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Despite
a popular misconception, the need for long-term care isn't restricted to the
elderly. In fact, many working age adults have disabling injuries and
illnesses, including arthritis, heart disease and mental impairment, as well as
stroke and trauma, that require ongoing care.
The
number of individuals with severe disabilities between the ages of 17 and 44 has
increased 400% over the past 25 years.
There
are now more than 13 million Americans between the ages of 15 and 64 who need
some type of daily assistance.
All
told, eight out of ten families in the U.S. have a need for longer term
care. Unfortunately, many of these individuals may have to deplete their
resources in order to pay for care in the U.S., and when it does, it covers only
skilled or acute care.
State
Medicaid programs, require recipients to spend down their assets to poverty
levels to qualify for assistance.
The
best solution is private long-term care insurance, particularly in light of
recent federal health legislation that makes this coverage more tax favorable.
The
financial impact of long-term care is significant, no matter where it is
provided. Nursing home care now averages $ 35,000 a year. Today, more Americans
are receiving home health care and hospice care as an alternative to nursing
home care. In fact, 80 percent of all long-term care is now provided
at home by family members. In 1994, there were 2 million people receiving
home health or hospice care on any given day.
Favorable
Treatment For Tax Qualified Long Term Care Insurance
The
Health Insurance Portability & Accountability Act of 1996, otherwise known
as the Kennedy-Kassebaum Bill provided favorable tax treatment of long term care
insurance benefits and premiums.
Up to certain limits premiums paid for insurance are deductible, and the
benefits (up to $190 per day in 2000) would be received tax free to the insured.
Long term care insurance premiums can now be added along with eligible medical
expenses on Schedule A, and to the extent they exceed 7.5% of the insured's
adjusted gross income, they are deductible.
A long term care insurance premium, Medicare supplement premium and
non-reimbursed medical expenses (prescription drugs) could make it possible to
take advantage of the medical expense deduction.
Employer
and Employee Tax Benefits
Many
new long term care products are available to the small to mid-sized businesses,
often with multi-life discounts. And the need for long term care coverage is
growing as workers increasingly grapple with tending to aging parents.
Most business advisers assume the taxation of tax-qualified long term care
insurance is similar to that for disability insurance. It is not. The Health
Insurance Portability and Accountability Act of 1996 allows varying tax
deductions of qualified long term care premiums by business type (C
corporations, S corporations, etc.) and yet allows the benefits to be paid out
tax-free. Furthermore, businesses can discriminate in providing benefits for
classes of employees, such as owners and key executives, even directors.
In the case of a C corporation, for example, a business may deduct 100 percent
of the premiums for tax-qualified long term care coverage, as long as all
employees in the class receive the coverage. It is possible for a C corporation
to carve out a select group of executives or owners and provide a selective
benefit for them and their spouses that is 100 percent deductible to the
business. Yet the benefits remain tax-free.
In
the case of S Corporations, LLCs, LLPs, and sole propriertorships can also
purchase coverage with a phased-in deductibility. The deductibility is phased-in
by year - 60 percent of the premium in year 2001, 70 percent in year 2002 and
100 percent in year 2003 and thereafter. Spousal premium is also eligible for
tax deductibility.
To
check insurance company ratings, click Moody
,
Standard and
Poors
or A.M. Best.
If
you have an interest in obtaining a long-term
care quote for
yourself, a friend or a family member, complete our long-term care quotation form. There are no hidden charges for this service and you will
receive personalized attention. In fact, there is no reason not to call
our office to discuss your
questions before requesting a quotation. All information is confidential.
Long
Term Care Links
MetLife
Market Survey of Nursing Home and Home Care Costs 2004
http://www.metlife.com/WPSAssets/11704283601096047636V1F2004%20NH%20and%20HC%20Market%20Survey.pdf
Medicare
http://www.medicare.gov/
California
Partnership for Long Term Care http://www.dhs.cahwnet.gov/mcs/cpltc/cpltcindex.htm
California
Department of Insurance http://www.insurance.ca.gov
American
Association of Housing and Services for the Aged http://www.aahsa.org
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