Nursing home executives hope tax-policy changes included in health insurance reform legislation will encourage consumers to buy long-term-care insurance policies.
But they don't expect immediate changes in their revenues.
The health bill that passed Congress earlier this month makes some purchases of long-term-care insurance policies a tax-deductible expense.
The legislation treats long-term-care insurance premiums the same as health-insurance premiums, allowing individuals and employers to deduct such expenditures from their gross income when reporting to the Internal Revenue Service. Such premiums would be deductible only if they exceed 7.5% of a taxpayer's adjusted gross income.
Long-term-care providers said the provision would reduce the pressure on the Medicaid program, which accounted for about 47% of all nursing home expenses in 1994. It also would reduce nursing homes' reliance on Medicaid income and entanglements in the state politics surrounding Medicaid.
"In the long-term-care field, we seem to go from Medicaid budget crisis to Medicaid budget crisis," said Steven Chies, president of North Cities Health Care, which owns two Minnesota nursing homes.
Greater long-term-care insurance coverage "may help us smooth out the bumps in the road as we go forward," said Chies, who chairs a long-term-care reform task force for the American Health Care Association, a nursing home trade group.
Increased coverage will come only over time, however, as market penetration increases, Chies added.
In 1994, private insurance accounted for $2.2 billion of the $72.3 billion spent on nursing home care, according to HCFA. More than 3.8 million long-term- care insurance policies had been sold by the end of 1994, mostly to individuals and not through employer plans, according to the Health Insurance Association of America.
The average age of purchasers in the individual long-term-care market was 66.7 in 1994, while the average age of buyers in the employer-sponsored market was 42.2, according to HIAA.
In only 14 states have more than 10% of people 65 and older purchased long-term-care policies, HIAA said. More than 37 million Americans are 65 or older.
Other experts, however, cast doubt on whether the tax clarification would spur increased sales of long-term-care policies.
Joshua Wiener, principal research associate with the Urban Institute, a Washington-based research organization, said few employers are likely to sponsor long-term-care insurance either for their employees or retirees because they already are nervous about the costs of existing health benefits.
Meanwhile, tax clarification is unlikely to spur increased sales of individual policies, Wiener said. He said most individuals don't itemize deductions on their tax returns, which would be necessary to receive the tax benefit.