The Obama administration's decision to pull the plug on long-term care insurance, a key part of health care reform, is disappointing but understandable. It has been increasingly clear that the program could not pay for itself, and there is no point in raising expectations for desperately needed coverage if the numbers won't work. The goal now should be to design a better plan to help families cope with the high costs of long-term care, not give up or seize on this setback as a reason to repeal federal health care reform entirely.
The Community Living Assistance Services and Supports Act, or the CLASS Act, was pushed by the late Sen. Ted Kennedy rather than the Obama administration. It would have created a voluntary long-term health insurance program to help pay part of the costs for nursing home stays and in-home services that help patients remain in their own communities. That sort of affordable coverage is badly needed, but Health and Human Services Secretary Kathleen Sebelius wrote in a letter to Congress late Friday that she did not see "a viable path forward'' for CLASS.
The problem, of course, is money. To get enough votes for approval, Congress reasonably required CLASS to have actuarially sound premiums and to be financially solvent for 75 years. Yet the insurance was to be voluntary. If younger, healthier people did not sign up for coverage and too many older, unhealthy people did, premiums would be unaffordable. And while there was no defined premium or government subsidy, there was a defined benefit of at least $50 a day for beneficiaries. Even many Democrats who voted for health care reform feared CLASS would not be financially viable, and now the Obama administration has reached the same regrettable conclusion.
As Sebelius points out, the long-term care problem is not going to go away. About 15 million Americans will need some long-term care by 2020, but fewer than 3 percent have a private long-term care policy. In Florida, more than 160,000 residents live in some form of long-term care now. The cost of private long-term care insurance continues to skyrocket, and Medicare generally does not pay for long-term care. While the wealthiest may be able to pay for care that can run more than $70,000 a year, many Americans have no choice but to spend down their modest assets and rely on publicly funded Medicaid to pay for nursing homes or other long-term care. Medicaid pays for some 40 percent of all long-term care costs nationally now, and Florida spends nearly $3 billion a year in Medicaid money just on nursing home care.
Republicans predictably point to the failure to make the CLASS Act work as a reason to repeal the entire health care reform act. Long-term care premiums would have been paid for five years before any benefits were awarded. So it's true that because of the creative accounting, the CLASS Act produced $70 billion of the $143 billion in deficit reduction attributed to health care reform. But health care reform still saves money and has many other positive provisions, including many that already have taken effect. There is no reason for Congress to repeal it, and the U.S. Supreme Court is likely to ultimately decide its fate.
The Obama administration's abandonment of the CLASS Act reflects economic reality and the shortcomings of the act's design. The other reality is that the high cost of long-term care remains a problem for taxpayers and for millions of families. The private sector has not solved it, and the president and Congress should find another solution.