Community Living Assistance Services and Supports Act
Encyclopedia
The Community Living Assistance Services and Supports Act (or CLASS Act) is a U.S. federal law, enacted as Title VIII of the Patient Protection and Affordable Care Act
(PPACA - aka "Obamacare"). The CLASS Act would have created a voluntary and public long-term care insurance option for employees, but in October 2011 the Obama administration announced it was unworkable and would be dropped.
Under the Act the Department of Health and Human Services was to set the terms prior to implementation, but determined the program was not viable and could not go into effect.
The CLASS Act had been "a key priority" of the late Senator Edward "Ted" Kennedy
.
estimated the program would have resulted in $2 Billion in Medicaid
savings in the first ten years because of individuals receiving benefits under the CLASS Act that they could have received under Medicaid
.
Many organizations, including the Congressional Budget Office, developed estimates of potential premiums and benefits:
Benefits would have varied by severity of functional limitation, with the average being at least $50 per day. The benefit schedule could have been adjusted in future years by the Secretary.
plans (i.e., benefits would not have been taxable and premiums might have been eligible for medical expense deduction).
The CLASS program did not extend coverage to an employee’s family members. It was not clear how non-working spouses could enroll in the program or receive benefits due to the requirement that the beneficiary must have had sufficient earnings to be credited with income quarters under the Social Security Act.
The statute says, "No taxpayer funds shall be used for payment of benefits under a CLASS Independent Benefit Plan... the term ‘taxpayer funds’ means any Federal funds from a source other than premiums.... and any associated interest earnings."
and Lindsey Graham
introduced the Repeal the CLASS Entitlement Act citing the potential of it becoming a new entitlement program. It was predicted that enrollees requiring large medical payouts would be attracted to the plan, leading to the inability of the collected premiums to cover all costs.
On July 19, 2011 the Senate so-called Gang of Six, a bipartisan group of senators proposed to repeal the CLASS act as part of a proposal for a balanced budget legislation
opponents of the plan called it "a financial gimmick" to manipulate the Congressional Budget Office
deficit projections for the PPACA, while Democratic
Senator Kent Conrad
called it a "Ponzi scheme
," because (a) projected premiums during the vesting period were counted as revenue during the first decade but promised spending would have begun in the second decade, so the CBO's 10-year estimates included the revenue but not the spending, and (b) benefits would cost more than premiums.
Timothy Carney of the Washington Examiner
wrote that the Act would have encouraged revolving door
behavior, calling the Act "an 'unsustainable' subsidy
to companies whose former executives helped write it, and which are now hiring the congressional staff that helped write it."
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...
(PPACA - aka "Obamacare"). The CLASS Act would have created a voluntary and public long-term care insurance option for employees, but in October 2011 the Obama administration announced it was unworkable and would be dropped.
Under the Act the Department of Health and Human Services was to set the terms prior to implementation, but determined the program was not viable and could not go into effect.
The CLASS Act had been "a key priority" of the late Senator Edward "Ted" Kennedy
Ted Kennedy
Edward Moore "Ted" Kennedy was a United States Senator from Massachusetts and a member of the Democratic Party. Serving almost 47 years, he was the second most senior member of the Senate when he died and is the fourth-longest-serving senator in United States history...
.
Key provisions
Most of the terms were to be developed by the Department of Health and Human Services over several years. However, certain terms were set in statute:- Enrollees would have paid a monthly premium, through payroll deduction
- Enrollees would have been covered on a guaranteed-issue basis
- Enrollees would have been eligible for benefits after paying premiums for five years and having worked at least three of those years
- Enrollees would have received a lifetime cash benefit after meeting benefit eligibility criteria, based on the degree of impairment
Timeline for provisions
- June 21, 2010: Required the Secretary to establish a Personal Care Attendants Workforce Academy Advisory Panel for the purpose of examining and advising the Secretary and Congress on workforce issues related to personal care attendants
- By January 1, 2011: Established the CLASS Program, as specified
- By January 1, 2011: Addressed infrastructure for personal care attendant workers
- By January 1, 2011: Required information on supplemental coverage from the CLASS program in the National Clearinghouse for Long-Term Care Information
- By January 1, 2012: Would have required the Secretary to (1) establish an Eligibility Assessment System (2) enter into agreements with the Protection and Advocacy System for each state; and (3) enter into agreements with public and private entities to provide advice and assistance counseling.
- By October 1, 2012: Would have required the Secretary to designate a benefit plan as the CLASS Independence Benefit Plan and publish such designation, along with details of the plan and the reasons for the Secretary’s selection, in a final rule to allow for a public comment period.
- Beginning January 1, 2014: Would have required the Secretary to submit an annual report to Congress on the CLASS program, as specified.
Expanded availability of long-term care
According to Barbara Manard, a health economist with LeadingAge, the act would have created "a national insurance trust" with a potential "daily cash benefit on the order of about $50 to $75 a day, depending on your level of disability."Reduce government spending
The Congressional Budget OfficeCongressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
estimated the program would have resulted in $2 Billion in Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...
savings in the first ten years because of individuals receiving benefits under the CLASS Act that they could have received under Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...
.
Premiums
Premium rates were to be determined by the Department of Health and Human Services with subsidies for low-income individuals and students. Premium rates would have varied by issue age. The CLASS program contained an implicit redistribution tax to subsidize lower income and full-time student participants.Benefits
The legislation did not set specific benefits. The Secretary of Health and Human Services was tasked with developing actuarially sound premiums and benefits.Many organizations, including the Congressional Budget Office, developed estimates of potential premiums and benefits:
| Analyst | Average Daily Benefit | Estimated Monthly Premium | |
|---|---|---|---|
| ACLI | $90/day | $140/month | |
| CBO Congressional Budget Office The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress.... (June 25, 2009) |
$75/day | $65/month for initial decade, rising to $100/$110 for subsequent cohorts | |
| CBO Congressional Budget Office The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress.... (July 6, 2009) |
$75/day | $65/month for initial decade; after 2019, benefits dropped to $50/day and premiums for new enrollees raised to $85/month | |
| AAA American Academy of Actuaries The American Academy of Actuaries, also known as the “Academy” or the AAA, is the body that represents and unites United States actuaries in all practice areas... /SOA Society of Actuaries The Society of Actuaries is a professional organization for actuaries based in North America. It was founded in 1949 as the merger of two major actuarial organizations in the United States: the Actuarial Society of America and the American Institute of Actuaries... |
$75/day | $125/month | |
| Mercer Group | About $75/day [2-3 ADLs = $50/day; 4+ ADLs= $100/day] | $61/month to $123/month, depending on participation rate and disability trends | |
| ACLI | $50/day | $107/month to $117/month | |
| AAA American Academy of Actuaries The American Academy of Actuaries, also known as the “Academy” or the AAA, is the body that represents and unites United States actuaries in all practice areas... /SOA Society of Actuaries The Society of Actuaries is a professional organization for actuaries based in North America. It was founded in 1949 as the merger of two major actuarial organizations in the United States: the Actuarial Society of America and the American Institute of Actuaries... |
$50/day | $86/month | 0 |
Benefits would have varied by severity of functional limitation, with the average being at least $50 per day. The benefit schedule could have been adjusted in future years by the Secretary.
Enrollment process
Employers would have auto-enrolled employees through payroll deduction, a negative election similar to some 401(k) plans.Tax treatment
Tax treatment would have been the same as for tax-qualified long-term careLong-term care
Long-term care is a variety of services which help meet both the medical and non-medical need of people with a chronic illness or disability who cannot care for themselves for long periods of time....
plans (i.e., benefits would not have been taxable and premiums might have been eligible for medical expense deduction).
Limitations
Participation would have been limited to employees actively at work, and required a five-year vesting period (including three working years) prior to benefit eligibility.The CLASS program did not extend coverage to an employee’s family members. It was not clear how non-working spouses could enroll in the program or receive benefits due to the requirement that the beneficiary must have had sufficient earnings to be credited with income quarters under the Social Security Act.
The statute says, "No taxpayer funds shall be used for payment of benefits under a CLASS Independent Benefit Plan... the term ‘taxpayer funds’ means any Federal funds from a source other than premiums.... and any associated interest earnings."
Administrative expense
Administrative expenses, including advocacy and assistance counseling, were to be limited to three percent of premiums.Repeal efforts
On April 4, 2011 senators John ThuneJohn Thune
John Randolph Thune is the junior U.S. Senator from South Dakota and a member of the Republican Party. He previously served as a U.S. Representative for .-Early Life, Education:...
and Lindsey Graham
Lindsey Graham
Lindsey Olin Graham is the senior U.S. Senator from South Carolina and a member of the Republican Party. Previously he served as the U.S. Representative for .-Early life, education and career:...
introduced the Repeal the CLASS Entitlement Act citing the potential of it becoming a new entitlement program. It was predicted that enrollees requiring large medical payouts would be attracted to the plan, leading to the inability of the collected premiums to cover all costs.
On July 19, 2011 the Senate so-called Gang of Six, a bipartisan group of senators proposed to repeal the CLASS act as part of a proposal for a balanced budget legislation
Abandoned by Obama Administration
On October 14, 2011, HHS Secretary Kathleen Sebelius announced that the Obama Administration would not attempt to implement the C.L.A.S.S. Act stating “I do not see a viable path forward for Class implementation at this time.”Criticisms
RepublicanRepublican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
opponents of the plan called it "a financial gimmick" to manipulate the Congressional Budget Office
Congressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
deficit projections for the PPACA, while Democratic
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
Senator Kent Conrad
Kent Conrad
Kent Conrad is the senior United States Senator from North Dakota. He is a member of the North Dakota Democratic-NPL Party, the North Dakota affiliate of the Democratic Party...
called it a "Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
," because (a) projected premiums during the vesting period were counted as revenue during the first decade but promised spending would have begun in the second decade, so the CBO's 10-year estimates included the revenue but not the spending, and (b) benefits would cost more than premiums.
Timothy Carney of the Washington Examiner
Washington Examiner
The Washington Examiner is a free daily newspaper published in Springfield, Virginia, and distributed in the Washington, D.C. metropolitan area. It is owned by Denver billionaire Philip Anschutz....
wrote that the Act would have encouraged revolving door
Revolving door (politics)
The revolving door is the movement of personnel between roles as legislators and regulators and the industries affected by the legislation and regulation and on within lobbying companies. In some cases the roles are performed in sequence but in certain circumstances may be performed at the same time...
behavior, calling the Act "an 'unsustainable' subsidy
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
to companies whose former executives helped write it, and which are now hiring the congressional staff that helped write it."