[ OUR OPINION ]
Benefits dubious in
long-term care planGOOD intentions, like the long-term care tax legislators approved this week, aren't enough when the program's costs are weighed against its benefits. The plan's limited coverage, its regressive mode, its uncertain financial stability and a likelihood of increasing the state's administrative expenses all combine for an unsatisfactory measure.
THE ISSUE The state Legislature has passed a measure to assess taxpayers $120 a year for a health program.
Fortunately, Governor Lingle, who has been critical of the bill, will probably veto it, although she supports the tax credit the measure offers to those who buy long-term care insurance.
Concern about Hawaii's aging population and about the state's increasing costs for Medicaid prompted lawmakers to tailor the program, based on one proposed last year by then-First Lady Vicky Cayetano.
The bill imposes a $120-a-year income tax in the first year with gradual increases to $276 a year in 2011. Those who pay in for 10 years would then be eligible to receive a maximum $70 a day benefit for one year. At present, that amount could be enough to cover minimal home care, but with the average cost of nursing facilities running about $150 a day, it won't provide much relief. As health-care costs surely will go up in 10 years time, even with benefits increasing to about $83.58 a day, the payments won't be sufficient.
Although people who earn less than $10,000 a year would be exempt from the tax, lower- and middle-income families with two wage earners would be assessed $240. Because the flat rate nullifies income levels and because of the delayed vesting period, the tax is considered regressive. A state auditor's review states that such taxes are "not justifiable" since there is no clear relationship between those who pay them and those who receive benefits. The review also describes long-term care insurance in general as an ineffective financing mechanism with less than 1 percent of expenses being paid by private insurance.
There are also concerns about whether the pool of revenue will be enough to provide benefits to all who qualify. To generate adequate income, the money will have to be invested to gain considerable returns, more so if a large segment of the baby-boom population seeks benefits in the program's early stages. If Social Security is any indication, the state may eventually confront a huge fiscal crisis.
In addition, the state will have to take on the burdensome tasks of keeping track of who was taxed and when, calculating pro-rated benefits for those who had breaks in payments, issuing checks, monitoring for fraud -- all with predictable increases in administrative costs.
Proponents say that the need for long-term health care negates these issues, that the minimal benefits will help those in their sunset years maintain a certain quality of life, that the tax credit will encourage insurance purchases and that the program will spur younger people to consider their health-care future. However compassionate the goals, the bill's shortcomings raise issues that require further consideration.
