[Congressional Record Volume 144, Number 124 (Thursday, September 17, 1998)]
[Senate]
[Pages S10522-S10523]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Graham):
  S. 2492. A bill to amend the Internal Revenue Code of 1986 to allow a 
deduction for the long-term care insurance costs of all individuals who 
are not eligible to participate in employer-subsidized long-term care 
health plans; to the Committee on Finance.


               long-term care and retirement security act

 Mr. GRASSLEY. Mr. President, I introduce the Long-Term Care 
and Retirement Security Act. This bill is an important first step in 
helping Americans prepare for their long-term care needs. A companion 
bill to the Long-Term Care and Retirement Security Act has been 
introduced in the House of Representatives by Representative Nancy 
Johnson.
  Longer and healthier lives are a blessing and a testament to the 
progress and advances made by our society. However, all Americans must 
be alert and prepare for long-term care needs. The role of private 
long-term care insurance is critical in meeting this challenge.
  The financial challenges of health care in retirement are not new. 
Indeed, too many family caregivers can tell stories about financial 
devastation that was brought about by the serious long-term care needs 
of a family member. Because increasing numbers of Americans are likely 
to need long term care services, it is especially important to 
encourage planning today.
  Most families are not financially prepared when a loved one needs 
long-term care. When faced with nursing home costs that can run more 
than $40,000 a year, families often turn to Medicaid for help. In fact, 
Medicaid pays for nearly two of every three nursing home residents at a 
cost of more than $30 billion each year for nursing home costs. With 
the impending retirement of the Baby Boomers, it is imperative that 
Congress takes steps now to encourage all Americans to plan ahead for 
potential long-term care needs.
  The Long-Term Care and Retirement Security Act will allow Americans 
who do not currently have access to employer subsidized long-term care 
plans to deduct the cost of such a plan from their taxable income. This 
bill will encourage planning and personal responsibility while helping 
to make long-

[[Page S10523]]

term care insurance more affordable for middle class taxpayers.
  This measure will encourage Americans to be pro-active and prepare 
for their own long term care needs by making insurance more affordable. 
I urge my colleagues to support this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:
  [The bill was not available for printing. It will appear in a future 
edition of the Record.]
 Mr. GRAHAM. Mr. President, I rise today, along with Senator 
Grassley, to introduce legislation designed to protect our nation's 
families hard-earned savings and ensure quality long-term care.
  Our nation has achieved great strides in the 20th century in 
delivering quality health care and improving the standards of living of 
its citizens. Just last year Congress added preventive benefits to the 
Medicare program, thereby ensuring that Americans will have longer, 
more productive lives. In fact, thanks to these developments life 
expectancy has increased from 47 years in 1900 to 68 years in 1950, and 
has steadily increased to 76 years in 1991. These tremendous advances 
in medicine have also produced challenges because as more and more 
people live longer, chances increase that they will experience chronic 
illnesses and disability.
  A three-year stay in a nursing home can cost upwards of $125,000. As 
a result, nearly half of all nursing home residents who enter as 
privately-paying patients exhaust their personal savings and lose 
health insurance coverage during their stay. Medicaid becomes many 
retirees' last refuge of financial support.
  Another challenge facing America in the future will be the aging of 
the ``baby boomers.'' Unfortunately, many ``baby boomers'' are not 
planning for the future because they are preoccupied with more 
immediate concerns. This portion of our population represents more than 
half of all workers and are the parents of 75% of the nation's children 
under age 18. Child care, housing expenses and saving for their 
children's college education tend to dominate their budgets.
  Many Americans mistakenly believe that Medicare will pay for their 
long-term care needs. ``Baby boomers'' need to understand the 
limitations of government programs with regard to long-term care. In 
reality, this program primarily focuses on hospital stays and physician 
visits. Without adequate private insurance a significant number of 
retirees are likely to deplete their assets in order to receive 
essential long-term care.
  Insurance products are available to ensure that an individual's long-
term care needs are met. However, current tax law establishes several 
obstacles to purchasing long-term care insurance. First, most Americans 
purchase health insurance through their employer. Over sixty-five 
percent of 235 million individuals, under age 65, purchase their health 
insurance through their employer or union. However, tax law prohibits 
an employer from offering employer subsidized long-term care insurance 
products through its employee benefits plans.
  Since the enactment of the Kennedy-Kassebaum legislation of 1996, 
purchasers of qualified long-term care insurance policies are permitted 
to deduct the premiums as part of their medical expenses. However, for 
taxpayers other than the self-employed, the tax code restricts the 
medical expense deduction to the portion of expenses exceeding 7.5 
percent of their income--a threshold that bars the deduction for 95 
percent of non-self employed people.

  Kennedy-Kassebaum also precluded employees from purchasing long term 
care insurance on a pre-tax basis through their employer. Specifically, 
the legislation prohibited the inclusion of long-term care insurance in 
employer-sponsored cafeteria plans and flexible spending accounts. Only 
if the employer actually pays for the insurance can the employee obtain 
the coverage on a tax-free basis, but few employers currently are 
willing to pay for the coverage. The result is that only a small 
percentage of purchasers of long-term care insurance can obtain the 
insurance on a pre-tax basis.
  Second, long-term care insurance paid directly by the taxpayer is 
only deductible if the individual both itemizes his or her deductions 
and already has deductible medical expenses in excess of 7.5 percent of 
their adjusted gross income.
  Suppose Mr. and Ms. Jones earn $40,000 per year and want to purchase 
long-term care insurance. Under current law, health and medical 
expenses are not deductible unless they exceed 7.5 percent of $40,000, 
which is $3,000.
  Suppose the premiums for long-term care insurance totaled $1,000. The 
Joneses would get no tax benefit from the deduction of the premiums 
unless they already had $2,000 in other qualified medical expenses, and 
would not get the full benefit of the deduction unless they had $3,000 
in other qualified expenses.
  Even if they meet this threshold, the Joneses still will not benefit 
from the current deduction unless their total itemized deductions--
health and non-health--exceed the standard deduction, currently $6,900 
for a married couple.
  It becomes clear that the current deduction for log-term care 
insurance premiums is not providing a very strong incentive to prepare 
for one's health retirement. A recent survey shows that premium 
deductibility was cited most frequently as the action that would make 
non-buyers more interested in long-term care insurance.
  Looking into the future, there are two key goals for retirement 
security: (1) saving enough money for retirement, and (2) protecting 
against life's uncertainties, including long-term care costs. An 
unanticipated nursing home stay can deplete hard-earned savings and 
threaten a family's financial future. This situation could be 
especially difficult for the surviving spouse of someone who has had a 
long-term care stay and depleted all of their retirement savings. The 
widow or widower can have many years left to live and no remaining 
retirement assets.
  A recent study by the American Council for Life Insurance indicates 
that long-term care insurance has the potential to significantly reduce 
future out-of-pocket and Medicaid expenditures for long-term care. If 
individuals are covered by long-term care insurance, they are less 
likely to become Medicaid beneficiaries, thus preserving the 
individual's savings and decreasing government spending. This would 
also reinforce Medicaid's intent of serving as a safety net for those 
who are most needy.
  With the provisions in this legislation, Americans can be more 
assured of a financially secure retirement.
                                 ______