Kirk pushes health care program championed by Kennedy

KIRK'S REMARKS

Today in the United States, approximately 200 million of our citizens are elderly or disabled. These are not mere statistics. They are family members and loved ones – vulnerable, challenged and too often forgotten. But they always had a friend and advocate in Senator Ted Kennedy. He understood that a fair and civilized society should be judged on how it treats its most vulnerable citizens.

Sadly, millions of seniors and persons living with disabilities struggle to obtain the services and supports they need to live fulfilling lives and to remain in their communities among their friends and families – in what they hoped would be their productive “golden years”.

As Senator Kennedy understood, it is morally wrong for so many disabled men and women who need assistance to be forced to face the heartbreaking choices: Do I abandon my job? Spend down my savings? Move out of my home? And give up my American Dream in order to qualify for Medicaid —the only government program that can provide me with the supports I need? Or do I forgo my independence and resign myself to living the rest of my life confined to a facility?

Senator Kennedy also understood that it is morally wrong when friends or a loved one must also face the heartbreaking choice: Do I give up my job and commit my time to care for my parents at the expense of my own family and children? Or do I resign myself to confining my aging mother or father to a facility?

Families across the country understand this heart-wrenching crisis all too well. A recent scan poll found that nearly 60% of those surveyed had a personal experience with long term care. Nearly 80% would be more likely to support health care reform if it included a long-term care program. These families know that the current long term care industry is not meeting their needs, and that change must come.

As always, Senator Kennedy cared how our society would be judged. He didn’t just sit idly by. He acted. He drafted The Community Living Assistance Services and Supports Act, known as the CLASS Act, which we are debating this morning.

This program was at the heart of his effort to help people with functional limitations and their families to obtain the services and supports they need. It gives them the chance to maintain their independence and remain active and productive members of their communities. Under the CLASS Act, a worker in Massachusetts or any other state can choose to pay a premium into this voluntary insurance program through affordable payroll deductions. After contributing for five years, they become eligible for a cash benefit of at least $50 a day if they become disabled. That cash benefit can make the difference in allowing a disabled person to live with independence, self-respect and dignity. For example, it can pay for having a ramp installed to their home, or to pay for needed transportation, or to purchase a computer to work from home and remain self-sufficient. It can also pay for a caregiver to come to their home, help them bathe, get dressed, and cook meals—services that otherwise often fall to family and friends, who are forced to work reduced hours on their own jobs, or quit those jobs altogether.

Currently, long-term care, as we know it, is paid for through a fragmented combination of sources, including family budgets, Medicaid, Medicare, and private insurance. Without a prior and voluntary insurance investment, which the CLASS act offers, paying for long term care can be financially catastrophic for many individuals and families, since home care and nursing homes can cost over $70,000 a year. Only one in five individuals can afford private long term care insurance, and many are excluded because of pre-existing conditions. Medicare’s role in providing long-term services is extremely limited, covering only short-term skilled nursing care and home health. This lack of options forces many people to turn to Medicaid, which is our nation’s primary payer and only safety-net program providing comprehensive long-term care services and supports.

But who is eligible for Medicaid? People only qualify for Medicaid if they are, or become, poor, which forces many families to impoverish themselves to obtain the support they need. We have all heard the stories.

Persons work hard all their lives, and then, due to an accident, they cannot afford to pay for needed services and supports out of pocket. So they now must give up their savings to become eligible to turn to the government and Medicaid to provide the proper care they need to survive.

No one wins. Not the disabled or elderly parent. Not the family care giver. Not the government and not Medicaid.

I know family who lives on the Cape in Massachusetts who know firsthand how powerful the CLASS Act could be for families. Jerilyn has been caring for her sister who is brain damaged and legally blind, paralyzed and incontinent.


The CLASS Act will help turn this serious no win situation into an everyone wins result. It gives individuals with disabilities and their families the funds they need to obtain some of the services they need, without having to resort to Medicaid. The current reliance on Medicaid is not only a strain on families — it is also a strain on our already overburdened Medicaid system. Today, Medicaid spends nearly $50 billion a year on long term services and supports – in 2007, Massachusetts spent over $3 billion on long-term care. Estimates indicate that by 2045, that national spending could exceed $200 billion. Obviously, the current course is unsustainable.

In addition, the private insurance industry is not doing enough to meet the growing demand for such care. Aging Baby Boomers and longer life spans will increase the demand for long-term care dramatically for decades to come. Yet, 95% of people over 45 do not have private Long term care insurance, and fewer and fewer people are able to buy such coverage. Make no mistake — as it stands today, if someone without adequate long term care coverage becomes disabled, they will more than likely have to turn to the already overburdened Medicaid system to get the help they need.

The CLASS Act is designed specifically to remedy this looming crisis. By giving people an affordable option other than Medicaid, the act will save the system over $1.6 Billion over the first four years that people start receiving benefits. Some opponents of the CLASS Act argue that the program will not be sustainable over time, and that it will become insolvent and end up costing taxpayers large amounts. That argument could not be further from the truth.
Let’s give proper credit where it is due. With the help of our friends on the other side of the aisle, we have taken real steps to ensure that the program remains solvent for years to come.

The act establishes a strong work requirement, to make sure that funds continue to come into the program from the payroll tax deduction or from an individual’s voluntarily paid premium. It requires the Secretary of HHS to review and set the premiums annually to ensure that the program will remain solvent for the next 75 years. It directs the secretary, in addition, to review the cost projections 20 years into the future. And, finally, it mandates that no taxpayer funds will be used to pay benefits. Let me repeat that final point, since I have often heard it misrepresented by opponents of the program: no tax payer funds will be used to pay benefits. Benefits will be paid through self-funded and voluntary premiums.

During the markup in the HELP Committee this summer, Senator Dodd led a major discussion about this program. With the help of the Republicans on the committee, especially Senator Gregg of New Hampshire, additional safeguards were included to ensure that the act will stand on strong financial footing for years to come. After the Committee adopted Senator Gregg’s 75-year amendment, the program won strong words of support from both parties. In fact, Senator Gregg published an op-ed praising the program in the July 20th issue of Roll Call.

In short, the CLASS act creates a voluntary, self-funded insurance plan that is a cost saver for Medicaid.

It puts the money and the power to decide for themselves in the hands of those directly affected - the individual and their loved ones. It keeps people productive in the community and their families financially sound. The CLASS Act has the potential to help millions of individuals, families and businesses across the country by allowing them to make an investment in their future and determine the quality of life they want to lead.
The CLASS Act is a realistic answer to the serious problems of our current system. It enjoys strong support from the White House and from hundreds of disability groups throughout our nation. More importantly, it provides financial and health security to the lives of millions of Americans. Disability could suddenly strike any of us in the years ahead. As we work to provide health insurance to the tens of millions of Americans who do not have it, it makes no sense to ignore the needs of millions of people with disabilities and the elderly, who desperately need our help.

I hope very much that our colleagues will support the CLASS Act as part of the current health reform bill, and I look forward very much to its enactment.

SUMMARY OF PROGRAM

The Need for the CLASS Act

Long-term supports and services are an area that is not currently affordable or accessible for millions of Americans. Approximately 5 million people under age 65 living in the community have long-term care needs. There are more than 70,000 workers with severe disabilities in the nation today who need daily assistance to maintain their jobs and their independence. Many of the people that need long term services and supports rely on unpaid family and friends to provide that care. Demographic trends suggest that these sources of support will be increasingly scarce in the coming decades. Therefore, paid assistance will be increasingly needed by people with disabilities.

It is estimated that 65% of those who are 65 today will spend some time at home in need of long-term care services – which costs on average almost $18,000 per year. Currently one and a half million people are in nursing homes. Approximately 9 million elderly Americans will need help with activities of daily living (ADLs) or intermediate activities of daily living (IADLs) during the current year – and by 2030 that number will increase to 14 million.

However, contrary to popular belief, Medicare and most private health insurance only pay for long-term care for a short period of time, meaning that most people pay out of their own income or assets. Those with the most intense needs will frequently exhaust their assets and rely on Medicaid. Through the CLASS Act, a new voluntary long-term care services insurance program will provide a lifetime cash benefit that offers seniors and people with disabilities some protection against the costs of paying for long term services and supports, and it helps them obtain services and supports that will enable them to remain in their homes and communities.

How the Program Works

CLASS is a voluntary, self-funded program for people who are currently employed. Affordable premiums will be paid through payroll deduction, if an individual’s employer decides to participate in the program. In this case, people who do not want to participate may opt out of the program. Self-employed people or those whose employers do not offer the benefit will also be able to join the CLASS program. Participants must pay premiums for five years and work for 3 years in order to qualify for benefits.

One of the ways the CLASS program is unique is that it relies less on medical underwriting than do most private insurance plans. All working Americans can participate in the CLASS program. The conditions for qualifying for benefits are the same as those commonly used in private insurance plans – when participants in the program need help with a set number of activities of daily living, they will be assessed and, if eligible, start receiving benefits.

The CLASS Act seeks to empower consumers. Individuals usually know best which services and goods they need to stay independent. Yet they can also use help navigating the complicated health and long term services market place. For these reasons the CLASS Act provides an average cash benefit of $75 per day, so that participants have the most flexibility to meet their own needs. The actual cash benefit will depend on a person’s level of impairment. Counseling, coordination and advocacy services to facilitate the receipt of high quality services will be available to every beneficiary.

Actuarial Framework

CLASS is a program that stands on its own financial feet. It is not a government entitlement program and it does not affect receipt of or eligibility for other benefits, such as Social Security, SSI or SSDI. If an individual uses Medicaid services, the CLASS benefit will be used to offset part of the cost of community based, residential or nursing home care.

Voluntary long term care insurance poses challenges for establishing a solid financial structure. Early formulations of the CLASS Act faced concerns over its financial viability. Through constructive interaction with the industry and other interested parties, several changes in the program were made to address those concerns. First, spouses are not eligible as dependents, decreasing the amount of adverse selection possible in enrollment. Second, the Secretary of HHS has flexibility in premium determination to ensure 75 year solvency, and flexibility in setting eligibility requirements for the receipt of the cash benefit (either 2 or 3 ADLs). Third, premiums are age-rated.

All told, these changes ensure that the CLASS program is financially viable and self-sustaining long into the future.

The Participation Question

In its modeling assumptions, the Congressional Budget Office assumes a 5% participation rate in the CLASS program, following current participation rates for private long-term care insurance. However, there a number of sound reasons to believe that participation in the CLASS program will be substantially higher than the 5% figure – which would further strengthen the financial outlook for the program.

First, the benefit in the CLASS program is a cash benefit, rather than a service-based payment. The ability to flexibly address one’s own needs by purchasing anything from a caregiver’s services to orthotics to a shower chair will make this program more attractive to consumers than traditional long-term care insurance. This is expected to translate into higher participation rates.

Second, the CLASS program is a lifetime benefit. In contrast, only 4% of group long-term care insurance products and 20% of individual long-term care insurance products have a lifetime benefit. As a lifetime cash benefit, this program will generate increased interest and participation.

Third, the CLASS program, unlike private long term care insurance, entails the ease of autoenrollment and payroll deductions for premiums. While the program maintains its voluntary nature through an employee opt-out, the autoenrollment feature will increase participation levels above that expected for proactive enrollment, a trend that has been demonstrated with 401(k) plans, and that underlies automatic enrollment in the Federal Employees’ Group Life Insurance (FEGLI) plan, where enrollment rates are 84%.

Fourth, government endorsement of the plan could be expected to increase participation. The Long Term Care Partnership Program, for instance, found that people who enrolled in private long term care insurance plans reported that the endorsement of the State was an important factor in the decision to purchase.

Long-Term Savings

Beyond being a self-supporting voluntary program, the CLASS Act program can be expected to generate long-term savings in Medicaid. First, there is the direct offset of the $75 daily benefit which is applied towards any Medicaid long term care costs. But beyond that, the CLASS program will help people live independent lives at home and in the community. When people with disabilities get the services they need, they are less likely to enter a nursing home or hospital.

The average $75 daily cash benefit in the CLASS program – which is the equivalent of $27,375 a year – could certainly enable someone to purchase services in the community, delaying and avoiding more expensive institutional care. In fact, the cash benefit is larger than the average yearly cost of home health services ($18,000). Based on 2008 caregiver prices, $75 a day can purchase 2 ½ hours of daily service from a home health aide, 4 hours of daily service from a homemaker, and cover all of the daily cost of an Adult Day Care Center.

While the CLASS program is innovative – and therefore without exact precedent – there are examples and systematic evidence that demonstrate the ability of community-based services to avoid or delay more expensive care in an institution. One study showed that the “Cash and Counseling” program, which provides a cash benefit towards home health services, reduced nursing home use 18% over 3 years. Another study of expansions of home and community based services through Medicaid waivers from 1995 to 2005 revealed that states with high spending on Medicaid HCBS had 15 percent less Medicaid spending on nursing home care than states with low spending on HCBS. As a result, expansion of HCBS entailed a reduction in institutional spending, and long-term cost savings after the initial investment in establishing community services.

A driving force behind entry into a nursing home is caregiver stress. It has been estimated that eliminating high caregiver stress would prevent 73,900 long-stay nursing home admissions over a two year period (roughly one quarter of all long stay nursing home admissions). Providing acash benefit under the CLASS program to enable people to buy additional caregiver services could therefore be expected to avoid admission into a nursing home.

A consumer-directed benefit like that set out in the CLASS program has the additional advantage of increasing consumer satisfaction with services. When consumers directly hire their caregivers (as is the case with a cash benefit), both the consumer and care worker report higher rates of satisfaction, making home-based care through a consumer-directed approach a sustainable alternative for institutional care.

For all of these reasons, the CLASS program can be expected to generate long-term savings, while also enabling a growing older and disabled population to maintain functional lives in their homes and communities.