STAND. COM. REP. NO.2995

Honolulu, Hawaii

, 2002

RE: H.B. No. 2638

H.D. 2

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committees on Health and Human Services and Commerce, Consumer Protection and Housing, to which was referred H.B. No. 2638, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO THE HAWAII LONG-TERM CARE FINANCING ACT,"

beg leave to report as follows:

The purpose of this measure is to create a mandatory income tax assessment system to finance long-term care services for most residents of Hawaii.

Testimony in support of this measure was received from the Executive Office on Aging, Department of Taxation, Department of Human Services, Department of Accounting and General Services, Insurance Commissioner, Hawaii State Commission on the Status of Women, Healthcare Association of Hawaii, Coalition for Affordable Long-Term Care, ILWU Local 142, Policy Advisory Board for Elder Affairs, Faith Action for Community Equity, American Association of Retired Persons, Hawaii State Coalition of Senior Citizens, Kokua Council, Hawaii Long-Term Care Association, National Association of Social Workers, NAMI Oahu, and five individuals. Testimony in opposition was received from the Legislative Information Services of Hawaii, Chamber of Commerce of Hawaii, Hawaii Medical Association, Libertarian Party of Hawaii, National Association of Insurance and Financial Advisors, Hawaii Medical Association, and two individuals. Comments were submitted by the Office of Information Practices and Tax Foundation of Hawaii.

There is little dispute of the need for long-term care services to assist the rapidly growing population of Hawaii's elderly and disabled. There is also little dispute that the cost of long-term care services, particularly institutional nursing home care, is astronomical and out of the reach to all but the most affluent.

Medicaid finances a small percentage of individuals needing long-term care services who are income-qualified. Medicare is not intended to pay for long-term care services. Private insurance is a good product that is much touted but is still largely unaffordable to the average wage earner.

Therefore, there is presently no recourse for families but to pay out-of-pocket for long-term care. The present system encourages families to spend down their assets and get on Medicaid, in which the State incurs costs for its federally subsidized share.

Your Committees find that in view of the foregoing, there is a public necessity for an affordable and universal state-sponsored long-term care system. This matter is not new and has a long history of efforts to enact a long-term care financing law.

This measure is intended as the first step in the journey to culminate in the nation's first state-sponsored long-term care system. Whether economic times for the State are good or bad, there is no "right time" for enactment. Your Committees believe that too many lost years have already passed and the long-term care problem has become a long-term care crisis, heading into a long-term care disaster by the year 2020. It is the duty and responsibility of the legislature to head off this crisis. A measure such as this requires about ten years of lead time to build up adequate funding.

Your Committees wish to correct a public misconception that this measure is the panacea for long-term care. It is not. This measure is intended to help citizens bridge the gap between the initial onset of the qualifying condition, and the beginning of payments whether directly out-of-pocket, under a long-term care insurance policy, or Medicaid. The benefits would likely not cover institutional care because of the prohibitive expense, but the matter of benefits is left to the interim board of trustees to determine.

Your Committees have amended this measure by:

(1) Deleting reference to a blue ribbon panel as the administrative entity and substituting a board of trustees appointed by the Governor with the advice and consent of the Senate;

(2) Deleting references to tax and benefit amounts;

(3) Establishing an interim board of trustees to be appointed by the Governor, without involvement of the Senate, to serve from July 1, 2002, to July 1, 2003, for purposes of designing a tax-based long-term care system, as described in new section    -6(b) the measure;

(4) Clarifying the fiduciary and investment obligations of the trustees;

(5) Specifying the information to be included in the actuarial report;

(6) Deleting the appropriation to the Department of Taxation for start-up costs, and substituting an unspecified appropriation to the Department of Budget and Finance for the interim board of trustees to make a report to the 2003 Session; and

(7) Changing the effective date to upon approval, except for the appropriation section which shall take effect on July 1, 2002.

Your Committees request the Executive Office on Aging and the Department of Taxation to assist the interim board of trustees upon request by providing information.

Your Committees believe that the interim board of trustees should be comprised of knowledgeable and objective persons, who would strive to design a long-term care financing system that meets the broadest needs at the most reasonable amount of tax. The trustees should examine a flat fee and a graduated tax rate to compare the burden and the benefits to citizens. The trustees should also examine a range of benefits, whether home, community-based, or institutional care.

As affirmed by the records of votes of the members of your Committees on Health and Human Services and Commerce, Consumer Protection and Housing that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 2638, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 2638, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Health and Human Services and Commerce, Consumer Protection and Housing,

____________________________

RON MENOR, Chair

____________________________

DAVID MATSUURA, Chair