House Panel Hears Doubts On Value Of LTC Tax Incentives

By

Views on both sides of the question of the value of tax incentives for long term care insurance were presented at a House panel hearing last week.

Some witnesses at a hearing of the House Ways and Means Committee health subcommittee chaired by Rep. Nancy Johnson, R-Conn., presented arguments about why expanding tax breaks for private LTC insurance could encourage a higher percentage of high-income and moderate-income U.S. residents to take care of their own LTC needs, helping government health programs focus on meeting the needs of low-income LTC patients.

Other witnesses, however, presented testimony that suggests insurers may continue to face significant resistance to expansion of LTC insurance tax breaks.

Douglas Holtz-Eakin, director of the Congressional Budget Office, noted that private LTC insurance now covers only about 3% of LTC spending. CBO projections show private insurance could account for about 17% of LTC spending in 2020, but, at that rate, private insurers would continue to be paying a smaller share of patients LTC bills than Medicaid or Medicare, Holtz-Eakin said in testimony presented to the committee.

Dr. Meghan Gerety, a geriatrics professor at the University of Texas Health Science Center at San Antonio, said she does not believe private LTC insurance is now a viable option for many Americans.

“Tax incentives for private long term care insurance primarily benefit the higher income [consumer],” Gerety said. “Additionally, premiums are often unpredictable over the long term. Long term care insurance premiums often increase dramatically as individuals age, meaning that people drop their policies just when they need them most. In fact, as a baby boomer and a geriatrician, I have neglected to purchase a long term care policy because it is of limited value.”

Judy Feder, a long term care researcher at the Georgetown Public Policy Institute, predicted that private insurance will play a growing role in LTC financing. “However, even with improved standards and special partnerships with Medicaid, it does nothing for those currently in need, is not promoted as a means to serve the under-65 population, and, in the future, will be affordable and valuable for only a portion of the older populationmost likely, the better off.”

Additionally, Feder criticized the idea of enacting new tax preferences to spur sales of private LTC insurance.

“Such credits are likely to primarily benefit those who would have purchased long term care insurance even in the absence of credits,” Feder said.

Given the enormity of the expected burden on long term care that the baby boomers will provide, some federal action is necessary to help the system, according to speakers at a mini-conference of the 2005 White House Conference on Aging.

Held in advance of the full conference, scheduled for October, the two-day event was designed to craft recommendations to be taken up at the later event.

Karen Ignagni, president and CEO of Americas Health Insurance Plans, called on policymakers, and the industry, to undergo a “paradigm shift” in their thinking about insurance. “Its time to end the differentiation between acute care and long term care,” she said, calling for changes including allowing employees to use flexible benefits to purchase LTC coverage.


Reproduced from National Underwriter Edition, April 15, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.