Individual Medical Accounts
An individual retirement account for long-term care, often called an individual medical account (IMA), would give tax advantages to those who saved for their long-term care expenses. In contrast to an individual retirement account (IRA), which can be used for any retirement expense, the money accumulated in the individual medical account would be earmarked for long-term care services or private long-term care insurance. By encouraging private saving, an individual medical account would give people some degree of financial protection from catastrophic long-term care costs and the flexibility to construct a service package that best fit their needs.
Several proposals to establish individual medical accounts have been put forward by government agencies, Congress, and researchers. 1 At least two legislative proposals embodying this concept have been introduced in Congress. 2 Although specific features of proposed individual medical accounts vary, they have several common characteristics. Each year people could contribute up to a maximum amount to their individual medical accounts. Proposals differ on whether the contributions would be federal income tax deductions or tax credits, but in all proposals the interest earnings on deposited funds would be tax exempt. Upon reaching a certain age, people could begin withdrawing funds to pay for their long-term care needs or, in some proposals, acute care needs. Financial penalties would apply to money used for purposes other than long-term or acute care or withdrawn before the IMA owner had reached the specified age. All funds remaining at the death of the IMA owner would go to his or her designated heir.
The United States has a low savings rate, and many economists believe that prospects for economic growth would be enhanced if