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Democrats Try to Rescue CLASS Act

I wrote last week about the sad and expected demise of the CLASS Act, a long-term care insurance program that was included in the Affordable Care Act. The Administration has effectively stopped implementation of the measure, and the recently departed chief actuary basically said that the office was shutting down.

The main worry is over potential cost overruns in the out years for a program designed to be voluntary.   If people wait to sign up only when they need it, it may not be sufficiently funded, but many people cannot afford to pay the full costs for in-home care late in their lives. The CLASS Act seeks to solve that problem, but the Administration is focused more on the numbers than the issue.

Some powerful Democrats in Congress want to see the program live.

“It’s sad,” said Sen. Barbara Mikulski (D-Md.), a champion of the program that was developed in her Senate HELP Committee by the late Sen. Edward Kennedy (D-Mass.). “We’re evaluating our strategy now.”

Rep. Frank Pallone (D-N.J.), who sponsored the program in the House, said terminating the program would be a “huge mistake.”

“Obviously the administration has put some kind of hold on it,” he told The Hill. “I’m going to try to find out why, but beyond that I’m going to continue to press them to implement it as soon as possible because it makes sense.”

Even Kent Conrad, a longtime opponent of the CLASS Act, called it a “Ponzi scheme” (that’s the new term for anything disfavorable in Washington).  But Conrad acknowledged a real need for long-term care. So the next move should be to find a way to translate that real need into a program that can find broad support. Unfortunately, that’s not how Washington works these days.

UPDATE: Just to wonk out for a second, the fear is that there won’t be enough contributions to the program to offset the costs of paying out the benefits. If only those prone to needing long-term care insurance purchase the voluntary program, in other words, there won’t be enough money to keep it in balance later. One option would be to make it an entitledment that everyone pays for, to provide a minimum benefit. That might upset the insurance industry, which markets its own long-term care insurance. However, only 7 percent of the population purchases private LTC insurance, so if the benefit is minimal (right now it’s set at $50 a day, fairly low compared to private insurance), there would still be a market for add-on insurance much like a Medigap policy.

These, of course, are solutions, so they play no role in US policy debates.

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David Dayen

David Dayen