On Monday, Rep. Charles Boustany (R-LA) introduced a bill “that could block implementation” the health law’s long term care benefits program,” known as the CLASS Act. Boustany’s bill would require the government to shut down the long-term care insurance program “if government actuaries said the program was unsound.” It’s a radical solution to a very real concern that could probably be addressed with some smaller tweaks to the current law.
First, some background. CLASS is a voluntary, government long-term care insurance program that will provide medical and non-medical services like dressing, bathing, and using the bathroom to adults who become severely functionally impaired. Working adults who enroll in the program will be able to receive the benefit — approximately $50 a day — after paying into the program for five years.
Long-term care proponents contend that the current system of financing long-term care is unsustainable. Americans spend more than $200 billion a year on long term care services in nursing homes, at home, or in assisted living facilities. “Medicaid is now the largest single provider of long-term care costs — it spent more than $100 billion last year, over one-third of its budget” and “paid more than 40 percent of the nation’s total long-term care bill.” Families and senior citizens (and Medicare to a lesser extent) pick up the rest of the tab, often spending down to “$2,000 in financial assets” to qualify for Medicaid coverage. By mid-century, the Congressional Budget Office predicts that the nation will have to spend 16% of anticipated federal revenues on Medicaid to fund care for the baby-boom generation.
So the question becomes, how do we fix this system? How do we create a system that can both relieve the burden on families and relieve this burden on government? Republicans argue that the program will be overrun by sick people who desperately need long-term-care benefits, increase costs, and push out healthier enrollees. “Health economists call this an ‘adverse-selection death spiral,’ and it would likely end in program bankruptcy,” the Heritage Foundation’s Brian Riedl noted in yesterday’s Washington Times, predicting that the government would have to consistently bail out the program with taxpayer dollars “to keep premiums low and pay out all benefits.”
But rather than repealing the program, as Boustany suggests, Congress should address some of its shortfalls. I spoke with Howard Gleckman, a resident fellow at the Urban Institute and author of “Caring For Our Parents.” He admitted that the current CLASS Program has its pitfalls and suggested several solutions to keeping it sustainable over the long term:
- Make the program mandatory: If you have a mandatory program, you accomplish two things. The first is you of course eliminate the adverse selection problem, because everyone is in the program, and the other thing is, you are able to push down rates to level where they are pretty easily affordable for most of the population.
- Include CLASS in employer cafeteria plans: The tax deduction is not so important, but including long-term insurance insurance with other benefits raises its profile.
- Provide HHS with more money to market CLASS: The law only allows 3 percent of premiums for all admin costs. That is not enough and, in the run-up to initial sales, there are no premiums.
- Redesign premiums: In CLASS, they are fixed at the age at which you first enroll. Unless all premiums are raised (because the program is deemed insolvent) you always pay the same premium. Instead, they could adjust premiums for inflation. This would allow premiums to start very low (especially for young workers) and rise with their incomes.
As Gleckman noted just yesterday, “Fiscal conservatives such as Capretta and Riedl ought to be looking for ways to improve CLASS, rather than demanding its repeal. The millions of Americans who will need personal assistance, their families, and taxpayers would all be better off for it.” Those principles should outweigh whatever pressure Republicans are receiving from the long-term-care insurance lobby — which sees CLASS as a competitor to their private insurance product. (When in reality it may compliment the existing market place in which private insurers will be able to market supplemental “Medigap”-like coverage to CLASS beneficiaries.)