The Community Living Assistance Services and Supports (CLASS) Act, the national long-term care insurance program included in the 2010 health reform law, is on life-support. It is increasingly likely that the Obama Administration will never develop the actual insurance policies that were supposed to be available to consumers next year.
On Wednesday, the Senate Appropriations Committee deleted all of the $120 million the Obama Administration requested to design and market the plan in 2012. On Thursday, the Department of Health & Human Services—the agency working to create CLASS policies– laid off Bob Yee, the lead actuary on the project, and reassigned most of his
staff. Yee, a high-respected industry analyst, had been brought in to crunch the numbers needed to set premiums and benefits for the program.
After first denying the layoffs, the agency confirmed the cutbacks, acknowledged the program was being delayed, and said it was “an open question whether the program will be implemented.” In Washington-speak, this is akin to a surgeon telling his patient’s family that “things didn’t go as well as we’d hoped.”
Yee and his staff finished their actuarial analysis some weeks ago and sources say it showed how difficult it would be to create successful CLASS policies given the limits of the law. Along with many others, I’ve argued the program was deeply flawed for several reasons. The biggest problems: It is voluntary, and it attempts to combine a new benefit for working people with disabilities with a true insurance program for those looking to hedge against the risk of long-term care in old age.
This model would effectively force a relative handful of insurance buyers to subsidize a benefit program for the working disabled, a design that would likely drive up premiums and discourage healthy people from purchasing coverage. Known as adverse selection, this phenomenon would eventually make the program unsustainable.
CLASS might have been fixable. But in the end it was done in more by politics than substance. Nearly all congressional Republicans and a number of influential Senate Democrats opposed the program. It became a prime target for those looking to kill the entire health reform law. And after its powerful champion, Sen. Ted Kennedy, died, no-one stepped up to take his place. And Obama has never shown much enthusiasm for either CLASS or long-term care issues in general. HHS Secretary Kathleen Sebelius has been warning for months that she would refuse to roll out a program
that was likely to fail. After reviewing the actuarial work done by Yee and his staff, she seems to have concluded it would flop. And she kept her promise.
But while CLASS is fading away, the challenge of financing long-term care is not. Medicaid, which pays more than 40 percent of these costs, is itself in serious financial trouble. And only about 7 million Americans own private long-term care insurance. Yet, more than two-thirds of those 65 and older will need long-term personal care at some point in their lives.
It would be nice if, with the death of CLASS, insurance industry groups, advocates for the aged and disabled, and long-term care providers could sit down together and design a long-term care financing system that does work. But more
likely, this critical issue will now return to the closet where many politicians would like it to stay.