Senator Calls Federal Long-Term Care Insurance Ponzi Scheme

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A group of Democratic Senators is attempting to derail a proposed plan to pay for health care reform by creating a new federal long term care insurance program.

A provision in reform legislation that has received little attention is a proposal for the federal government to offer long-term care insurance. The CLASS Act, short for Community Living Assistance Services and Supports, is included in both House and Senate health-care reform legislation. The proposal for federal long-term care insurance was originally proposed by the late Sen. Edward Kennedy.

The plan has captured the interest of liberal Democrats because it would provide a source of revenue to offset costs of health care reform. Premiums for long-term care insurance would be deducted from workers paychecks starting upon enactment. Experts explain the costs, still undetermined, will cost workers from as little as $750 per-year to as much as $3,000 for a working couple.

Sen. Kent Conrad, D-N.D., called the Community Living Services and Support Act "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of."

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The Congressional Budget Office (CBO) evaluated the CLASS Act and determined it would reduce budget deficits by $72 billion over the next 10 years. For a period of five years, the plans proponents explain workers will pay for federal long-term care insurance. Those concerned about the program point out that no benefits will be paid for the initial five years of the plan's operation.

After the initial time frame of income and no expenses the CBO expects the plan will reduce deficits by a smaller amount going in the next decade. Following 2029, the CBO points out that the CLASS program stands to increase budget deficits unless the HHS secretary adjusts the program to ensure its actuarial soundness by raising the cost for long-term care insurance premiums.

Senators Nelson; Joe Lieberman, I-Conn.; Blanche Lincoln, D-Ark.; Mary Landrieu, D-La.; Evan Bayh, D-Ind.: and Mark Warner, D-Va., wrote a letter to Senate Majority Leader Harry Reid asking him to leave the program out of the Senate health care bill. "We have grave concerns that the real effect of the provisions would be to create a new federal entitlement program with large, long-term spending increases that far exceed revenues," the senators wrote.

A statement issued by the American Association for Long-Term Care Insurance remarked that "Regardless of what one thinks of the merits of the program, it should be debated on its own merits, not slipped into law as a means to lower the purported cost of health care reform."

Written by Jesse Slome, American Association for Long-Term Care Insurance

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