Kennedy LTCi Entitlement Program Gaining Traction

July 9, 2009

In all the talk of health care reform, a significant proposal is growing behind the scenes: a national long-term care insurance plan, a new entitlement program.

It is the Community Living Assistance Services and Supports (CLASS) Act, a perennial proposal from Sen. Edward Kennedy (D-Mass.) that has some traction this year. The bill aims to provide long-term care (LTC) to 10 million functionally disabled people, a number he projects to hit 15 million by 2020.

In introducing the bill, Kennedy said the only program that supports this population is Medicaid, which requires losing everything to qualify.

“Too often, they have to give up the American Dream – the dignity of a job, a home, and a family,” said Kennedy, the chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee.

Medicaid already spends $44 billion annually on LTC, Kennedy said.

The bill itself discusses private long-term care insurance (LTCi) but perpetuates a long-standing perception: “Most private-sector disability or long-term care insurance plans are constrained in the insurance protection they can offer at an affordable price.”

Taxpayers over 18 years old would be enrolled automatically and finance the National Independence Fund with payroll deductions, but they can opt out. Non-working spouses can enroll and pay into the program independently.

State disability determination centers would determine eligibility and would be limited to: People who are unable to perform two or more activities of daily living, such as eating, bathing and dressing or have an equivalent cognitive disability that requires supervision or hands-on assistance to perform those activities such as traumatic brain injury, Alzheimer’s disease, multiple sclerosis and mental retardation. People would have to pay into the program at least five years to become eligible.

It would provide a benefit of at least $50 a day for life, with the average premium expected to be $65 per month, but the health secretary would set the premium, according to Kennedy. The fund would grow in the first five years during the vesting period before anyone could withdraw money. But the Congressional Budget Office reportedly said that even with that, the program would be in deficit within 10 years. The CBO also said the premium would be closer to $100 a month.

Although the bill’s introduction said private LTCi is expensive, it also said the national plan would work with private coverage.

“The ‘Class’ program benefit does not replace the need for basic health insurance --- it provides a mechanism to pay for those non-medical expenses that allow a disabled person to remain independent,” according to the bill. “The ‘Class’ program benefit can be an addition to long-term care insurance. It provides a consistent, basic cash benefit to glove with the insurance products that provide more intense medical services over a shorter period of time.”

Although the bill does not explain how the two could co-exist, Howard Gleckman, senior research associate at The Urban Institute, said the program’s $50 daily payout undoubtedly would need supplementing.

“(A) key issue is whether private insurers would be willing to sell long-term care coverage to supplement CLASS Act government policies, and what they would charge for those extra benefits,” Gleckman wrote. “For now, many of the big carriers say privately they don’t want anything to do with such a structure. But private insurance sales have been in the dumps for years, and I’d bet many carriers would see add-on coverage as a big potential market, much like Medigap, or Medicare Supplement, health insurance.”

The Obama administration has supported the proposal. In fact, Obama as senator had co-sponsored the bill in a previous session. But Sen. Max Baucus, D-Mont., chairman of the Finance Committee, has been reluctant to include the proposal in the overall health reform plan.

SOURCE: InsuranceNewsNet, Inc.