LONG TERM CARE: Archer Proposes Three Tax Cuts
House Ways and Means Chair Bill Archer (R-TX) yesterday unveiled a package of three tax breaks designed to encourage the purchase of long term care insurance and reimburse family caregivers, CongressDaily reports. Under Archer's proposal, individuals would be able to write off 100% of long term care insurance premiums, in a deduction phased in over 10 years; family caregivers could take an additional personal exemption, currently worth $2,750, on their income tax; and businesses would be able to offer long term care insurance to employees, with the premiums subtracted from pre-tax income as in 401(k) plans. Archer noted that the National Alliance for Caregiving estimates that one in four Americans provide care for a family member or friend (7/6). Although cost estimates have not been finalized, an Archer spokesperson said "preliminary estimates suggest the tax deductions for insurance premiums would cost 'several billion' over the next decade, while the exemptions for caregivers would cost roughly $2 billion to $3 billion a year" (Goldstein, Washington Post, 7/7). Current law provides for tax breaks only if long term care expenses exceed 7.5% of gross income (Welch, USA Today, 7/7).
A Different Spin
The GOP proposal, which will be taken up by Ways and Means when Congress returns from recess next week, differs fundamentally from President Clinton's proposed $1,000 long term care tax credit -- in part because Clinton's benefit would phase out for upper-income taxpayers, and would benefit both family members and the individuals themselves. But perhaps more importantly, in emphasizing long term care insurance, passage of the Archer plan would represent a major win for the insurance industry, which has lobbied heavily for increased utilization of such plans. Health Insurance Association of America President Chip Kahn said that providing federal incentives to buy long term care insurance "is the most important public policy we can have right now to help us alleviate eventual problems relating to long term care." But senior advocates are dubious that such proposals would help many seniors. AARP lobbyist Maryanne Keenan said, "Archer's proposal would help a relatively small number of Americans, because such insurance is so expensive that most of the people who buy it are at least upper-middle-class" (Washington Post, 7/7). Democrats echoed those doubts, with Dan Maffei, spokesperson for Ways and Means Democrats, saying, "It sounds good, but when you read the fine print you find out that many people don't benefit from this. Some people are helped, but a large number of people who really need help get nothing at all." Regardless, USA Today reports that "Archer's move suggests that some break for long-term care is likely to be part of a final agreement" (7/7). The Washington Times reports that Archer's move "sends a further signal that the GOP intends to counter the Clinton administration's government-mandated health care proposals with a more market-oriented, tax-incentive approach" (Lambro, 7/7).