CLASS Act Abandoned / Long Term Care Remains in Crisis

The Community Living Assistance Services and Support Act (CLASS Act) established the first national, government run long-term care insurance program to be a consumer financed insurance pool overseen by a government trust. A primary goal of CLASS was to reduce to the role of Medicaid, which currently spends one-third of its entire budget – more than $100 billion a year – on long-term care, and that number is only set to increase as the population ages.

What effect the CLASS Act had on long-term care needs

 

The CLASS Act provisions would have created a government administrative structure, under which participants would pay a monthly premium and be eligible for modest benefits for their long-term care needs after five years of paying the premiums. This would have been significantly different from any other government program because the Act required that benefits would be paid by premiums collected from voluntary participants and not by the taxpayers.

Although the CLASS Act had laudable goals, commentators from the start have questioned how it would be financed. Not surprisingly, the CLASS Act was cancelled in mid-October and the Obama administration stated it could not be sustained without using taxpayer money as the program had originally intended. Because participation in the program is voluntary, Health and Human Services Secretary Kathleen Sebelius concluded that there was no way to keep it solvent. It was determined that few healthy people would feel the need to pay a premium for care they might never need, and without healthy people paying into the system, there would be no way to keep the premiums affordable for those who did want to participate.

Still a great need for federal programs that would make long-term care more affordable.

 

The failure of the CLASS Act doesn’t change the need for a federal program that would make long-term care more affordable or create incentives so that people can pay privately for their care. Our population is aging rapidly and we do not have a plan about how to afford to pay for that care. Hopefully, despite the current political climate, there will be a chance for a reasoned discussion of how we can achieve this goal.

The Importance of Discussing End-of-Life Decisions

Many people have health care proxies, sometimes called advance directives, that authorize another person to make health care decisions for them once they are no longer able to do so.           How many, however, have actually discussed the difficult topic of end-of-life decisions with that person?  More often, this discussion is avoided until it is too late.  Health care proxies are often vague as to specific interventions or treatments that would or would not be agreeable to the person who is to be treated.          The Massachusetts Executive Office of Health and Human Services, in conjunction with the Executive Office of Elder Affairs, recently completed a pilot program in Worcester for a patient and doctor to discuss these issues and together create Medical Orders for Life-Sustaining Treatment (MOLST).           The MOLST, which is called Physician Orders for Life-Sustaining Treatment (POLST) in other states, is signed by both the patient and physician and outlines in detail whether the patient would choose certain end-of-life treatment.           The MOLST is meant to complement advance directives by providing more specific information about a person's preferences concerning treatment.  Some of the treatments specifically included on the form are do not resuscitate (DNR) orders, intubation and ventilation, artificial nutrition and hydration, palliative care, and the use of antibiotics.              Because the form is signed by both the patient and the physician, it allows the patient to express his or her wishes through actionable medical orders.  The form clarifies a patient's wishes and preferences as to these difficult decisions.           The orders must be honored as medical orders, as they are already signed by a physician. The forms become part of the patient's permanent medical file.           POLST programs are currently in effect in 14 states and 16 more are in the process of developing programs.             In March, the Massachusetts Expert Panel on End of Life Care issued a report entitled The Urgency of Health Care System Reforms to Ensure Respect for Patients' Wishes and Accountability for Excellence in Care.  The report was intended to review the current state of end of life health care and ways to improve the status quo.  Its recommendations, among other things,  include an increase in efforts to elicit and document patients' end-of-life preferences and an increase in coverage for hospice services.           The report also makes specific policy recommendations concerning the implementation of the MOLST model in Massachusetts, with a target date of full statewide implementation no later than January 1, 2014.            Regardless of whether or when this occurs, it is very important for each of us to discuss our values and wishes concerning treatment preferences with our loved ones, our health care givers, as well as our health care providers so that they understand our wishes.  It can be an uncomfortable discussion, but it can really help make a difficult time a lot easier.         Let us know if you have any questions or comments.



The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law on December 17, 2010.  The federal estate tax was retroactively reinstated for 2010, at a top rate of 35%, and that rate applies to estates of individuals dying in 2010, 2011, and 2012. The $5 million basic exclusion amount, effective in 2010, 2011, and 2012, will be indexed for inflation in 2012.  In addition, Congress enacted a "portability" provision for any unused exemption in the estate of the first spouse to die:  For 2011 and 2012, when one spouse dies, any unused portion of that spouse's estate tax exemption equivalent amount may be transferred to the surviving spouse.

With regard to federal gift and generation-skipping transfer ("GST") taxes, for 2011 and 2012, there will be a $5 million lifetime gift tax exemption equivalent at the estate tax top rate of 35%.  The GST tax exemption amount for 2010, 2011, and 2012 is $5 million; a 0% tax rate applies for 2010, and the same estate tax top rate of 35% applies for 2011 and 2012.

Much has been made of this bill, especially by GOP lawmakers who claimed it "raised" the federal estate tax.  While technically this is accurate because there was no federal estate tax in 2010, due to the "sunset" provisions of EGTRRA, passed in 2001, in fact Congress simply continued the trend evident in the EGTRRA legislation, namely, a steadily increasing exemption amount (which had reached $3.5 million in 2009) and descending estate tax top rate (45% in 2009).  While Democratic lawmakers howled about the decrease in the top tax rate to 35%, it was probably necessary to lower it to that figure to garner sufficient GOP support for passage of the tax bill.

Bear in mind this is essentially a "punt" - the provisions outlined above expire at the end of 2012, so Congress will have to re-visit this estate tax / gift tax / GST tax issue all over again next year.  But at least the legislation provides a structure on which to base solid estate planning, and some sense of where these taxes are probably headed after 2012.