The Patient Protection and Affordable Care Act (PPACA)
Note: The CLASS Act was repealed in January 2013; it will not be implemented. Instead, the government has appointed a 15-member Federal Long Term Care Commission to compile recommendations for addressing the substantial long-term care needs of our growing elder population. More info will be posted soon.
Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, March 23, 2010), the health care reform legislation signed into law this spring, includes the Community Living Assistance Services and Supports Act, known as the CLASS Act, and is part of the legislative legacy of Senator Ted Kennedy. What follows is an explanation of the provisions of the Act after passage of PPACA. Regulations must be issued by the Secretary of Health and Human Services no later than October 1, 2012, and will spell out the details of the CLASS program. Those regulations will specify the method of operation of the program, the premiums for each population group, how people will qualify for and obtain benefits, how decisions can be appealed, and a host of other program details. Until then, there may be much public speculation about whether people will or will not participate in the program, and how much premium will be needed for the program to be successful. This summary is intended to clarify what is in the law that will become the CLASS long-term care benefit program.
Long-term care is supervision or assistance with everyday activities of daily life such as bathing, dressing and getting in and out of bed. Almost 11 million people living in communities across the country need this kind of care. Half, or about 5.5 million of these individuals, have one or more a disabling conditions and are younger than age 65.(1) As the U.S. population ages, the number of baby-boomers reaching age 80 and older will explode, while at the same time the number of people with disabilities will also increase. Growth in both populations will create a surge in the cost of care, an unprecedented demand for services, caregivers, service workers, and a critical need for funding sources to pay for care. The CLASS Act establishes a national voluntary insurance program for working individuals to help them pay for this kind of care if they need it later, and requires states to assess and ensure the adequacy of a workforce available to provide care to recipients of CLASS benefits.
Enrollment in CLASS is restricted to actively employed individuals, or individuals on active duty with the military, regardless of their health status. Enrollees will pay premiums through a voluntary payroll deduction system; self-employed individuals through an alternate premium contribution system; and those on active duty with the military will pay their premiums through the military payroll deduction system. Individuals enrolled in the program must pay premiums for a minimum of 60 months (5 years), known as a vesting period, before they will be eligible for benefits, and have had earned income during 3 of the first 5 years of enrollment.
Benefits of the CLASS Act are intended to help maintain independence and provide support for an impaired person living at home, in the community, or in an institutional setting of their choice. The program will pay a minimum daily cash benefit of $50(2) that can be used to purchase typical home and community-based long-term care assistance and other non-medical services and supports. The actual daily benefit amount a covered individual receives will be based on an assessment of their functional limitations(3) or cognitive impairment.(4)
CLASS benefits are in addition to any Medicaid benefits being received and cannot supplant or replace those benefits. CLASS Act benefits also cannot have any effect on eligibility, continued eligibility, benefits or services provided by any federal, state, or locally funded assistance program.
The CLASS Act creates a Board of Trustees and the Independence Advisory Council to assist the Secretary of Health and Human Services in establishing and maintaining the program. The Act gives the Secretary broad authority and discretion to choose a benefit structure, establish premiums, and set up structural and operating rules for the program. Administrative expenses of the program are capped at 3% annually of program funds. The Secretary and the Board are responsible for constructing and maintaining adequate premiums, ensuring the ongoing solvency of the program each year and in 20-year projections. The long-term solvency of the program must be calculated over a 75-year period that takes into account both premiums collected and investment earnings. Premiums can only be invested in U.S. Treasury bonds and will be the exclusive funding source for the program plus any interest earned. Legislative language specifically prohibits the use of taxpayer funds.
Initial premiums can only be based on the age of an individual when they enroll in the program, and not on any health conditions they might have. Actual premium amounts an individual will pay depends the premiums established by the Secretary and the Board. Premiums will be based on a number of complex factors, including initial and ongoing projections of how many people are likely to enroll and stay in the program, the anticipated health status of those enrollees over time, the kind of care enrollees are likely to need and for how long, and the amount and cost of the services they use.(5)
Premiums and benefits of the program are treated in the same manner as tax qualified long-term care insurance, making the premiums deductible as a medical expense and the benefits non-taxable under the same standards as commercial tax qualified insurance products.(6)
Like any insurance program, the success or failure of the program will depend on the balance between those enrolled in the program paying premiums and those using the benefits. There must be enough healthy people in the pool of enrollees to offset the number of people who will use the benefits, and enough premiums collected over time to maintain a balance between premiums coming into the program and benefit payments going out.
NOTE: The details of all of the following information will be developed by the Secretary of Health and Human Services between now and when the final regulations are published by October 1, 2012.
Creating the Program
Two official bodies created by the Act will advise the Secretary on certain aspects of the program such as a CLASS Independence Benefit Plan (or Plan), the ongoing operation of the program, and the solvency of the CLASS Independence Fund (or Fund).
The Independence Advisory Council (IAC) will be composed of 15 non-federally employed individuals serving overlapping 3-year terms who will be appointed by the President and serve a maximum of 2 terms. These individuals must represent people covered or likely to be covered by the program, caregivers, people with disabilities, older and younger workers, experts in long-term care or disability insurance, economics, actuarial science, and other relevant disciplines. The President will periodically appoint a Chairperson from the group.
The Secretary of Health and Human Services, in consultation with appropriate actuaries and other experts, is charged with developing at least 3 actuarially sound benefit plans to submit to the IAC for consideration. The IAC in turn will recommend one of the 3 plans to the Secretary that in their judgment best balances price and benefits in an actuarially sound manner with long-term sustainability. The Secretary will take the recommendations of the IAC under consideration before designating one benefit package as the CLASS Independence Benefit Plan no later than October 1, 2012. The IAC will also advise the Secretary on the general policy of the program, the formulation of regulations in regard to the development of the final benefit package, and the financial solvency of the program.
The Board of Trustees of the CLASS Independence Fund will be composed of the Secretaries of Health and Human Services, Treasury, and Labor, all ex-officio, and 2 members of the public from different political parties who are each appointed by the President for a term of 4 years. The Board will meet at least annually, with the Secretary of the Treasury acting as the Managing Trustee of the Fund.
The Board will report to the Congress each April on the operation and status of the Fund during the preceding fiscal year. It will also report on the expected operation and detailed financial status for the next 2 fiscal years with projections over the next 20 and 75 years. The report must include an actuarial opinion from the Chief Actuary for the Centers for Medicare and Medicaid Services that the methods, assumptions, and cost estimates are those that are generally accepted within the actuarial profession. The Board is also required to immediately report to the Congress whenever the Fund is projected to be actuarially unsound over an immediate 20-year period.
The Board must review and recommend changes to the policies and management of the Fund, including advising Congress of any necessary changes to the law. The Secretary of the Treasury is required to deposit into the Fund an amount equal to all of the premiums collected each year.
Benefits are based on a daily cash benefit of “not less than an average of” $50 adjusted annually for inflation. Information on the federal government’s newly established website,http://www.healthcare.gov, describes the daily benefit as a minimum of $50, removing any potential fears that the benefit could be less than that. The Plan’s daily benefit amount increases annually based on the Consumer Price Index (CPI).(7) Benefits, when payable, will be paid into a “Life Independence Fund” established for each eligible beneficiary. The Fund is required to have electronic capability and a debit card function. The rules for transferring these electronic funds, payments, and billings must be adopted by the Secretary by July 1, 2012. Documentation of services purchased with CLASS benefits have to be kept by the beneficiary or their representative, and reported when required.
The actual amount of benefits paid into an individual’s Fund will be based on a sliding scale tied to an assessment of an individual’s current and expected future functional impairment.(8) Those with greater levels of impairment are expected to receive more than the minimum daily benefit of $50, but the Secretary not yet established what these greater amounts would be. Benefit payments can be paid into an individual’s Fund on a daily or weekly basis, or deferred and rolled over from one month to the next.(9) Any unused benefits can be collected in an aggregate amount during a benefit year, but benefits can’t be rolled over from year to year. The daily benefit amount can increase or decrease with changes in the assessed functional status of the individual. Any underpayments due to a change in an individual’s functional status during a benefit year can be paid into the individual’s Fund, while any overpayments can be recouped. There is no aggregate or lifetime benefit limit, and benefits are payable, based on the assessment of an individual’s functional abilities, for as long as an individual remains eligible for benefit payments.(10)
The cash benefit can be used to pay for typical home and community based services for long-term care, and other non-medical services and supports that assist an impaired person living in a residential or institutional setting of their choice. The benefit includes assistance choosing care and care providers, as well as making decisions about accepting or rejecting care. Services can also include home modification, assistive technologies, accessible transportation, homemaker services, respite care, and personal assistance. The Act specifically prohibits benefit denials for compensation to a family caregiver, ensuring that family members can provide care and receive some compensation for their services.
Legislative language does not address how CLASS Act benefits will coordinate with any other benefits for similar services, such as benefits of an existing long-term care insurance product or one developed in the future to supplement or fill in the gaps of CLASS benefits, nor how other types of insurance products with benefits for similar services might coordinate with CLASS Act benefits.(11)
Medicaid Eligible Beneficiaries: Beneficiaries in an institutional setting will be allowed to keep 5% of their daily or weekly CLASS cash benefit in addition to their monthly needs allowance. The remainder of their daily benefit will be applied to the cost of their care. Beneficiaries receiving PACE or home and community-based services under Medicaid can keep 50% of the daily or weekly benefit from the CLASS Act program, with the remainder applied to the cost of their care. No state claim for federal matching funds can be made.
A state can only receive the remaining 50% of the CLASS Act benefits for home and community services if the state provides statewide home and community based benefits under a Section 1115 waiver or state plan amendment, and, offers at a minimum, case management services, personal care services, habilitation services, and respite care under a federal waiver or state plan amendment.
Authorized representatives have to comply with standards of conduct established by the Secretary, including conflict of interest standards requiring that representatives provide quality services, do not misuse benefits paid on behalf of these beneficiaries, nor engage in fraud or abuse.
CLASS Act benefits cannot have any effect on eligibility for other federal benefits, and benefits paid under the CLASS Act cannot supplant or replace Medicaid or any other federally funded program that provides health care benefits or assistance. The Act prohibits any effect on the eligibility, continued eligibility, benefits or services provided by any federal, state, or locally funded assistance program.
Benefit Eligibility and Assessment
Eligibility to receive benefits will be based on the same eligibility criteria used for federal tax qualified long-term care insurance benefits. A person must be unable to do 2 (or 3)(12) Activities of Daily Living (ADL) from a list of 6 ADLs, or need substantial supervision due to cognitive impairment that includes threats to health and safety of the individual. A third benefit trigger is possible if the Secretary of Health and Human Services develops one in the future. Presumptive eligibility is given to active enrollees who have applied for the maximum cash benefit, are receiving long-term care services in an institutional setting, and are discharged or preparing to discharge within 60 days of becoming eligible for benefits. An individual’s need for care must be certified by a health care professional, and must be expected to last for 90 continuous days. These are the same standards required for tax qualified long-term care insurance policies. Functional assessments will be made using an entity established by the Secretary.
When a claim for benefits is requested, the Act provides for an assessment process to determine whether benefits are payable, the degree of impairment that exists, and the amount of benefit that will be paid. Periodic recertification for continued receipt of benefits is required. The Secretary will issue regulations to develop an “expedited nationally equitable eligibility determination process” that included appeals and redetermination processes and conflicts of interest policy. Procedures must be established to ensure that the entities selected to perform these tasks comply with certain specified requirements. They must have operating procedures to: avoid or minimize conflicts of interest between that entity and an active enrollee or beneficiary; make available all information about services and potential resources; and assist the beneficiary in obtaining desired services from any provider. These entities must also report the number of active enrollees and beneficiaries they assist by age, disability, and the services received from them or any other entity.
Program Enrollment and Premiums
Before benefits can be claimed, an individual must have been actively employed or received earned income for at least 3 of the first 5 years of enrollment in the program or be in the uniformed services on active duty and physically able to perform their duties.(13) Employment is defined by the I.R.S.’ definition of employment, and by the Social Security Administration’s rules on how to qualify for a quarter of earnings.(14)
Enrollment is automatic for active workers age 18 and older, although individuals are allowed to opt out, and employers can choose not to participate. Premiums will be withheld through a voluntary payroll deduction system, although the Secretary will have to establish an alternative system for the following enrollees: those who are self-employed, whose employer does not participate in the program, who work for more than one employer, or who are no longer working. The Secretary will also have to ensure that premiums are not deducted by more than one employer for the same individual. There is no provision for non-working spouses or other non-working individuals to enroll in the program.(15) However, an enrollee can continue their enrollment once they are no longer working, but they must have been actively employed for a minimum of 3 years during at least the first 5 years of enrollment to be eligible for benefits later.
Low-income individuals who meet the requirements for active employment, and full-time students up to age 22 who are working, can enroll in the program and pay a nominal monthly premium of $5. The program must maintain a nominal premium for these 2 groups of people, increased only by Consumer Price Index (CPI). Full-time students who stop working or reach age 22 can stay enrolled in the program and pay a premium based on their age when they first enrolled in the program. Both low-income individuals and working students are required to self certify their status annually, which will be verified through government data matches.
As mentioned previously, premiums will be established by the Secretary of Health and Human Services and based only on the age of the applicant, and not on any current or past health conditions. Medical conditions cannot be used to establish or influence the monthly premium or discourage enrollment in the program. Individuals who are currently disabled and have enough annual earned income to meet the Social Security threshold can enroll in the program.
Premiums are intended to remain level, but there are provisions for both premium increases and reductions based on the projected solvency of the program from year to year and over spans of 20 and 75 years, with a full re-evaluation 10 years after implementation. Individuals over age 65 who have paid premiums for 20 years, and who are not actively employed will be exempt from any premium increases.(16)
Disenrollment and Re-enrollment
Individuals who have not enrolled when they are first eligible will have a chance to re-enroll every 2 years under rules established by the Secretary. Individuals who disenroll will have a 90-day window to re-enroll at the same premium and retain their vesting credit equal to their prior months of coverage. After 90 days, but within 5 years, an individual can re-enroll at the premium for their current age. However, the Secretary will determine the amount of vesting credit for prior months of coverage.(17) Five years after disenrollment an individual will not receive credit for any prior months of coverage, and premiums will be based on their current age plus a premium penalty for each month of non-coverage.
An individual will only be allowed to disenroll during a disenrollment period to be established jointly by the Secretary of Health and Human Services and the Secretary of the Treasury. However, disenrollment for non-payment of premium can occur at any time.
Counseling and Assistance for CLASS Act Enrollees
The Secretary is required to enter into agreements with the Protection and Advocacy System(18) in each state for advocacy services, and with public and private groups to provide advice, assistance and counseling services.
Protection and Advocacy: The Secretary is authorized to enter into agreements with the Protection and Advocacy System for each state and require the assignment of an advocacy counselor as needed to each eligible beneficiary that is covered by such an agreement. Each beneficiary must receive information about how to access the appeals process of the Plan, assistance with annual certification, and any other such services the Secretary requires by regulation.
Advice and Assistance Counseling: The Secretary is authorized to enter into agreements with public and private entities to provide advice and assistance counseling. Such entities are required to assign an advice and assistance counselor as requested by an eligible beneficiary to provide information on accessing and coordinating services and supports in the most integrated settings, as well as information about eligibility for other services and benefits, service and support plans, and assistive technology.(19)
Counselors will also assist with decision-making about medical care, advance directives and other written instructions concerning medical care, and any other services the Secretary requires by regulation. These entities will be required to give active enrollees and beneficiaries a list of available service providers that met their needs, and disclose any financial interest the entity may have had in any of the recommended providers.
The Secretary will establish procedures to ensure that both these entities, Protection and Advocacy and Advice and Assistance Counseling described above, will comply with certain requirements that foster the best interests of the beneficiaries; have operating procedures to avoid or minimize conflicts of interest between the entity and an active enrollee or beneficiary; make all information about services and potential resources available; and assist the beneficiary in obtaining desired services from any provider selected by the beneficiary. These entities will be required to report the number of active enrollees and beneficiaries they assist by age, disability, and services received from them or any other entity.
Workforce Assessment and Adequacy
States are required to assess the extent to which a variety of home and community-based providers and non-profit organizations that provide personal care services to individuals eligible for Medicaid covered service are serving, or have the capacity to serve, as fiscal agents for employers and home and community-based employers and workers who provide services to CLASS enrollees. This assessment must include rural and underserved areas and be done within 2 years following the date CLASS was enacted.(20)
States are required to designate, or create entities to ensure an adequate supply of personal care and other workers who can provide services to individuals receiving CLASS benefits, including in rural and underserved areas. These requirements are not allowed to negatively affect or impede existing programs or methods that allow the use of consumer directed or self-directed home and community services. States must ensure that consumers are allowed to direct and control their home and community services, including the ability to “select, manage, dismiss, co-employ, or employ workers,” and cannot prohibit them from employing family members to provide their care. The legislation establishes a Personal Care Attendant Workforce Advisory Panel, the selection of which is currently in progress by the Secretary of Health and Human Services. This panel will advise the Secretary and Congress on workforce issues related to personal care attendant workers, including the number of workers available to provide care, their salaries, wages, and benefits, and the ability of consumers to access these workers and their services.
The CLASS Act is a new approach to financing some of the costs of long-term care services and has the potential to draw public attention to the need to prepare for these costs. However, the program will not, and was not intended to pay all of a person’s long-term care expenses. It could, however, provide some important benefits to support a person’s ability to live longer at home or in the community.
How the CLASS Act will affect the existing long-term care insurance market remains to be seen. Some experts think private insurance could become supplemental coverage to CLASS benefits while others see the deficiencies in the federal plan as a marketing tool to sell broader coverage with greater benefits. Some see the potential of developing specific insurance products designed to wrap around CLASS benefits that pay additional benefits, or fill specific gaps in the program. Which direction the private market takes will depend in large part on how these benefits coordinate with existing or future benefits contained in privately purchased insurance products.
The CLASS Act establishes a framework for the regulatory details that must be worked out within the federal government, its agencies, and the federal rulemaking process. California Health Advocates continues to closely follow the progress of this innovative program and the details as they emerge.
For information about this summary contact:
- Kaye,H; Harrington, C; LaPlante. M; Long-Term Care: Who Gets It, Who Provides It, Who Pays, and How Much, HEALTH AFFAIRS, (vol 29, pg 11, 2010).
- See: http://www.healthcare.gov/foryou/disabilities/longtermcare/class/index.html.
- Measured by Activities of Daily Living (ADLs) such as bathing and dressing.
- Cognitive deterioration or dementia caused by Alzheimer’s disease or other conditions.
- The Congressional Budget Office’s (CBO) report on the CLASS Act estimated an average monthly premium of $123 for an average daily benefit of $75. Younger enrollees would pay less and older enrollees would pay more.
- See Section 3210: The CLASS Program shall be treated for the purposes of the Internal Revenue Code of 1986 in the same manner as a qualified long-term care insurance contract for qualified long-term care insurance benefits.
- It is unclear whether the inflation adjusted daily benefit amount would increase for those who are already on claim, or only for those who have not yet filed a claim.
- Sliding scale benefit levels established by the Secretary would consist of at least 2 but no more than 6 benefit levels.
- This might occur if an individual incurred costs less than their daily benefit amount, or did not receive a service each day for which a benefit was available.
- There is no language that clarifies whether premiums must continue to be paid once benefits have begun. Most private long-term care insurance policies waive premium payments after benefits have been paid for a certain period of time, usually 90 days, although some limit that waiver to the use of institutional services.
- Coordination of benefit provisions are common in many types of insurance coverage, and the order of payment is an important issue to be resolved.
- There is no explanation of when 2 or 3 ADLs may be used. This very likely relates to the benefit levels that will be established later by regulation with greater levels of impairment qualifying for a higher daily benefit payment.
- . Individuals in hospitals or nursing home, or in other institutions and covered by Medicaid, or in correctional facilities are excluded from enrollment.
- An individual must earn $1,100 in 2010 to qualify for one quarter of Social Security coverage.
- The Secretary is required to promulgate regulations specifying exceptions to the minimum earning requirements, and this might be the vehicle for inclusion of non-working spouses and other qualified individuals.
- This provision clarifies that premium increases can be imposed on existing enrollees if necessary to maintain solvency of the program, although nominal premiums must continue to be maintained for low income individuals and full time students who are employed.
- The Secretary may calculate an actuarially sound amount, or apply 1% of the applicable age-adjusted premium for each month of lapsed coverage.
- The system established by each state under section 143 of the Developmental Disabilities Assistance and Bill of Rights Act of 2000 (42 U.S.C. 15043).
- Programs established under the Assistive Technology Act of 1998.
- See: Conforming Amendments to Medicaid, PPACA, P.L. 111-148, Section 8801(2).