- Jun 6, 2007
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In the Health Care Reform bill currently being debated in the Senate there are provisions known as the CLASS Act provisions. These provisions create a voluntary insurance program for Americans that provides to enrollees when the insurance benefit is triggered which occurs when the enrollee develops real problems functioning money to pay for living assistance services and supports in his or her community, it is a long-term care insurance program.
A description of some of the relevant details of the program entails the following. People that want to join the insurance program will pay a premium, CBO estimates for the Senate version of the program the premium will be $123.00 a month, for the House version CBO estimates a higher amount. One of the selling points of the program is that once a person joins the program the premium over the life of the plan stays fixed at the initial level, there is one massive catch to this condition though the Secretary of the Dept. of HHS is mandated by law to increase that premium as needed to insure that the overall CLASS insurance program will be solvent for twenty years projected into the future. Also with respect to premiums every year the Secretary will set the premium rate for new enrollees joining the program so the that the program is solvent 75 years out which means premiums for later enrollees will be higher than earlier enrollees premiums which creates an incentive for people to enroll earlier in their life. An enrollee has to pay into the program for at least five years before that person is eligible for benefits. To qualify for benefits an enrollee has to be certified that he or she can't do at least two or three common daily living activities without substantial assistance from another person. The benefit entails at least $50.00 per day for the "entire" balance of that person's life. To avoid adverse selection in the program, that is, people waiting to join the program until their approaching the age or time where their health definitely might fail them, the Senate mandates that during this pre-vested benefit period enrollees have to be working at least three of the five years in this period. However, this protection is super weak because the CLASS provisions provide that in order for a person to qualify as working a person need only earn an amount equal to the amount of wages and self-employment income which an individual must have in order to be credited with a quarter of coverage under section 213(d) of the Social Security Act for the year which for the year 2009 is "$1090.00" - many clerical, telemarketing, etc. types of jobs (ordinarily relatively easy to get) could meet this requirement.
Recently, the Office of Actuary for Medicare put out a report on this CLASS initiative coming to the same "alarming" assessment than many public commentators have raised. Their assessment was that the join up rate for the program won't be that great and despite Congress's intention to stop the adverse selection problem it will exists to a large degree producing in the program a very large beneficiary pool and not a very large membership pool that just pays premiums. Resulting in because of the mandate to increase premiums to maintain solvency ever skyrocketing premiums which will drive enrollees to drop out of the insurance program and potential enrollees not to join because for one reason they will be able to get more affordable long-term care insurance in the private sector. The medicare experts further predict that because of the premium increase and suppression of enrollment dynamic the program will be placed on a death spiral where it will eventually fail. If it does fail, good sense would indicate to any Senator the federal government will likely step in and pay beneficiaries because it will be too politically problematic to do otherwise. As a practical matter, good sense would indicate that the Congress will likely step in one day and not allow the Secretary to raise premiums needed to maintain solvency and the government will commit to help pay beneficiary costs, this program will morph into the Medicaid Two program. The proponents of this CLASS initiative response to this Medicare experts criticism is "laughable" and "nonpersuasive"; they say the American people have nothing to worry about with this CLASS program because the CBO predicts the program will be solvent 75 years out - this is ridiculous because the bill mandates the program be solvent seventy five years out - the CBO's report is no rebuttal to the Medicare experts report.
This "adverse selection and the resulting upward pressure on premiums" problem should alone be enough for responsible Senators to say scrap this CLASS program the American people dont need to be put on the hook for a big expense in the future with this program. Another compelling reason responsible senators would say scrap this long-term care program is that it is going to start a chain of events that is going to cause a big expense on the American taxpayer from a perspective not previously mentioned. This is evident if one considers the following. The initial premium for this insurance program will be $123.00/per month and almost certainly will increase in subsequent years. Individual senators need to ask themselves what category of Americans can afford to pay $123.00 per month on a non-essential item like long-term care insurance, it is wealthy and upper middle class Americans that's who! To ordinary working people in the lower and middle income bracket $123.00 per month is a lot of money, after these Americans pay all their non-discretionary bills their isn't that much money left from their paycheck to pay such an amount and have money to live. If individual senators are honest with themselves they will recognize that the economic profile of the people that make up the membership group for this CLASS insurance program will be predominately wealthy and upper middle class Americans. A prudent Senator would then recognize that this is a politically untenable situation to have such a government sponsored insurance program that primarily benefits wealthier Americans, the America people won't stand for it; lower and middle income Americans vote and their numbers are very significant. A prudent Senator would recognize that if the American government starts this CLASS insurance program it is only a matter of time before the Federal government has to start providing subsidies for lower and middle income Americans so they can participate in this program and America can't afford this additional expense it will be a budget breaker.
See Part Two
A description of some of the relevant details of the program entails the following. People that want to join the insurance program will pay a premium, CBO estimates for the Senate version of the program the premium will be $123.00 a month, for the House version CBO estimates a higher amount. One of the selling points of the program is that once a person joins the program the premium over the life of the plan stays fixed at the initial level, there is one massive catch to this condition though the Secretary of the Dept. of HHS is mandated by law to increase that premium as needed to insure that the overall CLASS insurance program will be solvent for twenty years projected into the future. Also with respect to premiums every year the Secretary will set the premium rate for new enrollees joining the program so the that the program is solvent 75 years out which means premiums for later enrollees will be higher than earlier enrollees premiums which creates an incentive for people to enroll earlier in their life. An enrollee has to pay into the program for at least five years before that person is eligible for benefits. To qualify for benefits an enrollee has to be certified that he or she can't do at least two or three common daily living activities without substantial assistance from another person. The benefit entails at least $50.00 per day for the "entire" balance of that person's life. To avoid adverse selection in the program, that is, people waiting to join the program until their approaching the age or time where their health definitely might fail them, the Senate mandates that during this pre-vested benefit period enrollees have to be working at least three of the five years in this period. However, this protection is super weak because the CLASS provisions provide that in order for a person to qualify as working a person need only earn an amount equal to the amount of wages and self-employment income which an individual must have in order to be credited with a quarter of coverage under section 213(d) of the Social Security Act for the year which for the year 2009 is "$1090.00" - many clerical, telemarketing, etc. types of jobs (ordinarily relatively easy to get) could meet this requirement.
Recently, the Office of Actuary for Medicare put out a report on this CLASS initiative coming to the same "alarming" assessment than many public commentators have raised. Their assessment was that the join up rate for the program won't be that great and despite Congress's intention to stop the adverse selection problem it will exists to a large degree producing in the program a very large beneficiary pool and not a very large membership pool that just pays premiums. Resulting in because of the mandate to increase premiums to maintain solvency ever skyrocketing premiums which will drive enrollees to drop out of the insurance program and potential enrollees not to join because for one reason they will be able to get more affordable long-term care insurance in the private sector. The medicare experts further predict that because of the premium increase and suppression of enrollment dynamic the program will be placed on a death spiral where it will eventually fail. If it does fail, good sense would indicate to any Senator the federal government will likely step in and pay beneficiaries because it will be too politically problematic to do otherwise. As a practical matter, good sense would indicate that the Congress will likely step in one day and not allow the Secretary to raise premiums needed to maintain solvency and the government will commit to help pay beneficiary costs, this program will morph into the Medicaid Two program. The proponents of this CLASS initiative response to this Medicare experts criticism is "laughable" and "nonpersuasive"; they say the American people have nothing to worry about with this CLASS program because the CBO predicts the program will be solvent 75 years out - this is ridiculous because the bill mandates the program be solvent seventy five years out - the CBO's report is no rebuttal to the Medicare experts report.
This "adverse selection and the resulting upward pressure on premiums" problem should alone be enough for responsible Senators to say scrap this CLASS program the American people dont need to be put on the hook for a big expense in the future with this program. Another compelling reason responsible senators would say scrap this long-term care program is that it is going to start a chain of events that is going to cause a big expense on the American taxpayer from a perspective not previously mentioned. This is evident if one considers the following. The initial premium for this insurance program will be $123.00/per month and almost certainly will increase in subsequent years. Individual senators need to ask themselves what category of Americans can afford to pay $123.00 per month on a non-essential item like long-term care insurance, it is wealthy and upper middle class Americans that's who! To ordinary working people in the lower and middle income bracket $123.00 per month is a lot of money, after these Americans pay all their non-discretionary bills their isn't that much money left from their paycheck to pay such an amount and have money to live. If individual senators are honest with themselves they will recognize that the economic profile of the people that make up the membership group for this CLASS insurance program will be predominately wealthy and upper middle class Americans. A prudent Senator would then recognize that this is a politically untenable situation to have such a government sponsored insurance program that primarily benefits wealthier Americans, the America people won't stand for it; lower and middle income Americans vote and their numbers are very significant. A prudent Senator would recognize that if the American government starts this CLASS insurance program it is only a matter of time before the Federal government has to start providing subsidies for lower and middle income Americans so they can participate in this program and America can't afford this additional expense it will be a budget breaker.
See Part Two
