The failure of the CLASS Act, a component of the 2010 health care reform law that was added as an amendment because of the late Sen. Edward Kennedy’s (D-Mass.) longtime passion to do something about long-term care, was predicted by some and denied by many.
But it should come as no shock to anybody closely following the issue. The numbers simply were not going to add up.
The Community Living Assistance Services and Supports Act was an effort to deal with what will become a huge societal problem — as we age and live much longer, more and more people will need some form of assisted living. Nursing homes or other expensive, long-term facilities will not be the answer for everybody who needs help; home care will increasingly become the vehicle. But that vehicle will be too costly or burdensome for most families.
So the CLASS Act was an effort to provide modest assistance to families — $50 a day — for home care for the elderly who will need it, through a long-term insurance plan administered by the Department of Health and Human Services. But that modest assistance adds up quickly when applied across a large number of people, and to pay for it in the long run meant premiums that were going to be too costly or at least unattractive for people now.
The CLASS Act as designed was going to bring in a lot of money in the next 10 years, as premiums flowed in but little went out, and be a net gain for the following 10 years, but then it would become a major drain on the Treasury. The inability to find any formula combining premiums that would attract enough able-bodied individuals now but still be able to pay for the program later doomed the CLASS Act.
Conservatives who said, “I told you so” and were right are cheering and jeering now. But at some point they, and everyone else, need to confront the larger societal problem. In fact, we will end up confronting a major part of it, like it or not, sooner rather than later. That is because long-term care is the single largest component of Medicaid, making up nearly a third of its costs (and if you begin to factor in care for the disabled and dual-eligibles, it is much greater).
The world has changed since I had my brief brush, about 20 years ago, with this system. My father was at a point where we needed to explore long-term care options; we went to the facility in the Twin Cities that made the most sense, sat down with the nursing home administrator and were asked first about my dad’s assets. We were told that Medicaid would pay for his care in the facility if he had very limited assets and were then told about ways to divest him of the not-quite-so-limited assets he did have.
The requirements are stiffer now in terms of middle-class people shifting their assets out of their control to qualify for Medicaid, but the fact is that if middle-class people need institutional care, whatever assets they have get depleted quickly in the institution, and they sooner or later qualify for Medicaid assistance. Almost half of those in nursing homes pay for the care via Medicaid.
Every deficit reduction plan calls for significant cutbacks in Medicaid, either by cutting funds and using block grants to the states, or capping its spending, or dividing up its responsibilities, with some going solely to the states and the rest to the federal government.
There is no magic in the states that will enable them to take in far less money and provide efficient services, especially in this area.
We have reached the limit with what savings can accrue from slashing provider payments; many people on Medicaid cannot find a physician now.
Cut the payments going to nursing homes and there will either be fewer nursing homes, or the ones that exist will cut their staffs or their amenities, leaving the elderly there in much worse shape.
None of these plans solve the problem of more and more elderly and disabled Americans needing long-term care, with no good way to apply in a broader fashion private or public long-term care insurance for many of them or to make better use of home care.
The CLASS Act was a failure, but the need for something like it remains and will grow. In fact, without a replacement policy, we could end up with the bigger nightmare — none of the revenue coming in that the CLASS Act provided for the next 20 years, and an even bigger burden after that as all these elderly people needing care, and without any ability to get it via home care, require some institutional care funded by Medicaid or whatever program exists in 2030 or beyond.
Congress is understandably obsessed right now with deficit and debt reduction. Some of the best and brightest better start thinking about the substance of these policies and the delivery of services. Push will come to shove before we know it.
Norman Ornstein is a resident fellow at the American Enterprise Institute.