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‘Gang of Six’ Budget Plan Would Eliminate Obama’s Long-Term Care Savings Program

nursing home graphic

The Obama administration's health care law not only revamped the nation's entire health care system, it also created a new entitlement -- one that some analysts say will never work.AP2007

A key provision in President Obama's health care law that would allow Americans to save money for elderly long-term care has been put on the chopping block as part of a sweeping $3.7 trillion deficit-reduction plan proposed by a bipartisan group of senators known as the "Gang of Six."

The provision is known as the CLASS Act, or the Community Living Assistance Services and Support Act, and was designed to relieve pressure on Medicaid and help keep Americans out of nursing homes by enabling them to save for future senior assistance with issues like eating, bathing or dressing as they get older.

But the program has yet to begin amid concerns about the actual long-term costs.

Critics, citing the Congressional Budget Office, have argued the CLASS Act is little more than a short-term revenue fix that will eventually add to the federal deficit. They also say that a mandate would be required to sustain the program because premiums would ultimately be based on how many Americans actually sign up.

President Obama's own deficit reduction commission last year recommended reforming or abandoning the program, saying in its report that "absent reform, the program is therefore likely to require large general revenue transfers or else collapse under its own weight."

As written, the CLASS Act would allow workers to have an average of about $150 or $240 a month automatically deducted from their paycheck to save for costs associated with long-term care, such as nursing home fees that aren't covered by Medicare or Medicaid.

The deduction, which was scheduled to begin next year, is tied to a sliding scale based on age. Younger workers would be charged less while older workers charged more.

After a five-year vesting period, enrollees who need help bathing, eating or dressing will be eligible to take out benefits, estimated to be around $75 a day for in-home care.

Even though the health care law stated that the program is designed to be self-sustaining, with an advisory board to ensure the funds remain solvent, Health and Human Services Secretary Kathleen Sebelius acknowledged during a congressional testimony in February that the program as originally envisioned is "totally unsustainable."

"We determined pretty quickly it would not meet the requirement that the act be self-sustaining and not rely on taxpayer investments," she told a Senate panel.

"If you would take a snapshot of what was written as the criteria of how many years someone would have to work, what the wage would have to be to enter the program, if there would be any indexing in benefits, the snapshot in the bill I would absolutely agree is totally unsustainable," Sebelius said, noting that her department was working on making a number of changes to the program.

But with the Gang of Six plan gaining steam in Congress, that may not be necessary. Though it is unlikely to get passed before an Aug. 2 deadline that the Obama administration says is the date when the U.S. risks a first-ever default, future passage could bring an end to the CLASS Act before it ever began.

It remains to be seen whether Sebeilus supports the proposed elimination of the program. Her office declined to comment for this story.

But supporters say eliminating the CLASS Act would be "shameful."

"CLASS will save money for individuals, families, states and the federal government over time," Larry Minnix, president and CEO of LeadingAge, an elderly advocacy organization, said in a statement. "More important, it will help people remain independent at home while not draining government resources."