Fri, Feb 08, 2013 - Page 8 News List

Facing up to long-term care woes

By Wang Pin 王品

In the face of annually decreasing government revenue, the Ministry of Finance has always done everything it can to protect its sources of tax revenue. However, not long ago, the ministry could finally hold on no longer and admitted for the first time that apart from the current itemized deductions on insurance premiums worth NT$24,000, it is also considering listing expenditure on individually purchased private long-term care (LTC) insurance as an item eligible for deductions from consolidated income tax.

This proposal is very worrying. Apart from the problems the public keeps criticizing the government for — such as decreases in government revenue, the increasing gap between the rich and poor and the way the government keeps shirking its responsibility to introduce public LTC insurance — there are three other problems here worthy of closer exploration.

The first problem is that Taiwan has a welfare system that utilizes measures such as the National Health Insurance (NHI) and the Catastrophic Illness Card to minimize the financial cost people may incur as a result of medical treatment and hospitalization. Thus, most forms of private medical insurance have two characteristics that aim to lower the financial burdens of policyholders. The first one is making up the gap between that which is covered by the NHI and that which patients must pay for by themselves, with the second being offering policyholders reimbursements for any medical expenses that exceed their maximum level of coverage.

However, by doing all they can to promote private LTC insurance before the government implements its public LTC insurance means that private insurance policyholders cannot be sure whether their financial burdens are really being minimized because it is not clear how much of a gap there will be between their current private insurance and public insurance once it is introduced. Also, private LTC insurance lacks options similar to the abovementioned reimbursement scheme.

If we factor in trends such as inflation and decreasing salary levels, will fixed benefit schemes really be able to guarantee buyers of private insurance that they will be able to afford the services they need in the future? Or will people only be getting half of the care that they are paying for?

The second problem is that the abovementioned expenditure on private medical insurance premiums are already tax deductible as a form of life insurance with an upper limit of NT$24,000. Also, after deducting what insurance companies pay, the total amount of real healthcare expenditure can be listed as itemized deductions from income tax to which no upper limit is imposed.

In addition, the Council of Grand Justices’ Constitutional Interpretation No. 701 last year emphasized that the medical expenses referred to in this regard include medical expenses incurred from LTC in any legal hospital or healthcare center and that this is not limited to hospitals that have contracts with the NHI.

Insurance companies have recently been lobbying the government to list private LTC insurance as a tax-deductible item. The logic behind this is that LTC insurance is not a part of life insurance and its costs are different from medical expenses. If this idea is accepted, it will highlight the need for Taiwan to offer public LTC insurance. However, it will not prove that there is a need to increase the amount eligible for income tax deductions.

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