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A pioneering idea from Nebraska

State's long-term care savings plan a model for Minnesota.

Last update: August 18, 2008 - 8:30 AM

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COST OF CARE

• State average daily nursing home rate (semiprivate): $134.00

• State average monthly cost in assisted living facility: $3,204.00

• Home health aide average hourly rate: $26.00

Genworth Financial, 2008

It's a safe bet that neither Madonna, who turned 50 on Saturday, nor the recently-turned-65 Mick Jagger will have trouble paying for long-term care in the years ahead. For us regular folks, especially aging baby boomers, long-term care looms as an expensive necessity that many are ill-prepared to pay for.

Long-term care covers a wide range of services needed by the elderly and the disabled -- everything from nursing homes to assisted living to home health aides. According to the federal government, 70 percent of people 65 and older will need long-term care at some point. It doesn't come cheap. In Minnesota, a year's stay in a nursing home (in a shared room) averages about $49,000. Surveys show that many in Minnesota and elsewhere plan to rely on Medicare, the nation's health care program for seniors, to pick up the tab.

The trouble is that Medicare does not pay for most of these services. While Medicaid is a last resort when an individual does not have private insurance or has exhausted life savings, that leaves taxpayers on the hook. And that's a problem when the number of elderly is rising dramatically.

Nothing short of systemic reform will solve the looming problem. But until then, creative smaller-scale policymaking can help. This week, Nebraska State Treasurer Shane Osborn flew to the Twin Cities to push one of those ideas -- one that Minnesota lawmakers should move rapidly to adopt.

Osborn's home state is pioneering a practical approach: a state-sponsored long-term care savings plan. The accounts work much like the 529 tax-advantaged college savings plans that many states already have. In this case, people save for long-term care expenses for themselves or family members. State income tax deductions -- currently up to $2,000 for couples filing jointly -- are an incentive.

Nebraska is the only state with such a plan. But Osborn, a Republican and former Navy pilot who made international headlines in 2001 when a Chinese fighter jet collided with his spy plane, hopes others will follow. He rightly concludes that the accounts could not only ease some of the financial strain on state and federal governments in years ahead, but would also raise badly needed awareness about long-term care costs. Osborn spoke at a Wednesday event sponsored by the Minnesota Chamber of Commerce, Citizens League, 2020 Conference and Ecumen, a senior services and housing nonprofit. Fortunately, Minnesota lawmakers know a good idea when they hear one. "I'm sold. I would go as far as saying I would be prepared to carry this legislation next year in the senate,'' said state Sen. Geoff Michel, R-Edina.

One adjustment that could make a good idea even better: raising the state income tax deduction ceiling for account holders. Osborn is pushing to raise Nebraska's to $5,000 for couples. That's a good target for Minnesota, too. Thinking about future long-term care needs is neither easy nor fun. Tax incentives may help more people tackle this difficult issue and prepare for the challenges ahead.

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