With CLASS out, future clouded for long-term care

Now that the Obama Administration’s effort to offer government-sponsored, long-term health care insurance has crashed, it’s unclear whether any viable path exists to prod more Americans into recognizing the need for such coverage – and to buy it — as they grow older and more prone to debilitating illnesses.

Last week, the administration ended the Community Living Assistance Services and Supports Act program long before it was due to be begin. A small section of the controversial 2010 health care reform act, CLASS aimed at providing low-cost long-term care insurance that would pay no less than $50 a day to policyholders.

The idea behind CLASS, a long-sought goal of the late U.S. Sen. Ted Kennedy of Massachusetts, was to help older Americans better cope with the cost of care at nursing homes or in community- or home-based settings. That offered the added potential benefit of reducing demands on Medicaid to pay for such services.

But CLASS suffered from its legislative construction two years ago and a recognition that Republicans in Congress now are unlikely to help fix it rather than attempt to eliminate it.

The program’s primary hurdle was something known in the insurance business as “adverse selection.” Unlike the larger health reform bill’s mandate that all Americans buy traditional medical insurance, enrollment in CLASS would have been voluntary. That raised the likelihood that the pool of persons who joined would include too many who currently suffer from health problems or who anticipate a need for coverage in the future, and too few healthy individuals who subsequently collect little or no benefits.

Thus, many experts mused that actuarially, CLASS could not have been sustained without expensive premiums, which would discourage buyers, and/or an eventual infusion of taxpayer money, which the CLASS law specifically prohibited.

“For 19 months, experts inside and outside of government have examined how HHS might implement a financially sustainable, voluntary, and self-financed long-term care insurance program under the law that meets the needs of those seeking protection for the near term and those planning for the future,” said U.S. Health and Human Services Secretary Kathleen Sebelius in an Oct. 14 letter to Congress. “But despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.”

Since then, there have been signs that internally at least, some HHS officials thought there might have been a way out of the actuarial dilemma. Bob Yee, an HHS actuary who was deeply involved in the agency’s deliberations, listed a few options to The New York Times, such as increasing benefits and premiums over time on a fixed schedule, or barring benefits for 15 years for care related to medical conditions that existed when a person enrolled.

But many such ideas could not be attained without congressional approval. A report to Congress that accompanied Sebelius’ letter noted that some potential changes could have been completed administratively. But other alterations were a tossup at best. “Although there are arguments that can be made that the secretary can implement those features, there are also arguments, and in some cases strong arguments, that she cannot,” the report stated.

And Republican leaders, who favor repealing the entire health reform law, appeared in no mood to help improve one of its provisions. Said GOP Senate Leader Mitch McConnell of Kentucky in a statement last week: “The CLASS Act is only one of the unwise, unsustainable components of an unwise, unsustainable law.”

Still, CLASS faced another hurdle: A significant segment of its potential customers appear less than thrilled with the concept. As part of its work on the program, HHS hired firms to study marketing the program to the public, including focus groups. The findings, summarized in the HHS report to Congress, were not encouraging: While some recognized they would need long-term care eventually, that didn’t necessarily translate into a vow to buy insurance to cover those costs; potentially high premiums, as well as vesting periods and complicated benefit plans, were turn-offs; many perceived insurance as “akin to gambling;” and men more so than women tended to see little need for long-term care coverage.

“To be honest, I think it’s just one of those issues that you really don’t think about until it kind of hits you on the head, when your mom or dad is sick or something like that,” said Sean Coffey, a policy specialist at the Family Caregiver Alliance in San Francisco, which supports CLASS. “It’s not something you think about until you have to.” He acknowledged that by that point – say, for example, a 40- or 50-year old who suddenly realizes that long-term care insurance is a necessity – the premiums offered by the private market can be too high.

And the private market isn’t exactly robust. Many leading insurance companies no longer offer long-term policies, and those that do are trying to raise premiums.

Advocates of CLASS are not giving up. LeadingAge, a coalition of 5,600 non-profit groups focused on aging issues, is sponsoring a telephone campaign this week in support of CLASS aimed at the White House and HHS. “We believe a fiscally solvent, self-sustaining CLASS Act is not only possible, but essential for our country,” said Larry Minnix, LeadingAge’s president and CEO. “There is no other solution on the table right now to solve the crisis of paying for long-term services and supports.”

The administration agrees there is a need: “The challenge that CLASS was created to address is not going away,” Sebelius wrote. “By 2020, we know that an estimated 15 million Americans will need some kind of long-term care and fewer than three percent have a long-term care policy.” Without private or government-sponsored insurance, or large personal savings, she added, “more Americans with disabilities will rely on Medicaid services once their assets are depleted, putting further strain on state and federal budgets.”

(A White House spokesman on Monday signaled opposition to repealing CLASS, even though HHS has said it cannot find a way to implement it as currently structured.)

Critics are unbowed. “Increasing federal spending and creating new programs, especially ones that are likely to have the cost of the CLASS program, would be unacceptable,” said Kathryn Nix, a Heritage Foundation policy analyst. But when asked how Heritage proposed to address the need for long-term care coverage that Sebelius and CLASS proponents see coming down the road, Nix demurred.

If CLASS remains out of reach, some advocates are likely to turn to state governments, said Jhamirah Howard, a policy analyst at the Kaiser Family Foundation, which has studied the issue. “States are definitely looking at a number of different ways to try and make the market and the existing options more viable for people. I think that we will continue to see movement to that end sort of in the absence of anything else,” she added.

In California, legislation by Assemblywoman Mariko Yamada would implement several requirements, including barring insurers from increasing rates more frequently than once every five to 10 years, depending on when the policy originated.

Yamada’s bill, AB 999, passed the Assembly earlier this year and is due for consideration by the Senate Insurance Committee next year. The state Insurance Department and groups representing seniors, nurses and consumers support it, while the insurance industry opposes it.

Herbert A. Sample is a freelance writer based in Los Angeles. He can be reached at has ample@mac.com.

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