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Low Class Has Become No Class

Posted on: October 31st, 2011
President Obama’s March, 2010, health care law had lots of moving parts.  One was called the Community Living Assistance Services and Supports or “CLASS” Act.  It was to provide a long term care benefit starting in 2017 to those who chose to enroll under it and pay premiums for at least 5 years before receiving any benefit.  The CLASS Act was to be implemented by the federal Department of Health and Human Services (DHHS).  Note that I said “was.”

Today Medicaid pays for the care of more than 60% of Texas nursing home residents.  The CLASS Act was touted by the Congressional Budget Office (CBO) as a money saver that would reduce that burden.  Others were skeptical from the outset.  Senator Kent Conrad (D – N. Dakota) called it “a Ponzi scheme Bernie Madoff would have been proud of.”

Plus, the maximum CLASS Act benefit would have been only $50/day -- less than half of the current cost of the lowest level of nursing home care in Texas cities.  Heavens knows how great the gap would have been by 2017!  That’s why I called it the “Low CLASS Act.”  Now the Low CLASS Act has become the NO CLASS Act. 

Congress required that DHHS implement the CLASS Act only if it could do so in an actuarially sound manner – in other words, have it at least pay for itself.  Earlier this month, DHHS threw in the towel, admitting that the CLASS Act numbers just wouldn’t crunch.  The first hint came when DHHS reassigned all of the employees in its CLASS Act implementation office except its actuary, Richard Foster.  Then he quit, publicly stating that the CLASS Act would not work.  Then, late on Friday, October 14th, DHHS issued a press release telling the world that the CLASS Act would not be implemented. 

While the White House still officially holds out hope for the CLASS Act, it is alone in doing so.  Those in the business of providing long-term care insurance have said from the start that the CLASS Act could not work.  They were right.  The “savings” the CBO predicted for the CLASS Act was just smoke and mirrors.

Long term care is in the future for millions of Americans.  For those 65 years of age, the probability of needing nursing home care is more than 40%.  With advances in medicine that increase longevity without eliminating the crippling diseases of old age, like Alzheimer’s and other dementia, Parkinson’s Disease, osteoporosis, etc., the percentage will likely increase. 

Thus, the death of the CLASS Act was a good thing.  The CLASS Act offered only false hope.  The real solution to the looming long term care crisis takes individual action.  You need to plan for the risk that you will need long term care.  If you don’t have several million dollars of assets that can be drawn down to support you, your planning should begin NOW.

If you can get it, get long term care insurance.  Talk to your financial advisor about that. 

Do the legal planning while you are still able to protect yourself and preserve the heritage you’re building for your children.  We help our clients to do that.  Call us today to at 512.330.9802 to get started. We'll be glad to hear from you.
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