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Key to Long Term Care Issue Needs Creativity

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By Lowell L. Kalapa

Last session lawmakers punted on the issue of long-term care and adopted legislation that established a temporary board of trustees to study the issue and make recommendations to the 2003 session of the legislature.
Lawmakers had rejected a plan that called for a tax of $10 per month to be paid by every individual between age 25 and 98. Employers were to collect the tax and beneficiaries would receive a payment of $70 per day for up to 365 days. No doubt lawmakers shied away from the idea of levying a new tax in an election year, critics also raised numerous issues which could not be answered by proponents.
Thus, the board of trustees was charged with the design of a program that would provide for the financing of universal and affordable long-term care. This charge included the determination of an amount of tax, how the tax is to be collected, the nature and the amount of the benefits to be provided, and recommendation of a third- party administrator. Because critics last session questioned whether or not the proposed program under consideration was compliant with the federal Health Insurance Portability and Accountability Act or the federal ERISA, the panel was also to research the question and ensure that the proposed plan they recommended would be compliant.
Well the panel has released its recommendations and the plan is no different from the proposal submitted last session. It is the same $10 per month tax with a daily benefit of $70 for 365 days. And like last session, the recommendation acknowledges that the premiums and benefits will rise. No indication was given that someone checked out whether or not the proposal is compliant with the two federal laws.
No doubt as Hawaii’s population ages the need for long-term care will become more acute. However, socking taxpayers for another tax for what should be a matter of personal responsibility and prudence can be no less than a shell game. The plan will supposedly provide a “floor” of insurance so that people can stay in their own homes instead of entering expensive care homes.
However, for many, such a plan would be viewed as the solution to the possibility of needing long-term care. So instead of taking out an insurance policy that would truly cover all their long-term care needs including that expensive institutional care, many will view this plan as the be-all, end-all coverage of their needs. What will happen if a person covered by this proposed plan truly needs institutional care? By the time that need rolls around, the individual will not be able to afford long-term care insurance.
In fact, one of the driving forces behind this push for a universal long term care insurance plan is that those seeking long-term care insurance in the current market are the elderly who are or soon will be in need of long- term care. However, because of their immediate or soon to be needs, the cost of private long-term care insurance is very high. But that is true of any insurance, the greater the risk of incurring the need for the insurance, the higher the premium will be. For example, a smoker attempting to take out life insurance is probably going to pay more for that insurance than an individual who doesn’t smoke.
Proponents also argue that the poor will probably not be able to purchase any kind of long-term care insurance as they will not be able to afford the premium. How ironic that such an argument would be made when at the same time proponents are willing to take $10 a month out of the paycheck of that same poor person for their proposal. One witness compared the monthly premium to the two lattes a week she purchases. The poor probably couldn’t even afford an ordinary cup of coffee at the same coffee stand.
Like Social Security, the proposal will rely on continuing infusions of contributions that will continue to grow as the demand for benefits increases. That being the case, then the proposal becomes nothing more than a big black hole. Rich and poor alike will be entitled to the benefits because they contributed to the pot. So like Social Security, both ends of the income spectrum will be able to draw on the funds.
If the concern is that there will be a burgeoning demand for long-term care and no way to pay for it, then public officials need to encourage those who can afford long-term care insurance either because they are still young or have the means to purchase the insurance to do so. For the poor, who will never be able to afford either private long-term care insurance or this $10 a month plan, policy makers should just provide that care when it comes time. It should by no means require a new tax on all individuals.

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