The CLASS Act would add to the national deficit

Buried in the health care reform legislation is a proposal that attempts to help Americans with their long-term care needs. While the proposal’s goal is worthy, the program would amount to little more than a new entitlement program that will raise our nation’s deficit while doing little to help pay for long-term care.

The Community Living Assistance Services and Supports (CLASS) Act creates a new government-run program that would charge working Americans a premium, taken as a payroll deduction, and in exchange provide them with a daily benefit of $50-$75 to help pay for care. Advocates of the program estimate premiums to be between $120 and $123 per month.

Worker participation in the program is paramount to its long-term financial success. If too many workers opt-out of the program, the Health and Human Services Secretary would be required to raise premiums annually to maintain the program’s solvency. But analyses by several organizations show that the CLASS Act is unlikely to remain financially sound and could contribute billions of dollars to the national deficit.

In October, the Congressional Budget Office determined that the program would produce a savings in the early years but by 2029, the CLASS Act would begin to pay out more than it collects in premiums and add to the deficit in the decade that follows. The non-partisan Concord Coalition concluded that the CLASS Act would eventually require an infusion of government revenue to maintain its solvency.

In a joint study, the American Academy of Actuaries and Society of Actuaries said the program could be insolvent at early as 2021. The study also concluded that: “Due to its design and the high level of required premiums, the program is unlikely to cover more than a very small proportion of the intended population or achieve its goal of broad participation. There are significant concerns that the program’s design may limit the ability of the program to be both sustainable and affordable for participants.”

Moreover, should the purported early savings from the CLASS Act be diverted to help supplement the cost of health care reform—as some have suggested—the program could be in debt much sooner than 2029.

Solvency is not the only problem with the CLASS Act. With long-term care costs running as high as $46 per hour, the CLASS Act will do little to defray these costs. Too many Americans already mistakenly believe Medicare covers their potential long-term care needs. It is likely that many also will mistakenly believe the same about the CLASS program. As a result, people who can and should plan ahead for their long-term care needs will not take appropriate action.

Helping Americans prepare for their long-term care needs will require sound financial and public policy proposals. Improving public education about long-term care and making it easier for Americans to purchase long-term care insurance through their employers are just some of the ideas that would do more to help those preparing for their long-term care needs than the inadequate, financially unsound CLASS Act.