Senate Health Reform Bill Incorporates CLASS Act

November 25, 2009

On Saturday, Nov. 21, 2009, the U.S. Senate moved a step closer to passing a bill to overhaul the nation’s healthcare system. The Democratic leadership achieved a key procedural victory when it secured the 60 votes required to begin debating and amending the Senate’s version of health care reform legislation titled “The Patient Protection and Affordable Care Act” (H.R. 3590) after the Senate’s Thanksgiving break.

Subtitle H of the Senate bill contains a controversial provision to enact the Community Living Assistance Services and Supports Act (the “CLASS Act”). The CLASS Act, originally introduced by deceased Sen. Edward Kennedy (D-MA), Congressmen Frank Pallone (D-NJ) and John Dingell (D-MI), calls for the establishment of a national, voluntary disability insurance program that would enable individuals with severe functional impairments and their families to purchase community living assistance services and support to maximize a person’s functionality and independence. A similar proposal is also contained in the House’s healthcare reform bill, the “Affordable Health Care for America Act” (H.R. 3962). According to the sponsors, the CLASS Act would benefit adults who become severely functionally impaired (individuals who are unable to perform two or more functional activities of daily living) by creating a new national long term care insurance program financed by voluntary payroll deductions designed to provide a cash benefit to help people obtain services and support, while providing beneficiaries with more choices and opportunities to live and participate in their communities. Beneficiaries, for example, would be able to use funds to:

  • obtain housing modifications;
  • acquire assistive technologies,
  • hire personal assistance services, or
  • secure transportation.

To qualify for benefits under the Senate bill, individuals must be 18-years-old and must have contributed to the program for at least five years prior to being eligible for benefits. All working adults would be automatically enrolled in the program and would pay a monthly premium (presently estimated to be approximately $65 per month). Employees, however, would be able to opt out of enrollment.

The CLASS Act’s proponents argue that “the large risk pool to be created by this program would make added long term care coverage much more affordable than it is currently, thereby reducing incentives for people with severe impairments to “spend down” to Medicaid. Proponents also note that CLASS Act participation would be voluntary and the premiums would be designed to cover all program costs. The proposal is widely supported by disability rights groups and groups advocating on behalf of community-based services, including the American Association of Homes and Services for the Aging.

The CLASS Act, however, faces many hurdles and ultimately may not succeed. For example, the insurance industry is fighting to remove the CLASS Act from final healthcare legislation, arguing that its modest benefit would not adequately protect Americans who need nursing home care or 24-hour home healthcare services. An additional potential problem with the proposal is the lengthy waiting period requiring a beneficiary to wait five years before making any claims.

Although the fate of the CLASS Act is yet undetermined, many people believe that it is likely to be included in any final health reform legislation because it would help the bottom line by generating Federal revenue for approximately the first two decades after its enactment. In its preliminary analysis of the House bill, for example, the Congressional Budget Office projected that because the CLASS Act would pay out far less in benefits than it would receive in premiums over the 10-year budget window, it would reduce deficits by about $72 billion, and by a smaller amount in the following decade. After 2029, however, the program would start contributing to the Federal deficit.

Please contact one of the authors or a member of the Long Term Care practice group if you would like more information about the CLASS Act.

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