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Credit for long-term care may not be healthy policy


IT SOUNDED like a great idea when President Clinton announced it at the start of this month. A $1,000 tax credit for people needing long-term care, or for the relatives taking care of them at home. It's a down payment on the burgeoning issue of how to support the elderly infirm, while helping families with younger disabled members, too.

The House Republicans floated a similar, $500 tax credit in their 1994 Contract With America, although it never made it into law. With both parties behind it, a tax credit should pass (if we ever get away from all-impeachment-all- the-time). Estimated cost of the Clinton version: $5.5 billion over five years.

Caregivers deserve a place in heaven. On this Earth, an income-tax credit appears to be the equivalent. But as a way of addressing the growing national cost of long-term care, it's not the best idea.

I understand the burdens of long-term care, having been there myself. Many families are going to feel that their struggles entitle them to an income-tax break. But I'd like to argue the other side: The federal government has embarked on a $112 billion cut in the growth of Medicare by 2002. This helped balance the federal budget in 1997, and will limit the national health bill when the Boomers reach 65.

One result: A number of health maintenance organizations have withdrawn from the Medicare market, because they say they're no longer getting paid enough. Payments have been slashed to services that treat Medicare patients at home.

A Medicare reform commission will soon recommend further changes to keep the program within its current payroll-tax bounds.

Does it make sense to allot $5.5 billion to long-term care if far more might have to be taken from Medicare?

Medicaid already covers long-term nursing home costs for low-income people who have used up their personal savings. So a safety net exists. Between them, the state and federal governments will spend $42 billion this year, covering about 46 percent of the nation's nursing home bill. Medicare will spend another $12.6 billion.

Some home-care costs are covered, too (the amount depends on your state). But not every poor person qualifies for Medicaid, or has access to home care. Should $5.5 billion be spent on people who have more money, while many of the elderly disabled poor go without?

A tax credit won't help the poor, because they pay little or no income taxes. It's for the middle and upper-middle class. The president would provide the full credit to couples with incomes up to $110,000 and singles, to $75,000.

Families with major long-term care expenses can already deduct them, to the extent they exceed 7.5 percent of adjusted gross income. That may be the better deal.

To qualify for the tax-cut program, you'd have to be caring for someone who's severely disabled. That's a dementia victim, or someone who needs help with at least three of the following activities: bathing, dressing, eating, getting to the toilet or transferring (say, from the bed to a chair).

Long-term care insurance normally triggers benefits after only two impairments. So the tax credit is only for the severest cases.

For such a person, home care is pretty expensive. The tax credit gives you less than $3 a day. That honors your efforts, but won't change your life.

The credit might not even be spent on home-care services, says Joshua Wiener of the Urban Institute in Washington. It might simply vanish into your everyday budget.

Wiener thinks the money should be spent on expanding existing programs so that more of the poor and disabled could be helped.

This Congress, however, would rather spend through the tax code than spend through the home-care services that help people now.

There's a big risk of fraud. To get the credit, you'd merely need a doctor to attest that you were caring for a disabled person. Might some doctors certify cases that didn't qualify? Perhaps even cases that didn't exist?

Starting a $5.5 billion program suggests that the government will eventually pay more, says Stephen Moses, head of the Center for Long-Term Care Financing in Seattle. That lessens people's incentive to plan for themselves.

Highlighting care giving is "a good message but bad public policy," Moses says. "People should be told that they need to save their money or else buy long-term care insurance."

Unless people use their own resources, the needs of the elderly will eventually crowd out everything else.

Pub Date: 1/25/99

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