Washington state retools first-in-the-nation long-term care benefit

Patricia Keys, 71 and a stroke survivor, needs help with many everyday activities, such as dressing and bathing. Her daughter Christina, who lives near her mom in Vancouver, Washington, cares for her in the evenings and pays about $3,000 a month for help from other caregivers.

Christina Keys, 53, was thrilled three years ago when Washington state passed a first-in-the-nation law that created a long-term care benefit for residents who paid into a state fund. She hoped it would be a resource for others facing similar challenges.

The benefit, which has a lifetime limit of $36,500, would have made a big difference during the first year after her mom's stroke, Keys said. Her mom needed a ramp built and other modifications made to her house, as well as a wheelchair and hospital bed. The extra money might also have made it easier for Keys to hire caregivers. Instead, she gave up her technology sales job to look after her mom.

"People are under this cloud of delusion that between your insurance and your retirement [income] you're going to be fine," she said. "They don't understand all the things that insurance doesn't cover."

But relief for Washington families will have to wait. The WA Cares Fund, which was set to begin collecting money for the program with a mandatory payroll tax on workers in January, has been delayed while lawmakers made adjustments during the current legislative session. Payroll deductions will start in July 2023, and benefits will become available in July 2026.

Other states are watching Washington closely as they weigh offering coverage for their own residents. In California, a task force is examining how to design and implement a long-term care program, according to the National Conference of State Legislatures. Illinois and Michigan are also studying the issue, according to the NCSL.

Supporters of the Washington program say it just needed fine-tuning and note that social programs like Medicare and the Affordable Care Act also underwent tweaking. The program's long-term solvency, however, is in doubt and the cost to workers who buy into the program is in question.

What's not in doubt is that it is critically important to address long-term care needs. About 70% of people who turn 65 will require some type of long-term care services. Many will need help such as an at-home assistant, while others could face a stay in a nursing home, which on average costs more than $90,000 a year. But many don't have good options to cover the expense. Medicare's coverage is very limited, while Medicaid generally requires people to impoverish themselves before it picks up the tab. Private long-term care insurance policies are unaffordable for most people.

The upshot: Many people rely on unpaid family members to help them with medical care, as well as everyday activities like bathing and dressing.

The problem is getting much worse. The number of people 85 and older is projected to more than double within the next 20 years, while the number of Americans living with Alzheimer's disease and related dementias is expected to double as well, to 13 million.

The federal Community Living Assistance Services and Supports Act (CLASS Act), which was part of the Affordable Care Act, created a voluntary long-term care buy-in program, but it was never implemented because of concerns it wouldn't be financially sound. Since then, policymakers in Washington, D.C., have had little appetite for addressing the problem.

"We don't have a solution at the federal level, so states are taking it on themselves to experiment with solutions," said Bonnie Burns, a consultant for California Health Advocates and an expert on long-term care who was appointed to a Washington state committee to help develop a supplemental long-term care insurance product to be offered alongside the state benefit.

The Washington state program's maximum benefit is intended to cover a year's worth of home care at 20 hours a week, said program director Benjamin Veghte.

Although wealthy people likely can afford to pay for their care and the poorest families qualify for Medicaid, middle-class families might burn through their savings trying to cover such bills.

"It doesn't solve all the problems, but with a modest premium and a modest benefit it eases the problem for families," Veghte said. It could also give some families time so that "maybe they can develop a plan" for long-term care needs after their benefits expire, he added.

Although the law passed in 2019, it remained below many people's radars until the mandatory payroll deduction approached. Workers faced a tax of 0.58% per $100 of income. For someone earning $52,000 annually, the deduction would equal $302 a year, according to state estimates. As people realized they were about to have to start paying into the program, some pushed back.

Workers could get an exemption if they had private long-term care insurance, and thousands of people scrambled for that coverage before the Nov. 1, 2021, opt-out deadline. Many of the state's employers quickly offered workers the opportunity to buy private plans.

Because withholding for the benefit isn't capped based on income, wealthier people may be better off with private long-term care insurance, if they can pass the insurer's medical evaluation.

"We did have a good number of higher-earning, younger folks who wanted to buy a policy," said Gary Brooks, a certified financial planner who is co-owner of BHJ Wealth Advisors in Gig Harbor, Washington.

By last month, 473,000 workers had taken the one-time offer to opt out of the program.

Other people raised objections because they would have to pay into the system but wouldn't benefit. These included people who work in Washington but live in a neighboring state, the spouses of service members who are unlikely to make Washington a permanent home, people planning to retire before the three years needed to qualify for benefits, and some workers on temporary visas. The commission overseeing the long-term care program has estimated that the number of people from these groups eligible to opt out is about 264,000.

In January, Gov. Jay Inslee signed legislation that addressed many of these issues. It allows certain groups to opt out and people nearing retirement to receive partial benefits based on the number of years they paid into the program.

One other group — those who plan to retire elsewhere — hasn't been addressed, but the state is developing recommendations for the legislature, Veghte said. According to current actuarial projections, 3.1 million workers will begin paying into the program next year, out of a total of 3.6 million, Veghte said.

Some critics are concerned that allowing more people to opt out of the program puts it on increasingly precarious financial footing.

"The solvency issue just gets greater and greater," said Richard Birmingham, a partner at Davis Wright Tremaine in Seattle who is representing employers and workers in a class-action lawsuit that claims the law violates federal and state statutes governing employee benefit plans. "Any change they make further increases the cost."

Supporters are sponsoring a ballot initiative that they believe would help bolster the program's assets by allowing program funds to be invested in a diversified portfolio rather than fixed-income investments. That initiative "probably will eventually" pass, Veghte said, even though it failed in 2020.

Although the program delay isn't ideal for the thousands of people who could benefit from the new program in the short term, consumer advocates are taking it in stride.

"We know that as the first state to do this that it may not be perfect going out of the gate," said Jessica Gomez, coalition manager of Washingtonians for a Responsible Future, which represents community groups for aging and disability populations. "It may have to be fixed, but we'll fix the problems and go forward."