A Project of The Annenberg Public Policy Center

CLASS Act


 Q: Did Congress slip a $150 to $250 monthly tax into the new health care law to pay for home care for the elderly?

 A: No. The new CLASS Act program is voluntary. Premiums are estimated to be $123 per month for workers who choose to participate. It covers home care for those who become disabled at any age, not just those over age 65.

FULL QUESTION

Dear FactCheck Editor,

Is the email below legitmate? If so, it’s insane. My wife and I may not be able to retire.

There’s a surprise in the Reconciliation Bill.

We will all be taxed $150-$250 PER MONTH beginning in 2011 for the NEW Community Living Assistance Services and Support Act (CLASS Act) that was added to the Reconciliation Bill on Friday night, Mar 19, 2010, before Congress voted on Sunday, Mar. 21, 2010. It will help pay for long-term home-care for the elderly. Isn’t that nice?

[EET ]

In January of 2011, the government will start taking between $150-$250 out of our paychecks every month. And, not to worry, there is no discrimination here. ALL of us will be taxed on this one. Rich, poor, everyone except people who don’t have a job, is included. If you have a job and get a pay check, the government will take this tax from you. Just to clarify, this is not a fee per household. It is a payroll tax deduction PER PERSON

And there’s more to this surprise! The program won’t begin for five years, and they don’t expect to pay out anything for at least 10 years. So we get a head start on paying for it. Isn’t that great? The government will take our money and put it in their savings account for at least 10 years, and then they will start giving it to other people. What a great idea!

The CLASS Act, (isn’t that a great name for it?) was apparently a pet project of the late Sen. Ted Kennedy, who was never able to get support for it because it was just to costly. What a wonderful tribute to Senator Kennedy! I know he would be so proud of Nancy for getting this done for him.

Beneficiaries will include anyone age 65 and older who have paid into the program for at least five years, but they have to wait until they are old enough to require home health care. I know it’s a little confusing, but I’m sure Nancy and the boys in Washington really do know what they are doing. So, it’s all good.

Gee, I need to start budgeting for this now. I don’t have an extra $150-$250 per month, and neither does my husband. So we’ll need to figure out how we can cut our expenses by $500 by next January… Either that, or we could each get another job… No, that won’t work. There are no jobs. Hmmmmm… Hopefully we’ll figure something out.

No wonder Mrs. Pelosi was in such a big hurry to get that silly little Reconciliation Bill passed. She wanted it to be a big SURPRISE! Isn’t she a stinker?

I can’t wait to find out what other surprises are in that bill. Thanks, Nancy!

PS: Just punched some numbers into the calculator… If I put $200/month in an interest bearing account of some kind, earning, let’s say at 5% interest (I know that’s a little high for these times, but it’s a nice round number) for five years, I’d have about $14,000 at the end of that time period. Double that if Joe did it too. I could buy one heck of a health insurance policy with that kind of money. Oh well. The government is going to take care of me so I don’t have to worry about it. What was I thinking?

[/EET]

FULL ANSWER

This widely circulating e-mail message contains several false claims. Here are the facts:

  • The new CLASS Act insurance program is voluntary. It is not a "tax." Employers are required to deduct premiums automatically, but anyone who wishes to opt out can do so.
  • Premiums have not yet been determined, but are expected to be much lower than the amounts claimed in this message. Students and those below the poverty level will pay only $5 per month. For others, the Congressional Budget Office estimated last year that monthly premiums would be about $123.
  • The program covers anyone who becomes disabled, not just those "over 65" as claimed. It will provide in-home care, such as a home health aide, adult day care or assisted living, as an alternative to nursing home care. It will pay an average of at least $50 per day, $18,250 a year, with no lifetime limit.
  • The program was not suddenly inserted in the health care reconciliation bill as claimed. Both House and Senate had passed slightly different versions of the measure much earlier, as part of their broad health care overhaul legislation. Congress eventually adopted the Senate version.

The CLASS Act is Title VIII of the new health care law. It is spelled out starting on page 710 of the measure as it was passed by both Senate and House. (CLASS stands for "Community Living Assistance Services and Supports.) The law specifies that it is "a national voluntary insurance program," the key word being "voluntary." Section 3204(a) requires employers to enroll workers automatically, but Section 3204(b) then says workers may choose to waive coverage "at any time."

Far from being a last-minute "surprise," the Senate passed the bill Dec. 24, 2009, and the House approved it March 21, 2010. President Obama signed it into law March 23. Contrary to the claim in the chain e-mail, the reconciliation bill that was passed later and became law on March 30 did not mention the CLASS Act program or make any changes to it.

The law sets premiums at $5 per month for those below the official poverty line and for students. That will be adjusted each year in line with inflation. For others, the Secretary of Health and Human Services is required to calculate a level of premiums that will keep the system solvent for 75 years, without any subsidy from the government. The Congressional Budget Office estimated last year that the Senate version of the CLASS Act (the one which later became law) would be $123 per month to start, and that even by the year 2019, fewer than 10 million persons would choose to enroll — about 3.5 percent of the adult population.

The program starts to take effect in 2011. The Secretary of Health and Human Services is expected to set benefits by October 2012, and then to begin enrolling workers. Benefits will depend on a person’s degree of impairment, but can’t average less than $50 per day. Democratic sponsors of the legislation say benefits are expected to average roughly $75 per day.

One smidgen of truth in the message is that persons must pay premiums for at least five years before they qualify for benefits. As a result, the government will be bringing in extra revenue for years before it must start making any payments. According to CBO’s most recent estimate (Table 5, page 32) the program would act to reduce the deficit by a total of $70.2 billion during the nine years ending in 2019 — including savings to the Medicaid program brought about by fewer persons entering nursing homes.

CBO said earlier, in its estimate given last year, that the program probably would reduce the deficit during the decade starting in 2020 as well, though not by as much as during the first nine years. After that, CBO said, "the sum of benefit payments and administrative costs would probably exceed premium income and savings to the Medicaid program. Therefore, the programs would add to budget deficits in the third decade—and in succeeding decades—by amounts on the order of tens of billions of dollars for each 10-year period."

— Brooks Jackson

Sources

United States. Cong. 111th Congress, 2nd Session. H. R. 3590 "The Patient Protection and Affordable Care Act" Enrolled Bill [Final as Passed Both House and Senate]. 21 Mar 2010.

United States. Cong. 111th Congress, 2nd Session. H.R. 4872 "Health Care and Education Reconciliation Act of 2010" Enrolled Bill [Final as Passed Both House and Senate]. 25 Mar 2010.

Elmendorf, Douglas W. letter to Chairman George Miller, U.S. House Committee on Education and Labor. Congressional Budget Office. 25 Nov 2009.

"Community Living Assistance Services and Supports (CLASS)" undated fact sheet posted by the U.S. Senate Democratic Policy Committee. Accessed 17 Jun 2010.

Elmendorf, Douglas W. Letter to Speaker Nancy Pelosi, U.S. House of Representatives. Congressional Budget Office. 20 Mar 2010.

"Health Care Reform and the CLASS Act." Kaiser Family Foundation. Apr 2010.

Meyer, Harris. "New Long-Term Care Insurance Will Provide Flexible Cash Benefits." Kaiser Health News. 15 Apr 2010.

Vestal, Christine. "Hope for the long term." Stateline.org. 15 Apr 2010.