By Lowell L. Kalapa
Throughout this past session the phrase it’s not perfect, but it is a good start was often repeated in hearing after hearing on pending legislation.
While a good start may be plausible and perhaps acceptable to some, writing legislation that does not try to be perfect should be unacceptable. Such was the case with the proposed long-term care plan – CarePlus – which was submitted to this past year’s legislature. As originally introduced, it looked like a safety net of $70 a day for 365 days. But that money would have come from rich and poor alike and because it is a fixed dollar amount, it would take a greater percentage from the poor family’s income than from the well-to-do. In that sense it is regressive, penalizing the poor to benefit rich and poor alike.
The premiums had nothing to do with the health of the person nor would the benefits take into account how much one has contributed into the system. Although it looks like Social Security because one has to contribute for a minimum of ten years, the benefits are the same regardless of how much is contributed. Thus, the person who has contributed for all forty years of his career would collect the same benefits when the time comes as the person who has put in the minimum ten years.
One has to pay-in and wait ten years before becoming eligible for benefits whereas private long-term care insurance would pay anytime after the contract is signed and the premium paid, be it tomorrow, next week, or next month. Private long-term care insurance is affordable when purchased at a young age. Most of those high-priced quotes are probably because the applicant was in poor health with existing health problems. And their quotes should be high. The elderly are correct to say the insurance is expensive now that they are 65 or 75, because the risk is higher.
No one seemed to have asked how the proposal interfaces with federal mandates such as HIPAA – the federal health portability insurance law. Most experts agree that Care Plus is not HIPAA compliant. If it is not HIPAA compliant, then for federal income tax purposes, the benefits paid out of this plan would not be tax exempt, the $70 a day would be subject to federal income taxes, reducing that amount. There is also a question of HIPAA preemption with a resulting lawsuit if the bill had passed in that form.
The proponents argued that this plan would not create any public bureaucracy as it would be contracted out to a private provider, but the tax would still have to be collected by the tax department. Since the proposed CarePlus tax base would differ from the current income tax, a totally new system must be put in place to keep track of the payments and individuals.
Given that the proposed long-term care plan would have to track data that has never been collected before – like age of the contributor, how long they have contributed, if and when there is a hiatus in the contributions, where the contributor is if the contributor moves out of state – and for which there is no underlying infrastructure like W-2’s, there is no doubt it would cost a substantial amount. And the proposal never did define how the tax was to be collected from people who are not employed as the collection system is dependent on employers to collect the tax. That also meant that retirees, who were in favor of the proposal, could not participate unless they are employed. One of the later versions would apply the tax to anyone who has adjusted gross income of $10,000 or more, an attempt apparently to exempt the poor. The problem here is that there is no way an employer would know if his or her employee has adjusted gross income of $10,000 or more as that number is the product of not only wages but also adjustments for losses from investments like shares of Enron or depreciation of rental property. Further, because pension income is tax exempt for state tax purposes, many retirees who have nothing but pension and Social Security income would not be able to participate and therefore would not be covered by CarePlus.
The bill assures us that the money in this plan can never be transferred to another fund. Of course, this is not unlike the special educational facilities fund, the hurricane relief fund, and the numerous other special funds that have been raided time and time again.
Good first step, perhaps, but ill-conceived. Had this plan been adopted, there is no doubt that lawmakers would be scrambling next year to “fix” it. Better to try for perfection rather than adopting a disaster like this.