LTC Bullet:  CMS' Scully on LTCI and Tax Deductibility

Wednesday  February 13, 2002


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*** Bad news for Medicaid planners and their clients; worse news for the poor who depend on Medicaid:  "Iowa nursing homes are evicting residents or considering closure because of uncertainty over the state's Medicaid system."  Read about it in the 2/13/2 "DesMoines Register" at  Hint:  search for "evictions." ***

LTC Comment:  Tom Scully, Administrator of the Centers for Medicare and Medicaid Services (CMS, formerly HCFA) delivered a luncheon keynote address on January 24, 2002 to the National Academy of Social Insurance.  The talk, titled ďProspects for Long-Term Care Policymaking at State and Federal Levels,Ē included some comments on the need for private long-term care insurance and tax incentives to encourage people to buy it.  The following excerpts from Scully's extemporaneous speech are a little hard to follow, but considering the prominence of the speaker, they give a valuable glimpse into the Bush Administration's thinking on long-term care financing.

"Long term care insurance is another huge issue. This is another thing that we probably should have fixed 20 years ago.  I believe, and the Presidentís made some proposals on this, as have many people on a bipartisan basis, that people start buying long term care insurance when theyíre 62.  I started buying my mother long-term care insurance when she was 68.  Thatís not a good thing, but thatís what the tax code incentivizes. 

"At some point, we need to start looking about, if we donít want to have a, you know, hundred year trend of everybody spending down their assets and having nursing homes all be paid for by Medicaid, which is what happens now, which is not necessarily good social policy, or good financial planning, we need to get to the point where we change the tax code and start incentivizing people.

"When theyíre 44 like me, or 24, to say, you know, part of my cafeteria plan at work is buying a health plan, putting money up beside my 401K and, oh, by the way, Iím gonna start buying long term care insurance when Iím 24 and not 64.  Because, actuarially, you canít buy insurance for a predictable event thatís gonna happen when youíre 75 if you start buying it at 65.  But, given the incentives we have in the tax code right now, thatís the way it is. 

"And I think a lot of our long term care problems are related to the way we pay for long term care. And theyíre relative strict little boxes we put ourselves in Medicaid and Medicare and private pay, and itís driving a lot of it.  And, until we start thinking about the financing mechanisms to pay for long term care, and getting people to start thinking about their long-term life care financing appropriately, weíre gonna have those problems.  And the tax code drives a lot of behavior.  And, until we start thinking about long term care insurance as a tax code, those problems are still gonna be there."


*** As promised in our last Bullet, we've added two new features to the Center's donor-only zone.  Enter The Zone and then click on your choice of The LTC Reader, The Data Base or LTC Week in Review.  Ordinarily, we'll add an average of one item a day, but for starters, we've posted five items in the Reader and five in the Data Base to give you the flavor.  Here's a list of what you'll find there already:

The LTC Reader

#1:  A.M. Best Warns Re LTCI

#2:  Due Diligence for LTCI Agents

#3:  How Much BIO is Enough?

#4:  The Myth of Anti-Aging

#5:  Who Will Buy LTCI?

The Data Base

#1:  Dire Shortage of  Nursing Home Caregivers

#2:  Swiss Re on the LTC Opportunity

#3:  Global Aging Through Rose-Colored Glasses

#4:  Highlights of AoA's 2001 Profile of Older Americans

#5:  New CMS Data on Nursing Home Expenditures is Misleading

Next week, we're going to give LTC Bullets subscribers a taste of what they will find when they qualify for The Zone.  But we want all of you who already qualify to see the new material first.  Enjoy and let us know what you think.

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