UBP blog

11/06/2009

Will the CLASS Act make long-term care affordable or just make people believe it is?

The CLASS (short for Community Living Services and Support) Act, if passedwould create government-run long term care insurance available to anyone (even those who are already disabled). Currently, more than 10 million Americans need long-term care, and this number is only expected to go up as the Baby Boomer generation ages.

Here’s how the proposed plan would work.

Individuals would be automatically enrolled unless they opted out. While still actively working, they’d pay premiums in exchange for a cash benefit of at least $50 per-day in the event that they become disabled. Individuals could use this benefit to cover home care  and  adult day care services as well as assisted living and nursing home care services.

The goal of this program is to save Medicaid money and also to help seniors in need of nursing home care afford it. as The cost of nursing homes average $70,000 per-year and Medicaid only covers temporary stays.

But can we afford this?

The Congressional Budget Office estimates that the CLASS Act’s program would be fiscally solvent over a 75 year period. This is based on initial monthly premium rates of $123 (which would be adjusted for inflation as time goes on) and a $75 per-day benefit.  Individuals would need to have been paying premiums for 5 years before they could access this benefit. 

The program would begin taking premiums immediately but would not pay out any benefits until2016. Because of this, congressional budget analysts forecast that over the program’s first 10 years, it would actually reduce the Federal budget deficit on paper by $73 billion. This makes it especially attractive for lawmakers concerned with the cost of President Obama’s massive healthcare overhaul. However, with Congress voting  in 1965 to use Social Security tax revenues for purposes other than making payments to  eligible SS recipients, there are those who worry that CLASS ACT revenues may be similarly diverted. The frightening prospect of Social Security  “running out of money”  and not paying those who have been paying their taxes for years,  feeds similar fears about the Class Act program.   

And is it really a good idea for our seniors?

Or will it just confuse them? The American Council of Life Insurers says this program would do the latter.

A spokesperson for the group cited that most people already believe Medicare will cover their long-term care needs. Having a new long-term care insurance option would only add tothis false sense of security and possibly leave them financially unprepared for the real costs of care.

Supporters of the plan say that elders can use it as a base policy and buy up by adding private long-term care coverage. Just like people don’t want to live on Social Security alone, people don’t want to finance their long-term care needs with a government plan alone.

If this plan is passed, will employees no longer see the need to purchase a richer, private long-term care plan? Do they know the costs of home care, nursing home care, etc. in your city (especially in the Boston area where everything costs more than the national average)?

One thing HR professionals can consider is educating employees on the future cost of care that they’ll incur in the event that they become disabled as they age. That way they’ll know how much they’ll either need to set aside or buy in insurance.

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