You probably don’t know anything about the Community Living Assistance Services and Supports Act (CLASS). I didn’t until recently. The act essentially creates a voluntary new federal long-term care insurance. It would basically work in much the same way that Medicare and Social Security do–through payroll deduction–with the major distinction that those programs aren’t voluntary and CLASS is.
Before CLASS, there were only three ways to finance long-term care. You could pay for it all yourself, you could have a private long-term care policy, or Medicaid would pay a portion of your long-term care costs. The problem is, very few people have the ability to pay for their own long-term care, and an equally small number are forward-thinking enough to purchase long-term care insurance far enough in advance for it to be affordable. That leaves most people in the position of “spending down” their resources to get Medicaid eligibility. In other words, you are forced to deplete most of your savings and other assets before Medicaid will pick up the tab for your long term care. The law allows your spouse to keep your primary residence, and some money may be reserved for your and their living expenses, but beyond that, you can expect to be poor before Medicaid becomes an option. In the past, some people have tried to get around these laws by giving money to their children, putting their assets in someone else’s name, or the like, but the Feds have been cracking down on that practice for a while, by increasing the “look back” period–they actually look into your records to see if you were dumping assets in anticipation of becoming Medicaid eligible, and they penalize you for it if they find such evidence–by barring you from the program for a considerable length of time depending on the value of the assets you unloaded. That makes all three long-term care options less than stellar.
Enter the CLASS Act. Now, just like Medicare, CLASS is designed to be a valuable–but not entirely sufficient–product. Sure, Medicare Part A covers hospital stays, but if you want coverage for doctor’s visits, you’ll have to pay the Part B premiums, or even get a “Medi-gap” policy to cover those things that Medicare doesn’t cover. The same is true of CLASS. It will cover a good portion of your long-term care costs, but you’re still likely to end up paying some portion out-of-pocket or needing a private long-term care insurance policy to supplement CLASS. To some, that may sound like CLASS isn’t worth it. Here’s why that’s not true:
CLASS has enormous potential to be an affordable means of long-term care insurance–thanks to the power of risk-pooling–provided that enough people opt to enroll in the voluntary program. The fact that it is voluntary–unlike Medicare, which is compulsory–may be its biggest weakness. Young people are prone to thinking about anything but their mortality, which explains why so few of them purchase private long-term care insurance, and are not likely to have CLASS premiums deducted from their paychecks. That’s unfortunate, and I hope they prove me wrong, because financing long-term care is–and will remain–one of our country’s biggest health care challenges for the foreseeable future.
Note: For more on the CLASS Act, read this piece by Judith Feder, Harriet Komisar and Paul Van de Water, which appeared in a recent issue of The American Prospect.