Washington state’s mandatory long-term care (LTC) insurance program, WA Cares, and the payroll tax that funds it will become optional if voters approve a citizen’s initiative in November.
WA Cares was authorized by a law enacted in 2019, and the state began collecting a 0.58 percent payroll tax on all wage income on July 1, 2023. More than 475,000 Washingtonians who were able to opt out of the program did so during a limited initial period. Washington Gov. Jay Inslee (D) signed bills on March 15 that add portability to WA Cares, allowing employees to receive benefits out of state and to continue their eligibility by making further payments to the program.
Initiative 2124, which will appear on the November ballot due to a petition effort, could drastically reduce payroll revenues by requiring that individual employees choose to join the program and pay the tax, allowing them to opt-out at any time. Leaders of the Democrat-controlled legislature announced in February they would take no legislative action to derail the ballot initiative, which is supported by Republicans, who say the tax is unpopular, unfair, uncertain, inadequate, and should be repealed.
Washington is the first state to implement a payroll tax for state-based long-term care, and other states are considering similar programs.
‘The Math Doesn’t Work’
WA Cares promises total lifetime benefits that would cover less than three months in a Seattle-based nursing home at today’s prices; in-home care now costs more than $7,100 per month.
Compared to current and projected LTC costs, the limited lifetime benefits promised by the program are negligible, says Devon Herrick, a health care economist who is a policy advisor to The Heartland Institute, which publishes Health Care News.
“Probably one of the biggest problems with the Washington Cares Act will be the political pressure to expand benefits to cover more situations than initially planned,” said Herrick. “The average income worker paying in for 30 years will contribute $8,716 in withholding but be eligible for a maximum benefit of $36,500.”
The payroll taxes collected for WA Cares are put in a trust fund that will begin paying benefits to certain employees, such as individuals near retirement, in 2026. Most workers will have to pay into the program for a decade before they are eligible, though the state says 35 percent of individuals requiring LTC are under 65 years of age.
“All the while, the state claims 70 percent of residents will need long-term care and benefits will be available in as little as 10 working years,” said Herrick. “The math doesn’t work.”
Medicaid Is LTC for All
Most Americans rely on Medicaid for LTC, and Insurance News says less than 8 percent of Americans ages 55 and older have LTC plans.
Qualifying for Medicaid is easy, says Stephen Moses, president of the Center for Long-Term Care Reform.
“That’s the fundamental problem; we have everyone relying on Medicaid and we end up with people needing long-term care, usually from old age, frailty, or cognitive impairment,” said Moses. “Income can be virtually unlimited, because [the government] deducts your medical and long-term care from your income before determining your income, and assets are exempt.”
Safety net programs are on the verge of collapse, says Moses. “We are approaching a perfect storm in the fourth decade of the current century when Social Security and Medicare trust funds run out,” said Moses. “Most importantly it’s the beginning of the aging of the Baby Boom generation who now need medical and long-term care at much faster and higher rates.”
‘Basically Ponzi Schemes’
“The easy way out, to most policymakers or politicians, is to just give people access to long-term care and to fund it through payroll deductions similar to Medicare and Social Security,” said Moses.
But these entitlement programs will become insolvent in the 2030s and are unlikely to exist in the future as they have in the past, says Moses.
“These big payroll-funded, pay-as-you-go programs are basically Ponzi schemes,” said Moses.
The claim that people are “dying broke” and are being “forced into long-term care” is a lie, says Moses. “The vast majority of people who need catastrophic care qualify for Medicaid. In [Washington] the state will just capture all the money,” said Moses.
‘Punishes Responsible Behavior’
“It’s just a shame that objective analysis of the real problem with long-term care is not carried out,” said Moses. “Analysts, especially those on the left, and most of them are so-called progressives, will recount all the problems with long-term care, institutional bias, shortage of caregivers, excessive dependency on friends, family, and loved ones, but not one of them ever asks, ‘how did we get into this mess?’”
Most LTC is government-financed, which discourages private, long-term planning, says Moses.
“Medicaid has the effect of discouraging responsible planning early in life when you have the chance to prepare by buying insurance or saving,” said Moses. “These [government plans] exacerbate the problem and create a false sense of security. People have been totally irresponsible in how they represent [government-funded] LTC.
“Unlike private insurance, which spreads price risk, social insurance does not price risk,” said Moses. “If you want life insurance and you smoke, you pay a higher premium [in private plans]. Social insurance charges everyone the same. It punishes responsible behavior and rewards irresponsible behavior.”
Ashley Bateman (bateman.ae@googlemail.com) writes from Virginia.