Sebelius affirms commitment to CLASS long-term care insurance

Answering critics of the Community Living Assistance Services and Support Act (CLASS), Health and Human Services Secretary Kathleen Sebelius has affirmed the administration's commitment to ensure the program is self-sustaining and won't rely on taxpayer dollars.

Speaking to a forum of the Kaiser Family Foundations, Sebelius said the administration is aware of many of the concerns raised about the viability of CLASS, a voluntary insurance program that is designed to allow people with long-term care needs to stay in the community.

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"It would be irresponsible to ignore the concerns about the CLASS program's long-term sustainability in its current form, and we haven't done that," Sebelius said. "But it would be unconscionable to ignore the likelihood that without the CLASS Act countless Americans will have to clear out their savings and leave their homes and loved ones in order to get the services they need."

One of the problems of the CLASS Act, which was included in last year's health reform law, is that it doesn't include many changes suggested during the debate that would have made he program more financially sustainable.

President Barack Obama's Fiscal Commission had found those same flaws and suggested that CLASS be either reformed or repealed. Sebelius said the HHS will instead find ways to work within the existing structure to create a self-sustaining model.

"It's important to remember that the law already provides plenty of flexibility to make sure CLASS is successful," she said.  "And today, I can tell you that we are committed to using that authority to make sure this program meets people's needs while remaining fiscally sound."

Conservative critics have contended the program will cost taxpayers billions of dollars in the future.  Sebelius disagreed, saying the statute language says CLASS must be funded solely from program premiums.

That said, there are significant hurdles to clear to make CLASS viable. First among them is how to design a premium structure that provides a low enough bar to attract significant numbers of enrollees, while also being high enough to fund the program. Premiums that are too low would see the program run out of money too quickly, while high premiums would keep people from participating in the program and undermine its ability to spread risk.

The solution, Sebelius said, is to create a structure that indexes premiums to rise along with the expected rise in benefit expenses.

"We know that many Americans have had their confidence shaken by large premium hikes over the last few years, especially in the long-term care insurance market. This indexing system would have to be completely transparent," she said.

The administration also will need to make employers and the public aware that the insurance is available in order to get broad participation.

The voluntary insurance program is scheduled to begin accepting premium payments in October 2012, with first payments beginning in 2017.