The Untimely Death Of Long-Term Health Insurance – OpEd

The US Administration’s decision to pull the plug on long-term health insurance in the new healthcare law (so-called Community Living Assistance Services and Support or, as it was known by healthcare insiders, CLASS) offers an important lesson.

As written, the law had three incompatible parts.

First, it required beneficiaries to receive at least $50 a day if they had a long-term illness or disability (to pay a caregiver or provide other forms of maintenance). That $50 was an absolute minimum. No flexibility on the downside.

Second, insurance premiums had to fully cover these costs. In budget-speak, the program was to be self-financing. Given the minimum benefit, that meant fairly hefty premiums.

Third, unlike the rest of the healthcare law, enrollment was to be voluntary. But given the fairly hefty premiums, the only people likely to sign up would know they’d need the benefit because they had or were prone to certain long-term illnesses or disabilities. Healthier people probably wouldn’t enroll.

Yet if the healthier didn’t enroll, the program would have to be financed entirely by the relatively unhealthy — which meant premiums would have to be even higher. So high, in fact, that even the relatively unhealthy wouldn’t be able to afford it.

End of story. End of program.

The lesson: If a public insurance system has minimum benefits and must pay for itself, it can’t be voluntary. Everyone has to sign up.

Or something else has to give — benefits have to be more flexible, or the program can’t be expected to pay for itself.

For example, Medicare and Social Security are mandatory. Everyone effectively signs up through their payrolls. Even so, questions arise about how flexible their benefits have to be if the programs must be self-financing.

So what does this mean for the remainder of the new healthcare law? Its fate hinges on the so-called individual mandate — the requirement that everyone, including younger and healthier people, participate (or pay a fine if they don’t).

Today’s decision to jettison long-term care offers clear evidence why that individual mandate is so necessary.

Unfortunately, the mandate isn’t popular — because it wasn’t modeled on Social Security or Medicare but based instead on private insurers who’ll want to maximize revenues. It’s also vulnerable to constitutional challenge, largely for the same reason. The Supreme Court will likely decide its fate this term.

Why, oh why, didn’t the Obama administration make life easy for itself and for Americans by choosing the simplest and most efficient system for both primary and long-term health insurance — Medicare for all?

It didn’t because it wanted to get Republican votes. It got almost none. And now the Republicans are enjoying the prospect of the law being dismembered piece by piece, starting today.