The demise of the CLASS (Community Living Assistance Services and Support) Act is the calamitous result of ideological warfare and political cowardice. It would have provided a modest benefit – a basic guaranteed lifetime benefit of at least $50 a day in the event of illness or disability to be used for medical or related nonmedical needs, such as making a house wheelchair-accessible or hiring a home caregiver to assist with basic tasks. The aging of the population does not have to be a financial disaster, but it does pose real challenges, including the need to finally address long-term care.
Just as the baby boomers are entering retirement, the first real step toward a national long-term care policy in 45 years has been cast asunder. The Obama administration announced last month that it was suspending implementation of the CLASS Act as part of health reform, and legislation to repeal the act is working its way through Congress. No act of Congress, administration backpedaling, or outcry from the punditocracy will change the facts that the ranks of the elderly will double by the middle of this century and the “oldest-old” (85-plus) are the fastest growing segment of the elderly population.
The CLASS Act, which was under attack from all sides, would have been no panacea to the impending long-term care crisis, but it would have been a reasonable first step. However, it was handicapped from the start by being thrust into the straightjacket of documenting financial viability over 75 years without receiving a dime of taxpayer funds. Some people also raised objections that it would not adequately deal with the long-term care needs of the elderly and disabled. That is true, but it was never meant to be a substitute for existing long-term care coverage through Medicaid or private long-term care insurance.
Republicans and their allies claimed it was a “Ponzi” scheme because, by collecting premiums over the first five years before benefits were dispensed, it disguised a “hidden” subsidy for the entire Affordable Care Act. Rather than being a Ponzi scheme, this is precisely what President Roosevelt did when Social Security was signed into law in 1935. Madoff ran a Ponzi scheme. Using that term in this context is nothing more than a politically charged, divisive scare tactic – like using “death panels” to describe the provision of palliative care.
While not a complete solution, the CLASS Act would most likely have eased the burden of tens of thousands, if not millions, of disabled and their caregivers and helped many to age with dignity at home instead of spending their last years in an institution. Moreover, it would have been affordable. Both Germany and Japan offer comprehensive long-term care benefits to their populations. Despite this, spending on long-term care has not led to significant budget problems. In Germany, per capita spending on long-term care is actually lower than in the U.S.
Actuarially speaking, the administration may have thrown in the towel too soon. Secretary Sebelius’s CLASS administrator, Kathy Greenlee, claimed that not enough individuals would have signed up, making premiums too expensive and the program not financially viable. She concluded, “I do not see a path to move forward with CLASS at this time.” We believe that relying upon assumptions based on take-up rates in the private, voluntary long-term care insurance industry is too conservative. Based on our research, at least 10 million adults provide caregiving for their aging parents and another 40-to-50 million provide care to their spouses and other family members. Wouldn’t a substantial portion of these folks be likely to choose a benefit, backed by the federal government, that would clearly be in their interest?
And why not open up the benefit to family members who can contribute premiums on behalf of those who will need care, or make the benefit mandatory? Without CLASS, Medicaid and other taxpayer-funded sources will bear the brunt of long-term care expenses. Expanding the purchasing base of premiums for the CLASS program would help shore up its financing and at the same time reduce public spending.
Consider that 40 percent of long-term care users today are between the ages of 18 and 64, and 70 percent of people 65 and older will need long-term care services at some point in their lifetime. Take-up rates can also be compared to those who sign up for their 401k’s at their job, and nearly two-thirds of eligible workers participate in these plans. Would the CLASS Act have been as popular? Without a well-funded public education and outreach effort, funds for which were not included in the new law, probably not, but there is no reason to believe it could not work.
Even if the critics were partially correct that down the road, the program would need a higher level of funding, so what? The disappearance of the CLASS Act will not change the demographic reality of aging baby boomers or their needs for long-term care. Expensive institutional care for the elderly and disabled will likely grow and increase its share of our national health care dollars. We need a national long-term care policy. The shortsightedly abandoned CLASS Act was a reasonable first step.
Peter S. Arno is Professor and Director of the Center for Long Term Care Research and Policy, School of Health Sciences and Practice, at New York Medical College. Michael K. Gusmano is a research scholar at The Hastings Center, deputy director of the Center for Long Term Care Research and Policy, and an associate professor at New York Medical College. Deborah Viola is a research scholar at the Center for Long Term Care Research and Policy and an associate professor at New York Medical College.