Is the CLASS Act already dead and buried, a full year before
it comes to life?
A couple of months ago, I wrote a column about the ill-advised,
bi-partisan Congressional effort by the Senate “Gang of Six” to deep-six the
CLASS Act. The CLASS Act is the new national privately-financed long term care insurance program authorized by Congress in 2010. Without going into all the details again, it is intended to make long term care insurance care available to the working middle class. This would take pressure off of the Medicaid program, resulting in billions of dollars of savings to taxpayers.
The CLASS Act won’t even take effect until October, 2012, and
the Administration hasn’t even announced exactly how it would be
structured. But the Department of Health
and Human Services may be closing down the CLASS office. This past weekend’s news
report from the Hill and other media outlets noted that it has let its
actuary go and asked the Senate not to appropriate $120 million needed for the CLASS
Act’s implementation.
That’s not “life
support,” as one writer who is sympathetic to the Act suggested. It’s a death rattle.
A program designed to cost the government next to nothing,
provide benefits that people need, and save taxpayers significant dollars should
be popular with elected officials.
However, that’s not the case here.
According to the Hill,
Senator Kent Conrad, a Democrat, has called the CLASS Act “a Ponzi scheme of
the first order.” Representative Phil
Gingrey, a Republican, agrees with him.
Last March, according to Howard Gleckman in his Caring for Our Parents blog,
Rep. Gingrey called the CLASS Act “a Bernie Madoff Ponzi scheme run by the
Secretary of Health and Human Services.”
On CNN almost two years ago – before the CLASS Act was even
enacted – Senator Lindsey Graham called anyone who would vote for it a
“co-conspirator to one of the biggest Ponzi schemes in the history of
Washington.” And Senator John Thune also
characterized it in a 2009 Time
article as “a classic definition of a Ponzi scheme.”
Aside from the
hyperbolic tic that appears to compel all these members of Congress to refer to
the CLASS Act in precisely the same way, and in the most demeaning manner
possible, you get the bi-partisan picture.
They oppose it.
Their problem seems to be that it would collect premiums
from a lot of people to pay for the care needs of a few. What they call a “Ponzi scheme” is often
referred to as “insurance.”
Other opponents have literally thrown the kitchen sink at
the CLASS Act. Heritage Foundation
writers have made the simultaneous and contradictory arguments that too few and
too many people will enroll, premiums will be too low and too high, benefits
will be too small and too great, and the Trust Fund it establishes will be so
big the Congress will raid it and so small that it will have to be subsidized.
The real problem
seems to be that as it is currently designed, the program’s primary
beneficiaries will be working members of our disappearing middle class.
This is because most well-to-do aging Americans, like
members of Congress, have personal wealth sufficient to help finance their long
term care. Long-term care insurance
isn’t a necessity for people who have over $1 million in assets, because they
can usually generate enough income from these assets to pay for their own long
term care needs.
Or they can protect these assets by transferring them to
their children, and qualify for Medicaid just like any other indigent
person.
Transferring assets to qualify for Medicaid is a common
occurrence, but no one seems to know exactly how common. In one analysis in New York, 7%
of Medicaid applicants were denied because of a recent transfer of assets. The percentage transferring assets successfully
was likely much, much higher.
Maybe limiting the CLASS program to working people, or
setting a $50 per day benefit level, or locking in an age-related premium aren’t
the best approaches to setting up the program.
Perhaps its Trust Fund will prove too tempting for politicians who to
raid for other purposes.
But we need long term care insurance or our long term care
system will collapse one day. And the current
private plans are far too scarce, and too few people are enrolled in them.
So, instead of doing something about this, Congress will
kill the one program it has passed that promised to make a difference – and, at
the same time, help the middle class afford long term care.
That’s what CLASS warfare is all about.
If you have questions about this column or would like to receive an email notifying you when new Our Health Policy Matters columns are published, please send an email to gionfriddopaul@gmail.com.
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