ISSUE
The U.S. lacks a healthy, ethical and affordable system of financing long-term services and supports. The Community Living Assistance Services and Supports (CLASS) Act program creates a consumer-financed, premium-based, voluntary insurance plan to help people finance whatever long-term services and supports they come to need.
Ten million Americans today need long-term services and supports, including 4 million under age 65. As the baby boomers age into retirement, these numbers will more than double.
CLASS Act Signed into Law
After decades of debating how the nation might better address appropriate financing for these critical services and after more than 5 years of legislative development, debate, and hearings, the CLASS Act was signed into law in 2010 as part of the Affordable Care Act (ACA). It received bipartisan support during its development by House and Senate committees and was endorsed by over 270 consumer, provider, and faith-based organizations from AARP and the Alzheimer’s Association to Easter Seals and the Paralyzed Veterans of America.
Without the CLASS Act, Medicaid would remain the nation’s default insurance plan for long-term services and supports. Medicaid is an open-ended, taxpayer-funded entitlement program that already is straining federal and state budgets. This system fails to provide realistic opportunities for personal planning, requires people to spend down into poverty before receiving the help they need, fails to support family caregivers adequately, and is fiscally unsustainable, given the baby boomers’ coming explosive needs.
While private long-term care insurance policies and tax incentives for their purchase have been available for approximately thirty years, fewer than 10% of seniors have this coverage. Even fewer people under age 65 have long-term care insurance policies.
This kind of coverage will continue to be an important source of financing for long-term services and supports. However, even if the rate of long-term care insurance policy purchases accelerates beyond current projections, private insurance will not provide enough of an alternative to Medicaid funding of long-term services and supports in the coming decades.
The CLASS Act promotes personal responsibility, puts choice in the hands of consumers, saves Medicaid money, and doesn’t rely on taxpayer funds.
- Its cash benefit approach allows consumers to choose the type of help they want.
- It saves Medicaid money, according to the Congressional Budget Office.
- It is not a government entitlement program and stands on its own financial feet. The ACA prohibits the use of taxpayer funds to pay for benefits under the CLASS Act.
- The law gives the Secretary of Health and Human services authority to set premiums and benefits at levels that will keep the program solvent over a 75-year period based on actuarial analysis.
- Numerous mechanisms were put in place to ensure the integrity of the program.
The CLASS Act also is important to employers, including small businesses. MetLife estimated the cost of lost productivity for employees who must take time off for family caregiving to be $17 billion annually. In a John Hancock survey, 50% of small business employers reported a negative impact on business because employees had to deal with long-term care issues and 60% believe their employees are concerned about the ability to afford long-term care.
The CLASS Act can help these employed family caregivers hire needed help for those for whom they are responsible, easing stress and reducing the caregivers' own health problems, reducing the cost of their employer-sponsored health care.
Plan design, communication and public education now are critical to encourage working people of all ages to sign up for the program. This process is ongoing at the Administration on Aging.
Solutions
To establish a healthy, ethical and affordable system of financing long-term services and supports, LeadingAge urges Congress to:
- Allow implementation of the CLASS Act program to continue moving forward.
- Allow the U.S. Department of Health and Human Services (HHS) to use funds already available to educate the public on long-term services and supports risks, costs and coverage and on the CLASS Act's provisions for individuals to plan for these costs.