Call for Additional Tax Deduction For LTC Insurance

Joseph Stango, the founder of the public policy group “Choice Centered Medicaid” also known as “Dora’s Hope” has called for an above-the-line tax deduction for Long-Term Care Insurance.

Choice Centered Medicaid (CCM) is a not-for-profit, grassroots movement created by Stango, an advocate for Medicaid reform. CCM says it strives to make Americans aware of the plight of millions of middle-class seniors and disabled adults who are being forced into nursing homes in order to receive Long Term Health Care.

In an opinion piece published in the Republican-American newspaper in New Haven, Connecticut, Stango wrote, “America spends $725 billion a year caring for the chronically ill. Ironically, in a country that embraces the benefits of capitalism, private enterprise pays very little — less than 1 percent.”

He said the cost of Long Term Health Care is many times ignored by many Americans until they face it first-hand.

“It is a simple human trait to ignore the degenerative aging process. People believe the negative effects somehow will pass. Then, little by little, age erodes health. One day, we find ourselves needing help but having limited resources to pay for it,” he noted.

The cost of this care is very high. Individuals and their families carry a $63 billion burden, paid directly out of their pockets Stango says. He also explains that family caregiving costs an additional $450 billion for family leave, reduced working hours and lost jobs.

“With 70 percent of Americans needing Long-Term Care after age 65, the costs and added pressure on individuals and their families will continue to grow,” he said.

The tax-payer gets involved as well, especially when people don’t plan. Tax-funded programs for veterans and those supported by local and state governments cost $10 billion a year; Medicare (health insurance for those 65 and older), $64 billion; and Medicaid (the medical welfare program), $130 billion.

Generally, health insurance and Medicare pay very little for Long Term Health Care. They will pay for a limited amount of days of skilled care and only if a person is getting better. Most Long Term Health Care is custodial in nature and custodial care is not covered by any health insurance or Medicare. This means many people, without Long-Term Care Insurance, pay out-of-pocket until they spend down a majority of assets. At that point Medicaid will pay for care in a nursing home.

Stango says if we are to lessen the burden for taxpayers and families, we need to change the ratio of cost-sharing by increasing the share of the private markets and reducing that of government agencies. Doing so will provide greater choice to consumers, maintain a healthy middle class and reduce the burden on taxpayers.

To transfer this risk to insurance companies and away from individual families and the tax-payer, Stango suggests addition tax benefits to encourage more people to purchase Long-Term Care Insurance.

“To increase the private-market share of the cost, we should provide tax incentives to consumers to pay for Long-Term Care Insurance. This can be done by providing a dollar-for-dollar reduction in personal income taxes to those making less than $150,000 per year, and a tax deduction for those earning $150,000 to $250,000 per year. An alternative would be to offer tax-and penalty-free distributions from personal retirement accounts for the purchase of a policy,” he said.

Some tax incentives already exist. Benefits are always tax-free and businesses and self-employed can deduct premiums. In addition, some people could include premiums as a medical expense if they itemize.

Stango also calls for the federal government to mandate that all states provide equal access to a nursing home or home-based care services for those on Medicaid.

Long-Term Care Insurance is generally purchased prior to a person’s retirement as part of an overall retirement plan. Premiums are very affordable for those in their 40’s and 50’s. With this additional tax incentive, even more, people would be able to make Long-Term Care Insurance part of their retirement plan.

"Individuals mistakenly have been led to believe that Long-Term Care Insurance costs thousands of dollars." A national consumer advocacy organization that helps both consumers and insurance agents with Long-Term Care Insurance issues. Premiums can be affordable and many options exist including new shorter-term plans for those who may have health issues.

Slome suggests consumers work with a specialist in Long-Term Care.

“It really takes experience and some time to develop a real expertise in the field.”

 Jesse Slome, an executive director of the American Association for Long-Term Care Insurance (AALTCI)