The health reform bill passed by Congress last night includes big changes in the way we pay for long-term care, both at home and in nursing facilities. The reforms will give the elderly and disabled far more flexibility in the way they get care and, at the same time, begin turning long-term care from largely a welfare program to an insurance system.

The biggest change is the Community Living Assistance Services and Supports (CLASS) Act. It would, for the first time, make voluntary long-term care insurance available to all Americans, give those unable to care for themselves a lifetime cash benefit they could use to help make their lives–and the lives of their caregivers–a bit easier.

But CLASS is not the only major change. The new law will also make it easier for the poor to receive home care benefits under Medicaid. It would ease paperwork requirements for states that want to offer such assistance and provide more federal money to help pay for Medicaid home and community care.

The bill also takes modest steps aimed at coordinating care for those very poor and frail who are eligible for both Medicare and Medicaid–a population that often faces multiple, and complicated, chronic diseases. Finally, the new law will provide additional federal money to train health professionals and health aides in geriatric care.

It remains to be seen how all of this will work. There are major questions about the CLASS Act: What kind of  benefit package can it offer for a premium price consumers will be willing to pay? Will young and healthy people enroll in the voluntary program, or will the insurance end up covering only those with the greatest need–a recipe for unsustainably high premiums? How will private insurance respond? Will carriers create policies to wrap around government insurance, much like Medicare Supplement (Medigap) works today? Or will they try to cherry pick the least risky customers, leaving the government with the tab for the costliest buyers?

Similarly, the Medicaid home care reforms fall far short of the ideal. Medicaid would still only be required to provide nursing home care. Home care would remain optional for the states. And the House “fixes” bill would delay additional federal funding for these benefits from next fall until October, 2011. This could be critical since many states are currently slashing their home care benefits in the face of severe budget pressures.     

The new law takes only modest steps and is flawed in some important ways. But it is making the biggest changes in long-term care since the creation of Medicaid more than a half century ago. And for those of us caring for our parents, most are long overdue.