By Lowell L. Kalapa
There is increasing awareness about the issue of long-term care as the baby boomers begin to age and developments in medical technology hold greater prospects of a longer life.
Here in Hawaii, the issue was broached several years ago when more than a million dollars was appropriated to study the issue and recommend ways of insuring affordable and quality long-term care. Indeed the cost of long-term care is very expensive, costing thousands of dollars per month depending on the type of care, be it in-home care or nursing home care.
It is this cost that strikes fear into the hearts of most seniors today, afraid that they will deplete their savings and have nothing to leave their children or if not that, being a burden on their children. On the other hand, it is not that those who need long term care will be thrown out onto the streets. The federal Medicaid program does provide a safety net of sorts for those who cannot pay for their own care or have completely run out of resources.
It is with this dilemma in mind that the Office of Aging undertook the million-dollar study several years ago. However, the study seemed to focus solely on how to insure people who would have enough money to pay for long-term care.
The result was that the recommendations of the study centered on providing long-term care insurance through mandatory participation by all taxpayers in the state. In fact, that is what the key recommendations proposed, that an additional rate be added to the state income tax the proceeds of which would be earmarked for the purchase of a state long-term care insurance policy.
While such an idea would undoubtedly be rejected today given the current economic situation of the state, at that time, lawmakers took the proposition to heart and almost adopted it. The plan was called “Family Hope” and its centerpiece was the state-funded insurance plan that would provide payments for long-term care. It would be funded through an additional rate imposed on all income received by individuals. Initially, the tax base would have been the same as the state income tax. However, when it was pointed out that pensions, which are the primary source of income for seniors, are tax exempt, supporters of the plan obligingly agreed to also tax pension income.
As the debate raged on, the discussion became quite heated, pitting basically retirees against wage-earners. When the really difficult questions of financial integrity of the fund and sufficient revenues to pay for all of the long-term care demand of the future were asked, the plan fell apart. More importantly, critics questioned the appropriateness of raising taxes on already overburdened taxpayers.
Unfortunately, the long-term care plan called Family Hope is just one more example of the kind of thinking that got government into the pickle it is in today. That approach was if there is a problem just throw money at it and maybe it will go away. In this case, the response was not only to throw money at the problem but to raise even more from taxpayers as a way to solve the problem.
Not only did the Family Hope program call for an increase in taxes, but it would have created a new and even larger public bureaucracy by establishing a state insurance plan. It would have hired even more public employees to administer and run the plan. Once on track, if financial resources proved to be insufficient, there is no doubt that tax rates would have been increased to cover the costs.
Instead of just trying to come up with the money to pay for long-term care, policymakers need to take a long hard look at the reasons why long-term care is such an expensive proposition. They should look to the supply of that service and ask why such care is not only expensive but usually very difficult to secure. Is the reason that long-term care is expensive is that the supply is so limited?
If the reason is a limited supply that demands a high price, then policymakers need to take a look at how they can increase the supply of this type of care and reduce the costs of providing this care. Another study of long-term care is currently underway and it appears that it is headed in the same direction as the last study. Let’s hope some rational voices will prevail and a more logical approach be used to address this problem instead of merely raising the money to pay for this very costly service.