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Senate Holds Hearing on Long Term Care

Wed, 03/28/2001 - 12:00am — Karen Stevenson
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Senator Chuck Grassley, chairman of the Committee on Finance, headed up a hearing on "Society's Great Challenge: The Affordability of Long-Term Care," and also announced that he and Sen. Bob Graham have re-introduced their Long-term Care and Retirement Security Act, S 627, which they sponsored in the last Congress. The bipartisan measure would allow individuals a tax deduction for the cost of long-term care insurance premiums and give individuals or their caregivers a $3,000 tax credit to help cover their long-term care expenses.

Witnesses in the Finance Committee hearing provided information about the cost and need for long term care, and discussed ways that it can be financed. Carol V. O'Shaughnessy of the Congressional Research Service reported that about 37 million caregivers provide informal, unpaid care to family members of all ages, and that almost 60% of the functionally impaired elderly, and nearly three-quarters of adults under age 65, receiving care rely exclusively on informal, unpaid assistance.

William J. Scanlon, Director of the United States General Accounting Office pointed out that nearly 80 percent of the elderly requiring assistance with ADLs or IADLs live at home or in community-based settings. He said that aging Baby boomers may have a disproportionate effect on the demand for paid services, since many baby boomers will have fewer options besides paid long-term care providers because a smaller proportion of this generation may have a spouse or adult children to provide unpaid caregiving due to the geographic dispersion of families and the large percentage of women who work outside the home.

Scanlon also pointed out that long term care financing is heavily dependent on Medicaid, which is a significant share, about 20%, of state budgets. This makes Medicaid financing vulnerable to states? fiscal health, and a recent fiscal survey of states showed that about one-half of states are expecting declines in revenue growth for 2001 to 2002, and about one-half of the states estimate that Medicaid spending will exceed their current projections. With declining revenue and increasing Medicaid expenditures, maintaining balanced budgets in states may require constraining Medicaid expenditures, including the large share represented by long-term care services.

In spite of the problems on the horizon for public financing of long term care, less than 10 percent of elderly individuals and even fewer near-elderly individuals (those aged 55 to 64) have purchased long-term care insurance, compared to about two-thirds who have private Medicare supplemental. Lisa Maria B. Alecxih of The Lewin Group discussed the cost of long term care insurance. She presented a chart showing that premiums can range from $274 annually for a four-year policy with no inflation protection that covered nursing home, assisted living and home care and was issued at age 40 to $7,022 per year for a policy with similar benefits, but that includes inflation protection and benefits if the purchaser stops paying premiums (nonforfeiture) issued at age 79. She also pointed out that insurance only helps consumers if they still have it when they need it, but said that the limited data available suggests that 30 to 50 percent of all individual purchasers of long-term care insurance lapse within five years.

Senator Chuck Grassley, chairman of the Committee on Finance, headed up a hearing on "Society's Great Challenge: The Affordability of Long-Term Care," and also announced that he and Sen. Bob Graham have re-introduced their Long-term Care and Retirement Security Act, S 627, which they sponsored in the last Congress. The bipartisan measure would allow individuals a tax deduction for the cost of long-term care insurance premiums and give individuals or their caregivers a $3,000 tax credit to help cover their long-term care expenses.

Witnesses in the Finance Committee hearing provided information about the cost and need for long term care, and discussed ways that it can be financed. Carol V. O'Shaughnessy of the Congressional Research Service reported that about 37 million caregivers provide informal, unpaid care to family members of all ages, and that almost 60% of the functionally impaired elderly, and nearly three-quarters of adults under age 65, receiving care rely exclusively on informal, unpaid assistance.

William J. Scanlon, Director of the United States General Accounting Office pointed out that nearly 80 percent of the elderly requiring assistance with ADLs or IADLs live at home or in community-based settings. He said that aging Baby boomers may have a disproportionate effect on the demand for paid services, since many baby boomers will have fewer options besides paid long-term care providers because a smaller proportion of this generation may have a spouse or adult children to provide unpaid caregiving due to the geographic dispersion of families and the large percentage of women who work outside the home.

Scanlon also pointed out that long term care financing is heavily dependent on Medicaid, which is a significant share, about 20%, of state budgets. This makes Medicaid financing vulnerable to states? fiscal health, and a recent fiscal survey of states showed that about one-half of states are expecting declines in revenue growth for 2001 to 2002, and about one-half of the states estimate that Medicaid spending will exceed their current projections. With declining revenue and increasing Medicaid expenditures, maintaining balanced budgets in states may require constraining Medicaid expenditures, including the large share represented by long-term care services.

In spite of the problems on the horizon for public financing of long term care, less than 10 percent of elderly individuals and even fewer near-elderly individuals (those aged 55 to 64) have purchased long-term care insurance, compared to about two-thirds who have private Medicare supplemental. Lisa Maria B. Alecxih of The Lewin Group discussed the cost of long term care insurance. She presented a chart showing that premiums can range from $274 annually for a four-year policy with no inflation protection that covered nursing home, assisted living and home care and was issued at age 40 to $7,022 per year for a policy with similar benefits, but that includes inflation protection and benefits if the purchaser stops paying premiums (nonforfeiture) issued at age 79. She also pointed out that insurance only helps consumers if they still have it when they need it, but said that the limited data available suggests that 30 to 50 percent of all individual purchasers of long-term care insurance lapse within five years.