CLASS Act The Angel We Don't Know Versus the Devil We Do

by Larry Minnix

Long-term care is something most families will have to deal with at some point. It’s potentially the biggest financial risk of family life, yet none of us wants to think that someday we may need help with the simplest activities – eating, bathing or moving around. After decades of debating how the United States might better address financing for these critical services and after more than five years of legislative development and hearings, the Community Living Assistance Services and Supports Act was signed into law just over a year ago as part of the landmark federal healthcare reform.

The CLASS Act creates a consumer-financed, premium-based, voluntary insurance plan to help people finance whatever long-term services and supports they come to need over time. It received bipartisan support during its development by House and Senate committees and was endorsed by nearly 300 consumer, provider and faith-based organizations around the country, from AARP and the Alzheimer’s Association to Easter Seals and the Paralyzed Veterans of America.

Now, let’s see. The CLASS Act was part of a historic effort to transform an overpriced and inefficient healthcare system. It had bipartisan support in both houses of Congress. And it was endorsed by some of this country’s most trusted and respected advocacy organizations. All of this sounds pretty good, right? Much like Mick Jagger and the rest of the guys, I thought we had it made in the shade.

So what happened next? I can tell you it was not what we expected at LeadingAge, the association I head – and it also was a surprise to the field of aging services in general. For starters, the National Commission on Fiscal Responsibility and Reform took aim at the CLASS Act almost before the ink was dry. Citing it as financially unsustainable, the commission recommended that it be reformed or repealed.

On top of that, we’re staring across the table at a new Congress intent on ending the program before it begins. This became all too clear to me when I had the opportunity to testify before the House Energy and Commerce Subcommittee on Health in March 2011. The subcommittee chair delivered opening remarks that set the stage for the hearing: “The Community Living Assistance Services and Supports program, a government-run long-term care insurance entitlement, was included in last year’s health reform law, seemingly as part of a budget gimmick to make Obamacare look less expensive than it really is. With the Congressional Budget Office estimating that the CLASS program will begin running a deficit by 2030, and the Centers for Medicare and Medicaid Services’ own actuaries estimating that the program will go into deficit in 2025….”

Those words tell us one thing: It’s a whole new ball game in D.C., folks. Rather than working with the U.S. Department of Health and Human Services and Secretary Kathleen Sebelius on how best to implement the program, we find ourselves fighting tooth and nail to save a program that has the potential to fundamentally change for the better how we care for this country’s older adults.

As far as I can tell, there are three main reasons behind this challenge. The first comes from the business sector. A few companies that sell private long-term care insurance view the CLASS Act as a threat to their business model. This is somewhat ironic considering that their current product offerings are shrinking, while at the same time there are growth opportunities in the private market for supplemental products similar in nature to the CLASS Act. Some of these companies lobbied heavily against the inclusion of the act in healthcare reform and found bipartisan support in states where major insurance carriers have their corporate headquarters.

The second reason is straight-out partisan politics. Every member of the Senate Committee on Health, Education, Labor and Pensions voted for the CLASS Act to be part of their version of the healthcare reform bill. Clearly, it embodies the values of choice, personal responsibility and fairness that both parties support – yet it became controversial simply because it happened to be part of healthcare reform legislation that was crafted by one party and not the other. Even current opposition is not about the merits of the program. According to off-the-record comments from some of my right-leaning friends on Capitol Hill, the CLASS Act is getting beat up because it was part of the Democrats’ healthcare reform plan.

The third reason is what I call dueling actuaries. For all of you bean-counter types out there (and I love you), you’ll appreciate this. CLASS is a new program, so there are several respectable actuarial studies that run the gamut of predictions about its success or failure. Everyone from the independent Congressional Budget Office to some actuaries affiliated with companies opposing the CLASS Act has shown how the program can be financially sustainable for the long term. Are there differences between one analysis and another? Sure, but these tend to reflect the use of different data, different assumptions and different details regarding benefit levels and triggers – as opposed to showing a fundamental flaw in the program. In fact, the law requires the CLASS Act to be actuarially sound for at least 75 years.

So what now? Ten million Americans today need long-term services and supports – including some 4 million under the age of 65. As the baby boomers age into retirement, these numbers will more than double. The CLASS Act represents our best chance to get out in front of this demand. It promotes personal responsibility, puts choice in the hands of consumers and doesn’t rely on taxpayer funds. Participation in the program is totally voluntary, and its cash-benefit approach puts money into the hands of consumers so they can choose the type of help they want.

We all have fire insurance for our homes and car insurance against accidents and fender benders. Most of us have health and life insurance, even burial insurance. And some of us have pet insurance in case Lucky isn’t so lucky. Insurance is an accepted way of hedging against risk. With CLASS, we will have the chance to insure ourselves against one of the biggest risks any of us will face: the need for substantial help to live, work and function in a place called home.

CLASS helps break Americans’ dependency on federal and state programs such as welfare and Medicaid. Often times, people need additional resources to cover the cost of long-term services and supports that could help them continue working – but if their incomes increase, they lose eligibility for Medicaid or other assistance. CLASS helps them avoid this Catch 22 by allowing them to purchase – with cash – just the services they need to stay independent. And if a person needed Medicaid and became eligible, CLASS benefits would go to repay the Medicaid program, with 95 percent going for institutional care or 50 percent for home and community-based services.

CLASS also is important to employers, including small businesses. In fact, a study by MetLife estimated the cost of lost productivity for employees who are forced to take time off for family caregiving to be $17 billion annually. Another recent study found that employees who are caring for an older relative are more likely to report health problems like depression, diabetes, hypertension or heart disease – costing employers who provide their workers health insurance an average additional healthcare cost of 8 percent each year, or $13.4 billion annually.

So we find ourselves at a tipping point. On one side, there are voices calling for the repeal of the CLASS Act – referring to it as a Ponzi scheme and saying it is so financially unsound that it will collapse under its own weight. On the other side, people like Secretary Sebelius and Assistant Secretary Kathy Greenlee at the Administration on Aging are working with staff to develop a model for CLASS premiums and benefits that will meet our country’s needs now and in the future.

Those of us passionate about the CLASS Act – with no conflicts of interest or products to sell – believe that our next great hurdle and responsibility is to educate the American public about a need that many already know they have. And we must educate political leaders that CLASS is a risk worth taking with little downside. By contrast, the risk of sticking with the status quo is predictable, unacceptable and catastrophic.

Many members of LeadingAge California played a critical role in helping get CLASS included in healthcare reform  – people like David Ferguson, the CEO at American Baptist Homes of the West in Pleasanton, Calif. David helped raise the money we needed to figure out whether this idea was even possible. Dozens of you provided sweat equity, serving as ambassadors for our Long-Term Care Solution initiative. You should be proud of how your efforts made such a difference in this important debate.

CLASS is the angel we don’t know; the current untenable system of long-term care is the devil we know all too well. Nonprofit providers of housing and services for elders nationwide have a calling to encourage our communities and our country to embrace positive change. I hope that all LeadingAge California members will join us in the continued fight to ensure that CLASS can help make care affordable for all Americans.

Larry Minnix is president of CEO of LeadingAge. Visit the LeadingAge website at www.leadingage.org.