Paying for Health and Long-Term Care

With the demise of the Community Living Assistance Services and Supports (CLASS) Act, Program on Retirement Policy Director Richard Johnson talks us through ways it could be revitalized, new policies that could boost participation in the private market, and public-private options that could help achieve higher rates of coverage.

It appears the Obama administration is abandoning the Community Living Assistance Services and Supports (CLASS) Act, a program included in the Affordable Care Act that aimed to make long-term health care more affordable and accessible for most Americans. In this first video in a two-part Urban Institute package, Program on Retirement Policy Director Richard Johnson walks us through CLASS's aims and design, why greater access to long-term care is needed, and where the program ran into problems.

At 40 percent of Medicare's and of Medicaid's costs, the 9 million dual eligibles who receive benefits from both programs, are a focus of efforts to slow growth in entitlement spending. But, given the two programs' responsibilities, policy-makers are relying far too heavily on states to find the solution. Dollars spent on dual eligibles are overwhelmingly federal; potential savings come from better management of Medicare-financed acute care services; and enhanced state, rather than federal, responsibility for overall spending increases the risk of cost-shifting to Medicare and may undermine quality of care for vulnerable beneficiaries.

Some of projected Medicare spending growth over the next decade (6.5 percent per year) can be explained by the retirement of the baby boomers; moreover, provisions in the Affordable Care Act will reduce spending per enrollee to about 3.5 percent. We agree with the analysis of the Congressional Budget Office that concluded that privatization initiatives would actually increase health care spending and shift costs to beneficiaries themselves. We argue that it is possible to reduce Medicare spending growth further by selected policies such as increasing home health co-insurance, reforming cost sharing provisions, increasing premiums for beneficiaries earning more than 300 percent of the federal poverty line, increasing the age of eligibility, reducing fraud, and better management of Medicare's dual eligibles.

The Congress, the President, and various commissions have begun discussing real Social Security, Medicare, and Medicaid reform. This paper suggests that as these discussions move forward, it would be helpful to examine lifetime contributions and benefits for Medicare and Social Security to understand the programs’ internal fiscal situations and their broader role in overall budget policy and, most importantly, as a way toward a more unified and coherent approach to entitlement reform for seniors. This approach also provides a useful window on how equitably lifetime benefits and taxes are distributed and on the fiscal stability of the overall system.