Legislation (H.R. 4946) designed to provide tax relief for individuals who purchase and maintain long-term health care insurance for themselves, their spouses, and their dependents was approved, 362-61, by the House on July 23.
Sponsored by Rep. J. D. Hayworth (R-AZ), the Improving Access to Long-Term Care Act would allow tax deductions for the costs of long-term care insurance. Under current law, a taxpayer may deduct health care expenses only if they represent more than 7.5 percent of the individual’s adjusted gross income. Long-term care expenses may be included in the 7.5 percent calculation.
Under the bill, an individual who pays at least 50 percent of the cost of long-term care coverage would be allowed to take an above-the-line deduction for a percentage of eligible long-term care premiums. The deduction is available to individuals with adjusted gross incomes between $20,000 and $40,000, and twice that amount for married couples filing a joint return.
The legislation also would provide additional personal exemptions for each qualified family member with long-term needs. Under current law, an individual can take a personal exemption of up to $3,000 for the taxpayer, his or her spouse, or for each dependent. The exemption is phased-out for individuals with an adjusted gross income of $137,000 for single individuals and $206,000 for married couples filing jointly.
Under H.R. 4946, the personal exemption would be expanded for qualified individuals. Starting in 2003, qualified individuals would be eligible for an additional $500. The new exemption would increase by $500 every two years until it reaches $5,000 in 2009, $5,500 in 2011, and $6,000 in 2012.
Additional provisions in the bill would expand several corporate medical tax benefits and would expand access to Medical Savings Accounts for some eligible individuals and their employers.
Arguing in favor of the legislation, Rep. Hayworth pointed out, “By 2040, the number of Americans 64 and older will more than double.” He added, “Without long-term care reform, these changing demographics will drive spending for Social Security, Medicare, and Medicaid to consume nearly 75 percent of all federal revenue by the year 2030.”
“I believe firmly that we need to do something about the long-term care issue, but we have had precious little debate as to whether private insurance is the right approach,” said Rep. Pete Stark (D-CA), arguing against the bill. “Even if you think it is a good idea to promote the purchase of private long-term care insurance, the real question is whether or not this bill before us today will do any good,” he said.
According to the House Joint Tax Committee, the bill would cost $5.5 billion over ten years.
