An insurance plan championed by Sen. Edward M. Kennedy that would help elderly or disabled people avoid nursing homes ironically adds yet another sticking point to the comprehensive health care reform plans for which the Massachusetts Democrat fought through much of his career.
The Community Living Services and Support (CLASS) Act is designed to help those who need assistance with basic daily tasks pay for in-home assistance. But moderate Democrats and Republicans worry about the plan’s impact on the deficit and the potential for saddling the federal government with the responsibility of another insurance program.
Sen. Kent Conrad, North Dakota Democrat and chairman of the Budget Committee, has called the act a Ponzi scheme.
Under the proposal in the House-passed version of the overhaul, the CLASS Act fund would collect monthly premiums, estimated to be $65 in 2011, from the wages of all working Americans, unless they elect to opt out – a technique used to help drive participation.
Once they pay premiums for five years, participants would be eligible for cash benefits to help them buy in-home care, if they can no longer care for themselves. Participants would qualify if they could no longer do two of life’s basic tasks on their own, such as eating, showering and dressing.
Mr. Kennedy first proposed the act years ago and later included it in the comprehensive reform bill that his Senate health committee passed a month before he died in August.
“We must pass the CLASS Act and create a long-term care infrastructure in this country that will support every American’s choice to live at home and be part of their community,” he said in November 2006. “Every older or disabled American has this right, and it’s our job in Congress to provide them with the support they need to make this a reality.”
But budget hawks warn that cost estimates for the program by the Congressional Budget Office (CBO), Congress’ nonpartisan budget-keeper, don’t look far enough into the future, when they expect benefit requests will far outweigh revenue.
“While the goals of the CLASS Act are laudable – finding a way to provide long-term care insurance to individuals – the effects of including this legislation in the merged Senate bill would not be fiscally responsible for several reasons,” several senators wrote late last month in a letter to Senate Majority Leader Harry Reid, Nevada Democrat, asking him to keep the act out of the bill he sends to the Senate floor.
“Nearly all the savings result from the fact that the initial payout of benefits wouldn’t begin until 2016, even though the program begins collecting premiums in 2011,” wrote the group, which includes Mr. Conrad and Democratic Sens. Mary L. Landrieu of Louisiana, Evan Bayh of Indiana, Blanche Lincoln of Arkansas, Ben Nelson of Nebraska and Mark Warner of Virginia, as well as Connecticut independent Joe Lieberman.
The act makes the health committee’s bill look less expensive than it is. The bill’s impact on the deficit is judged only on its costs and savings within 10 years. Over that time, the CLASS Act would raise money – about $82 billion in premiums – and spend $22.6 billion on benefit payments.
The CBO found that the bill would reduce the budget deficit by $58 billion between 2010 and 2019. But after that, the effects of the program, “could be quite different,” the group said.
The program joins a series of land mines that threaten support of the health care reform plan, particularly in the Senate, where Democrats have no room to lose any party support. The Senate’s bill, which Mr. Reid said Tuesday could be introduced as soon as next week, is so broad that it touches many controversial issues, such as cost, taxes and abortion.
Democrats have pledged to bridge any divides and pass a bill out of the Senate by the end of the year.
The CLASS Act was included in the House’s reform bill, which passed Saturday, but it was unclear whether Mr. Reid planned to include it in the bill he sends to the Senate floor. It will be crafted from existing bills written in the Finance as well as the Health, Education, Labor and Pensions committees.
Benefits would average about $75 per day, depending on the severity of the patient’s needs, according to analysis by the CBO.
Under the act as written in the health committee, the secretary of health and human services would be tasked with ensuring the program remains in the black, adjusting premiums and benefits – as long as they don’t fall under $50 per day – as necessary.
CBO warned that the secretary likely would need to adjust premiums and benefits shortly after 2019 or risk bankrupting the program.
“Overall, CBO estimates, if the secretary did not modify the program to ensure its actuarial soundness, the program would add to future federal budget deficits in a large and growing fashion beginning a few years beyond the 10-year budget window,” the group said in its report. “If the secretary did act to ensure the program’s solvency, the program and its effects on Medicaid spending and revenues might or might not add to future budget deficits, depending on the specific actions that were taken.”
Actuaries warn that the program isn’t sufficiently structured.
The American Academy of Actuaries said in a July letter to the health committee that it estimates the fund would be insolvent by 2021 because it’s not actuarially sound and would “not only be unsustainable within the foreseeable future,” but “unlikely to cover more than a very small proportion of the intended population.”
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