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.

Connecting the Dots

By Greg Scandlen

Pretty often you have to read several stories side-by-side to figure out what is going on in the Democratic mind. Although you may walk away more confused than ever.

Two stories in Politico illustrate the point. In one, “Democrats Seek Redo of Health Pitch,” Senator Chuck Schumer (D-NY) says he can’t wait to get into the debate over repeal. The article says the repeal effort, “gives Democrats a second chance to defend their landmark legislation — and the first substantial chance to show a united front on health reform.” It quotes Sen Schumer —

“We welcome, in a certain sense, their attempt to repeal it because it gives us a second chance to make a first impression,” Sen. Chuck Schumer (D-N.Y.) said Sunday on NBC’s “Meet the Press.” He said the debate will allow Democrats to talk about “the good things that didn’t get a real airing during the sturm und drang of the debate.”

And Kathleen Sebelius agrees –

“Health and Human Services Secretary Kathleen Sebelius said there is an “opportunity for education” during the repeal debate. The pieces of the law that have already gone into effect allow for “a more productive conversation than when the bill was being drafted, because the bill was so intangible to people. That conversation is easier now,” she told the University of Miami Global Business Forum on Thursday.”

Yep, they are really eager to have this debate and be able to show America all the wonderful things that have been done.

But, wait a minute. Another article in Politico, “Repeal Vote Just GOP’s First Step,” reports —

“McConnell will push for a vote on the House bill after the body returns next week, even though Majority Leader Harry Reid (D-Nev.) has made clear that he will do everything he can to block the measure.”

So, The Democrats are eager to have this debate, but Harry Reid wants to “do everything he can” to prevent it from happening?!?! Golly, someone must not have gotten the memo from HQ

Too Big to Succeed

By Greg Scandlen

After TARP, we’ve all become familiar with the idea of “too big to fail,” that is, some companies are so large and so critical to the economy that they cannot be allowed to fail. But ObamaCare showed us what “too big to succeed” looks like.

The Great Debate on ObamaCare has become a model for how not to pass legislation or develop social policy. There were so many versions and iterations of all the different bills and amendments that it became nearly impossible to discuss any of it. CBO kept scoring this, that and the other, and it was hard to match up the particular CBO score with the right bill or amendment, let alone compare specifics.

Yet every provision was critically important, and not just by itself, but how it interacted with the other provisions.

It felt like a shell game, and it is small wonder people got edgy about the whole enterprise. Too many moving parts, too little clarity, too much rhetoric and jargon, and all tainted with political ambitions.

We got way beyond what the legislative process is capable of doing. There was literally no one in Washington who knew what it is they were voting on, so they all voted for the narrowest of political reasons or personal ambitions, not any real understanding of the consequences. To the point that even Newsweek’s Evan Thomas is saying, one year after the bill passed, that “it is a disaster, it’s not working out at all as people anticipated.”

It would have been far better to take all the topics one bite at a time, by which I mean separate bills for:

  • Medicare payment reform
  • Insurance regulation
  • Assistance to the needy
  • Management technology upgrades
  • Workforce initiatives
  • Quality improvement initiatives
  • Professional liability reform

Each of these is complex by itself. Blending them all together into a single bill was simply impossible.

For example, I concede that we need to fundamentally overhaul the regulatory regime currently in place for insurance. Each state has completely different statutes for the individual, small group, and large group markets. Some states have separate regulations for Blue plans, commercial companies, and HMOs. Then ERISA exempts self-funded employers from any state regulation at all. Regulatory reform is an enormous challenge all by itself and the current law is way too vague on how, or even whether, that is supposed to happen. As a result, Kathleen Sebelius is free-lancing on all of it, with no boundaries or clarity. If she thinks a rate increase is “unreasonable” she will punish the insurance company. But how does she define unreasonable? No one really knows except she seems to have picked 10% out of the air for the moment. Is she even concerned about company solvency, reserves, accounting, investment practices?

She gives companies and unions waivers so they don’t have to comply with the loss-ratio standards in 2011. But what is the basis for the waivers? How does one company qualify while another one doesn’t? Nobody can say, so it appears it is based on political favoritism.

Or take the workforce issue. We are facing substantial shortages of primary care physicians and nurses as the Baby Boom generation retires. Expanding insurance coverage will aggravate the problem. Plus there are new technologies coming on-line all the time. How do we get enough technicians to run the machines?

It is not just a matter of giving scholarships to med students or opening more slots in dental schools. The whole licensure and oversight regime currently in place needs to be re-examined. Everyone who looks at it concludes it is a mess. Why at least could there not be interstate reciprocity for licensing and disciplinary actions? Why can’t a physician who is licensed in Arizona prescribe drugs for patients in New Mexico? Or how is it that a doctor who is disciplined in one state can set up shop in the adjoining state?

And on, and on, and on. Because this thing is so big, we are not paying enough attention to the critically important REAL issues.

Let us hope that the new Republicans will get serious and develop legislation to address each of these issues – one at a time.