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Jamie C. Yesnowitz
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On May 13, 2019, Washington State Gov. Jay Inslee signed legislation creating a new payroll assessment to fund what his administration calls a “first in the nation” program to provide financial assistance for long-term care. The legislation, H.B. 1087, establishes a new 0.58% tax on employee wages beginning Jan. 1, 2022, to fund long-term care assistance.1
The question of who pays for senior and long-term health care is becoming an increasingly popular topic as the baby boomer generation enters retirement. According to a recent study, the majority of middle-income seniors will not be able to afford all of their assisted-living fees by 2029.2
Since Medicare does not pay for most long-term care, states generally provide assistance to seniors through their own Medicaid programs.
According to H.B. 1087, Washington spends $24,000 a year for each Medicaid recipient who needs in-home care and $65,000 a year for nursing home residents.3
Furthermore, seven out of 10 people over age 65 will need long-term care and 90% of those people have no savings for it.4
Currently, more than 850,000 Washington citizens are serving as family caregivers and providing $11 billion of care and services each year.5
By 2030, the pool of family caregivers is projected to be cut by nearly half.6
Long-term services and supports trust program
H.B. 1087 establishes the Long-Term Services and Supports Trust Program (Trust Program), creating a long-term care insurance benefit for qualified individuals that will be paid through an employee payroll premium. The new payroll premium is estimated to raise approximately $1 billion annually, which will be used to fund payments for long-term care insurance.
Beginning Jan. 1, 2022, employees in Washington will be assessed a premium of 0.58% of their wages (all gross wages are subject to the premium assessment), equivalent to $290 for every $50,000 in income.7
Employers are responsible for collecting the premiums through payroll withholdings and must remit the premiums to the Washington Employment Security Department.8
However, employees that demonstrate they have long-term care insurance are exempt from the premium assessment.9
Also, self-employed individuals can elect to pay into the system but are not required to do so.10
The program will begin providing benefits in 2025.11
Beneficiaries must be found to need assistance with at least three daily activities, as determined by the state, such as bathing, dressing, and medication administration.12
To receive benefits, a person must be at least 18 years old and will need to have paid into the program for “three years within the last six years,” or “for a total of 10 years, with at least five of those years paid without interruption.”13
Furthermore, the person must have worked at least 500 hours in a year for that year to count toward the requirement.14
The Trust Program will provide long-term care for a lifetime maximum of $36,500 per person, equivalent to $100 per day for 365 days.15
In addition, qualified family members acting as family caregivers are eligible to receive payments from the Trust Program for their services.16
Opposition to trust program
Supporters of the Trust Program argue that it will benefit Washington’s overlooked and vulnerable populations while also reducing the burden on the state’s Medicaid system. In response, critics claim the Trust Program imposes a heavy cost in new taxes and additional compliance burden on employers while providing relatively little in benefits.
For example, according to an April review of H.B. 1087 by the Washington Policy Center, the Trust Program will cost Washington residents roughly $1 billion annually to save the state roughly $40 million annually when all the costs of the Trust Program are considered.17
Notably, Republicans unsuccessfully sought in April to require the legislation to go before the public for a vote in November.
Washington Democrats and Gov. Inslee touted the passing of H.B. 1087 as a victory for Washington families, as Governor Inslee stated in a press conference, “Washington State, once again, is at the head of the pack when it comes to policies that help working families and provide much-needed security when it comes to their healthcare.”18
However, critics will closely monitor the economic effects of the legislation, as the findings by the Washington Policy Center indicate that the true savings of the Trust Program will be significantly reduced once the Trust Program costs are considered. In addition, employers will now be faced with a new compliance obligation.
While the Trust Program is intended to provide long-term care, the legislation may not completely solve these issues. For example, the Trust Program has a lifetime maximum benefit of $36,500 per person, but the bill states that it costs approximately $65,000 a year per nursing home resident. It should be noted that self-employed individuals have the option to choose whether or not they would like to participate in the Trust Program, and nonparticipation may make it more difficult for the Trust Program to survive. Furthermore, due to the eligibility requirements of H.B. 1087, it is likely that some individuals requiring long-term assistance will not qualify for the Trust Program. As the number of senior citizens continues to grow, it will be interesting to see whether more states will follow in Washington’s footsteps and enact similar legislation to provide long-term care.
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