASS Act, according to CBO, the President's own 
debt commission and even the Administration is financially 
unsustainable and a potential time bomb for the Federal budget 
and our economy. To quote the President's debt commission, 
``Sustaining the program over time will require increasing 
premiums and reducing benefits to the point that the program is 
not able to accomplish its stated function of caring for the 
sick and disabled.'' Absent reform, the debt commission 
concluded, ``The program is likely to require large general 
revenue transfers or collapse under its own weight.''
    To sum it up, the CLASS Act is a new entitlement nightmare 
created by or included in, as the gentleman from New Jersey 
said, Obamacare that when it fails it could harm disabled 
patients that would depend on it as well as Medicare seniors 
who are currently facing an unsustainable Medicare program of 
their own. So Senator Conrad, current chairman of the Senate 
Budget Committee, called the CLASS Act, and I quote him ``a 
Ponzi scheme for the workers who are encouraged to sign up. The 
perpetration of a Ponzi scheme requires an ever increasing flow 
of money from investors, American workers in this case, to keep 
this thing going and it is ultimately destined to collapse.'' 
So my question is, is Senator Conrad right? This country does 
not need another Bernie Madoff fraudulent investment scheme, 
especially one run by the Secretary of the Health and Human 
Services.
    And I want to close with the debt commission recommendation 
for CLASS. The commission advised the CLASS Act be reformed in 
a way that makes it credibly sustainable, and if that is not 
possible, we advise it to be repealed.
    Mr. Chairman, I am not seeing anything that would lead me 
to think this program can be made credibly sustainable, and if 
I am not convinced otherwise after today's hearing, and 
certainly we will listen carefully to the witnesses, I will be 
dropping a bipartisan bill today with my good friend, Dr. 
Charles Boustany, the gentleman from Louisiana, to repeal this 
program once and for all, and I yield back.
    Mr.Pitts. The chair thanks the gentleman.
    Mr.Barton. With that, I would like to yield to Mr. Shimkus 
the remaining time.
    Mr.Shimkus. Thank you, Mr. Chairman, Mr. Ranking Member.
    The national government is headed off a cliff. Our budget 
consists of Medicare, Medicaid, Social Security, interest on 
the debt and the discretionary budget. All are following the 
actions of the Congress today just trying to get to the end of 
a budget fiscal year. How in the world do we add another 
entitlement to the mix? How do we take 5 years of revenue 
making promises that we can't fulfill?
    This is a crazy process and I am glad we are having the 
hearing, and I yield back.
    Mr.Pitts. The chair thanks the gentleman. The gentleman's 
time is expired. The chair recognizes the ranking member, Mr. 
Waxman, for 5 minutes.

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

    Mr.Waxman. Mr. Chairman, today's hearing is about much more 
than the nuts and bolts of the CLASS Program. At its core, this 
meeting is about an issue that has touched virtually every 
person in this room, public and private alike: the indignity, 
the burden and the expense of long-term-care services and 
supports and our lack of a decent, reasonable and accessible 
program for those in need of this kind of assistance.
    The problem has been with us for a long time, and it is 
growing. With the aging of the Baby Boomers, the numbers are, 
indeed, quite staggering, and I am sure we will hear much more 
about that point from today's witnesses. But rather than facing 
the challenge, we have pushed the problem aside year after 
year, pledging to those in need that with just a bit more time, 
we could get a good program in place. And if the Republicans 
decide they want to repeal this program, I would like to know 
what they are going to put in its place. We still haven't heard 
what they want to put in place for the health care reform that 
they want to repeal and replace. We know they want to repeal. 
What do they have to offer?
    Almost a year ago, we tried to keep the promise. In 
creating the CLASS Act, a voluntary, self-sustaining, privately 
financed and beneficiary-driven effort, we set in motion a 
process that will allow the elderly and the disabled to be able 
to stay in their homes and in their communities when they are 
no longer able to do so independently. Shame on those who would 
take this promise away and put nothing in its place.
    Having said that, all of us who support the CLASS program--
members of Congress, HHS, advocacy organizations--all readily 
agree that much work needs to be done before the program is 
ready to go live in 2012. That is what the 2 years of 
preparation time and the Secretarial discretion and flexibility 
provided for in the enacting legislation is all about.
    So let us get on with that task. Let us learn today about 
where the program is and where the program is going and how it 
plans to get there, and let us be assured that the requirements 
of the law will, in fact, be met. But along the way, let us not 
forget who and what brought us to this point: the Tony Youngs 
of America--Tony, we are going to hear from later, is one of 
our witnesses--their families, and the discouraging and often 
devastating experience of simply wanting to stay put and remain 
engaged and productive, and being told that is not possible.
    The CLASS program is designed to change all that. Let us 
give the CLASS Act a chance and keep our promise to those who 
have waited so long for meaningful reform.
    I want to yield the balance of my time to Mr. Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr.Dingell. Mr. Chairman, I thank my good friend, Mr. 
Waxman, for giving me this time, and I commend you for having 
this hearing. Oversight is an extremely important undertaking, 
and this will enable us to come to conclusions as to what is 
the best thing for us to do with regard to the CLASS Act and 
how it can best be made to enable us to serve a terrifying 
unmet need for all of our people.
    This is a proposal that was put into law, as you will 
remember, by the ranking member of the Health Subcommittee, Mr. 
Pallone, and by my dear friend, Senator Kennedy, and I, and it 
is vital program and part of the health reform law. It will 
fill an enormous unmet need in our society: affordable long-
term care services and support for 10 million Americans in need 
of long-term care now and some projected 15 million Americans 
that are going to need that by 2020. Currently, Americans in 
need of long-term care, whether they are functionally disabled 
or elderly, find themselves with few options, if any. Private 
long-term care insurance is available but options are limited 
and costs are too burdensome for many families. This 
legislation, the CLASS Act, is not an entitlement program, it 
is a voluntary program, and in our review today, if we will 
work together, we can come up with an intelligent way of making 
it work and be acceptable in terms of the budget constraints 
and concerns that we have, and I call on my friends to approach 
it that way rather than to seek to repeal a program which has 
so much opportunity to help and benefit our people who have 
desperate needs and their families who suffer.
    Medicaid cannot continue to be the only affordable long-
term care service available to Americans, and I would call on 
my colleagues to know that the CLASS Act enables people to pay 
a part of their costs through premiums which they pay prior to 
the time that they have need of the program. That is an 
extremely important difference between it and Medicaid, and my 
urging to my colleagues on both sides of the aisle, 
particularly the Majority, is let us work together to make this 
a good thing, to make it work for all the people and to stop 
some of this nonsense about fighting about legislation of this 
kind when in fact we could work together to make things better 
for Americans in a fiscally responsible and proper way.
    I thank you for holding these hearings and I thank my 
colleague for yielding me this time.
    Mr.Pitts. The chair thanks the gentleman. The gentleman's 
time is expired.
    Mr.Waxman. Mr. Chairman, may I ask unanimous consent that 
the statement from the Jewish Federations of North America be 
inserted in the record?
    Mr.Pitts. Without objection, so ordered.
    [The information follows:]



    
    Mr.Dingell. Mr. Chairman, may I make a similar unanimous 
consent request? The AARP has an excellent statement which they 
have presented to me to ask me to have it submitted to the 
committee by unanimous consent, and I ask unanimous consent 
that that excellent statement be inserted in the record.
    Mr.Pitts. Without objection.
    [The information follows:]



    
    Mr.Burgess. Mr. Chairman, may I ask unanimous consent that 
our side could be allowed to see those letters?
    Mr.Pitts. If you can pass those down, we will take a look 
at them.
    All right. We have two panels today, and I would like to 
introduce the first panel at this time. Assistant Secretary 
Kathy Greenlee was appointed by President Obama and later 
confirmed by the Senate in June 2009 to serve as the Assistant 
Secretary for the Administration on Aging, an agency within the 
U.S. Department of Health and Human Services. In January of 
this year, Assistant Secretary Greenlee was designated as the 
Administrator of the Community Living Assistance Supports and 
Services, more commonly referred to as the CLASS, program. 
Prior to joining the Administration, she served as the 
Secretary on Aging in Kansas and as the General Counsel of the 
Kansas Insurance Department. In addition, Ms. Greenlee served 
as Chief of Staff and Chief of Operations for then-Governor 
Kathleen Sebelius.
    Your written testimony will be entered into the record and 
we ask that you summarize your statement in 5 minutes and then 
be available for questioning. We look forward to your 
testimony. The witness is now recognized for 5 minutes.

       STATEMENT OF KATHY GREENLEE, ASSISTANT SECRETARY, 
                    ADMINISTRATION ON AGING

    Ms.Greenlee. Thank you, Mr. Chairman.
    Chairman Pitts, Ranking Member Pallone and members of the 
subcommittee, thank you for the opportunity to discuss the 
implementation of the Community Living Assistance Services and 
Supports Act, or what we all commonly call the CLASS Act.
    Today, approximately 10 million Americans need long-term 
services and supports ranging from having an aide visit for a 
few hours a week to living in a nursing home around the clock. 
As America ages, that number is rising steadily. By 2020, it is 
expected that 15 million Americans will need some kind of long-
term care. We know that one out of six Americans who surpass 
the age of 65 will spend more than $100,000 on long-term care 
and far more will need less extensive but substantial care. 
More than one of five persons who enter a nursing home will 
spend down their own resources and qualify for Medicaid after 
virtually exhausting their savings.
    Unfortunately, only 8 to 10 percent of Americans have 
private long-term care insurance, and new enrollment is 
declining while major long-term care competitors have exited 
the market. Taken together, this means that many Americans are 
not well prepared to finance long-term care services and 
supports that they will need.
    There are a number of reasons for this reluctance to 
prepare. First, four out of five Americans mistakenly believe 
that Medicare will provide them with extensive coverage for 
long-term care, and it does not. In addition, while Medicaid is 
the primary payer for long-term care, paying approximately 50 
percent of all nursing home expenditures in this country, 
Medicaid requires that individual impoverish themselves in 
order to qualify for long-term services and supports with only 
modest protections for the needs of a spouse who remains in the 
community.
    Americans also frequently misjudge the likelihood that they 
or a spouse will someday need long-term services and supports, 
and many people are unaware of the cost of these kinds of 
supports. A year of nursing home care costs around $75,000. But 
it isn't just individual budgets that are stretched. Recent 
data from the CMS Office of the Actuary showed that in 2009, 
Medicaid spent $111.2 billion on long-term care, and spending 
on those services is projected to increase as the population 
ages, stressing both Federal and State budgets.
    Prior to coming to Washington, as the chairman 
acknowledged, I had the honor of serving as the Secretary of 
Aging in Kansas. The Secretary of Aging in Kansas has a unique 
portfolio. I oversaw community aging programs as well as the 
Medicaid-funded programs for both nursing home services and 
home and community-based services for frail elders. I also had 
the opportunity during my service in Kansas to spend 8 years as 
an insurance regulator, serving half of that time as the 
General Counsel for the Kansas Insurance Department. I have 
visited dozens of nursing homes and spoken to thousands of 
seniors. I have managed a Medicaid budget. And what I know with 
certainty is that all people regardless of age hope to maintain 
their independence for as long as possible. I know and respect 
many nursing home providers. Their particular task is 
difficult. But for all of us, we hope to postpone nursing home 
admission for as long as possible, and some people swear that 
they will never go to a nursing home.
    Fortunately, for policymakers, people prefer to live in the 
setting that is the least, not the most, expensive. In most 
cases, that setting is home. How then do we help people prepare 
for the costs associated with aging and disability and increase 
their access to home and community-based services and community 
supports that they so desperately need? The CLASS program 
offers one new tool to support Americans' long-term care needs 
and help them remain independent. Its goals are to provide an 
opportunity for individuals to take responsibility and to 
prepare financially for their own long-term care needs, support 
consumer choice related to their own care and their living 
arrangements and facilitate independence and community living.
    President Obama and Secretary Sebelius have pledged to use 
the discretion provided in the law to protect the solvency of 
this program. There are changes that we intend to make through 
the Secretary's regulatory authority to guarantee the solvency. 
We are committed, as the Secretary said in a recent speech, 
that we will do everything we can to make these changes to 
ensure the solvency. And as the Secretary has outlined, and I 
can spend more time discussing with you, there are a number of 
things that we have in mind that we will change by regulation.
    We need to change the employment and earning requirements 
for the program. We need to close loopholes that allow people 
to skip payments and then enroll at a later time. We need to 
explore options for indexing the premiums along with the 
benefits. We need to tailor the benefits to more closely meet 
the individual needs and preferences. We need to educate the 
public about long-term care and we need to partner with 
employers, and also protect against fraud and abuse. We will do 
all of this in full view of the public with a transparent 
process. We will do everything we can as we move forward to 
implement this law responsibly and protect its solvency. Thank 
you.
    [The prepared statement of Ms. Greenlee follows:]



    
    Mr.Pitts. The chair thanks the gentlelady. We will now 
begin our questioning, and the chair recognizes himself for 5 
minutes for questions.
    Madam Secretary, some have suggested that in order to have 
a sustainable program, the monthly premium may have to be at 
least $240 a month or higher. When will your agency announce 
what the monthly premium will be, and is it possible the 
premium could be as high as $240 a month?
    Ms.Greenlee. Mr. Chairman, there are two pieces of that I 
would like to address. In terms of the plans for announcing the 
monthly premium, the proposal going forward is that we will 
submit three plans as recommended in the law to the 
Independence Advisory Council for their submission to the 
Secretary. We will then publish in a reg, most likely this 
fall, our initial assessment of those three plans. I do not 
know at this point whether or not that initial publication will 
include specific pricing information but it will provide 
information about the specific plans that we are looking at. We 
know that the best way to protect the solvency of the program 
is to ensure high participation, and participation will be a 
function of several things, including the price of the product.
    Mr.Pitts. Thank you. On the Administration on Aging's 
authority to increase premiums, do you believe the Secretary 
has the authority to increase CLASS program premiums, and if 
so, on what basis, and are there limitations?
    Ms.Greenlee. Mr. Chairman, it is clear in looking at the 
law that the Secretary was given many protections once the 
program is enacted in order to adjust or make changes to the 
premiums. The list of recommendations that I have suggested are 
things that we need to do early through a regulatory process, 
not just to adjust premiums but to deal with the indexing of 
the premiums to help protect the financial solvency. So she has 
the authority both after the program is adopted and now.
    Mr.Pitts. The President's fiscal year 2012 budget request 
includes $120 million to begin the implementation of the CLASS 
program. However, just last month Secretary Sebelius admitted 
the CLASS program to be ``totally unsustainable.'' Madam 
Secretary, do you agree with Secretary Sebelius that the 
program in its current form is unsustainable? Yes or no.
    Ms.Greenlee. Mr. Chairman, if I could elaborate beyond a 
yes or no I could be more responsive. The Secretary is 
referring to the conclusion we have come to by a plain reading 
of the specific statute without adjustment. We are committing 
to making reforms to the program so that we can hit the 
financial targets that she is required to hit to make sure that 
the program is solvent.
    Mr.Pitts. Can you please explain why the Administration 
requested $120 million for FY 2012 of which nearly $94 million 
was for outreach and enrollment efforts when the 
Administration's chief health official clearly does not believe 
the program is sustainable in its current form?
    Ms.Greenlee. Mr. Chairman, the Secretary's comment with 
regard to not sustainable in its current form is her 
explanation as to why we will reform the program. We don't 
intend to implement the program without those changes. The 
request for the $120 million is start-up funds so that we can 
begin the program. This is a new program. It is a type of 
product that has never been offered to the American public. As 
I said earlier, participation is key and we will need to do an 
education and outreach effort to America to describe not just 
the program but the need that they have that is currently 
unaddressed.
    Mr.Pitts. And can you please provide more information on 
the changes you believe you will need to make to the program in 
order to make it more sustainable, including premium increases 
and your intended timeline for doing so?
    Ms.Greenlee. Certainly.
    Mr.Pitts. The chair yields to the vice chairman, Dr. 
Burgess.
    Mr.Burgess. Yes. Secretary, thank you for being here. Do we 
have an idea--Secretary Sebelius testified to the fact that the 
program as drawn may be unsustainable. Do you have an idea as 
to when that realization occurred, when that information became 
available to the Secretary?
    Ms.Greenlee. During the past year, after the law was 
passed, we have worked to develop two actuarial models that 
include the best of actuarial science as well as economics. 
Each of those models has led us to the conclusion that to 
protect the solvency, there are some changes that we need to 
make to the program.
    Mr.Burgess. And will those changes likely be on raising the 
premium, reducing the benefit, a combination of both, or draw 
on the Federal Treasury?
    Ms.Greenlee. Congressman, the changes I mentioned briefly, 
they are more fully described in my written testimony, but they 
are changes that can be made with regard to earnings, anti-
gaming, fraud protections and indexing the premiums, which will 
help strengthen the program.
    Mr.Burgess. I will get to that in just a moment, but we do 
need to pursue that a little bit. Thank you.
    Mr.Pitts. The chair thanks the gentleman. Time is expired. 
The chair recognizes the ranking member, Mr. Pallone, for 5 
minutes for questioning.
    Mr.Pallone. Thank you, Mr. Chairman, and I want to ask 
questions, but I have to say, and again, not meant with any 
disrespect to you or the Republicans on the other side, but it 
just seems that we know we have a huge problem out here with 
people not having these community-based services and the 
Democrats come up with a plan to try to address it, and it just 
seems like everybody on the other side is so scared like there 
is this fear of a new program and, you know, we are going to 
get the word out about it. I mean, the bottom line is, when you 
have a problem, you try to address it and yes, it is going to 
new and there are going to be some problems in implementation 
and outreach, but that is what happens when you try to do 
something new, address something that hasn't been addressed 
before, and I appreciate the Assistant Secretary for pointing 
that out, that we are trying to do something that has never 
been done before and so naturally there are going to be some 
kinks in it, but that is what happens when you try to address 
something that hasn't been addressed.
    Now, I just wanted to ask some brief questions, if I could. 
First, I wanted to start with this decision that we made to put 
the program in your agency, the Administration on Aging. Some 
suggest that that is not the proper place for it. Why is the 
program being housed there and how prepared do you feel you 
are, and did we make the right choice? Quickly, because I want 
to get to another one.
    Ms.Greenlee. Congressman, the Secretary has the authority 
to reorganize Department of Health and Human Services, which 
gives her the authority to place it in the Administration on 
Aging. This is a different kind of program than AoA has run in 
the past but the connection is that we have long expertise in 
providing services in the community that help support 
independence, and I believe that I also have the credentials to 
help make this possible.
    Mr.Pallone. Thank you. Now, we heard statements here, the 
Republicans referenced the Secretary's statements about 
loopholes and sustainability and the need to strengthen the 
program, but I see the basis for the Secretary exercising 
flexibility and discretion given to her in the law to implement 
it and make program improvements that address these loopholes 
and sustainability. Would you tell us where the Administration 
is in reviewing some of these criticisms, you know, statements 
that were made by the chairman about loopholes, sustainability? 
How are these being addressed?
    Ms.Greenlee. As I had mentioned earlier, we have spent the 
last year analyzing the law as written so that we have a 
fundamental science to the analysis. We have hired an actuary 
for the CLASS staff, who will now build on that to develop 
solvent programs that we can take moving forward, but we know 
there are changes that we need to make to protect the solvency. 
The Secretary not only has the authority, she has the 
responsibility to roll out a solvent program, and we take that 
very seriously.
    Mr.Pallone. OK. And then the last thing I wanted to ask is, 
the process by which the requirements, the guidelines, the nuts 
and bolts of the programs, if you will, will be disclosed and 
subject to review by the relevant stakeholders. In other words, 
how will the department go about publicizing the framework of 
the program and at the same time seeking advice of those with 
an interest in its operations?
    Ms.Greenlee. There are two primary ways. We will work with 
the CLASS Independence Advisory Council, which is clearly set 
forth in the law to be a place where we go for additional 
public input, stakeholder input, and we will go through the 
Federal rulemaking process so that we will publish regs and 
have full opportunity for the general public to comment. We 
will review those comments and address them as we move forward.
    Mr.Pallone. Well, I appreciate that. I just wanted to point 
out a couple other things, and again, I am trying to sort of 
address some of the criticisms that were made by my colleagues 
on the other side. Statements were made about how this is a 
mandate to employers. That is not true. Employers decide 
whether they want to have their employees participate in this. 
It is voluntary. Now, obviously, as you have said, Madam 
Secretary, we want as many employers as possible to participate 
because the price, if you will, will be lower if more people 
participate and it is very important. But is it not mandated. 
The law specifically says that employers can decide whether to 
sign up, and obviously you are going to try to get as many of 
them as you possibly can, but if you would comment on that?
    Ms.Greenlee. That is correct. Both employers and employees 
will have a choice about whether or not to participate. We will 
work actively with the employer community to make it as easy as 
possible for them to participate or to help individuals 
participate because we need a large number and a broad risk 
pool of people to apply.
    Mr.Pallone. And I appreciate that. And I have about 10 
minutes left here. Again, I just want to stress--oh, I don't? 
Oh, 10 seconds? I am sorry. Now I have nothing left. No, I just 
want to say again, you know, we are trying to address something 
that hasn't been addressed. You said that. We are going to have 
some kinks, but let us move forward. Let us not repeal it. I 
really feel strongly that way. Thank you.
    Mr.Pitts. The gentleman's time is expired. The chair 
recognizes the vice chairman, Dr. Burgess, for 5 minutes for 
questioning.
    Mr.Burgess. Again, thank you, Secretary Greenlee, for being 
here, and your testimony is important and certainly underscores 
some of the testimony we had when we last had hearings on this 
in 2005, and that is the general lack of knowledge of the 
general public about the importance of having long-term care 
insurance, your reasons why people don't pursue it, not wanting 
to think about unpleasant things in the future, thinking that 
some other Federal agency is going to pick this up at some 
point. So all of this is extremely important. I guess the 
question just comes up, you have mentioned the $120 million 
budget that is spent this first year on developing the program. 
What do you think we could have done with $120 million just 
sort of increasing awareness, increasing the general public's 
awareness of this as a problem and what options are out there 
for them? Could we have done a better job?
    Ms.Greenlee. I want to make sure I understand, without a 
program attached to it, just a general----
    Mr.Burgess. There are programs available. I bought one in 
the year 2000. Again, it wasn't because I read an article in 
Health Affairs. It wasn't because I saw somebody on C-SPAN who 
looked smart. My mother told me that, hey, if you don't want to 
be a burden on your children like I am on you, then perhaps you 
will consider long-term care insurance, and indeed, I 
investigated it and made a decision to purchase it. Now, it 
wasn't particularly--you know, it was one of those bets I hope 
that will never get covered, but at the same time, if more 
people are aware of the importance of having this, what the 
implications are of not having this, do you think we could have 
perhaps done some good with $120 million as a public outreach 
program, even employing old Andy Griffith to tell us about it?
    Ms.Greenlee. You know, the private long-term care insurance 
market has been selling for 30 years and they have only reached 
penetration of probably 10 percent in the market. Clearly, 
there is a need for more people----
    Mr.Burgess. But, if I could, we make it extremely hard. 
There is no tax deductibility for long-term care insurance like 
there is for some of the employer-sponsored insurance. You 
can't pay the premium out of a medical savings account or 
health savings account. These are all after-tax dollars that 
have to be invested. There are things we could do on the policy 
side absent the CLASS Act that would have made a difference in 
the number of participants. I am not saying it would have 
solved the entire problem. Surely there are still going to be 
people who are going to need a medical safety net. Medicaid is 
obviously not going to go away. But it always seems like the 
default position is, we are going to expand those Federal 
programs. You talk about fraud and abuse and wanting to be able 
to clamp down on that. I salute you for that. I want you to do 
that. But at the same time, when you look at those third-party 
payment programs that are subject to fraud and abuse, it is 
never United Health Care that you read about in the front of 
the page of the newspaper that has a problem with too many 
wheelchairs going out, it is Medicaid, it is Medicare. It is 
those public programs that seem to be so vulnerable. Why not 
try to partner with those people who are already out there 
offering private long-term care insurance and try to build on 
that, perhaps remove some of the obstacles, work with 
policymakers to remove some of those obstacles to purchase of 
long-term care insurance?
    Ms.Greenlee. Congressman, the product that the CLASS Act 
represents is a different market than what the long-term care 
insurance market has ever addressed. This is for a different 
group of individuals with a limited benefit. The private market 
has always offered comprehensive long-term care insurance, 
which many people need, and I agree that there are new 
opportunities, new ways to reach that market. That is not the 
same market that the CLASS product is designed for.
    Mr.Burgess. Well, let me ask you this: Do you think when 
people look at--and granted, people's understanding of things 
sometimes is more superficial than I think it should be, but as 
people look at the Patient Protection and Affordable Care Act, 
say aha, they have got the CLASS Act in there, are they going 
to be more or less inclined to more seriously look into private 
long-term care insurance should they be able to afford it or is 
there going to be an acknowledgement in people's minds now 
that, yes, the government is taking care of that for me, I 
don't have to worry about it?
    Ms.Greenlee. This is a supplemental program, not 
comprehensive needs, so the answer for an individual would 
depend on what they could afford to purchase for themselves, 
but whether or not there----
    Mr.Burgess. But do you think there is a general awareness 
that this is a supplemental program? It is not the way I hear 
it talked about in the media.
    Ms.Greenlee. That is part of the reason for the budget 
request so that we can very clear with the public so they know 
that this is for a supplemental supportive program and not a 
comprehensive product.
    Mr.Burgess. Look, I grant you that H.R. 3200 never saw the 
light of day after it left the House floor, but when we marked 
up the health care bill in this committee, the CLASS Act was 
brought in at the last minute as kind of a shell bill. It was 
to be filled out by other committees. And in fact, it was put 
together as a hodgepodge on the Senate floor on Christmas Eve. 
That is why we have got the problems that we have, and we ought 
to be honest about addressing that, fix what we can but 
understand that this was not an ideal program, was never 
properly vetted by the United States Congress.
    I will yield back, Mr. Chairman.
    Mr.Pitts. The gentleman's time is expired. The chair 
recognizes the ranking member of the full committee, Mr. 
Waxman, for 5 minutes for questions.
    Mr.Waxman. The gentleman was correct about private long-
term care insurance. It is what we hope people would buy to 
take care of themselves, otherwise we end up with people on 
Medicaid and in nursing homes right now, which is the most 
expensive place for long-term care, 70 percent is paid for by 
Medicaid, and I don't think that means 30 percent is paid for 
by long-term care insurance, it means a much smaller percentage 
of the 30 because a lot of people are there still under 
Medicare or they are paying it out of their own pockets. So 
long-term care insurance has not been a great success so far. 
The Federal Government allows employees to buy long-term care 
insurance and it is negotiated by the OPM, office of something 
management, whatever it is, program management?
    Ms.Greenlee. Personnel Management.
    Mr.Waxman. Personnel Management. OK. Do you have an 
estimate of how many Federal employees have taken up long-term 
care insurance?
    Ms.Greenlee. Mr. Waxman, I can get that. I don't have that 
with me here.
    Mr.Waxman. OK. I would like to have that for the record.
    Ms.Greenlee. But it is a small percentage, around 5 
percent, but I would need to verify.
    Mr.Waxman. I think when we look at the fact that very few 
people put away money for their retirement, which is pretty 
astounding, to get them to buy long-term care insurance that 
they may never use and are in a state of denial, if they are in 
a state of denial about retirement, they are even in a greater 
state of denial about long-term care needs. So I don't see that 
long-term care insurance is the way we are going to solve the 
problems.
    You answered a question I had. This is not a replacement 
for private insurance. It dovetails quite nicely with that 
market because it is a supplement to long-term care insurance. 
Isn't that accurate?
    Ms.Greenlee. Actually I would say it is the reverse, that 
it is the first step for an individual to protect themselves 
from a cost, and if they want to protect themselves further, 
the private market would be there to help.
    Mr.Waxman. Medicaid has been the primary safety-net 
provider for the poor and elderly and disabled people, and 
elderly and disabled become poor once they start paying for the 
high costs of long-term care. It pays 40 percent of the costs 
of long-term care services. It is the largest payer therefore 
of these services in the Nation. There are a million nursing 
home residents under Medicaid. That is 70 percent of all 
nursing home residents. In addition, there are 2.8 million 
individuals receiving community-based care services from 
Medicaid. So Medicaid is the biggest payer for long-term care 
services, and it comes at a high price. Each year we expect to 
add $44 billion to the price tag of Medicaid due entirely to an 
increasing demand for long-term services among an aging 
population. These are vital services but they take an enormous 
toll on State and Federal budgets, especially during the times 
of economic downturns as we are now experiencing.
    In the 2009 CBO analysis of the CLASS Act, there are some 
Medicaid savings because at least in the last 2 years of the 
10-year window that come to $2.5 billion in those 2 years. Do 
you believe this program has the potential to save even more 
Medicaid dollars?
    Ms.Greenlee. Yes, sir. There are two primary ways that we 
will see Medicaid savings. People who receive both CLASS and 
Medicaid, depending on whether they are in the community or in 
the nursing home, will pay a portion of that back to the State 
for Medicaid. But even more importantly for savings, the CLASS 
program can help people prevent spend-down to Medicaid, use 
their own resources with the CLASS program resources to stay in 
the community without asking for Medicaid.
    Mr.Waxman. Well, I would say to my Republican and 
Democratic colleagues, if we look down the road of how to deal 
with this problem without humiliating people to have to go 
through the indignity of becoming a Medicaid recipient after 
they have exhausted all their money, we can go one of two ways. 
We can require people to buy private insurance for long-term 
care, we can require them to pay the money and buy it and then 
they will be covered. But I hear a lot from my Republican 
colleagues that they don't like a mandate, and that would 
certainly not be a real popular idea, I would expect. The other 
is to say everybody should pay into a fund. This is a real 
clear, insurable event. If everybody paid into a fund, it would 
be a small amount to pay for a relatively limited use of these 
funds for those who are going to need long-term care, unlike 
Medicare, which serves everybody who becomes eligible for it 
because they need health care services. Long-term care is like 
a catastrophic kind of coverage for people who need these 
services, and that might be a real good social insurance 
system. I just hope my Republican colleagues don't look down 
their nose at all ideas of social insurance because I don't 
know what other choices we have because Medicaid is not 
sustainable with this burden.
    So I thank you for what you are doing and let us hope that 
this little program--it is a little program and it is no 
answer, as far as I am concerned, to the big issue--can help. I 
yield back.
    Mr.Pitts. The gentleman's time is expired. The chair 
recognizes the gentleman from Illinois, Mr. Shimkus, for 5 
minutes.
    Mr.Shimkus. Thank you, Mr. Chairman, and I appreciate 
Chairman Waxman's calm approach. I mean, we all know this is a 
major issue, and I am an original ``mi casa'' guy. When we had 
Federal dollars following the individual and helping people 
remain independent as long as they can and have them make the 
decisions based upon dollars versus government making that 
decision. So don't take these questions as being harsh or 
accusative.
    We have got a couple issues here. You are going to hire an 
actuary. You are promising it is going to maintain solvency. An 
actuary, if it goes out of solvency, the actuary is going to 
have to decide one or two things: raise revenue or cut 
benefits. Is the Secretary willing to do that?
    Ms.Greenlee. Mr. Shimkus, we have already hired an actuary.
    Mr.Shimkus. I know. I made that statement. That was my 
statement.
    Ms.Greenlee. Right. And before we move forward, as the law 
requires, we will work with the CMS actuary as put forward. The 
Secretary is only willing to move forward to implement the law 
if we can demonstrate that it is solvent to the standards of 
the law from the very beginning.
    Mr.Shimkus. So we are having 5 years of revenue, no 
payouts. Initially, that is going to be an easy decision. Our 
concern is year 10, year 15, and then I follow up with a 
question again. If then there is a solvency issue, will she be 
willing to raise premiums or cut benefits?
    Ms.Greenlee. The law requires the CMS actuary by way of 
this other work that we have done to certify for both 25 and 75 
years that the program is solvent, and we are committed to that 
before we start the program. Thereafter, both the Secretary and 
the board of trustees have the ongoing fiscal oversight of the 
program and the authority to make the changes that they might 
need, but we won't start the program unless we think it is 
solvent from those modelings before we begin.
    Mr.Shimkus. Well, I hope, Mr. Chairman, we are able to have 
the Administration back numerous times to help you all review 
your actuary and your numbers to make sure it is solvent 
because in my opening statement, I mean, we are concerned about 
making promises that we can't deliver. We have done it in our 
entitlement programs and they are bankrupting us. And so that 
is the concern.
    So the actuary is going to calculate payments out based 
upon payments in and people in the pool. What about the annual 
expense that your budget requests or the budget request is $120 
million for this program, is that part of the actuary numbers?
    Ms.Greenlee. The program is designed to be self-sustaining, 
to pay benefits only from premium dollars. So once the program 
is up and running, then that is how it will operate.
    Mr.Shimkus. What about the overhead?
    Ms.Greenlee. And that is contained within the premium 
revenue structure that I just described.
    Mr.Shimkus. So we won't see another additional annual 
request for money to administer this program?
    Ms.Greenlee. No, the current request is for start-up funds.
    Mr.Shimkus. Do you ever feel that the Secretary can go into 
the $17.5 billion health care slush fund which is under section 
4002, Prevention and Public Health Fund, which is $17.5 
billion? Might she tap into that? It is at her discretion.
    Ms.Greenlee. I have never had a conversation where that 
even came up in discussion of the CLASS Act.
    Mr.Shimkus. Would you ask her for us?
    Ms.Greenlee. I can follow up with you.
    Mr.Shimkus. Good. That would be great, because that is our 
concern. In the fiscal environment, we already got the 
Secretary to admit 2 weeks ago that she double counted $500 
billion, which really addresses the fact that the statements 
that the health care law pays down the deficit and the debt is 
untrue. It could be true if you double count $500 billion. It 
is untrue when you adequately put the $500 billion in its 
proper concerns. If we want to help our citizens, we have to 
have sustainable funds. Government doesn't have a good record. 
We are hoping that you can prove us wrong in this, and we will 
be following closely.
    Thank you, Mr. Chairman. I yield back.
    Mr.Pitts. The chair thanks the gentleman.
    We are voting on the floor. We have two votes. Let us take 
one more 5-minute questioning from the ranking member emeritus 
and then we will recess until immediately after the second 
vote. The chair recognizes the gentleman Mr. Dingell for 5 
minutes.
    Mr.Dingell. Mr. Chairman, thank you for your courtesy. We 
commend you for this hearing, which is a very useful thing.
    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.
    Mr.Dingell. Very good. Now, I am going to make a statement 
and you tell me yes or no. Ten million Americans are in need of 
long-term services now, and in 2020, 15 million Americans will 
be needing long-term health care services. Is that correct?
    Ms.Greenlee. That is correct.
    Mr.Dingell. Now, Madam Secretary, it is my understanding 
there are a number of long-term insurers in the United States 
are leaving or planning to leave the market. Is that true?
    Ms.Greenlee. Yes.
    Mr.Dingell. In my opinion, this seems to offer individuals 
in need of long-term insurance much more limited options. Do 
you agree?
    Ms.Greenlee. Yes.
    Mr.Dingell. Isn't it true that the goal of the CLASS 
program is to help Americans prepare for the unexpected and 
allow them to participate in a choice that offers them services 
and allows them to remain in the community rather than to go 
into the nursing home?
    Ms.Greenlee. Yes.
    Mr.Dingell. So if I understand the program correctly, and I 
was one of the authors of it, it is going to allow an 
individual to buy into this program at an early time. Is that 
correct?
    Ms.Greenlee. Yes.
    Mr.Dingell. And so that individual will pay money into the 
program before that individual begins to draw benefits?
    Ms.Greenlee. That is correct.
    Mr.Dingell. That is conventional insurance practice, is it 
not?
    Ms.Greenlee. Absolutely.
    Mr.Dingell. And you will see to it that it is done 
actuarially soundly?
    Ms.Greenlee. Yes, we will.
    Mr.Dingell. Now, that will absolve Medicaid of providing 
the same benefits in a nursing home, will it not?
    Ms.Greenlee. Congressman, it will help buffer the costs of 
Medicaid but it won't cover the full amount----
    Mr.Dingell. It will help the individual stay home. Am I 
right?
    Ms.Greenlee. It will help the individual stay home.
    Mr.Dingell. OK. And instead of the taxpayer paying 100 
percent on Medicaid, the individual who derives benefits under 
the plan will be paying into the plan so he will be actually 
paying a significant part of the cost instead of that coming 
out of the pocket of the taxpayers by way of Medicaid. Is that 
correct?
    Ms.Greenlee. He or she will be paying, yes, a portion of 
the CLASS benefits back to the Medicaid program.
    Mr.Dingell. Now, as you said, AARP says in their rather 
excellent statement it is going to save about $2 billion to 
Medicaid due to the CLASS Act. Is that correct?
    Ms.Greenlee. Yes, that is consistent with the CBO score as 
well.
    Mr.Dingell. Is that an actuarially sound statement by AARP?
    Ms.Greenlee. I haven't looked at their methodology but I do 
know it was the CBO score as well.
    Mr.Dingell. Now, Madam Secretary, as you said in your 
testimony, Medicaid now pays for about 50 percent of the 
Nation's nursing home expenditures, and in 2009 spent $112 
billion on long-term care services. Isn't it probable that by 
offering the ability to individuals to remain in the community 
and not the nursing home that it will help Medicaid to reduce 
its costs and also it will help reduce nursing home costs?
    Ms.Greenlee. Congressman, it will help individuals use 
their own resources and the CLASS resources to postpone the 
need for Medicaid.
    Mr.Dingell. So wouldn't I be fair in assuming that the 
CLASS Act will fill an unmet need in terms of providing long-
term affordable health care services and to support people in 
need?
    Ms.Greenlee. Yes.
    Mr.Dingell. Now, do you believe that the CLASS Act will 
help today's workers to prepare for and provide for their 
personal long-term needs in the future?
    Ms.Greenlee. Yes.
    Mr.Dingell. Mr. Chairman, I note that I am returning to the 
committee 33 seconds. I yield back the balance of my time.
    Mr.Pitts. The chair thanks the gentleman. And on the 
unanimous consent request of the gentlemen, Mr. Waxman and Mr. 
Dingell, without objection, the documents are entered into the 
record. So ordered.
    Without objection, so ordered.
    We will now recess until immediately after the second vote. 
I trust the witnesses will bear with us. We will get back as 
soon as possible. Thank you. The committee is in recess.
    [Recess.]
    Mr.Pitts. The recess time having expired, we will go back 
to questioning, and the chair recognizes the gentleman from 
Louisiana, Dr. Cassidy, for 5 minutes for questioning.
    Mr.Cassidy. Thank you, Mr. Chairman.
    I can't help but notice that Mr. Waxman pointed out the 
indignities of people being on Medicaid and yet the PPACA put 
16 million people on Medicaid by design and more by effect, and 
so I found that an interesting comment. And I also will remark 
that the people on the other side of the aisle who are 
frightened of weather forecasts 100 years from now are so 
sanguine about realistic predictions of bankruptcy within 11 
years. Now, I am a physician who works in a public hospital so 
I am very familiar with people, politicians overpromising and 
underfunding. Do I call you Secretary or Assistant Secretary?
    Ms.Greenlee. Either one is appropriate.
    Mr.Cassidy. Madam Secretary, I just want to take the logic 
from the other side of the aisle and go through this. Their 
argument about an individual mandate is that if you don't force 
people to be in the insurance program, only those who are 
sickest will take the policies and it enters the so-called 
death spiral where only the sickest are in it but those who 
would have to support them by not being sick and paying 
premiums get out because of expense. Now, you by law are 
mandated to keep this actuarially sound for 75 years. Let us 
assume the logic is correct that we are going to enter into a 
situation where only those who are going to benefit wish to be 
in and those who frankly don't see it in their financial 
interest to do so choose not to join. Now, you have to 
obviously by law make the premiums effective. So it seems to 
me, and tell me if you disagree, if there is this adverse 
selection that progressively you will have to raise the 
premiums so much so that you will enter into the death spiral 
we heard so much about regarding the private health insurance 
market.
    Ms.Greenlee. Congressman, as you have heard me testify, we 
are absolutely committed to the solvency of the program, and 
the key to the solvency will be broad participation----
    Mr.Cassidy. But keep in mind my presumption. My presumption 
is that they are right, that without a mandate only those who 
benefit financially choose to participate, and if you will, 
drop out those who don't see it in their financial interest to 
pay a lot in and get a little out.
    Ms.Greenlee. The underlying question is, what is the method 
by which you gain broad participation so that you can avoid----
    Mr.Cassidy. No, my underlying question is, is this at risk 
of entering the death spiral?
    Ms.Greenlee. We must have broad participation and not only 
people who could access the benefit early in order for it to be 
financially----
    Mr.Cassidy. And is it possible--Mr. Waxman spoke about 
potentials, so is it potentially true that again we would have 
a lot of non-working spouses who would participate, which I 
gather would be thought to be at a higher risk for claiming 
benefits without paying in over the long hauls, someone 
actively working, etc., that people over 65 cannot have their 
premiums adjusted upward, all those things that obviously limit 
your ability to raise premiums on anybody but the younger 
working class, that as those younger people see wow, this 
premium is $240 a month for a benefit that I am supposed to get 
when I am 70 years old. I have to buy a car. Is there the 
potential for this adverse selection process to occur?
    Ms.Greenlee. Congressman, you are describing an adverse 
selection death spiral that would occur if the program only 
attracted those individuals. We are familiar----
    Mr.Cassidy. Is there the potential--because I tell you, the 
second panel, when I read the testimony of the second panel, 
four out of whatever, six, agreed that there is a strong 
potential for that death spiral to occur.
    Ms.Greenlee. It comes back to the question of broad 
participation, and all of the actuaries, the actuaries we work 
with, all of the actuaries that will testify after me also 
understand that a basic insurance sort of fundamental principle 
is broad participation in the method by which----
    Mr.Cassidy. So let me ask you, have you put into your 
models, if you have premiums of $240 a month how broad your 
participation will be?
    Ms.Greenlee. We have looked at different pricing 
mechanisms, of different pricing options and looked at what a 
similar product looks like in the marketplace and understand to 
get broad participation we must be competitive both in product 
design and in price. I might return to something you said just 
to tell you that non-working spouses are not eligible in this 
program. I believe that was considered in an earlier bill that 
came through Congress but that actually wasn't a feature that 
was----
    Mr.Cassidy. So let me finish up by saying again, I will see 
patients on Monday at a public hospital in which politicians 
overpromise and underfund and I see that it is ultimately the 
patient who pays the penalty. So it is very easy for us to 
promise when future generations have to pay, but I will tell 
you, it won't just be future generations that pay, it will be 
future so-called beneficiaries. Unless you can convince me 
there is not a death spiral, I have to admit I have to be more 
skeptical of this than a 100-year forecast. Thank you.
    Mr.Pitts. The chair thanks the gentleman. The gentleman's 
time is expired. The chair recognizes the gentlelady from 
California, Ms. Capps, for 5 minutes for questions.
    Mrs.Capps. Thank you, Mr. Chairman. One general comment, if 
I may, to begin. While I appreciate hearing from this 
Administration on the topic of aging and certainly on your 
testimony, Madam Secretary, about the importance of strong 
long-term care and program accessible to all Americans, I can't 
ignore the fact that this hearing is yet another in a long line 
organized by those on the other side of the aisle obsessed with 
repealing the Affordable Care Act. When repeal doesn't work, 
they try to defund. When defunding doesn't work, they try to 
find targets like school-based health centers or the CLASS 
program to cut off. As the ranking member said, it is like deja 
vu all over again, so I will continue myself to ask for a 
hearing on the number one issue to our constituents, which is 
jobs, and I will continue to ask for this subcommittee to come 
together and support our health care workforce.
    I also find it concerning that while the Republican members 
of this committee are declaring the program we are discussing 
today unsustainable, actually they should be taking credit for 
the flexibility that will be the key to ensuring its success. 
In fact, there is a political article today which describes how 
the CLASS program flexibility came to be. It was an amendment 
by then-Senator Judd Gregg and it was accepted unanimously by 
the Senate Health Committee. In fact, after it was agreed to, 
Senator Gregg went on to say that his amendment ensures that 
the program will be fiscally solvent and that we won't be 
passing the buck to future generations.
    So Hon. Secretary Ms. Greenlee, considering the amount of 
flexibility in the program design that you have already 
discussed, do you agree with Senator Gregg in his assessment?
    Ms.Greenlee. Congresswoman, as I understand, in response to 
Senator Gregg's concern, the 75-year requirement was placed 
into the law so that we look long term, and we are required to 
look long term from the very beginning to know that we can hit 
that marker before we ever start the program.
    Mrs.Capps. Thank you. Now, I acknowledge in this committee 
a strong difference of opinion among some of us on the 
substance of this program but the overall issue should be one 
we can easily agree on: The current system for affordable long-
term care is not just broken, it is all but nonexistent. Long-
term care insurance is far too expensive for most individuals 
and Medicare does not cover the range of care needed. Instead, 
we ask Americans to spend down their savings, sell their assets 
and purposely become impoverished so that they can access the 
Medicaid program, the primary long-term care provider in most 
of our country.
    Two weeks ago, this committee heard how expensive Medicaid 
is both to the Federal Government and to the States. This is 
particularly true in regards to long-term care but right now 
what other option is there for most Americans? My colleague, 
Mr. Waxman, accurately described how Medicaid costs could be 
lessened by this program. Before many families get to this 
point, they often struggle to find needed care for their loved 
ones themselves. I think it is fairly clear and straightforward 
how the CLASS program would benefit people who might need 
assistance with such activities of daily living as dressing, 
toileting, eating, and sometime in the future this could be the 
case for all of us but the program also promises to help those 
individuals who provide this kind of assistance to those in 
need, family caregivers whose own lives are often disrupted or 
put on hold while they care for a loved one. So would you 
describe how the CLASS program would affect and benefit 
individuals such as family members?
    Ms.Greenlee. Family caregivers in specific--as you probably 
know from talking to your constituents, family care-giving is a 
tremendous burden both physically and financially. One of the 
ways that the CLASS program would help provide the family 
member themselves with cash benefits so that they can purchase 
assistance--respite care, the kinds of things right now that 
are often borne by family caregivers both in terms of physical 
work and expense to provide care to their loved one.
    Mrs.Capps. One more question, or comment and question. 
There is a notion that the CLASS program won't work because 
there is no room for it and that is because of the existence of 
a private market, as limited as it is, provides the potential 
market for long-term care is limited. The fact that there isn't 
more of a market for it must mean that people don't want this, 
yet this fails to take into consideration that government 
programs often spur private markets. For example, the 
implementation of Medicare led to the creation of what is now a 
successful Medi-gap market. As the former General Counsel for 
the Kansas Insurance Department, how do you see the CLASS 
program impacting the private market? Do you see any room for 
collaboration? Do you think this will be a growth industry in 
the future?
    Ms.Greenlee. Thank you. As I mentioned earlier, the private 
market has been around for about 30 years. They started with 
comprehensive nursing home insurance and then added and changed 
really to include community-based services but it has always 
been designed to be a comprehensive product. Nothing like the 
CLASS program has ever existed in the private market so these 
are complementary but different markets and I think there is 
plenty of both need and room for both to exist as we move 
forward.
    Mrs.Capps. Thank you very much. I yield back.
    Mr.Pitts. The gentlelady's time is expired. The chair 
recognizes the gentleman from Pennsylvania, Dr. Murphy, for 5 
minutes for questioning.
    Mr.Murphy. Thank you. Thank you, Madam Secretary.
    I appreciate the comments from my colleagues about good 
intentions, and all of us want to make sure that those who are 
disabled have the care that they need, but good intentions do 
not necessarily cause good law, and I may intend to pay all of 
my bills, but if I don't, the bank isn't going to accept my 
intentions as a reason to not foreclose on my home or my car. 
So it is important that we have these numbers, and I appreciate 
your patience in helping us understand this.
    With regard to the health care bill, the latest CBO and 
Joint Commission on Taxation estimates are that for the first 
decade on the health care bill, it would cause a net increase 
in Federal deficits of $210 billion over the period of 2012 to 
2021. Now, last March the CBO and JCT estimated it would 
actually be $124 billion, it would reduce deficits, so we are 
off here by almost $300 billion in those estimates. They also 
note that the repeal of the CLASS Act provisions would increase 
Federal deficits by $86 billion, meaning that that money was 
counted as part to pay the bills for the health care bill. For 
the first 5 years, I believe the revenue would be collected 
from people on a voluntary basis as long as they didn't opt 
out. Am I correct on that?
    Ms.Greenlee. You are correct on that, yes.
    Mr.Murphy. And that would be a defined contribution, you 
would set the rates of what someone would pay. Am I correct?
    Ms.Greenlee. Yes.
    Mr.Murphy. And it is a defined benefit of $50 a day. Am I 
correct on that?
    Ms.Greenlee. There will be a defined benefit. That is what 
we are still developing.
    Mr.Murphy. We still don't know how much that will be. Will 
there be lifetime caps on that?
    Ms.Greenlee. We are working with the law, which says an 
average of $50 a day with a lifetime benefit in the product 
design but I don't have specifics other than that to give you.
    Mr.Murphy. Well, given this information we have that in 
order to pay for the health care bill overall, the other day 
Secretary Sebelius was speaking to us and under questioning 
from Mr. Shimkus she acknowledged that the health care bill 
actually by borrowing the $500 billion from Medicare really was 
double counting that money to pay for the health care bill but 
we still had to pay back Medicare. So I ask a similar question 
here. This money which is going towards helping to offset the 
cost of the health care bill, is it also double counted?
    Ms.Greenlee. Congressman, truthfully, I am aware of the CBO 
budgeting process. My responsibility really is to help advise 
how we make this particular program solvent and not--I don't do 
as much with what the CBO counting of the score and certainly 
not for the overall bill.
    Mr.Murphy. I appreciate that, but isn't that money also 
being counted to offset the health care costs of the rest of 
the bill?
    Ms.Greenlee. As I understand the CBO scoring, for the first 
5 years as you described, there would be money coming in and 
that has been considered in the CBO scoring as you have 
described.
    Mr.Murphy. So that is double counted. That money is also to 
help pay for the health care bill as well as to cover the CLASS 
Act?
    Ms.Greenlee. I would have to go back to the CBO description 
but that sounds accurate, but I would just refer back to what 
CBO did themselves----
    Mr.Murphy. Yes, it is double counting. I am taking that as 
an answer. In that case, don't we have to pay back that money 
to cover the CLASS Act, that $80 billion plus, and not just 
take it out? You also need that as you are going through to 
define the benefits and contributions and the caps. I am 
assuming that you are hoping that money comes back and isn't 
just taken out and it never returns.
    Ms.Greenlee. Certainly, we will only move a program forward 
if there are premiums, and we have modeling to indicate that 
the premiums will cover the benefits as designed, so by 
inference we are assuming that will have premiums to collect 
and that they are accounted for in the Federal Government that 
we can draw upon to pay the benefits.
    Mr.Murphy. I am trying to help you, because you have a very 
difficult job here. If $80 billion plus is taken out to pay for 
health care but you still need to have $80 billion in there to 
pay for your benefits, the question is, where is that money 
going to come from? And I liken it this way: If I went to the 
State of Pennsylvania and I said I want to start up a long-term 
care insurance company and so what I am going to do is, I am 
going to collect benefits from people but I am going to spend 
that money on other things but I promise you the day it starts 
I am going to have money to pay for that. I am sure they would 
say you are not going to do this, and if you try to, we are 
going to put you in jail because you don't have the money to do 
that. I think you have been given an impossible situation here 
where you are going to have to come up with this plan that 
someone is already taken $80 billion plus for something else, 
and I hope there is a mechanism, I don't know what it is, where 
the money is going to come from to help you. Do you have any 
idea how that is going to work out?
    Ms.Greenlee. Congressman, I am understanding your question. 
To me, this is the difference between the budget methodology 
and the financial accounting that we need to do in order to run 
a solvent program. I have much more authority and 
responsibility with regard to the basic accounting and 
fundamental science of the plan----
    Mr.Murphy. I appreciate it, and my concern is also for the 
people. I hate to promise people a benefit and then say, ``By 
the way, there is no money to pay for it so we are going to 
have to raise your premiums, raise your co-pays, reduce your 
benefits and set caps.'' That is concerning to me because that 
is a promise unkept.
    I am out of time. Thank you.
    Mr.Pitts. The gentleman's time is expired. The chair 
recognizes the gentlelady from Illinois, Ms. Schakowsky, for 5 
minutes for questioning.
    Ms.Schakowsky. The gentleman just described exactly what we 
have with private insurance right now, that kind of uncertainty 
that is in the private market, and I have confidence that the 
CLASS Act will actually address this problem.
    I am happy to meet you and to see you here. I have been 
working on the issue of long-term care since I was in the State 
legislature starting in 1991 in Illinois and helped to pass the 
prevention from spousal impoverishment that people didn't have 
to lose their homes, spend down every single asset in order to 
have their spouse go to a nursing home. The issue of the cost 
of long-term care not just for persons with disabilities, who I 
see are here today and I welcome them, but certainly for most 
families or many families, anyway, you know, face this really 
frightening prospect right now of not being able to have the 
care that they need, having to move from one place to another, 
find some place that will accept Medicare, and so I wanted to, 
Mr. Chairman, put into the record and then refer to the 
National Council on Aging has ``Top 10 Reasons Why 
Conservatives Should Love the CLASS Program,'' and I would like 
unanimous consent to place this in the record.
    Mr.Pitts. Without objection, so ordered.
    [The information follows:]



    
    Ms.Schakowsky. I wanted to go over a couple of them and 
welcome your comments. It says, one, CLASS provides flexibility 
to ensure fiscal solvency, and thanks to an amendment from 
former Senator Judd Gregg, the plan includes strong provisions 
to guarantee fiscal solvency for 75 years. Statutory language 
was purposefully written to provide flexibility in benefit 
design, eligibility triggers and work requirements which help 
reduce adverse selection and ensure solvency. I wondered if you 
wanted to comment or expand or just assure its accuracy.
    Ms.Greenlee. Congresswoman, the Secretary has the 
responsibility to guarantee solvency and the authority to make 
adjustments that we need to in order to get us to that point. 
The amendment by Senator Gregg certainly gives us the 
guideposts that we must make sure that this is solvent in the 
long run for 75 years.
    Ms.Schakowsky. Let me go to the second one. No Federal tax 
funds will be used to pay benefits. Section 3208 states, ``No 
taxpayer funds shall be used for payment of benefits under 
CLASS independent benefit plan.''
    Ms.Greenlee. That is correct. The premiums have to cover 
the benefits.
    Ms.Schakowsky. Three, CLASS has no mandates. It is optional 
for both employers and consumers.
    Ms.Greenlee. That is correct.
    Ms.Schakowsky. CLASS will increase business productivity by 
reducing caregiver absenteeism and permitting people with 
disabilities to work. A recent survey found that 74 percent of 
caregivers have had to change their job or stop working because 
of their care-giving responsibilities.
    Ms.Greenlee. Well, as you know, the main purpose of the law 
is to provide cash to an individual who needs assistance. There 
is a parallel there for additional support for the caregivers 
who are providing that assistance. Care-giving is a huge 
burden, and as we know, many people struggle to both maintain 
their own work and care for a loved one, so helping the person 
needing care will help both people.
    Ms.Schakowsky. Americans across party lines strongly 
support CLASS. Let me just give you some figures. The Kaiser 
Family Foundation poll in February, 74 percent of Americans 
support the program. Only 20 percent oppose it. Among 
independent voters, 75 percent support, 19 percent oppose. 
Among Republicans, 57 percent support, 36 percent oppose it, 21 
percent margin. I will go on, six, CLASS will jump-start a flat 
private long-term care insurance market. I think you talked a 
bit about that. I know that Congresswoman Capps suggested that 
this actually could do this. I want to just give you one fact. 
When France implemented a proposal similar to CLASS, sales of 
private plans increased annually by 15 percent, largely because 
the public debate increased awareness of long-term care risk. 
So you stated earlier that you hoped that and thought that 
would be the result?
    Ms.Greenlee. Certainly. One of the major issues that we 
need to address and that is part of the plan for the budget is 
to market to the American public the problem, that there is a 
need for support for long-term services. CLASS is one option. 
Private insurance would be another.
    Ms.Schakowsky. I am going to skip to, CLASS will reduce the 
Federal budget deficit by $86 billion over the next 10 years.
    Ms.Greenlee. Yes, that was the CBO score.
    Ms.Schakowsky. My time is expired. Thank you.
    Mr.Pitts. The chair thanks the gentlelady and recognizes 
the gentleman from Ohio, Mr. Latta, for 5 minutes for 
questioning.
    Mr.Latta. Thank you, Mr. Chairman, and Assistant Secretary, 
thanks very much for being here today. I really appreciate it.
    Just kind of the line of questions that some of the other 
members asked a little bit earlier but maybe I could just 
follow up on. One is, I just want to make sure I understand it, 
did the Secretary say at a Senate hearing that the program will 
not start unless we can be absolutely certain that it will be 
solvent and self-sustaining into the future? Did she make 
that--I just want to make sure I have got that correct.
    Ms.Greenlee. Yes.
    Mr.Latta. OK. And also in your testimony, you stated on 
page 4, you said that ``President Obama and Secretary Sebelius 
have acknowledged that 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 were 
reflected in the Congressional Budget Office assumptions that 
scored the CLASS program. Therefore, it was not unexpected that 
the President's fiscal commission identified that these same 
unresolved issues in December and recommended reform or repeal 
of CLASS. Given the critical unmet needs of long-term care that 
I noted earlier, we should not repeal CLASS until we have made 
every effort to reform the program,'' and that was in your 
testimony.
    And the next question is, is it my understanding that the 
President is requesting in fiscal year 2012 $120 million?
    Ms.Greenlee. That is correct.
    Mr.Latta. OK. And may I ask, what exactly does he want to 
spend the $120 million on?
    Ms.Greenlee. Ninety-three point five million would be for 
education and outreach efforts to both inform the public about 
the new program as well as the larger issue of the need for 
long-term care. The other two expenses are for administrative 
costs and----
    Mr.Latta. OK. Let me ask this question. If we have a 
program that everybody acknowledges is broken, why do we want 
to spend money educating people on something that might not 
work in the present form? Let me give you this example. If 
someone in the private market makes a defect product and puts 
it on the market, should that person have done that?
    Ms.Greenlee. I am trying to draw a connection to CLASS 
here.
    Mr.Latta. If someone goes out and makes a defective 
product, knowingly knows that they put something out on the 
market that is defective, should they have done that?
    Ms.Greenlee. We don't intend to market a defective product.
    Mr.Latta. OK. Well, let me ask this, though. We are going 
to educate people on $120 million on something that is broken, 
you know, in the private market what would happen is, we would 
have every State attorney general, we would have the ABCs of 
the Federal Government, we would have private individuals 
filing class lawsuits against someone that would have done 
that. And so I guess, you know, I am not saying good or bad 
about this program. What I am saying is, why do we in the 
Federal Government want to spend money on something that we 
already know right now isn't working and we are going to go out 
and market it to tell people--are we going to tell people this 
is defective? Should we use the statement from the Secretary 
and her testimony before the Senate Finance hearing saying the 
program will not start unless we can be absolutely certain that 
it will be solvent and self-sustaining into the future?
    Ms.Greenlee. We spent a year since the law was adopted 
analyzing through two actuarial models what the law would look 
like, and that led us to the conclusion that there are changes 
and improvements that we need to make so that we can go to 
market with a product----
    Mr.Latta. Pardon me. Should that be the first statement we 
should put out in any notice to anybody, we should put a 
disclaimer, a caveat to the American people saying that this 
program will not start unless we can be absolutely certain that 
it will be solvent and self-sustaining into the future?
    Ms.Greenlee. I think we should tell the American public 
that this program will be solvent because we won't start if it 
won't, and provide them information so they know what they are 
participating in if they choose to.
    Mr.Latta. You know, and again, though, maybe my logic is 
off, but we are going to spend money on something out there 
that is defective. Shouldn't we first improve the product, then 
market it?
    Ms.Greenlee. To me, that is the description of what we are 
telling you that we are in the process of doing, that we did 
the initial modeling. There are improvements that we need to 
make. Both the President and Secretary have discussed that in 
terms of reform in response to the debt commission, and we will 
not, again, using your language, go to market until those 
improvements are made and we know it is solvent.
    Mr.Latta. OK. Do you all have the authority to make all the 
reforms in it beforehand?
    Ms.Greenlee. There are between 35 and 40 different places 
in the law where the Secretary is given both authority and 
responsibility to make the program work.
    Mr.Latta. Do you have to come back to Congress to have any 
forms implemented?
    Ms.Greenlee. No, we don't have any proposals at this point.
    Mr.Latta. But at the same time, we are going to spend $120 
million. How long do you think it is going to be before you 
could go out to market and actually have a product that people 
can say on our side that it is something that is totally done, 
that we don't have to worry about telling people that it is not 
incorrect?
    Ms.Greenlee. The statute requires the Secretary to publish 
a final plan in October 2012, and we will hit that marker and 
have a product at that point that we could support and go to 
market shortly after that. That is the scheduled described in 
the law.
    Mr.Latta. Thank you, Mr. Chairman.
    Mr.Pitts. The gentleman's time is expired. The chair 
recognizes the gentleman from New York, Mr. Weiner, for 5 
minutes for questions.
    Mr.Weiner. Thank you, Mr. Chairman.
    This morning I woke up to a phone call from my brother, 
Jason, who told me that my mom, who is 75 years old, who skis 
every weekend and who takes long walks, tries not to drive 
anywhere, walks up and down her stairs, and she lives in a 
four-story walkup, had to be taken to the doctor because she 
fell. Jason is going to eventually have to go to work. I have 
to figure out whether I am going to be able to cast votes 
tonight because I am going to have to run home to see if I can 
take care of her when she gets done with the doctor. Nothing 
remarkable about this story.
    Ms.Greenlee. No.
    Mr.Weiner. Every single day people are trying to figure out 
how you deal with an increasingly healthy, longer-living, aging 
society, something we should be very proud of, something that 
was largely the result of the Medicare Act, which many people 
objected to. They said it is socialized medicine, what are we 
doing, we should stay out of people's business. But we created 
that program and now we have healthier people, and a lot of 
them women because husbands die, you know, actuarially die 
earlier so a lot of women like my mother. She didn't choose to 
fall and hurt her hip. No one chooses to have Alzheimer's 
because they are Democrat or Republican. No one gets up one 
morning and says the free market leads me to decide that today 
I am going to go shopping for a broken hip. It doesn't happen.
    You know, there is an expression that it takes a great man 
to build a barn but any jackass can kick one down, in this 
case, a great woman to build a barn. In this case, my friends 
on the other side of the aisle are kicking down their own barn. 
They are the ones that have continually said throughout the 
health care debate, well, if you just give people money back 
and let them decide the smart way to spend it, then that is the 
way to structure a program. That is what the CLASS Act did. It 
imbued the idea that my friends had and yet here they are 
saying, you know what, we can't do that. Now, it is funny how 
they all stipulate so comfortingly, oh, of course, it is a big 
problem, oh, yes, it is a very big problem because they know 
every one of their constituents literally sits in anxiety like 
I do and like my brother, how are we going to balance this. We 
don't want my mother to be in an institution. That would cost a 
great deal, and she doesn't really need it. But how do we 
provide this seam of care? I am very lucky. Jason is very 
lucky. We are both gainfully employed. We have some 
flexibility. But what about the families that don't? They know 
that it is not a partisan thing about whether your loved one 
gets sick. It is not a party thing. If we can step back for one 
moment and say well, wait a minute, if we all concede and 
stipulate that this is a problem that needs to be solved, let 
us think of the foundation on how we try to solve it.
    Now, I believe in a single-payer system like Medicare that 
covers things like this, that covers people 65 and older, also 
covers 55, also covers 35 and 45. I believe in that. Now, some 
of my Republican friends say, no, we don't believe in that, we 
don't like Medicare, we don't like programs like it, we believe 
in the private model, let us double down on private insurance. 
And so Secretary Greenlee, you are here to say well, we have 
come up with a program that tries to address something you 
stipulate is a need in a model that you stipulate you like 
more, doesn't have a guaranteed anything except that we are 
going to try to make sure everyone gets at least $50 a day and 
now we are saying, oh, this is a very big problem but we don't 
like this idea. We don't like this way. OK. Where is your idea? 
Well, we heard earlier there is no Republican idea. This is an 
entirely deconstructionist agenda. And I want to say to my 
friends and to my colleagues, for 99 percent of the American 
public, they see politics as kind of this white noise in their 
background. They just want to tune in every once in a while and 
say, you know what, they get it. They watch this debate today 
on C-SPAN 6 or whatever it is on. They watch this debate today 
and they listen to you say, well, I want to see a guarantee. 
Well, if you are dealing with a loved one who has hurt 
themselves and needs care and needs to be taken care of maybe 
for the first time in your life, you are not thinking that way. 
You are thinking, you know what, let us see if we can try to 
help out a little bit, and we have to return to this place 
where we try and solve problems, not constantly deconstruct the 
solutions that other people are coming up with.
    And I say to my colleagues on the other side of the aisle, 
good and decent people, God willing you live that life where 
none of your senior loved ones get sick. God willing. I wish 
that to you. But on the off chance that one of your 
constituents, even one of them, faces this problem, let us try 
to come up with a solution, and we are bludgeoning this poor 
person who is trying to say, you know what, I stipulate to the 
idea, it might not be perfect. It is a tough challenge. We are 
trying to fix it. We are using a model that you suggested, 
using flexibility that you demanded and we are trying our best 
and we are committed to trying to solve the problems.
    And what is the answer? Oh, you can't say with metaphysical 
certitude you will solve the problems today before you leave 
the room? Well, in that case, let us hear from the four 
panelists who we paid to come here to say this program stinks. 
Let us listen to them. That ain't the way to run a country.
    Mr.Pitts. The chair will ask the audience to please 
restrain themselves.
    The gentleman's time is expired. The chair recognizes the 
gentleman from Georgia, Dr. Gingrey, for 5 minutes for 
questioning.
    Mr.Gingrey. Mr. Chairman, thank you, and I will take a lot 
of my time to maybe give a speech as well, and even if the 
audience were permitted their applause, I am not sure that I 
would get any, but I will take the privilege anyway.
    Let me just say this, that my friend from New York made a 
comment in regard to this side of the aisle being in opposition 
to Medicare and Medicaid and SCHIP, and he didn't say it but 
probably Social Security as well, and that is absolutely not 
true. That is absolutely not true. I have spent my whole adult 
professional life practicing medicine, 31 years, and I was a 
freshman in medical school when Medicare passed. So this side 
of the aisle truly believes in the importance of the safety-net 
programs that we have. But we also firmly believe, Madam 
Secretary, that we need to pay for these programs, and if we 
don't and if we use gimmicks and certainly we feel and can 
point to the evidence in the Patient Protection and Affordable 
Care Act that there was a funny accounting used, double 
counting. We brought that out a number of times in this 
particular hearing. And all of this is what leads to $14.3 
trillion worth of debt and deficits of $1.63 trillion and the 
need to raise taxes in the President's current budget that he 
submitted to us last month by $1.6 trillion.
    So, you know, you go off a cliff. As important as these 
programs are--and I have talked to some of you between the 
break, and I understand that this CLASS Act has great merit and 
maybe some potential but clearly with this double counting, the 
gentleman from Pennsylvania on our side brought that up and I 
am going to bring it up again, Madam Secretary, because this is 
the kind of thing that is wrecking this country and pushing us 
toward the precipice of bankruptcy, and so that is why we say 
if a program like this doesn't work, let us don't start it, and 
I plead with you not to do that. I wish this bill was a stand-
alone provision that we could really vet and make sure before 
we started anything like this that it was not just another 
situation where you have the big Federal Government raiding the 
trust funds, whether it is Social Security or Medicare.
    So let me, Madam Secretary, address that once again. My 
numbers say that the CBO found that something like $39 
billion--Mr. Murphy had a higher figure--the total costs of 
Obamacare, would be paid for by the total net savings from the 
CLASS Act. So do you know why CBO--again, he asked you that 
question and I will give you a second opportunity to answer 
it--why the CBO counted the $39 billion toward paying for 
Obamacare and yet you say the importance of raising that money 
earlier before this program goes into effect in essentially 5 
years, where is that money going to come from when it is needed 
for these seniors that Mr. Weiner and others are 
compassionately talking about?
    Ms.Greenlee. Congressman, I hope to be able to describe 
accurately to you how I believe the program will operate. I 
don't have any involvement with the CBO scoring, and I know 
that is something that you realize. The money will be collected 
for a number of years, 5 years, before the money is paid back 
out, and it is clear that there will be an obligation to the 
American public that they pay premiums, we will pay their 
benefits. I am simply not involved in the CBO scoring process 
or how the budget impacts the actual accounting of the program. 
We will make sure the accounting works and continue to be 
involved, follow up with you if there is something that we need 
to readdress with regard to the CBO----
    Mr.Gingrey. Well, Madam Secretary, you have said that a 
number of times, and I appreciate that, and I think you are 
very honest in your testimony, and being an honest woman and 
somebody with a lot of experience going back to your days in 
Kansas, do you think it is fair for the Administration to spend 
whatever dollar amount, whether it is $40 billion or $80 
billion, put into the CLASS Act trust fund and then take it out 
and use it as part of the CBO score to make the Obamacare 
numbers work?
    Ms.Greenlee. I just don't have a comment on that, sir.
    Mr.Gingrey. Well, Madam Secretary, let me go a little bit 
further on that and say this. The Secretary of Health and Human 
Services has stated that she has the regulatory authority to 
make changes to this program. Do you believe under that 
authority that she has the ability to increase the program's 
income eligibility standards? It is a fairly straightforward 
yes or no question. And I think my time is about to expire. Yes 
or no.
    Ms.Greenlee. Yes, there are requirements in the law she 
must follow. She has the authority to do that.
    Mr.Gingrey. Mr. Chairman, if you will bear with me just for 
a second then, I would like to ask unanimous consent to put 
into the Congressional record this CRS report that questions 
whether or not the Secretary has that authority, and that 
questions the overall viability of the program, and I admit 
this to the record.
    Mr.Pitts. Without objection, so ordered.
    [The information follows:]



    
    Mr.Gingrey. I yield back.
    Mr.Pitts. The gentleman's time has expired. The chair 
recognizes the gentleman from New York, Mr. Towns, for 5 
minutes for questioning.
    Mr.Towns. Thank you very much, Mr. Chairman and Ranking 
Member, for holding this hearing. And we have long agreed that 
our country simply does not have an established framework to 
provide long-term care for those in need.
    Nursing home care is extremely expensive. When paid for by 
Medicaid, taxpayers are spending over $200 per person per day 
on these expenditures. At a time when both the Federal and 
State budgets are extremely tight, we need to be looking for 
ways to alleviate these issues. Programs like CLASS can pose 
one solution so long as we can work together to ensure that it 
remains financially sound.
    Let me ask you, Ms. Greenlee, what is HHS doing to ensure 
the fiscal soundness of this program? Now, this question might 
have been asked and I am sorry.
    Ms.Greenlee. I am certainly willing to answer. Since the 
law was passed a year ago, we have been involved in putting 
together two different actuarial models so that we can check 
them against each other to determine how the program works from 
the actuarial point of view. It is from those models that we 
have come to the conclusion that we need to make some changes 
to the program. We will now move forward using the new 
assumptions so that we can develop the plans that we need to 
prepare for presentation to the advisory council and to the 
Secretary. All of that will be a very public and transparent 
process so we continue to move forward and build on what we 
have learned so far.
    Mr.Towns. Thank you very much. You mentioned in your 
written testimony that 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. Can you give me at least two examples?
    Ms.Greenlee. Indexing of the premiums would be one example.
    Mr.Towns. Yes.
    Ms.Greenlee. I was not a participant in those 
conversations. As we have come to the conclusion that we need 
to make some changes, revisiting that Senate list was the first 
place we looked for ideas and some of those things on the list 
are ones that we are proposing now.
    Mr.Towns. You know, Mr. Chairman, we are getting a lot of 
criticism on the other side, and it bothers me because I am not 
getting any suggestions or ideas from the other side when it is 
a known fact that people are now living longer and they need 
this care at the end of their days, and if we are not going to 
work together to come up with some ideas, how do we reject what 
is already there? I mean, I just want to get a little answer 
because I am really troubled, because this is a very serious 
issue and I am not sure it has been treated in a serious 
fashion, and I direct that to you, Mr. Chairman, not to the 
witness on this one.
    Mr.Gingrey. Mr. Towns, if you would yield to me?
    Mr.Towns. I would be delighted. I will yield to anybody 
that might be able to help me.
    Mr.Gingrey. Well, I appreciate, and I think in my time and 
the remarks that I made and the questions that I asked of the 
Secretary is to further outline and shine a little light on the 
fact that we are very much concerned, Mr. Towns, in regard to 
this program, if it were stand-alone and we could get it 
right----
    Mr.Weiner. Will the gentleman yield?
    Mr.Gingrey. Yes.
    Mr.Weiner. I appreciate the gentleman yielding. I mean, the 
fact of the matter is, we had 75 hours of hearings, hours and 
hours of markups and basically every single time it was greeted 
with ``No, we are against it.'' Mr. Towns, you are correct in 
pointing out, they don't have--this repeal and replace is a 
fiction. It is just repeal. Earlier you missed it, Dr. Burgess 
said no, we don't have a bill. I would ask, Dr. Gingrey, is 
there a bill? We will take a look at it right now. Let us hold 
it up and take a look at it. They said read the bill. It won't 
even take you much time to read their bill, Mr. Towns. They 
don't have one. They are bankrupt of ideas but they do know 
that for all the people that are going to get care under the 
CLASS Act, they want them to be out of luck. That is clear, Mr. 
Towns, and I yield back to you.
    Mr.Towns. I thank the gentleman, and I must admit that I 
agree with your statement, and I think it is unfortunate 
because this is a very serious issue and I don't think it has 
been handled in a very serious fashion, and that bothers me.
    Mr.Burgess. Will the gentleman yield?
    Mr.Towns. I would be delighted to yield. Do you have any 
kind of solution?
    Mr.Burgess. Well, I just----
    Mr.Towns. If you do, I will yield to you.
    Mr.Burgess. Well, the solution is the hearing that we are 
having today, but I would just point out, this is a hearing 
that we were promised when we marked the bill up in the middle 
of the night without having a hearing on this subject, and 
Chairman Pallone at that time promised a hearing after the bill 
passed. That seemed odd to me, but I was willing to go along 
with it. Well, now we are having the hearing, but 
unfortunately, the bill was passed and signed into law, and as 
we know, the Gregg amendment over in the Senate was slapped 
together at the last minute. The Gregg amendment did protect 
the draw on the Treasury but that can be overwritten by the 
Secretary of Health and Human Services. Is that not correct?
    Mr.Towns. Thank you, Mr. Chairman.
    Mr.Pitts. The gentleman's time has expired. The chair 
thanks the gentleman and yields 5 minutes to the gentleman Mr. 
Guthrie from Kentucky for questions.
    Mr.Guthrie. Thank you, Mr. Chairman. I appreciate that. And 
we are concerned. You know, people do have issues when they are 
older and we need to prepare financially for that. And like all 
the members here, I am willing to work with whoever we need to 
help people. People can't use health savings accounts, they 
can't use pre-tax dollars for long-term planning, and that is 
where we need to go with it.
    But on the premium side of it, if you look at the questions 
we are asking, I mean, Kentucky today, the legislature is in 
general assembly and special session to close $100 million gap 
in Medicare and looking at cutting education to do so. So when 
something passes and the Secretary of Health and Human Services 
says in its current form is not solvent, I think it would be 
absolutely irresponsible for us seeing what is happening in the 
budget not to sit down and ask these questions, and you are 
giving some answers that are comforting.
    A couple of things, one, on the premium. It is going to be 
self-sustaining so the premium that goes in pays the benefit?
    Ms.Greenlee. That is correct.
    Mr.Guthrie. And so there is no--well, the premium may be 
high. That is the question once you start figuring out what it 
is going to be, maybe, you know, if it is unaffordable. It 
won't be any, well, we are going to save Medicaid here, 
therefore we can--the law doesn't allow you to say this premium 
will pay this but there is a gap but we are going to have 
savings in Medicaid and therefore it is a self-funding program. 
You know what I'm saying, just booking savings in other 
categories to----
    Ms.Greenlee. No, the analysis is self-contained within the 
CLASS Act itself. I mean, the Medicaid savings are important to 
watch but they don't in some way offset what is happening 
within the CLASS program itself.
    Mr.Guthrie. Now, if I understand this, the first 5 years 
people will pay in but you can't receive a benefit for 5 years 
because you have to pay in 5 years to receive a benefit.
    Ms.Greenlee. That is correct.
    Mr.Guthrie. So the money paid in has been scored to support 
other parts of the health care bill?
    Ms.Greenlee. Yes.
    Mr.Guthrie. So when you say a premium is going to pay 
benefits, you have to account for that? Because that money is 
not going to be there in year five to pay so the premium will 
have to be higher to cover the benefits in the CLASS Act alone 
because you are taking money out to subsidize something else, 
right?
    Ms.Greenlee. This is----
    Mr.Guthrie. You have to factor that into that.
    Ms.Greenlee. As I described earlier, the difference between 
budgeting and the budgeting process and the accounting that we 
have to do in the receipts and expenditures in the CLASS 
program itself. They are not the same thing. They are related 
but they are not the same thing in terms of the solvency of the 
program.
    Mr.Guthrie. Well, I know you are not budgeting, I mean, I 
know you are not CBO but you are going to have to account in 
the value of the premium for the fact that you are not going to 
have the first 5 years of dollars to spend for benefits.
    Ms.Greenlee. No, the program must be credited with the 
premiums that come in.
    Mr.Guthrie. OK. So you are going to count the premiums that 
are spent somewhere else as part of the benefit?
    Ms.Greenlee. It will have to----
    Mr.Guthrie. You are not going to have the money there.
    Ms.Greenlee. But it has to be a part of the accounting that 
we make for the program. I mean, it is very clear in the law 
that the premiums that come in have to cover the benefits and 
there will be a request for benefits. I mean, that is the 
program design. If there is a budget methodology that accounts 
for that in a different way, it does not change the 
fundamental----
    Mr.Guthrie. So now we are going to have to cover the first 
5 years of money?
    Ms.Greenlee. Five years it will be there, but again, these 
are kind of different financial mechanisms that we are 
interchanging.
    Mr.Guthrie. I have worked in family business and provided 
benefits to our workers and looked for ways for people to plan 
for their long-term care. If a business doesn't auto-enroll, is 
there an alternative process to enroll individuals? If a 
business chooses not to offer it as an auto-enroll benefit, 
then what is the alternative process?
    Ms.Greenlee. The key here is that both the employers and 
the individuals have a choice. The law describes an employer 
opt-in methodology, which is up to the employer if they want to 
participate, and we also have to come up with an alternative 
mechanism for individuals. We are seriously interested in 
engaging the business community about what would work for them. 
If they choose not to opt in, are there other kinds of 
information, other kinds of ways that they could help their 
employees gain access to the program, and we will be engaged 
with the employer community in a robust fashion because their 
support is helpful to us as we gain the large numbers of----
    Mr.Guthrie. Well, that is just a way to reach access.
    Ms.Greenlee. That is how we get the numbers we need.
    Mr.Guthrie. Like when you do immunizations, you get them at 
school because you know you are going to get everybody coming 
in.
    Ms.Greenlee. And we need to be engaged with them and plan 
to do that.
    Mr.Guthrie. I have just about a minute, but I understand 
you have the 3 months so you don't want to pay in early, drop 
out and then get back in and try to get in at your earlier rate 
so if you drop out for 3 months, then you come back, you are 
reassessed at the age and the time and actuarially at the time 
you come back in, so if you buy a policy at 20, it should be 
cheaper than if you buy a policy when you are 60 because you 
have got longer--hopefully, unless you are disabled, have a 
longer time to pay. So currently we have had people on 
unemployment for 2 years so we have these kinds of situations, 
but if somebody dropped out, lost their job and couldn't get a 
job for 3 months and a day, when they show back up they would 
be reassessed at their new age. So if they started at 20, they 
get 40, they lose their job, they come back at 40, 3 months and 
a day later they get reassessed. Is that how----
    Ms.Greenlee. There are two things we have to achieve 
together in that----
    Mr.Guthrie. I mean, that is just a real issue that----
    Ms.Greenlee. Right, the fact that people may come in and 
out of the program in a very legitimate way that we need to 
price but we also need to protect from gaming the program at 
the same time.
    Mr.Guthrie. Thanks. I appreciate it.
    Mr.Pitts. The gentleman's time has expired. Madam 
Secretary, thank you for your testimony and your response to 
the questions. Earlier this month, Secretary Sebelius promised 
Dr. Gingrey during her testimony before this committee that HHS 
would engage in a transparent process in the development of the 
CLASS program. My hope is that you will share information with 
this committee as you develop the program's structure.
    Ms.Greenlee. Yes.
    Mr.Pitts. Thank you, and that concludes the first panel, 
and the chair thanks the Secretary for your very informative 
testimony and responses.
    Mr.Dingell. Mr. Chairman?
    Mr.Pitts. Yes, Chairman.
    Mr.Dingell. Very briefly. Thank you for having this 
hearing. It has been very useful and it is moving us towards 
seeing to it this program works well. This is the purpose for 
which oversight was designed and it is our responsibility, and 
I commend you for it. Thank you.
    Mr.Pitts. Thank you, Mr. Dingell, for those comments.
    So you are excused at this time and we will call the second 
panel to sit at the table, and I will introduce them at this 
time. Thank you. And let me introduce the witnesses and they 
will testify in this order, and I ask that they will summarize 
with 5-minute statements each. We will make your written 
testimony part of the record. First of all, Mr. Allen Schmitz 
is a Principal and Consulting Actuary with the Milwaukee office 
of Milliman, focusing primarily on long-term care insurance. 
Mr. Schmitz was part of a team of actuaries from the American 
Academy of Actuaries that has provided actuarial analysis and 
review of the CLASS program. Mr. Schmitz has also recently 
served on the Society of Actuaries' long-term care insurance 
section council and currently leads the International Actuarial 
Association long-term care team.
    Dr. Joe Antos is Wilson H. Taylor Scholar in Health Care 
and Retirement Policy at the American Enterprise Institute. Dr. 
Antos is also a Commissioner of the Maryland Health Services 
Cost Review Commission, a help advisor to the Congressional 
Budget Office and an Adjunct Professor at the Gillings School 
of Global Public Health at the University of North Carolina at 
Chapel Hill. Before joining AEI, he was Assistant Director for 
Help and Human Resources at the Congressional Budget Office. 
Dr. Antos received his PhD in economics from the University of 
Rochester.
    Mr. Warshawsky currently serves as the Director of 
Retirement Research at Towers Watson, a global human capital 
consulting firm. He conducts and oversees research on employer-
sponsored retirement programs and policies, Social Security 
financial planning and health care financing. In addition, Mr. 
Warshawsky was confirmed by the Senate to serve as a member of 
the Social Security Advisory Board for a term through 2012. He 
previously served as Assistant Secretary for economic policy at 
the U.S. Treasury Department.
    Mr. William Minnix, Jr., has served as the President and 
CEO of LeadingAge since 2001. LeadingAge is an association of 
5,400 not-for-profit organizations focused on advancing 
policies that support the empowerment of people to live fully 
as they age. For more than 35 years, Mr. Minnix has been an 
advocate for innovation in not-for-profit aging services, and 
during his tenure with LeadingAge established the LeadingAge 
Center for Aging Services Technologies.
    Mr. Tony Young is the NISH Senior Public Policy Strategist 
addressing employment issues as they affect individuals with 
significant disabilities. Mr. Young is particularly involved 
with the AbilityOne program, whose mission is to provide 
employment opportunities for people who are blind or have 
severe disabilities in the manufacture and delivery of products 
and services to the Federal Government. In 1998, Mr. Young 
received the Disability Achievement Award by the American 
Public Health Association's Disability Forum. This award is 
given to a person who has a long history of making substantial 
achievements in the field of disability science or policy 
benefiting persons with disabilities.
    So welcome. We look forward to your testimony, and Mr. 
Schmitz, you are recognized for 5 minutes.

     STATEMENTS OF ALLEN J. SCHMITZ, FSA, MAAA, PRINCIPAL, 
 CONSULTING ACTUARY, MILLIMAN, AMERICAN ACADEMY OF ACTUARIES; 
 JOSEPH ANTOS, PH.D., WILLIAM H. TAYLOR SCHOLAR IN HEALTH CARE 
AND RETIREMENT POLICY, THE AMERICAN ENTERPRISE INSTITUTE; HON. 
   MARK J. WARSHAWSKY, CURRENT MEMBER OF THE SOCIAL SECURITY 
ADVISORY BOARD, DIRECTOR OF RETIREMENT RESEARCH, TOWERS WATSON; 
 WILLIAM LAWRENCE MINNIX, JR., LEADINGAGE, CEO, ADVANCE CLASS, 
    INC., CHAIR; AND ANTHONY J. YOUNG, SENIOR PUBLIC POLICY 
            STRATEGIST, NISH, THE ABILITYONE PROGRAM

                 STATEMENT OF ALLEN J. SCHMITZ

    Mr.Schmitz. Thank you, Chairman Pitts and Ranking Member 
Pallone, for the opportunity to testify today.
    My name is Al Schmitz, and I am here on behalf of the 
American Academy of Actuaries. We published an analysis of the 
CLASS Act legislation in 2009, which modeled an earlier version 
of the program. Based on that analysis, we concluded that the 
program would not be sustainable in the long term and that it 
would be unlikely to cover more than a small percentage of the 
intended population. Those same concerns persist with the CLASS 
program as enacted.
    The CLASS program is a voluntary, guaranteed-issue, 
employment-based program. It is important to note that the 
CLASS program is required to be actuarially sound over a 75-
year period with no support from taxpayers. Nevertheless, the 
actuarially sound requirement will be very difficult to achieve 
under the current program design.
    A primary concern is the considerable potential for adverse 
selection in this program. Without addressing many of the 
program's issues, the program will be unsustainable in the long 
term. An effective, actuarially sound public long-term care 
program will limit the effect of adverse selection, and this is 
critical in a voluntary program in which participants may opt 
in and opt out. Those with greater need for long-term care 
coverage are more likely to opt in and those individuals 
without that need are more likely to opt out. This adverse 
selection increases the average insured risk and results in 
higher average premiums which in turn may lead to less 
participation from healthy individuals and even more adverse 
selection. This can result in a premium spiral.
    Important provisions in the CLASS Act that affect adverse 
selection include guaranteed issue with a weak actively-at-work 
requirement, opt-out and opt-in provisions that allow 
participants to delay coverage until it is needed, premium 
subsidies requiring a premium of only $5 per month for students 
and those below the poverty line, a waiting period that is not 
long enough to control adverse selection, rate increase 
limitations for certain individuals older than age 65, and 
benefit design features such as cash benefits and unlimited 
lifetime maximums that have been and continue to be problematic 
in the private long-term care insurance market because they are 
susceptible to induced demand and may drive higher premiums and 
lower participation.
    There has been significant focus on participation levels as 
a critical yardstick in measuring the viability and success of 
this program, and while higher participation generally makes it 
easier to obtain a reasonable spread of risk, it should be made 
clear that it is the mix of individuals with different risk 
characteristics enrolled in the program at any one time and not 
participation alone that is key to long-term sustainability. 
High participation from only higher-risk individuals will 
threaten the program.
    Key factors influencing participation are affordability and 
marketing. The premium levels must be affordable, competitive 
with what is available in the private long-term care insurance 
market and of good value to consumers. But the CLASS program 
design includes features that increase adverse selection and 
result in relatively unaffordable premiums. A strong marketing 
program would significantly increase participation and aid in 
obtaining a reasonable spread of risk. In addition, it would 
encourage individuals to plan for their future long-term care 
needs, and getting people to plan for their future long-term 
care needs could help reduce pressure on government which 
currently pays a majority of long-term care. A sustainable 
voluntary program will have provisions to address many of the 
adverse-selection concerns I have outlined.
    On behalf of the academy, I offer the following 
recommendations for modifying the CLASS program: an actively-
at-work definition with the minimum requirement of 20 to 30 
hours of scheduled work or comparable requirement, restrictions 
on the ability to opt out and subsequently opt in with the use 
of either a long second waiting period or alternative 
underwriting mechanism, the use of benefit elimination period 
and duration limits, benefits that are paid on a reimbursement 
rather than cash basis, and an initial premium structure that 
provides for schedule premium increases at either Consumer 
Price Index or alternative rate.
    These modifications along with an effective marketing 
effort will improve the sustainability of this voluntary long-
term care program. Without these modifications, the program is 
likely to be unsustainable. We are encouraged that Congress and 
the Administration are considering changes to the program 
design that could help address adverse selection. Significant 
additional changes, however, are necessary to address the 
concerns I have raised here today or the CLASS program may not 
be sustainable.
    Again, I thank you for the opportunity to appear before you 
today and would welcome any questions.
    [The prepared statement of Mr. Schmitz follows:]



    
    Mr.Pitts. The chair thanks the gentleman and recognizes Dr. 
Antos for 5 minutes.

                   STATEMENT OF JOSEPH ANTOS

    Mr.Antos. Thank you, Mr. Chairman, and thank you, Ranking 
Member Pallone.
    CLASS is a new Federal long-term care program that is 
financed solely through enrollee premiums. Because the program 
collects premiums in advance of benefit payments, CLASS reduces 
the budget deficit in the near term. Over the longer term, 
CLASS increases the deficit and worsens the fiscal crisis we 
are already facing due to the mounting costs of Medicare, 
Medicaid and Social Security.
    The goals of CLASS are laudable. The program aims to 
provide persons with functional limitations cash assistance to 
help them remain living in their communities, but few people 
will benefit unless the program is attractive to a broad 
population who can share the cost and keep premiums affordable. 
CLASS will primarily enroll an older, sicker population, which 
will drive premiums up sharply. This adverse selection will 
create a death spiral of rising premiums and declining 
participation that will doom the program as it is now 
structured.
    The technical defects in CLASS arise from the intention to 
make long-term care benefits readily available including to 
persons who already have disabilities but are still able to 
work. Underwriting is prohibited and enrollees of the same age 
are charged the same premium regardless of their health or 
disability status. Moreover, low-income people would pay a $5 
monthly premium. Consequently, premiums for other enrollees 
will be high to begin with and grow rapidly as healthier people 
refuse coverage or drop out of the program. Automatic 
enrollment and the minimal work requirement will have very 
little impact on this situation.
    Premiums are hard to predict. CBO estimates that premiums 
would be $123 a month for a $75-a-day benefit. The CMS Chief 
Actuary estimates $240. That tells you that there is 
fundamental uncertainty about what is going on with this 
program. By comparison, however, private premiums average about 
$184 for a daily benefit, somewhat larger than $150. There are 
differences, but nonetheless that tells you something about the 
state of the market. With high CLASS premiums and better deals 
elsewhere, it is not surprising that participation is estimated 
at 2 to 3-1/2 percent of the market.
    It will soon become obvious to many workers that prompt 
enrollment in CLASS is not in their best interest, even for 
those few who are actively interested in purchasing long-term 
care insurance. A 40-year-old who waits 10 years would save 
about $15,000 in premiums with only a small risk of becoming 
unable to qualify for CLASS by the time she reaches 50. 
Consequently, there will be few younger, healthier people in 
the program to subsidize those who will soon draw benefits.
    The law requires premiums to be set to keep the CLASS trust 
fund solvent over 75 years. That guarantees steep price hikes 
as the mix of enrollees shifts towards those with greater risk. 
Even if solvency is achieved, the program will generate budget 
deficits in coming years. CBO says the deficit will appear 
sometime after 2030. The CMS Actuary says 2025. The question is 
not whether there will be deficits but rather when and how 
much.
    As with Medicare, the trust fund does nothing to protect 
the CLASS program. Surpluses that accumulate in the fund are 
invested in non-marketable Treasury securities, essentially 
IOUs that obligate Treasury to find funds to cover the 
operation of CLASS when premiums are no longer sufficient to 
cover expenses. That money is of course used, the surpluses are 
used immediately by the Treasury to fund the ongoing operations 
of the Federal Government. It is standard operating procedure. 
Although premiums would be set to maintain a positive fund 
balance for 75 years, that balance includes the excess premiums 
from the first few years that were in fact spent and it 
includes imputed interest on Treasury Secretaries that is not 
in fact new money.
    If adverse selection is not addressed, CLASS will face a 
funding crisis. Unless Congress reneges on a public promise, it 
fails to pay benefits after having collected billions in 
premiums, it would have no choice but to provide a financial 
bailout rivaling anything we have seen to date. Congress could 
take action to mitigate adverse selection by, for example, 
toughening the work requirement or permitting some form of 
underwriting. I know that Secretary Sebelius has said that she 
has the authority to take the necessary actions and the CRS 
analysis that was introduced strongly indicates that that is 
not the case. Congress could also ignore the structural defects 
of CLASS and force workers to buy it, despite the fact that 
very few people now buy long-term care insurance today, which 
says something about how people view the situation regardless 
of what we analysts think is right.
    There is no guarantee that even legislative changes, even 
dramatic legislative changes, can cure the CLASS program's 
serious defects. Repeal is a logical alternative. It is far 
better as a public policy matter to repeal a defective program 
than to let it repeal itself through fiscal failure.
    [The prepared statement of Mr. Antos follows:]



    
    Mr.Pitts. The chair thanks the gentleman and recognizes the 
gentleman, Mr. Warshawsky, for 5 minutes.

                STATEMENT OF MARK J. WARSHAWSKY

    Mr.Warshawsky. Chairman Pitts, Ranking Member Pallone, 
other members of the subcommittee, I appreciate the opportunity 
to share information and thoughts with you on the new voluntary 
long-term care insurance program to be offered by the Federal 
Government in 2012 called CLASS. I am Director of Retirement 
Research at Towers Watson, a firm consulting on employee 
benefits, and a member of the Social Security Advisory Board. 
In this testimony, however, I am not representing either 
organization. Rather, I am speaking as somebody who has done 
research and written on long-term care insurance and disability 
risk for more than 15 years and most recently about the CLASS 
legislation.
    In this statement, I hope to set forward a framework that 
could be used by employers in deciding whether or not to 
participate in the CLASS program. First, however, I thought it 
would be helpful to provide some statistics about current 
offerings of private long-term care insurance by employers to 
workers. According to our benefits data source at Towers 
Watson, as of 2010 about 50 percent of large employers offer 
but do not subsidize long-term care insurance to their workers. 
Another 4 percent provide such insurance with either a partial 
or full subsidy. The fact that the vast majority of employers 
either do not subsidize or even offer long-term care insurance 
to their workers despite a tax advantage to the worker for many 
employer subsidies reflects that this insurance is considered a 
convenience benefit to employees. That is, long-term care 
insurance is not a core benefit for employers because it is not 
thought to provide a significant business advantage to the 
employer offering it beyond goodwill and convenience to the 
employee.
    Moreover, experience to date with take-up by employees and 
employer-offered long-term care insurance plans has been quite 
modest. Even in large organizations with well-paid and well-
informed employees for whom Medicaid is unlikely to be thought 
a source of long-term care coverage, take-up rates have not 
exceeded 5 or 6 percent, and that is at the upper end of the 
spectrum. This is despite the fact that employer-offered 
policies have the advantage over commercial individual policies 
that little or no underwriting is done in the workplace.
    We have had extensive discussion about the intended 
structure of the CLASS program so I won't go into that, but I 
will note that one aspect is that it provides that workers can 
be enrolled in the program via one of two methods. The 
employers who can decide to participate in the program would 
automatically enroll their workers through payroll deduction 
with the workers having the right to opt out. Such automatic 
enrollment is now common in many 401(k) plans. Self-employed 
workers and those whose employers do not participate could join 
through an individual enrollment mechanism. According to my 
understanding of the language of the law, employers could only 
participate in the program if they agreed to automatically 
enroll their employees. Also, according to my understanding of 
the legislative expectations of the program and the score given 
to the program by the CBO, as part of the broader health reform 
legislation, it is thought that most of the enrollment in the 
program projected by the CBO to be 6 percent of the Nation's 
working population in 2010 will be through employers.
    Now, the framework, and I will have to be quick. The 
overall important consideration to employers is whether the 
government aggressively promotes the need and the benefits of 
long-term care insurance per se directly with workers. In other 
words, they have to make a sale to the American public that 
this is the right thing to do as a long-term care insurance 
benefit. For example, is it possible for the government to add 
informative and candid inserts into regular communications that 
workers get from the Federal Government? Absent such 
promotions, many employers, even those currently offering long-
term care insurance, are unlikely to want to participate in an 
automatic enrollment program when the vast majority of workers 
are likely to opt out.
    I have in my testimony discussion of the adverse selection 
problem, which would concern employers as well, but I think 
that has been very accurately and ably discussed.
    So let me discuss in terms of some benefits and drawbacks 
of the Federal program per se. Obviously, the employers will be 
comparing the benefits and premiums of the administration of 
the Federal program with those available in the private sector. 
This will be an intensely facts-and-circumstances evaluation 
and I can't speculate on how it will come out, but there are 
sort of two opposing factors. One would favor the government 
program and others would favor the private long-term care 
insurance. The fact that the government program pays cash 
benefits that can be used for any purpose I think is an 
attractive feature of the program because it provides 
flexibility but the level of benefits that are contemplated in 
the government program, $50 to $75 a day, is unlikely to cover 
the actual costs of care for many disabilities, nursing home, 
home health care. But in private insurance, that is a parameter 
in the policy and can be selected to be appropriate to the 
region of the country and a level of care desired by the 
insureds. Also, an advantage to the private insurance is that 
there is no 5-year waiting period.
    Let me conclude by saying that CLASS program employers will 
need to evaluate at the time whether to offer it to their 
workers on an automatic enrollment basis, and it is worth 
noting that employers have a lot on their plate at this time 
with health care reform and so this is just another issue.
    [The prepared statement of Mr. Warshawsky follows:]



    Mr.Pitts. The chair thanks the gentleman and recognizes Mr. 
Minnix for 5 minutes.

           STATEMENT OF WILLIAM LAWRENCE MINNIX, JR.

    Mr.Minnix. Thank you, Mr. Chairman, and I want to thank 
especially Congressman Dingell and Congressman Pallone for 
their leadership on this issue.
    My organization represents not-for-profit aging services 
sector. They have been in your communities on average for 75 
years. They are the Jewish and Catholic and Lutheran and 
Masonic and labor-sponsored organizations. We joined with a 
large coalition. I want to remind everyone that we are 270 
consumer service organizations that supported CLASS. Senator 
Dodd said as far as he knew, that was unprecedented. So we come 
to the table today with a lot of people that want this program. 
Why? Because they see the need for it inside out.
    Long-term care is something most families will face and 
nobody wants to talk about. We have been discussing risk. Here 
is where the big risk is: It is the single biggest risk that 
most American families face today. Just ask those that have 
been through it and they are not insured for it. So it is hard 
to talk about but who will benefit from CLASS is potentially 
every American family. Disabling conditions are not respecter 
of political party, age, socioeconomic status, living venue, 
background, genetics, what have you. It is the 20-year-old that 
took the dive at beach week and is now a paraplegic. It is the 
veteran who comes back from the war as a double amputee. It is 
the Alzheimer's person who moves in with the family.
    Families spend 35 hours a week care-giving, and that mostly 
involves women who also work full time. They spend on average 
out of their own pockets $5,500 a year in that job, $9,000 if 
they are a long-distance caregiver. So Mr. Weiner's situation 
is becoming more and more commonplace. Those who are poor or 
have to spend down, we do have Medicaid and we need to do all 
we can do to make sure Medicaid is there for people who need 
it.
    For private long-term care insurance, I own it just like 
Dr. Burgess. I bought it 10 years ago. My wife couldn't get it, 
through no fault of her own. My premiums just went up 60 
percent. I can't wait for CLASS to roll out for me and my wife. 
Every poll or focus group I have seen about CLASS, when you ask 
real people, Democrat, Republican, especially women, say the 
time has come for a program like this. We need a choice not 
available in the marketplace. What is wrong with giving people 
a chance to choose something that may help them because the 
options they have today are simply not there for the masses? So 
when we talk about risk, we better be talking about the risk of 
real people trying to live out their lives every single day.
    Now, who will benefit from CLASS? Consumers, we have talked 
about, the taxpayer. It is a self-contained program. Business 
will benefit from it. We have had discussions with the business 
community. A MetLife study says that it is costing business, 
care-giving is costing business $17 billion a year, and when I 
talk to business leaders, many of them say, you know, we know 
this is happening but we are really not sure about what to do 
about it. Part of Advance CLASS, which is a group that formed 
out of these 270 groups, is committed over the next several 
years to educating the public. These 270 groups, touches the 
lives, has communication with tens of millions of people every 
year, and one of the things that is paramount for all of us to 
do over the next several years is educate the public because 
the more people enroll, the better the effect on Medicaid. It 
puts money back in families' pockets that are willing to assume 
responsibility for care-giving, and it will help the taxpayer. 
It also will help business, because whether we like it or not, 
the need for care-giving is not going away. It will increase.
    You know the history of CLASS and we have had on both sides 
of the aisle conversations about this ad nauseam. The biggest 
unknowns about CLASS, the biggest one is that no one can be 
sure how many people will sign up. I heard Secretary Greenlee 
say they are going to roll out a plan and that is the actuarial 
study we ought to all be looking at, because the day the plan 
rolls out and you can say here is what it looks like, here are 
the options, here are the premiums, then we have all got a big 
education role. The biggest risk is status quo, doing nothing. 
The risk of moving forward with CLASS is minimal compared to 
what we face otherwise.
    Thank you for your interest in this issue.
    [The prepared statement of Mr. Minnix follows:]



    
    Mr.Pitts. The chair thanks the gentleman and recognizes Mr. 
Young for 5 minutes.

                   STATEMENT OF ANTHONY YOUNG

    Mr.Young. Good morning, Chairman Pitts, Ranking Member 
Pallone and members of the Health Subcommittee. I am Tony 
Young, as you know, a Senior Public Policy Strategist with 
NISH. I work in a program called the AbilityOne program. We 
assist people with very significant disabilities and blindness 
to obtain jobs through Federal contracts. In FY 2009, the 
AbilityOne program helped over 47,000 people who are blind or 
have severe disabilities obtain employment.
    The national voluntary CLASS program could help individuals 
and their families manage the impact when a sudden, unexpected 
event results in a lifelong need for assistance with basic 
human functions. Such an event can happen to anyone at any time 
and most who learn they need long-term services and supports 
have few options for financing that care. Many try to rely on 
their own resources or on help from family members for their 
care. However, unless they are extremely wealthy or they have 
very good, dedicated family support, they will not be prepared 
for the financial and emotional costs. That is why I am here 
today. My experience demonstrates the need of a national 
voluntary CLASS program.
    I was 18 when I acquired my disability while body surfing. 
In high school, I was very active in sports, lettering in 
football and track, even selected Second Team All-Met Right 
Guard for the Washington Post. There were social clubs, school 
activities, summer jobs, dating, dancing, pool parties and 
preparing for college. It all ended abruptly and without 
warning on a hot summer day in August 1970. I went from near-
total independence to near-total dependence in the crunch of a 
C4 vertebra.
    After 10 months of medical and physical rehabilitation, I 
was sent home to live with my parents. There was no information 
available on how or where to get help. There were long months 
when my parents managed all of my personal assistance while 
working full time. We were fortunate enough to have good health 
insurance at that time so the medical bills did not bankrupt 
the family. This continued for nearly 3 years.
    Slowly we discovered that some services were available. 
They came from a local visiting nurse service. I received home 
visits for personal care, physical and occupational therapy and 
medical monitoring. These services helped to relieve some of 
the personal care burdens on my family but it soon became 
apparent that I would need more flexibility and more responsive 
supports as they aged.
    There are three things I would like you to keep in mind 
during my testimony today. First, I am one of the fortunate 
few. I was not forced to go into a nursing home. I was not 
forced to become impoverished in order to be eligible for 
Medicaid. I was able to obtain the long-term supports and 
services I needed. [Inaudible.] prior to the accident. Had 
someone like me had CLASS prior to such an unexpected life-
changing accident, my family and I would have some security, 
that the personal assistance and long-term supports I needed 
would be available to us. I want the opportunity for my wife 
and eventually my son to plan for a future disability.
    Three: Keep in mind that a person born with a disability, 
one who acquires a disability in adult life or develops 
disabilities in latter life are not automatically triggered 
into the CLASS benefits. In order to trigger benefits, an 
individual must meet a threshold of functional limitations. 
There are different thresholds and different benefit levels 
depending on the level of limitations. Some individuals will 
choose not to trigger the benefits at all.
    I know that some of you have concerns over the solvency of 
the program. Believe me, I want and need CLASS to be solvent 
too. I want it for my family and for millions of other 
Americans to have a sustainable program for the future. As we 
have already heard today, the HHS Secretary has authority, 
indeed, the responsibility, to ensure that the program is 
solvent for 75 years. The Secretary has announced important 
steps to ensure the sustainability of the CLASS program by 
addressing earnings minimum levels, adjusting premium levels to 
account for inflation and strengthen the fraud, waste and abuse 
loopholes that might threaten the program. These reforms are 
important to the program and I believe that the Secretary must 
be given the time to make these and other changes to strengthen 
the CLASS program. Thank you.
    [The prepared statement of Mr. Young follows:]



    
    Mr.Pitts. The chair thanks the gentleman, and we will start 
questioning. I yield myself 5 minutes for questioning.
    Dr. Antos, during Congressional debate on health care 
reform, we heard bipartisan concerns with the structure of the 
CLASS program. We have repeatedly heard Senator Conrad's 
quotes, regularly calling the program a Ponzi scheme. Could you 
please explain the budget gimmick that was used to claim 
program savings, even though by most accounts this program will 
significantly add to the Nation's deficit?
    Mr.Antos. Thank you, Mr. Chairman. Well, I think it is a 
time-honored tradition in Congress to use this particular 
technique, so I wouldn't want to call it a gimmick. But the 
fact is that premiums will be collected for the first 5 years 
before any benefits are paid, and there is a 5-year vesting 
period so that that means even--and I wasn't clear when the 
program will begin but suppose it starts next year--even after 
2017 or 2018, there will still be premiums coming in from an 
individual before there is any possibility that they could draw 
down benefits. This idea of collecting the money in advance and 
putting it in a trust fund is a well-known political concept 
but it has nothing to do with budget rules. Trust funds are a 
separate kind of accounting mechanism. The budget follows 
essentially cash in and cash out. And so in the normal course 
of events with the government, while this trust fund will 
accumulate balances, that money is immediately disbursed to 
finance the other operations of the government, and eventually 
when money needs to be drawn on that trust fund, the way it 
works is that the Treasury has to go to its usual sources to 
find the money, which is generally deficit financing, generally 
borrowing money from Americans and others who buy government 
securities.
    Mr.Pitts. Thank you.
    Mr. Schmitz, one of the challenges of long-term care 
insurance and health insurance is adverse selection, which 
occurs when insurance benefits attract a larger number of high-
risk participants. The American Academy of Actuaries' analysis 
noted that the CLASS program in its current form has the 
potential for adverse selection. Could you please speak to the 
potential magnitude of that selection and how such an effect 
could put the viability of the entire CLASS program at risk?
    Mr.Schmitz. Sure. The adverse selection that is potential 
in the CLASS program as it is designed is driven by a number of 
things. It is going to be a voluntary program on a guaranteed-
issue basis, and to make a voluntary program work, there needs 
to be risk classification. You need to adhere to actuarial risk 
classification principles, and the way it is currently 
designed, the risk classification principles will not be 
followed because you will have unhealthy individuals who will 
be more likely to join the program. So you end up with a 
situation not just because of initial selection but also 
throughout the program as healthy individuals, they may be the 
ones who decide to leave and you end up with a group that--the 
premiums end up rising and you end up with a rate spiral. The 
other things that are important to look at with respect to 
this, in order to try to make this program work, there is going 
to have to be significant marketing of the program. That is 
going to be a critical piece in order to get the participation 
from healthy individuals that it is looking for.
    There also needs to be--there is a concern in terms of 
adverse selection as to what is available in the private long-
term care insurance market, because right now, the way CLASS is 
designed, there is really not a good way to supplement the way 
it is structured. And so what is going to happen is, the 
private market is going to end up competing with CLASS and so 
if there is an individual who is healthy, who is able to get 
underwritten in the private market, is perhaps married, the 
private market offers significant marital discounts, that 
individual is going to find a better deal in the private 
market. And so what you will end up with is the more unhealthy 
individuals will end up in CLASS and so there will be a problem 
with adverse selection from that perspective.
    Mr.Pitts. The chair thanks the gentleman and yields 5 
minutes to Ranking Member Pallone for questions.
    Mr.Pallone. Thank you, Mr. Chairman.
    I wanted to start with Mr. Minnix. Basically you pointed 
out that there are a lot of things that people pay out of 
pocket are not covered right now. I could give you just from 
being a caretaker to my parents that that is certainly true. So 
explain to us why we need CLASS. In other words, what is wrong 
with Medicare? What are the limitations with Medicaid? What are 
the problems with private long-term insurance that even if none 
of these alone can fully address the long-term needs of the 
elderly and disabled, and we know that in terms of allowing 
them to stay at home or in the community--what is wrong with 
the sort of mix-and-match approach to the problem, which is I 
think essentially what we are doing with CLASS?
    Mr.Minnix. Sure. Well, Medicare covers acute and some post-
acute needs on a limited basis until somebody is to the point, 
say, of they have rehabilitated to their maximum, and Medicare 
is a very good program in that regard. Then there are--but 
Medicare does not cover someone to come in inexpensively to 
help you get bathed and dressed or someone to monitor your 
medications if you are living in your daughter's home. Nobody 
pays for that.
    Mr.Pallone. Exactly.
    Mr.Minnix. If you are fortunate enough to survive 
underwriting of private long-term care insurance and can afford 
it, oK, you have got some coverage there. And then there is 
Medicaid. We have a colleague at our work whose mother moved in 
with him. She would have been an ideal CLASS kind of person but 
obviously CLASS wasn't in existence. The woman died. A week 
later she was notified that she was number 176 on the waiting 
list for a Medicaid-eligible home and community-based services 
in her community. Well, that is just crazy. So what do regular 
people do? They patch it together. They sweat it out. They pool 
their money if they can. And CLASS comes in beautifully to help 
look at that need.
    One of the issues we found in our studies is that young 
people have seen this in their own families, and one of the 
things we think is going to help in the marketplace is younger 
people because what they have seen in their families may well 
be willing to say, you know what, I have seen it in my own 
family, I am willing to pay premiums. So we are excited about 
the opportunity of educating people to say I want to get in 
this early.
    Mr.Pallone. I want to ask another question. Basically in 
terms of who it targets, the funding mechanism, the benefit 
package, the things that you think we need to do, do you think 
the program is designed to achieve the goals and deal with some 
of these problems that you have spoken about?
    Mr.Minnix. I think the law provides a very good framework, 
and now what we have to do is see a final plan, and I think we 
have heard Assistant Secretary Greenlee and Secretary Sebelius 
say, and we support that. It ought to be a sound plan that it 
looks like a lot of people will buy into. I am confident that 
both of those things will happen.
    Mr.Pallone. Now, let me ask Mr. Young, because you are 
talking from personal experience, would you describe how the 
program could benefit your family, your wife, who works full 
time, I believe? In other words, you talked about some of the 
problems that you have had and difficulties others had. Tell us 
how CLASS once it goes into effect is going to help, 
particularly with caregivers, both the patient, I guess, as 
well as the caregivers.
    Mr.Young. The burden, the cost, I should say, of long-term 
services and supports goes well beyond what we pay out of 
pocket. I pay $17,000 a year now for about 18 hours of services 
in the morning and a couple of hours in the evening. All the 
rest of the support that I need, whether it is grocery shopping 
or laundry or preparing meals or, you know, hanging out with my 
son, any of those activities that makes a family go really fall 
on my wife, and for our purposes, a little extra would give us 
an opportunity to bring in that much more assistance that would 
ease her burden, give her some rest every once in a while. With 
a six-year-old child and a C4 quadriplegic husband and a full-
time job, she doesn't get much downtime, and even a little bit 
more would be very helpful.
    Mr.Pallone. Thank you. Thank you, Mr. Chairman.
    Mr.Pitts. The chair thanks the gentleman and yields 5 
minutes to Vice Chairman Dr. Burgess.
    Mr.Burgess. Thank you, Mr. Chairman.
    Dr. Antos, you described, I think you called it a death 
spiral of increasing premiums and decreasing benefits. What 
happens if you move too far out along that timeline? Will the 
Secretary have any ability to modify the program as you 
understand it if that scenario develops?
    Mr.Antos. Well, Dr. Burgess, I think the prudent thing 
would be for the Secretary if she has authority to make the 
changes now. I think there is considerable doubt about how much 
authority she does have to make the changes, and many of those 
changes would move in a direction that I believe folks who are 
looking forward to benefits from this program would find very 
negative, very unfavorable to them. But the fact is that you 
have to follow through, they have to follow through on what 
they said which is they won't start the program unless it is 
fiscally sound, and that is not just a question of solvency in 
a trust fund. It is also a question of the impact on our 
deficit. There is no requirement in the law that says the 
Secretary has to worry about the deficit, just the trust fund.
    Mr.Burgess. Correct, but when we say if the program is 
started. My understanding was, the program has started and the 
passage of the Patient Protection and Affordable Care Act was 
predicated on the money coming in from the premiums paid into 
the CLASS Act.
    Mr.Antos. That is right, but since the regulation isn't 
coming out until sometime later, I am not sure when, we don't 
really know all the details of how things will get started. 
With that said, I believe that the basic structure of the 
program is so fundamentally flawed that the Secretary I believe 
does not have the authority to make such dramatic changes and 
it will have to come back here.
    Mr.Burgess. When we had the initial exposure to the CLASS 
Act concept when Mr. Pallone brought it late that night when we 
were marking up H.R. 3200, I seem to recall at that time the 
discussion was the premium was set at $50 a month and the 
benefit was $50 a day. I get the impression it has morphed a 
little bit since then. Can you give us further insight as to 
what the likely premium is going to be?
    Mr.Antos. Well, there is nothing in the law that says what 
the premium must be. What is specified is what the minimum 
benefit must be, $50 a day. Beyond that, it is a matter of 
actuarial science and guesswork, I would say, and the----
    Mr.Burgess. Well, then I guess we better ask our actuary.
    Mr.Antos. I would, but I think the key point is that there 
is a huge difference of opinion between CBO and the Chief 
Actuary at CMS, which tells you how fundamentally uncertain 
this whole thing is.
    Mr.Burgess. And I think that is the point I was actually 
trying to make, but let us do hear from our actuary. You look 
like you wanted to say something.
    Mr.Schmitz. Sure. I think that the current design is 
structured such that I think the premiums are going to be 
difficult to price with the current design because of the lack 
of risk classification and the actually rich type of benefits. 
This plan is a cash plan, and everybody likes cash. Cash is 
easy, cash is flexible, but cash is a very expensive way to pay 
long-term care insurance benefits. People claim earlier, they 
claim more often. You end up with what the private industry 
calls ADL creep in that, in order to qualify for benefits, you 
need assistance with your activities of daily living. Well, 
people will start to move towards claiming that earlier under a 
cash plan. You also have lifetime benefits in this plan, and 
lifetime benefits, there is significant adverse selection that 
the industry is well aware of that they experience on lifetime 
benefit plans. So you have these very expensive features in a 
voluntary guaranteed-issue program that put all together, you 
know, with what is available in the competitive market, needs 
to all be taken into account when pricing this program, and it 
is a very difficult task the way the structure is currently 
designed.
    Mr.Burgess. Is it possible that the premium could increase 
under the CLASS as written?
    Mr.Schmitz. I think it could. I think there is a risk of 
not pricing this right away. It is so important to take in all 
these considerations right away because if you don't, we are 
going to start in the hole, and if we start in the hole, the 
thing is not going to--you are not going to be able to--to dig 
out is going to be almost impossible. It is going to be very 
difficult to actually right the ship and either increase 
premiums or lower benefits.
    Mr.Burgess. Could you see premium increases by as much as 
60 percent?
    Mr.Schmitz. Well, because of all the issues going on in 
this program, it is unknown what the premium increases might 
be.
    Mr.Burgess. Thank you. I yield back, Mr. Chairman.
    Mr.Pitts. The chair thanks the gentleman and recognizes the 
ranking member emeritus, Mr. Dingell, for 5 minutes for 
questioning.
    Mr.Dingell. Mr. Chairman, I thank you for your courtesy.
    Mr. Minnix, I want to thank you first for your kind words 
about me and my colleagues who have worked on this matter. I 
want you to know I intend to continue working with the 
Administration and with other stakeholders to ensure that the 
program is successful. Mr. Minnix, you note in your testimony 
that the CLASS Act will be of assistance to employers, 
particularly small businesses. Your testimony points out that 
MetLife estimated the cost of lost productivity for employees 
to be $17 billion annually. I gather this is in good part due 
to employees having to take time off for care of older 
relatives. Am I correct in that?
    Mr.Minnix. Right.
    Mr.Dingell. Now, on the other hand, Mr. Warshawsky, in your 
testimony you note that the vast majority of employers do not 
subsidize or even offer long-term care insurance partly due to 
the fact that they do not see offering such insurance as 
providing a significant business advantage. Is that correct?
    Mr.Warshawsky. That is correct.
    Mr.Dingell. Thank you. Now, you both discussed the impacts 
of CLASS Act for employers, and I would like you both, if you 
please, to respond to the following questions, and if you 
please again to answer yes or no. If you answer no, would you 
please for the record submit a detailed explanation to give us 
a more full picture of your concerns.
    Now, Mr. Minnix and Mr. Warshawsky, I have too often heard 
from adult constituents about financial difficulties of trying 
to care for their older relatives, mostly their parents, while 
trying to raise children of their own. Is it true that the 
CLASS Act allows payments to adult caregivers that would help 
offset the cost of the care that they are providing? Yes or no.
    Mr.Warshawsky. Yes.
    Mr.Minnix. Yes.
    Mr.Dingell. Thank you, gentlemen. Mr. Minnix and Mr. 
Warshawsky again, is it true that the availability of CLASS Act 
would allow adult caregivers to hire home care assistants to 
help in the daily care of their elder relatives? Yes or no.
    Mr.Minnix. Correct. Yes.
    Mr.Dingell. Mr. Warshawsky?
    Mr.Warshawsky. Yes.
    Mr.Dingell. Now, Mr. Minnix and Mr. Warshawsky, by hiring 
these home care assistants to help with the daily care of elder 
relatives, wouldn't this help to reduce caregiver absenteeism 
in the workplace? Yes or no.
    Mr.Minnix. Yes.
    Mr.Warshawsky. Not to a significant amount.
    Mr.Dingell. Now, Mr. Minnix and Mr. Warshawsky again, in 
your opinion then, if the CLASS Act will help to relieve the 
financial burden for adult caregivers and also reduce caregiver 
absenteeism from the workplace, do you believe that it would 
help the employers to see in their workforce greater 
productivity? Yes or no.
    Mr.Minnix. Yes.
    Mr.Warshawsky. No.
    Mr.Dingell. No?
    Mr.Warshawsky. No.
    Mr.Dingell. OK. Now, Mr. Minnix and Mr. Warshawsky, is it 
not true that a more productive workforce would be a business 
advantage for employers? Yes or no.
    Mr.Minnix. Yes.
    Mr.Warshawsky. Yes.
    Mr.Dingell. Now, I would like to look at this. We have 
looked at the costs of this to government and the possibility 
of failures but we pay for health care for our people out of a 
lot of different pockets. On Medicaid, we pay for health care 
particularly in the area of long-term care, and this is an 
enormous cost for the taxpayers. In that particular program, 
there is virtually no contribution made by the person who 
receives the help from the Federal-State combined program. But 
with the program we are talking about here, we would find that 
the CLASS Act would allow persons and in fact encourage them to 
pay into the program. Would this not then ease somewhat the 
burden on Medicaid, which pays a huge amount of cost and which 
largely pays costs for institutional care as opposed to home 
care? Isn't this going to help somewhat with regard to the cost 
of Medicaid, which is breaking State budgets, causing huge 
budget difficulties to the Federal Government?
    Mr.Warshawsky. Congressman, as I indicated in my written 
testimony, it is very unlikely that lower or even moderate-
income workers will purchase long-term care insurance, because 
of the availability of Medicaid. There have been many very 
rigorous, fine studies that have been done on this subject, and 
they indicate uniformly that that----
    Mr.Dingell. So you don't think that would be a help?
    Mr.Warshawsky. Extremely minimal, yes.
    Mr.Dingell. Mr. Minnix, yes or no?
    Mr.Minnix. I have the opposite view.
    Mr.Dingell. Thank you.
    Mr. Chairman, you have been courteous. Thank you.
    Mr.Pitts. The chair thanks the gentleman and recognizes Dr. 
Cassidy for 5 minutes for questioning.
    Mr.Cassidy. To all of you whom I question, I apologize. I 
had to step out of the room, so if it is a repeat question, I 
am sorry.
    Mr. Schmitz, folks on the other side of the aisle kept on 
saying how this a solution but I think what I am hearing is 
that if by statute they have to make it work, meaning they have 
to increase the premiums so that it is actuarially sound, that 
the way you write how--I think I have a quote here--``based 
upon this analysis, it was concluded that the program would not 
be sustainable in the long term and it is unlikely to cover 
more than a small proportion of the intended population,'' not 
much of a solution. That said, it also seems as if it would 
cover even a smaller portion if there is adverse selection, and 
I think the Assistant Secretary, her absence of comment upon my 
question kind of affirmed my answer that there would be a great 
potential for that adverse selection. Can we imagine what would 
be the uptake of a product, an insurance product that the 
monthly premiums were $240 for a benefit that would be accrued 
when you are 30 years older?
    Mr.Schmitz. I think the uptake, it is going to really 
depend--the way it is currently structured right now and those 
higher premium levels will likely have very low participation. 
There needs to be--the structure of the program as it is right 
now on a guaranteed-issue voluntary basis is going to be very 
expensive.
    Mr.Cassidy. Now, when you say ``very expensive,'' it could 
be $3,000, $4,000 a year, correct?
    Mr.Schmitz. I mean, you end up with a situation trying to 
deal with the premium spiral in that, well, the more you raise 
premiums, the healthy individuals will keep leaving and so then 
you have to keep raising premiums and so you get to a point 
where eventually you are just going to have prepaid care. And 
so without having risk classification in the program that is 
going to be adequate to get the participation from healthy 
individuals that you need, the premium rate spiral potentially 
will make it unsustainable in the long term.
    Mr.Cassidy. Mr. Warshawsky and Mr. Minnix, Mr. Dingell 
asked you all a question just now and you said no, you didn't 
think it would have much an impact. I think it was about the 
ability of this payment to offset Medicaid cost. Was that the 
question that you all differed on?
    Mr.Warshawsky. Yes.
    Mr.Cassidy. Now, you quoted data. You said there are 
multiple studies showing it will not have an impact. Now, Mr. 
Minnix, you disagree with Mr. Warshawsky. Do you similarly have 
data or is that just a feeling that you have?
    Mr.Minnix. No, we are going on what the CBO said in their 
scoring. We also did a----
    Mr.Cassidy. Now, what specifically did the CBO say that you 
would base that on? Because what I was reading is that it is 
going to be actuarially unsound in a decade or so.
    Mr.Minnix. What the CBO data said--and I can get the 
specific figure but I think it is a matter of public record--is 
beginning the sixth or seventh year out it begins to show 
Medicaid savings.
    Mr.Cassidy. Now, the $2 billion Medicaid savings that Mr. 
Waxman quoted earlier, I tried to look up the number for our 
national debt for long-term care and Medicaid program. It is 
huge. And Deloitte, they did an analysis and they were saying 
that it is going to be, like, 35 percent--I don't have the 
article in front of me--of New York's budget. So $2 billion 
over the entire Nation, well, that is a lot of money in 
absolute terms. As a percent, it doesn't sound like very much 
to me.
    Mr.Minnix. Well, you can take it from a conservative 
standpoint and say----
    Mr.Cassidy. I like that.
    Mr.Minnix [continuing]. That if there is minimal 
participation, that is all it saves. A study we commissioned 
independently that I would glad to share with you says that if 
everyone eligible participated in a similar kind of program--
you have to remember, there are different assumptions.
    Mr.Cassidy. Now, it would have to be mandated, right? When 
you say ``everyone''----
    Mr.Minnix. I am talking about the political mandate. I am 
talking about--everybody is talking theory here.
    Mr.Cassidy. Well, no, no, because actually the thing I am 
after is, Mr. Warshawsky is quoting data and I think Dr. 
Antos----
    Mr.Minnix. I am trying to respond. I have got data.
    Mr.Cassidy. But they say 2 to 4 percent. Are you saying 
there would be 100 percent?
    Mr.Minnix. I am saying that we commissioned a study that 
shows that if there were 100 percent of the participation that 
the Medicaid savings if a plan like this were in place today, 
Medicaid for long-term care would be----
    Mr.Cassidy. Sorry. I am almost out of time.
    Dr. Antos----
    Mr.Minnix. A $50 billion savings.
    Mr.Cassidy. Dr. Antos, do you think it is reasonable based 
upon any empiric experience that we would have 100 percent 
uptake in a voluntary program like this?
    Mr.Antos. None whatsoever.
    Mr.Minnix. I don't think that either.
    Mr.Cassidy. But that is what your study shows. And what do 
you think would be more likely, Dr. Antos?
    Mr.Antos. Well, it is hard to argue with the people who 
have done the estimates so far, and they think that the take-up 
rate for the total population, not the employed population, 
will run 2 to 3-1/2 population.
    Mr.Cassidy. Thank you all very much.
    Mr.Minnix. We think it would be significantly more than 
that over time.
    Mr.Pitts. The chair thanks the gentleman and recognizes the 
gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for 
questions.
    Ms.Schakowsky. Well, first of all, after sitting here not 
through all the testimony but through this hearing and others 
like it, I have to question the intention of this hearing. 
Everyone on the other side of the aisle, on the Republican side 
of the aisle, has voted it seems like dozens of times to simply 
repeal the Affordable Care Act and the CLASS Act with it, so I 
think this is just another effort to try and set up a panel 
that aside from our two witnesses, Mr. Minnix and Mr. Young, to 
discredit this program.
    I was on the President's Commission on Fiscal 
Responsibility and Reform, and I started that by saying, you 
know, it would be pretty easy to balance the budget. You put on 
your green eyeshade, you bring in the actuaries and a red 
pencil and you just cut, cut, cut. But that is not who we are 
as Americans, and today we are talking about a program that is 
designed to not cost one single dollar of taxpayer funding and 
we are finding out that, oh, hidden in there is going to be 
some sort of addition to the deficit reduction. Now, I would be 
happy to sit down with actuaries and experts on all the 
research and design a real program if you don't like what is 
going on, but that is not what we are talking about. This is an 
effort to discredit a program that we think by and large, 
perhaps with some important improvements, could help people.
    Now, I want to talk a little bit about money, Mr. Young. 
You used to be getting Federal support, right, SSDI?
    Mr.Young. Yes.
    Ms.Schakowsky. But you aren't anymore?
    Mr.Young. Right.
    Ms.Schakowsky. You are now working, paying taxes and 
contributing. I don't know how much you are reducing the 
deficit by with your income taxes but it is something. So 
creating a program--I guess my question is, how will this help 
people work as opposed to even have to get long-term care 
insurance or, according to the naysayers, be on the public 
dole?
    Mr.Young. Well, if you can't get out of bed in the morning 
and you can't get dressed and you can't have supports that work 
where, you know, if you need to go to the bathroom or have a 
drink of water, you can't work. That is the bottom line. If 
there are no supports available for basic bodily needs, nobody 
is going to be thinking about how to go to work or even being 
in the workforce because you are worried about basic survival.
    Ms.Schakowsky. So you think that this kind of program 
available to persons with disabilities could actually make more 
people as taxpayers as opposed to tax eaters?
    Mr.Young. Right. Exactly. And the fact that it is lifelong, 
it doesn't disappear once you go to work and start earning some 
money like Medicaid supports do, is invaluable.
    Ms.Schakowsky. Mr. Minnix, this notion of this tiny number 
of people that is projected to get this insurance I think first 
assumes that people would rather spend down into total poverty 
in order to get on Medicaid as opposed to take care of 
themselves, personal responsibility. But as you said, it will 
take an education program. Why do you think that there will be 
more than this miniscule number that they are projecting that 
would actually enroll in this program?
    Mr.Minnix. I have been serving people in this field for 38 
years. I have seen a little bit of everything. And one of the 
things you see over and over again is, number one, families' 
willingness to bear responsibility for their loved ones, and 
secondly, they begin to run out of money doing it, and the 
sandwich generation in the middle begins to say do I help my 
children or grandchildren or do I pay for elderly relatives, 
and there is no program there to do it. And the work we have 
done with focus groups and polls and other things say the 
American public is ready to look at this issue. We have talked 
to younger people, older people and middle-aged people and they 
say, yes, that is beginning to make sense and I would be 
willing to pay. So I am looking forward to the day Assistant 
Secretary Greenlee rolls out this plan and we see who salutes, 
and I am betting it is going to be more than 2 or 3 percent of 
the people.
    Ms.Schakowsky. But you are not just waiting, I would hope.
    Mr.Minnix. No.
    Ms.Schakowsky. Can you talk to us about what kind of 
efforts you see to educate people and to make sure that they 
know about it, etc.?
    Mr.Minnix. Well, the Advance CLASS Board, which is made up 
of some leaders of the 270 coalition, we have set up shop. We 
have got a Web site. We are beginning to get the word out, and 
just things like this will be a huge education effort so people 
can talk about it and begin to plan for it. We are determined 
to get people to plan for it.
    Ms.Schakowsky. Is the disability community going to do that 
as well, get the word out?
    Mr.Young. We are together in this.
    Mr.Pitts. The chair thanks the gentlelady. The gentlelady's 
time is expired. The chair recognizes the gentleman from 
Georgia, Dr. Gingrey, for 5 minutes of questions.
    Mr.Gingrey. Mr. Chairman, thank you, and I am going to 
read, sort of in response to my colleague from Illinois, from 
the debt and deficit commission, the National Commission on 
Fiscal Responsibility and Reform, the official title of their 
report in December of 2010 of which Ms. Schakowsky was a 
member, so I am sure she knows exactly what it is in here, but 
here is what they say in regard to the CLASS Act.
    Ms.Schakowsky. And you know it wasn't adopted.
    Mr.Gingrey. Reclaiming my time. ``The Community Living 
Assistance Services and Support, the CLASS Act, established a 
voluntary long-term care insurance program enacted as part of 
the Affordable Care Act,'' Obamacare. ``The program attempts to 
address an important public policy concern, the need for non-
institutional long-term care. But it is viewed by many experts 
as financially unsound. The program's earliest beneficiaries 
will pay modest premiums for only a few years and receive 
benefits many times larger so that sustaining the system over 
time will require increasing premiums and reducing benefits to 
the point the program is neither appealing to potential 
customers nor able to accomplish its stated function. Absent 
reform, the program is therefore likely to require large 
general revenue transfers or else collapse under its own 
weight. The commission advises the CLASS Act be reformed in a 
way that makes it credibly sustainable over the long term. To 
the extent this is not possible, we advise it to be repealed. 
Technically repealing the CLASS Act will increase the deficit 
over the next decade because the program's premiums are 
collected up front and its benefits are not paid out for 5 
years. To address this, we would replace the deficit reduction 
on paper from the CLASS Act with real options that truly save 
the Federal Government money and put it on a more sustainable 
path.''
    Let me ask Mr. Antos, have you seen the CRS memo that I 
submitted earlier for the record when I was with the Secretary? 
Have you seen that? It states that the Secretary does not have 
the authority to change income eligibility.
    Mr.Antos. Yes, I have looked at that. I am merely an 
economist, not a lawyer, so I am not qualified to really opine 
on this, but I believe that CRS has experts in the law who can 
make this judgment. If this is in fact the case, then it seems 
unlikely to me that this program can be put on an actuarially 
sound basis.
    Mr.Gingrey. Well, then it is your opinion, Mr. Antos, I 
think I understand you correctly, that if the Secretary does 
not have the authority and the language in the law to make 
those necessary changes that the first witness said were 
absolutely essential to put it on a sustainable glide path, if 
we can't fix it, do you think that we should repeal it as the 
President's commission, of which Ms. Schakowsky was a member, 
recommended?
    Mr.Antos. Well, I think we should deal with the problem. I 
think that is the problem with this law. It doesn't deal with 
the actual problem. Mr. Young is a great person who has somehow 
managed to survive our system. This CLASS Act really doesn't 
address it, and to have a program that is going to fail with 
certainty and going to make false promises that can't be kept 
is a disservice to disabled people.
    Mr.Gingrey. And I thank you for that, and of course, that 
is my concern and that is why I bring up these points. In the 
minute that I have remaining, I would like, Mr. Schmitz, to ask 
you, under the law, any individual whose income does not exceed 
the poverty line and any individual who has not attained age 
22, is actively employed and is a full-time student will pay a 
nominal premium beginning at $5. What do you believe will 
happen to the program's sustainability if more low-income 
individuals enroll at the $5 premium subsidy than it is 
actually projected in the bill?
    Mr.Schmitz. If we end up having more people in the program 
at the $5 subsidy, it is the other individuals who are going to 
have to subsidize them and their premium rates are necessarily 
going to be higher. It is going to be important to try to 
understand and estimate those numbers of how many people we 
will be subsidizing, and that is one of the challenges in 
pricing this plan is being able to predict that level of 
adverse selection. There is a lot of unknowns and a lot of 
assumptions that need to be nailed down in this plan that are 
pretty volatile to predict.
    Mr.Gingrey. I wanted to pursue it further, Mr. Chairman. I 
see my time has expired, and of course, I yield back.
    Mr.Pitts. The gentleman's time has expired. The chair 
thanks the gentleman.
    This has been excellent testimony, an excellent panel. In 
conclusion, I would like to thank the witnesses, thank the 
members for participating in today's hearing. I remind members 
they have 10 business days to submit questions for the record. 
I would like to ask the witnesses to respond promptly to any 
questions that are given to you in writing. Members should 
submit their questions by the close of business on March 31st.
    The subcommittee is now adjourned.
    [Whereupon, at 1:05 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]




                                 
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