Supporters of Senator Ted Kennedy's CLASS Act, which would create a national long-term care insurance program, are bragging that the plan would produce $59 billion for the government over the next 10 years, money they say could help pay for health reform.
As much as I like the ideas behind the CLASS Act, this claim is both misleading and counterproductive. It implies that premiums for this insurance would get tossed into the bottomless pit of the federal budget. In reality, a well-designed program, which the CLASS Act could be, would keep those premium payments totally separate from the rest of the budget. They would, instead, go into a discrete fund to be invested just like private insurance premiums.
The $59 billion in projected revenue comes from the Congressional Budget Office, which is responsible for estimating the costs of all legislation. CBO says the CLASS Act would raise $59 billion because, while premiums would be collected right away, no benefits would be paid out for the first five years. There are good financial reasons for setting this "vesting" period, but it is this unusual schedule that creates this temporary income.
It is easy to understand what the CLASS Act backers are doing. With lawmakers desperate to find money to pay for health reform, they want to make it appear that government long-term care insurance is something of a golden goose. But if a national long-term care insurance plan is going to pass, both consumers and lawmakers need to understand it is designed to be financially sound over the long-term. And if consumers are to believe they are paying a premium, and not a tax, they have to be convinced they are purchasing insurance, not a vague government promise of support for their long term care in 50 or 60 years.
Industry opponents have already jumped on the claim. Jesse Slome of the National Association for Long-Term Care Insurance, a trade group, blasted the CLASS Act as "an underfunded entitlement program." Supporters seem to want to counter that, no, it is actually an overfunded entirelement program. I don't think that's an argument they can win.
Many of the families I talked to in Caring for Our Parents would love to have access to financially sound long-term care insurance. But they don't want to pay premiums that will help fund health reform.