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MARGARET WARNER: Now new proposals to help pay for long-term health care. Phil Ponce has that.
PHIL PONCE: Americans are living longer than ever, but that means more now suffer from chronic illnesses or disabilities, ranging from severe arthritis to Alzheimer’s. More than 5 million are now in need of long-term care either in institutions like nursing homes, or at home with the assistance of relatives and other care givers. Today at the White House President Clinton described the problem and announced some proposals to help.
PRESIDENT CLINTON: Millions require the care that can only be provided in a nursing home. But millions more choose to remain at home with family and friends. Indeed, the elderly are remaining at home in record numbers. Nearly half the people over 85 — one of the fastest-growing segments of our population — need help with everyday, basic tasks — eating, dressing, going to a doctor.
We cannot expect that every older American will be able to fend for himself or herself. And the real question is: What are our obligations to help every American get the care that is appropriate for each individual case? This is a complicated challenge that requires a range of responses — First, to provide a long-term care tax credit — $1,000 for people with long-term care needs or for the families that shelter them. It would help to offset the direct cost of long-term care, like home health visits and adult day care; as well as the indirect costs, like unpaid leave some caregivers must take. The care they provide is invaluable, but we can show that it is valued by our society.
Second, we should create a family caregiver support program, a new national network to support people caring for older Americans. This initiative enables states to create one-stop shops, places caregivers can access the resources of the community, find technical guidance, obtain respite and adult day care services. I am proposing that the federal government, as the nation’s largest employer, use its market leverage to set an example, offering private long-term care insurance to federal employees. By promoting high-quality, affordable care, we can encourage more people and more companies to invest in long-term care coverage.
We must use this time now to do everything in our power, not only to lift the quality of life and the security of the aged and disabled today, and the baby boom aged and disabled, but to make sure that we do not impose that intolerable burden on our children.
PHIL PONCE: For an explanation of the proposals we turn to Susan Dentzer of our health policy unit, a partnership with the Henry J. Kaiser Family Foundation. Susan, first of all, tell us a little bit more about the problem that these proposals are aimed at.
SUSAN DENTZER: Phil, the problem is the great and growing need for long-term care in this country. An estimated two out of five Americans are projected to need long-term care at some point in their lives now and in coming years. It’s very costly. We now spend as a nation about $125 billion a year on all forms of long-term care. That’s a low-end estimate. We’re obviously going to spend more and more as the population of elderly and disabled people grows. The problem is that much of that cost is out of pocket; basically at least $50 billion worth of that $125 billion is paid by people themselves. It is not covered by the major insurance programs available to take care of other health care expenses. Medicare, for example, pays only for the cost of nursing home care that is related to short-term hospital stays. Medicaid pays a large share of the nation’s nursing home bills, about half of them, but even so does not necessarily provide assistance certainly to people who are well enough to remain in their homes, even though they’re greatly incapacitated. So it’s a large and expensive problem that the president proposes to deal with.
PHIL PONCE: And the key component, the tax credit part of it, tell us more about that.
SUSAN DENTZER: That is the largest piece of the package that the president announced today. It’s basically about 90 percent of the projected $6.2 billion cost over five years of all the proposals that he enumerated. In fact, what this would do, as the president said, would allow up to $1,000 of a tax credit to individuals who need long-term care or to the families or the care givers of those people who need long-term care. It’s a tax credit. It’s not a tax deduction. So it’s a dollar for dollar offset to tax liability, therefore, it’s more valuable than, for example, a tax deduction would be.
PHIL PONCE: So, in other words, if your tax bill is $2,000, if you’re entitled to a $1,000 tax credit, that means your tax bill for that year would just be $1,000.
SUSAN DENTZER: That’s right. And like tax credits, this would not be fully useable for all individuals; it would be phased out at income levels of $95,000 a year for individuals, $130,000 a year for married couples. So there is a ceiling on how much assistance that would provide. Nonetheless, it is significant, because to chop your tax bill by $1,000 would mean a lot to a lot of families struggling with the costs of caring for their chronically ill and disabled family members.
PHIL PONCE: So basically this $1,000 would, what, help offset the – what you call the out of pocket expenses involved in taking care of somebody over the long term. What kinds of expenses come to mind?
SUSAN DENTZER: Well, for example, having somebody come in to provide some additional care for an individual. Almost everybody who provides long-term care in the home to a family member or someone else can’t be available to do that 24 hours a day, and there is a lot of assistance that’s granted, that’s given and paid for in the form of aides coming by to help, that kind of thing would be paid for – expenses for having adult day care would also be coverable. And the important thing about this proposal, at least from the standpoint of many families, is they would not have to provide records of those expenses. They would simply have to show a doctor’s documentation of the fact that their loved one or family member had at least three difficulties with what are known as activities of daily living, three activities of daily living in this case would be required – the threshold of not being able to meet three activities would be required to be met to be eligible. That means, as the president said, can you eat by yourself, can you go to the toilet by yourself, et cetera? As long as a doctor’s documentation were provided, the family could claim the credit. They wouldn’t have to submit a long list of receipts to the IRS.
PHIL PONCE: So administratively it would be fairly simple for the taxpayer – just a letter from the doctor, as opposed to keeping track of all these receipts, as you point out. Some other parts of the proposal, these support centers that the president was talking about, quickly, what would that be?
SUSAN DENTZER: In effect, what the president proposes to do is take the existing mechanism of area agencies on aging that exist throughout the country and give more dollars to allow families to be reimbursed for direct assistance in many cases. For example, again, respite care, having somebody come in to provide some relief to a family care giver, those kinds of things – this is not a big budget item; it’s $625 million over a five-year-period, but, nonetheless, it would make services available to an estimated 250,000 individuals and their families.
PHIL PONCE: And why is it important that the president wants to start with government employees? What’s the point of that?
SUSAN DENTZER: Well, that is specifically a plan to try to encourage the growth of the private long-term care insurance market. That is a market that now sells policies to about 5 million individuals a year. It’s small, but it probably needs to grow. One way to help that process is for the federal government, one of the nation’s largest employers, to actually begin to offer that as an employee benefit. It can set standards, as it intends to do, about the things that must be inherent in those insurance policies; it can – it is hoped – raise the quality of those policies over time and in a way provide a kick to that market so that it grows more in the future and provides a mechanism for individuals to help cover some of their costs of their care that they may need in the future.
PHIL PONCE: Susan, how big of a deal is it that the president is addressing the whole issue of long-term care?
SUSAN DENTZER: Well, as a person in the White House said to me today this is the Clinton administration; our proposals are always going to be too big for some people and too small for many others. This proposal falls into that category. It’s significant in the sense that it is the first time that this administration has weighed in on the subject of long-term care in a big way. It’s actually the first time that the issue has really come back on the national agenda in a major way since 1988, when it was a big issue in the presidential campaign of that year, so it’s significant in that respect. On the other hand, $6.2 billion over five years in the context of federal budgets that are inching up towards $2 trillion a year is not a lot of money and in the context of yearly expenditures of the nation of $125 billion a year on long-term care, it’s not a whole lot of money.
PHIL PONCE: And for an individual family how much does the $1,000 tax credit do? What’s the average cost of providing for somebody a year of long-term care?
SUSAN DENTZER: Well, keep in mind that a year in a nursing home now averages $41,000 a year, so you get some sense of the proportion of the assistance that would be provided, meaningful, but by no means exhaustive of all the needs that are out there.
PHIL PONCE: Susan, thank you very much.
SUSAN DENTZER: Thanks, Phil.