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A Class Act


By Stan Hinden | December 2009

Stan Hinden
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Stan Hinden

You have to love those Washington acronyms! In this instance, CLASS Act stands for the "Community Living Assistance Services and Supports Act," which would establish a new federal insurance program for people with disabilities.

The proposed CLASS Act is part of the landmark health care reform legislation passed by the House and now pending in the Senate. Thus, at this writing, the fate of the CLASS Act is uncertain.

But whatever happens, the bill's drafters were clever to name the legislation in a way that created the acronym "CLASS Act." It is a catchy phrase that's easy to remember and fits easily into newspaper headlines.

As such, it helped the late Sen. Edward M. Kennedy (D-Mass.), the bill's original sponsor, to bring national attention to the needs of people with disabilities caused by aging or accident.

As a journalist, retiree and senior citizen who himself may need long-term assistance one of these days, I am sensitive to the financial and medical difficulties which face seniors when their health deteriorates.

What I like most about the CLASS Act is that it would give millions of Americans the opportunity to regularly set aside money for their future long-term care needs. The savings could enable individuals who develop chronic or disabling conditions to stay in their own homes instead of going to nursing homes or similar facilities.

During their working years, persons enrolled in the program would build up savings by payroll deduction that could be used for a variety of non-medical services. These include: home care aides, homemaker services, respite care, nursing support, home modifications, transportation and assistive technology.

Meanwhile, the debate over the CLASS Act legislation has put a badly-needed spotlight on the dreadful state of long-term care in this country. From where I sit, here's what I see:

  • The Act essentially recognizes that the Graying of America is a demographic event that will dominate health care in this country for the next two decades and beyond. As 78 million boomers live into their eighties and nineties, more and more of them will need long-term care services at home or in nursing and assisted living facilities.
  • It seems unlikely that most boomers will be able to afford those facilities. A private room in a nursing home costs $219 a day or $79,935 a year, according to a 2009 survey by the MetLife Mature Market Institute1. Assisted living facilities cost $37,572 a year. Home care is priced at $21 an hour.
  • While the financial bite can be reduced if you have long-term care insurance, relatively few people have those policies. "People who shop for, but do not buy long-term care insurance cite cost as the most important reason for their decision," according to a recent report by Avalere Health, LLC, and the Kaiser Family Foundation2.
  • The Avalere/Kaiser study reported on the cost of long-term care policies, which rise with the age of the purchaser. In 2008, for a 60-year-old individual, the annual premium averaged $2,329, while it was $3,096 for a couple of the same age. At 70, the individual's cost was $4,515 while it was $6,010 for a couple. The prices cited were based on typical policies offered by three major carriers, the report said.
  • For many people who are ill or need help with their daily activities, the last resort often is Medicaid, the state-federal program which provides comprehensive long-term care services. But to get Medicaid, you have to either be poor or impoverish yourself by "spending-down" almost all your assets.
  • So, either way, whether you try to pay for home care and nursing home costs out of pocket or whether you go the Medicaid route to obtain long term care for yourself or a loved one, you can be wiped out financially.
  • The CLASS Act would help end this financial/medical nightmare by creating a way for enrollees in this voluntary saving program to get financial help for in-home, non-medical expenses when they develop disabilities. To obtain benefits, you'd have to be enrolled for at least five years.
  • People who enroll in the CLASS Act program would pay a monthly premium and receive a daily benefit. Those figures would be set by the Secretary of Health and Human Services (HHS). The legislation instructs the Secretary to set the premiums at a level that will ensure the program is solvent for 75 years.3

The House and Senate versions, while similar, differ in this respect: The House would permit both workers and their nonworking spouses to enroll; the Senate version would not include nonworking spouses.4

The Congressional Budget Office estimated that, under the House bill, the premium in 2011, would average about $146 a month but, under the Senate bill, would average only $123 a month.5

Both bills call for a benefit of at least $50 a day.

  • In a recent analysis of the CLASS Act bills, Douglas W. Elmendorf, director of the Congressional Budget Office (CBO), estimated that the House version would reduce the budget deficit by about $102 billion during the years from 2010 to 2019, while the Senate version would reduce the deficit by $72 billion. Both versions, he noted, would show net outlays in subsequent years.6

The initial reductions, he said, would take place because enrollment would begin in 2011 but benefit payments would not begin until 2016, allowing a five-year buildup in the program's trust funds.

  • What would happen after 2019 has been the subject of some controversy. The American Council of Life Insurers (ACLI) opposes the measure, saying that the program would eventually contribute to the nation's deficit. The ACLI also stated: "The CLASS Act is intended to help people pay for the cost of receiving long-term care services at home. While well-intended, the program amounts to little more than an unfunded and financially unsound entitlement program."7

On the other hand, the CLASS Act is supported by the National Council on Aging and other senior groups. NCOA President James Firman called long-term care "the primary unmet health need for seniors."8

  • Meanwhile, about 25 states have now taken steps to participate in the State Long-Term Care Partnership Program, authorized by Congress in 2005. Essentially, this program allows states to say to individuals: "If you buy a long-term care policy, we will not force you to spend all of your assets to get help from Medicaid. If, for example, your policy pays a total of $150,000, we will let you keep $150,000 of your assets and you will still qualify for Medicaid coverage." Thus, the state Medicaid partnership could be quite helpful to people who can afford to buy long-term care insurance.9

But the health needs of our aging nation will not be resolved until Washington finds a way to make long-term care services affordable and attractive to everyone. The CLASS Act would be a significant step in the right direction.




  1. 2009 SURVEY MET LIFE MATURE MARKET INSTITUTE OF NURSING HOME AND LONG TERM COSTS: http://www.metlife.com/assets/cao/mmi/publications/mmi-pressroom/mmi-market-survey-nursing-home-pr-final.pdf
  2. "CLOSING THE LONG-TERM CARE FUNDING GAP: THE CHALLENGE OF PRIVATE LONG-TERM CARE INSURANCE." BY AVALERE HEALTH, LLC AND THE KAISER FAMILY FOUNDATION JUNE 2009.
    www.kff.org Report #7879.
    http://www.kff.org/insurance/upload/Closing-the-Long-Term-Care-Funding-Gap-The-Challenge-of-Private-Long-Term-Care-Insurance-Report.pdf
  3. Senate bill. page 1972.
    http://democrats.senate.gov/reform/patient-protection-affordable-care-act.pdf
  4. Congressional Budget Office (CBO). Director's Blog. Long-Term Care Insurance. Nov. 19, 2009.
    http://cboblog.cbo.gov/?p=425
  5. Congressional Budget Office (CBO). Director's Blog. Long-Term Care Insurance. Nov. 19, 2009.
    http://cboblog.cbo.gov/?p=425
  6. Congressional Budget Office (CBO). Director's Blog. Long-Term Care Insurance. Nov. 19, 2009.
    http://cboblog.cbo.gov/?p=425
  7. American Council of Life Insurers, ACLI news release, October 30. 2009.
    http://www.acli.com/ACLI/Newsroom/News+Releases/NR09-078.htm
  8. National Council on Aging and James Firman. NCOA news release, October 30, 2009.
    http://www.ncoa.org/content.cfm?sectionID=61&detail=2957
  9. Medicaid Partnership Program. Article: "LTC Insurance Partnership Program will allow policyholders to exceed Medicaid's asset limits."
    http://www.elderlawanswers.com/resources/article.asp?id=5717&Section=4&state=


Copyright 2009, Stan Hinden. All rights reserved. Reprint permission required.

The author was compensated for writing this article by AARP Financial.








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