ACLI Testifies on Benefits of Long-Term Care Insurance Before Senate Finance Committee

Business Wire, June 29, 2005

WASHINGTON -- The American Council of Life Insurers (ACLI) testified at a U.S. Senate Finance Committee hearing today about the benefits of long-term care insurance to individuals and the Medicaid system. Joyce Ruddock, vice president of long-term care insurance for MetLife, testified on behalf of ACLI.

For individuals, private long-term care insurance can help pay for long-term care needs without severely depleting savings.

As Americans enter the 21st century, living longer than ever before, their lives can be made more secure knowing that long-term care insurance can provide choices, help assure quality care and protect their hard-earned savings when they need assistance in the future, Ruddock testified.

"Over half of women and nearly one-third of men 65 and older will stay in a nursing home sometime during their lifetime," Ruddock testified. "The annual cost of a nursing home stay averages $70,000 and is projected to reach $241,000 by 2030. Five visits a week by a home health aide to help with bathing, dressing, and household chores can cost over $1,300 per month. If more hours of home care are needed, the expense is greater. These costs can quickly erode a hard-earned retirement nest egg."

Medicaid, the government's health system for the poor, is threatened as well by the rising costs of long-term care.

"By the year 2030, Medicaid's nursing home expenditures could reach $134 billion a year -- up 360 percent over 2000 levels," Ruddock testified.

By encouraging the purchase of private long-term care insurance through tax incentives, Congress could help alleviate the financial pressure on Medicaid and millions of Americans by the increasing costs of long-term care.

ACLI supports S. 1244, the "Long-Term Care and Retirement Security Act of 2005," sponsored by Sens. Charles Grassley (R-Iowa) and Blanche Lincoln (D-Ark.) as well as H.R. 2682, the companion bill in the House to the Senate legislation sponsored by Reps. Nancy Johnson (R-Conn.) and Earl Pomeroy (D-N.D.). The bills would provide an "above-the-line" tax deduction for people who purchase long-term care insurance. They also would provide a $3,000 tax credit for individuals with long-term care needs and their caregivers.

Ruddock cited ACLI research, previously reported in "Can Aging Baby Boomers Avoid the Nursing Home," March 2000, which indicates that by paying policyholders' nursing home costs -- and by keeping policyholders out of nursing homes by paying for home- and community-based services -- private long-term care insurance could reduce Medicaid's institutional care expenditures by $40 billion a year, or about 30 percent.

Individual states are looking for ways to work with private insurers to ease the burden caused by rising long-term care costs. One idea is Partnerships for Long-Term Care, a pilot program developed by the Robert Wood Johnson Foundation in conjunction with state governments and with the support of the private insurance industry. Under the partnerships, consumers buy long-term care policies and must fully use their benefits before qualifying for Medicaid. Because they use their insurance coverage under the partnerships program, they can protect the level of assets as defined in their policy. Partnership programs are currently operational in California, Connecticut, Indiana and New York.

"ACLI believes that some type of simplified uniform approach to the long-term care partnership program that includes eligibility for benefits for any approved tax-qualified long-term care policy; state reciprocity; dollar for dollar asset protection; uniform, simplified annual reporting to a single repository; and consumer education can play an important role in encouraging the purchase of long-term care insurance and help provide important savings to Medicaid," Ruddock testified.

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 354 member companies account for nearly 75 percent of the life insurance industry's total assets. ACLI member companies offer life insurance, annuities, pensions and 401(k) plans, long-term care insurance, disability income insurance and other retirement and financial protection products. ACLI's public Web site can be accessed at www.acli.com.