Exploring New Ways to Pay for Care

the UCLA/USC Long Term Care Gerontology Center

Alzheimer's disease has been getting a lot of attention. Victims frequently deteriorate and require expensive 24-hour custodial care, often for the rest of their lives. Such costs rapidly bankrupt a middle-class family. Perhaps in response to media attention, policy makers are beginning to deal with the social and economic effects of debilitating illnesses.

The average family cannot protect itself against such long-term care costs; it is not possible for most people to save enough to guard against this personal disaster. Medicare does not pay for ongoing custodial care, Medi-Cal has a bias toward care in institutions and virtually no private insurance covers long-term care, wherever it is administered.

Distraught spouses of deteriorating patients often ask Medi-Cal eligibility workers how to get the program to pay for nursing-home care, which often exceeds $25,000 a year. Pursuant to agency policy, workers may encourage the wife, for example, to divorce her husband so that she can divide out, and thereby preserve, her half of the marital property.

In California, legislation was recently enacted to avoid this unhappy situation and allow for property division and Medi-Cal eligibility without requiring a divorce. Other states are considering this precedent.

Many families would like to keep the ill parent or spouse at home, but are unable to afford the cost without a subsidy or tax relief. Marc Hankin of Los Angeles, who drafted the above legislation and specializes in law relating to disabled older people, feels that tax credits for custodial care will preserve family unity and save the government money.

If everyone in a family could get tax relief for contributing to Grandmother's custodial care at home or in a nursing facility, she probably wouldn't need Medicaid. Legislation to achieve this is being submitted in California, and those interested in custodial-care tax relief should write to their elected representatives.

Question: I am a recent widow and retired bookkeeper. My husband and I always did our own taxes. Now I don't know if I should do my taxes or seek help. What do you suggest?

Answer: The answer depends on how complex your taxes are. If because of the death of your husband you have unresolved estate issues, it may be wise to seek professional help. Almost 60% of taxpayers prepare their own taxes, but most of them don%t itemize deductions. The majority of people who itemize seek professional help.

The type of help and cost can vary greatly. Generally, people who have their taxes prepared for them use a certified accountant, enrolled agent or storefront, such as H&R; Block. Costs range from $50 to more than $1,000. It's wise to get an estimate. Tax-preparation costs are deductible on your next return.

In choosing professional help, be wary of anyone who guarantees you a refund before they know your financial situation. You are responsible for the accuracy of your return. If someone makes a mistake in preparing your return, the IRS will ask you to pay back taxes or penalties.

The Select Committee on Aging has prepared the "1985 Federal Income Tax Guide for Older Americans." For a free copy, write Chairman Edward Roybal, Select Committee on Aging, 712 Annex 1, Washington, D.C. 20515. If you choose to prepare your own taxes, the IRS has free publications that may be useful, including "Tax Benefits for Older Americans." You can order these with the form on the back cover of your tax package or by calling the IRS. The Tax Counseling for the Elderly program provides free tax assistance for people 60 and older.

Q: I'm 64 and planning to retire when I celebrate my coming of age this summer. I feel that some of my co-workers are beginning to treat me as if I'm incompetent. Why does the magic age of 65 make people think I'm losing my marbles? Will I rapidly go downhill mentally and physically?

A: No, most Americans upon reaching age 65 have at least 10 more years before chronic illnesses begin to interfere with daily activities. The age of 65, which has become synonymous with retirement and old age in industrialized nations, has its roots in German social reforms of the late 1800s. German Chancellor Otto von Bismarck selected it as a point of retirement, and therefore an unofficial point of entry into "old age."

Age 65 was selected solely for pragmatic, economic reasons--not scientifically determined ones. At that time, the average life expectancy was 40 years; thus only a small percentage of people would ever live to benefit from the retirement program. Today, people age 65 and over make up 12% of our nation's population, and that percentage continues to grow. As more people live to age 65 and beyond, our definitions of old age will change. For future generations, Social Security benefits probably won't start until age 67 or later.

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