Many employees in Washington state will see their paychecks become lighter on July 1 as the state’s WA Cares Act – a bill aimed at helping residents pay for long-term care – takes effect on that date.
WA Cares requires employers to withhold a 0.58% premium tax on employee wages to pay into the first-of-its-kind state-mandated trust called the WA Cares Fund. The fund is designed to provide Washington residents up to $36,500 adjusted for inflation per lifetime to pay for long-term care, beginning in July 2026. Residents must pay into the fund for at least 10 years to be eligible for the benefit.
The increasing cost of Medicaid to pay for long-term care was cited as the main reason behind implementing WA Cares. In Washington state, Medicaid expenditures related to long-term care costs are $2.1 billion annually – 5% of the state’s total budget – and rising, said Maeghan Gale, National Association of Insurance and Financial Advisors policy director, government relations.
Carroll Golden, director of NAIFA’s Limited and Extended Care Planning Center, said that 50% of agents surveyed in Washington said they believe the WA Cares program prompted positive conversations about long-term care. About 500,000 Washington residents were able to opt out of the WA Cares program by purchasing their own long-term care coverage.
Could California be next?
While Washington is on the cusp of implementing its long-term care savings plan, California could be the second state to establish a similar program.
A California task force was created in October 2019 to begin studying options for a state LTC benefit.
A 115-page report from consultant Oliver Wyman offers five program recommendations for California. They are:
$36,000 over two years for “supportive benefits.” Examples of supportive benefits include caregiver support, adult day care, meal delivery, transportation, durable medical equipment, home assessment, and minor home modifications.
$110,400 over two years in “targeted benefits.” In addition to the same services as in option one, this includes home care and residential care facility benefits.
$36,000 over one year in comprehensive benefits. Covered benefits are the same as in option two. This option is “inspired by the WA Cares Fund design with select updates,” the report said.
$81,000 over 18 months in comprehensive benefits. Covered services include those covered in option three, along with care in a skilled nursing facility.
$144,000 over two years in comprehensive benefits. Covered services are the same as in option four.
The task force has the goal of deciding on a recommendation by the end of this year.
New York, Pennsylvania model proposals after WA Cares
In New York state, Senate Bill s9082 enacts the New York Long-Term Care Trust Program. The bill was introduced in 2022 and would enact a payroll tax to fund a long-term care trust, similar to that in WA Cares.
As proposed, the only way for workers in New York to opt-out of this new payroll tax is to own a private long-term care insurance policy no later than Jan. 1 of the year the law is passed.
One major difference between the New York proposal and WA Cares is that New York would levy the tax on workers in the state, regardless of what state they reside in. This has the potential to impact workers who live in Connecticut, New Jersey and Pennsylvania. Also, unlike WA Cares, the long-term care benefit is portable, meaning that workers could access the benefit in all 50 states.
In August 2022, the Pennsylvania Long-Term Care Trust Act was introduced in the General Assembly. Similar to WA Cares, the Pennsylvania bill would establish a 0.58% payroll tax on workers and would allow workers who have private LTC coverage to opt out of the tax.
Other states looking at long-term care options
In October, Michigan officials began exploring options to help residents pay for long-term care.
Earlier this year, Illinois lawmakers ordered a study to calculate how many seniors are likely to need long-term care; the possible financial impact on their families; the availability of caregivers and the tax implications of a state-run long-term care program.
In Arizona, a proposed caregiver tax credit failed in the state Senate. However, Senate passed a bill in April that would create a pilot program providing grants of up to $1,000 a year to reimburse caregivers taking care of disabled family members at home. The program would be paid for out of a $1.5 million a year fund included in the state budget. The measure is now working its way through the House.
Minnesota: A life insurance alternative
The Minnesota Department of Human Services through the Own Your Future initiative began analyzing that state’s long-term care problem and looking at possible solutions in 2018. has embarked on a multi-year effort to analyze the problem and recommend solutions.
Minnesota’s goal has been to encourage affordable long-term care solutions for households with incomes between $50,000 and $125,000. The state’s approach has been to encourage private market solutions that are affordably priced, actuarially sound, appealing to consumers and acceptable from a risk and market perspective to insurance companies.
One possible solution, LifeStage, combines term life insurance protection during a person’s working years with long-term care protection in retirement. As currently proposed, LifeStage has three levels of lifetime coverage, $100,000; $200,000 and $300,000. When a person applies, they choose the coverage level they want. During working years, that will be the amount of their term life insurance coverage. When they reach retirement age, their life insurance benefit will end and their long-term care coverage, in that same amount, and for that same premium, will begin.
The state currently is waiting for carriers to submit requests to sell the product.
Hawaii: Paying family for long-term care
In 2017, Hawaii began providing up to $70 a day to residents who work while also taking care of elderly family members at home. Hawaii pays for the program, Kupuna Caregivers, out of its general budget.
Another Hawaii program, Kupuna Care, provides services to seniors in need of help with daily activities. This year, lawmakers passed a series of elder care bills, adding $11.2 million to the $9.7 million appropriated in the state’s budget.
Missouri: Allowing ‘dignity accounts’
Missouri began incentivizing taxpayers to establish and contribute to a long-term dignity savings account to help fund future long-term care expenses. they may incur in the future as a result of being in a long-term care facility. The contributions to the Long-Term Dignity Savings Account may then be deducted on the Missouri individual income tax return.
The deduction may not exceed the Missouri adjusted gross income and is limited to $4,000 per taxpayer ($8,000, if married filing combined).
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