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Friday, July 10, 2009
1:03 PM EDT
Wallace Forman

Kennedy’s Incredible Disappearing, Reappearing Health Tax

The regulatory monstrosities of Kennedy’s new health care reform bill are difficult to fathom. Tucked into the end of Title I of the bill is the drolly named CLASS Act. The CLASS Act is an odd duck – an entitlement program that pretends to be a voluntary public insurance program.

The CLASS Act promises benefits of $50/day for long-term (nursing) care for eligible individuals with certain disabilities. To be eligible, individuals pay premiums (effectively taxes) at average rates of $65/month for at least 5 years and work for at least 3 of those years.

Perhaps you’re wondering why we need a publicly run insurance program when long term insurance is already widely available through private insurers. Short answer: we don’t. Kennedy’s plan is a deceptive mix of hidden taxes and unfunded liabilities. 
 
The CBO explains how Kennedy tries to hide the CLASS Act’s costs:
The estimated reduction in the federal budget deficit over the next 10 years is chiefly the result of the five-year vesting requirement; the payout of benefits would not begin until 2016, five years after the initial enrollment in 2011....
 
Beyond the 10-year budget window, the effects of the program could be quite different, and CBO expects that the HHS Secretary would need to reduce benefit payments and increase premiums to maintain the program’s solvency.
Who would voluntarily pay taxes to a fiscally insolvent program? No one. That’s why Kennedy bribes employers to automatically enroll their employees with a tax credit worth 25% of employer premiums toward the program. You can expect employers to quietly register their employees without notifying them of the tax.
 
What happens when the money runs out? Congress will likely repeal the program’s voluntary nature – imposing yet another “shared responsibility”. Even that will only delay the inevitable catastrophic bankruptcy of yet another insolvent program that pays out more benefits than it receives in premiums. Can you guess what happens then?
 
All the CLASS act offers is tax increases now and tax increases later. But what else would you expect from Sen. Kennedy?
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