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Policy Matters

Fourth Quarter 2021

NEWS YOU CAN USE FROM THE EXPERTS AT LLIS

We first alerted you to Washington State’s WA Cares Fund in our 2nd quarter Policy Matters. It was Washington State’s plan to curb the state’s high Medicaid LTC expenditures, paid for by a .58% tax on all W-2 employees’ wages.

But how did it come into being in the first place? What has happened since the deadlines that quickly approached then? What are some lessons learned? And what federal initiatives are in the works?

A History Lesson

The Class Act (Community Living Assistance Services and Supports Act) was part of the Affordable Care Act; a self-funded and voluntary long-term care insurance choice, using no taxpayer funds to pay benefits, designed to reduce Medicaid spending by allowing people to continue working and living in their homes and avoiding nursing homes. It was officially repealed on January 1, 2013 because HHS could not develop a valid model to comply with the program’s requirement to be financially sustainable for 75+ years.

Fast forward to Washington’s plan, which was rejected twice by voters then passed in the legislature.

It was initially proposed to be funded by investments in the stock market.

So the concept of a .58% payroll tax on all W-2 employees came into being.

What’s Next in Washington state?

Program and payroll tax deductions begin January 1, 2022. There was a one-time offer to opt out, and Washington residents had until November 1, 2021 to purchase an individual LTCi policy. They must then apply for an exemption between October 1, 2021 and December 31, 2022.

Unlike a private LTCi policy (which has a guaranteed premium and benefit), this tax can go up or the benefit can be adjusted down.

The benefit is $36,500. Upon first glance, many thought that was an annual benefit. However, it’s not. It’s a pool of money for the Washington residents’ lifetime. Given the cost of long term care now (and its future projections), that certainly won't do much. Industry speculation is that, more than likely, the tax will go up to make it sustainable; or the state will make another effort toward stock market approval, but the suggested rate of return of 5% is simply not feasible in the current economic climate.

News about the financial sustainability of the WA Cares Fund isn’t good. The state expected -- and priced their plan based off of -- 100,000 people wanting exemption. As of November 2, more than 300,000 exemptions were received, meaning it’s already underfunded. What seems to be the logical next step for the state? Raise the tax.

Who Will Benefit in WA (and other states with similar bills)?

  • Low-income employees not qualified for Medicaid
  • Uninsurable employees at older ages
  • People retiring in the next 10-15 years who make less than $500,000 (using WA as an example)

At the Federal Level

New Federal Initiatives
Initiative: WISH Act (Well-Being Insurance for Seniors to be at Home Act) Social Security Caregivers Credit Act Better Care Better Jobs Act Credit for Caring Act The Long-Term Care Affordability Act
Details: .6% payroll tax Retirement compensation in the form of Social Security credits to people forced to leave the workforce to care for a loved one Expands Medicaid to home and community-based services Creates a non-refundable tax credit up to $5,000 for caregivers (adjusted for inflation) Allows use of qualified money to purchase LTCi, including riders on life insurance and annuities, and hybrid LTCi policies
  Elimination period: 1-5 years Credit can be claimed for up to 60 months Increased wages and benefits for paid caregivers Claimant must be certified by healthcare professional to need care for at least 180 consecutive days  
    Caregiver must provide minimum 80 hours/month care to parent, spouse/domestic partner, sibling, child, grandparent, grandchild, aunt/uncle who can’t perform ADLs without assistance Funded by Medicaid’s HCBS federal budget (Home and Community-Based Services) Caregiver must have earned income of at least $7,500  
The Good:
  • $3,600/month (adjusted for inflation); better than WA benefit
  • 2 ADLs or cognitive impairment (similar to private plans)
  • 50/50 cost share (employee and employer)
  • Credit added to individual earnings toward Social Security benefits
  • Caregivers who don’t earn an income get max credit equal to half average national wage
  • Keeps people at home as long as possible
  • Free state caregiver wages and benefits
Credit=30% of expenses paid/incurred by family members providing care in excess of $2,000
  • Up to $2,500 per year for premiums
  • No income tax or pre-age 59½ penalty on distribution used
  • Promotes clients getting private LTCi (instead of relying on state program)
The Bad:
  • Must work 40 quarters to qualify for full benefits
  • Long elimination period means high income clients may get $0 with a 5 year wait
  • Still a payroll tax
  • Unsure how long the monthly benefits will last
Doesn’t provide income, but does protect their Social Security calculation
  • Don’t know how much (a $400 billion budget is being proposed).
  • Only one way to pay for something like this: Tax.
Credit phases out (individual filers: $75,000, joint filers: $150,000) Unknown if it’s income tested
Proposed by: Congressman Thomas R. Suozzi (NY) Senator Chris Murphy (CT), Congressmen Brad Schneider (IL) and Grace Meng (NY) Senator Robert P. Casey (PA) Bipartisan Senate proposal: Bennet, Ernst, Capito, Warren Senator Pat Toomey (PA)

What’s Next across the U.S.?

Click here to read about states expected to follow Washington’s lead and the lessons we hope they’ve learned.

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