Washington Governor Jay Inslee has signed into law the nation’s first public state-operated long-term care insurance program. The Long-Term Care Trust Act will pay benefits of up to $36,500 for those who need assistance with regular daily activities such as eating, bathing, or help with medications.
The benefits initially will be funded with a payroll tax of 0.58 percent on employees, and be available for a very wide range of services. However, the state won’t begin to collect the tax (or premium) until January of 2022, and won’t start paying benefits until 2025.
The most notable fact about this law is that it is the first in the nation. The details are far less important than the politics. For the first time, the majority of a state legislature was willing to vote to create a public program and, critically, raise taxes to pay for it. That may send an important signal to other lawmakers that increasing taxes to finance a need like long-term supports and services is not a political death sentence—at least not in a blue state like Washington.
Still, the new law raises some big questions for the future of public programs. Will it be financially sound? Can the state pay the benefits it promises with the revenue it will raise? Will the private market build new insurance products or other financial tools to wrap around what will be a very modest benefit? How will consumers respond to the program and the need to supplement it?
Here are some important details to know about the new law.
It is not universal. Only Washington residents age 18 or older who have paid the payroll tax for either 10 years without interruption of five consecutive years, or three of the last six years, and who work at least 500 hours a year, are eligible. Self-employed people may choose to participate but do not have to. The work requirement effectively exempts from the program current retirees, children with disabilities, and adults with disabilities who work less than about 10 hours a week. However, it calls for a study of whether to include those who become disabled before they are 18.
Benefits are broadly defined. People are eligible for benefits once they need assistance with three or more daily activities. Washington State defines those activities more broadly than private long-term care insurance policies, whose benefits are triggered once someone needs help with just two of six ADLs. Benefits do not count as income for determining eligibility for Medicaid or other state safety-net programs. They are paid directly to service providers. However, they may also be paid to family caregivers, as long as they receive minimum levels of training.
The program needs to be sustainable over the long run without general fund revenues. The tax/premium goes into a state trust fund. However, lawmakers cannot dip into the fund for other purposes without notifying participants. And the state is barred from using money from outside the fund to pay benefits. An independent commission and the state actuary must regularly certify that the program is solvent. If it is not, the state must cut benefits.
It is not the CLASS Act. The 2010 Affordable Care Act included its own public long-term care insurance program, called the Community Living Assistance Services and Support Act. But, despite the high hopes of its sponsors, the law never was implemented by the Obama Administration.
The Washington law is different in two crucial ways. CLASS was voluntary while the Washington law is funded by a mandatory payroll tax that every employee (except those doing very part-time work) must pay. The CLASS benefit would have been about $50-a-day for life. The Washington benefit is a maximum of $36,500. Thus, premiums for CLASS would have been relatively high, somewhere between $125 and about $400 per month, according to various estimates at the time. And they’d likely be much higher today. By contrast, for a middle income worker, the Washington state plan would cost only about $300 per year.
It is the first. Who will follow? Watch Illinois and Michigan. Both have begun thinking about how to design their own long-term care financing models. Minnesota’s department of health has proposed ways to enhance private insurance to make long-term care coverage more accessible. Let’s see if any carriers take it up on its creative ideas.
But mostly, watch California. Governor Gavin Newsom says he wants to make services for older adults a top priority of his administration. And advocates are looking to put a long-term financing plan on the state ballot.
It will be nearly a decade before we know whether Washington’s initiative is a success. But whatever happens, the state took a critical first step, as the US slowly begins to act on the need for a public long-term care financing program
Date: May 22, 2019