Long-term care tax credit being pushed in House

By Kevin Dayton
Advertiser Capitol Bureau Chief

Plans for a new tax to pay for long-term care have died at the Legislature, but some House members are now pushing a new proposal to provide tax credits to encourage people to buy long-term care insurance.

Under the proposed credit, people who buy their own long-term care coverage would be eligible for a tax credits equal to half the amount they spent on premiums or $2,500, whichever is less.

In effect, the proposal would provide a state subsidy of up to 50 percent of the cost of the premiums, which lawmakers hope would encourage more people to buy coverage. Long-term care encompasses nursing homes, personal home care and other services for elderly and disabled people.

"The estimated impact on the state's tax collections would be less than $5 million per year initially, but this gives folks who claim to be concerned about the coming long-term care crisis a chance to prove it," said House Human Services & Housing Chairman Mike Kahikina.

Earlier this year, both House and Senate rejected plans to impose a $10-per-month tax to pay for long-term care because of technical problems and political opposition to the new tax.

Senate Health & Human Services Committee Chairman David Matsuura said he likes the proposal and is ready to approve the bill now, but doubts that the Senate Ways and Means Committee would be able to find the money to cover the cost of the new tax credits.

"If (Ways and Means) says it's OK, it's going," said Matsuura, D-2nd (S. Hilo, Puna). But he added that "if there's going to be a major tax hit on this one, I guarantee WAM's not going to give us the clearance to go with it."

Kahikina, D-43rd (Barbers Pt., Wai'anae, Ma'ili), said he believes the tax credit proposal will fail unless House and Senate lawmakers agree to use at least some of the $217 million in the Hawai'i Hurricane Relief Fund. But many lawmakers want to hold that money in reserve or refund it to the people who paid into the fund. There is particularly strong resistance in the Senate to spending the hurricane relief fund surplus.

Members of a House-Senate conference committee on the issue will meet at 4 p.m. today to discuss the proposed draft of Senate Bill 1534.

Rep. Bob Nakasone, D-9th (Kahului, Wailuku), who drafted the new long-term care tax credit proposal, said it should save the state some money over time by reducing the number of people who use Medicaid to cover their long-term care costs.

The measure is a modified version of the bill introduced last year, and the new version should cost the state far less, said Nakasone.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com or 525-8070.