• Gleckman on the CLASS provisions

    Howard Gleckman sums up the debate over the CLASS provisions in the ACA. Since I’ve covered that before, I’ll not review it here. Then Gleckman wraps up with,

    Congress could fix CLASS by following the lead of nearly every other developed country in the world and turning it into universal insurance. A mandated program could make basic long-term care coverage available to all for an average monthly premium of only about $40, according to private consultants Avalere Health. And it could cut Medicaid long-term care costs in half, by about $50 billion. However, in today’s anti-government political environment, such a step is, shall we say, unlikely.

    It may also be possible to repair CLASS through a series of technical changes, all designed to reduce premiums and make the product more attractive to healthy buyers. This morning, I participated in a panel at the Urban Institute that addressed those options.  A podcast of  the event is available here.

    As you consider what to do about CLASS, keep the context in mind. Medicaid now pays more than $110 billion annually for the long-term care of both the elderly and disabled.  It funds nearly half of all these services, and spends fully one-third of its entire budget on such care. By contrast, private long-term care insurance pays for less than 10 percent. And before they become eligible for Medicaid, millions of Americans go broke paying for these services out of pocket.

    Even as nearly all Republicans and some Democrats in Congress try to kill CLASS, some of these same lawmakers also favor capping Medicaid’s federal contribution, which now covers about 60 percent of the program’s costs. This will inevitably result in fewer Medicaid dollars for long-term care. They are also proposing to freeze or cut a wide range of non-Medicaid benefits, such as Meals on Wheels, transportation, subsidized housing, and the like. The result: an already tattered support system for the frail elderly and disabled (especially those trying to remain at home) will become even more frayed.

    That brings us back to CLASS. As poorly designed as it is, the program is an insurance-based alternative to means-tested direct spending programs that will be under growing stress in coming years.

    Medical technology is making it possible to live with disabilities for a very long time. Americans are not financially prepared to support themselves through years of care. Few save or have any interest in buying private insurance.

    For those who want to kill CLASS, I have a simple question:If government assistance is not the answer, and CLASS insurance is not the answer, what is?

    Remind me, again, in light of the alternatives, what is so horrible about mandating a degree of personal responsibility? (Read Gleckman’s piece in full. If you’ve made this far, you’ve already read half of it. Go catch the rest.)

    • The problem with CLASS is not just poor design that leads to it being unsustainable. The bigger problem is that the CLASS trust fund is being raided to pay for health reform, so that when it comes time to pay the benefits there isn’t any money, there’s just an IOU. Gleckman’s mentions this but doesn’t address the problem.

      But to your question: I don’t think it is horrible to mandate some personal responsibility, but I look at our government’s track record on entitlements and do not have much faith that they can run this in a sustainable way. I think it is likely that a universal LTC program would end up like SS and Medicare, an unfunded burden on the taxpayers (the fact that they don’t even keep the premiums in the trust fund only strengthens this belief). I’d like to fix our current unfunded entitlements before creating a new one.

      • @AB – But it’s done. Entitlements we now have. I’m moving on to how to make them work better, cost less, and deliver higher quality. I took Gleckman’s post in that spirit. I find it a healthy outlook. (Seriously, it is good for my mental health!)

      • It doesn’t have to be done. If a bad piece of legislation gets passed I don’t think we should just throw up our hands and say “It’s done, we’ll have to figure out how to make it work.” We should get rid of the bad legislation! Why stick with bad programs and try to tweak them? Why not design a better program? Can we come up with a sustainable way for the government to fund long term care? Let’s find out. Get the right people on the problem and have them figure something out. But everyone agrees that the CLASS Act doesn’t work, so get rid of it and start over.

        The shameful part of it is that all of this was known a long time ago. The Academy of Actuaries and CMS head Richard Foster said all of these things long before PPACA passed, and were either ignored or dismissed, because the Democrats wanted that $70B in phantom “revenue”. Rewarding that type of political cynicism only ensures that we’ll continue to get it.

        • @AB – Politics. In large part it is done. I’m not throwing up my hands. I agree, tweaks can happen. Maybe on CLASS wholesale repeal can happen. But on the whole ACA? No. (Tiny, slim chance of SCOTUS killing it, but that’s not what I’m talking about.)

          Thus, entitlements we have. Let’s make them better. With me? If so, then I’ll disregard your, “I’d like to fix our current unfunded entitlements before creating a new one.” We created several new ones. Not all of them are going away. In that sense, they are the current entitlements and we have to deal with them.

          • I see where you’re coming from and I agree that there’s basically no chance ACA is going away. I was talking about just CLASS, that I think we can get rid of and start anew (the lack of severability is maybe a problem there, but that’s out of my range of knowledge).

            I think I am more willing to reject the perceived political limitations and fight for radical change, which I admit is possibly naively optimistic.

    • Even if CLASS is self sustaining (premiums match outlays over time) it will reduce the deficit early on, and add to it later on, simply because under accounting rules we use when a security is redeemed later it is a transfer and not revenue. It is good to have a set of rules by which to account for things, but they don’t always give the full story. The real policy question is whether a self sustaining LTC pool can be set up? And what is the default in the absence of not trying.

    • ” And what is the default in the absence of not trying.”

      Not much. Medicaid is a target for the current Congress. If it gets cut, there wont be much left. That is part of what is so disappointing with where we are now. There is energy for repeal, but none for replace.


    • Mandating personal responsibility is like legislating honesty, both are behavioral patterns that derive from personality and/or internal characteristics that are very resistant to coercion.

      • @SteveSC – Who should pay for my grandmother’s nursing home care, our yours? I’d rather they both have LTC insurance and have paid the premiums — provided they were able to do so — then end up on Medicaid for which taxpayers pay. Should I solve this by not paying my taxes?

        • Good behavior is obviously important for society, and encouraging good behavior is a reasonable function of government. My point is that, while you may be able to encourage good behavior through incentives, etc., you cannot mandate internal states of mind (except fear, which is pretty reliably caused by use of force).

          In the specific instance of personal responsibility, someone who has personal responsibility will most likely pay for their grandmother’s care (although they might choose some alternative arrangement than a nursing home). Causation does not flow in the other direction–mandating the purchase of nursing home insurance, etc., does not create personal responsibility. It probably leads to the opposite if studies of crowd behavior can be believed, and the proportion of those who will do only what is required, not what is needed (the essence of personal responsibility) will rise.

          It is my opinion that this confusion leads to a lot of legislation that, while good intentioned, is actually counter productive unless there is an all-seeing administrator that can anticipate every need and create regulations that cover every possibility.

          • @SteveSC – The mandates we’re talking about are incentives. Never mind what people call them, the effect is a “tax” on noncompliance. I call that an incentive, termed a “mandate.” There really isn’t a difference. Even if the incentive was staying out of jail, it’s still an incentive.

            People like to get stuff and not pay for it. Isn’t that the story of our health care system, which, as it turns out, is the story of our government’s projected debt? Somebody will pay. Who? This is a question of distribution of costs and benefits.

    • Austin,

      I understand that you understand that ‘mandates’ are really ‘incentives’, but this is just one example of the sloppy language that permeates (perhaps intentionally?) government entitlements.

      You and I both know that very few people put in more Social Security taxes than they take out in benefits, but for years the language has been that it is a ‘retirement fund’ and that people’s ‘contributions’ have been ‘invested’ and the government owns ‘Social Security bonds’, etc. Many, many people believe that they have an account that has been filled with THEIR money, taken from their paychecks, and that when they get SS they are drawing from THEIR account. Can you blame them for wanting to get every penny they have been promised?

      Yes there are a lot of people who just want to get stuff for free, but there are a lot of other people who have been indoctrinated to believe that they have already paid for the benefits.

      Politicians clearly have incentives to over-promise and, as lawyers, are skilled at using slippery language, but I think it is incumbent on all the rest of us to resist using jargon that is easily misunderstood.