STAND. COM. REP. 1142

Honolulu, Hawaii

, 2003

RE: S.B. No. 1088

S.D. 2

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Health and Human Services and Housing, to which was referred S.B. No. 1088, S.D. 2, entitled:

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

beg leave to report as follows:

The purpose of this bill is to meet long-term care (LTC) needs in Hawaii by:

(1) Establishing a LTC income tax starting at $144 for the 2006 taxable year and increasing incrementally thereafter; and

(2) Providing a benefit level beginning at $70 per day for 365 days and increasing incrementally thereafter.

The Hawaii State Commission on the Status of Women, National Association of Social Workers - Hawaii Chapter, Hawaii Alliance for Retired Americans, Long Term Care Finance Act Temporary Board of Trustees, Hawaii Long Term Care Association, Coalition for Affordable Long Term Care, Policy Advisory Board for Elder Affairs, Faith Action for Community Equity, AARP Hawaii, ILWU Local 142, and many concerned individuals testified in support of this measure. Kokua Council and the Healthcare Association of Hawaii supported this measure with amendments.

The Hawaii Association of Realtors, Chamber of Commerce of Hawaii, NAIFA Hawaii, Health Insurance Association of America, and Hawaii Bankers Association opposed this measure. The Department of Taxation, Tax Foundation of Hawaii, and Hawaii Medical Association submitted comments.

Your Committees recognize that Hawaii is facing a LTC crisis. Although private LTC insurance is available, only a small percentage of individuals have purchased it. Private LTC insurance is unaffordable for many people. Some argue that $70 per day is not enough to pay for care in a LTC facility, but that $70 may pay for services to keep an individual at home and out of a facility.

Your Committees have amended this bill by:

(1) Using the term "defined benefit" in place of "benefit payments", and describing conditions of, and adjustments to the benefit;

(2) Providing that the LTC income tax shall not be imposed on a person who is fully vested to receive a defined benefit and is receiving that benefit;

(3) Providing that LTC benefits shall be excluded from income tax;

(4) Inserting a provision governing withholding of LTC income tax from wages and making conforming amendments to the withholding provisions of the income tax law;

(5) Deleting the provision that exclusions from gross income, adjusted gross income, and taxable income provided by section 235-7, Hawaii Revised Statutes (HRS), do not apply to individuals with income exceeding specified levels for purposes of imposing the LTC income tax;

(6) Replacing the requirement that a person 65 years or older who does not file a tax return shall file a LTC premium tax form, with the provision that the board of trustees of the LTC Financing Program (board) establish a procedure allowing persons who receive pensions and do not file a tax return, to voluntarily pay the LTC tax;

(7) Replacing the requirement that adjustments in the amount of LTC income tax be preceded by an actuarial review to determine whether the LTC financing system is in balance, with the requirement that the board of trustees recommend adjustments to the tax that are substantiated by an actuarial report, for taxable years after December 31, 2012;

(8) Establishing a LTC tax credit of a maximum of $120 per year applicable between December 31, 2003 to January 1, 2009, and $180 per year between December 31, 2008 and January 1, 2014;

(9) Describing the conditions for vesting for LTC benefits, the effect of nonpayment of tax on vesting, and the effect of the individual's death before LTC payments commence;

(10) Establishing portability of LTC benefits by allowing a person vested to receive benefits to continue to be vested and make payments after leaving the State, and requiring defined benefits to be paid without regard to place of residence;

(11) Moving the required actuarial report of the LTC Financing Program from chapter 235, HRS, the income tax law, to chapter 346C, HRS, the LTC financing program law, and providing that the board may adjust the defined benefit based on the report;

(12) Providing in the LTC financing program law that the program shall be implemented under the new part added to chapter 235, HRS, by the bill;

(13) Providing that qualified entities contracted to administer the LTC financing programs or to process benefit claims shall ensure against fraud and abuse in claims and payment of benefits;

(14) Removing the amendment to Act 245, Session Laws of Hawaii 2002, that deleted the requirement that the temporary board of trustees appointed to design the Hawaii LTC financing program recommend a third party administrator;

(15) Exempting the LTC Benefits Fund from transfers for central service expenses and administering department administrative expenses;

(16) Requiring the LTC fund to reimburse the general fund after July 1, 2010, for amounts appropriated for fund start-up costs and administration of the Act;

(17) Appropriating unspecified amounts to the Department of Taxation and Department of Budget and Finance for start-up costs to collect and administer the LTC income tax; and

(18) Making other technical, nonsubstantive amendments.

As affirmed by the records of votes of the members of your Committees on Health and Human Services and Housing that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1088, S.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 1088, S.D. 2, H.D. 1, and be referred to the Committee on Finance.

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

 

____________________________

MICHAEL PUAMAMO KAHIKINA, Chair

____________________________

DENNIS A. ARAKAKI, Chair