Additional Information on the Budgetary Effects of Proposals to Establish the Community Living Assistance Services and Supports (CLASS) Program

November 25, 2009

Today CBO released a letter providing additional information on the budgetary effects of proposals to establish the Community Living Assistance Services and Supports (CLASS) Program, a new federal program for long-term care insurance. H.R. 3962, the Affordable Health Care for America Act, as passed by the House of Representatives, and the Patient Protection and Affordable Care Act proposed by Senator Reid contain similar proposals that would establish a voluntary program for such insurance.

The major difference between the two proposals is in the population eligible to enroll: H.R.3962 would allow both active workers and nonworking spouses to enroll, while the Senate proposal would allow only active workers to participate. For both the House and Senate versions of CLASS, CBO estimates that the cash flows under the new program would generate budgetary savings (that is, a reduction in net federal outlays) for the 2010-2019 period and for the 10 years following 2019, followed by budgetary costs (an increase in net federal outlays) in subsequent decades. That pattern would occur because enrollees would pay premiums for a number of years before receiving benefits. Because participation in the program would be voluntary, collections of insurance premiums under CLASS would be recorded as offsetting receipts (a credit against direct spending).

On balance, CBO estimates that the version of CLASS specified in H.R. 3962 would reduce deficits by $102 billion over the 2010-2019 period, and the version contained in the Senate proposal would reduce deficits by $72 billion over that period.

Last week, CBO released a revised estimate for H.R. 3962 to correct a mistake that CBO made in its earlier assessment regarding the population eligible to enroll in the CLASS program. Please see my blogs on November 19 and November 20 for more information.