The "Golden Age" for Long-Term Care?

Welcome to the Advanced Markets Minute in both print and audio form. Today's article is called "The Golden Age for Long Term Care."

You've probably heard about the State of Washington's Cares Fund, a state long term care benefit funded by a payroll tax. If you're not in the State of Washington, you may have thought that you didn't need to be concerned with any of it, and that your state would never do something like that.

If you thought that, it is time to think again.

The Washington law was postponed and amended, but it is now scheduled to begin operating in mid-2023. What is more, approximately 13 other states are in various stages of implementing a similar law. States as different as California and Utah are putting plans in place for state-sponsored long term care programs.

Why? In a word, Medicaid. Every state has Medicaid cost problems, and even states that would not typically add a state tax are looking favorably at adding a tax specific to funding long-term care. The goal is to delay state Medicaid costs for as long as possible.

While these state-sponsored programs may be better for an uninsured client than nothing, the bad news is that if Washington is a model, they will be only a little better than nothing. Washington will assess a payroll tax of .58% on all people working in the state. For that tax, anyone who had paid into the plan long enough to qualify for benefits is eligible for a lifetime maximum of $36,500 in LTC care, payable at $100 per day. According to the American Association for Long Term Care Insurance, the average lifetime long-term care claim as of the end of 2020 was more than $137,000, and over half the claimants needed benefits for more than a year.

While the benefits are capped, the payroll tax is not. For someone earning $30,000 a year the tax would be $174. But if someone earns $200,000 the tax would be $1,160. Most clients could buy a lot more benefits than one year of $100 a day with that money.

What does all this mean for our industry? The Washington law allowed people with long-term care coverage in place to opt out of the Act and avoid the payroll tax. But the coverage had to be in place prior to November of 2021. If other states follow the opt-out model then clients with existing long-term care policies will be able to avoid the tax-but only if they have their policy in place.

Now is the time to raise this issue with potential long-term care clients, and show them how they can get the right coverage at a much lower cost per dollar of care than they can through the payroll tax. Preparing your clients in advance of the state-backed wave that is coming will benefit them and help you to stand out as their trusted advisor.

After these state-backed programs are in operation, it is very possible we will all look back and call the next few years the golden age of long-term care. The good news is that golden age is still in front of us. Your clients, and you, can still take part in it. Call us in Advanced Markets if you have any questions.