Payments from long term ins. to ALF are considered income and taxed accordingly. Is there a way around it?

My dad paid LT. insurance premiums for many many years and never claimed them as a deductible on his tax return. Now the Long Term insurance pays for his assisted living, and I get a tax form that lists all that money as income for him. In addition to increasing the amount of money he must pay in federal taxes, This makes it look like he has a greater income and negatively affects his other benefits.

Am I doing something wrong on his taxes or is this really the way it works?