ANNAPOLIS – The Senate Budget and Taxation Committee, which considered and rejected two proposed tax credits for long-term care insurance last session, is looking at the issue again.
Long-term care is most often needed by people with mental illnesses, functional or developmental disabilities, and the elderly. Policymakers theorize that tax credits for private insurance purposes might offset some public spending for Medicaid.
Projections based on data from the U.S. Census Bureau and the General Accounting Office show the number of Marylanders over the age of 65 nearly doubling by 2020. In addition, the number of Marylanders 85 and older is growing at a rate of 3.3 percent a year, three times the growth rate of the general population.
Medicaid, which is half funded by state governments, pays for 47 percent of formal long-term care services (services not provided by family and friends), while private insurers pay for only about 5 percent.
Research provided by the Department of Legislative Services shows that every private policyholder saves Medicaid $3,500 to $6,800.
“There’s still some question about whether or not it’s enough juice for the squeeze,” Sen. Barbara A. Hoffman, D- Baltimore, who chairs the committee, said in an interview. Any state tax credit would have to be certain of a “measurable policy outcome,” she said.
Last session, the committee examined and rejected two tax- credit proposals. Identical bills were rejected in the House.
One would have given a 5 percent credit to help individual purchasers of insurance cover the premiums. It would have had to have boost sales of policies by 50 percent over current growth in order to break even with projected revenue losses to the state of more than $5 million annually.
The other would have credited employers who offer insurance for their employees. It would have required only a 1 percent increase to break even.
“You have to ask yourselves, would people be doing it anyway?” Hoffman asked. “The general public still does not believe that Medicaid will not be there.” She added that given the cost of long-term care insurance, most people who could afford it would probably not qualify for Medicaid anyway.
The office of one of the legislators who introduced the bills, Sen. Paula C. Hollinger, D-Baltimore County, said that she was studying the issue carefully and was planning to introduce “some sort of income tax credit legislation” next session.
Currently the only states which provide tax incentives for long-term care policies are Alabama, Illinois, Maine, Montana, New York and North Dakota, according to the Department of Legislative Services. “I’m not sure if it gets us anywhere,” Hoffman said after Tuesday’s briefing, “but we know more now.” -30-