Representative Pallone Wants to Fix the LTSS Financing System

November 28, 2018

courtesy of NAELA News:

By Morris Klein, CELA, CAP, and David M. Goldfarb, Esq.

Ranking-Member Frank Pallone (D-NJ) of the House Energy and Commerce Committeeis on a mission. The lead Democratic House sponsor of the Special Needs Trust Fairness Act wants to fix the long-term services and supports (LTSS) financing system.

His last major effort to give Americans a new LTSS benefit was the Affordable Care Act’s Community Living Assistance Services and Supports (CLASS) Act. The CLASS Act was a voluntary, government run LTSS insurance program. It tasked the Secretary of Health and Human Services to develop actuarially sound premiums and benefits, which most estimated would be around $75 dollars a day.

The program was criticized for allowing individuals with pre-existing LTSS needs to join the program and receive benefits after a five-year vesting period, and actuaries did not believe the program could sustain itself on its own over a 75-year window. Ultimately, it was repealed in 2013.

Now after over a year of defending against Medicaid cuts and the ACA repeal and replace efforts, Rep. Pallone has turned his eyes back toward LTSS by introducing rough draft legislation to create a new guaranteed benefit.

The current draft is just a sketch with many details to follow, but it follows a similar pattern to the CLASS Act except it’s universal, not merely voluntary.

The minimum benefit would cover 5 hours of home health per day or roughly $100 per day nationally. As someone requires more assistance, the benefit would increase. By how much still remains unclear.

An individual who receives Medicare Part A, or has at least 40 Social Security Act credits, could qualify for the benefit. It’s essentially a cash benefit, giving individuals the ability to choose their own providers, and linked to a debit card.

In order to receive benefits, the person must either: a) meet a two-activities-of-daily-living (ADL) trigger and wait two years; or b) meet a three-ADL trigger and pay a yet to be determined deductible.

NAELA provided feedback on the concept. In particular, we noted that, like the Aid and Attendance pension for veterans, it could help some individuals stay out of institutions by paying for in-home care or by helping them with their assisted-living bill.

However, we noted that for those with the most needs, a $100-a-day benefit will not prevent impoverishment. Those individuals may still require Medicaid.

As with other benefit programs, a key question will be how to finance it. “Pay-fors” in this context are both political and economic. Politically, Republicans, who control Congress, are often skeptical about new government-run benefit programs. Economically, program costs will increase an ever-widening federal deficit unless a financing source can be found. Even if the Democrats take control of the House, House Minority Leader Nancy Pelosi (D-CA) has signaled a commitment to the “pay-for” rules. This means that for a benefit like this to pass, it must include offsetting cuts or by raising new revenue.

Ironically, tax reform may play into hands of the Democrats, who can now revert back to the old system while “paying for” perhaps $1.5 trillion in new spending without running afoul of the rules.

The legislation likely has a long time before it becomes law. But, the time to develop policy is now. When an opportunity — or a crisis ­— hits, Congress looks for what’s on the shelf to pass. With America getting older, the demand for a new LTSS benefit will only increase.

Not wanting to wait for federal action, some states are considering similar programs. Hawaii enacted a law last year to provide modest care benefits, and Washington is considering such legislation. Like the federal proposal, determining a funding source is a major challenge to get such programs running.

About the Authors
Morris Klein, CELA, CAP, is co-chair of the NAELA Public Policy Steering Committee and a member

of the Board of Directors. He is a NAELA Fellow. David Goldfarb, Esq., is NAELA’s Senior Public Policy Manager.