Proposed long-term insurance program raises questions

By Lori Montgomery
Washington Post Staff Writer
Tuesday, October 27, 2009; 12:53 PM

As congressional leaders haggle over the shape of a proposed government-run "public option" in health-care reform legislation, a quiet revolt is brewing against a different public insurance program -- a plan to create government insurance for long-term care.

The proposal is known as the CLASS Act, short for Community Living Services and Support. The idea has been around for years, and the late Sen. Edward M. Kennedy (D-Mass.) pushed to have the measure included in the health-care overhaul package that passed the Senate health committee in July. A similar measure was also adopted by voice vote in one of the three House committees handling health care.

The idea is to create long-term care insurance that would be available to anyone, including those who are already disabled. People would be automatically enrolled, unless they chose to opt out, and would pay a premium in exchange for the opportunity to receive cash benefits to cover the cost of home care, adult day programs, assisted living or nursing homes after they had been enrolled for at least five years. Premiums and benefit levels would be set by federal health officials, but advocates predict that the program would provide beneficiaries with a minimal sum, around $75 a day.

The proposal has gained momentum in recent days as Democrats in both the House and Senate cast about for cash to help finance a final health package. Because the program would begin taking in premiums immediately but would not start paying benefits until 2016, congressional budget analysts have forecast that it would generate a nearly $60 billion surplus over the next 10 years, cash that would help the larger measure's balance on paper.

But an array of groups -- including the Congressional Budget Office and the American Academy of Actuaries -- have questioned the design of the program, warning that it could easily require vast infusions of cash to cover benefits after 2019.

Sen. Kent Conrad (D-N.D.) called the CLASS Act "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of," and he vowed to block its inclusion in the Senate bill.

In the House, Rep. Earl Pomeroy (D-N.D.) also questioned the program in a caucus meeting last week. Pomeroy said the nation needs to find a way to relieve the heavy burden that now falls on Medicaid to cover the cost of nursing home care. But he said that will require long thought and hard decisions, "not some provision cooked up by advocacy groups at the last hour."

Advocacy groups, for their part, counter that the program would be actuarially sound far into the future and would save Medicaid money.

"It is not a Ponzi scheme," said Larry Minnix, president of the American Association of Homes and Services for the Aging, which represents nonprofit providers and is one of more than 200 consumer and other groups supporting the legislation. "It is a consumer-funded insurance pool that provides people a cash benefit to help with simple chores of daily living so they can remain independent."

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