AARP Backs Tax Hike to Fund Nursing Home Plan

Leaders of the politically powerful American Assn. of Retired Persons voted Friday to campaign for a plan to raise the California sales tax by half a cent to help fund nursing home insurance for people over 65.

The AARP’s executive committee endorsed a proposed state ballot initiative to generate nearly $900 million a year in new tax revenues. The money would be distributed to Californians who buy insurance policies that pay for nursing home and home care expenses.

The amount of the insurance subsidy would be linked to income.

The California plan, if qualified for the ballot and approved by the voters, would be the most extensive and costly government action yet taken to help the middle-class avert the financial catastrophe of a nursing home stay.

Proponents describe the plan as a vital measure to safeguard families from impoverishment when someone enters a nursing home, care that costs an average of $22,000 a year. Opponents fear that, without strict cost controls, the new tax could be a bonanza for the insurance industry and a financial windfall for nursing homes, driving up the price of their services.

Most Stays Not Covered

Currently, neither Medicare nor most private insurance policies cover the cost of lengthy stays in nursing homes. Government help becomes available only after a nursing home patient has spent all his assets except $1,800 and becomes eligible for the Medi-Cal welfare program.

By subsidizing the cost of insurance, the initiative is designed to encourage the widespread purchase of private insurance to cover catastrophic health care costs.

Nationwide, only 500,000 people now are covered by such policies. They are relatively costly, often priced at $800 or $900 a year or more, rising sharply with the age of the buyer, said Assemblyman Lloyd G. Connelly (D-Sacramento), author of the ballot initiative.

The tax increase, if approved by the voters, would raise $860 million in the fiscal year starting July 1, 1989, according to estimates by the Assembly office of research. The current state sales tax, 6%, would rise to 6.5%, or 7% in municipalities already collecting an added .5%.

The California plan would require the state to set standards for benefits under the insurance policies. Half the insurance benefits would be spent for nursing home bills, and half would be reserved for services to enable the frail elderly to continue living independently at home.

The policy, for example, might pay for someone who is bedridden to hire a part-time homemaker to do cooking and cleaning.

Low-Income Provisions

Some funds would be allocated to provide health insurance for low-income Californians under the age of 65.

The measure requires 600,000 verified signatures by May to qualify for the November ballot.

AARP’s “level of involvement in securing the necessary signatures will be addressed in coming weeks,” said Greg Merrill, AARP director of state legislation. The organization, which enrolls people over the age of 50, has more than 2.2 million members in California.

The association’s endorsement of the California plan came Friday from the six-member executive board, which sets official policy for the 28-million-member organization. The vote on the issue was not disclosed. Both Kermit Phelps, chairman, and John Denning, president, are strong supporters of the California initiative.

AARP has stepped up its political activities with a costly voter registration and education drive and is one of the prime sponsors of Long Term Care ‘88, an effort to make nursing home finances an issue in this year’s presidential campaign.

But “we don’t want to sit around and wait for Congress to act,” Merrill said, indicating that AARP will be strongly backing the California measure while pressing the issue in Washington.

Connelly, chairman of the Assembly’s Committee on Aging and Long-Term Care, said he expects widespread support for the initiative. “Our polling shows there is not a substantial difference in support by conservatives and liberals,” he said. “Everybody gets old, and everybody has relatives who get old.”