[Congressional Record Volume 145, Number 2 (Thursday, January 7, 1999)]
[Extensions of Remarks]
[Pages E45-E46]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               THE LONG-TERM CARE ADVANCEMENT ACT OF 1999

                                 ______
                                 

                       HON. CHRISTOPHER H. SMITH

                             of new jersey

                    in the house of representatives

                       Wednesday, January 6, 1999

  Mr. SMITH of New Jersey. Mr. Speaker, today I am re-introducing the 
Long-Term Care Advancement Act to provide real assistance to families 
and jump-start debate over how to best prepare Americans for their 
long-term care needs.
  Although the worsening long-term care situation in this country does 
not get a lot of media attention, it is very real and millions of 
families will find themselves under tremendous emotional and financial 
pressures unless measures are adopted now to address it. The rapid 
expansion of the group of Americans defined by the Bureau of the Census 
as ``the oldest old''--those senior citizens aged 85 and above--is 
slated to double by the year 2030. In fact, the fastest growing 
demographic age group in the United States are the ``oldest old,'' and 
about half of such individuals will eventually require assistance with 
various activities of daily living (ADLs).
  The Long-Term Care Advancement Act of 1999 will assist Americans as 
they prepare for their future long-term care needs. To help families 
keep more of what they have earned over the years, my bill allows 
penalty-free withdrawals from IRAs and 401(k) plans when the funds are 
used to pay for `qualified' long-term care (LTC) insurance premiums (as 
defined by the Health Insurance Portability and Accountability Act of 
1996).
  In addition, my legislation will enable a family to make an IRA/
401(k) withdrawal to pay for an LTC insurance policy premium and a 
portion of the withdrawal will be excluded from their taxable income. 
Depending on one's tax bracket, age, and type of policy purchased, the 
savings on an LTC insurance policy under my bill are considerable.
  Lastly, the Long-Term Care Advancement Act will provide a refundable 
$500 tax credit for families caring for a dependent elderly spouse or 
parent in the home. This tax credit is important because most of the 
long-term care provided in America is provided by families in the home, 
and these families desperately need and deserve tax relief. In my view, 
families trying to take care of their loved ones should be rewarded by 
the tax code, not punished as they are now.
  The tax breaks contained in this legislation will help families 
provide the peace and security they want and need against the massive 
costs of professionally provided long-term care, including nursing home 
care, home health care, respite care, and adult day care services.
  Last year, this legislation secured the support of the 60 Plus 
Association, the American Health Care Association, and the Home Health 
Assembly of New Jersey. The Health Insurance Association of America 
(HIAA) has also supported the concept behind the bill.
  This year, I was very pleased to see the President Clinton has 
decided to join my colleagues and I in the long-term care debate by 
proposing a tax credit for elderly disabled persons as part of his 
fiscal year 2000 budget. Many will recall that the Republican 
``Contract with America'' called for providing ``tax incentives for 
private long-term care insurance to let older Americans keep more of 
what they have earned over the years.'' They say that imitation is the 
sincerest form of flattery, so Republicans should be flattered that Mr. 
Clinton has decided to make a plank in of the ``Contract with America'' 
the centerpiece of his new domestic initiatives contained in his 
budget.
  However, in addition to providing a tax credit, I believe a vital 
part of any comprehensive proposal on long-term care must also be the 
promotion of private long-term care insurance. Although the number of 
persons insured under LTC policies has nearly doubled between 1992 and 
1996, this growth is from a very low base. The fact of the matter is 
that the overwhelming majority of Americans still do not have any 
private LTC insurance coverage at all. This needs to change, and soon.
  Unless it does, changing demographics will put an enormous strain on 
our nation's fragmented system of long-term care. Already, our Medicare 
and Medicaid programs have demonstrated their financial shortcomings 
when providing long-term care services to increasing numbers of the 
frail elderly. The Medicaid program already spends over $41 billion on 
nursing home care services for senior citizens. Medicaid expenditures 
are projected to double over the next 10 years, with nursing home care 
driving much of the growth.
  By encouraging more Americans to plan for their future care needs, I 
believe we can improve the medical, social, and financial well being of 
families, as well as provide substantial future savings to the Medicaid 
and Medicare programs. According to the John Hancock Mutual Life 
Insurance Company, there is a 48% chance of any given individual 
needing long term care in one's lifetime. And the costs of nursing home 
care for one year is approximately $40,000. If we can successfully 
encourage families to purchase LTC insurance, the potential for savings 
to American families, as well as the Medicaid and Medicare programs, is 
simply enormous.
  I look forward to working on and discussing long-term care issues 
with my colleagues throughout the 106th Congress, and urge all of my 
colleagues to support this important initiative.


[[Page E46]]



 Section by Section Analysis of the Long-Term Care Advancement Act of 
                                  1999


                         Section 1: Short Title

 Section 2: Exclusion from income for retirement plan withdrawals used 
                  to purchase long-term care insurance

       Penalty taxes are waived on IRA/retirement plan withdrawals 
     used to pay for LTC insurance policy premiums.
       IRA/retirement plan withdrawals will not be included as 
     taxable income if the withdrawal is used to pay for 
     ``qualified'' LTC insurance policy premiums. The amounts 
     excludable from taxation are as follows (the amounts are 
     identical to the LTC tax breaks contained in P.L. 104-193):

------------------------------------------------------------------------
                                                  Exclusion from income
                                                  allowed on IRA/401(k)
            Age of LTC policyholder                  withdrawals for
                                                  ``qualified'' policies
                                                        under HR--
------------------------------------------------------------------------
40 or less.....................................                  $200.00
41 to 50.......................................                   375.00
51 to 60.......................................                   750.00
61 to 70.......................................                 2,000.00
71 and up......................................                 2,500.00
------------------------------------------------------------------------

       ``Qualified'' LTC plans eligible for the incentives 
     contained in this bill are defined by the Health Insurance 
     Portability and Accountability Act of 1996 (HIPAA, or P.L. 
     104-193).
       Double tax benefits are prohibited. For example, a taxpayer 
     otherwise eligible to take a deduction for LTC premiums could 
     either take the tax deduction allowed by P.L. 104-193, or 
     make a tax-excludable withdrawal from their IRA or other 
     retirement plan. They cannot do both.
       Only the amounts withdrawn to pay for actual LTC premiums 
     are eligible to receive tax benefits under LTCAA. Amounts 
     withdrawn in excess of those needed to pay LTC premiums would 
     be subject to normal tax rules (including applicable 
     penalties, if any).
       Provisions effective for taxable years beginning after 
     December 31, 1998.


 Section 3: Tax Credit for taxpayers caring for a dependent parent or 
                           spouse in the home

       A $500 tax credit (refundable) can be claimed for each 
     chronically ill spouse/parent who cannot perform two or more 
     activities of daily living (ADLs) due to a physical or mental 
     impairment.
       Dependent spouse/parent must reside in the taxpayer's 
     principal place of residence for more than half of the 
     taxable year.
       `Elder-care' tax credit phased in over the next five years 
     as follows:

------------------------------------------------------------------------
                                                 Applicable `elder-care'
                 Calendar year                      tax credit amount
------------------------------------------------------------------------
1999...........................................                     $250
2000...........................................                      350
2001...........................................                      400
2002...........................................                      450
2003...........................................                      500
------------------------------------------------------------------------

       The tax credit is indexed for inflation after 2003. It will 
     be indexed to the medical cost component of the Consumer 
     Price Index (CPI).
       Income limits for `elder care' credit are identical to 
     $500-per-child tax credit included in Taxpayer Relief Act of 
     1997 (P.L. 104-34).
       Provisions effective for taxable years beginning after 
     December 31, 1998.

     

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