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LTCI Watch: What Will They Do Next?

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Everyone was right recently when members of the House Energy and Commerce Committee marked up H.R. 1173, the Kill the CLASS Act Dead Dead Dead (Really, Really Dead) Act bill of 2010.

Rep. Fred Upton, R-Mich., the committee chairman, pointed out that the Obama administration’s own actuaries had acknowledged that the voluntary long-term care (LTC) benefits program was unsustainable and a “recipe for disaster” before the program provisions had even worked their way into the Patient Protection and Affordable Care Act of 2010 (PPACA).

Upton pointed out that the administration’s own secretary of Health and Human Services (HHS), Kathleen Sebelius, has said HHS sees no way to go forward with the current version of the program.

“I believe we have to start over again on long-term care reform, an issue that will affect millions of Americans,” Upton said.

Rep. Henry Waxman, D-Calif., very predictably does not like H.R. 1173, which was introduced by Rep. Charles Boustany, R-La., and would wipe out a program beloved by the late Sen. Edward Kennedy, D-Mass., noted that the Republicans have been reluctant to talk about what they would replace the CLASS program with.

The bill “would tear down the only framework we have to deal with the nation’s long-term care crisis,” Waxman said. “The Republicans want to throw out CLASS and replace it with absolutely nothing.”

And, yes, Waxman was right. H.R. 1173 says nothing about creating a new long-term care insurance (LTCI) tax credit, or anything of the sort.

Rep. Eliot Engel, D-N.Y., was the first member of the panel to mention LTCI, and he did so to dis the product. He said Republicans believe private LTCI is the solution to the LTC crisis.

“Do you reall know if that’s the case?” Engel asked. “I say, we do not.”

Committee members should make sure the private market can meet LTC needs at an affordable price before putting their faith in it, Engel said.

Another Democrat, Rep. Frank Pallone, D-N.J., suggested a middle way: Acknowledging that the CLASS program law has problems, letting a CLASS program advisory council be formed, and seeing if the advisory council could come up with ideas for ways Congress could make the program work better without eliminating the program entirely.

Upton suggested that letting the CLASS program stay on the books without HHS implementing the program would create harmful uncertainty in the private sector.

My suggestions for moving forward, in a fairy tale alternative universe where Republicans and Democrats can sometimes put partisanship aside and move forward on something other than a life-or-death budget bill:

  • Acknowledge that even the most fervent Ayn Rand-thumping Objectivists among us are reluctant to let frail, disabled elderly people — even elderly people who failed to plan for their financial future when they very clearly had a chance — die alone on the sidewalk. Acute-care health insurers have realized that they need the Children’s Health Insurance Program because there is no possible way for a health insurer to win a public relations battle with a newspaper picture of an adorable, uninsured 3-year-old who has brain cancer. Similarly, LTCI carriers need for the United States to have a strong Medicaid nursing home safety net benefits program because there is no way for LTCI carriers to win a public relations battle with a newspaper picture of a disabled 90-year-old who is dying in misery on a park bench.
  • Bite the budget bullet and create an above-the-line tax credit for LTCI.
  • Consider creating an alternative to CLASS that would either be mandatory or would allow for serious medical underwriting and would rely on private carriers to provide the coverage through a program similar to the Medicare Advantage program. Medicare Advantage has its faults, and there might be a temptation to offer benefits that are too rich or rates that are too low, but it seems as if the whole world is converging on that model for acute health care.
  • Have the Federal Reserve and the Treasury Department come up with some new kind of bond, or some new kind of reinsurance or financial guaranty program, that would shield long-term care insurers and long-term disability insurers against Fed efforts to cut interest rates to artificially low levels. If the Fed wants to fiddle with interest rates to try to keep home owners afloat and nurse banks back to health, fine, but then, if the Fed wants to play that game, the Fed, or the borrowers who benefit from the low rates, ought to use some of what the borrowers have gained to protect interest-sensitive programs that help the elderly and disabled. The Fed should not help a holder of an adjustable rate mortgage, or Citigroup, by shafting a 95-year-old woman who needs help with 3 activities of daily living.