Long-term care tax in limbo
By Lynda Arakawa
Advertiser Capitol Bureau
The graying of Hawai'i is prompting the Legislature to act on bills that would help people pay for nursing homes and other long-term care. But a key element — a $10 monthly tax to pay for it — may go unresolved this year.
Meanwhile, some Republicans and other opponents argue that the proposed state program would be ineffective, and that private insurers already offer long-term care coverage.
One thing both sides agree on: Hawai'i's population is aging, and policy-makers had better start planning for it.
By 2020, one in four Hawai'i residents will be at least 60 years old, according to the state Executive Office on Aging. The office also predicts that annual nursing home costs will increase to at least $200,000 per person.
Only 6 percent of Americans have long-term-care insurance policies, according to the Health Insurance Association of America.
"Long-term care is a train wreck waiting to happen," Greg Marchildon, state director of the American Association of Retired Persons, told the Senate Health and Human Services Committee at a hearing last week.
Policy-makers, community leaders and others have worked for years to find ways the elderly and disabled can receive affordable long-term-care services, from nursing homes to personal home care.
This year some supporters acknowledge there are many flaws in the bills, and some are even conceding they may have to resort to a fall-back position that would involve establishing a long-term-care trust authority of some sort without imposing the tax to pay for the program.
The legislation would levy a tax of $10 a month on working residents age 25 to 98 to pay for a long-term-care program for the disabled. Anyone who paid into it for at least 10 years would be eligible for cash benefits of $70 a day for one year. Those who paid the tax for less than 10 years would be eligible for lower benefits.
Under the legislation, the tax would increase by 5 percent annually beginning in 2005, so employees would pay $12.77 a month in 2009.
Such a tax would raise about $89 million in 2004, increasing to $114 million in 2009.
Norm Baker, vice president of administration of Child and Family Service, pays about $1,300 a year, or $108 a month, for a two-year long-term-care insurance policy. Baker, 57, said he had been rejected earlier by a couple of insurance companies because he is a prostate cancer survivor.
Baker said he is normally not a supporter of state programs, but he supports this one.
"The problem is that long-term care is so far down on the average person's priorities," he said. "It's going to cost them an arm and a leg.... They're going to encounter what I encountered."
After last week's hearing, Senate Health and Human Services Committee Chairman David Matsuura said he would need to meet with state tax officials, the attorney general's office and others to find solutions to problems in the legislation.
"We're too late in the session now to be re-evaluating new ideas on this issue," said Matsuura, D-2nd (S. Hilo, Puna). "We have to make some hard decisions now."
One fundamental question that remains unresolved is how the state would collect the money. The state Tax Department has pointed to problems in various proposals.
Legal questions also have surfaced about whether the long-term-care program would comply with the federal Health Insurance Portability and Accountability Act. No one looked into that before because the bill wasn't expected to survive this long, Matsuura said.
"There are serious concerns about the bill," said Senate Vice President Colleen Hanabusa, D-21st (Kalaeloa, Makaha). "And yet there is a strong commitment to see the long-term-care issue addressed in this legislative session. I believe at the end of session, what we will have is a bill that would have moved the whole long-term-care issue the farthest that you've ever seen it go to date. But it may not reach the point of a total financing plan."
Opponents and some lawmakers have pointed out that $70 a day for a year will not be adequate coverage, and that such a program might give people a false sense of security. Supporters have said that while the benefits would not cover all long-term-care costs for everyone, the amount would still help a struggling family by covering much of the cost of in-home care. They have said the bill was never meant to replace private long-term-care insurance.
And then there's the political risk involved in imposing a new tax in an election year. Republicans quickly targeted the bills and likely would use legislators' support for a tax as campaign ammunition.
Some opponents, such as Senate Minority Floor Leader Fred Hemmings, R-25th (Kailua, Waimanalo), have scoffed at the claim that there are few affordable long-term-care policies available. Hemmings has argued that private insurance policies offer prices comparable to the proposal and provide better benefits.
Determining the affordability of long-term-care insurance is not simple, however.
Insurance executives say some private long-term-care insurance policies with premiums of about $25 a month or less for 50- and 60-year-olds provide benefits of about $70 a day for about two years. Not everyone can qualify for policies at these prices, however. Quoting premium prices does not take into account key factors, such as a person's health and medical history, and whether the policies include the desired benefits and flexibility.
Some insurance agents, including one outspoken opponent of the bill, say they don't recommend those policies because the benefits are limited. Nursing home care costs about $250 a day.
Insurance agents also say some companies might not accept applicants with certain health conditions. About 12 to 15 percent of people who apply for long-term-care insurance are rejected, said Laudra Eber, an insurance agent who said she had sold long-term-care policies with premiums ranging from $140 a year to $12,000 a year.
Kailua resident George Honjiyo, 67, pays $154 a month for long-term-care insurance that would provide him lifetime nursing home and alternative long-term care benefits. But his 68-year-old wife, Marjorie, has not been able to get long-term-care insurance.
Honjiyo, chairman of the Coalition for Affordable Long Term Care, said two years ago Marjorie applied for long-term-care insurance offered through the Hawai'i State Teachers Association, but was rejected because of medical problems associated with her blood chemistry. Others had been turned down as well, he said.
You can reach Lynda Arakawa at larakawa@honoluluadvertiser.com or 525-8070.
