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One-two punch: CLASS demise and budget cuts

November 8, 2011
by Bob Gatty
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Bob gatty
Bob Gatty


The hits from Washington keep coming for the LTC industry, already reeling from a series of Medicare and Medicaid cuts, and now facing the possibility of even more payment reductions and the demise of the short-lived Community Living Assistance Services and Supports (CLASS) program.

In late September, the Department of Health and Human Services (HHS) shelved implementation of CLASS, reassigning the eight staff members on the program staff-a move that resulted in the departure of Bob Yee, an actuary responsible for long-range cost estimates.

The action followed a congressional investigation led by Republican leaders who issued a report detailing the insolvency of the program. The report by the Repeal CLASS Working Group said HHS was aware that the program was unsustainable and suppressed that information prior to its passage. Finally, the Obama administration had to concede they were right and in mid-October, HHS Secretary Kathleen Sebelius sent a letter to Congress saying she could not see a viable path forward at this time.

The law, a longstanding priority of the late Sen. Edward M. Kennedy (D-Mass.) and the LTC industry, was created under President Obama's healthcare reform legislation. However, critics contended from the beginning that unless large numbers of healthy people sign up, premiums for a smaller group of frail beneficiaries would soar and eventually destabilize the program.

According to the Associated Press, emails from government technical experts said that CLASS could not be kept afloat indefinitely without a taxpayer bailout or a requirement that workers enroll.

The action was taken despite a massive call-in to the offices of lawmakers in Washington organized by LeadingAge. Larry Minnix, president and CEO, said his organization wanted to work with the Obama administration to implement CLASS. “We believe a fiscally solvent, self-sustaining CLASS Act is not only possible, but essential for our country,” he says. “There is no other solution on the table right now to solve the crisis of paying for long-term services and supports.”

LeadingAge also issued an analysis of the Repeal CLASS Working Group's report, saying the report was “flawed” because it cites outdated estimates and rehashes early arguments that have since been addressed.

Said LeadingAge, “The CLASS Act promotes personal responsibility, puts choice in the hands of consumers, saves Medicaid money and does not rely on taxpayer funds.” In fact, the organization said the program would reduce the federal deficit by $86 billion over 10 years and reduce Medicaid costs.

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) issued a statement saying it regretted the end of CLASS, but thanked the administration for its efforts in creating the program.

“The AHCA/NCAL looks forward to working with the sdministration and Congress to develop a system that allows our nation's seniors and individuals with disabilities to afford long-term care services in the setting best suited for them,” said Mark Parkinson, president and CEO of AHCA/NCAL.

Meanwhile, the new jobs legislation proposed by President Obama in September included in its funding mechanisms for an estimated $42 billion in savings that would come from nursing homes, rehabilitation centers and LTC facilities by encouraging increased efficiencies in providing care immediately after patients are discharged from the hospital.

The administration pointed out in its explanation of its healthcare provisions that over the years, expenditures for SNFs, LTC hospitals and inpatient rehabilitation facilities have increased dramatically. “Payments in excess of the costs of providing high quality and efficient care place a drain on Medicare,” the statement said, adding that payment for the same service varies by provider type.

Thus, its proposal includes these policies:

  • Adjust payment updates for certain post-acute care providers, gradually realigning payments with costs through adjustments to payment rate updates in 2014 through 2021.

  • Equalize payments for certain conditions, reducing the differences in payment by inpatient rehabilitation facilities and SNFs for treatment of specified conditions to encourage care in the most clinically appropriate setting beginning in FY 2013.

  • Encourage appropriate use of inpatient rehabilitation hospitals, updating compliance requirements to better ensure that the higher payments to these facilities apply to cases requiring this level of care.

  • Adjust SNF payments to reduce hospital readmissions. The administration said nearly 14 percent of Medicare patients that are discharged from a hospital to a SNF are readmitted for avoidable conditions. This proposal reduces SNF payments by up to 3 percent beginning in FY 2013 for facilities with high rates of care-sensitive, preventable hospital readmissions.

“The new Medicare and Medicaid cuts proposed today-on top of the many cuts already in place-would significantly compound the growing SNF sector instability placing patients, our workforce and local facilities at risk,” says Alan G. Rosenbloom, president of the Alliance for Quality Nursing Home Care. “We will continue to point out that SNFs are already part of the solution to cost efficiency in the context of the deficit reduction discussion, and are key to maintaining quality care at a comparatively favorable price point. Further weakening our sector with more Medicare and Medicaid cuts is counterproductive to our nation's healthcare objectives.”

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