The Obama Administration did not notify Congressional supporters of the CLASS Act, a voluntary public long-term care insurance program passed with the Affordable Care Act, before pulling the plug on the idea. Advocates were left blindsided by the official announcement, though the Administration had recently released the chief actuary and shut down the offices doing the implementation of the program.
The news was a slap in the face to CLASS advocates, who knew a report was imminent but did not suspect it would be a death certificate.
“I don’t know what happened,” said Rep. Frank Pallone (D-N.J.), a champion of the program. “I didn’t find out until a half an hour before it came out.”
Pallone said HHS Assistant Secretary on Aging Kathy Greenlee told him, “This is the report. And we’re dropping it.”
The Administration was hemmed in by an amendment from former Sen. Judd Gregg (R-NH), now a Goldman Sachs executive, that the program show its fiscal solvency 75 years out. While the CLASS Act would bring in revenue in the early years of the program, under the ACA it would have depleted that money and cost the government over time. And without a mandate, some critics saw a potential adverse selection problem, where the only people using the long-term care insurance were unhealthy, leading to higher program costs.
Still, the alternative is a situation where almost nobody has long-term care insurance, many think Medicare will cover those services (they won’t), and the elderly are frequently starved of their life savings – sometimes the life savings of their children – paying for costly long-term care, before moving onto Medicaid to cover the cost of a nursing home or in-home support services. The CLASS Act meant to solve a problem that still exists and is growing worse.
There are a number of possibilities to actually fix long-term care, and the fact that the Administration doesn’t want to repeal CLASS, but just terminate it in the state it’s in, is a decent sign. You could add a long-term care benefit to Medicare, or actually underwrite the program to make sure that higher-risk individuals pay a somewhat higher premium. Or you could make the insurance premium mandatory with automatic enrollment and an opt-out. I know we’re supposed to hate mandates, but this is a government-run program we’re talking about, and if you got everyone in the risk pool you could reduce the premium to a very low level.
I think creating a 401(k) style long-term care savings account is a bad idea, as it puts all the burden on people who couldn’t possibly save enough money to pay for their long-term care. But there are ways to go about this that don’t lead to bankruptcy or hardship on sons and daughters to care for their parents. Cutting the program quickly without warning isn’t the answer. Unfortunately, we have the Congress that we have, and that means that a decent solution is a long way off.