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Life Health > Long-Term Care Planning

Dear Candidates: Make LTCI Deductible for All

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This month, the American Association for Long Term Care Insurance is reaching out through the Internet, and through the traditional media and Web media, to ask President Obama and Governor Romney to help Americans plan for long-term care (LTC) expenses.

We want the candidates to help us make long-term care insurance (LTCI) premiums fully deductible for at least five years.

Americans are aging. Medicare is already teetering. But most of the talk about Medicare fails to confront the threat facing Medicaid as aging Americans turn to that program for help with paying for nursing home care.

Congress started Medicaid to help the poor.

Both the federal government and the states fund state Medicaid programs, and state officials manage the programs.

The programs are spending more and more of their limited funding on financially comfortable people who want to avoid selling assets to pay for nursing home care. 

Making LTCI premiums tax deductible and the policy benefits tax-free for all individuals would help relieve the burden on Medicaid programs, by getting more taxpayers to plan ahead to pay for LTC expenses using private programs rather than leading those taxpayers to rely on the government.

At the federal level, Congress responded to concerns about retirement plan by creating the 401(k) retirement plan program. More than 50 million workers now participate in 401(k) plans.

Why not do something similar for LTC planning?

Meanwhile, at the state level, some states already are recognizing the role private LTCI can play in holding down Medicaid spending and offering tax credits for residents who buy private LTCI.

Up till now, neither Obama nor Romney has discussed LTC planning policy in a formal way.

When Obama did try to tackle the issue in the health reform law, the ill-fated CLASS Act voluntary LTC benefits component was the work of the late Sen. Edward Kennedy, not something designed by the Obama administration.

This subject is so important. Both Obama and Romney should be telling us how they would handle it.

Today, individuals can deduct LTCI premiums only when their total medical expenses exceed 7.5% of their adjusted gross income, and that cut-off is set to increase to 10%.

Few people with medical costs that exceed 7.5% of their taxable income can qualify to buy LTCI coverage in the first place.

Even if we offered a universal LTCI premium deduction that lasted for just five years, that could help us test the effect of a deduction on private LTC planning efforts.

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