A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Cash Benefits

10/14/2011

With regard to the form of benefits for the eligibility beneficiaries, the statute states the following (emphasis added): “Cash benefits paid into a Life Independence Account of an eligible beneficiary shall be used to purchase nonmedical services and supports that the beneficiary needs to maintain his or her independence at home or in another residential setting of their choice in the community…”36. Accordingly, we question whether payments of straight cash are required. Instead, cash equivalents in individual accounts could be used to purchase services and supports for the beneficiaries. The provisions of the statute appear to grant a great degree of autonomy to the beneficiaries on the choice and specifics of the services and supports.

We are not opposed to paying cash when it is appropriate. We believe it is difficult to determine whether it is appropriate or not. Sound insurance systems require a demonstration of a real loss. With cash payments as benefits without limitations, the enrollees are incented to claim whether there is a real loss or not. Unfortunately, we believe the statute gives conflicting messages regarding benefits. On one hand, it appears to limit the usage of the benefits. One the other hand, it appears to suggest cash payments without accounting for its use.

We utilized some of the learning from Cash and Counseling demonstration projects in the following proposed benefit structure. A counselor will be assigned to provide advice and assistance in planning of services and support, in particular, assistance in developing a plan of care. The cost of counseling will be part of claim administrative expenses and will not reduce the benefit amounts. Funds will be deposited into an individual account (the Life Independence Account) of the beneficiary on a weekly basis. Under the plan of care and the advice of the counselor, the beneficiary can direct available funds in the account to obtain the services and supports needed as long as they are not on a list of exclusions. This list would include items such as food, rent, liquor and luxury items. Within guidelines set by the CLASS Office, the counselor can make exceptions to the list. Associated with the account, the beneficiary will receive a debit card with which permissible services and supports can be purchased. Cash could not be withdrawn from the account via the debit card.

The CLASS Office will establish a process to train, monitor and evaluate the performance of the counselors. If beneficiaries need direct-paid care services (for example, unlicensed home health aide), they must use a fiscal manager to handle various employment and reporting requirements. The expenses associated with the fiscal manager will be deducted from the account balance. Specific activities and time spent by the paid direct care worker (including paid family members) must be fully documented.

Our goal is to strike a balance between beneficiary-directed benefits and the potential for induced demand from the perception of a free-flow of cash. According to the statute, “nothing in this title shall be construed as prohibiting benefits paid under the CLASS Independence Benefit Plan from being used to compensate a family caregiver…”37 We remain concerned regarding unwarranted payments to family members, in particular, the spouse. It is difficult to differentiate spouse’s free time from the time spent that needs to be compensated. Moreover, payments to a spouse are effectively cash to the beneficiaries. We are considering a reduced payment amount to a spouse (for example, $10 daily).

Regardless of our concerns, the proposed benefit structure is a significant departure from typical long-term care insurance benefits and should be viewed as an attractive feature of the CLASS plan.

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