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Life Health > Health Insurance

CBO Eyes LTC Proposal

By Arthur D. Postal

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WASHINGTON BUREAU — The Congressional Budget Office is questioning the viability of a Senate health bill provision that could create a new long term care services entitlement program.

The Community Living Assistance Services and Supports Act provision would create a voluntary insurance program.

Sen. Edward Kennedy, D-Mass., chairman of the Senate Health, Education, Labor, and Pensions Committee, has made the CLASS Act provision Section 191 of the major Kennedy-Dodd health bill, which is officially known as the Affordable Health Choices Act.

The Senate HELP Committee is marking up portions of the bill, including the CLASS Act section, this week.

If the U.S. secretary of Health and Human Services 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,” CBO analysts write in a discussion of Kennedy’s original version of the CLASS Act.

“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,” CBO analysts write.

The HELP Committee now has adopted by voice vote an amendment offered by Sen. Judd Gregg, R-N.H., that would mandate that the HHS secretary make annual changes in premim rates to ensure the long-term solvency of the program.

THE PROGRAM TERMS

Under the terms of the original version of the CLASS Act provision, every worker would be eligible to join the program, and workers who wanted to stay out would have to opt out.

The average premium would be limited to $65 per month in 2011 and indexed for inflation in later years.

To qualify for benefits, an enrollee would need to have paid premiums for at least 5 years and been actively working for at least 3 of those years. The enrollee “also would have to be unable to perform at least two or three activities of daily living.”

The minimum benefit would be at least $50 per day.

The program would be administered by the U.S. Department of Health and Human Services.

Under the original version of the CLASS Act provision, the HHS secretary would be allowed to reduce all benefits to the daily minimum of $50 and, if that action was inadequate to avoid insolvency, to increase enrollees’ premiums.

The Judd amendment would require the HHS secretary to set premiums at a level that would ensure program solvency.

THE CBO ANALYSIS

The current version of the CLASS Act program provision would reduce the federal deficit during the first 10 years but could increase the deficit significantly in later years, the CBO says.

“Premium collections would exceed benefit payments during the 2010-2019 period by about $59 billion,” the CBO says.

The early surplus would be a result of the fact that participants could not begin collecting benefits until 2016, at the earliest, because of the 5-year vesting requirement, the CBO says.

To make the program actuarially sound, the monthly premiums would have to be higher or the minimum monthly benefits would have to be lower, the CBO says.

THE ACLI WEIGHS IN

The American Council of Life Insurers, Washington, has issued a statement questioning the adequacy of proposed CLASS Act funding.

In addition to lacking adequate funding, the proposed CLASS Act program “may not adequately cover individuals for their long-term care needs,” the ACLI says.

The program also could increase consumer confusion about the magnitude of LTC planning needs, the ACLI warns.

“With the cost of a 1-year stay in a nursing home expected to rise to $270,000 in 30 years, it is unlikely that the CLASS Act program would be adequate to completely supplement that cost,” the ACLI says.

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