[Congressional Record Volume 150, Number 126 (Thursday, October 7, 2004)]
[Senate]
[Pages S10713-S10714]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ALLEN:
  S. 2918. A bill to amend the Internal Revenue Code of 1986 to provide 
that distributions from an individual retirement plan, a section 401(k) 
plan, or a section 403(b) contract shall not be includible in gross 
income to the extent used to pay long-term care insurance premiums; to 
the Committee on Finance.
  Mr. ALLEN. Mr. President, I rise to bring the Senate's attention to a 
bill I introduced today, the Long-Term Care Act of 2004.
  Baby boomers will begin to turn 65 years old in 2010 and by 2030, all 
77 million baby boomers will have reached retirement age and the over 
65 population will have doubled. The practicality of these conditions 
will require the Federal Government and most State governments to spend 
more money on health care. Presently, Federal and State governments are 
spending billions of dollars to ensure the health and well being of our 
fellow citizens.
  In one sector of the health care arena where costs are dramatically 
rising is in the area of long-term care. In 2000, spending on long-term 
care was estimated at $123.1 billion and it is expected to triple to 
$346.1 billion by 2040. Currently, 70 percent of long-term care costs 
are spent on nursing home care. The average cost of nursing home care 
is $178 per day or $60,000 per year. That is a significant burden on 
Federal and State governments as well as the thousands of individuals 
who pay for that care out of pocket.
  In addition, almost 75 percent of nursing home care is publicly 
funded. Medicaid spends about 58.7 percent on long-term care while 
Medicare spends 14.7 percent. According to the Council for Affordable 
Health Insurance, by the year 2030, Medicaid's nursing home 
expenditures are expected to reach $130 billion a year.
  If more people purchased private long-term care insurance, we could 
reduce Medicaid's future institutional-care expenses by more than $40 
billion each year, while giving those who are insured alternatives to 
nursing homes: including home care, adult day care, foster care and 
assisted living. Congress has taken steps to give individuals more 
power to pay for their health care services such as long-term care. One 
such outstanding measure was the creation of Health Savings Accounts 
(HSAs).
  Last year, I was pleased to support the passage of the Medicare 
Modernization Act. This landmark legislation

[[Page S10714]]

created Health Savings Accounts, which are a new way that people can 
pay for unreimbursed medical expenses such as deductibles, co-payments, 
and services not covered by insurance like long-term care. Eligible 
individuals can establish and fund these accounts when they have a 
qualifying high deductible health plan and no other health plan, with 
some exceptions. The beauty of these plans is that they have tax 
advantages such as deductible contributions; tax-exempt withdrawals if 
the individual uses the money for medical expenses; and tax-exempt 
account earnings.
  I am confident that with the creation of Health Savings Accounts, 
individuals and families will be encouraged to set money aside for 
their health care expenses and give individuals the means to pay for 
health care services of their own choosing, without being constrained 
by insurers or employers. Unfortunately, Health Savings Accounts are 
relatively new and most individuals will not have the built up funds in 
their HSA to pay for a number of costly health care expenses such as 
long-term care insurance and that is why we need to provide other 
options to help pay for this important investment.
  Currently, thousands of Virginians and millions of Americans are 
saving in their retirement plans to have a comfortable life once they 
become seniors, be it IRA, 401(k), and 403(b) accounts. These savings 
plans help prepare individuals for their future retirement or any 
unforeseen circumstance that may arise. Indeed, over 43 million 
Americans own IRAs with total savings of $2.5 trillion, while more than 
47 million Americans have 401(k) accounts with $1.8 trillion saved. In 
addition, 6.4 million Americans have 403(b) accounts, amounting to over 
$590 billion saved.
  These are untapped funds that individuals should be allowed to use to 
help pay for their future health care needs. Current tax law and some 
retirement plans allow individuals, in extreme circumstances, to 
withdraw funds from their retirement accounts, but more often than not, 
a 10 percent excise tax applies for early withdrawal. In my opinion, 
that tax precludes the ability or desirability of individuals to 
provide for their and their families well-being and that is why I have 
introduced legislation to provide a new health care option to help 
address this unfortunate circumstance.
  My legislation, the Long-Term Care Act of 2004 will allow individuals 
to use their IRAs, 401(k), and 403(b) plans to purchase long-term care 
insurance with pretax dollars at any age and without early withdrawal 
penalty. Under the Long-Term Care Act, the consumer has the option to 
purchase long-term care insurance at the most appropriate amounts for 
their own needs and their spouses.
  Today, only six percent of Americans own a long-term care policy. One 
of the reasons behind this dismally low figure is that individuals wait 
too long to purchase long-term care insurance. In fact, purchasing 
long-term care insurance at age 65 is about twice expensive as 
purchasing it age 55. That is why we must encourage individuals to plan 
for their future health care needs and purchase long-term care 
insurance at an early age. By purchasing long-term care insurance at a 
younger age, individuals will be saving money in the long run and not 
depleting their life savings.
  Our country is heading towards a demographic melt down on long-term 
care costs. It is simply unsustainable for individuals and the 
government to maintain the current rate of spending without further 
endangering the state of health care in the United States.
  Preparing for future costs of health care is something that every 
American should be doing. Long-term care insurance is one way for 
Americans to plan for periods of extended disability without burdening 
their families, going bankrupt or relying on government assistance.
  Every American should be preparing for future health care costs and 
it is important that we encourage people to take responsibility today 
for those costs, be it with the purchase of long-term care insurance or 
investment in a Health Savings Account. If Virginians and Americans 
fail to act, it will result in an increased and unsustainable financial 
burden on the Federal Government and taxpayers.
  My legislation, the Long-Term Care Act of 2004, is a commonsense 
approach that will encourage individuals to plan for their future 
health care needs and help make long-term care insurance more 
affordable. While this may not be the solution for some people, it is 
another option for the millions of Virginians and Americans to help 
provide for their health and well-being or the health and well-being of 
loved ones. I look forward to the Senate's action on this legislation 
early on in the 109th Congress because it not only encourages Americans 
to plan for their future health needs but will also help sustain the 
viability of our Nation's health care system.
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