CLASS Act Could Change the Way Seniors Pay for Long Term-Care

In early December, the CLASS, or Community Living Assistance Services and Supports Act, survived a vote aimed at removing it from the Senate health reform bill. Both the House and Senate bills contain a version of the act. Although the CLASS Act is buried deep in both bills and has garnered little media attention, its potential impact is significant, making real changes to the way seniors may pay for long-term care.

The CLASS Act would, for the first time, create a federally run long-term care insurance program. Funds for the program would be provided by premiums deducted from workers’ paychecks. After paying premiums for five years, qualified individuals would be entitled to a modest daily benefit of between $50 and $75. In order to qualify for the benefit, individuals would have to require assistance with two aspects of daily living, such as bathing or dressing.

Proponents of the measure see several advantages for seniors, adults with disabilities, and their families. The first of these is that the benefit paid by the program could be used at the discretion of the beneficiary. This stands in contrast to Medicaid, which must be used for nursing home care. Individuals receiving a benefit from the proposed plan could use it to pay for in-home care or to outfit a home for accessibility, thus allowing more people to stay in their homes. The cash benefit would provide more flexibility for families who do not wish to place loved ones into nursing homes.

Currently, very few Americans have long-term care insurance. As a result, Medicaid pays for about 40% of all care for seniors and individuals with disabilities. As these costs increase, the burden on states, the federal government, and families continues to grow. The price of nursing home care varies by location, with the national average hovering around $90,000 per year and some areas seeing costs of up to $200,000 per year. Medicaid also requires that individuals “spend down” their assets in order to qualify. According to supporters of the act, keeping more people out of Medicaid and in their homes would lessen the burden on families and taxpayers.

Some skeptics are concerned about the new program’s long-term solvency and potentially low enrollment. Supporters agree that whatever the final manifestation of the plan, it must pay for itself. In order to address concerns about cost and participation, some critics have offered suggestions such as requiring employers to offer payroll withholding, giving tax benefits for premium payments, and imposing a penalty for delayed enrollment, similar to that in Medicare Part D.

Although the CLASS Act remains in each of the health reform bills, its passage and the shape it will ultimately take still remain in question. However, the act deserves attention. If it does ultimately become law, it has the potential to make serious changes in the way individuals and the country as a whole pay for and provide long-term care.