Requiem for the CLASS Act

On Friday, the stepchild of health reform died at the hands of the Obama administration, and the obits for the troubled long-term care program were mostly similar recitations of why the administration was not going forward to implement that portion of the Affordable Care Act, how it was part of Ted Kennedy’s legacy, and how gleeful Republicans were at its demise.

The media amply quoted Senators Mitch McConnell of Kentucky and John Thune of South Dakota. Thune’s quote in The New York Times, “the Obama administration ignored repeated warnings about the financial solvency of this massive new entitlement,” gives a flavor of what they said.

The CLASS Act, short for the Community Living Assistance Services and Support Act, was a voluntary program where people could join a government plan to pre-fund some of the long-term care they might need in the future. Under the plan they would pay premiums during their working years. If they later became disabled and needed assistance, they would be entitled to a daily cash benefit of say, $50, that they could use to buy services such as a personal care attendant, home improvements that would let them stay in their house, or even to help pay nursing home costs.

Supporters saw the CLASS Act as a first step toward a national long-term care insurance program like those in other countries. Whatever its technical flaws, supporters argued that it would begin to solve the dilemma millions of families face—how to pay for a loved one’s care. Many politicians and the insurance industry weren’t keen on that idea since it could also be a first step to a publicly-financed insurance program (anathema to insurance sellers) and might cut into the market for long-term insurance, a product that has never really become a big seller primarily because of its high cost. The CLASS Act barely made it into the final bill.

Shortly after the health reform law cleared Congress, Medicare’s chief actuary Rick Foster warned that over the long term the CLASS Act may have been “unsustainable.” Because the program was voluntary, it depended on lots of healthy people signing up. That way the risk of insuring those likely to need care could be spread over a healthier population. But on Friday, Health and Human Services Secretary Kathleen Sebelius agreed with Foster and declared that there appeared to be no way to, as the reform law required, make the act actuarially sound over seventy-five years. The secretary did not have authority to change the act, but she had the task of making it sustainable, which she said could not be done. Sebelius noted that the premiums consumers would have to pay to join the plan ranged from $235 to $391 a month and perhaps as high as $3,000 under some scenarios. That was such a steep outlay that they might not enroll, causing the program to fall apart. Long-term care is expensive no matter who is providing the benefit—private insurers or the government—and that fact gets us into a discussion of social insurance with everyone in the risk pool, which I will save for another time.

Because budgets are the dominant story narrative out of Washington these days, it’s not surprising that the negative budget implication of ending the CLASS Act was as prominent a story line as those quotes from joyful Republicans. The program was supposed to reduce the federal deficit by $86 billion over ten years because people would be paying premiums and bringing new revenues into the program.

Most of the coverage also discussed the implications of what happened to the act for other parts of the health reform law. So what does it mean for the rest of health reform? Probably not much, unless Republicans use it as ammo in their drive to repeal the entire health law after the next election. What does it mean for the future of long-term care in this country? Probably a lot. The country is back to square one in figuring out how to pay for long-term care. While it may not be surprising that most media outlets told essentially the same story (they usually do when these kinds of announcements are made), it was surprising that there was scarcely a nod to the problem the act had been meant to address, the need to pay for long-term care. The way it works now is that families either pay out-of-pocket or, when they run out of money, they turn to Medicaid and “spend down,” using most of their income and assets on care until they sink low enough to qualify for Medicaid assistance.

A PBS NewsHour blog post touched on the future problem of paying for care. In a Q and A with Susan Dentzer, former NewsHour health correspondent and now editor of Health Affairs, Dentzer responded that she didn’t believe that scrapping the CLASS Act had necessarily killed the idea, adding “I wouldn’t say people should hold their breath that we’re going to get something like this up and running anytime soon.” She suggested that “we might see some creativity in terms of building a market for private long-term care insurance. But one is hard-pressed to see what that might be.”

That might be the case, especially since long-term care insurance is exempt from the rules governing health insurance under the reform law. For example, sellers can turn people away who have health conditions that are likely to send them to a nursing home. It seems that another battle would have to be fought over this issue, and that’s not likely. The Los Angeles Times did note that Sebelius said about fifteen million elderly Americans will need some kind of long-term care and few have insurance. That means most Americans will rely on Medicaid “putting further strain on state and federal budgets”—an important dot to connect as Congress considers significant cuts to Medicaid.

There’s another irony in the CLASS Act’s demise. For most of the year, public discourse has touted the fact that people are living longer and that it’s okay for them to wait longer to receive Social Security and Medicare benefits. The downside to living longer is that it’s likely many will need in-home assistance. But the media, taking their cues from the politicians and the think tanks driving the narrative, have yet to make this connection. This part of the “living longer equation” has barely been mentioned.

Trudy Lieberman, a journalist for more than 40 years, had a long career at Consumer Reports specializing in insurance, health care, health care financing and long-term care. She contributes to the Columbia Journalism Review where this post first appeared.


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