While talk of national healthcare reform lately has turned largely to Medicare and Medicaid cutbacks, some provider groups see an opportunity for improved long-term-care insurance coverage under a Republican-majority Congress.
Republican leaders have pledged to enact their "Contract with America," which includes a "Senior Citizens' Equity Act," in the first 100 days of Congress. Among the proposed bill's provisions are several to give private long-term-care insurance policies the same tax deductibility as health insurance. Projected cost to the federal government would be $1.3 billion over five years.
Unlike health insurance, the purchase of long-term-care insurance has not been explicitly qualified as a tax-deductible expense, and the Internal Revenue Service has not given any guidance on the issue.
The proposed bill is good news to groups representing long-term-care providers, which say such a provision will encourage consumers to buy policies.
"It means (nursing home residents) would be able to pay their own way longer and put off the time they have to go on Medicaid," said Scott Parkin, vice president of communications for the American Association of Homes and Services for the Aging.
Medicaid, which most nursing home residents rely on only after their assets have been all but exhausted, is the primary payer for 68% of all nursing home residents. Medicaid paid $20.8 billion for nursing home services in calendar year 1993.
But some senior citizens' advocates cautioned that a policy seeking to expand private insurance coverage would primarily benefit rich people.
"Most of the people who purchase these (policies) are upper-income," said Howard Bedlin, legislative representative for the American Association of Retired Persons. Tax incentives "will disproportionately benefit wealthier individuals," he said. "I think there's a question if this is the best place to put scarce dollars."
Joshua Wiener, a senior fellow with the Brookings Institution, echoed Mr. Bedlin's concerns that tax deductibility of insurance premiums is regressive because it's worth more to higher-income people.
In a book Brookings published this year, Mr. Wiener and two co-authors wrote that for the 60% of taxpayers in the lowest income bracket, tax deductibility would only reduce their insurance premium costs by about one-sixth, which they argued is not enough to motivate consumers to buy such coverage.
And, he said, only the minority of taxpayers who itemize deductions would benefit, and they tend to earn more money. A tax credit for buying insurance, however, could be less regressive, he said.
Employers, meanwhile, also could take advantage of the tax deductions, but Mr. Wiener argued that many already have unfunded medical insurance liabilities for their retirees and are unlikely to take on the burden of long-term-care coverage.