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The Honolulu Advertiser
Posted on: Monday, March 10, 2003

Lingle opposes care plan for elderly

By Robbie Dingeman
Advertiser Health Writer

The Democrat-controlled state Legislature appears inclined to pass a proposal to provide long-term-care benefits for Hawai'i residents through a $10-a-month payroll tax, but the Republican governor already has promised a veto.

The state Executive Office on Aging estimates that only 6 percent of Hawai'i residents have long-term-care insurance. Lawmakers last year rejected the payroll tax plan, devised as a way to head off an impending crisis as a big chunk of the community becomes likely to need such care.

Gov. Linda Lingle said she prefers a state tax credit for people who buy long-term-care insurance.

Nearly halfway through the legislative session, both the House and Senate are supporting measures to impose a tax of about $10 a month to create a state program that would provide about $70 a day in cash benefits for as long as a year. The tax would rise to $23 a month by 2012.

People who paid could start receiving benefits two years after the bill passes, to fit needs including help for their caregivers and assistance with chores.

Both houses also have kept alive Lingle's proposal for a tax credit and a rival plan.

House Health Chairman Dennis Arakaki, a Democrat and longtime advocate on human services issues, sees the tax plan as a good start to address the issue, and one that insurance experts endorse as financially sound. Arakaki remains hopeful that the importance of the issue will override the politics. "It's not only Democrats that get old," he said.

But Lingle last month called the proposal "a tax on all the people of Hawai'i for no immediate benefit."

According to Joan White of the University of Hawai'i's Department of Political Science, who worked for the panel that analyzed a state

financing program for long-term care, nearly a quarter of state residents will be 65 years of age or older by 2020. The first wave of baby boomers turns 65 in 2011.

White noted that about three quarters of residents who receive long-term care have it paid for by Medicaid. If nothing is done to shift the burden away from the government support, she said, the program will drain money from other worthy programs. "It will pit the poor and the needy against the poor and the needy."

The National Association of Insurance Commissioners said Hawai'i had 28,160 people covered by private long-term-care policies in 2001, at an average cost of $3,236 a year.

Minimum benefit

Gov. Linda Lingle last month called the proposal "a tax on all the people of Hawai'i for no immediate benefit."

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In the state Senate, Health Chairwoman Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui) supports the tax proposal as a big step in the right direction.

"People that pay in will have a minimum benefit of long-term care," she said. "Seventy-five percent of people's needs can be met by this kind of a program."

Baker said she believes the tax plan will be cost-effective over time. "We can hold the cost of long-term care down, plus do it in the setting that most of them want.

"It's an issue that's not going to go away; it's only getting bigger. It's never going to be a good time. We just have to bite the bullet and go on with a plan. We have to do what's best for our state."

Baker said she realizes the tax will be more of a burden on lower-income people. But at $10 a month, it works out to the cost of a can of soda a day. "It's really not that expensive," she said.

Phased-in tax credit

Under the governor's proposal, taxpayers would get a credit equal to 30 percent of what they spend on long-term care insurance. The tax credits would be phased in over three years, beginning at 10 percent in 2004, 20 percent in 2005 and 30 percent in 2006.

The administration estimates that the measure would cost the state $2 million in lost tax revenue in 2004, increasing to $6 million in 2006.

The House proposal would provide a tax credit of 50 percent of the premium for long-term-care insurance, to a maximum credit of $2,500. Arakaki said it was designed to offer an incentive to people who might not otherwise buy such policies.

George Honjiyo, chairman of the Coalition for Affordable Long-term Care, said the biggest obstacle has been persuading lawmakers to pass another tax creating a major social policy change.

But he said the state's share of Medicaid for long-term-care insurance is projected to increase fivefold by 2020, from the current $100 million a year. "There's just no free ride in this world. It's time we took responsibility," Honjiyo said. "Only those people who contribute will get benefits."

Greg Marchildon, who represents the AARP Hawai'i, which advocates for seniors, says the tax credit provides no solution "to what is frankly a looming long-term-care crisis in the state." While he applauds Lingle for pursuing the issue, he says tax credits help the rich.

Marchildon doesn't see middle- and lower-income workers making long-term-care insurance a priority. "They'd be more apt to put it away in a savings account or a rainy-day fund in case the car breaks or the roof leaks," he said.

Models being studied

Grant Tanimoto of the state Tax Department said 22 states provide a tax incentive to purchase long-term-care coverage, and seven states offer a credit ranging from 15 percent to 25 percent.

He said the department is still analyzing and gathering information on those programs' cost and effectiveness.

Marchildon said only about 1,800 long-term-care policies have been purchased among Hawai'i's 140,000 AARP members, because they are expensive and there's no guarantee that those needing benefits will qualify medically.

He said the current healthcare system forces people to "spend yourself into poverty, qualify for Medicaid, and get a nursing home bed. And in this state, it's if you can find one."

The program supported by a tax, he said, would allow people to choose care within their homes that matched their needs: someone to come in and cook a few meals, install grab bars or assist with purchase of prescription drugs.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 535-2429.