Long-Term-Care Insurance Finds Place in Reform Bills

A controversial proposal has been added to some health care reform measures to provide the first national government insurance program to cover long-term care for people whose incomes disqualify them from Medicaid assistance.

Democratic leaders in the House added the long-term-care insurance program to their health care overhaul bill (HR 3200) in October after a Senate committee added similar language to a bill in July.

The voluntary insurance program would provide cash benefits to help cover the cost of a home-care attendant, equipment and supplies, home improvements to aid disabled beneficiaries, and nursing-home care.

“What we are doing here is relieving a burden on individuals so they can be fully functional and independent,” said Sen. Bob Casey (D-Pa.) in an October floor speech.

The proposal is based on the Community Living Assistance Services and Supports Act (CLASS Act, S 697 and HR 1721), which has already been introduced and has the support of President Obama.

Under the program, all workers who pay federal income taxes would be automatically enrolled; however, they could choose to opt out. It would charge a premium in exchange for cash benefits to help cover the cost of long-term care after participants were enrolled for at least five years. Federal regulators would decide the program's premiums and benefit levels.

The program could have a significant impact on people with disabilities, including the more than 10 million Americans who need long-term services and supports to assist them in daily activities, according to the proposal's supporters. That number is expected to grow as the U.S. population ages and the number of people with disabilities increases.

MH Advocates See Pressing Need

Some mental health advocates among the measure's supporters, and in March they sent a letter to the Obama administration urging the White House to support the CLASS Act and push for health care reform that includes its provisions.

“We must create a public program that allows all people, including individuals with disabilities and those near retirement, the opportunity to contribute to and prepare for the costs of long-term services and supports,” wrote the advocacy groups, which included Mental Health America and the Bazelon Center for Mental Health Law. APA also supports the long-term-care insurance program.

The insurance program aims to expand on Medicaid's support for comprehensive long-term services and supports, which is limited to low-income Americans. Medicare covers only short-term, skilled nursing and home-health programs.

Advocates of the proposed program said that it is needed to keep the soaring cost of long-term services from wiping out the savings of elderly people and younger ones who are disabled. Lower- and middle-income people are rarely able to afford long-term nursing-home costs, for example, which average more than $70,000 each year, according to a 2008 estimate by the Department of Health and Human Services.

The insurance program was promoted for many years by the late Sen. Edward Kennedy (D-Mass.), who pushed to have it added to the health care overhaul bill that passed the Senate Health, Education, Labor, and Pensions Committee in July.

Lawmakers Anxious About Price Tag

While it has strong support among some lawmakers, the measure has drawn significant opposition, including from fiscally conservative Democrats, because they worry that its long-term costs could far outstrip premiums and add to the budget deficit.

Seven moderate Democrats wrote Senate Majority Leader Harry Reid (D-Nev.) in October asking him not to include CLASS Act provisions in the chamber's final health care bill due to concerns about long-term costs.

The Congressional Budget Office (CBO) estimated, however, that in its first 10 years the program as currently proposed would bring in more money than it pays out and reduce the federal budget deficit by about $73 billion. Critics noted that the initial 10-year period includes 10 years of premium collections and only five years of benefit payouts. The program would begin collecting premiums in 2011 but would not begin paying benefits until 2016. The CBO also estimated that the program would remain fiscally solvent over a 75-year period, assuming an initial monthly premium of $123 and a $75 daily benefit.

Another analysis of the CLASS Act by the American Academy of Actuaries concluded that a combination of factors would make the program insolvent by 2021 and require massive federal subsidies to provide even limited benefits. The costs of the program would further rise, according to critics, under pressure from beneficiaries to raise the low annual benefit of $27,000—far less than needed for nursing-home care.

If the cost concerns over the long-term-care proposal lead to significant Democratic opposition to the health care reform bills in either chamber of Congress, that opposition could endanger passage of the final reform package, according to critics of the proposed insurance program.

The Community Living Assistance Services and Supports Act can be accessed at <http://thomas.loc.gov> by searching on the bill numbers, S 697 and HR 1721.