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US Pulls plug on Long Term Care portion of health care reformct ("CLASS Act")
Old 10-14-2011, 03:18 PM   #1
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US Pulls plug on Long Term Care portion of health care reformct ("CLASS Act")

One part of the "Affordable Care" act included available government insurance for long term care. It looks like this isn't going to happen.

US Pulls Plug on LTC Act

When the CBO crunched the numbers for the Affordable Care act, the premiums to be paid for this LTC insurance (but which wouldn't be used to pay for actual LTC for many years) were used to offset current costs of other parts of the program, and helped show a lower near-term cost for the law than would have been the case otherwise. I don't know if we'll be seeing a recalculation of these costs now--CBO has already revised the figures upward several times for other reasons.

At the time the legislation was proposed, many analysts cast doubt on the long-term affordability of the LTC component. Today's announcement by HHS may be related to those earlier-expressed concerns. I'm not sure exactly how HHS will simply "not implement" something that is required by legislation which has been passed, but we'll see.

Anyway, this certainly will be of interest to many ER folks grappling with the cost of LTCi and LTC itself.
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Old 10-14-2011, 03:37 PM   #2
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Well, given how much difficulty the private insurers have had in pricing this product correctly, it's not surprising to me.
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According to the article cited
Old 10-14-2011, 03:40 PM   #3
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According to the article cited

"By law, implementation of the program was contingent on the HHS secretary ensuring the program was fiscally sustainable and doesn't use taxpayer funding to pay out benefits."

Since she has determined it is not fiscally sustainable, that portion of Health Care Law is eliminated
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Old 10-14-2011, 04:05 PM   #4
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Originally Posted by F-One View Post
Since she has determined it is not fiscally sustainable, that portion of Health Care Law is eliminated
Great. Thanks.

Regarding the effect of the CLASS Act on the overall costs of the Affordable Care act, this from CBO (July 2009, 5 months before the bill passed the Senate):

Quote:
CBO estimates that the proposal’s [CLASS Act] net effect on the federal budget would be to reduce the budget deficit by about $58 billion during the 2010–2019 period, including some effects on federal revenues and Medicaid spending. . . . The estimated reduction in the federal budget deficit over the next 10 years is chiefly the result of the five-year vesting requirement; the payout of benefits would not begin until 2016, five years after the initial enrollment in 2011.
Beyond the 10-year budget window, the effects of the program could be quite different, and CBO expects that the HHS Secretary would need to reduce benefit payments and increase premiums to maintain the program’s solvency. Assuming that the premiums and daily benefit amounts were $65 and $75, respectively, CBO estimates that benefit payments would exceed premium income within the first decade after 2019, leading to depletion of previously accumulated premium reserves (and accumulated interest on those reserves).
So, without the CLASS Act premiums, it looks like the cost of the Affordable Care act (and other programs) through 2019 will now increase by $58 billion.

Secretary Sebellius didn't reveal that her staff had developed any new information not available to the drafters of the legislation. As noted above, over two years ago CBO had already assessed that at the program would need to raise premiums or decrease benefits in the outyears to remain solvent. Oh, well.
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Old 10-14-2011, 07:42 PM   #5
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Some interesting data points from the HHS report linked from the article:

"Long-term care is also expensive. While costs for nursing home care vary widely, they average about $6,500 per month, or anywhere from $70,000 to $80,000 per year. People who receive long-term care services at home spend an average of $1,800 per month. Expected lifetime long-term care spending for a 65 year old is $47,000; sixteen percent will spend $100,000 and five percent will spend $250,000."
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Old 10-15-2011, 12:01 AM   #6
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Some interesting data points from the HHS report linked from the article:

"Long-term care is also expensive. While costs for nursing home care vary widely, they average about $6,500 per month, or anywhere from $70,000 to $80,000 per year. People who receive long-term care services at home spend an average of $1,800 per month. Expected lifetime long-term care spending for a 65 year old is $47,000; sixteen percent will spend $100,000 and five percent will spend $250,000."
To be precise, $214/day in a large western city with some assurance of 6% APY raises.

The $1800/month average for home care does not include the additional $20 bezillion dollars of the family's stress-related costs.
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Old 10-15-2011, 03:03 AM   #7
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To be precise, $214/day in a large western city with some assurance of 6% APY raises.

The $1800/month average for home care does not include the additional $20 bezillion dollars of the family's stress-related costs.
From January 2003 through August 2004 we were being charged $288 per day + prescription drug costs.
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Old 10-15-2011, 05:40 AM   #8
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I am not sure if people on this forum are going to buy to LTC insurance or not as a consequence of this new health care reform development.
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Anyway, this certainly will be of interest to many ER folks grappling with the cost of LTCi and LTC itself.
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Old 10-15-2011, 06:23 AM   #9
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For the purpose of a cost benefit analysis, can long term care insurance be considered analogous to a fixed income annuity where the payments from the insured cease and a capped benefit payment from the insurer begins upon the commencement of long term care?
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Old 10-15-2011, 06:35 AM   #10
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Those new LTC hybrid annuities and life policies may have received a boost from this news.
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Old 10-15-2011, 09:45 AM   #11
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A few more numbers cited in my morning paper. Program director Kathy Greenlee mentioned of course the eventual imbalance as the healthy wouldn't pay it and only the unhealthy would. But the numbers she mentioned I thought was interesting. She said the programs premiums (exact quote from the paper)" could have cost as much as $391 a month, or even as much as $3,000 a month for a benefit that paid out only about $50 a day". Now that's the kind of insurance I want.. Pay a $3000 monthly premium for about $1500 a month in LTC. I at least give them credit for shelving it. It might have been tempting to reap the initial money, and then let someone else down the road deal with the problem.
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Old 10-15-2011, 09:47 AM   #12
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Under the CLASS Act, the benefits were so meager (projected to be about $50 per day) and the premiums looked like they were going to be so high that most folks on this board likely wouldn't have signed up. The only exceptions would have been:
1) If you were already sick or had a good reason to expect you'd need the LTC very early, but believed you could still work and pay in long enough to get the benefits.
2) You wanted to bet that a later decision would be made to keep the program afloat with taxpayer money. So, you'd be buying a chance to get a big subsidy later.

I believe the CLASS Act, as part of the larger legislation, did a good job of meeting the goal of those who proposed it.
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Old 10-15-2011, 10:05 AM   #13
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It's not much different than the health insurance issue overall. If you design something in a way that encourages adverse selection, the costs are going to be prohibitive -- especially if there is no underwriting. You can't have "no underwriting" in an optional plan without massive adverse selection problems. You either have to allow underwriting or make it universal.
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Old 10-15-2011, 11:01 AM   #14
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It's not much different than the health insurance issue overall. If you design something in a way that encourages adverse selection, the costs are going to be prohibitive -- especially if there is no underwriting. You can't have "no underwriting" in an optional plan without massive adverse selection problems. You either have to allow underwriting or make it universal.
Yes, it's clear to you and I. Any guesses as to why they wrote the law as they did?

Regarding health insurance (as distinct from LTCi), I still think it's possible to get a LOT of compliance without underwriting and without mandatory enrollment, but it would require some "tough love" from government and a broadening of what credit agencies and employers consider when making their decisions. We're not ready to accept that yet. We might be ready to examine those issues in a year or so, depending on SCOTUS and voter decisions.
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Old 10-15-2011, 11:27 AM   #15
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When preparing a piece of legislation often sections are added to earn the support of specific congressmen/men, I think that was one of them. The writers had doubts about its economic viability so added an administrative exit clause.

Home care is very stressful on families, quality institutional care very expensive. There is no easy answer.
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