U.S. health officials said on Friday that after 19 months of analysis, they could not come up with a model for the so-called CLASS Act that keeps it voluntary and budget-neutral.
"We do not have a path to move forward," Kathy Greenlee, assistant secretary of aging from the Health and Human Services department and administrator of the program, said in a call with reporters.
"Everything we do to make the program more (financially) sound moves us away from the law, and increases the legal risk of the program."
The Community Living Assistance Services and Supports (CLASS) program was designed to give the disabled and elderly cash to receive care at home instead of usually more expensive institutional care.
Under the law, workers would have begun enrolling in the program after October of 2012, after the HHS set the program's benefits. The program was to have been voluntary, with participants required to pay into it for at least five years before qualifying for benefits.
The Congressional Budget Office had estimated the program would reduce the federal deficit by $70 billion in the program's first decade.
However, the CBO also said the program would start to lose money after the first decade or two, once benefit payments exceeded income from premiums.
Republicans, many of whom are eager to repeal Obama's healthcare reform, have criticized the CLASS Act as a way to trump up the cost savings of the Affordable Care Act.
"However, it is worth remembering that the CLASS Act is only one of the unwise, unsustainable components of an unwise, unsustainable law."
Greenlee said the Affordable Care Act will continue to reduce the deficit by $127 billion between 2012 and 2021, even without the CLASS Act. However, the decision to suspend the program would probably reduce the president's 2013 baseline budget.
Dozens of states have sued to challenge the healthcare law, particularly its requirement that all Americans have health insurance. The Supreme Court is expected to rule on the legal challenge sometime before June 2012.
Not adding up
In September, Republicans in Congress posted emails that showed government actuaries were already questioning CLASS, even before the program became part of the Affordable Care Act.
The Republican Policy Committee also posted a September email from Bob Yee, an HHS actuary who said he was hired to run the program, saying he was leaving his position and the CLASS office would be closing.
HHS Secretary Kathleen Sebelius in February acknowledged the agency was struggling to make the program self-sustainable in the long run.
On Friday, Greenlee said the law specifically allowed the program to be suspended if the HHS could not prove it was financially sound for 75 years.
"Because of the tremendous uncertainty that surrounded the program from its inception, it had this provision that the (HHS) Secretary had to satisfy solvency, and we could not proceed otherwise," she said.
Some Democrats on Friday urged the HHS to not be so quick in giving up on the program.
Congressman Frank Pallone, a Democrat from New Jersey who co-authored the program along with the late Senator Edward Kennedy, said seniors and the disabled who need home care would only have Medicaid to fall back on if the program were repealed.
"If the program needs improving, then let's find the way to do it," he said in a statement.
"While we are fighting so hard against Republican attempts to cut Medicaid ... abandoning the CLASS Act is the wrong decision. Soon enough, those in need will have nowhere to go for long term care."
According to the AARP, a nonprofit group that represents those over 50 years of age, 70 percent of people age 65 and over will need long-term care services at some point in their lifetime, and Medicare, the federal insurance program for the elderly and disabled, does not cover such care.