Home Insurance CLASS Act Long-Term Care Insurance in the Healthcare Reform Bill – Good Idea or Bad?

CLASS Act Long-Term Care Insurance in the Healthcare Reform Bill – Good Idea or Bad?

by EG

As reported on the New York Times site, Ted Kennedy’s CLASS Act made its way into the healthcare reform bill. The CLASS Act sets up a government-run long-term care insurance program, a “public option” for long-term care insurance. The program will be available through employers and participation will be voluntary; however, people will be automatically enrolled, meaning if you don’t want to participate you’ll have to take the action of opting out (as opposed to opting in in the first place). After five years participation participants would become eligible to receive benefits. The program is scheduled to take effect in January, so expect a lot of scrambling to work out the precise details between now and then.

It was stated in the New York Times piece that in order for a program such as this to work, it needs a high rate of participation from healthy people, which logically means younger people.

I recognize that participation rates will increase with automatic enrollment, but, and you can call me a cynic, I’m of the thought that many younger, healthier individuals will take the extra step to opt out, leaving the program dependent on general taxpayer funds to be financially sound. Those certain to remain in are those anticipating needing the assistance, people that will draw down funds from the pool.

It is widely documented that younger people are already not saving enough for retirement, let alone long-term care costs (read Rahm Emanuel’s own 2005 piece on the subject). Why would a younger person want to participate in this program if he/she isn’t already on track to have a sound retirement portfolio? Not everyone lives long enough, or becomes disabled enough, to require long-term care assistance. Far more people need retirement savings than long-term care financing. Further, if you have a sound retirement portfolio, those funds have more flexibility and can be used to help cover long-term care costs should the need arise. Long-term care insurance is largely only useful for persons with a certain asset/wealth status, when the insurance can help protect that wealth by covering expensive long-term care costs and preventing the need for someone to “spend down” for Medicaid qualification. A person doesn’t get to that stage unless they’ve built a solid financial portfolio.

I applaud the idea put forth, but I think more political attention should be given to finding creative ways to bring down long-term care costs first and foremost. Let’s focus on bringing down the rate of obesity and diabetes in this country, and supporting healthy habits and lifestyles. These efforts yield far greater cost-to-benefit ratios, reduce long-term care costs through avoidance or delay and increase quality of life.

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