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Bill Revives Quest For Above-The-Line LTC Tax Break

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NU Online News Service, May 14, 2003, 5:43 p.m. EDT – Insurance trade groups, health care trade groups and groups representing older Americans are supporting a bill that would create an “above-the-line” income tax deduction for individual long-term care insurance premiums.

The bill, introduced today by Reps. Nancy Johnson, R-New Britain, Conn., and Earl Pomeroy, D-North Dakota, would start by offering a 25% LTC insurance premium deduction. If enacted as written, the bill would phase in a 100% deduction by 2008, according to a summary released by Johnson and Pomeroy.

The bill, which does not yet have a number and is not yet posted on the Web, would also let workers pay for LTC insurance through employer-sponsored cafeteria plans, and it would phase in a $3,000 tax credit for taxpayers who provide informal care for relatives, friends or others who have trouble with activities such as eating and dressing.

“Nearly everyone should have long-term care coverage, but almost no one does,” Pomeroy, a former North Dakota insurance commissioner, says in a statement about the bill. “If you don’t have it, you’ve got to impoverish yourself for Medicaid to pay for prolonged care. By creating tax breaks that encourage private coverage and offset caregiver expenses, we can stabilize public assistance while preserving individual choices and protecting family assets.”

Some health care advocacy groups argue that tax breaks for LTC insurance serve mainly to help a narrow slice of middle-income U.S. residents and will do little to ease the burden that the aging of the baby boomers is expected to have on Medicaid and other social welfare programs.

But the idea of creating an above-the-line LTC premium tax break is popular in Congress and has nearly become law several times.

AARP, Washington, is one of the groups backing the Johnson-Pomeroy bill.

The American Council of Life Insurers, Washington, warns in its statement about the bill that the aging of the boomers “will overwhelm our nation’s patchwork long-term care system and leave millions of Americans unprepared for the heavy financial burden of long-term care.”

“Helping people pay for these services directly and helping them purchase quality insurance products should be part of our nation’s answer to this long-term care need,” ACLI President Frank Keating says in the statement. “Private long-term care insurance ensures Americans will have access to assistance they want and need in retirement, while protecting their retirement savings.”

The Health Insurance Association of America, Washington, also praised the bill.

HIAA research shows that providing tax relief to people purchasing private long-term care insurance will provide better care for the seniors of today, improve quality of life for caregivers, and ease the financial burden on Medicare and Medicaid in the future, the HIAA says.

The HIAA estimates that each person who purchases a long-term care insurance policy saves the federal government about $6,600 in future spending.


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