Another failure of Government Healthcare Reform: CLASS for Long Term Care

We all know the U.S. population is aging, and that Long Term Care is going to be a huge issue.  It is so expensive that people are now buying LTC insurance, but rates even when one is healthy are exorbitant.  The Affordable Care Act introduced the CLASS Act to offer a LTC benefit of $50/day for help with activities of daily living.  After 19 months of work, they determined that a solution could not be found.

Takeaway: the actual CARE in LTC has to be AFFORDABLE, through either consumer-driven and consumer-priced solutions or LTC insurance that works with HC insurance in an AFFORDABLE way.  Lots of room for innovation here!

October 18, 2011, 7:00 am

Behind the Class Act, a Numbers Game

By PAULA SPAN

Jim Lo Scalzo/European Pressphoto AgencyKathleen Sebelius, health and human services secretary, at a House committee hearing in July.

Let the post-mortem on the Class Act begin.
The health and human services secretary, Kathleen Sebelius, charged with carrying out this first-ever national program of voluntary long-term care insurance, made official on Friday what had been speculated for several weeks: the administration was shutting down Class. After 19 months of research and consultation, “we have not identified a way to make Class work at this time,” she said.
But was it really unsound? Was it impossible to offer to those who needed help with the activities of daily living a $50-a-day benefit ($18,000 a year) that would help ease the huge financial burden of long-term care? The insurance industry veteran hired to serve as the program’s chief actuary, Robert Yee, begs to differ — or at least, he begs to defer judgment.
Mr. Yee, whose dismissal last month first signaled that the program was in trouble, told me on Monday that when it came to setting benefits and premiums, planning for Class remained at a fairly early stage. It would have taken another six months, he said, to come up with the numbers. But “from an actuarial perspective, we can make it work,” he said.
The primary stumbling block, as Class critics have pointed out since it was enacted as part of the Affordable Care Act, was the potential for so-called adverse selection — the chance that too many people needing benefits (because they were already sick or disabled or soon would be) would enroll without enough younger, healthier people joining up, paying premiums and balancing the risk.
“Clearly, everyone agreed that if you don’t control that, you don’t have a program,” Mr. Yee said.

On Friday, Ms. Sebelius submitted a 48-page report on her department’s attempts to come up with a marketable, sustainable program. In the appendix, of which Mr. Yee was an author, you can see the actuaries grappling with adverse selection and trying out various ways to limit the damage.
Private insurers rely on underwriting. You can’t get long-term care insurance if you’re already sick, and the rates get awfully high if you’re already old.
The Class program could not have resorted to such remedies, but Mr. Yee proposed other modifications, like “phased enrollment,” in which large employers offer the plan first before individuals can sign up. Or benefits and premiums that increased over time on a fixed schedule, so younger workers could pay less initially, then more as their income increased. Or “temporary exclusion”: no benefits for 15 years if the need for help arises from a serious medical condition that already existed when someone enrolled. Or some combination thereof.
“These are tools and techniques private insurers use in both health and life insurance,” Mr. Yee said. He wanted the Health and Human Services Department to use them and to keep working on the problem.
The greater obstacle might have been not actuarial but legal. As the legal analysis in the report points out, the Class Act statute imposed certain requirements that were at odds with some solutions the actuaries contemplated. The department’s report is full of phrases like, “We conclude that there is no statutory basis for this kind of approach.”
Mr. Yee — who said he didn’t hear of these qualms until the report’s publication — doesn’t see why they should bring the whole program to a halt. “Tell the Congress to make very simple changes in the language,” he suggested. Some legislative fixes might amount to only a sentence. “If people believe a long-term care insurance program is a good thing, it’s easy,” he said.
Telling Congress to do anything isn’t easy these days but, said Mr. Yee, “I’m a little disappointed” that the administration won’t give it a try. “It seems like they gave up. In my world, quitting is not an option.” His bosses evidently saw things differently.
One issue he and Ms. Sebelius agree on, however, is that the need for long-term care will only grow. Most developed nations have mandatory long-term care insurance, Mr. Yee pointed out. “You have to take baby steps. I’m having problems with people saying they care about this issue but not doing enough.”
Ms. Sebelius announced on Friday that “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.”
Good to know. We’ll be waiting to hear what she has in mind.

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Paula Span is the author of “When the Time Comes: Families With Aging Parents Share Their Struggles and Solutions.”