A CLASS Act Failure

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.

11 thoughts on “A CLASS Act Failure

  1. The only preventive care that will work to reduce costs would be greater acceptance of individual responsibility for one’s own health.
    Paying for more preventive care, i.e. more “screening,” ala the ACA, is not going to do it as it has a downside – a serious downside. Screening results in alot of often unnecessary and usually costly follow-up procedures, never mind that the screening itself often has no benefit. I don’t see any way to control this other than to impose the costs on individuals.
    I am 67 and have Medicare and backup insurance from Blue Cross. I have no idea what my medical care costs. Most of us don’t because the cost is not transparent. And any effort to discover that cost from the provider or the insurer is met with a “why should you care?” response.
    This is unsustainable. I would shift benefits from paying for routine care to paying for the clearly specified unlikely event (true health insurance). I would even mandate that coverage – by the states to avoid the Consitutional issues – much like auto insurance is required. I would also give discounts based on health habits that can be verified (like no smoking, weight management.)
    I don’t see a problem here. We all pay for the irresponsibility of others. If someone wants to eat until they weigh 300 lbs, with all the attendent health problems that result, they should bear the preponderance of the cost

  2. I think it’s only natural for many Americans to put this issue on the back-burner as the thought of needing long term care seems far off. The fact of the matter is however, that almost everyone will rely on this one day. To gain any ground it is critical that people stop seeing this as a problem of the elderly and instead accept that it is a problem they too will someday face.

  3. What an outrage! What politician eliminated the previous mandate for paying for long term care insurence before that got us into this mess?? Was it Regan?

  4. Isn’t health care…health care? Why should it be divided into long-term care, mental health care, chronic disease care, etc. At any given time, any one of us could require some kind of additional care, and what differnece does it make what the label is?

  5. The President represented that CLASS would save 70 billion in costs. The facts proved otherwise as CLASS collapsed following an actuarial analysis. Now we are learning the whole package will produce more than one trillion in deficits. Obamacare has some good characteristics, but this legislation needs to be thrown in the trash and rewritten with a more thoughtful and debated approach. The US is not Europe, where we are now witnessing their financial collapse from their welfare states budgets.

  6. I agree that health care should be more focused on helping people with their needs and wellness, not just about medicating the issue away. The CLASS Act, although fiscally unconstrained, sounded like a good idea for people to start thinking about their future and the “what if..” question. It shouldn’t be the government’s responsibility to take care of us alone, but we should have some financially commitment too. Caring for an elderly person can be costly and time-consuming, and without proper financial planning, the quality of care can be lost.

  7. My wife and I do have long-term care insurance and it’s not cheap! We’re lucky that we can afford it. The only way I can see to have affordable LTC insurance for everybody would be to include it in the Medicare system and pay for it with the combination of an increase in the payroll taxes paid by workers and an increase in the Medicare premiums paid by seniors. An optional insurance program with a limited pool of subscribers will never be easily affordable and self-sustaining.

  8. Agree with other comments that the CLASS Act made people aware of the LTC issue, but Harry’s comment about the limited pool of people insured would not be self-sustaining will be repeated with the insurance exchanges. They’ve been tried before and end up only insuring a limited number of people who are notably sicker than the rest of the population. The other side of the coin is that the CLASS Act is indicative of the rest of the ACA Act that was passed without being read. Another brilliant Congressional move.

  9. Harry and Hoyt,
    To lump the CLASS Act in with the overall effort to reform health care is a tactic used by those who are dead set against the ACA which, by the way, was passed into law over a year ago. It was always a far smaller effort, there were always questions about its ability to be self-sufficient–especially in light of what other readers have said about people being incapable of thinking about long-term care before they actually need it. I do not believe that Obama promised that CLASS would save $70 billion; but rather it was envisioned as a program that would take some of the burden off of Medicaid and, interestingly, would shift some long-term care to the consumer-driven model conservatives seem so fond of. That it failed is really a function of the lack of an individual mandate or other strong incentive that would increase participation. The Affordable Care Act, of course, does have an individual mandate. So your statement about past experiences with failed health insurance exchanges just doesn’t make sense. Perhaps you’re talking about high-risk state insurance exchanges, where only those denied insurance because of pre-existing illness participate–but those are not at all like the ACA’s planned exchanges.
    For the rest of the commenters (TDP, DA, Joe, JS), I agree that we can’t continue to think about long-term care as something separate from medical care–it is far too interwoven. For now, payment for nurses aides, nursing homes, and other care for the elderly will be paid for by a mix of out-of-pocket, Medicaid, Medicare (through the increasing number of people choosing hospice services)and for a minority–through private long-term care policies. But this is an untenable situation as our population ages and lives longer–not necessarily healthier–lives.
    CLASS is a program with a lot of good ideas and potential. Its current failure may force a deeper discussion about long-term care, an issue to be dealt with in the next wave of reform.

  10. LHF:
    At 58 I was running 10ks three times per week, in 70 minutes, and was suffering from high bood pressure. No matter how hard I tried I could not lower my blood pressure through diet or exercise.
    In 2009, I attended Showdown in Chicago to protest and also report on it at Angry Bear Blog. I had just Finished a series of 10ks. I caught pneumonia and drove from Chicago to Ann Arbor while sick. No matter how hard I exercised I could not lower my blood pressure even though I was normal and better than average while growing up.
    At far as costs? No matter how hard I asked, the doctor could not tell me how much the blood tests were and I waited three days to see if U of M could tell me.In the end a clerk told me to go to a private clinic for blood and urine tests and imaging. I was uninsured and trying my best to get the best deal.
    The problem was not me, it was dealing with a service for fees cost and pricing model which is pervasive in the healthcare industry. Change that cost model, which the ACA does, and the problem is minimized. Furthermore, why am I liable for a condition that I might have been predisposed to by genetics or my environment? Is it fair that black males are predisposed to a shorter life span than white males? If I grow up in the inner city and my diest consists of processed foods due to cost proximity for fresh foods, should I be penalized? Should they and I really pay more as a result? Not likely. At 63 today, I finished kayaking the perimeter of Lake Cazenovia in less than three hours, run, and hike to Chittenago. None of hich will ever change my dosage of .5 mg of a diurectic to keep my blood pressure low. Jim Fixx a long distance runner died from a heart attack and an enlargered heart. Sometimes and many times we are predisposed. Under the ACA and the MLR, I will pay more because of my age which is n fault of my own either.
    Primary care is the issue today. It is under funded with the specialties gaining more. Exactly, the opposite should be taking place with Primary care being given a priority over specialties. Primary care impacts people from birth through old age to death. It is here we are lacking.
    What is unsustainable is the 1% of the Taxpaying Households who scammed Wall Street, and still are doing so, and cost us $trillions to bail them out. What is unsustainable are two wars. What is unsustainable is the 2001/2003 tax breaks which are heavily skewed to 1% of the taxpaying population with no reurn on investment in job creation.