Bill Overview
Title: Long-Term Care Affordability Act
Description: This bill allows the use of tax-exempt retirement plan distributions to pay for long-term health care insurance. Specifically, it excludes such distributions from the gross income of an insured individual up to $2,500 for per individual in a taxable year. It also imposes reporting requirements on plans and insured individuals and requires a description of long-term care insurance arrangements and facts sheets for employers and workers.
Sponsors: Rep. Wagner, Ann [R-MO-2]
Target Audience
Population: Individuals with anticipated or ongoing needs for long-term health care
Estimated Size: 70000000
- The bill directly impacts individuals who have tax-exempt retirement plans since it allows their distributions to be used for long-term health care insurance without being included as gross income up to a certain limit.
- The financial relief from tax-free distributions affects older adults or those nearing retirement who may have foreseen needs for such care.
- Long-term health care insurance policyholders will benefit as this may reduce their out-of-pocket expenses.
- People concerned about future long-term care needs are more likely to purchase such insurance if they see a tax benefit.
- The bill serves as an initiative to increase long-term health care insurance coverage by providing financial incentive.
Reasoning
- The target population for this policy is primarily individuals aged 65 and over, as they are more likely to require long-term care services. The policy may also indirectly affect younger individuals planning for future long-term care needs, though to a lesser degree.
- The policy benefits those who have both a retirement savings plan and an interest or need in long-term care insurance, aligning with approximately 70% of individuals over 65 who will need long-term care.
- Among the total U.S. population aged 65 and over, it is estimated that around 60-70% have access to tax-sheltered retirement plans or a likelihood of such care need, influencing the extent of impact for this policy.
- While the budget limitations delineate the reach in year 1 to prioritize immediate impact for those close to drawing on arrangements, long-term impact involves encouraging insurance uptake among wider spans.
- The categorization of impact levels (none, low, medium, high) is crucial to reflect the differentiated effects across age brackets, economic standings, and health forecasts.
- Including perspectives from those who are not covered by the policy is necessary to identify nuanced understanding and potential spillover benefits.
Simulated Interviews
Retired Engineer (Florida)
Age: 70 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 13/20
Statement of Opinion:
- This policy offers a good tax incentive for someone like me who has long-term care insurance and is concerned about future healthcare expenses.
- It helps me feel more secure about covering my potential future needs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 5 |
HR Manager (California)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 17/20
Statement of Opinion:
- Although I'm not immediately affected, the policy shows foresight into helping aging populations which could encourage more people to consider long-term care insurance.
- I plan to use this benefit when I qualify for distributions in the future.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Retired Teacher (Texas)
Age: 82 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- The policy provides significant tax relief which directly assists with my long-term care costs.
- I'm relieved that my distributions won't increase my tax burden further.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 4 |
| Year 20 | 5 | 4 |
Accountant (Illinois)
Age: 60 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 14/20
Statement of Opinion:
- This policy incentivizes me to maintain and potentially increase my retirement savings contribution as I anticipate healthcare needs.
- This could positively influence my decision in opting-in for long-term care insurance.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 6 |
| Year 20 | 8 | 6 |
Freelancer (New York)
Age: 34 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 18/20
Statement of Opinion:
- I don't see a direct benefit since I don't have a retirement plan in place yet, but I might consider it knowing future tax benefits.
- I appreciate the policy's potential in making long-term care more accessible.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Retired Nurse (Ohio)
Age: 68 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- It's comforting to know savings used for potential long-term care won't increase taxable income, allowing me more flexibility.
- This is a small step toward better financial security in my retirement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Retired Business Owner (Arizona)
Age: 72 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- Seeing tax advantages enhances my ability to manage costs as my health needs increase.
- This policy is an excellent support in utilizing my savings efficiently.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Retail Manager (Washington)
Age: 50 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- This policy seems to plan well for future retirees by offering long-term care incentives to ease future burdens.
- For those who qualify, it's a reason to maintain consistent insurance coverage.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Retired Homemaker (Pennsylvania)
Age: 88 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 0.0 years
Commonness: 9/20
Statement of Opinion:
- I don't own any retirement savings plans, so this policy doesn't affect me.
- It seems beneficial for those with more taxable assets than I have.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 4 |
| Year 2 | 4 | 4 |
| Year 3 | 4 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Semi-Retired Consultant (Nevada)
Age: 66 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 20.0 years
Commonness: 13/20
Statement of Opinion:
- Knowing that I can use some retirement savings without tax penalties to help with insurance costs increases my likelihood of purchasing coverage.
- This is a meaningful governmental encouragement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Cost Estimates
Year 1: $300000000 (Low: $200000000, High: $400000000)
Year 2: $315000000 (Low: $210000000, High: $420000000)
Year 3: $330750000 (Low: $220500000, High: $441000000)
Year 5: $363826875 (Low: $242550000, High: $484650000)
Year 10: $438367897 (Low: $292613625, High: $584991225)
Year 100: $13484879787 (Low: $8994212500, High: $17988425000)
Key Considerations
- Impact on Medicaid savings due to increased uptake of private long-term care insurance.
- Administrative costs of the reporting requirements set forth by the legislation.
- Potential macroeconomic effects if prevalence of long-term care insurance allows for more disposable income in the long run.