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Medicare Won’t Go Broke But Seniors May-The Class Act

Long-term care comprises a variety of services that include medical and non-medical care for people with chronic disease or disability. These services include support services such as assistance with activities of daily living at home or in assisted living or nursing homes. Many seniors mistakenly believe that Medicare pays for long-term care. Well, it doesn’t and it can be very expensive. For example, if you don’t have long-term care insurance (which is obtained privately and can cost over $2500 per year if you’re over 60 years old) nursing home costs can run upwards of $75,000 per year! Medicaid does pay long-term care costs, but you have to be impoverished or you have to impoverish yourself by spending down all your wealth.

The new healthcare reform legislation contains the Community Living Assistance Services and Supports Act or the CLASS Act – Amends the Public Health Service Act to create a national, voluntary disability insurance program (CLASS program).  This bill was the brain child of the late Senator Edward M. Kennedy. The Act essentially recognizes that the Graying of America is a demographic event that will dominate healthcare in this country for the next two decades and beyond. As 78 million boomers live into their eighties and nineties, more and more of them will need long-term care services at home or in nursing and assisted living facilities. Under the act: (1) all employees are automatically enrolled, but are allowed to opt out; (2) payroll deductions pay monthly premiums (roughly $146 a month); and (3) two-tiered benefits are provided, based on the level of disability, to purchase non-medical services and supports that the beneficiary needs to maintain independence. To obtain benefits, you’d have to be enrolled for at least five years, and the daily benefit is expected to be at least $50.

The CLASS Act will help end the financial/medical nightmare faced by seniors and their families by creating a way for enrollees in this voluntary saving program to get financial help for in-home, non-medical expenses when they develop disabilities. The Act will also save Medicaid billions of dollars for long-term care making the program financially viable and available to all who want to participate, no matter what your personal wealth may be.

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3 Responses to “Medicare Won’t Go Broke But Seniors May-The Class Act”

  1. Craig Collins-Young April 26, 2010 at 4:02 pm #

    Thanks for posting this. The CLASS Act is great because it will help help seniors and people with disabilities obtain the services and supports they need to stay functional and independent, while providing them with choices about community participation, education and employment.

  2. Mark Baron April 26, 2010 at 11:56 pm #

    Let’s get realistic here. The CLASS Act will only help people who are still working and uninsurable. That is the fact. The coverage at $50 per day will barely scratch the surface of covering care, especially in the Northeast and many other places that have a similar standard of living. Being in the insurance industry, I can tell you that the cost of this coverage, as projected, is going to be about 2 to 3 times more expensive than a private long term care insurance plan, that healthy people can purchase on their own. This means that nobody who is healthy will buy the federal plan. The only people who will actually run to get this will be unhealthy people who can’t get the coverage anywhere else. This is actually a good thing for them, but the claims will outstrip the reserves within 20 years, instead of the 75 years that the program is being touted as lasting. This doesn’t come from me, but rather from the chief actuary for Medicare and Medicaid. Read his report, and the many other reports from actuarial professionals, who can’t believe that this program will actually go into effect as it is currently designed. Anyone in the insurance industry can tell you that when you accept people who have major health issues, the claims will be off the charts and will bankrupt the program. This program will only last for as long as 15-20 years because the 5 year vesting period will hold off on benefits being paid. Then the tidal wave of claims will take off. I do feel that this program will create major awareness for people to start planning for long term care issues, rather than find themselves in crisis management. But please don’t make this program out to be a savior. I’m promising you now it will be a disaster, and unbiased people, with no vested interest, who have actuarial experience will support this. I’m very worried about all the people who are being falsely led into believing this government plan is going to protect them. I sure hope the health insurance component isn’t as badly planned out as the long term care piece.

    Mark Baron
    Long Term Care Planning Specialist
    Andover, MA

  3. Jeff Kreisberg April 27, 2010 at 8:41 am #

    I agree with you. My goal was to educate lay folks about the realities of long term care. I didn’t realize the magnitude of the problem when my parents were faced with it. Then it was too little too late. I devote a lot of time to this subject in my book. Thanks for your comment.

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