Washington State First To Pass Publicly Funded Long-Term Care Benefit For Residents

As states throughout the nation scramble to get ahead of a looming long-term care crisis, Washington is the first to pass a publicly funded option to provide residents with long-term health care.

Krensavage Partners

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In 2022, the state will begin collecting an 0.58 percent payroll tax on wages – about $290 for every $50,000 in income – and will start paying out in 2025.

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The Long-Term Care Trust Act will provide $36,500 per employee for long-term health care services – whether provided in the home, by family members or in a nursing facility.

Long-term care is becoming increasingly more expensive as people live longer. Currently, the average cost for in-home services in Washington is $24,000 a year per recipient and $65,000 for nursing home care.

Six percent of Washington’s operating budget goes toward long-term health care services, but demand for these services is expected to double by 2030.

According to Senior Care Center, more than half of long term care residents in the U.S. are older than 65 years. Three out of every four people over 65 will eventually need long-term assistance of some kind.

Throughout the country, state legislators and health care leaders are urgently trying to find novel ways to fund long-term care, particularly as the number of older Americans is expected to double to 98 million by 2050. In Washington, the senior population is anticipated to reach more than two million by 2040.

Because Medicare doesn’t cover long-term care and the few private long-term care insurance plans available aren’t affordable for most people, around 90 percent of older Americans will be not be able to get long-term care insurance coverage.

Without long-term care insurance, seniors must rely on family caregivers and spend their life savings down to poverty levels to access long-term care through Medicaid, according to the new bill.

As costs continue to rise dramatically, the state’s lawmakers hope that implementing the payroll tax will help avert a potential Medicaid budget crisis and alleviate family hardships. Lawmakers expect the payroll tax to reduce Medicaid spending by about $470 million a year by 2052, a total of $4 billion in savings.

To be eligible for benefits, Washington residents must pay into the program by working three of the past six years or for 10 years, at least five of those years consecutively. To qualify as a benefit year, the resident must have worked at least 500 hours in that year.

Residents also will be required to demonstrate their need for help with at least three activities of daily living (ADL), such as eating, dressing, preparing meals or bathing, according to the bill.

Self-employed individuals will not be required to pay the tax, nor will those who have purchased long-term care insurance.

About the Author

Ankur Shah
Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at AnkurShah47@gmail.com