Community Living Assistance Services and Support Act (CLASS Act)

February 2010

Community Living Assistance Services and Support Act (CLASS Act)

While the future of comprehensive health reform remains unclear, the debate has identified many ideas, programs, and innovative proposals to combat rising health care costs and provide individuals with the care and services they need. One such provision in proposed reform legislation, the Community Living Assistance Services and Support (CLASS) Act, has generated significant interest because of its focus on long-term care services and supports, which historically had not played a prominent role in discussions on reforming the current health care system.


Currently, nearly $230 billion is spent each year on long-term care, totaling 10.6 percent of all health expenditures.1 Of that amount, 48.5 percent is covered by Medicaid programs, which are financed jointly by the federal and state governments. To be eligible for Medicaid support to finance a nursing home stay, a person must demonstrate financial need; individuals who are unable to pay out of pocket typically spend down their assets to meet that eligibility requirement. Medicare, on the other hand, currently covers only short-term nursing home stays following acute episodes of illness.

In 2007, Senator Edward M. Kennedy (D-Mass.) introduced the original CLASS Act to augment long-term care services and supports for the millions of Americans that utilize these services each year. Although it did not pass at that time, in 2009, the Senate and House of Representatives each included the CLASS Act in their proposed health reform legislation, The Patient Protection and Affordable Care Act (H.R. 3590) and The Affordable Health Care For America Act (H.R. 3962), respectively. The program sparked debate among its proponents and critics about the structure of long-term care provisions within comprehensive health care reform.

CLASS Act Structure

The CLASS Act creates a new national voluntary program to assist individuals experiencing functional limitations. The program would offer benefits in the form of cash payments of at least $50 per day to those who are unable to perform at least two daily living functions or suffer from cognitive impairment that is expected to last for more than a 90-day period.2

The CLASS Act would be funded through voluntary monthly payroll deductions from workers over the age of 18. Premiums, covered by workers, would be based on one’s age and enrollment year and could increase if necessary to support the program.3 The program would automatically enroll workers unless they opted out and includes guaranteed issue for those defined as actively at work. If a worker’s employer did not withhold premiums, an alternate collection mechanism would be established.4

Benefits from the CLASS program would not affect an individual’s eligibility for Medicare, Medicaid, Social Security, or other benefit programs. Additionally, CLASS would not replace traditional private long-term care insurance or Medicaid, but would instead supplement this coverage.5 The cash benefit from CLASS could be used for non-medical expenses. Medicaid recipients residing in nursing homes would be permitted to keep 5 percent of their cash benefit, while those receiving benefits under home and community-based waivers could keep 50 percent of their cash benefit.6

While the House and Senate bills do agree on the main tenants of the CLASS Act, they do differ in a few important ways. For example, the House bill would allow the spouse of an enrolled worker to also enroll in the program. In the Senate bill, full-time students, ages 18-22 and workers who fall below the poverty line, would be eligible for premium subsidies.7 Both versions of the program call for a five year vesting period during which premiums would be paid into the program before any benefits are paid out.

The CLASS Act Debate8

Proponents of the CLASS Act see it as a financial lifeline that would allow individuals to remain functional and independent longer and mitigate the financial burden on informal and family caregivers. It is estimated that the economic value of informal caregiving is $300 billion annually.9 CLASS Act funds could be used to make housing modifications, hire personal assistant services, pay for transportation, and other services and supports.

Supporters of this program suggest that the risk pool created by enrollees would make long-term care a more affordable benefit and would reduce the number of individuals spending down their assets to achieve Medicaid eligibility. In addition, the Congressional Budget Office (CBO) has estimated that the House version could reduce the deficit by $102 billion between 2010 and 2019 while the Senate version is estimated at a $72 billion reduction.10 The CBO’s projections for deficit reduction are based on anticipated premiums exceeding benefit payments over an initial 10-year budget window.11

Opponents of the CLASS Act believe the benefit would be insufficient for those with significant functional and cognitive disabilities and they are concerned about the length of the five year vesting period. Some analysts also challenge the claim that the program is deficit reducing. The American Academy of Actuaries notes that while a five year premium collection window could generate revenue initially, benefit payouts could overtake those savings and add to the deficit as soon as 2021.12

Those who oppose the CLASS Act caution that to the extent premiums are set too high to attract enrollees or are raised over time to support the program, the program is likely to loose healthier individuals, while retaining those with significant needs. This adverse selection could jeopardize the long-term viability of the program.13

HCFO-Funded Work on Long-Term Care Services and Supports

The HCFO program has funded a number of projects in the long-term care arena, which provided important lessons for the current CLASS Act debate. David Grabowski, Ph.D. and David Stevenson, Ph.D., Harvard Medical School, recently examined the role of assisted living facilities on the nursing home market. As more aging adults seek continued independence, understanding the assisted living market becomes more critical. The researchers examined assisted living locations, demographics of the populations served, and future financing and regulatory issues that may arise. They found that assisted living facilities are disproportionately located in wealthy areas due to the reliance on private incomes. Specifically, assisted living facilities are clustered in areas that generally have higher educational attainment, higher income, and higher housing wealth. More findings from this study can be found in the January issue of Health Affairs. For further information on the study please visit

HCFO researcher Richard Johnson, Ph.D., the Urban Institute, examined the future long-term care needs of baby boomers and the effect of those needs on the structure of families, paid helpers, and institutions. Johnson and colleagues found that the disabled older population will likely grow much faster than younger generations. This will result in the economic burden of long-term care rising in the coming years. This will also mean more disabled adults will receive care from paid helpers and fewer will receive care directly from a family member. These findings indicate that the challenges facing long-term care financing will continue to intensify in the coming years. See the July 2007 Findings Brief for grant findings.


As baby boomers age, the need for long-term care services will increase. Currently few individuals are planning for that eventuality. Those who challenge the viability of the CLASS Act maintain that the provision’s current structure needs a second look. Those who support the CLASS Act believe that there is substantial risk in failing to include long-term care services among other reforms.

For related HCFO-sponsored research, see the grants listed below or visit

Title: Impact of State Medicaid Policy Changes on Nursing Home Hospitalizations
Grantee Institution: Brown University
Principal Investigator: Vincent Mor, Ph.D.
Grant Period: June 1, 2008 - May 31, 2010

The researchers will examine the effect of changes in state nursing home bed hold payment policies. Bed hold policies are designed to prevent facilities from discharging low paying (i.e., Medicaid), costly, or complicated patients and to encourage continuity of residence by continuing to reimburse nursing homes if a resident is transferred to a hospital. The researchers will study the impact of these policies on the rate of hospitalization of nursing home residents, as well as on whether residents return to their originating nursing home following hospital discharge. In particular, they will: 1) describe variation in the rates of hospitalization between 1999 and 2005; 2) describe changes in the pattern of post-hospitalization discharge locations; 3) test the effect of changes in state Medicaid bed-hold payment policies between 1999 and 2005 on the rate of all hospitalizations of long stay nursing home residents; 4) test whether state bed-hold policies differentially affect the occurrence of “potentially avoidable” and “terminal” hospitalizations among nursing home residents; 5) test the effect of changes in state Medicaid bed-hold payment policies between 1999 and 2005 on the discharge location; 6) quantify the financial implications of changes in state bed hold policies; and 7) examine changes in residents’ functional status associated with hospitalization in the periods before and after changes in bed-hold policies. The objective of this study is to inform the debate about how best to address increasing hospitalizations of nursing home residents.

: Medicaid Long-Term Care Programs: Simulating Rate Setting and Cross-Payer Effects
Grantee Institution: State of Maryland Department of Health and Mental Hygiene
Principal Investigator: Tricia Roddy and Anthony M. Tucker, Ph.D.
Grant Period: February 1, 2008 - January 31, 2010

The financing of long-term care has become increasingly more complex as both Medicare and Medicaid seek to serve the dual eligible population. While states are examining ways to support integrated programs of care for duals through capitated payments for Medicaid-covered costs, important questions remain about how Medicare and Medicaid services and costs are related. Using data for 2006 and 2007, researchers from the State of Maryland Department of Health and Mental Hygiene will establish a framework within which to examine the implications of cross-program effects in long-term care including an array of potential factors that would affect the calculation of capitation payment rates. The researchers will accomplish this by: (1) developing a simulation using estimated and actual expenditures to model the full spectrum of public program expenditures for duals; (2) examining how and to what extent providing Medicaid community supports, in particular, may affect the use of Medicare acute care and Medicaid institutional resource use; and (3) exploring how those effects might be applied in setting Medicaid payment rates. The objective of this study is to provide state and federal administrators and policymakers a better understanding of the interactive effects of public programs as efforts in coordinated care evolve.

Title: The Impact of Assisted Living Growth on the Market for Nursing Home Care
Grantee Institution: Harvard Medical School
Principal Investigator: David C. Grabowski, Ph.D.
Grant Period: June 1, 2007 - May 31, 2009

How is the growth in assisted living linked with decreased occupancy rates, increased resident acuity, and increased resident reliance on Medicaid in nursing homes? In particular, the researchers: 1) documented the growth of the assisted living sector over time; 2) isolated the effect of assisted living growth on nursing home utilization; 3) examined the relationship between assisted living growth and nursing home payer mix; 4) estimated the effect of assisted living growth on nursing home resident acuity; and 5) assessed whether the growth in assisted living has implications for nursing home quality. They also established a national assisted living database to facilitate empirical work to isolate the effect of assisted living growth on the nursing home market. The objective of the project was to better inform policymakers as they address the best incentives for meeting the nation’s growing long-term care needs, at reasonable cost, in a dynamic market.

Title: Meeting the Future Long-Term Care Needs of Baby Boomers: How the Changing Structure of Families Will Affect Paid Helpers and Institutions
Grantee Institution: The Urban Institute
Principal Investigator: Richard W. Johnson, Ph.D.
Grant Period: December 1, 2003 - February 28, 2007

How do families choose among types of long-term care services for older adults and what will be the demand for these services over the next 40 years?  The researchers estimated a model of informal family care, nursing home care, paid home care, and residence in assisted living settings. The model showed the impact of health status, financial resources, family networks, and relative prices, determined in part by family characteristics and in part by public policy. They also used the model to simulate the effects of potential changes in public policy on long-term care decisions, including the impact of an expansion of Medicaid eligibility or of expansions in Medicare coverage of long-term care services. The objective of the project was to better understand how competing social, demographic, and economic trends combine to determine future demand for long-term care services. The researchers used cross-sectional data for adults 65 and older from the 2000 Health and Retirement Study to model factors that affect family decisions about long-term care. The simulation portion of the project used DYNASIM3 and coefficients estimated in the modeling portion of the project to forecast future demand for long-term care services over the next 40 years. (DYNASIM3 is a microsimulation model developed by the Urban Institute to forecast future demographic, social and economic characteristics of the population by simulating births, deaths, marriages, divorces, labor supply decisions, and earnings trajectories. DYNASIM3’s core characteristics have recently been updated with data from the late 1990’s.)

1 Iglehart, J. “Long-Term Care Legislation at Long Last?” Health Affairs, Vol. 29 No. 1, January 2010, pp. 8-9.
2 The SCAN Foundation. “Summary of Key Provisions Supporting the Continuum of Care for Seniors in the House and Senate Health Reform Bills.” Policy Brief, No. 1, January 2010.
3 Schmitz, A., “Adverse Selection and the CLASS Act,” Milliman Health Reform Briefing Paper, December 2009.
4 The SCAN Foundation. “Summary of Key Provisions Supporting the Continuum of Care for Seniors in the House and Senate Health Reform Bills.” Policy Brief, No. 1, January 2010.
5 O’Malley, M. “The Community Living Assistance Services and Supports (CLASS) Act.” Focus on Health Reform, The Henry J. Kaiser Family Foundation, #7996, October 2009.
6 The SCAN Foundation. “Summary of Key Provisions Supporting the Continuum of Care for Seniors in the House and Senate Health Reform Bills.” Policy Brief, No. 1, January 2010.
7 Ibid.
8 Pollack, H. “CLASS Act (Updated), The New Republic, November 17, 2009 (Pollack distills the arguments for and against the CLASS Act from sources including CBO, the CMS Chief Actuary, the American Academy of Actuaries, the Office of Disability, Aging and Long-Term Care Policy, and the American Association of Homes and Services for the Aging, among others)
9 Iglehart, J. “Long-Term Care Legislation at Long Last?” Health Affairs, Vol. 29, No. 1, January 2010, 8-9.
10 Ibid.
11 “Senate Health Reform Bill Incorporates CLASS Act,” McGuireWoods Legal Updates, November 25, 2009.
12 American Academy of Actuaries. “Actuarial Issues and Policy Implications of a Federal Long-Term Care Insurance Program.” Letter to the U.S. Senate Committee on Health, Education, Labor, and Pension, July 22, 2009.
13 Schmitz, A., “Adverse Selection and the CLASS Act,” Milliman Health Reform Briefing Paper, December 2009.