February 21, 2011
Long-Term Care Needs Changes, Officials Say
By ROBERT PEAR

WASHINGTON — One of Senator Edward M. Kennedy’s legacies in the new health care law, intended to allow the chronically ill and people with disabilities to continue living in their homes, is too costly to survive without major changes, Obama administration officials now say.

Republican lawmakers, who have vowed to repeal the health care law, cite the administration’s acknowledgment as yet another reason to do so. But the health and human services secretary, Kathleen Sebelius, says the law gives her plenty of authority to make the necessary changes to the program without Congressional action.

To make the program viable, Ms. Sebelius said, she is considering changes in the eligibility criteria, including employment and earnings requirements, to ensure that only active workers may enroll. She also said she favored adjusting premiums to rise with inflation.

Senator Tom Harkin, Democrat of Iowa and chairman of the Senate health committee, encouraged the administration to make any changes that might be required to keep the program fiscally sound, so “no one with a disability will be forced to live in an institution.”

Under the current law, the program will allow workers 18 and older to buy insurance from the government to cover the costs of long-term care. After paying premiums for at least five years, they are then eligible for benefits if they become unable to perform basic activities of daily living because of chronic illness or crippling injury. The program is meant for people with severe disabilities who want to live in the community, though benefits can also be used to help pay for nursing home care or assisted living.

An employer can arrange for workers to be enrolled automatically, with premiums paid through payroll deductions. An employee can opt out at any time and, apparently, re-enroll later.

Advocates for older Americans and for people with disabilities say the need for such help will explode as baby boomers age. President Obama’s 2012 budget seeks $93.5 million for a huge “information and education” campaign, with the goal of having 7.7 million people in the long-term care insurance program by 2015.

In debate on the health care bill in late 2009, Republicans and moderate Democrats repeatedly warned that sicker people were more likely than healthy ones to sign up for the long-term care plan. Enrollment is voluntary, but the law stipulates that premiums must be set high enough to guarantee the solvency of the program over 75 years. Higher premiums would discourage healthier people from participating, economists and actuaries say.

Administration officials, who played down such concerns 15 months ago, say they now share them. Under questioning by a Republican at a Senate hearing last week, Ms. Sebelius said the original version of the program, known as Community Living Assistance Services and Supports, or Class, was “totally unsustainable.”

She told the House Ways and Means Committee, “We very much share the concerns that have been expressed that, as written into law, the framework of the program was not sustainable.”

But Ms. Sebelius resisted Republican demands for the program’s repeal. Instead, she said, she is considering changes to make the program “significantly different than the framework that the law itself describes.” A main goal, she said, is to attract more healthy people, thus spreading the financial risk across a larger group.

For example, Ms. Sebelius said, she may alter eligibility criteria, including employment and earnings requirements, to make sure people are established workers when they enroll.

Federal officials have not specified the amount of premiums or benefits. The Congressional Budget Office estimated that nearly 10 million people might enroll in the program by 2019 and said that premiums would start at $123 a month for benefits expected to average $75 a day. Medicare actuaries estimated that 2.8 million people would participate within three years and said premiums needed to be about $240 a month to cover program costs.

Under the current law, Ms. Sebelius said, a person’s premiums will generally stay the same, but cash benefits will increase with inflation. She said she favored adjusting premiums to rise with inflation, a change that could deter some workers from participating.

Federal officials said they were also looking for ways to discourage workers from dropping out and re-enrolling.

The law governing the program specifies that “no taxpayer funds shall be used for payment of benefits,” a provision Ms. Sebelius said was “nonnegotiable.” The health secretary can, however, adjust premiums as needed to maintain the program’s solvency. Her power to revamp it in other ways is unclear.

“Secretary Sebelius seems to believe that she has more flexibility to change the program than Congress gave her,” said Senator John Thune, Republican of South Dakota.

The law also says that up to 3 percent of the program’s premiums may be used to pay administrative expenses, but since no premiums have been paid, Mr. Obama is seeking the $93.5 million to publicize the program.

“The program’s financial solvency and viability will depend on the enrollment of large numbers of participants,” the White House said in its 2012 budget request. “Employers and individuals will need to have access to information about the need for long-term services and supports and the benefits of the program. It will be crucial to educate employers about how to enroll their employees and to inform individuals about how to enroll directly.”

Public confidence in the program is essential if the government expects millions of people to enroll starting next year. But economists and actuaries have raised many questions.

Richard S. Foster, the chief actuary at the federal Centers for Medicare and Medicaid Services; Alicia H. Munnell, director of the Center for Retirement Research at Boston College; and leaders of the American Academy of Actuaries all said the program would be unstable if, as expected, it attracts disproportionate numbers of people with health problems.

Mr. Foster said his analysis showed the program faced “a significant risk of failure” because people who are or expect to be sick or disabled were more likely to sign up. In a study issued this month, Ms. Munnell, an economic adviser to President Bill Clinton, said more stringent work requirements and an effective national advertising campaign could help attract young, healthy people to the insurance pool.

Even so, she said, “premiums may never reach an affordable level for middle-class households,” so “the program faces enormous challenges.”

Mr. Obama’s debt-reduction commission, a bipartisan advisory body, said in its report late last year that Congress should “reform or repeal” the program.

“The program’s earliest beneficiaries will pay modest premiums for only a few years and receive benefits many times larger,” the panel said, “so that sustaining the system over time will require increasing premiums and reducing benefits to the point that the program is neither appealing to potential customers nor able to accomplish its stated function.”

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