The state must drop its tax on long-term care
It is neither wise, fair, nor compassionate to take the income of today’s low-wage workers for a future benefit they may never need or be entitled to. But that’s what the Washington State Long-Term Care Act of 2019 will do. It should be repealed.
From July 2023, W2 workers — including those on low incomes, who are struggling to make ends meet — will face a payroll tax of 58 cents for every $100 they earn to fund a welfare program. long-term care called WA Cares. Their income will often be taken and given to people with greater means to pay for home care or nursing services.
This ill-conceived law creates an overly wide safety net, wasting precious resources for those not in need.
Even before it starts, WA Cares is a program with solvency issues. And its marketing gives Washingtonians false assurances. My analysis shows that the Long Term Care Act also caused disruption to the insurance industry, mass confusion among taxpayers, and created a potentially profitable monopoly for a politically connected union.
Nearly 500,000 Washingtonians took advantage of an exemption available to those who had private long-term care insurance (LTCI) that was purchased before Nov. 1, 2021. Many other Washingtonians were unaware of the opt-out provision , as it has been kept largely in obscurity. Still others tried to opt out and found themselves at an impasse when seeking a private plan, as the LTCI industry ground to a halt under state competition and interference.
Washington workers are rightly doubtful that they will ever benefit from this long-term care program for which they are taxed. Vesting criteria will exclude many people from the already inadequate $36,500 benefit for long-term care needs, and grossly unfair qualifications add to the doubt.
If you move out of state, regardless of what you pay in payroll taxes during your working years, you are excluded from the benefit. Deteriorating health criteria set by the state will also make some people who need help with activities of daily living ineligible. Failing to do W2-based work 10 years in a row without a five-year break also kicks you out. This will be a barrier to qualifying for the very people this law is partly intended to help: family caregivers of people in need of long-term care. It’s also a barrier for gig workers and people who spend part of their working years parenting at home.
There is a better way than putting even low-income workers on the shoulders of everyone else’s long-term care costs. We have a state safety net for people in need: Medicaid. Lawmakers should repeal this law and protect Medicaid from budget-bloating abuses.
Be aware that with an insufficient lifetime benefit for long-term care costs, some people will still find themselves using Medicaid when $36,500 runs out in a few months. And this law could lead to even more people relying on Medicaid, as the state falsely assures workers that their long-term care needs are now covered.
State legislators should also reduce state tax on insurance products and allow and encourage greater market competition to help make LTCI insurance more affordable and attractive.
The mess that WA Cares brought us has a silver lining – more people are now aware that one day they might need long-term care.
Raising awareness and encouraging financial planning for this possible vital need – and others – is an appropriate role for government. What is not appropriate is for the Legislature, in the midst of record inflation, to add a $30 billion burden on workers for an inadequate benefit they do not want, in hopes of achieving 1 $.2 billion in savings for the state over 30 years.
WA Cares is far from caring.
Elizabeth Hovde is the director of the Center for Health Care at the Washington Policy Center.