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Hassle-Free Health Coverage: Long-Term Care

The federal government has done a better job of coping with medical care for the elderly than of addressing long-term care.

The current long-term care system is widely criticized for impoverishing people when they become frail-and putting an unhealthy strain on state and federal budgets.

Because nursing-home care is so expensive (more than $40,000 a year per patient on average), and because the average length of a stay is more than two years, not even half of the money (48 percent) paid to nursing homes comes from individuals. Private insurance pays for 3 percent of the cost, Medicare covers 8 percent, and Medicaid foots 41 percent of the bill.

The current long-term care system cost Medicaid $30.4 billion in 1995. Spending on long-term care

eats up one-third of Medicaid's budget. "My guess is that Medicaid cannot survive much beyond...2010," when the first wave of baby boomers retires, says one analyst.

The American Council of Life Insurance predicts that by 2030 nursing-home care will cost Medicaid $134 billion -- and that doesn't even include Medicaid expenditures for other long-term-care options, such as home care.

In his 2000 budget, Bill Clinton proposed spending $6.2 billion over five years on long-term care, primarily to give $1,000 tax credits to help families cover the cost of home-based assistance. Some $125 million a year would be available to states to give temporary respite to residents looking after people with long-term care needs.

Meanwhile, some states were showing signs of taking matters into their own hands. A survey of legislators by the National Conference of State Legislatures suggested that long-term care would be a major priority in the states during 1999. Some states were considering tax incentives to encourage people to buy long-term care insurance, while others wanted federal Medicaid waivers to use federal-state money for alternatives to nursing homes, such as assisted-living facilities.

Again, willful ignorance controls a lot of the public response to this issue. Many of the boomers are sur

prised to discover that Medicare doesn't pay for long-term care. (Medicare covers only temporary nursing-home care after hospitalization.)

The Kassebaum-Kennedy Act, which made it easier for people to carry health insurance from one job to the next, included a provision that was intended to encourage people to buy private long-term care insurance. It clarified that taxpayers could count payments for long-term-care policies as a medical expense when calculating whether they had enough expenses (7.5 percent of gross adjusted income) to qualify for an income-tax deduction. Also, employers wanting to contribute to the cost of long-term care insurance could deduct that benefit as a business expense.

The problem: Most people don't incur enough medical expenses to claim a deduction -- until they're in a nursing home and it's too late. For their part, most employers don't want to take on another retiree burden.

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