The CLASS Program

By Kathleen Sebelius, Secretary of Health and Human Services
Posted October 14, 2011

At some point in our lives, seven out of ten Americans will need daily help because of a disability.  It could be nursing home care in the final months of our lives.  Or it could be a home health aide who comes by a few hours a week to help with daily tasks, giving us the freedom to live and work in our community for years.

As time goes by, even more of us will require these kinds of long-term services and supports in order to live our lives as we wish to live them.  But under the status quo, many of us will struggle to pay for this care – if we can afford it at all.

Many Americans assume that Medicare will pick up the bill for their long-term care, but it only pays for brief nursing home stays.  Medicaid offers broader coverage, but many families aren’t eligible until their savings are virtually exhausted. Meanwhile, the private market covers less than three percent of Americans.  And at $75,000 a year for a nursing home and $18,000 a year for home health care, most families cannot afford to pay out of pocket.

It was with the hope of giving Americans better choices that Congress included a voluntary long-term care insurance program called CLASS in last year’s health care law.  The idea behind CLASS, which was championed by the late Senator Edward M. Kennedy, is simple: workers could sign up and pay a monthly premium, and in return, they would be eligible after a number of years for a daily benefit administered by our department that could help pay for long-term care services should they become necessary.

CLASS would not only give Americans who knew they were likely to require long-term services and supports an affordable way to prepare for the future.  It would also give young and middle-aged Americans a way to insure against the possibility that they would someday require this kind of care themselves.  Because all benefits would be paid out of premiums, it wouldn’t cost taxpayers a dime.  And CLASS would provide relief for state and federal budgets, which currently attempt to bridge the long-term care coverage gap with scarce Medicaid dollars.

While some analysts predicted that the CLASS program’s finances would be sustainable, others including the actuary for Medicare and Medicaid issued warnings to Congress and the public before the law was enacted that not enough young, healthy people would sign up.  This could have led to a vicious cycle where premiums would have to be set higher and higher to cover the likely costs of benefits, leading fewer and fewer healthier people to sign up for the program.  For this reason, the law required me to develop a benefit plan that, in addition to meeting other statutory requirements, would also be solvent for at least 75 years.

Since then, our department has worked steadily to find a financially sustainable model for CLASS.  Over the last 19 months, we’ve examined the long-term care market, modeled possible plan designs, and studied the CLASS statute, consulting at every step of the way with outside actuaries, insurers, and consumer groups.

When it became clear that most basic benefit plans wouldn’t work, we looked at other possibilities.  Recognizing the enormous need in this country for better long-term care insurance options, we cast as wide a net as possible in searching for a model that could succeed.  But as a report our department is releasing today shows, we have not identified a way to make CLASS work at this time. 

This doesn’t affect the rest of the health care law, which will continue to provide affordable quality health insurance choices to millions of Americans and reduce the deficit.  And it doesn’t mean that we’re giving up our efforts to improve Americans’ long-term care choices.  In fact, one of the main reasons we decided not to go ahead with CLASS at this point is that we know no one would be hurt more if CLASS started and failed than the people who had paid into it and were counting on it the most.  We can’t let that happen.

So even as we suspend work on implementing CLASS, we are recommitting ourselves to the ultimate goal of making sure Americans can get the long-term care they need, whether it’s a working-age mom with disabilities who needs daily support right now or a young man at his first job who wants to protect himself and his family against the possibility of huge long-term care costs in the future. 

By 2020, we know that an estimated 15 million Americans will need some kind of long-term care.  If we want our family members, friends, and neighbors to be able to live with the maximum amount of freedom and independence, we need to make sure they have access to the long-term supports that make that possible.  We will continue to work with the Congress, consumer advocates, health care providers, insurers and other stakeholders to ensure that all Americans have access to long-term care choices that best meet their needs.

The CLASS report to Congress is available here: http://aspe.hhs.gov/daltcp/reports/2011/class/index.shtml
The report was sent to Congress with a cover letter from Secretary Sebelius, which is available at www.hhs.gov/secretary.

This blog originally appeared on the Huffington Post.