Insurance Committee Leaders Seek Support for Long-Term Care Insurance Tax Deduction

Democratic and Republican legislators request a federal tax deduction in return for investing in long-term care insurance

Hartford – Leaders of the Connecticut General Assembly’s Insurance and Real Estate Committee announced today that they are seeking support from fellow legislators to establish an income tax deduction for individuals who invest in long-term care insurance. The Democratic and Republican leaders are asking for federal support in the form of a nationwide tax deduction on long-term care insurance premiums.

Senators Joseph J. Crisco, Jr. (D-17) and Kevin Kelly (R-21), and Representatives Robert Megna (D-97) and Rob Sampson (R-80) are sending a letter today to the Connecticut Congressional Delegation [PDF] asking them to work towards passage of a federal tax deduction for long-term care insurance premiums.

These efforts are focused on encouraging individuals to invest in long-term care insurance, which would provide relief for the state’s growing burden of Medicaid-funded nursing home care.

The single largest expenditure in the Connecticut state budget is funding for long-term Medicaid services. In 2012, the state spent $2.8 billion, or 10 percent of the annual state budget, on long-term care for seniors. As Connecticut’s senior population grows, the costs of providing this care will increase beyond the state’s capabilities, further straining the state budget.

Currently, 14 percent of the population is over 65 years old. By 2032, the senior population is expected to increase by nearly 69 percent, making nearly one quarter of the population over 65 years old.

“This is a commonsense approach to relieving one of the heaviest burdens on our state budget,” said Senator Crisco. “Just as we in state government need to focus on long-term investments that will pay dividends for Connecticut for years to come, our constituents need to make similar investments so they can live healthy, independent lives as they age. The benefits of independent living are indisputable. People are happier when they are able to age in their own communities, and stay connected to their friends, neighbors and surroundings. This would be a good step toward promoting investment in long-term care insurance, and I encourage Congress to take action.”

“With huge growth in the senior population, it will be impossible to support people with the same amount of Medicaid services offered today,” said Senator Kelly. “We need to encourage people to invest in long-term care insurance now, so they can independently support themselves as they age. We hope that the federal government will support our efforts with nationwide legislation.”

Long-term care is not always direct medical care, but rather is a range of services and supports that help individuals care for themselves on a daily basis. This can include help bathing, dressing, eating, using the toilet, shopping for groceries, caring for pets, housework, managing money, taking medication etc.

“Long-term care insurance gives people the tools they need to age in place and stay in their own homes as they get older rather than moving into state funded nursing homes or assisted living environments. Staying in their own homes, and taking care of their own health costs, allows individuals to maintain their lifestyles, community connections, and current medical professionals. Aging in place gives people a sense of comfort and security, while also eliminating the heavy burdens of nursing home costs that would fall on the state,” said Senator Kelly.

“The costs of providing long-term care are rising and spending is unsustainable,” said Representative Sampson. “People need more incentives to encourage a personal investment in long-term care insurance. People deserve peace of mind when it comes to health care in their later years, and long-term care insurance can provide that. It’s time to make this insurance more affordable and more accessible while saving taxpayer money and helping people stay in their homes longer.”

The Insurance Committee leaders encourage the Connecticut Congressional Delegation to work towards passage of a federal “above-the-line” tax deduction for private long-term care insurance premiums. Currently, individuals can claim a deduction on their federal income taxes for the costs of long term care, but only if they itemize their deduction. The Insurance Committee is seeking support for a deduction that would come off the gross income, before the adjusted gross income is determined.

The majority of people do not itemize deductions when filing their taxes, with recent data from Urban Institute showing that only 30 percent of individuals did so in 2010. By requesting an “above-the-line” deduction, the Insurance Committee leaders hope to make it easier for all eligible individuals to receive the deductions they qualify for.