Washington’s long-term care plan is essential and must be protected

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Washington’s long-term care plan is essential and must be protected

WA Cares is the country’s first affordable and reliable public benefit for long-term care services

By Tracy Yeung and Andy Nicholas - September 13, 2021

In 2019, Washington became the first state in the nation to create a public long-term benefit for its residents. Known as WA Cares, the state’s long-term care option helps participating workers afford the costs of a nursing home, visits from an in-home caregiver, home renovations like wheelchair ramps, or other long-term care needs. This program is essential to the state’s increasing need for long-term care services, particularly for Washington’s aging population. Without WA Cares, many Washingtonians and their families could fall into deep debt and poverty due to the high costs of long-term care services and the lack of affordable private insurance options. The program will also alleviate the burdens of caregiving that fall disproportionately on women, particularly women of color, who shoulder the vast majority of the unpaid caregiving work.

Yet profit-driven insurance companies and anti-tax organizations working for the rich and powerful are spreading falsehoods about WA Cares. Seeking to undermine and destabilize the public program, these entities are convincing some Washingtonians to opt out and instead purchase narrow, expensive, and unreliable private long-term care insurance plans. But residents should not be fooled by the insurance industries’ scare tactics. And lawmakers should reject efforts to weaken WA Cares by denying changes to the program’s November 1 opt-out deadline. They should also take actions to strengthen the program by allowing current retirees and those near retirement to be able to benefit from the program, allowing program participants to retire outside of Washington, and creating standards for supplemental plans.

Before WA Cares, long-term care options were limited, unaffordable, and inequitable

The number of Washingtonians age 65 and older is projected to double by 2040, representing 22% of the total state population. Among this group, 7 in 10 older adults will need long-term care to help with everyday activities, like bathing, dressing, using the bathroom, and walking. However, paying for long-term care for conditions like diabetes, dementia, or even a broken hip can bankrupt a family.

In the past, options to pay for long-term care were extremely limited. And many people incorrectly assume that health insurance, Medicare, the Affordable Care Act, long-term disability insurance, and/or life insurance will cover long-term care costs. However, they do not. Before WA Cares, individuals and their families had one of four options for meeting their long-term care needs – all of which have significant shortcomings:

  1. using Medicaid, which is only available to people with low or moderate incomes;
  2. paying out-of-pocket;
  3. purchasing private long-term care insurance; or
  4. relying on informal care from a loved one.

Many people incorrectly assume that health insurance, Medicare, the Affordable Care Act, long-term disability insurance, and/or life insurance will cover long-term care costs. However, they do not.

Medicaid: While Medicaid is an important part of our health care system, it only covers long-term care services for people with $2,000 or less in assets. That means many residents are forced to spend down their entire savings to less than $2,000 to pay for long-term care services before Medicaid kicks in to cover the remaining costs. And as Washington’s population ages, Medicaid-funded long-term care services make up more of the state budget, crowding out resources needed for schools, infrastructure, and other vital community investments. Without WA Cares and at the current rate, state spending on Medicaid-funded long-term care services is projected to double by 2030, resulting in an additional $6 billion per year of spending.

Out-of-pocket: The cost of long-term care ranges from $2,000 to $10,000 per month, depending on the care setting and care needs. This is unaffordable for many families and can force them into bankruptcy.

Private long-term care insurance: These options are limited, expensive, and cover a very narrow array of services. Prior to WA Cares, the few available private insurance plans often required consumers to pay well over $1,000 a year in premiums – an excessive sum for many Washingtonians. Making matters worse, these plans included onerous and restrictive eligibility criteria that excluded many people with pre-existing conditions. One-third of people over 65 are denied private coverage due to their age or health condition(s).

Informal care: Because there were such limited options for long-term care services, most older adults receive care from unpaid family members or friends. Two out of three older adults who receive care at home get all their care from a family caregiver. The amount of time and labor required for caregiving often causes caregivers – most of whom are women – to reduce their work hours, take unpaid leave, quit their jobs, and/or use their own savings to provide care.

These inadequate options also result in large racial and gender disparities in terms of who receives long-term care. Due to centuries of discriminatory employment and bank lending practices, people of color are less likely to have access to jobs that provide retirement benefits and have less wealth to pay out of pocket for long-term care. And because of sexist insurance practices, women who choose to buy private insurance typically pay 50% to 60% more in premiums compared to men, which comes out to almost $1,000 more per year.

WA Cares provides affordable, reliable care and a broad array of services

The dire need for more affordable long-term care options led the state legislature to pass the Long Term Supports and Services Trust Act in 2019, which established WA Cares. Beginning on January 1, 2025, Washingtonians who participate in this program will be guaranteed a lifetime benefit of $36,500, which can be used to cover a broad array of essential long-term care services in Washington state. This includes services provided at home or assisted living facilities, training and support for paid and unpaid family members who provide care, adaptive equipment and technology, and many other important care services. Because the lifetime benefit is indexed to inflation, it will retain its value for future generations.

Funded by a modest 0.58% payroll deduction that will take effect in January 2022, WA Cares will bring peace of mind to hundreds of thousands of families at a very affordable price. Someone earning the median income in Washington state ($52,000 per year) will pay only about $300 per year under the new payroll deduction. Over the long-term, they’ll receive a benefit that will fully cover:

  • Five years of family caregiver support, including respite care and home modifications; or
  • Twenty-five hours/week of in-home care for one year; or
  • Nine to 18 months in a residential setting, such as an adult family home or assisted living facility.

Residents seeking options to cover long-term care costs that exceed WA Cares’ guaranteed lifetime benefit will be able to purchase supplemental private insurance plans in the coming years. These plans will likely be much more affordable than the private plans currently available, since WA Cares will cover a substantial portion of most Washingtonians’ long-term care needs.

Lawmakers’ decision to enact WA Cares will save billions of dollars and reduce inequities by lowering public health care costs in the coming years. With the program, Medicaid costs are projected to decline by nearly $4 billion through 2052 because far fewer residents will be forced into poverty paying for long-term care services. WA Cares will also begin to mitigate racial and gender disparities in long-term care access by offering the same affordable insurance rates to everyone.

Equally important, Washingtonians will be able to count on WA Cares for generations to come. The Office of the State Actuary commissioned a study showing that WA Cares will be able to pay 100% of benefits through 2075. And if lawmakers allow the WA Cares Fund to include stocks, bonds, and other assets with rapidly growing values, the program will be able to pay all benefits beyond the year 2095.

Volatile, expensive private insurance is no substitute for WA Cares

Under current law, Washingtonians have until November 1, 2021 to opt out of WA Cares. Those who opt out will not be subject to the small, 0.58% WA Cares payroll deduction, but they will also forgo the broad array of long-term care benefits provided under the system. To opt out, residents must show proof that they’ve purchased a private long-term care insurance plan by December 31, 2022.

Seeking to cash in on the looming deadline, unscrupulous insurance companies and brokers are pulling out all the stops to convince Washingtonians to opt out of WA Cares and purchase private long-term care insurance plans instead. They are joined by organizations that oppose any new tax that requires wealthy residents to pay their fair share. Together, these wealthy special interests are falsely claiming that WA Cares is not sustainable and that its benefits are too low. As noted above, independent studies show WA Cares will reliably deliver benefits for decades to come. And the benefits provided by WA Cares are intentionally designed to retain their value and cover a sizable portion of long-term care costs – features that are especially important for workers who cannot afford the private plans currently available.

Over 90% of private long-term care insurance providers have left the U.S. market in the past two decades.

In reality, the private long-term care insurance market is failing Washingtonians. WA Cares exists largely because the private market has nearly evaporated in Washington state and throughout the nation. Over 90% of private long-term care insurance providers have left the U.S. market in the past two decades. In 2001, there were 137 companies offering long-term care insurance coverage. Today, there are only 10.

Private long-term care insurance has been extremely expensive and volatile, with premiums rising by as much as 100% over the lifetime of a policy. Unlike WA Cares, in which residents will only be subject to the payroll tax during their working years, private plans require premium payments during retirement years. And missing even a single payment for any reason can be grounds for losing all benefits under private insurance plans.

Private insurance plans also typically offer very narrow coverage that is hard to obtain. WA Cares will provide a broad array of long-term care services, encompassing in-home providers, nursing homes, and outpatient facilities. Meanwhile, private long-term care insurance is often limited to nursing home care and does not provide coverage for many services.

Participants in WA Cares will be able to access benefits within 45 days of submitting an application if they meet the minimum level of assistance required. In the private market, profit-driven insurers often fight participants’ benefit claims. Over half of the complaints submitted to the Washington State Office of the Insurance Commissioner accused private long-term care insurance companies of unnecessarily delaying or denying policyholders’ benefits.

Lawmakers should work to strengthen, not weaken, WA Cares

Before state lawmakers established WA Cares, too many residents and their families were forced into poverty by the high costs of long-term care services. WA Cares is a sound solution that will greatly reduce financial hardship for millions of Washingtonians, give people the freedom to choose the kind of care they want, and reduce gender and racial inequities. Those with the means to do so will be able to purchase supplemental insurance plans to cover costs that exceed the lifetime benefits guaranteed under WA Cares.

Extending the deadline for Washingtonians to opt out of WA Cares would serve to only weaken this important benefit system. Doing so could destabilize the structure’s financial foundation by allowing the richest Washingtonians to avoid paying their fair share to support long-term care investments that benefit all communities. It would also give insurance brokers more opportunities to sell expensive and narrow insurance plans that are laden with fine print often used to deny coverage and benefits.

Going forward, Washington lawmakers should amend WA Cares to allow current retirees and people near retirement to be able to benefit from the program. They should also enact legislation allowing Washingtonians, and residents of other states who work in Washington, who retire in other states to access WA Cares benefits. Finally, the legislature should also set standards to ensure supplemental long-term care insurance plans – private plans that will cover costs above the lifetime benefit included in WA Cares – are affordable, transparent, comprehensive, and nondiscriminatory. These reforms would strengthen WA Cares’ solid foundation and expand the important benefits and protections it provides to residents, families, and communities.