States are trying to ease the burden of the high cost of long-term care

It’s a retirement problem few of us want to face: At some point, four out of five older Americans will need help with everyday needs, such as bathing, dressing, using the bathroom, or preparing meals.

Paying for such long-term care presents retirees with difficult choices. Medicare coverage is very limited. Private long-term care insurance is complicated and expensive. Medicaid, which insures low-income people, pays for long-term care only when a patient’s assets are almost completely spent. And many will rely on relatives for help.

In Washington, D.C., policymakers and lawmakers have long agreed on the need for a government-sponsored solution — but not how to pay for it, said Howard Gleckman, a senior fellow at the Urban Institute and author of “Taking care of our parents: Inspiring stories from families searching for new solutions to America’s most pressing health crisis.”

“It’s an obvious, pressing problem, and there’s a lot of interest among politicians in something like a public program until you start talking to them about paying to make it work,” said Mr. Gleckman. “You have to raise the payroll tax. You can call it a contribution or whatever you want, but politicians look at it and see a tax increase – and then they say forget it.”

Now a handful of states are acting alone. In July, Washington state will start the WA Worry Fund, a public long-term care insurance program. California is considering a similar plan. Minnesota and several other states are studying options.

State-sponsored long-term care programs raise a number of thorny questions, including mandatory participation rules, how to carry benefits when people move and how to align public plans with supplemental commercial policies.

But states that are making progress see their programs as essential to meeting the needs of aging populations and as a way to rein in rising Medicaid spending on long-term care.

“Increasingly, it’s something that overwhelms state budgets,” Mr Gleckman said.

Many Americans will need help

Most people need some assistance with daily living needs, but the intensity and duration are impossible to predict.

Four out of five 65-year-olds will need some form of long-term care during their remaining years Center for Retirement Research at Boston College.

The researchers found that one-fifth of retirees will not need support, but about one-quarter will have serious and expensive care needs.

“The data makes it clear how big the risk is,” said Anqi Chen, a research economist and deputy director of savings research at the center. “Some people may ignore the fact that they may need care later in life and that will require resources from family or savings.”

Many Americans seem to be in a state of denial about long-term care. A study by The Associated Press-NORC Center for Public Affairs Research found that 49 percent of Americans Those 40 and older expect Medicare to pay for their long-term care. In reality, the program only covers 100 days in a skilled nursing facility after a hospital stay. The survey also found that 69 percent of respondents had little or no planning for long-term care needs — and only 16 percent were confident they would have the money to pay for that assistance.

A large long-term care need can be financially catastrophic. By 2021, the average annual national cost of a private room in a nursing home will be $108,405, according to the most recent figures from Genworth, a major long-term care insurer that has a annual survey on healthcare costs.

Not all long-term care is provided in nursing homes. A large part is provided at home, which can significantly reduce costs. Costs also vary widely by location. And much of the work is provided by unpaid relatives and friends. AARP estimates that by 2021 there were 38 million family caregivers in the United States, providing an estimated $600 billion in uncompensated care.

“For families who don’t have insurance, the question is whether they have the financial resources to purchase care, or whether caregivers are available,” Ms. Chen said. “And is that a reasonable expectation for family members?”

Insurance may seem like a sensible way to protect against these unknown risks. But private long-term care insurance has floundered for the past decade.

The idea of ​​a public-private solution is not new. Ten years ago, Mr. Gleckman co-founder of the Collaboration for financing long-term care, which brought together policy experts from a wide range of political affiliations. The group agreed on a framework that would combine a national universal government program with initiatives to revitalize the private policy market.

Washington state approach

Without action at the federal level, Washington state will continue with its own program. In time, nearly all residents will pay contributions through a mandatory payroll tax, and the benefit is universal.

In July, most workers in the state will start paying a 0.58 percent payroll tax on their wages to fund the program. From 2026, participating residents can claim a benefit if they have a demonstrable request for help with three or more activities of daily living. The maximum lifetime benefit of $36,500 is adjusted annually for inflation; it is geared to about a year of home care. (Ten years of contributions are required to qualify for the benefit, but near-retirees may receive a partial benefit starting in 2026 that is aligned with the number of years they’ve contributed.)

According to Ben Veghte, director of the Washington State Department of Social and Health Services WA Cares Fund.

“It gives families some breathing space to meet the care needs of their loved ones,” said Mr. Veghte.

The program is expected to reduce the state’s Medicaid spending, which Washington expects to account for 8.9 percent of the total budget over the 2023-2025 period. Without WA Cares, that figure would rise to 10.9 percent by the end of this decade and 17.6 percent by 2045.

Washington has considered some complicated questions, including who can be exempted from participating. The legislation that state legislators approved in 2019 created an exemption for residents who had private coverage. The state later added a deadline for applying for that exemption, prompting more than 480,000 people to rush to buy the coverage, hoping to avoid the tax. They overwhelmed the insurance companies that still sell long-term care policies in the state.

Those applications had to be submitted by the end of 2022. But there is no requirement that buyers keep their coverage or prove they still have it.

“We were worried that people would just buy coverage and then drop it, which would be really counterproductive,” says John Mangan, vice president for state relations with the American Board of Life Insurers. “If people drop their private coverage and aren’t subject to the public plan, they’re not covered at all — and that means they could end up on Medicaid, which isn’t the goal.”

Currently, out-of-state employees who commute to work in Washington can apply for program waivers; so are spouses of military personnel. (All federal employees, including military personnel, are also exempt.) People with temporary non-immigrant work visas, such as seasonal workers, can apply for exemptions. Some disabled veterans who can receive care through the Department of Veterans Affairs are exempt.

Transferability of benefits poses another challenge. The program’s financial model assumes participation by state residents only; a committee has recommended several options for people who have settled into the program to receive benefits if they move.

Questions also remain about a number of issues, including how additional private policies will be coordinated with the public program.

“The journey has been bumpy at times, but companies want to make sure people can stay in or go back to work, especially women, who are often the caretakers,” said Rachel Smith, president and chief executive of the Seattle Metropolitan Chamber of Commerce.

California and Minnesota are taking steps

Legislators in several other states have introduced bills to study or implement public long-term care programs. Minnesota is weighing several options, including two that aim to make private insurance more affordable.

But apart from Washington, the main plan being developed is California’s. The state is exploring the financial feasibility of various options for a public insurance program, with possible legislative action expected in 2024.

“If California goes ahead, it’s going to be exciting because it’s a huge state,” said Mr. Veghte. “That could really break the dam for the rest of the country.”

Like Washington, California would fund its program through a payroll tax, but the state is considering a “progressive” tax system with a premium cap and an exemption for low-income residents. Another difference is that the load can be divided between employees and employers.

California is weighing a range of benefit designs, some of which would be significantly larger than Washington’s. For example, one option would provide a maximum benefit of $110,400 per year, for up to two years, for home-based services and residential facilities.

“The reality for us is that by the beginning of the next decade, 25 percent of our population will be 65 or older, and that’s about 8.4 million people in California,” said Michael Soller, deputy insurance commissioner for communications and press relations at the California Department of Insurance. “Leaving California seniors to fend for themselves is just not an option for us.”