Lingle plan for long-term care called deficient

By Lynda Arakawa
Advertiser Capitol Bureau

Gov. Linda Lingle's proposal to encourage people to purchase long-term care insurance with tax credits has received a lukewarm reception from some senior-citizen advocates, who say while it could be a first step, it would not do enough to address the issue.

Only 6 percent of Americans have long-term care insurance policies, the Health Insurance Association of America says.

Under the governor's proposed legislation, taxpayers with a long-term care insurance policy would be able to get a tax credit equal to 30 percent of their insurance premiums. The tax credits would be phased in over three years, beginning at 10 percent in 2004, 20 percent in 2005, and then 30 percent in 2006.

The administration estimates such a tax credit would cost $2 million in revenue loss in 2004 and grow to $6 million in 2006. The administration also noted the revenue loss may also grow as more people take advantage of the tax credit.

"Long-term care insurance is readily available and often affordable, but relatively few people have availed themselves of this self-help remedy," Lingle said in her State of the State address.

But some senior-citizen advocates say it's not so simple. They say many lower-income people cannot afford long-term care insurance premiums, which can range from less than $200 a year to thousands of dollars annually.

Insurance premium costs also take into account factors such as a person's health and medical history and the desired amount of benefits and flexibility. Some insurance companies have rejected applicants because of various health concerns.

Greg Marchildon, state executive director of AARP, an organization for retirees, applauded Lingle for recognizing the long-term care problem but said her proposal is not in itself a solution.

"I think it's one piece of the puzzle," he said. "This is certainly a way to extend an opportunity for people that have a good amount of money to get a tax credit on investing in long-term care insurance. But we shouldn't fool ourselves because this is not a plan that's going to help most people in the state of Hawai'i prepare for what's going to happen when they need long-term care."

In an interview Feb. 3, Lingle conceded that her plan is not perfect. Instead, she said, she sees it as "a good first step."

"We'll start to help a lot of families in Hawai'i," she said. "Rather than all or nothing, it's important to start, take a step, get going, start helping people."

She said the tax credit will give middle-class folks more incentive to plan for their own futures.

"There has to be some initiative on the part of people themselves," Lingle said. "Government can't do everything for everybody, but we can provide incentives sometimes. I think the tax credit over three years going up to 30 percent is a very good incentive."

Laura Manis, vice chairwoman and legislative chairwoman of the Coalition for Affordable Long Term Care, isn't convinced.

"The trouble with tax credits is that people with health problems can't get insurance," she said. "Most of the people with pensions don't pay state taxes on those pensions so they can't get credits and the third reason is that long-term care insurance is expensive.

"Taking money out of state funds for the 6 percent who can afford to buy it just increases the tax burden on the rest of us who get no benefit from it," she said.

Lingle said that people who can afford long-term care insurance are "part of the gap group that we're trying to help."

People who are poor, Lingle said, are already covered by government programs.

Reach Lynda Arakawa at larakawa@honoluluadvertiser.com or at 525-8070.