From AAPD (6.10.11):
CLASS in Jeopardy: Policy Options to Reshape the Program
By David Heymsfeld, AAPD Policy Advisor
The Community Living Assistance Support Program (CLASS), as established by the Affordable Care Act, was a huge victory for the disability community. It will create a national, voluntary disability insurance program that will help people with disabilities stay in their homes and communities and pay for services that they need. But now it is in jeopardy. This is because the law provides that CLASS cannot be implemented until the U.S. Department of Health & Human Services (HHS) finds that the premiums paid by purchasers of the insurance will cover benefits for 75 years. It is widely agreed that this cannot be done without significant changes and adjustments to the program. HHS intends to issue a proposed rule on necessary changes in October 2011. Recent reports by the Robert Wood Johnson and the SCAN Foundations suggest options to save this important new long term care insurance program.
Potential Benefits of CLASS program
The CLASS program - very strongly supported by the disability community during health care reform debates -- would offer an opportunity to purchase long term care insurance. If an insured person incurred a disability they would receive a cash benefit to be used for long term services and supports, including home care, adult day care, or a stay in a nursing home.
CLASS was designed to provide some of the same benefits as existing long term care insurance. It is intended to be much more widely utilized than existing insurance because the CLASS premiums would be lower. These are estimated at about $125 a month, compared to an average of about $184 a month for private policies. Also, unlike existing long term care insurance, CLASS premiums could not be adjusted for preexisting health conditions, and persons below the poverty level would be charged a premium of $5 a month.
The expected daily benefits under CLASS of $50-$75 a day would be less than those of private policies which may pay $150 a day. The CLASS benefits would probably not be sufficient to cover all the costs of long term care facilities, but might be sufficient to cover medical and non-medical expenses costs of home health care. CLASS benefits would be available to persons unable to perform two or more Activities of Daily Living. The persons receiving benefits would have more flexibility to self direct the benefits than is available under many private policies, and unlike most private policies there would be no limit on the time for which CLASS benefits would be paid. Note that many private plans only pay benefits for five years.
Implementation Problems
The Congressional Budget Office (CBO) estimated that CLASS would reduce the federal deficit by $87 billion over a ten year period, primarily because the law requires a five year vesting period. This means that in the early years of the program, premiums will exceed payouts. However, concerns are being raised about implementation of the CLASS program over the 75 year benefit period.
The main potential problem for CLASS is "adverse selection"; the possibility that the policies will be purchased disproportionately by those who are likely to need care, and that younger, healthier persons will not buy them. This would result in major payouts and limited premium revenues. This prevents the program from being financially self-sufficient.
Possible Reforms
To improve financing of CLASS, the Robert Woods Johnson Foundation suggests:
- Lengthening the vesting period of five years (including three years employment) to collect benefits. The report raised the period before participants could draw benefits to 10,15 or 20 years as possibilities, recognizing that if the vesting period is too long it will dampen enrollment, and prevent most baby boomers from getting benefits;
- Adjusting premiums to discourage people from waiting until they are older to enroll;
- Requiring people to achieve a reasonable level of income before collecting benefits (as a way of screening out persons who are already disabled and unable to work steadily);
- Giving employers incentives to participate by covering their costs in collecting premiums;
- Indexing premiums to inflation.
The SCAN report did not make specific suggestions, but includes technical briefs with an in-depth analysis of issues involved in designing and administering a long term care program.
Comment Below: What do you think?
What do you think HHS should do to make CLASS financially feasible? Which of the options mentioned above seems fairest to you? Contact Kathy Greenlee, Assistant Secretary for Aging, US Department of Health and Human Services, to give her your views on any of these options, via email to [email protected] OR Comment in the box below or write [email protected]
Suggestions for Further Reading:
Robert Wood Johnson Report at http://www.healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_46.pdf
SCAN Foundation Report at http://www.thescanfoundation.org/sites/default/files/TSF_CLASS_TA_Comprehensive.pdf
Recent Comments