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CLASS Won't Begin Until It's Financially Viable, HHS Says

By Jane Norman, CQ HealthBeat Associate Editor

March 17, 2011 -- A top Health and Human Services (HHS) official pledged at a House hearing that a long-term-care program included in the health overhaul law won't be launched unless it is financially sustainable.

Kathy Greenlee, assistant secretary for aging at HHS, made that promise after House Republicans raised the possibility that premiums could top $240 a month and expressed disbelief that the program will ever work.

Greenlee also defended the $120 million requested by the Obama administration in fiscal 2012 for implementing the Community Living Assistance Services and Supports (CLASS) program, saying $94 million of it will be used for public outreach and education to bring in the kind of broad-based enrollment that the insurance program will need to succeed.

HHS Secretary Kathleen Sebelius had said earlier this year that the department was working to revamp the program, a rare example of an item in the health care law that the administration has declared unworkable in its current form. A presidential fiscal commission in December recommended that it be changed or repealed. The Congressional Budget Office has estimated that by 2030 benefits paid out in the program likely will exceed premium payments.

In another signal that the program is in trouble, three House members introduced a bipartisan bill to repeal it. The measure was written by Republicans Charles Boustany Jr. of Louisiana and Phil Gingrey of Georgia, and Democrat Dan Lipinski of Illinois.

But Greenlee told the Energy and Commerce Subcommittee on Health that given the critical unmet needs when it comes to long-term care, "we should not repeal CLASS until we have made every effort to reform the program." Under the law, CLASS is supposed to go into effect in 2012.

The initiative also enjoys passionate support from advocates for people with disabilities. Those supporters—who say the program can be changed so it is effective—packed the hearing room to applaud Democrats who spoke in favor of the program. The powerful senior lobby AARP also is a backer, and polls have found that a majority of the public supports retaining the program.

"We're trying to do something that's never been done before and so naturally there's going to be some kinks in it," said Rep. Frank Pallone, D-N.J.

The CLASS insurance program included in the health care law (PL 111-148, PL 111-152) was the longtime vision of the late Sen. Edward M. Kennedy, D-Mass. It's voluntary and intended as a supplement to provide assistance to the elderly and disabled, rather than a comprehensive benefit that would foot the entire bill for care in a nursing home or assisted living facility. The cash benefit projected under the law is $50 a day, indexed for inflation.

Employers who participate would offer it to workers, who would be automatically enrolled and pay premiums unless they choose to opt out. It would be an alternative to the current system of long-term-care insurance offered by private carriers but bought by just 8 to 10 percent of Americans, though HHS says one in six people over the age of 65 will spend more than $100,000 on long-term care. Many will spend down their assets to qualify for Medicaid.

But financial questions from both Democrats as well as Republicans have long dogged the program. And actuaries have warned that adverse selection will occur because people could opt out of it until they are sick. Anyone is allowed to take part in the program, regardless of health history and the benefits, can be paid out for a lifetime.

Rep. Joe Pitts, chairman of the Health Subcommittee, said Center for Medicare and Medicaid Services actuaries have estimated the premium could run as high as $240 a month or more to keep the program afloat. He asked Greenlee if that's possible. She replied that a premium amount has not yet been set. Three plans for the program's structure will be submitted to an independent advisory council and then the agency will publish its initial assessment of those plans. There may or may not be pricing information at that point, she said.

"We are committing to making reforms to the program so that we can hit the financial targets," she said. "We don't intend to implement the program without those changes."

Rep. Michael C. Burgess, R-Texas, said that he bought a private long-term-care policy at the suggestion of his mother, and more could be done by the federal government to encourage the purchase of private policies. "I'm not saying it would solve the entire problem," he said, but "it always seems like the default position is to expand public programs."

Republicans also were critical of the way the program is set up because premiums are collected for five years before any benefits are paid out. The effect is to produce $80 billion in revenue to offset the costs of the health care law, Pitts said. And while the law bans taxpayer funds from being used to pay for shortfalls in the program, "Congress can always pass a new law to allow the practice," Pitts said.

But William L. Minnix, Jr., president and CEO of LeadingAge, an association of nonprofits that deal with the aging, said that the law requires close monitoring and actions to correct any problems before a crisis, including temporary moratoriums on new enrollees or premium increases.

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