Similar to any form of social insurance, individuals would have paid premiums while they were healthy. After being enrolled for five years, one could begin to receive benefits (around $50/day) that would go towards long term care and “non-medical costs such as home health care and adult day care”, according to the Kaiser Foundation. While there are some private plans that guard against long term care, this would have been a major federal initiative to protect against debilitating disability.
The key sticking point with its long term funding was a classic issue of insurance: adverse selection. That is, people who will likely need the insurance are probably the only ones who will sign up. The CLASS Act actually helped health care reform pay for itself by providing lot of revenue from premiums for the first decade or so; once benefits were allowed to be distributed (there was no time cap on receiving assistance), the surplus dried up quickly. Without healthy individuals paying into the system, the CLASS Act “would cost the federal government more than it took in starting in 2025”, according to the actuary at the U.S. Centers for Medicare and Medicaid Services.
That’s not sustainable, especially considering it was supposed to be sound for at least 75 years.
Where do we go from here? Many House Democrats and medical lobbying groups are pushing for the Obama administration to find a way to keep the program alive. While their hearts may suggest that, the White House realizes that any substantial changes to CLASS will need to be ushered through Congress. While a grand program on the scale of Social Security or an individual mandate might be needed to tackle the adverse selection issue, the appetite for that is gone, at least for the foreseeable future.
And as the delighted, almost gleeful tone of most congressional Republicans (upon hearing the news of CLASS’s demise) suggests, any step towards providing support and dignity for the disabled will face less-than-classy foes in the months to come.
Sources and suggested reading