There are substantial economic and personal costs that accompany aging with functional impairment. The majority of long-term care costs are publicly financed. Medicaid currently pays for half of all long-term care in the United States at a cost of more than $100 billion a year to taxpayers. As a result, state and federal budgets are collapsing under the weight of these skyrocketing expenditures. Population aging combined with chronic health conditions and a decline in the ability to function will only increase demand and cost for these services. A paradigm shift that combines personal responsibility for long-term care needs with government support is needed to achieve a sustainable, efficient continuum of care.
This week’s post is the second in our new multi-part series of posts on innovation in health care delivery. Look for additional posts in coming weeks from Altarum staff and select guest authors.
Much discussion of the new health care reform law focuses on expanding health insurance coverage to more people and improving the health care marketplace. However, the Patient Protection and Affordable Care Act (ACA, P.L. 111-148) also lays the groundwork for wide-ranging continuum of care reform. Currently the continuum of care—comprised of the entire realm of primary, acute, and rehabilitative medical services coupled with supportive long-term care services—is fragmented and unsustainable. ACA establishes a framework for care coordination and a future where connections between medical care and supportive services are strengthened for the betterment of the end user: persons with disabilities and older adults with chronic health conditions and functional impairment.
The ACA presents many opportunities to improve long-term care specifically, including a little-known provision called the Community Living Assistance Services and Supports program. CLASS stands to revolutionize the way Americans think about, have access to, and finance long-term services and supports.
The CLASS program creates a voluntary, publically administered insurance program that allows individuals to take personal responsibility for their future long-term care needs. CLASS has no exclusions for pre-existing conditions, and will be available to all actively employed adults age 18 and older. Enrollees will have a monthly premium based on their age, with younger people paying considerably less and older adults more. Participants will be required to pay premiums for at least five years prior to receiving benefits, which will be accessible to qualified adults at any age. Those who qualify will receive cash payments averaging $50 dollars per day, depending on disability level. This consumer-directed benefit could be used to purchase a wide range of supports and services, including personal care, adaptive equipment, adult day programs, assisted living or nursing homes—whatever is most appropriate to the individual’s needs and desires.
Some argue that such a modest daily amount does not go very far. Yet the fact remains that 70 percent of Americans over the age of 65 will need long-term care support at some point in their live. Among those who will require these services, the average person will need services and supports for approximately three years. The vast majority of middle-class Americans will struggle to pay the $6,000 per month it costs for nursing home care, or even the $1,700 per month it costs for part-time help in the home. Not surprisingly, a March 2010 poll of California voters age 40 and over, commissioned by The SCAN Foundation and the UCLA Center for Health Policy Research [http://www.thescanfoundation.org/commissioned-supported-work/poll-scan-foundation-ucla-center-health-policy-research-finds-most-calif], found that people are worried about long-term care costs and are unprepared to pay for these services. The reality is that only 27 percent of those surveyed said they would be able to afford to pay for more than three months of nursing home care and only 38 percent said they would be able to afford more than three months of personal care in the home. CLASS provides Americans an important option for planning ahead for these costs.
Currently, the only available insurance option for those seeking to preserve their independence in the face of functional decline is private long-term care insurance. After more than 25 years in business, insurance companies have attracted less than 10 percent of the potential market. For many consumers, private long-term care insurance is either too expensive or not available for purchase due to a pre-existing medical condition. Some potential buyers mistakenly believe Medicare will pay for long-term care costs when in fact Medicare covers only short-term rehabilitative care. Finally, many simply have a hard time facing the realities of aging and do not choose to purchase coverage.
Until CLASS makes its first beneficiary payments, which will be some years down the road, the only way to qualify for government assistance for extended nursing home or home- and community-based care is to go broke—basically spending down personal assets to $2,000 in order to qualify for Medicaid. With little saved for retirement—the Employee Benefit Research Institute states that 43 percent of American workers have less than $10,000 put away—the middle class is particularly vulnerable.
CLASS holds great promise, but it is not without challenges or critics. One challenge is the need to mitigate the potential for adverse selection, meaning that the only individuals who will sign up will be those who know they will need support in later years. The other conjoined challenge that critics raise is that the program’s solvency may be threatened in later years as more individuals meet the eligibility criteria to draw down benefits and that we might require the use of already-strapped tax dollars to cover the program’s obligations.
To ensure that CLASS is a healthy and vibrant insurance program operating alongside private long-term care insurance, it is imperative to have broad participation across all walks of life. In particular, younger people who have not been traditional consumers of private long-term care insurance need to see the value in buying a CLASS policy early on to qualify for a low monthly premium and insure themselves against the very real risk of becoming disabled at any age. Federal and state governments, as well as employers’ human resources representatives, have a vital role to play in educating and informing working individuals across the age span about CLASS and the broader issues around supportive services and disability. Linking planning for supportive services to traditional financial planning, such as signing up for a 401k plan to ensure income security in old age, may help “normalize” this process for workers and their families.
To address solvency concerns, the ACA explicitly states that federal tax dollars cannot be used to fund CLASS. The law deems the Secretary of Health and Human Services responsible for making determinations about the premium levels and adjusting them as needed to ensure that the program is actuarially sound for 75 years.
CLASS means that boomers and beyond will have an opportunity to take personal responsibility for their future needs should an unforeseeable, untoward event occur. But most importantly, CLASS creates a tremendous conceptual shift away from long-term care as an experience rooted in poverty toward one of choice, control, and dignity, allowing individuals to age well in the communities of their choice. Now that’s real reform.
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