HEARING - U.S. Senate Special Committee on Aging

92
However, public awareness is needed. Neither Medicare nor Medigap were designed to
cover long term care but most elderly persona incorrectly believe these programs will
cover them. Thus, consumer education and financial incentives appear necessary.
Therefore, we strongly support the thrust of Secretary Bowen's recent
recommendations to protect the elderly from catastrophic costs of long term care by
having the federal government encourage private solutions through;
o Working with the private sector to educate the public about the risks, costs and
financing options for long term care, and the coverage limitations of Medicare and
Medigap.
o Encouraging personal savings for long term care through tax-favored Individual
Medical Accounts.
o Encouraging development of private long term care insurance through:
1) A 50 percent tax credit for persons over age 55 who purchase such insurance;
2) Favorable tax treatment for long term care insurance reserves; and
3) Removal of the DEFRA statutory barriers to employers' prefunding of long term
care coverage for retirees.
We believe these federal activities would result in substantially increased purchase of
private long term care insurance. In addition to protecting the elderly from
catastrophic expenses, widespread purchase of long term care insurance would reduce
federal and state expenses for Medicaid payments to nursing homes. We urge you to
explore these proposed governmental incentives for private sector solutions, and would
be pleased to work with you on this important issue.
9