Linswritings

Obamacare Long Term Care is a bust

Posted on: October 17, 2011

On Friday, the Obama administration pulled the plug on a major program in Obamacare. The long-term care insurance plan was pulled. This is just one of the many flaws of the Obamacare plan that will soon be going away.

As you know congressional Republicans in the House repealed Obamacare but the Senate refused to bring it up. The plan is now going to the Supreme Court to make a decision. However, when you see pieces and parts of the plan being thrown out before it is implemented; you know this plan isn’t going to make it on its merits.

Known as CLASS, the Community Living Assistance Services and Supports program was a longstanding priority of the late Massachusetts Democratic Sen. Edward M. Kennedy. Although sponsored by the government, it was supposed to function as a self-sustaining voluntary insurance plan, open to working adults regardless of age or health. Workers would pay an affordable monthly premium during their careers, and could collect a modest daily cash benefit of at least $50 if they became disabled later in life. Beneficiaries could use the money for services to help them stay at home, or to help with nursing home bills.

But a central design flaw dogged CLASS from the beginning. Unless large numbers of healthy people willingly sign up during their working years, soaring premiums driven by the needs of disabled beneficiaries would destabilize it, eventually requiring a taxpayer bailout.

After months insisting that problems could be resolved, Health and Human Services Secretary Kathleen Sebelius, finally admitted Friday she doesn’t see how that can be done.

The law required the administration to certify that CLASS would remain financially solvent for 75 years before it could be put into
place. But officials said they discovered they could not make CLASS both affordable and financially solvent while keeping it a voluntary program open to virtually all workers, as the law also required.

Monthly premiums would have ranged from $235 to $391, even as high as $3,000 under some scenarios, the administration said. At those prices, healthy people were unlikely to sign up. Suggested changes geared at discouraging enrollment by people in poor health would have opened the program to court challenges, officials said.

“If healthy purchasers are not attracted … then premiums will increase, which will make it even more unattractive to purchasers
who could also obtain policies in the private market,” Kathy Greenlee, the lead official on CLASS, said in a memo to Sebelius. That “would cause the program to quickly collapse.”

That’s essentially the same conclusion that one the government’s top experts reached in 2009. Nearly a year before the health care
law passed, Richard Foster, head of long-range economic forecasts for Medicare warned administration and congressional officials that CLASS would be unworkable. His warnings were disregarded, as Obama declared his support for adding the long-term care plan to his health care bill.

Granted there are some good benefits to Obamacare such as accepting pre-existing conditions and no co-pays for wellness checks. But long-term insurance is a tricky benefit that needs fully funding. That is why you see so many insurance companies not vigorously pushing this benefit to the consumer.

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