Planned National Long-Term Care Insurance Program in Critical Condition

The Obama administration may be on the brink of scuttling a new national long-term care insurance program that was part of the health reform law.

The Community Living Assistance Services and Supports (CLASS) Act, Sen. Edward M. Kennedy's final legislative legacy,would create a modest, voluntary insurance program aimed at helping to keep people with disabilities and the elderly out of nursing homes and off the Medicaid rolls.

The CLASS program is to be designed by October 2012, but it has drawn intense fire from Republicans and some Democrats who charge it is financially unsustainable. The program's critics contend that because it is voluntary, only those with expensive health problems, especially people with serious disabilities, will sign up for it. Americans who wish to be in the program would pay a monthly premium for five years, after which they would be vested and eligible to receive benefits averaging between $50 and $75 a day to pay for a range of long-term care services that would help them stay in their homes, or the money could be used to defray the cost of nursing home care.

But if too few younger, healthier workers participate, the resulting "adverse selection" will mean that the benefits will be too meager or the premiums too high for the program to work.

Health and Human Services (HHS) Secretary Kathleen Sebelius has conceded that the CLASS program as outlined by Congress was flawed, but she has said that it could be fixed through regulations, and that if it couldn't, HHS would not continue to roll it out.

The latter seems to be what's now happening. According to Urban Institute fellow Howard Gleckman writing in Forbes, the CLASS program's chief actuary and his staff "finished their actuarial analysis some weeks ago and sources say it concluded it would be difficult -- though not impossible -- to create successful CLASS policies given the limits of the law."

Last week it was revealed that the Department of Health & Human Services had laid off the actuary, Bob Yee, and reassigned most of his staff. Earlier, the Senate Appropriations Committee, at HHS's request, deleted all of the $120 million that had been planned next fiscal year to implement the benefit.

HHS has acknowledged CLASS is being delayed, and says it is an open question whether the program will be implemented.

Comments Gleckman, "In Washington-speak, this is akin to a surgeon telling his patient's family that 'things didn't go as well as we'd hoped.' "

"After reviewing the actuarial work done by Yee and his staff, [HHS Secretary Sebelius] seems to have concluded it would flop," Gleckman writes. "And now she may be scuttling the program."

On September 15, The Hill reported that the CLASS Act's Democratic supporters in Congress are scrambling to stop the Obama administration from pulling the plug on it.

UPDATE: HHS will "issue a report along with recommendations about how to proceed" with the program by mid-October, according to Assistant Secretary of Aging Kathy Greenlee, as reported by The Hill. The report will include the results of the actuarial analysis of the CLASS Act.