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Long-term care insurance plan at risk

By Ricardo Alonso-Zaldivar

Even as leading Democrats offered assurances to the contrary, government experts repeatedly warned that a new long-term care insurance plan could go belly up, saddling taxpayers with another underfunded benefit program, according to emails disclosed by congressional investigators.

Part of President Barack Obama’s health care law, the program is in limbo as a congressional debt panel searches for budget savings and behind the scenes, administration officials scramble to find a viable financing formula.

A longstanding priority of the late Sen. Edward M. Kennedy, D-Mass., the Community Living Assistance Services and Supports program, or CLASS, was spliced into the health care law despite nagging budget worries. Administration emails and documents reveal that alarms were sounded earlier and more widely than previously thought. Congressional Republicans seeking repeal of the program provided the materials to The Associated Press.

“Seems like a recipe for disaster to me,” William Marton, a senior aging policy official in the administration, wrote in an October 2009 email. Marton explained his concern that large numbers of healthy people would not willingly sign up for CLASS, creating a predicament in which soaring premiums for a smaller group of frail beneficiaries would destabilize the program.

That central design flaw has dogged CLASS from the drawing board, and it may turn out to be insurmountable without making the program mandatory for most workers. CLASS remains vulnerable to repeal.

“There has been no decision made,” Health and Human Services spokesman Richard Sorian said. “We are continuing our analysis. But it’s an open question. The question is whether we can develop a program that is fiscally solvent and self-sustaining into the future.”

CLASS was intended as voluntary long-term care insurance plan, supported by premiums, not taxpayer dollars. Workers would pay an affordable sum of around $100 a month or less. In exchange, they would receive a modest daily cash benefit averaging no less than $50 if they become disabled later in life. Beneficiaries could use the money for services to help them stay at home, or to help with nursing home bills. The Health and Human Services Department (HHS)is supposed to set the final premiums and benefit levels in the coming months.

But the program is on a collision course with powerful demographic and economic forces. How to pay the exorbitant cost of long-term care remains a major unmet need for an aging society. On the other hand, many economic experts believe the government has already promised seniors more than it can deliver, and now is not the time to launch another program likely to need a taxpayer bailout or new mandates.
 Obama’s own bipartisan debt commission last year recommended major reforms or repeal of CLASS, as did another independent advisory group. Nursing homes and long-term care providers support the program, while private long-term care insurance companies oppose it.

CLASS poses a dilemma for the new congressional supercommittee, since it initially reduces the federal deficit until payouts overwhelm premiums collected.

The emails show that the first warning about CLASS came in May 2009, from Richard Foster, head of long range economic forecasts for Medicare. “At first glance this proposal doesn’t look workable,” Foster wrote in an email to other HHS officials, some of whom were working with Congress to get CLASS into the health care law.

Foster said a rough outline of the program would have to enroll more than 230 million people — more than the U.S. workforce — to be financially feasible.

But work on CLASS continued, bolstered by a report for AARP that laid out scenarios for implementing the plan. The AARP study also raised financial concerns, although it supports CLASS.

In July, Foster tried again. After reviewing the latest information from Kennedy’s office, he wrote HHS officials: “Thirty-six years of (professional) experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue.”

Too late. The Obama administration had decided to support CLASS. Documents and emails indicate that Foster was edged out of deliberations. Officials relied on a more favorable analysis from the Congressional Budget Office. In November, Foster went public with his concerns. Congress was well aware, the administration says.

By that time, Marton, the HHS aging policy official, was also raising questions internally. Emails he sent other administration officials relayed studies that raised concerns about such issues as premiums and the role of employers, while also recommending fixes.

Publicly, the administration maintained it would all work out. A December 2009 presentation for senior officials stressed the end result would be a financially robust program.

In private, administration insiders were still spelling out concerns. In January 2010, amid the final drive to pass the health care law through a divided Congress, officials circulated a 10-page list of “technical corrections.” One item questioned whether the law gave HHS sufficient authority to redesign the program to keep it afloat, and recommended a “failsafe” clause spelling that out.

Republicans say none of those changes were ever made. However, HHS spokesman Sorian said Secretary Kathleen Sebelius will not go forward with the program unless it is financially sustainable, and the law explicitly gives her that power.

GOP lawmakers aren’t reassured. — AP

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