News & Press: NAIFA-Wisconsin E-Newsletter

Savings Plan for Long Term Care Unlikely to be Effective

Friday, December 1, 2017   (0 Comments)
Posted by: Bill McClenahan
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Wisconsin Considers New Plan as Nebraska Scraps its Own

A bill has been introduced in Wisconsin to create a savings plan for long-term care (LTC) expenses.  It has been compared to Edvest, only for long-term care instead of education.

Although the bipartisan authors of Assembly Bill 596 should be commended for their effort to encourage planning for potential LTC expenses, NAIFA-Wisconsin believes the program would be ineffective.  Very few consumers have the resources or willingness to save sufficient money to self-insure for long-term care, and a state tax exemption on those savings is unlikely to change that. 

NAIFA-Wisconsin is also concerned that consumers may wrongly believe that saving a small amount of money is actually sufficient to cover potential future costs for care, giving them a false sense of security.

Although savings could also be used for long-term care premiums, those premiums already have state tax deductions.  The only real difference of the proposal is that, under the bill, people could contribute to the LTC savings accounts on behalf of someone else to help pay for premiums (or for future care).  

NAIFA’s concerns are borne out by Nebraska’s experience with a similar program.  That state is ending its LTC savings plan, effective January 1, 2018.  It allowed a person to contribute up to $1,000 per year for LTC premiums or expenses with a state deduction, or $2,000 for a married couple.   (In contrast, the Wisconsin program would allow deductions for contributions up to $5,500 per year, or $8,500 for those over 50.) 

A letter to participants from the Nebraska State Treasurer said, “Participation levels never reached desired goals in this well-intentioned program.”  He said the program was ineffective in encouraging savings for LTC costs or in reducing LTC burdens on taxpayers.  He added that, “The low level of participation does not justify the expense of administering the plan.”

The Nebraska program was created in 2006, but had only 506 accounts by 2014, with contributions averaging $1,467.  In contrast, that state’s education savings program has 197,000 participants.   

As in Nebraska, the authors of the Wisconsin LTC savings bill certainly are well-intentioned.  However, a better strategy may be to increase state efforts to educate citizens about the potential costs of long-term care, the drawbacks of relying on Medicaid, the level of savings it would take to self-insure and the potential benefits of purchasing LTC insurance (including though the state’s Partnership program).  The more people are prepared for long-term care costs, the less reliance there will be on expensive government programs, like Medicaid.   


National Association of Insurance and Financial Advisors-Wisconsin

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Cedar Falls, IA 50613