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Solving Long-Term Care Problem with More Money

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By Lowell L. Kalapa

The House Finance Committee heard a proposed draft of a bill a couple of weeks ago that would establish a brand new tax credit equal to the lesser of $2,500 or the cost of a long-term care insurance premium. In addition, the bill called for a three-part study to be conducted by the department of health to determine the best method of establishing a state program of long-term care. Part I would ask for a study of three methods of financing a long-term care system. Part II calls for an actuarial analysis of the alternatives described – in other words how many people will live long enough to need such care; and Part III would require the health department to evaluate parts I and II and present legislation to establish the preliminary outlines of a long-term care program.
It all sounds very impressive and comprehensive that such a study would be undertaken to address what everyone acknowledges is a growing problem that will only get worse as the “baby boomers” grow older. The problem is that all of the alternative approaches outlined in the bill focus solely on ways to come up with the money to pay for long-term care beginning with the ill-advised “Family Hope Plan.”
The latter plan was the product of the Executive Office on Aging at the cost of more than a million dollars. It was supposed to have been a comprehensive review of the ways long-term care could be provided to the citizens of the state. Instead, it became nothing more than another proposal to raise money to pay for long-term care in the state. Its sole focus was an income tax surcharge that would be imposed on all income taxpayers.
As expected since the study came out of the Executive Office on Aging, there were many seniors in support of the measure. However, when it was pointed out that in most cases seniors did not pay income taxes because their income came in the form of pensions which are exempt from the state income tax law, that support began to erode. In the end, many lawmakers realized that they could not support another state program that would exacerbate an already burdensome load of taxes and the program was shelved.
That’s why there was a lot of concern expressed when the proposal was heard before the Committee. It was noted that the three alternatives proposed to be studied did nothing more than lead the study down a path of trying to determine how to raise the money to fund any of the three alternatives.
The other two alternatives included a voluntary, privately financed program similar to the one that is currently offered to government employees and a phased-in $3,000 tax credit program that would amount to nothing more than a government subsidy of long-term care insurance premiums for individual taxpayers.
And indeed, the tax credit contained in the bill would be nothing more than a subsidy for those who can afford to purchase long-term care insurance policies. To that extent, only those taxpayers who have the money up-front to pay for a long-term care policy would benefit. The poor, or families just struggling to make ends meet, would not benefit, but would end up subsidizing those who can purchase those policies.
In the hearing it was noted that instead of only addressing the financing side, lawmakers also need to address the supply of long-term care services. Given the basic law of supply and demand, if there is not enough supply to meet or match the demand for those services or products, the cost will be prohibitive as there will be many (demand) chasing what few services are available (supply).
It was suggested that lawmakers look at how they could help increase the supply of long-term care services and facilities. For example, the state owns a lot of land, could the state provide the land for long-term care facilities, either out right or under a long-term lease at little or no cost as government’s contribution to increasing the supply? And what about declaring long-term care as a “public purpose” so that private providers could secure subsidized financing for facilities?
More importantly, what is the community college and university system doing to develop a career path and training for long-term care providers? If there aren’t enough trained care givers, the cost of course will be high for what limited supply there may be. And certainly government can do something about relaxing some of its own regulations governing long-term care facilities. So rather than just raising money to pay for the care, government needs to do something about increasing the availability and supply of these services.

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