Viewpoint: CLASS Long-Term Care Insurance Is Dead, But What Comes Next?

Howard Gleckman is a resident fellow at The Urban Institute and author of “Caring for Our Parents.”

Viewpoint: CLASS Long-Term Care Insurance Is Dead, But What Comes Next?

To the surprise of absolutely nobody, the Obama administration today walked away from the CLASS — Community Living Assistance Services and Supports — Act, the landmark long-term care insurance program included in the 2010 health reform law. But while CLASS may have disappeared, the challenge of financing the long-term care needs of 20 million Americans over the next few decades has not.

Health and Human Services Secretary Kathleen Sebelius killed CLASS in a letter to Congress today. “I do not see a viable path forward for CLASS implementation at this time,” she wrote.

Congressional critics of CLASS are gleeful. After all, they have their first Obamacare scalp on their belts. But there is a far more important question at stake now: What happens next? Medicaid, which pays for nearly half of all long-term care, is itself under immense financial pressure. And hardly anyone buys private long-term care insurance — only 7 million Americans own policies. As a society, we are simply unprepared for the crushing financial burden of frail old age or disability at younger ages due to accident or illness.

Where do we go from here? Most independent analysts recognize that the model most likely to succeed for long-term care insurance is a system of universal coverage. Every developed nation on the planet — except for the U.S. and the U.K. — has gone this route. And most programs have been extremely successful. But we just had a national debate about universal health insurance as Congress considered the 2010 health law and the returns are in — people don’t want it.

Perhaps there is a way out. Suppose Congress designed a system built on private insurance rather than government coverage? Suppose also that instead of a dreaded mandate, it included a combination of penalties and rewards to encourage people to buy insurance at a relatively young age.

Such a model already exists. Several do, in fact. Think about the Medicare Part D drug benefit, for instance. Insurance is sold by private companies in a regulated, transparent environment. Consumers can compare policies and prices. Premiums are relatively inexpensive for people who buy when they are first eligible. But they are penalized for delaying their purchase since premium prices rise rapidly.

Also imagine a choice of long-term care insurance options, much like Medicare Supplemental (Medigap) insurance. You might buy a lifetime cash benefit of $50-a-day that looks like CLASS would have. Or you could buy a policy that paid $200-a-day for three years. Or one with a $100,000 deductible and a lower premium.

There are many options. But advocates, long-term care providers and insurance companies must sit down and work out a consensus plan. Advocates have to understand they are not going to get the government plan they wanted. Insurance companies must recognize their business is dead in the water and desperately needs a jump-start. And providers such as nursing homes, assisted living facilities and home health agencies must find a steady source of revenue as Medicaid begins to shrink.

I know that consensus is out of fashion in Washington. But if people who care about long-term care issues — and we all should — don’t act quickly, this issue will end up back in the closet. And that will be a personal and financial disaster for tens of millions of Americans and their families.