The Trojan Horse in Government Run Health and Long Term Care Coverage

The most recent version of the CLASS Act (Community Living Assistance Services and Support) was released in the 1,990 page House Healthcare Reform bill today.  This addition to the over 1,900 page bill will potentially give limited long term care benefits for a premium.  However, no claims can be made in the first 5 years which is why the politicians are salivating at the opportunity to collect 5 years of premiums and use the money to mask the enormous cost of the overall $1.5 Trillion healthcare bill.

The main problem that I see in the CLASS or simply put government run long term care plan is it will not be deficit neutral because it will JUST attract unhealthy people to the plans with conditions such as Alzheimer’s, Diabetes, etc. and in turn will have huge claims down the road.  The healthy people know they can get much more benefits for less money if they buy a private long term care insurance plan so that’s why they will not buy into the government run plan and just a unhealthy group of people will be left with very limited benefits. 

A quick snap-shot of the plan is that enrollees will pay about $120/month for 5 years with absolutely no coverage and after the 5th year they can receive about $30-75 dollars per day in benefits.  Long Term Care costs around $175-250/day in most areas of the country so you can see that this amount of benefits is just a drop in the bucket.  The benefit period is unlimited or lifetime coverage which means that benefits will be paid for as long as needed.  Democrat politicians have been emphasizing this feature which sounds good on paper but the reality is 92% of all long term care claims last for less than 3 years.  The real risk is not needing $50/day for 20 years, but needing $250/day for 2.5 years.  In politics all one has to do to discover the true intention of the person (s) (pro government run health care folks) is follow the money trail.  Again, NO claims can be paid in the first 5 years, but of course premiums will be collected happily by Pelosi and the rest of her gang.  The politicians will use that money to off-set the large cost of the government run health care expense in attempt to mask the foul smell of $1.5 trillion tax payer expense of government run health care. 

1)  The new CLASS Act can have 2 to 6 different benefit levels, depending upon the level of disability.  That is good for private Long Term Care Insurance because of point 2 below.

2)  $50 per day is now the "average" benefit amount.  The benefit will be less depending upon the number of ADL's.  We're probably looking at a sliding scale of benefit amounts ranging from $30 per day (for a couple ADL's) to $70 per day (for 5 or 6 ADL's)

3)  It might only pay benefits if the care recipient needs assistance with 3 or more ADL's (this won't be finalized until sometime in 2012). 

4)  You can only cancel your participation in the program during a certain period each year, called the "disenrollment period".  In other words, if you sign up, you've got to stay signed up for at least a year.

5)  Although it's a "cash benefit", beneficiaries still need to provide receipts to account for how the money was spent at least once per year.

6)  They've taken out the work requirement.  You still have to be working when you first sign up for it.  But Kennedy's version required that you had to work 3 of the first 5 years you paid the premiums in order to be vested.  This version of the CLASS Act has removed that requirement which means that a lot more older people will sign up for it.  They can get a job (or be "self-employed"), sign up for the CLASS Act, and quit a month later and they'll still be in the program.  I think this is good because it will cause many older people to sign up, which will increase the participation in private Long Term Care Insurance even more, because the older folks will need to supplement the meager benefit amount.  Additionally, the CLASS Act will send a strong message to the older population:  "Healthcare reform does NOT include free long term care." 

7)  They've removed the clause that allowed the CLASS Act premiums to be an above-the-line tax deduction.   It keeps it more on-par with private Long Term Care Insurance (which is rarely deductible, except for business owners and self-employed persons).

8)  There's a lot of language in the bill requiring that it be actuarially sound for 75 years and that the secretary of HHS set up advisory boards will REAL actuaries that have real knowledge about Long Term Care Insurance.  This is disingenuous that the government has the nerve to say this as actuarially sound and deficit neutral for 75 years when almost everything they have touched in that past are in the red.
Amtrak, Postal Service, Social Security, Medicare, and Medicaid just to name a few are all hemorrhaging money at the expense of future generation’s prosperity.  The reason is you can’t simply max out your credit card, continue to open new cards and expect to be financially solvent.

9)  There's also a lot of language about counseling services and care advisory services.  We all know how important that is for our Long Term Care Insurance clients.  I think that one of the big pluses of the CLASS Program is that it will help to create a much larger network of care advisory services (services, which up 'til now have been primarily for the wealthy and for those who own a top-tier Long Term Care Insurance product.) 

10)  Just as one of the benefits of the Medicare Act in the sixties was a huge influx of money into healthcare R&D, I think that the CLASS Program will result in a lot of private investment into the entire care continuum, especially care advisory services.

The CLASS Act is a "barest of bare bones" Long Term Care Insurance policy.  The more people get to know the CLASS Act, the better private Long Term Care Insurance looks.  However, for the unfortunate people who have medical condition beyond their control having the safety net of Medicaid is a must and they could improve that program.  Taking over the entire health care system is simply not the answer.  Take on tort-reform, and simply allow people to buy insurance across stateliness is a good first step, not government run health care.   It's a shell game they are playing, these politicians are making a mistake in thinking that American citizens are not smart enough to see through their manipulation and reveal their misguided intentions of government controlling it's people.  We know the truth and are going to continue to expose the corrupt politicians. 

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