Sen. Orin Hatch (R-UT) called it a “Ponzi scheme,” President Barack Obama held it up as a testament to the work of Ted Kennedy who wanted to ensure that the elderly and disabled would be able to afford help with simple activities of daily living; Rep. Phil Gingrey (R-Ga.) simply called the program “insolvent.”
The Community Living Assistance Services and Supports (CLASS) Act was many things to many people, but it was not well supported–even by the Obama administration–communicated to, or understood by most Americans. The CLASS Act, included in the larger health reform bill passed in 2010 and quietly abandoned for good last week, would have created a voluntary, public insurance program to which Americans could contribute each month so that they could receive help paying for long-term care in the future.
This abandonment of what Obama saw as an ultimately unworkable program leaves open the question of just how the nation will pay for the long-term care needs of some 20 million Americans. As Sen. Tom Harkin (D-IA) testified at a March hearing, only about 8 to 10 percent of Americans have private long-term care insurance coverage. Most people assume it’s not something they will need until they are elderly—even though some 40% of the 10 million Americans who now need long-term care are under 65. Also, commercial policies are often expensive, end up providing inadequate coverage and with few consumer protections in place, have a long history of fraud and abuse.
By default, Medicaid now foots the bill for more than 40% of all long-term care. As Harkin testified; the over-stressed joint state-federal program “now pays more than $110 billion—$110 billion—annually for long-term care for both the elderly and the disabled.” The Congressional Budget Office, meanwhile, estimated that the CLASS program might have saved more than $3 billion in Medicaid costs (primarily by keeping people out of nursing homes) in its first 10 years.
Everyone agrees that the enormous burden that long-term care places on Medicaid is unsustainable. Already many states have cut reimbursement rates to providers, setting them so low that in some areas doctors and other practitioners who agree to accept Medicaid patients are in short supply. Nursing homes in poor, inner-city neighborhoods are closing at an increased pace; and even though the care they provided was often low-quality, they are still considered critically important parts of the safety-net. There just aren’t any other alternatives. Payment for in-home and community services for disabled adults under age 65, as well as for mothers and children are being cut; including dental and vision care, along with a range of other key Medicaid benefits.
Without a CLASS-type program, we are left with a serious gap in coverage for seniors and the disabled, who are now living longer but not necessarily into a healthy old age. In total, some 70% of people over 65 will require some long-term care during their lifetimes. Medicare will pay for multiple hospitalizations; life-saving but often unwanted interventions like feeding tubes and respirators; cancer surgery and testing ad nauseum—all during the last year or so of life. But except in rare cases, it does not pay for long-term care in the home or community. The very wealthy will be able to afford this care—hiring private caregivers, buying into assisted-living facilities and even paying for nursing home care. The poor will need to rely fully on Medicaid, and the middle-class will continue to have to spend all their savings (and some of their children’s savings) on long-term care until they are poor enough to qualify for Medicaid.
The basic idea of the CLASS program was to make this slide toward destitution a little less inevitable. Healthy workers would start contributing to their long-term care—similar to how they contribute to an IRA, say, when they were much younger. Unlike Social Security, it would be a voluntary “opt-out” program with a monthly pay-in that, according to Families USA, would average about $123/month, depending on a person’s age. When it became clear that younger people—especially the “young invicibles”—were unlikely to sign on to the program, CLASS quickly morphed into a target for opponents of health reform and, eventually, fiscal conservatives of all stripes.
Howard Gleckman, author of the book “Caring For Our Parents” and a fellow at the Urban Institute, wrote in HealthBeat recently that “CLASS has been a target of both Republican and Democratic deficit hawks since it was enacted, largely because they feared it would fail as an insurance program and eventually have to be bailed out by taxpayers. They also objected to budget accounting rules that made it seem as if CLASS was generating about $78 billion in new revenues that would be available to pay for health reform.”
While it’s no surprise that CLASS, with its shaky financing based on voluntary contributions, was sacrificed to deficit hawks, its demise must not be construed as a general rejection of long-term care insurance or health reform in general. Conservatives are touting the failure of CLASS as the first in a wave of repeals of ACA provisions, including the much-maligned individual mandate and the requirement that states set up health insurance exchanges.
That’s where Obama and the rest of us who support universal health coverage need to draw the line. CLASS, although well-intentioned and designed to serve a growing and critical need, was doomed by its voluntary, opt-in structure. As Jonathon Cohn writes in The New Republic; “The sustainability of CLASS would not have been in such question if everybody had to sign up for it. In other words, if long-term care insurance were subject to an individual mandate, old and sick people would not have been the only people enrolling.”
Without an individual mandate to maintain fiscal solvency (the “everyone in the pool” concept), the effort to expand insurance coverage to most Americans through the ACA will be similarly doomed.
Where do we go from here? Long-term care remains a pressing problem without an imminent solution. As our population ages, more adults with chronic, multiple medical conditions will require care—many for years. We know it costs an average of $75,000 a year (with great variability across the nation) to house a frail elderly or disabled person in a nursing home. Yet as Gleckman points out in a new Forbes column , “half of Americans have less than $55,000 in financial assets, barely enough to pay for 9 months in a nursing home, or 2 years of 4 hours of help each day from a home health aide. And hardly anyone buys private long-term care insurance—only 7 million Americans own policies.”
Again, it all comes back to Medicaid: Elderly people who have savings pay out of pocket for private home care and nursing homes until they have nothing left and then qualify for public assistance. Some of them never receive the services they need and suffer from neglect and deprivation. Using a new scorecard developed by the AARP and the Commonwealth Fund, we have a fairly good idea of how individual states are doing in terms of meeting the needs of the growing legions of residents needing long-term care. By all accounts, even the best states are barely meeting demand, and could benefit from improvement and better coordination between the various agencies, providers and programs that serve the elderly and disabled.
The CLASS benefit was a modest one; ranging from a minimum of $50 up to $75 a day—about $27,000 a year. The idea was that this benefit would cover several hours of unskilled care—help with bathing, dressing, food shopping and other tasks that might allow an elderly or disabled person to stay living at home longer. It’s an idea that still makes a lot of sense economically—especially as states struggle to meet pressing Medicaid costs. But without a mandate or an incentive giving younger people a reason to buy in to a long-term care insurance plan, the government wasn’t able to guarantee solvency.
For the time being, the focus of health reform must remain on making sure that the many other important—and innovative—features of the ACA stay on track. These include moving toward a health care system that focuses on prevention; on well-coordinated, high-quality care; on reducing waste and overtreatment from Medicare; and on paying for services that actually help people live comfortably at the end of life—rather than bouncing them from hospital to nursing home and back again at great personal and financial cost. We also have to prevent more dire cuts to state Medicaid programs that currently pay for so many services required by the elderly and disabled.
The problem of paying for long-term care has not gone away. Anyone cheering the demise of CLASS and claiming a victory for the anti-reform (and anti-Obama) side is deluded; this issue has no “side” and we’ve merely punted it further down the road. We are all going to get old. The vast majority of us will require long-term care services in the future and most will require government or other outside help to pay for it. The silence from the right is deafening.