Probably like many others in his age group, a 64-year-old professor at a small state university recently contemplated retirement, which would begin for him next year. He said his finances were in order and his health was good, although he did admit, “I write notes to myself since I don’t trust my memory.”
His retirement funds were more than adequate, his home was secure, and he was investigating Medicare and supplementary coverage. But there is one more thing it will be important for him to consider.
Coverage Currently Uncommon
Although high Medicare costs and limited coverage clearly give pause to those involved in retirement planning, long-term care (LTC) expenditures and health insurance coverage are also a daunting challenge that some in the baby boomer generation are seriously examining only now.
LTC can cost upwards of $150 daily, and in some large metropolitan areas, such as Boston, Chicago, New York City, San Francisco, and Washington, DC, it can exceed $110,000 a year, according to the MetLife Mature Market Institute.
With those born between 1946 and 1964 expecting to live longer than their parents did, and well beyond their grandparents, factoring in long-term care costs has become a critical element in retirement security plans.
Neither Medicare nor most employer-based health insurance plans cover long-term care expenses. Hard-pressed Medicaid covers LTC expenses, but only after the individual disposes of nearly all personal assets in order to qualify for assistance. As a rule, it is the individual or family members who pay long-term care expenses.
Not Just for Seniors
Long-term care includes nursing, social, rehabilitative, and personal care or services provided on an ongoing basis in one’s own home, a nursing facility, or another setting such as an assisted living facility.
Although such care is typically associated with older persons, young people or middle-aged Americans recuperating from an accident or debilitating illness often need long-term care as well.
According to studies released since 2001 by Americans for Long-Term Care Security (ALTCS), a Washington, DC-based lobbying coalition of health insurance agents, health plans, nursing homes, and senior citizen advocates, 40 percent of the 13 million Americans now receiving long-term care are between the ages of 18 and 64.
Nonetheless, the majority of individuals needing long-term care are senior citizens, and the aging of the large baby boom generation is likely to increase demand for this service significantly.
Bipartisan, Free-Market Solutions Offered
To encourage older Americans and their children to take control of their own futures while relieving some of the political and financial pressure on Medicaid, a dozen states, along with the federal government for its workers and retirees, have enacted legislation providing tax incentives for those who purchase long-term care insurance.
Reps. Nancy Johnson (R-CT) and Earl Pomeroy (D-ND), chair and ranking member, respectively, of the health subcommittee of the House Ways & Means Committee, in March 2003 introduced legislation allowing workers a federal tax deduction over several years for qualified long-term care premiums, the opportunity to purchase coverage through an employer’s “cafeteria plan” and flexible spending arrangements, and a tax credit for their own long-term care needs or those met by caregivers.
The Long-Term Care and Retirement Security Act (HR 2096) is something of an oddity among health care legislation on Capitol Hill because of the bipartisan nature of its 136 cosponsors. Moderate Republicans such as Kay Granger (TX) and Jim Greenwood (PA) are allied with liberal Democrats Patrick Kennedy (RI) and Rosa DeLauro (CT), and with conservative Republicans, including John Doolittle (CA) and Patrick Toomey (PA).
Although to a lesser degree, the 16 cosponsors of the Senate companion bill (S 1335) are also bipartisan. They include Republicans George Allen (VA), Gordon Smith (OR), Susan Collins (ME), Chuck Hagel (NE), John Warner (VA), and sponsor Chuck Grassley (IA); among the Democrats are Barbara Boxer (CA), Richard Durbin (IL), Bob Graham (FL), and Barbara Mikulski (MD).
Despite this bipartisan support, both bills lacked the “critical mass” of cosponsors, leadership support, and time to assure placement on the legislative calendar this past session in either house. A budgetary “score” (cost to the federal government in lost revenue) of about $38 billion over 10 years did not help prospects for passage.
Bills Have Stalled
Long-term care prospects were given a boost in Congress shortly after the death of former President Ronald Reagan in mid-June, with the introduction of S 2533, the Ronald Reagan Alzheimer’s Breakthrough Act, by Mikulski, and a companion bill in the House, HR 4595, introduced by Rep. Edward Markey (D-MA).
Like the Johnson-Grassley bills, the Mikulski-Markey legislation is bipartisan and provides an above-the-line deduction for LTC premiums as well as a $3,000 tax credit for patient or caregiver expenses. It contains no provision for LTC through employer “cafeteria plans,” but it doubles funding for Alzheimer’s research at the National Institutes of Health. In addition, the measure increases funding for two federal programs increasing the availability of home health care, counseling, and training for caregivers.
Whether the significant increase in Alzheimer’s funding is a sufficient “carrot” to overcome the problems that impeded passage of Johnson-Grassley is unclear. Proposals for congressional action on the federal tax code to provide LTC options will probably return in the 109th Congress.
As the baby boomers rapidly approach retirement age, the call to do something to ensure increased coverage for long-term care will become more urgent. The question remains as to whether the solutions will be more government- or market-oriented.
Tom Bruderle ([email protected]) is vice president of congressional affairs for the National Association of Health Underwriters.