One of the health care reforms that Ted Kennedy was most eager to enact is a bill that would would fund in-home living assistance services for elderly and disabled Americans. The idea is to enable people to live independently as much and as long as possible so that they do not have to move into group homes, nursing homes, or assisted living centers. Senator Kennedy's bill – the "CLASS Act" – has been incorporated into both the House and Senate health care reform bills. Details below.
I confess my bias. Our oldest child is developmentally disabled. He cherishes his independence, and with a little assistance he is able to live in his own apartment. It is not necessary for him to live in an assisted living center or a group home. Not only is home health care all that he wants and needs, it is the most cost effective alternative.
Our son's case is hardly unique. Tens of millions of Americans who are either elderly, permanently disabled, or temporarily disabled are in the same situation. Furthermore, as I discussed in a previous posting, America is aging – rapidly! According to this report dated November 6 from the Congressional Budget Office (CBO), by the year 2040 nearly 40% of Americans will be over the age of 65. Simple demographics will force us to confront the problem of how to care the aging population.
The CLASS Act promises to provide a simple, low-cost solution to our common problem. As the Kaiser Family Foundation states,
"If enacted, the CLASS Act will provide an alternative to programs like Medicaid and Medicare, while at the same time providing mechanism to pay for non-medical expenses for millions of Americans who need assistance to stay independent and remain in their homes."
The CLASS Act is a voluntary government-run form of long-term care insurance that would cover the expenses of home health care for our elderly and disabled population. As of this date only about six percent of Americans have long-term care insurance. Private long-term care insurance companies vigorously oppose the enactment of this bill.
In an article posted November 17 Ricardo Alonso-Zalvidar of the Associated Press summarized the advantages of the CLASS program as follows:
The cost of nursing homes averages $70,000 a year, and a home care attendant runs about $29 an hour. Medicare only covers temporary nursing home stays. Middle-class households have to exhaust their savings before an elder can qualify for nursing home coverage through Medicaid.
Under the proposed program, people would pay a modest monthly premium during their working years. If they become disabled, they would get a cash benefit of at least $50 a day that could be used to pay a home care attendant, buy supplies and equipment, make home improvements such as adding bathroom railings, or defray the costs of nursing home care.
The CLASS Act is contained in Title VIII of the Senate health care reform bill, the Patient Protection And Affordable Health Care Act, starting at page 1925 of that bill. This portion of the bill commences by stating the purpose of the CLASS Act:
The purpose of this title is to establish a national voluntary insurance program for purchasing community living assistance services and supports in order to—(1) provide individuals with functional limitations with tools that will allow them to maintain their personal and financial independence and live in the community through a new financing strategy for community living assistance services and supports; (2) establish an infrastructure that will help address the Nation’s community living assistance services and supports needs; (3) alleviate burdens on family caregivers; and (4) address institutional bias by providing a financing mechanism that supports personal choice and independence to live in the community.
The success of the CLASS Act depends upon how many people purchase long-term care insurance, how high the premiums are, and how expensive the care is that they will qualify for. These factors are interrelated – the higher the premiums that people pay, the more money will be available for their long-term care expenses, but fewer people will purchase insurance, and accordingly the program's risk will be greater because it will be spread across a smaller population. Experts disagree about all three of these factors – how high premiums will be, how many people will enroll, and how much their benefits will be – and as a result they disagree about the likely financial consequences of the program. The law requires the Secretary of Health and Human Services to set premiums at such a rate as to guarantee that the program would be financially solvent for at least 75 years – but will it?
The Centers for Medicare and Medicaid Services (CMS) prepared a pessimistic analysis of the CLASS program: this analysis appears beginning on page 10 of its report of November 13, 2009, on the House bill, H.R. 3962. CMS predicts that the CLASS program will fail because people who expect to become disabled are more likely to enroll in the program, and as a consequence premiums will have to be set so high that few other people will enroll. CMS expects that only 2.8 million persons would enroll by the program's third year of operation, and that the average premium would be $180 per month. During the first five years the program would accumulate a large surplus as premiums are received by the program but no benefits are paid out. However, CMS predicts that beginning in the year 2025 expenses would exceed revenues, and that at some date thereafter when the accumulated surplus is used up the program would become a drain on the federal budget.
The Congressional Budget Office's estimate of the projected budgetary effects of the CLASS Act are more optimistic, probably because it assumes that premiums will be lower and more people will participate. In his article Alonso-Zalvidar states that the CBO assumed that average premiums would be set at $123 per month for the CLASS program. In its report of November 18, 2009, analyzing the Senate health care reform bill, the CBO concludes that the CLASS program would run a surplus until the year 2029, and that any deficits that it would incur thereafter would be "fairly small." The CBO states:
The CLASS program included in the bill would generate net receipts for the government in the initial years when total premiums would exceed total benefit payments, but it would eventually lead to net outlays when benefits exceed premiums. As a result, the program would reduce deficits by $72 billion during the 10-year budget window and would reduce them by a smaller amount in the ensuing decade (an amount that is included in the calculations described in the preceding paragraphs). In the decade following 2029, the CLASS program would begin to increase budget deficits. However,the magnitude of the increase would be fairly small compared with the effects of the bill’s other provisions, so the CLASS program does not substantially alter CBO’s assessment of the longer-term effects of the legislation.
The table showing the effect of the CLASS Act on the federal budget is set forth on page 35 of the CBO report.
On November 21 Manu Raju of The Politico reported that Senator Kent Conrad (D-NE), a key moderate who initially opposed the CLASS Act, had changed his mind and intended to support its adoption. Conrad had called the program a "ponzi scheme" but now felt that the program was set on a fiscally sound basis:
“My description was when they were using the money to pay for other things – and it would be a ponzi scheme if it’s constructing that way,” Conrad said. “Sen. Reid has changed that. I was very strongly in opposition to the CLASS Act being used as a piggy bank and use the money to pay for other things. That would have no integrity and Sen. Reid changed that and it does not use the money to pay for other things.”
In my opinion home health care is a necessary component to any plan of health care reform that is intended to reduce costs and improve people's well-being. I wish that I had the training and experience to make an informed judgment about whether the CMS or the CBO is making the more accurate assessment of the economic projections regarding this program.
Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.
{ 6 comments… read them below or add one }
RE:"…whether the CMS or the CBO is making the more accurate assessment of the economic projections regarding this program."
I have a bad feeling that the CMS has a more realistic projection here. I have no training in financial crystal balling, but I can see far enough ahead to realize that my group of middle class boomers isn't going to plunk down another $200+/_ a month for insurance against something that we don't realistically see a need for in the next ten years. Many of us will either bet on reasonably healthy lifestyles or try to arrange our assets to shield them from total drainage before we need government assistance. For the millions of us about to enter the 'fixed income' stage of our lives, another monthly bill is something we don't need.
I CARRY PRIVATE LONG-TERM CARE INSURANCE AT A RATE OF $368.00 QUARTERLY. IT IS A FINANCIAL STRAIN AS I AM A WIDOW ON A FIXED INCOME, BUT I FEEL IT IS NECESSARY. I THINK A LOT OF SENIORS WILL NOT BE ABLE TO AFFORD THIS PROPOSED PLAN AND WILL NOT ENROLL.
STOP ROBBING MEDICARE AND MEDICAID FOR OTHER PURPOSES THAN THOSE FOR WHICH THEY WERE INTENDED AND WE SHOULD BE JUST FINE. AS THE OLD SAYING GOES, "IF IT'S NOT BROKE, DON'T FIX IT."
Dan and Barbara,
Dan, you may be right – even with the CBO's figures, a lot of people won't purchase the insurance. Barbara, you and I pay about the same amount for long-term care insurance. I agree – it is a lot. The answer would seem to be to make long-term care more affordable by streamlining and modernizing home health care.
Barbara, there are tens of millions of people younger than 65 who are either uninsured or underinsured. They, no less than people 65 and older, deserve to have affordable health care available. It makes sense to me to expand both Medicaid and Medicare – with Medicaid, to everybody who is earning less than 133% or 150% of the poverty level, and with Medicare, to allow people to purchase Medicare insurance at cost. Medicare will not be given away – people will have to pay a premium for it. This should actually strengthen Medicare. Finally, there is a lot of waste in Medicare – we could be much more efficient in how our dollars are being spent. Whether or not we expand coverage to people who don't have it, we have to trim the waste out of that program. In my opinion, anyway!
It is easy to make the bald statement that "there is a lot of waste in Medicare" but I have never seen any documentation of this or even a listing of the suspected waste or types of waste that would add up to anywhere near $500 billion. Blue pill instead of green pill just doesn't get there. I have been on Medicare for 5 years and my wife recently passed at age 70 after several years of battling cancer. I have never seen any evidence of waste in that time. Her oncologist would have liked PET scans regularly to check on the efficacy of the current medications. Medicare would pay for only less than half the number of scans he would have preferred. We hand carried CDs of CT scans from pulmonologist to oncologist and oncologist to pulmonologist to avoid duplication that supposedly exists. I was embarrased by how little her highly skilled doctors were paid by Medicare. Professor, both you and I make significantly more per hour of work than her doctors received from Medicare and that is wrong. My doctor wil not accept new medicare patients and I understand that is quite common. Reducing Medicare costs by further reducing payments to doctors will be a disaster. I guess that the next step will be the government paying students to go to medical school if they will accept Medicare. What will that do to the quality of health care? Soon the best and brightest students will all go to law school rather than medical school since they can become wealthy suing doctors who can barely afford their liability insurance premiums. Earlier on in this reform debate the claim was that $500 billion to $700 billion of the cost would be paid for by "eliminating fraud, waste and abuse" in Medicare. Now that our law makers have rejected a process for uncovering fraud, we are just told that $500 billion will be saved by reducing medicare payments to doctors, hospitals and other providers. If there really is waste, fraud and abuse in the Medicare system, why hasn't that been addressed independently of the current reform legislation. What were they waiting for? They should have attacked that as soon as it was discovered. Of course, the answer is that they needed to save it for the reform legislation so that they can claim the bill pays for itself. I believe, and I think most people are of the opinion, that the only way anything close to $500 billion can be taken from Medicare is by reducing benefits. If one thinks that it is appropriate and necessary to reduce Medicare benefits in order to pay for insurance for the uninsured, be honest enough to make that argument but please don't tell me you are only going to eliminate waste.
Al,
Not one suspected listing of waste? Every single "illegal" on medicare / medicade is WASTE that should be spent on American citizens. Don't take me wrong, here. I am not a bit racist, but our tax dollars need to be spent taking care of OUR citizens, not those who have illegally entered our country, illegally obtained a drivers license, illegally obtained a fake social security number, and illegally obtained medicare / medicade. And that's just ONE example for you that adds up to a LOT of waste!
That is a great post, Al. Longevity is not in a progressive government's best interest, particularly the longevity of our most vulnerable citizens. The writings of key White House healthcare reform advisor Zeke Emanuel make that clear and it is no coincidence that taxes on medical devices such as wheelchairs and Medicare cuts are being relied upon to fund this reform fiasco, or that only a half-assed concession on funding abortions was made only last-minute and in the face of the bill not passing.