Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 170
                                        H.D. 2
                                        S.D. 1

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Commerce and Consumer Protection, to which
was referred H.B. No. 170, H.D. 2, entitled: 


begs leave to report as follows:

     The purpose of this measure is to establish a State income
tax deduction for long-term care insurance costs.

     The Department of Taxation, State Farm Insurance Companies,
the American Council of Life Insurance, and the Executive Office
on Aging presented testimony in support of the measure.  The
Healthcare Association of Hawaii, the Policy Advisory Board for
Elder Affairs, the Hawaii State Association of Life Underwriters,
the Hawaii Long Term Care Association, and the Hawaii Coalition
for Affordable Long Term Care, though not present at the hearing,
submitted written testimony in support of the measure.

     Your Committee finds that Hawaii residents age seventy and
older comprise the fastest growing segment of the State's
population.  As Hawaii's population ages and more residents
require long-term care, the problem of how to finance such care
becomes more urgent.

     Long-term care services can cost an average of $65,000 to
$75,000 for skilled nursing or intermediate care facilities, and
nursing home costs often exceed a family's ability to pay.
Additionally, seventy per cent of Medicaid payments in the State

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go towards nursing home care and the cost of paying for long-term
care for indigent individuals creates a drain on the State's

     Your Committee believes that providing a tax incentive for
the purchase of long-term care insurance will encourage Hawaii's
residents to purchase such coverage during their younger years
when the premiums are more affordable.

     Your Committee has amended this measure by replacing its
contents with the contents of S.B. 194, S.D. 2. which establishes
a State income tax credit equal to fifty per cent of premium
costs up to a $1,000 maximum, rather than a State income tax
deduction.  Your Committee believes that the cost to the State of
a tax credit will be outweighed by the State's future savings in
Medicaid expenses.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 170, H.D. 2, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as H.B. No. 170, H.D. 2, S.D. 1, and be referred to the
Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,

                                   BRIAN KANNO, Co-Chair

                                   BRIAN T. TANIGUCHI, Co-Chair

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