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"After age 65, Americans have more than a 70% chance of needing some form of long-term care."
-American Society on Aging

"An estimated 12.1 million Americans need assistance from others to carry out everyday activities."
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Recent Articles: Long-Term Care Legislation Offers Financial Security

By: Larry Akey
Date of Article: May 14, 2003

"People need to prepare before it's too late," says American Society on Aging.

Tax Incentives Improve Quality of Care, Ease Strain on Government Programs

WASHINGTON - The Health Insurance Association of America strongly supports bipartisan legislation to help millions of working Americans protect themselves against the often-catastrophic costs of long-term care.

Sponsored by Congresswoman Nancy Johnson (R-CT) and Congressman Earl Pomeroy (D-ND), the legislation introduced in the U.S. House of Representatives today phases-in full income tax deductibility of long-term care insurance premiums, even if a taxpayer does not itemize other deductions. The bill also provides an additional incentive for younger individuals to purchase long-term care insurance though their employer's cafeteria plans or flexible savings accounts.

The sponsors of the Long-Term Care Retirement and Security Act of 2003 expect its passage will encourage more people to buy insurance coverage to protect themselves against expensive long-term care costs.

"HIAA commends Representatives Johnson and Pomeroy for sponsoring a bill that offers security and peace of mind to millions of Americans," said HIAA president Donald Young, MD, "and for including our suggestions to simplify the deduction and to strengthen consumer protections standards in long-term care insurance policies.

According to Young, more than 82 million Americans over the age of 45 do not have any financial protection against the potentially impoverishing impacts of long-term care.

The annual cost of a nursing home stay averages more than $50,000, and in-home care for the elderly can easily run more than $12,000 a year, making long-term care the largest unfunded liability facing baby boomers, he said.

Young noted that Medicaid might pay for some of the costs of care for a disabled elder, but only after the person "spends down" her assets to the poverty level. Even then, he said, Medicaid "severely restricts the choice of caregivers.

"We trust passage of this legislation will help millions of American families better plan for their future, giving them the flexibility of choosing where to get their long-term care," Young said.

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.

HIAA estimates that each person who purchases a long-term care insurance policy saves the federal government about $6,600 in future spending - $5,000 for Medicaid, and $1,600 for Medicare.

In addition to the tax incentives for purchasing long-term care insurance, the legislation also proposes a tax credit to help pay for services for those already in need of long-term care - or their caregivers.

Young called for quick Congressional action because the nation's current financing arrangements for long-term care will crumble as baby boomers reach retirement age.

"Unless Congress begins now to take steps to address these serious issues, the aging boomer generation will overwhelm our nation's patchwork long-term care system, leaving millions of Americans unprepared for the heavy financial and emotional burden of caring for seniors unable to care for themselves," Young said.

In 2020, one of six Americans will be 65 or older - 20 million more seniors than today. People 85 and older, currently numbering 3.5 million, will double to 7 million by 2020 and double again to 14 million by 2040, according to the U.S. Census Bureau.

The Health Insurance Association of America (HIAA) is the nation's most prominent trade association representing the private health care system. Its nearly 300 members provide health, long-term care, dental, disability, and supplemental coverage to more than 100 million Americans. It is the nation's premier provider of self-study courses on health insurance, managed care and long-term care.