By Jane Norman, CQ HealthBeat Associate Editor
March 24, 2011 -- Health and Human Services officials working to make a long-term care insurance program viable have a struggle ahead, but it is possible to design some changes to help the program survive, members of an Urban Institute panel said at a discussion.
The potential fixes may include some tough choices, such as making people pay into the program for longer than the current five years before they are eligible to file for benefits. Other options include tightening rules on who is eligible or tying premium increases to inflation.
An intense marketing campaign to sell employers and workers on the usefulness of long-term care insurance will be needed, panelists said. Even so, predictions are that just five to six percent of workers may take part.
The Community Living Assistance Services and Supports (CLASS) program was included as part of the health care law (PL 11-148, PL 111-152). It is a voluntary insurance program, based on premiums and designed to forgo taxpayer support. People who become disabled could draw a cash benefit averaging $50 a day for as long as they qualify.
Employers would choose whether to offer the program, and if they do, workers would have to opt out if they do not want to participate.
HHS officials have said the program is not workable in its current form and they are moving to change its structure, under authority the law gives HHS Secretary Kathleen Sebelius. Kathy Greenlee, assistant HHS secretary for aging, recently told a congressional panel that the program will not launch unless it is financially sustainable (See related story).
A main problem is that nothing like CLASS exists in the private long-term care market, so there is no direct experience that can be used to predict outcomes, said Brenda Spillman, a senior fellow in the Urban Institute's Health Policy Center.
Sorting Out the Details
The program was built "on the current political environment, not on sound technical advice in advance of drafting," she said. And it was based on the faulty assumption that employers and workers will be very interested in signing up, she added.
"I think it can and will happen in some form because they've got some pretty good heads working on it," Spillman said. But she said there are fundamental challenges, with the biggest one being that anyone can join the program regardless of previous health problems, which means the risk pool may be weighted toward the sick. Another is that it is a voluntary purchase, which means a "nightmare, literally," in figuring out how to structure a premium that is enticing enough to bring in participants and yet can sustain the program over the 75 years required in the law, she said.
Howard Gleckman, a resident fellow at the Urban Institute, said it would help to come up with financial incentives to get employers to take part and penalties for workers who delay enrollment. While in an ideal world the program would work best with a mandate that everyone take part, like the individual mandate for health insurance, "that's not going to happen," he said.
Any changes, though, will be closely scrutinized by advocates for people with disabilities who have championed the program. Marty Ford, who represents both The Arc and United Cerebral Palsy on issues such as long-term services, said it should be emphasized as the program is introduced to the public that it would assist people of every age who become disabled, not just the elderly. "It isn't long-term care, and it isn't nursing home care," she said. And marketing will be "very, very important," Ford said.
She also warned that by tightening eligibility standards, "you have to be very careful to not inadvertently eliminate people you want in the risk pool," such as those who may pay lower premiums because they have low incomes but also are healthy.
Allen Schmitz, a Wisconsin actuary who helped develop a model used by the American Academy of Actuaries to analyze the program, said that adverse selection in the risk pool—people with the greatest need for insurance buying it while others stay out—must be controlled for the program to succeed. "The better you can control adverse selection, the more marketable and affordable the premium will be," he said.