Governor

Dirk Kempthorne

of Idaho, Chairman of the National Governors Association

"Nearly every American will encounter the need for long-term care, either for themselves or a loved one. The rapidly increasing cost of long-term care is one of the largest expenses facing states and their spiraling Medicaid budgets. We need to change the culture of long-term care to help our seniors age healthier and our states more efficiently provide the dignified care our citizens deserve."

The Chairman's Initiative will encourage personal financial planning for health care costs and work to create public-private partnerships to examine tax incentives, long-term care insurance products and explore other avenues of financial planning.

Background Information:

There are 35 million people over age 65 living in the United States.  In eight years, 77 million baby boomers will begin turning 65 years old.

Long-term care consumes 35% of all Medicaid spending by states ($76.5 billion).

The care of chronic illness consumes 75 cents of every health care dollar spent in the United States.

Chronic care costs for diabetes alone total $105 billion annually.

Within the next 20 years chronic conditions such as heart disease, cancer, diabetes, and arthritis are expected to afflict 157 million Americans--nearly half of the U.S. population.

Alan Greenspan, Chairman of the Federal Reserve Board of the U.S.

"In 2008--just four years from now--the first cohort of the baby-boom generation will reach 62, the earliest age at which Social Security retirement benefits may be claimed and the age at which about half of prospective beneficiaries choose to retire; in 2011, these individuals will reach 65 and will thus be eligible for Medicare. At that time, under the intermediate assumptions of the OASDI trustees, there will still be more than three covered workers for each OASDI beneficiary; by 2025, this ratio is projected to be down to 2-1/4. This dramatic demographic change is certain to place enormous demands on our nation's resources--demands we almost surely will be unable to meet unless action is taken. For a variety of reasons, that action is better taken as soon as possible.

The budget scenarios considered by the CBO in its December assessment of the long-term budget outlook offer a vivid--and sobering--illustration of the challenges we face as we prepare for the retirement of the baby-boom generation. These scenarios suggest that, under a range of reasonably plausible assumptions about spending and taxes, we could be in a situation in the decades ahead in which rapid increases in the unified budget deficit set in motion a dynamic in which large deficits result in ever-growing interest payments that augment deficits in future years. The resulting rise in the federal debt could drain funds away from private capital formation and thus over time slow the growth of living standards.

Favorable productivity developments, of course, can help to alleviate the impending budgetary strains, but no one should expect productivity growth to be sufficient to bail us out. Indeed, productivity would have to grow at a rate far above its historical average to fully resolve the long-term financing problems of Social Security and Medicare. . .

The degree of uncertainty about whether future resources will be adequate to meet our current statutory obligations to the coming generations of retirees is daunting. . .  This uncertainty is an important reason to be cautious--especially given that government programs, whether for spending or for tax preferences, are easy to initiate but can be extraordinarily difficult to shut down once constituencies for them develop. . .

The dimension of the challenge is enormous. The one certainty is that the resolution of this situation will require difficult choices and that the future performance of the economy will depend on those choices. No changes will be easy, as they all will involve lowering claims on resources or raising financial obligations. It falls on the Congress to determine how best to address the competing claims. In doing so, you will need to consider not only the distributional effects of policy change but also the broader economic effects on labor supply, retirement behavior, and private saving.

History has shown that, when faced with major challenges, elected officials have risen to the occasion. In particular, over the past twenty years or so, the prospect of large deficits has generally led to actions to narrow them. I trust that the recent deterioration in the budget outlook and the fast-approaching retirement of the baby-boom generation will be met with similar determination and effectiveness."

President

George Bush

"Many Americans struggle to care for an elderly or sick loved one, and my Administration is working to help these families. I believe families can make better decisions about care than the current institutional-based, provider-driven system. We are making progress.

While current law provides tax deductions for certain long-term care expenses, families who provide care to a family member in their home may find their needs are not met. My Administration has proposed an additional personal tax exemption for taxpayers who care for certain qualified family members who reside together.

Additionally, I have proposed to make individually purchased long-term care insurance more affordable by creating an above-the-line deduction for qualified long-term care insurance premiums."

. . . "My goal is to make long-term care available and affordable instead of a path to financial ruin."

Background Information:

President Bush proposed tax breaks to help older Americans with nursing home insurance and those caring for relatives at home.

The President wants to provide an income tax deduction to anyone buying long-term care insurance. The deduction, now available only to people who itemize and have big medical expenses, would apply to everyone except those on employer-subsidized long-term care plans. An increasing number of people will be affected as the baby boom generation ages.

Also, President Bush proposed an additional tax exemption for elderly spouses, parents, or other relatives cared for in one’s home. That exemption is currently $2,750 a year. The campaign estimated the cost of that second proposal at $2.3 billion over 5 years.