The New CLASS Act and Your Estate: Planning with Long-Term Care in Mind

On 23 March 2010, President Barack Obama signed into law the Community Living Assistance Services and Supports Act (CLASS Act), creating a new voluntary publicly-sponsored national insurance trust for long-term care. CLASS is a part of the Patient Protection and Affordable Care Act. Designed to be a low-cost voluntary insurance program, CLASS is self-supported by premiums paid into the program by workers; no taxpayer funds are used. Unlike Medicaid, CLASS is not an entitlement program. Therefore, the only way that an individual derives a benefit from CLASS is if that individual contributes into CLASS through the payment of voluntary premiums primarily through an employer.

The Secretary of Health and Human Services is charged with developing both the premiums schedule and the schedule of benefits. The legislation does not specify either. But Congress did mandate that the schedules be actuarially sound and self-sustaining. Notwithstanding, several groups, including the Congressional Budget Office (CBO), have developed projections about both premiums and benefits. For example, the CBO projected in June of 2009 that an individual paying $65/month for initial decade would receive an average daily benefit of $75/day. But after 2019, the CBO-projected benefits dropped to $50/day and premiums for new enrollees went up to $85/month. But remember that these are mere projections. The final implemented version through Health and Human Services may incorporate different assumptions and different benefits.

Because the Act does not mandate screening of applicants, CLASS offers benefits to people who otherwise would not be eligible to apply for private long-term care insurance. However, CLASS is not designed to cover the full cost of long-term care. MetLife provides a long-term care calculator that can give you some realistic costs for long-term care in New York City and New York State. For instance, the annual cost of a semi-private room in New York City is $128,480. The daily rate would be $285. The daily rate is significantly less for an assisted-living facility ($153), and even less so for home care, around $58 per day for five hours of care, five days per week. The benefits of contributing into CLASS become apparent. And while some people would prefer to save for their long-term care needs, the rising cost of long-term care makes that prospect increasingly difficult.

In addition, no one can predict the seriousness of an injury or a disabling illness and the resulting costs of care and rehabilitation. But we can prepare to meet the challenge with a carefully crafted plan that take into account the individual's current state of health (physical, mental, emotional), their rate of savings, their family relationships, and their preferences as to long-term care, among other factors. Long-term care considerations should be part of any estate plan to make sure that financial resources are available and that assets are protected when the need arises.

Fortunately, New York State also has a unique program called The New York State Partnership for Long-Term Care that combines private long-term insurance with public Medicaid Extended Coverage. The website provides a list of participating private insurers. Most importantly, the program allows for partial or complete asset protection, providing some protection against "spousal impoverishment" in the case of nursing home care. It is well to remember that, for institutionalized care, any transfers of assets into an trust for Medicaid purposes is subject to a five-year "look back" period, and that some penalties may apply for some transfers of assets by the individual or his/her spouse if the transfer is made within that five-year window.

CLASS will provide New Yorkers with another arrow in their quiver as they contemplate their long-term care needs. Together with the New York State Partnership for Long-Term Care, CLASS will provide a valuable safety net, especially for those with pre-existing medical conditions.

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