If it survives, the Community Living Assistance Services and Supports (CLASS) Act would, for the first time, create a national, voluntary long-term care insurance program to help pay for personal care for the frail elderly and younger adults with disabilities. It is a modest first step toward turning long-term care from an unsustainable and inappropriate welfare program into an insurance-based system.
But congressional critics want to kill CLASS long before the first policy is ever sold. Rep. Phil Gingery, R-Ga., who has sponsored legislation to repeal the program, calls it "a Bernie Madoff-fraudulent investment scheme run by the Secretary of Health and Human Services." And the House GOP leadership's 2012 budget proposal, released on April 5, would eliminate CLASS, along with much of the rest of the 2010 health law.
Overheated rhetoric aside, critics have two substantive objections to this obscure health law measure. They are offended that, under the conventions of budget accounting, CLASS premiums are counted as revenues that help "pay for" health reform. And they fear that if the program fails as self-funded insurance, it eventually will be bailed out with general tax revenues.
Their concerns are important, and there is no doubt the program needs to be significantly revised if it is to have any chance of success. But without CLASS, or something like it, millions of disabled adults, frail seniors and their families will be left with only Medicaid's tattered safety net to support their personal care needs.
That's why CLASS should be revamped, not repealed.
If CLASS is murdered in its crib, many families will have no resources to pay for long-term care services. Fewer than half of us will have sufficient savings. Most retirement nest eggs will fall far short of what we'll need for nursing home care that costs more than $200 a day or home health aides who cost $20 per hour. Even fewer of us -- about 7 million Americans -- have private long-term care insurance.
As a result, many of the 10 million Americans who need long-term care will go broke paying out of pocket and then turn to Medicaid, a woefully underfunded entitlement program that pays for nearly half of all long-term services. This joint federal-state program spends one-third of its funds -- more than $110 billion annually -- on both home-based and nursing facility personal care.
But Medicaid is busting both the federal and state budgets, and many states are slashing already skimpy benefits.
CLASS could be an alternative. It would provide an average minimum benefit of $50 per day for life -- in cash. This feature would let families decide how to structure care, a vast improvement over Medicaid that too often forces the frail elderly into nursing homes.
Unfortunately, as designed, CLASS will be unaffordable for the vast majority of potential buyers, with average monthly premiums well in excess of $100. HHS Secretary Kathleen Sebelius vows to fix the program's many flaws. And while the repairs she has suggested don't go nearly far enough, she is on the right track.
Here are a few ways to make CLASS more attractive to buyers:
-- Narrow the focus. Today, CLASS attempts to achieve two goals at once. It tries to provide a personal care benefit for working people with disabilities and, at the same time, sell insurance to healthy people looking to hedge against the risk of needing assistance sometime in the future. The result: those who buy insurance will end up subsidizing those with disabilities. That will drive up premiums and discourage healthy people from participating. CLASS needs to be an insurance program only. Congress should make personal assistance benefits available to working people with disabilities -- but not through CLASS.
-- Second, encourage employers to include this insurance in their employee benefit plans. CLASS will succeed only with robust enrollment, but people must be nudged to participate. That will only happen if employers offer policies to their workers.
-- Third, start premiums low, but gradually increase them as people age. This structure will make policies far more attractive to younger buyers.
-- Finally, Congress should create an independent insurance fund to collect and invest CLASS premiums. This would assure participants that they are buying real insurance and not just exchanging their premium dollars for government IOUs.
Someday, perhaps, the U.S. will join nearly every other major developed nation in the world and create a universal long-term care insurance system funded by some mix of taxes and premiums. Coverage could be provided by private insurers -- just as the Medicare Part D drug benefit is today -- or it could be run by the government. Monthly premiums for a universal CLASS-like program could average as little as $40. And such a program could cut Medicaid long-term care costs in half -- by as much as $60 billion.
Given our current anti-government, anti-tax climate, Congress won't pass a universal long-term care insurance program any time soon. But as 77 million baby boomers age, the nation's care needs will only grow. Two out of three seniors and many younger people with disabilities will need some personal assistance before they die. They won't be able to count on a crumbling Medicaid program, and they have not saved. Insuring against this risk makes perfect sense. And CLASS, for all its flaws, is a step in that direction. It deserves a chance.
Howard Gleckman is a resident fellow at The Urban Institute and author of Caring for Our Parents.