Long-Term Care Insurance

November 19, 2009

The Patient Protection and Affordable Care Act proposed yesterday by Senator Reid and H.R. 3962, the Affordable Health Care for America Act passed by the House of Representatives, contain very similar proposals regarding long-term care insurance. Both proposals would establish a voluntary federal program for such insurance, termed the Community Living Assistance Services and Supports (CLASS) program. Under the proposals, individuals could purchase coverage that would provide specified future benefits, and premiums would be set to cover the full cost of the programs as measured on an actuarial basis. However, the programs cash flows would show net receipts for a number of years, followed by net outlays in subsequent decades. In particular, the programs would pay out far less in benefits than they would receive in premiums over the 10-year budget window (2010-2019), thereby reducing federal budget deficits over that period.

According to the legislation proposed in the Senate, only active workers would be eligible to enroll in the program. Under that specification, CBO estimates that the monthly insurance premium would average about $123 in 2011 and that the proposal would reduce budget deficits by about $72 billion over the 2010-2019 period.

According to the legislation passed by the House, both active workers and their non-working spouses would be eligible to enroll. CBO anticipates that the average non-working spouse who would enroll in the program would have more functional limitations than the average enrolled worker, which would make non-working spouses more likely to qualify in the future for the programs benefits. Due to an oversight, CBOs original estimate of the House version of the CLASS program did not reflect the inclusion of non-working spouses and, as a result, concluded that its premiums and budgetary effects would be the same as those for the Senate version of the program. CBOs corrected estimates are that the monthly insurance premium for the House version of the CLASS program would average about $146 in 2011 and that the program would reduce budget deficits by about $102 billion over the 2010-2019 period. Correspondingly, the programs outlays in future years would also be larger than those under the Senate version of the program.