The CLASS Act

1. The CLASS Act Presented by: Stephen A. Moses The Center for Long-Term Care Reform

2. What is the CLASS Act? • CLASS - Community Living Assistance Services and Supports • Title VIII Of the Patient Protection and Affordable Heath Care Act – signed into law March 23, 2010

3. What is the CLASS Act? (cont.) • Defined by the American Association of Homes and Services for the Aging (AAHSA): New voluntary nationwide long-term services and supports insurance program for persons with disabilities and seniors with chronic illness. http://www.aahsa.org/classact.aspx

4. Note contradictions in terms: • “Voluntary” • “Insurance for disabled and chronically ill” No: real insurance is for healthy people in case they become disabled or ill

5. Definitions & Provisions http://democrats.senate.gov/reform/patient-protection-affordable-care-act-as-passed.pdf • Actively employed: reporting for work or on active military duty • 6 ADLs: ‘‘(A) Eating. ‘‘(B) Toileting. ‘‘(C) Transferring. ‘‘(D) Bathing. ‘‘(E) Dressing. ‘‘(F) Continence

6. Definitions & Provisions (cont.) • Eligibility: • enrolled in CLASS • paid premiums for 5 years (vesting period) • have earned in 3 of the 5 years income at least equivalent to Social Security requirement • have paid premiums for at least 24 consecutive months if a lapse has occurred

7. Definitions & Provisions (cont.) • Secretary of Health and Human Services decides almost everything • CLASS Independence Advisory Council • CLASS Independence Benefit Plan: Not later than October 1, 2012 • CLASS Independence Fund

8. Definitions & Provisions (cont.) • To be invested like the Medicare trust fund, i.e. in Treasury bonds • Board of Trustees will examine and report to Congress • Report immediately if actuarially unsound • Consult regularly with the Secretary

9. Definitions & Provisions (cont.) • No taxpayer funds to be used to pay benefits (just to pay back the bonds when CLASS has to pay benefits) • Annual report by Sec. beginning Jan. 1, 2014 • Annual report by DHHS Inspector General on fraud in program

10. Premiums • Nominal premiums for the poor (poverty line): $5/mo plus CPI • Level premiums unless the Secretary decides they're "insufficient" • No increase if over 65, unemployed or paid premiums for 20 years • Premium recalculated if 90 day or more lapse • Penalty for re-enrollment after a five-year lapse

11. Premiums (cont.) • After 10 years, decide on future premiums • Administrative costs not to exceed 3% in determining premiums • Payment by • Payroll deduction • Alternative: TBD if employer does not participate

12. Triggers • 2 or 3 ADLs • requires “substantial supervision” • Seems to mirror “federal tax-qualified” requirements

13. Cash Benefit • No less than $50 per day increasing with CPI • Variable on a scale of functional disability with between 2 and 6 benefit levels • Paid daily or weekly • No lifetime or aggregate limit

14. Cash Benefit (cont.) • Coordination of benefit with insurance exchanges created by the Patient Protection and Affordable Care Act • Benefits go into a Life Independence Account to pay for among others: • Home modifications, assistive technology, accessible transportation, homemaker services, respite care, personal assistance services, home care aides, and nursing support.

15. Cash Benefit (cont.) • Institutionalized beneficiaries keep 5% of their benefit above personal needs allowance under Medicaid, the remainder going to offset Medicaid's cost • HCBS recipients keep 50% of their benefit with the remainder offsetting cost to the state

16. Cash Benefit (cont.) • Cash benefits received are disregarded in determining eligibility "under any other Federal, State, or locally funded assistance program," i.e. Medicaid, etc. • OK to use benefits to pay a family member to provide the care.

17. Underwriting • No underwriting, except based on age to determine: • Premiums • Eligibility for the program

18. Enrollment • Automatic by employer • Alternative enrollment for the • Self-employed • More than one employer • Employer who does not automatically enroll • Opt Out Election • Anytime

19. Enrollment (cont.) • Qualified individual • 18 years or more • Receives taxed wages or taxed self-employment income • Is "actively employed" • Is not . . . • A patient in a hospital, NH or ICFMR and receiving Medicaid • In jail

20. Benefits & Tax Treatment • Benefits • Sec. establish Elig. Assessment System nlt January 1, 2012 • Tax Treatment • same as tax qualified LTCI plans

21. Issues & Problems • JH says effective in two years; first benefits five years later • One size fits all • Guaranteed issue • No underwriting • Anti-selection or Adverse Selection • Pay five years before coverage begins

22. Issues & Problems • Moral hazard • Phony "trust fund" used to offset health reform deficit • Indeterminate premiums • Expensive: $100 or more per month premium depending on Sec. of DHHS • Latest estimates: $180 to $240 per month

23. Issues & Problems (cont.) • Minimal benefit: guaranteed $50 per day or more depending on Sec. of DHHS • Advocates say expect average benefit of $75 or $27,000 per year • Must remain employed • Indefinite triggers: 2, 3 or 4 ADLs depending on Sec. of DHHS

24. Issues & Problems (cont.) • Guaranteed eligibility, guaranteed benefit, guaranteed lifetime coverage, but . . . • Actuarially unsound • Sec. of DHHS can change everything if funding falls short • CMS actuary says only 2% will enroll despite "opt out" system • Billed as LTC benefit but more for working disabled

25. Who’s for it? • Senior advocates • LTC providers desperate for revenue (AAHSA, AHCA)

26. Who challenges it? • Deficit hawks worried about unfunded liabilities • Advocates for responsible LTC planning • Actuaries

27. Likely impact on private LTCI industry • Why some think it will help LTCI • Raise awareness • Great comparisons for private LTCI • Safer risk pool to jump into • Why some think it won't help • Public already asleep about LTC • CLASS is one more reason to ignore the problem • Extra anesthesia to the body politic

28. Current Status • Passed into law • How do we make the most of it is the big question now • Lemonade from lemons • So don't look back; forge ahead • But be ready to shift course if and when CLASS is repealed

29. The real LTC problem and the real solution • Public ignores LTC because government already pays for most of it • But that can't and won't continue much longer • CLASS diverts attention from the real risk • Unfunded liabilities of Social Security, Medicare and Medicaid • Now add CLASS

30. For more information • Center VP, Damon Moses interviews Claude Thau: Part 1 http://www.youtube.com/ltctv#p/a/u/2/Nb9BnFcZzjwPart 2http://www.youtube.com/ltctv#p/a/u/1/fL_jARY1wsM • LTC Bullet: "CLASS Dismissed" for Broker World, Thurs, Feb. 11, 2010 • LTC Bullet: DéCLASSé, Wed, Dec. 9, 2009 • LTC Bullet: CLASS Consciousness, Wed, Oct. 21, 2009 • LTC Bullet: CLASSified, Mon, Oct. 19, 2009

31. For more information (cont.) • LTC E-Alert #9-076--A CLASS Half Full, LTC E-Alert #9-104--Will CLASS Pass?, and LTC E-Alert #9-123--CLASS Dismissed, LTC E-Alert #10-032: SSA and LTC in NYT, OMG! (Translation Follows) (You'll need your Center for Long-Term Care Reform user name and password to access these publications in The Zone. Contact info@centerltc.com if you need a reminder or to join the Center and connect to The Zone.)

32. For more information (cont.) • Al Schmitz and Steve Schoonveld, "Health Reform's CLASS Act," Broker World, February 2010 (subscription required) • Summary of the CLASS Act, Affordable Health Choices Act (Title XXXII): http://www.aahsa.org/classact.aspx