The people of the state of Washington are getting closer to having to make a decision about a new payroll tax to fund a “long-term” care benefit, that is anything but long term. The 58-cent tax withholding for every $100 of salary and bonus may not seem like much, but the benefit is not much either.
This reminds us (sort of) of the Class Act that was part of the Affordable Care Act of 2010, except there does not appear to be any funding deception in this new legislation coming from the West Coast. The Class Act, you may remember, was canceled after even those members of Congress who voted for it realized it was a financial sham. The premiums for those first five years were actually going to fund other aspects of the ACA, and the money never was going to be there for the suckers who paid in, unless, of course, there was a new tax to subsidize the shortfalls. That was never going to happen.
At the time, we had a heated exchange with Larry Minnix, the then head of Leading Age, who just could not understand our opposition to the Class Act and its benefits to the elderly. He just did not want to accept the reality that, as structured, it would go broke before anyone would receive any of the benefits. Let’s just say the only thing we agreed on was to disagree. His heart was in the right place, but not his financial analysis. We fear the same thing for the Washington Long-Term Services and Supports Trust Act (LTSS Act).
The lifetime benefit under the LTSS Act is just $36,500, which in today’s costly healthcare world doesn’t buy you much. And that is the lifetime benefit, period. A year in a nursing facility? Forget about it. Home health aides for two years or more? Probably not going to happen.
The people of Washington State can opt out by purchasing a traditional LTC insurance policy before the deadline which, in almost all cases, will be more expensive – but the benefits will be tenfold. Actually, they are not even comparable, both from when you can start accessing them as well as the financial benefits.
The other problem is where the tax proceeds will be invested and what that assumed return will be. Investing in the stock market was recently turned down. But the biggest problem of all will be that poor recipient (and we mean financially poor), who taps into this policy in six years (or 10 years) and really needs full-time care, but finds out the policy stops paying after $36,500. Do you really think they will remember the financial restriction? Not likely.
So, is this merely a bridge to Medicaid, which is supposed to be for the truly poor and not middle-class citizens who can shelter a $400,000 house, expensive car and 401-K plan depending on their state, not to mention assets set up in trust accounts? While we hope that is not the intent, there also has to be a better way. We are waiting.
