Debt-reduction plan would kill CLASS Act

John Egan

The days could be numbered for a federal long-term care insurance program that isn’t even open for business yet. Nonetheless, supporters continue to fight for the program.

A plan by a group of U.S. senators aimed at reducing the federal debt would repeal the Community Living Assistance Services and Supports (CLASS) Act, a part of the federal health reform law that encourages the purchase of long-term care insurance. The debt-reduction plan would decrease the federal budget deficit by $3.7 billion over 10 years through spending cuts and tax increases.

The CLASS Act is a voluntary, federally administered insurance program that has been authorized but won’t be operating until the fall of 2012 or later. The program is designed to help people pay for long-term care needs — such as nursing home care, home care or adult day care — if they’re disabled early in life or need assistance later in life. Premiums would be paid voluntarily by employed Americans through payroll deductions when they’re healthy; cash benefits of at least $50 a day could be tapped when participants require long-term care services.

The federal CLASS Act is aimed at helping Americans pay premiums in advance for long-term care insurance, which would cover things like in-home care.

Critic: CLASS is ‘massive’ entitlement program

GOP critics like U.S. Sen. John Thune, R-S.D., want to ditch the CLASS Act to help cut the federal debt. Thune says the act “threatens to put taxpayers on the hook for a massive new entitlement program.”

Some Democrats also have criticized the CLASS Act. U.S. Senate Budget Committee Chairman Kent Conrad, D-N.D., has called the long-term care insurance program “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would be proud of.”

According to the Robert Wood Johnson Foundation, a nonprofit involved in numerous health care activities, the CLASS Act must be sustained solely through premiums — and without the infusion of federal dollars. “As currently structured, however, the program does not appear to be financially viable,” the foundation says. The Obama administration has acknowledged the program’s shortfalls and says it’s coming up with a long-term fix.

“Simply put, it could be difficult, if not impossible, to balance money coming into the program with the money that could ultimately flow out, and thus to create a program that would be solvent and sustainable,” the Robert Wood Johnson Foundation says.

By 2030 or so, the CLASS Act would be paying out more money than it collected, according to the Congressional Budget Office. As a result, the program would start running up a deficit in the billions of dollars.

Supporter: CLASS provides affordable care

Backers of the CLASS Act point out that the nonpartisan Congressional Budget Office estimates the program actually would reduce the federal budget deficit by as much as $87 billion from 2012 through 2021. That’s because people will be paying premiums but won’t be able to draw benefits until a five-year waiting period ends.

Supporters also say the program would mean less reliance on — and lower costs for — the federal Medicaid program in the long run. Why? Because Medicaid-funded stays in nursing homes would decline as participant-funded care at home would grow, they say.

U.S. Sen. John Thune, R-S.D., wants to do away with the CLASS Act.

In a July 20 letter to President Obama, William Minnix, president and CEO of LeadingAge, a trade association for long-term care providers, made his case for the CLASS Act. “To arbitrarily eliminate CLASS makes no sense from the perspective of deficit reduction or improving health care/human services,” Minnix wrote.

Results of a Kaiser Family Foundation poll released in February 2011 found that close to seven in 10 Americans surveyed want to keep the CLASS Act.

Most private health insurance policies provide little or no coverage for long-term care, according to the Robert Wood Johnson Foundation. Long-term care can be quite expensive. For instance, the average U.S. cost for a private room in a nursing home was $219 a day in 2009, according to the National Clearinghouse for Long-Term Care Information, and the average cost for a home health aide was $21 an hour.

In advocating for the CLASS program, Minnix wrote: “Families need a means of planning for their futures and for the long-term services and supports needs that inevitably arise. We urge you to make sure that CLASS allows our country to make it affordable to (provide long-term) care.”

Professor: CLASS is easy target

Uwe Reinhardt, a professor of economics and public affairs at Princeton University, wrote on a health care blog that repeal of the CLASS Act probably would be the easiest thing to achieve on the debt-reduction wish list because the long-term care insurance program hasn’t been launched yet.

In April, Thune introduced legislation that would repeal the CLASS Act. Also in April, U.S. House Budget Chairman Paul Ryan, R-Wis., unveiled a 10-year budget plan that would wipe out the CLASS initative.

By October 2012, the U.S. Department of Health and Human Services is supposed to put mechanisms in place for operation of the CLASS program.