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Life Health > Long-Term Care Planning

ACLI: Study Shows CLASS Act Won't Work

By Arthur D. Postal

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The American Council of Life Insurers is pointing to a new study by the Centers for Medicare and Medicaid Services as confirming its view that a long term care entitlement program contained in the latest Senate health care reform package won’t work.

In a statement, the ACLI says the proposed Community Living Assistance Supports and Services (CLASS) Act is an “unsustainable program that will add to our nation’s deficit and do little to help most Americans address their long term care needs.”

Despite criticism from the Congressional Budget Office, Republicans in Congress and LTC industry officials, the provision remains in the Senate bill. The Senate defeated an effort on Dec. 4 to remove it from the legislation.

The CMS study, released Dec. 10, reiterates an earlier analysis that the CLASS Act is a flawed program.

“We believe that there is a very serious risk that the program, as currently specified, would not be sustainable, because of adverse selection,” says Richard Foster, CMS chief actuary, in the new report.

The initial take-up rate for the CLASS Act LTC insurance program probably would be just 2%, compared with 4% for comparable private LTC benefits programs, in part because of a relatively high premium for most participants, Foster says.

Only the sickest participants who could not get private coverage would be likely to stick with such an expensive program, he adds.

The health bill provisions that would hold down Medicare and Medicaid spending increases would cut spending by more than $500 billion from 2010 to 2019, but CMS actuaries expect bill provisions meant to hold down overall health care spending, such as the comparative effectiveness and wellness provisions, will lead to less than $3 billion in savings over that same 10-year period.

In response, ACLI officials said, “Despite assurances of actuarial soundness in the CLASS Act, the CMS report concludes that ‘in 2025 and later, the projected benefits exceed premium revenues, resulting in a net Federal cost in the longer term.’

The ACLI cited the estimate in the CMS report of an initial average premium level of $240 per month and said this high cost and ‘the availability of lower-priced private long-term care insurance for many’ among other factors that will result in a participation of only ’2 percent of potential participants.’

“This latest report from CMS and additional analyses by the Congressional Budget Office, the American Academy of Actuaries, and the Concord Coalition present clear arguments for why the CLASS Act needs to be withdrawn from any final health care bill,” ACLI said in its statement.

“Certainly the high and rising cost of long term care threatens the financial and retirement security of all Americans. Helping Americans address this challenge is a necessary goal that requires sound public policy solutions but not a new government program that is doomed to failure,” ACLI added.

Earlier, when the Senate rejected an effort to remove it, Jesse Slome, executive director of the American Association for Long-Term Care Insurance said, “In the short-term CLASS will change the landscape for private long term care insurance sales as Americans become even more confused about their choices and options.”

But, in the long-term, he said, unless it is reversed by future administrations, CLASS will fail as a voluntary program leaving those now in their 20s, 30s and 40s with the financial problem of funding long term care for millions of aging baby boomers.”

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