Health reform's long-term care provisions won't be implemented

Kathleen Sebelius, the Secretary of Health and Human Services, has told Congressional leaders that the long-term care program established by the Patient Protection and Affordable Care Act (PPACA) will not be implemented.

The Community Living Assistance Services and Supports (CLASS) Program, was added by the PPACA as Public Health Service Act Title XXXII. The CLASS program was intended to be a national voluntary, consumer-funded insurance program. For tax purposes, the CLASS program was to be treated in the same way as a qualified long-term care insurance contract for qualified long-term care services.

A trust fund known as the CLASS Independence Fund, which was to be managed and invested by the Treasury Secretary as the Fund's Managing Trustee, would consist of CLASS program participants' monthly premiums to be invested on behalf of the CLASS program enrollees to pay the administrative expenses related to the Fund and for cash benefits to eligible beneficiaries.

Under the law, HHS was required to design a plan that would be actuarially sound and financially solvent for at least 75 years.

According to Sebelius, actuarial analysis presented to Congress "does not identify a benefit plan that I can certify as both actuarially sound for the next 75 years and consistent with the statutory requirements."

Daily benefit amounts. In the analysis, premiums for the basic $50 per day CLASS benefits were estimated to range from $235 to $391 per month. According to the analysis, "In the current private long-term care insurance market, most buyers choose products that provide a substantial daily benefit (e.g., $150/day to $200/day) for three to five years of coverage --daily benefit amounts that are significantly higher than the $50/day lifetime benefit. This could be an issue for marketing CLASS to a broad population as participants in focus groups specifically mentioned that they preferred a benefit that covered more of the total cost of long-term care. Moreover, premiums for products similar to the CLASS benefit, when they are sold to an underwritten population in the private market, would cost much less than the estimated premiums above. Thus, most discussion of this Basic CLASS Plan suggested that the assumed take-up rates used to compute premiums could not be achieved and were not plausible."

Reaction to the announcement. "While we appreciate that the Secretary has recognized the challenge of long term care has not gone away, we're disappointed that the Secretary has prematurely stated she does not see a path forward to properly implement CLASS. In fact, the CLASS actuarial report established that CLASS can still be designed to be a 'value proposition,' although development work still needs to be done. We urge the Administration to continue dialogue and development of a viable path forward," Joyce A. Rogers, Senior Vice President for Government Affairs at AARP wrote in a statement reacting to Sebelius's announcement.

"Medicare does not cover long-term care, and 70 percent of people age 65 and over will need long-term care services at some point in their lifetime. Families will continue to need a workable long-term care option to protect themselves, and CLASS was meant to help families plan and pay for their long-term care needs. A path forward is essential because the need for long term care will only continue to grow," Rogers stated.

Steve Schoonveld, the co-chairperson of the Joint American Academy of Actuaries and Society of Actuaries CLASS Act Task Force, said in a statement, "Our analysis of the CLASS Act legislation and our assessment of the program after the law was enacted both raised serious actuarial concerns about the program's design and benefit structure. An initial review of this report appears to validate our concerns that without considerable restructuring of the program, the CLASS program would have remained highly vulnerable to adverse selection and ultimately would have been unsustainable. While we are pleased that we were able to provide an actuarial perspective on the program, we recognize the critical need for Americans to have affordable long-term care financing solutions. As actuaries we will continue to work with policymakers to help provide consumers with robust financing options for long-term care services and supports."