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The bipartisan deficit reduction plan proposed by the so-called “Gang of Six” senators includes very few specifics. Oddly, one would repeal the Community Living Assistance Services and Supports (CLASS) Act. CLASS, a national, voluntary long-term care insurance program, was included as part of the 2010 health reform. Despite its obscurity, it is the only provision of that sprawling law the Gang would kill.
The Gang’s budget plan, which President Obama called a “very significant step,” also proposed large but unspecified cuts in Medicaid as well as other unidentified reductions in non-Medicaid social service programs—some of which also benefit the frail elderly and younger people with disabilities.
This combination of cuts and repeal of CLASS threatens to put millions of families in financial and physical jeopardy. Today, more than 40 percent of all long-term care is funded by Medicaid, the joint federal/state health program that is itself under tremendous financial stress. Only about 7 million Americans own long-term care insurance, which is both costly and often unavailable to those with pre-existing medical conditions.
While CLASS is deeply flawed and needs to be reformed, it is an opportunity to transform long-term care from the means-tested Medicaid program to an insurance-based system. Since so few consumers are interested in buying existing private coverage, this could be designed as government-run insurance, or as private insurance sold under a government rubric, much like Medigap insurance or Medicare Part D drug coverage.
Yet repealing CLASS would destroy that opportunity, and millions of Americans will no no choice but to turn to a shrinking Medicaid benefit in frail old age or in other times of disability. Currently more than 10 million Americans require long-term care services, either at home or in a nursing facility. By mid-century, twice as many will require this assistance.
The ultimate fate of the Gang’s broader bipartisan budget proposal is unknown. It would reduce the federal deficit by about $3.6 trillion over 10 years and is seen by some, including Obama, as a way to break the debt limit impasse that has divided Washington for months.
CLASS has been a target of both Republican and Democratic deficit hawks since it was enacted, largely because they feared it would fail as an insurance program and eventually have to be bailed out by taxpayers. They also objected to budget accounting rules that made it seem as if CLASS was generating about $78 billion in new revenues that would be available to pay for health reform.
For months, the Obama Administration has been struggling to design a CLASS insurance policy that would attract enough consumers to make the program self-sustaining. However, design problems left many insurance experts skeptical that premiums would ever be affordable enough for broad participation.
While advocacy groups want CLASS repeal dropped from the budget bill, I suspect their concerns will fall on deaf ears. CLASS is a tiny piece of a huge fiscal package and I see no one on Capitol Hill willing to defend it aggressively. With Obama and Congress looking for a way out of fiscal gridlock, CLASS will likely be lost in the noise of the bigger budget debate.
If so, CLASS will be remembered as a sadly missed opportunity, and those of us who worry about how the nation will fund long-term care will find ourselves back at square one. I believe that significant deficit reduction is absolutely necessary. But my question for the Gang of Six is simple: If you want to both cut Medicaid and scrap the only plan out there for a broad-based insurance system, where will millions of families turn to finance their long-term care needs?
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