Health Care Tax Break Clears House

A tax deduction to help middle-income people defray the cost of insurance for long-term health care, such as a nursing home, won passage Thursday in the House.

The legislation, approved on a 362-61 vote, would permit the deduction for a taxpayer, a taxpayer’s spouse or a dependent and it would apply whether or not the taxpayer itemizes tax deductions. The tax break would reduce federal revenue by about $5.3 billion over 10 years.

Current law permits long-term health insurance premiums to be deducted, but a taxpayer must itemize and the amount that can be deducted must be more than 7.5% of income when combined with all other medical expenses.

The deduction would be limited to individuals earning from $20,000 to $40,000 in adjusted gross income and from $40,000 to $80,000 for married couples filing jointly. In addition, the taxpayer would have to pay at least half of the insurance premiums.

The bill’s chief sponsor, Rep. J.D. Hayworth (R-Ariz.), said the deduction would encourage more people to use private insurance to pay for such things as nursing homes and assisted living arrangements instead of relying so much on Medicare and Medicaid.

Despite the overwhelming vote in favor, Rep. Pete Stark (D-Hayward) said the measure would help relatively few people at a great cost and it appeared designed to “bail out the insurance industry.”

“It’s worthless ... ,” Stark said.

The bill would also permit an additional 2002 personal tax exemption, worth $3,000, for members of a taxpayer’s family who are long-term caregivers and would expand the types of expenses drug manufacturers can claim as a tax credit in testing drugs for certain rare diseases.

The legislation heads to the Senate, where its chances are uncertain.