Deep Sixing the CLASS Act

The debt ceiling and deficit reduction command the attention of Congress this week.  Its members are trying to find trillions of dollars of cuts to balance the budget.

So why are some members of Congress trying to do something that is guaranteed to increase the already sky-high cost of the Medicaid program?  Do they want to drive us further into debt?

The Senate Gang of Six wants to deep six the CLASS Act before it takes effect.  The CLASS Act is the new national long term care insurance program that will take effect next year.  It will cost the federal government nothing and is projected to save the Medicaid program billions of dollars.

The Medicaid program, as most U.S. citizens now know, is a federal/state partnership resulting in different plans in every state.  In 2010, roughly 55 million people were insured through state Medicaid programs.  If they were all combined into one plan, Medicaid today would be the single largest health insurer in the nation. 

Of the 55 million people on Medicaid, half are children, and many more were working adults.  But they are not the most expensive people on the program.

The biggest costs in the Medicaid program are incurred on behalf of the five million elderly and nine million people with disabilities on Medicaid – the long term care populations.

Many members of Congress have put the Medicaid entitlement program at the top of their deficit reduction hit list. The federal government paid about $275 billion for Medicaid in 2010, and total state outlays approached $200 billion more.  That constitutes almost a half trillion dollars of health care spending. 

Almost half goes to long term care.  Medicaid typically becomes a long term care payer when an elderly person develops an age-related condition, like Alzheimer’s, which forces them to enter an institution for twenty-four hour care and exhaust their personal savings.  It also pays for younger people with mental retardation, or people with serious mental illness or other chronic diseases. 

The challenge for policymakers wanting to control Medicaid costs is, therefore, to control long term care spending for people with chronic conditions.  Cutting nursing home provider rates has long been a favored strategy, but this has never succeeded in reducing costs for any length of time. 

Policy makers have also explored managed care options.  These don’t work as well with people with chronic conditions as they do with a healthier population, because people with chronic conditions already have significant care needs.

So policy leaders are faced with only two choices. 

The first is for government to deny people care.  This is taking health care rationing to an extreme, choosing to leave older, sicker, and poorer Americans to fend for themselves while the government protects the interests of those who are better off.  This choice is inhumane and morally reprehensible to most people. 

The second is to devise a plan through which all people can pre-pay some of the cost of their long term care through private insurance before they get sick, reducing the government’s financial burden.

When Congress passed the CLASS Act in 2010, it chose the second way, the humane and rational way.    

It didn’t want to burden taxpayers, so it required the CLASS Act to be self-sufficient.  Premiums had to pay the full cost of benefits.  The premiums will only be affordable if younger, healthier people participate.  But if having to rely on Medicaid when they get sick is the alternative, then that may be the only reason people need to purchase a policy.

Earlier this year, the Congressional Budget Office projected that the CLASS Act will save the federal government $83 billion in its first ten years of implementation. That’s a lot of money.

This month, however, the Gang of Six joined an increasingly dissonant chorus wailing against common sense and humane, rational decision-making.  They don’t like the CLASS Act, so they want to get rid of it.  This won’t save anyone – ever – even a dime. 

The law may be flawed in its present form and need some revisions, but it’s the right idea.  Private long term care financing has to be part of our Medicaid long term care financing solution.

It is too soon to tell whether the CLASS Act will be deep-sixed as part of “deficit reduction,” gutted before it takes effect, left to languish unimplemented in 2012, or implemented as promised.

But there’s no way for our elected officials to argue that they care about deficit reduction if they jettison an $83 billion savings in Medicaid.

Unless, that is, they’re planning to choose the morally reprehensible option.

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