Wisconsin Bill Would Allow Tax-Preferred LTC Funds

Jan. 08--Wisconsin residents could set up long-term care funds in a manner similar to the Edvest college savings plan, under a bill with bipartisan support expected to have a public hearing soon.

Under the bill, people could make tax-exempt contributions of up to $5,500 a year -- up to $8,500 a year for those older than 50 -- and withdraw the money tax free for qualified long-term care.

The funds would be an alternative to long-term care insurance, which can be costly and hard to get.

"There needs to be an option for people, especially middle class and low-income people, to have a way to save money for this," said Ingrid Thompson, of Stoughton, former director of McFarland Senior Outreach Services.

Thompson worked on the proposal with others in the Wisconsin Aging Advocacy Network.

Rep. Dave Murphy, R-Greenville, is the lead Assembly sponsor, with Sen. Mark Miller, D-Monona, the Senate lead. The measure has 17 other Assembly sponsors -- four Republicans and 13 Democrats -- and two other sponsors, both Democrats, in the Senate.

"Everybody wants to find some solutions to help elderly folks live out their final days in a better way, with respect and comfort," Murphy said.

Long-term care includes help with bathing, dressing, cooking and other daily activities when people become frail. It can be provided in private homes or in settings such as assisted living facilities and nursing homes.

Medicare generally doesn't cover long-term care. Medicaid pays only after people spend or protect most of their assets.

Less than 10 percent of people who could afford and qualify for long-term care insurance have it, according to a 2016 report prepared for the National Association of Insurance Commissioners.

Under the bill, long-term care funds would have similar tax benefits to Wisconsin's Edvest funds for college expenses. Family and friends could also pay into the funds.

Account holders would have to deplete their funds before qualifying for Medicaid. But the funds would be protected assets -- like burial trusts -- in eligibility for other programs.

Balances remaining after death could be used for funeral expenses or outstanding medical expenses. Money left over would be transferred to beneficiaries for long-term care.

Based on data from Nebraska's tax-preferred long-term care savings plans, which ended this year, 1,311 people in Wisconsin could be expected to open such funds, reducing tax revenue by $360,000 a year, according to the state Department of Revenue.

The funds, which would be maintained by the state Department of Health Services, would save money in Medicaid, one of the largest parts of the state budget, Murphy said. However, the health department said the bill would unlikely have a noticeable impact on long-term care expenses in Medicaid because relatively few people would set up such funds.

"I think people feel a little better if they have some of their own money going into this, rather than feeling like they're just a total ward of the state," Murphy said.

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