Long-term Care Legislation Introduced

Published April 1, 2001

Legislation introduced on March 1 by Rep. Nancy Johnson (R-Connecticut) would help millions of Americans plan or pay for nursing home, home health care, assisted living, or other long-term care costs, according to Chip Kahn, president of the Health Insurance Association of America (HIAA).

Johnson’s legislation—”The Long-Term Care and Retirement Security Act of 2001″ (H.R. 831)—would provide needed tax relief for people purchasing private long-term care insurance, noted Kahn. It also would provide a tax credit for families with current long-term care needs.

“Long-term care remains the largest unfunded liability facing baby boomers approaching retirement—and their parents,” remarked Kahn. “Rep. Johnson’s legislation offers Americans real protection against the often-catastrophic cost of long-term care. It also would allow them to choose where to get the care they need.”

Respondents to a recent HIAA survey considered tax relief the most important step government could take to encourage them to plan for future long-term care needs. Additional HIAA research shows providing tax relief to people purchasing private long-term care insurance would pay for itself over time by reducing Medicaid spending.

LTC Demand, Costs to Grow

According to Aging in the United States, published by the Bureau of the Census, in 2020 one of six Americans will be 65 or older: 20 million more senior citizens than today. The number of individuals 85 and older, currently at 3.5 million, will double to 7 million by 2020, and double again to 14 million by 2040.

The Census Bureau report notes, unsurprisingly, that persons aged 85 and older are more likely to need nursing home care than any other age group. While only 1 percent of persons aged 65 to 74, and 6 percent of persons aged 74 to 85, lived in a nursing home in 1990, 24 percent of persons aged 85 or more lived in a nursing home in 1990.

A Congressional Budget Office report issued two years ago calculated the cost of long-term care and projected LTC expenditures would increase sharply by 2040.

The largest purchaser of long-term care, noted the CBO report, is the federal government, primarily through its Medicare and Medicaid programs. In 1995, LTC spending by the federal government accounted for just over $50 billion, about 56 percent, of long-term care expenditures for the elderly that year.

LTC expenditures also include out-of-pocket spending by the elderly and their families—over $34 billion in 2000, according to the CBO report—as well as the value of donated care from family members and friends. The Department of Health and Human Services puts the value of donated care at between $45 billion and $94 billion a year.

On the basis of projections made by the Lewin Group and researchers at Duke University, the CBO report estimated that total inflation-adjusted expenditures for long-term care for the elderly will grow annually by 2.6 percent between 2000 and 2040. LTC spending is projected to reach $207 billion in 2020 and $346 billion in 2040, in inflation-adjusted 2000 dollars.

The CBO estimates assume that current trends in disability among the elderly will continue until 2040, with the proportion of the elderly that have functional disabilities, and therefore require assistance, continuing decline, on average, by 1.1 percent a year. But if the disability trendline did not continue downward, and the elderly population in 2040 had the same disability rate as that projected for 2000, CBO estimates total long-term care expenditures would be $484 billion—about 40 percent higher.

“Sooner or later,” notes Stephen Moses, president of the Center for Long-Term Care Financing, “reform measures that promote private financing of long-term care for most Americans will not be an option, but a necessity.” In 1998, the Center issued LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle.

For more information . . .

The full text of Rep. Nancy Johnson’s H.R. 831, “The Long-Term Care and Retirement Security Act of 2001,” is available on the Internet at http://thomas.loc.gov/cgi-bin/bdquery/D?d107:2:./temp/~bdZYmz:@@@L&summ2=m&.

The Congressional Budget Office report, “Projections of Expenditures for Long-Term Care Services for the Elderly,” is available on the Internet at http://www.cbo.gov/showdoc.cfm?index=1123&sequence=0&from=1.

The Center for Long-Term Care’s September 1998 report, LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle, is available in Adobe Acrobat’s PDF format at http://www.centerltc.com/pubs/CLTCF%20Report.

For additional information on long-term care, visit the Web sites of the Health Insurance Association of America, www.hiaa.org, and the Center for Long-Term Care Financing, www.centerltc.com.