The CLASS Act
14th of October, 2011. The U.S. media has reported that Obama Administration has stopped work on health reform’s Community Living Assistance Services and Support Act (CLASS Act) because of difficulties in implementing it. The CLASS Act which was aimed to provide insured long-term care coverage to a larger base of American people thus became a non-starter.
14th of October, 2011. The U.S. media has reported that Obama Administration has stopped work on health reform’s Community Living Assistance Services and Support Act (CLASS Act) because of difficulties in implementing it. The CLASS Act which was aimed to provide insured long-term care coverage to a larger base of American people thus became a non-starter.
Background
The concept of CLASS Act took shape from the need for long term care. In an effort to reduce Medicaid costs over a certain period, legislators wanted to shift long term care from the publicly funded program to an insurance based program. This need was statistically supported by the National Clearinghouse for Long-Term Care Information too. The CLASS Act also aimed at creating an employment-based system by making payroll deductions to cover premiums. The expected benefit for the covered person was fixed at $ 50 per day after a waiting period of five years. The benefits which were to be tax free were expected to become payable based on individual’s level of need, even if formal services were not provided for.
What Went Wrong
The program was to begin after 2014. However, there has always been concern about the sustainability of CLASS because the long term insurance program depended on voluntary enrollment which was perceived as a threat to stability of the program. A major allegation was that the design of the program was not capable of covering the full cost of care. It created a significant gap in coverage which would be known to the employees only after they had paid premiums for years for drawing negligible benefits. Private long-term care plans already on the market pay significantly higher benefits. An actuarial review released by Health and Human Services recently has confirmed those fears. The Administration could not design a long-term care program that supported the health reform law which requires that CLASS beneficiaries receive a minimum of $50 in benefits per day. It was perceived as actuarially unsound. True, $50 per day benefit scantly covers the cost of nursing home care. In short, the promise of CLASS Act turned out to be inferior to what is available in the market today.
Implications
Numerous indications in the past have cast a shadow over the success of the program. In budget negotiations too, there was no proposal for funding towards implementation of the Act. With dropping of the Act, there is going to be major implications for the health reform law, particularly the reduction in projected budgetary savings by a minimum of $ 86 billion. The impact though marginal, is likely to be felt throughout including medical transcription services.
Although dropping of the CLASS Act was foreseen, there are going to be questions like why the provision was included in the health reform law particularly when there was a doubt about ability of the program to generate revenue. Media has reported Sherry Glied, HHS’ Assistant Secretary for Planning and Evaluation saying that the Administration had noticed the thin actuarial basis only after the law was passed!
