WASHINGTON BUREAU — A proposed federal long term care insurance program could create a heavy tax burden for the workers born after the end of the baby boom.
Jessie Slome, executive director of the American Association for Long Term Care Insurance, Westlake Village, Calif., made that prediction in comments on the Community Living Assistance Services and Support Act.
The act, which started out as a section of the Senate Health, Education, Labor and Pensions Committee health system change bill, is now also part of the “tri-committee” health system change bill in the House.
Sen. Edward Kennedy, D-Mass., chairman of the HELP Committee, put the provision in the HELP health system bill.
The CLASS Act provision was added to the House health system bill through an amendment introduced by Rep. Frank Pallone, D-N.J., chairman of the House Energy and Commerce Committee health subcommittee.
The House version of the provision does include a Republican-backed amendment that the Senate HELP Committee adopted earlier this month. That amendment directs the U.S. Department of Health and Human Services to develop the LTC program in an “actuarially sound manner,” and to make the premium and benefit adjustments necessary to maintain solvency.
Sen. Herbert Kohl, D-Wis., chairman of the Senate Aging Committee, has expressed strong support for the CLASS Act provision and said it is one of his health reform priorities.
Groups opposing the provision include the America’s Health Insurance Plans, Washington, and the American Council of Life Insurers, Washington.
AHIP President Karen Ignagni has written to Kennedy that AHIP “appreciates the hard work that has gone into the development of the CLASS Act,” but also has “serious concerns about its workability.”
AHIP members are concerned that “the CLASS Act creates a program with a premium structure that is not adequate and promises benefits that cannot be maintained,” Ignagni writes, citing a recent analysis by the American Academy of Actuaries, Washington, which shows that the CLASS Act benefits structure would require premiums to be set at a monthly level of $160, instead of the $65 level proposed in the legislation.
If premiums were set at $65, the program would be insolvent within 11 years, Ignagni writes.
ACLI President Frank Keating has suggested replacing the CLASS Act with a 3-pronged approach to expanding access to long-term care coverage.
Congress should increase funding for education about the cost of long-term care, allow workers to buy LTC insurance with pre-tax dollars, and expand the Long-Term Partnership Program, which allows states to coordinate Medicaid nursing home benefits with private LTC insurance benefits, Keating says.
Slome says CLASS Act advocates should think about the problems the program would create.
“I anticipate well meaning politicians will ultimately pass legislation creating a new voluntary entitlement program that provides long-term care benefits to Americans,” Slome says.
“When provisions designed to maintain the program’s solvency prove to be unpalatable to the very people the program is intended to benefit, the only recourse will be a mandatory tax on employers and employees,” Slome warns.
That, Slome says, is good news for insurance producers who will be able to market LTC-supplement plans to individuals who fear dependence on inadequately funded government programs.
The design of the program also is “good news” for the baby boomers, Slome says.
“By the time the new mandatory tax is required, most will have ceased working (and contributing to Medicare),” Slome says. “But, Senator Kennedy’s legacy for millions of younger working (and tax-paying) Americans will be a plan for funding our (baby boomer’s) failure to plan.”