LTC Bullet: CLASSless Journalism

Tuesday, September 21, 2010


LTC Comment: Reporting only the CLASS program's dubious benefits and none of its inevitable detriments is negligent journalism. An example, after the ***news.*** [omitted]



LTC Comment: Late last Friday afternoon, I was winding down from a grueling week of interviews and research for our California long-term care financing project.

My cell phone rang.

It was a "reporter" with Dow Jones MarketWatch and the Wall Street Journal. She wanted to know my views on the new CLASS LTC financing program.

Anyone who's followed our coverage of CLASS knows I do have strong opinions on the subject and I don't hesitant to share them.

Regrettably, only minutes into the interview it was obvious this reporter had a firm and unrealistic point of view on the subject already. No amount of evidence and logic would sway her.

But that didn't stop me . . . or her. The call went on for the better part of an hour. I contradicted every wishful opinion about CLASS she offered with hard facts.

Here are a few of the points I shared . . . and backed up with references.

  • CLASS has no medical underwriting so it does not price risk. It will experience severe adverse selection and slip quickly into what insurers call a "death spiral."
  • CLASS premiums, "triggers," and benefits are unknowable and will depend on what the Secretary of Health and Human Services decides the program can afford, a losing gamble.
  • CLASS cannot survive without a high take-up to spread the risk and cost, but the program is so skewed against healthy, insurable people in favor of the realistically uninsurable that actuarial experts predict as few as 2 percent will participate.
  • CLASS premiums are immediately spent by the federal government on other priorities and replaced by treasury bonds thus adding to unfunded entitlement liabilities that already exceed $107 trillion for Social Security and Medicare.
  • CLASS is supposed to be fully funded privately but when the bonds in its spurious "trust fund" come due, taxpayers will have to repay the missing principal plus interest.
  • CLASS is "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of" according to Kent Conrad (D, ND), Chairman of the U.S. Senate Budget Committee.
  • CLASS offers false hope for people in desperate need and further desensitizes others who should, could and would plan responsibly for long-term care in a rational system.

Following our interview, the reporter produced two columns about CLASS. One ran Sunday in MarketWatch and said exactly nothing negative about CLASS.

The other ran Monday in the Wall Street Journal. It was also uniformly positive about CLASS except for this:

"Stephen Moses, president of the Center for Long-Term Care Reform, a private outfit in Seattle, doubts the program will be successful partly because it isn't mandatory.

"'You have to have a big take-up but you're not going to get big take-up,' Moses said, 'because CLASS is only a good deal for people who know they will need care.'"

Imagine hinting that my main objection about CLASS is that it isn't mandatory!

Thank goodness for that last sentence which at least implies the CLASS program has an adverse selection problem.

There is an object lesson in this story. Beware slanted press coverage about CLASS.

Biased journalists dupe the public with their ideological proclivities and personal preferences. They report a rosy scenario about CLASS without disclosing the hard, actuarial reality.

Unfortunately, whether through prejudice or ignorance, the consumer-oriented reporting I've seen so far about CLASS has been mostly misleading or just plain wrong.