Most of the major Democratic presidential hopefuls have proposed ways for government to support frail older adults and their families. But they have chosen three very different models: tax credits; universal government-funded benefits; and public long-term care insurance. Which design makes the most sense? Here’s a first look.

Tax credits: Former vice president Joe Biden’s plan includes a $5,000 non-refundable tax credit for family caregivers. In an effort to target the credit (and hold down the cost), he’d limit it to 30 percent of documented expenses above $2,000. And he’d phase it out for couples with income of $150,000 or singles who make $75,000.

Sen. Amy Klobuchar (D-MN), supports three new tax credits:

  • A new 20 percent credit to offset qualified long-term care insurance premiums.
  • A $6,000 credit to reimburse family caregiving expenses.
  • A separate (unspecified) refundable tax credit for those receiving care to help offset their long-term care costs, such as nursing facility care, home care, assistive technologies, respite care, and certain home modifications.

It is important to distinguish between refundable and non-refundable credits. Non-refundable credits can be claimed only by those who pay federal income taxes. Refundable credits not only reduce tax liability for those taxpayers, they also are a direct government payment to those who do not pay federal income tax.

The Tax Policy Center estimates that in 2018 about 44 percent of US households paid no federal income tax (though they paid other taxes, such as payroll or sales taxes). And a separate analysis finds about 80 percent of those 75 and older paid no federal income tax. For them, a non-refundable credit would be worthless.  For those who pay only a small amount of federal income tax, the credit would have limited value because it could not exceed their income tax liability.

As a result, non-refundable caregiver credits such as Biden and Klobuchar are proposing would benefit relatively few families.

What about Klobuchar’s refundable credit for care recipients?  It would benefit more low-income older adults. But would a few thousand dollars be meaningful to someone whose annual cost of care could easily approach $100,000? For example, a $5,000 credit might pay for 4 or 5 hours a week of home care, or about 2 weeks in a nursing home. Not nothing. But not a lot.

Credits to subsidize the cost of long-term care insurance raise similar questions. A 60-year old woman who buys a good long-term care insurance policy can expect to pay something like $4,000 in annual premiums. A 20 percent credit would save her $800. A few more people would buy if their after-tax cost is only $3,200. But many? It is unlikely.

I’m also concerned about the sheer number of tax credits Klobuchar is proposing. Three separate credits with three separate sets of rules will confuse families and lead to mistakes, and even discourage people from claiming benefits simply because they don’t understand them. This is an ongoing problem with the Earned Income Tax Credit.

A universal government long-term care benefit: Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), would roll home-based long-term care into their Medicare for All plans, including it as part of the broad new government health benefit. While Warren’s current plan would phase in M4A more slowly, both would include the same long-term care benefit. Neither describes how this would work in any detail.

For instance, they don’t say what level of functional or cognitive limitation would trigger the benefit. Or what services and supports would be included. Or whether the benefit would be capped in any way. But even assuming reasonable limits, such a benefit would be enormously expensive.

And because it is not targeted, and apparently would cover something close to first-dollar costs, taxpayers would be funding the long-term care needs of, say, billionaire Michael Bloomberg—Sanders’s rival for the Democratic presidential nomination. I’m not sure that’s the best use of federal dollars when the budget deficit already tops $1 trillion.

A public long-term care insurance program: Former mayor Pete Buttigieg has proposed public insurance for older adults with true catastrophic needs. While he has offered only a few specifics, it appears his plan would require people to finance their own care for a period of time. Then, based on their income, government would provide a daily benefit of $90 for as long as someone needs a high level of care.

He’d encourage people to self-finance their initial long-term care costs by simplifying and standardizing private long-term care insurance policies, creating an online marketplace (similar to Medicare Supplement (Medigap) insurance), and encouraging employers to offer private long-term care insurance, including as an opt-out benefit.

This model is a refinement of what colleagues and I proposed in the Long-Term Care Financing Collaborative. It acknowledges that those costs are beyond the financial capacity of nearly all Americans and that the private market is unwilling to insure against this risk. Yet, it also recognizes the taxpayers will not willingly pick up the full costs.

Buttigieg has not said how he’d pay for this new program, which is likely to cost several hundred billion dollars over the first 10 years. But insurance is a far better solution than Medicaid or nothing at all, which are the only two options for millions of Americans with long-term care needs and limited resources.

It is good news that long-term care finally is getting attention from so many presidential candidates. Now, let the debate over the relative merits of their ideas begin.