How would you like to pay for a program that disqualifies you if you move out of state, imposes barriers to service and has a lifetime cap at a fraction of your likely need? Enter Washington’s new long-term-care program, funded by another payroll tax on workers and taking effect this January.
The tax was passed by the Democratic-controlled Legislature in 2019 and tweaked this past legislative session. It will bite into take-home salaries at a rate of 58 cents per $100.
The state government is taking money from W2 workers to fund a socialized, one-size-fits-all, long-term-care entitlement program that a lot of workers don’t want or need — and that some people won’t use, even after paying into the program for years.
Long-term care is when a person needs nonmedical help with the activities of daily living, such as bathing, cooking and taking medications. Industry numbers show seven of 10 of us will need it. Many people use assets, savings or family for the need. Others purchase insurance. And some use the safety net Medicaid provides if they haven’t planned for the expense. Lawmakers who passed this law want workers paying more of the bill for that last pool of people.
This payroll tax has no cap on income, so workers who earn $25,000 annually will pay $145 a year and a worker earning $100,000 will pay $580 each year — and so on. Everyone who pays in for a required number of years (typically 10 or more) is vested and eligible for the same lifetime benefit, regardless of the amount of money they’re forced to contribute and regardless of their individual needs.
If you need long-term care but move out of Washington for your retirement years you won’t receive the benefit you’ve been taxed for: The benefit is not portable and can only be used in Washington. Some soon-to-be retirees also are out of luck. They’ll pay into the program but won’t receive the promised benefit because they haven’t met the required number of vestment years.
A lot of Washingtonians might want to opt out of the program for these reasons and more — including the lifetime benefit’s low purchasing power.
That’s one of the worst parts of this state-imposed program. The lifetime benefit is set at $36,500, a laughably small amount. Anyone who knows the price of long-term care and the average length of time people need it is aware that even a modest level of care can cost more than twice that. (See Genworth’s Cost of Care Survey.)
This inadequate benefit makes the state’s marketing of the new program misleading. The WA Cares Fund website erroneously states that the fund addresses the long-term care need, giving Washingtonians peace of mind. But by offering a nonportable benefit with a cap at a fraction of the actual average need, the WA Cares Fund is not addressing the long-term-care need nor offering peace of mind.
Opting out is allowed for a limited time and with a cumbersome condition: Workers need to have private, long-term-care insurance in place by Nov. 1 and then apply for an exemption from the state between Oct. 1, 2021, and Dec. 31, 2022.
While the state government benefits from shifting costs onto the backs of workers, even low-income workers don’t win with this tax. Their paychecks are lowered for a benefit they might never use. And the lifetime benefit puts many of them back on Medicaid reliance when the $36,500 is gone.
The only silver lining to this law is that more people are talking about long-term care and making appropriate plans. Prompting this conversation was an appropriate role for lawmakers; becoming a long-term care insurer was not.
Legislators should repeal this unfair, costly and inappropriate law and its accompanying payroll tax when they meet again in Olympia.
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