cost of a nursing home in that state. The
look-back period, set at three years in 1993,
was extended to five years in the Deficit
Reduction Act of 2005.)
Because the CLASS Act lacks the routine medical underwriting essential for
all true health or long-term care insurance, it will attract those participants
most likely to claim benefits. It will repel people with better health prospects
who can get more protection for less cost
from private insurance or simply by going bare and counting on Medicaid and
Although the CLASS Act lacks
Medicaid’s state-specific variations, its
one-size-fits-all structure precludes
adapting the program to fit the special
needs of individuals and families in the
manner of private insurance policies.
Nor does the CLASS Act, finally, address
the problems it was supposed to solve:
■ ■ Are most people uninsured for long-term care? Yes, but CLASS will not
change that because it doesn’t address
the cause—decades of easy access to
■ ■ Do long-term care providers discriminate against Medicaid recipients? Yes,
but the CLASS Act will not change
that because it will not provide enough
revenue for beneficiaries to afford market-based private-pay service rates.
■ ■ Do too few people get the home care
services they prefer? Yes, but the
CLASS Act will not change that because wide publicity about Medicaid
“rebalancing” has further desensitized the public to the risk and cost
of long-term care.
■ ■ Is long-term care quality a problem? Yes, but the CLASS Act will not
change that because of low participation, very limited payments, and
(likely) rapid insolvency.
■ ■ Do too many people end up in nursing
homes on public welfare? Yes, but the
CLASS Act will not change that because few good risks will enroll.
A Gloomy Prediction
I predict the CLASS Act will be repealed
before it is implemented. If it is implemented as currently configured, it will fail
C L A S S
because the cLAss
Act lacks the routine
essential for all true
health or long-term
care insurance, it
will attract those
likely to claim
shortly after it is put in place. If the CLASS
Act is modified so that it reflects actuarial
principles, achieves lower premiums and
higher benefits, or is made mandatory, it
could be made to sputter along for a while.
In the meantime, state Medicaid programs will cut back radically to survive in
the wake of the disappearance of federal-match bonuses from the stimulus on July
1, 2011, and as 16 million new recipients are
added by health reform in 2014. Boomers,
only one-third of whom have saved enough
for their retirement, have set aside almost
nothing to meet future acute and long-term care costs. They will quickly spend
through their savings and home equity
if they need long-term care after they no
longer can rely on Medicaid. Reverse mortgages will become the dominant funding
source for middle-class and affluent home-owners who require long-term care once
Medicaid’s home equity exemption has
been eliminated or radically reduced (as
it will have to be). More and more people
will purchase private long-term care insurance to avoid the new, and very real, risk of
spending down their assets.
But let me also offer a more upbeat prediction.
We will get through this wrenching realignment of the long-term care
market. In time, most people will see
the real risk and cost of long-term care.
They will prepare to be able to pay privately for long-term care if and when
the need arises. Private revenue will
supply much-needed financial oxygen
to the service delivery industry. When
most patients pay market-based rates,
long-term care providers will prosper,
pay better salaries, and grow. Problems of access, quality, and caregiver
supply will disappear as a result. Once
the long-term care services industry is
again profitable, desperately needed
private debt and equity capital will pour
into the market. The reverse mortgage
and long-term care insurance industries also will prosper and grow.
STEPHEN A. MOSES is president of
the Center for Long-Term Care Reform
( www.centerltc.com) in Seattle. He
can be reached at 206-283-7036 or
This article is adapted from a
presentation given at the SOA 2011
Living to 100 and Beyond international
Symposium, which was held Jan. 5-7
in Orlando, Fla. To read the original
paper, go to http://livingto100.soa.org/
This article is solely the opinion of its author.
It does not express the official policy of the
American Academy of Actuaries; nor does it
necessarily reflect the opinions of the Academy’s
individual officers, members, or staff.
Andrews, Michelle, “Few Seniors Have Long-Term Care Insurance,” Kaiser Health News,
Dec. 14, 2010. http://tinyurl.com/2fk32wh
Fleck, Carole, “Many Boomers Report No
Savings at All,” AARP Bulletin, Feb. 4, 2011.
Moses, Stephen A., Doing LTC Right, Ocean
State Policy Research Institute, Providence,
R.I., Jan. 15, 2010. http://www.centerltc.com/
Moses, Stephen A., Medi-Cal Long-Term Care:
Safety Net or Hammock?, Pacific Research
Institute, San Francisco, Calif., January 2011.
Moses, Stephen A., “The Fallacy of
Impoverishment,” The Gerontologist, Vol. 30,
No. 1, February 1990.