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A Proposal to Finance Long-Term Care Services through Medicare with an Income Tax Surcharge

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Publication Date: June 2007

Publisher(s): Tax Policy Center

Author(s): Richard W. Johnson; Leonard E. Burman

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Health (Medical research and technology)

Keywords: Elderly; Health Insurance; Long-term Care; Health and Health Care

Type: Report


This paper proposes to expand Medicare to cover comprehensive long-term care services, including home care and custodial nursing home care. These services would be financed by a surcharge on federal income taxes. Unlike the regressive payroll tax that finances Medicare?s hospitalization coverage, the proposed surcharge would not increase tax burdens for low-income people. Beneficiaries would share costs through deductibles and copayments, but the program would include stop loss coverage and special protections for low-income adults. By providing long-term care insurance that protects the assets of older adults, our proposal would eliminate the savings disincentives inherent in the means-tested Medicaid system.