Sebelius on CLASS, Read Bait and Switch

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Starting sometime toward the end of next year, American workers will be asked to put their hard earned money into a new government program for long term care called the Community Living Assistance Services and Supports (CLASS) Program.  The CLASS Act is part of Obamacare and is supposed to generate $70 billion in revenue to the Federal government from the voluntary contributions of participants.  The likelihood that Americans will make a conscious decision to send their money to a government that is $14 trillion in debt with the expectation that sometime five years AFTER they start contributing they may be eligible for a benefit of as little as $50 per day to help pay for their long term care services is doubtful.

In addition, both well respected Actuary Associations have called the program unsustainable because of its poor design and lack of underwriting for participants.  The President’s own Fiscal Commission also called the program unsustainable and recommended reforming it or repealing it entirely.

In its original form when first proposed the average premium was to be around $60 per month per worker.  Both the government and the reports by the Actuary Associations now peg the expected average premium needed to sustain the program at more than $160 per month.  The actual amounts will be determined by the Department of Health and Human Services (HHS) through its regulatory authority given to it by the Act.

Realizing that no one in their right mind would voluntary give up $160 per month of their personal funds with the expectation of getting some vague promise from the government that they might get some funds for long term care services no sooner than five years down the road, HHS Secretary Sebelius is now doing what regulators claimed private long term care insurance companies have done in the past; bait and switch.  She is proposing that premiums start out lower and increase as “benefits increase.”  Don’t take the bait.  This is just a blatant attempt to make Obamacare’s numbers come out closer to what the Democratic Leadership put into the bill in order to try and convince us that the entire program will not add to our national debt.  If people don’t contribute $70 billion to the CLASS Act, that is less money for all the new expensive stuff contained in the rest of the legislation.  They consider your contributions “revenue” to the Federal government and not reserves to pay future claims.

Sebelius now suggests that she may be “looking at options for indexing premiums so they would rise with benefits.”  Although she claims that this information would be “transparent” to the buyer she doesn’t say that the legislation allows the government to raise the premiums whenever they decide that the program is not financial sound.  Before passage of Obamacare I wrote to members of Congress and asked them to include a full disclosure statement for Americans concerning enrolling in Class.  The disclosure would include the expected premiums over the first five years when the participant receives no benefits, information about the current and expected future cost of long term care services and the fact that Class participants do not have the rights and benefits of real insurance.  They do not get a policy or even a coverage certificate.

Here is the speech Sebelius recently gave concerning the Class Act
Here is the article published in The Hill:

I predict that the average premium that HHS will come up with will be around $100 per month.  That way the Administration thinks they can attract more of us to participate. They will then guarantee that rates will rise over time.  If government gets enough people to contribute and then drop out of Class before they become eligible for benefits then that $70 billion doesn’t all have to be used to pay claims.  It just remains with the government to pay for the rest of Obamacare.  What a concept!

The alternative for most Americans to this new government program is a privately owned long term care insurance policy purchased while a person is still in general good health with rights and benefits spelled out in the contract with the insurance company.  It is true that premiums can be increased but only on a class basis and only with the approval of State Insurance regulators. The Class Act does not provide this kind of protection.  It is not insurance as there will be no policies issued and the government can change the rules and premiums at will.  Imagine any long term care insurance agent trying to sell a client such a poorly designed program like Class.

Here is James Capretta’s article on the subject appearing in the National Review.


Sebelius Lies Before Congress About LTC

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Secretary of Health and Human Services Kathleen Sebelius testified under oath before the U.S. Senate Finance Committee on February 15th and lied when she defended the need for a government run long term care program called the Class Act and attacked private long term care insurance by saying this:

“One of the challenges right now is that in the private sector right now there isn’t such a product.  There are residential services available as an addendum to a long term care policy.  But the ability to buy really just home health services that would allow people to stay and age in place are really not available in the private sector market right now.”

Notice that she uses the word really twice which indicates to me she is trying to get the Senators to believe what she wants them to believe is real.  What is real is that I cared for my own Mom in her own home to the day she died and her long term care policy helped pay for her care.

See video of her presentation here (Find the statement between 7:33 and 7:56 minutes)

This is an appalling, harmful and untruthful statement.  It isn’t that Sebelius misunderstands how private long term care insurance works.  After all she was Insurance Commissioner of Kansas and President of the National Association of Insurance Commissioner (NAIC).  During her years heading NAIC she oversaw model regulations that dealt with long term care insurance.  She is purposely promoting the Class Act provision contained in ObamaCare by making stuff up and doing so under oath.  Since the beginning, promoters of the Class Act have tried to diminish and attack the value of private long term care insurance in order to say that their government designed and administered solution was needed.  Sebelius statement is just another in a series of incorrect statements.  In her position as our top official on healthcare she knows better.

Her false statement is harmful to the American people.  If someone is considering purchasing this valuable kind of insurance to protect themselves and their family and take her words as truth, they may forgo getting covered thinking home care benefits are not available.  The truth is that almost all long term care insurance being sold today contains home care benefits including home modification, care giver training, care management services and in home professional care through licensed home health agencies.  The policies have fully incorporated home and community care benefits; not some kind of addendum as her dismissive statement indicates. According to the American Association of Long Term Care 49% of all new long term care insurance claims are for home care services and 21% are for Assisted Living benefits in the community.  Only 30% are for Nursing Home care.  In my State of Pennsylvania the law REQUIRES that only comprehensive policies be sold and therefore that those policies include home care benefits.

Secretary Sebelius must apologize and provide an immediate and public retraction of her statement.  Anything less should be investigated by Congress.

Ross Schriftman on the CLASS Act

Ross Schriftman is a long term care insurance specialist who is warning against the new government long term care insurance program that he calls inadequate, unworkable and underfunded.  Schriftman cited the “ObamaCare” law as “another government program with serious flaws.”  This section is referred to as the Class Act.

Workers would pay $65 per month out of their paychecks to participate, beginning this year (2011).  The money would be deducted unless an individual requested to opt out once a year.  The government would take the money and create the “Independence Fund” and pay out benefits that will be structured by October 1, 2012.

Schriftman who volunteered his time for 20 years to help get the Long Term Care Partnership program up and running says that the proposal’s benefit of as little as $50 is inadequate. “I can tell you I know from being a care giver for my Mom who has Alzheimer’s the costs are far higher than the benefits being proposed in Congress,” said Schriftman. “This plan would provide so little benefit that if someone needed significant care at home families would end up bankrupt and face foreclosures.”  Schriftman said that his mother’s live in companion service through a home health agency costs $185 per day or $67,525, plus care management services and extra living expenses.  “The cost of 24/7 care is easily $100,000 per year.  What will $50 per day or $18,250 do?” he said.  “I am fortunate.  I planned ahead and bought private long term care insurance for my Mother 18 years ago and it pays a big chunk of the cost for her care.”

Schriftman also listed the following problems with the bill which he has analyzed.  “No one gets any benefits until they have paid into the program for five years,” he said. “The government determines the benefits you get based on your functional loss and not your needs and the government can raid the funds and use it for any other purpose merely by having 60 of 100 Senators vote to do so.  We already have a funding problem with Medicare and Social Security.

Instead of creating a new government fund that could run out of money why not give people tax breaks to buy their own insurance which they own and control.  We should be promoting the Partnership program and a massive public educational program about the financial risks of providing long term care and the need to plan. (See attached testimony) The government should focus on saving the Medicare and Social Security and fulfilling the promises they have already made and are about to break rather than creating another program.

Schriftman added:

Just imagine if a bunch of executives met behind closed doors and created an insurance scheme that will have American workers paying billions of dollars to a fund and not be entitled to any benefits for 5 years.  The scheme promises to pay for nursing and home care for the disabled sometime in the future but the rules for how much sick Americans will actually get in benefits will be determined at the time they get sick by a review board appointed by these executives.  The funds deposited through workers pay checks can also be diverted for other pet projects of these executives if 60% of them agree to do so

Is this something that Wall Street or Insurance Executives have cooked up?  No.  It is the newest and most wonderful proposal that the U.S. Congress has ever developed according to those who support it.  It is called the CLASS Act and it is in the new health care reform bill.  The executives who are promoting it are various leaders of Congress and so called advocacy groups that think the government, by collecting more money from American workers, should pay for long term care services rather than private long term care insurance.  Every concerned American should read the legislation and decide whether they would be better off paying more money into a government fund or owning their own insurance policy to protect against the risk of long term care expenses.