Community Living Assistance Services and Supports Act, or CLASS Act - Dec. 5, 2009

The cost of nursing homes averages $70,000 a year, and a home care attendant runs about $29 an hour. Medicare only covers temporary nursing home stays. Middle-class households have to exhaust their savings before an elder can qualify for nursing home coverage through Medicaid.

Under the proposed program, people would pay a modest monthly premium during their working years. If they become disabled, they would get a cash benefit of at least $50 a day that could be used to pay a home care attendant, buy supplies and equipment, make home improvements such as adding bathroom railings, or defray the costs of nursing home care.

The Class Act will offer hope to Americans with serious illnesses or injuries who can maintain their independence with the help of long-term care. -- Senator Dodd

In other words this is providing financial assistance to those who are already needing care.

Overall it will not provide the same protection that traditional long term care insurance provides, and the CLASS recipients will not qualify for state Partnership asset protection as traditional LTC insurance does.

The Congressional Budget Office estimated that the program would be fiscally solvent over a 75-year-period with the income from premiums, and no taxpayer financing. That assumes an initial monthly premium averaging $123, and a $75 daily benefit. People would sign up for the program at work through a payroll deduction. They would have to pay premiums for five years before they could qualify for benefits. Both the premiums and benefits would be adjusted annually.

Supporters say the government benefit would provide a foundation upon which private insurance companies could build by selling supplemental long-term care coverage. But the industry says a new program would only create confusion for consumers.

Critics countered that the voluntary insurance program is poorly designed and would attract people who already need the benefits. The program would raise money in its first decade because it would begin collecting premiums immediately, but pay out no benefits for five years. However, payouts would quickly outrun premiums, according to the Congressional Budget Office, and the program would probably require infusions of cash in its second decade.

Critics' concerns got more validation recently from a report by Medicare economists who are expert in long-range cost estimates. In a report issued last weekend, they said a voluntary insurance program is likely to attract people who expect they'll need the coverage. Without taxpayer subsidies, premiums would keep going up, discouraging healthy people from signing up and triggering an "insurance death spiral."

Why should people purchase from the government when they won’t buy from private companies? And premiums would quickly become unsustainably high if too many buyers are at high risk for becoming disabled.

"Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health," the report said. "There is a significant risk that the problem ... would make the CLASS program unsustainable."

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