Planning for Long-term Care?
Planning for Long-term Care?
By Lewis L. Wilson CPIA CIC
Did you know that:
- By 2020, one out of six Americans will be over 65?
- More than six million elderly Americans today need assistance from
family and friends?
- The average nursing home stay is two and a half years and costs $50,000
per year ($136 per day)?
As baby boomers get closer to retirement age, there's been a shift in
public policy, with more focus on assuring the solvency of such programs
as Medicare and Social Security that provide life security to Americans.
In so doing, both Democratic and Republican lawmakers have signaled that
it's critical for Americans to assume personal responsibility for planning
their long-term care and security.
Long-term
care (LTC) is best defined as ongoing nursing, social, and rehabilitative
personal care, or services provided in a nursing home, one's own home,
or an alternative site, such as an assisted-living facility. Many people
underestimate the costs of LTC and don't plan adequately for their future.
Planning for LTC is crucial to retirement security plans because without
it, individuals may be faced with insurmountable long-term care costs
that can quickly deplete their life savings.
It's a common misconception that either Medicare or major-medical
insurance will cover LTC expenses. Medicaid covers LTC only after
a person "spends down" his or her assets to qualify for assistance.
Families are at risk of forfeiting hard-earned assets to pay for a loved
one's long-term care needs.
In June, legislation was introduced in the House by Reps. Nancy Johnson
(R-CT) and Karen Thurman (D-FL) that would phase in a tax deduction (up
to 100 percent) for private long-term-care insurance premiums. The legislation
proposes making LTC insurance premiums fully deductible for policyholders
who pay at least half the cost of a tax-qualified policy. Premiums would
be 50 percent deductible the first year, with an additional 10 percent
deduction per year until the premiums become 100 percent deductible in
the sixth year.The deduction would stay at the highest level for as long
as the individual maintains the policy. Seniors 60 years and older would
get the full deduction in four years instead of six.
Historically these types of tax incentives have proved to be a sure and
fair way to encourage people to take personal responsibility for their
eventual long-term care needs.
In addition to broad bipartisan support in Congress, the Clinton Administration
has shown its support. During his 1999 State of the Union address, President
Clinton announced a measure that would institute a $6.2 billion multifaceted
LTC initiative. This includes a $1,000 tax credit for the LTC population
and their caregivers, enhanced public education, and offering LTC insurance
to the federal workforce.
The importance of this issue is underscored in a New York Times article
(January 11, 1999) that states: "The issue cannot be put off for
long as millions of baby boomers begin facing potentially huge long-term
care costs for themselves or their parents."
PIA National is working with Congress to make sure legislation is passed
that makes purchasing LTC insurance not only attractive but also imperative.
|
