‘Gang of Six’ plan drops long-term care provision

By Shira Schoenberg
Globe Correspondent / July 21, 2011

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A new insurance program for long-term care may fall casualty to the so-called “Gang of Six’’ plan to address the federal deficit.

A little-noticed provision of President Obama’s health care overhaul established a voluntary insurance program for in-home care in which individuals would pay premiums, then receive cash benefits should they become disabled and unable to perform basic functions like eating or dressing themselves. The bipartisan group of senators trying to develop a compromise to allow the president and Congress to raise the debt ceiling would repeal the program.

The details of the insurance plan are not yet known because the secretary of Health and Human Services has until Oct. 1, 2012, to design it. According to a June 2010 report by the Congressional Research Service, premiums would probably start at between $123 and $240 a month for average benefits of $50 to $75 a day once a recipient becomes disabled. (Students and those below the poverty level would pay just $5 a month.)

The late Senator Edward M. Kennedy of Massachusetts championed the idea of a government-run long-term care insurance program for years, and before his death was instrumental in getting it included in Obama’s overhaul. The plan is known as the CLASS Act, for Community Living Assistance Services and Supports. In the short term, the Congressional Budget Office estimated, the program would reduce federal spending by $83 billion between 2012 and 2021. But that is only because people must buy into the system for five years before getting benefits, so payouts would not actually start until 2017. In subsequent decades, the CBO predicted, the program would pay out more than it takes in.

The big question is whether the program is sustainable in the long term. Analysts say that because the program is voluntary, it is likely that only the sickest and most at-risk population would participate, driving up costs.

Obama’s bipartisan Simpson-Bowles commission on fiscal reform recommended repealing or reforming the CLASS Act last December. “The program attempts to address an important public policy concern - the need for non-institutional long-term care - but it is viewed by many experts as financially unsound,’’ the commission’s report said. The panel found that early beneficiaries would pay premiums for only a short period of time and would receive benefits that cost more than they paid in. By law, the Department of Health and Human Services is required to set premiums at a rate that makes the program solvent for 75 years. But that would require premiums to rise ultimately to a level no one would be willing to pay, according to the report.

Joseph Antos, a health policy expert at the conservative American Enterprise Institute, warned that if only the sickest Americans take part and the program becomes insolvent, taxpayers could be asked to bail it out. It will become “just another entitlement drawing down on the federal budget,’’ Antos said in an interview yesterday.

On the other hand, advocates for the program say it addresses an important need: ensuring that individuals contribute to their own long-term care, rather than relying on Medicaid, another federal program. “The reality is people are without protection against the catastrophic and uncertain risk of needing long-term care,’’ said Judy Feder, a professor at Georgetown Public Policy Institute and an Urban Institute fellow. “This is a way to have people pay in advance to provide a modest amount of protection to help them manage as they need long-term care.’’

Health and Human Services Secretary Kathleen Sebelius has said her department is examining ways to make the program fiscally sound - for example, by attracting healthier people, or tying premium rates to benefits.

It is unclear whether Obama would take a strong stand to support the program. A spokesman for Health and Human Services declined to comment. A White House spokesman referred a reporter to statements yesterday by White House press secretary Jay Carney that Obama supports the framework of the Gang of Six proposal but may not agree with all the details. Carney did not mention the CLASS Act.

Shira Schoenberg can be reached at