Even if you don’t live in the state of Washington, this article is important for you to read for two reasons.
First, though Washington will become the first state to enact long-term care insurance (LTCI) legislation, it won’t be the last. Like Medicaid, which is controlled at the state level, LTCI laws are expected to spread to other states. A handful of them are already examining it closely.
The second reason you need to read this article is that you’ll understand long-term care insurance much better if you do. This is important because there is a 70% chance that you will need long-term care services during your lifetime, and paying for it is much more complicated than you might think.
Before we dive into Washington’s long-term care plans, let’s first brush up on what long-term care insurance does and doesn’t cover.
- What does long-term care insurance cover (& not cover)?
- Why does Washington have a long-term care tax?
- How to opt-out of Washington's long-term care tax
- How will you pay for long-term care when you need it?
More than 50% of Americans believe that Medicare will pay for long-term care, which is not true. While Medicare will pay for some long-term care like home health services (with limitations), it will not cover assisted living or nursing home costs.
As for what it can cover? Well, most people understand they will need to liquidate savings and retirement plans, cash in life insurance policies, and sell off other assets (which often includes their home) to raise cash for long-term care before Medicaid pays a dollar in benefits.
Long-term care insurance can fill in the gaps left by Medicare and prevent the depletion of your personal assets with Medicaid. Though each LTCI insurance policy is different, it will generally help you pay for:
- Adult daycare programs
- Nursing home or specialized dementia care
- Assisted living
- Respite care
- Hospice services
For adults who want to recover from an illness or age in place at home, LTCI can help. Most policies pay for in-home care if you need help with two of the six activities of daily living (ADLs), which include:
- Transferring (out of a bed or chair)
LTCI will also pay for caregiver assistance with other household tasks like meal preparation, light housekeeping, running errands, etc.
Finally, LTCI typically pays for therapy and skilled nursing services received at home, which can mean the difference between aging in place or moving into a nursing home.
Like every other type of insurance policy, long-term care insurance has exclusions and policy limits. For example, pre-existing medical conditions may not be covered during an exclusion period that can last for several months after the policy is issued.
Also, care provided by a family member typically isn’t covered, even though they may have to sacrifice all or part of their income to help a loved one.
If you have LTCI, be sure to read your policy carefully and visit with your agent about what is and isn’t covered. If you don’t have LTCI, get with an agent who understands these policies and explore your options.
[ Related: The pros & cons of long-term care insurance ]
In 2019, the governor of Washington, Jay Inslee, signed the LTSS (Long-Term Services and Supports) Trust Act into law. The goal is to make long-term care affordable for all workers in the state as they age. It’s part of the larger WA Cares Fund, which is an earned benefit paid for by a payroll tax deducted from an employee’s paycheck.
The WA Cares Fund was created after years of research on making long-term care affordable for everyone in Washington. According to the state, the program offers a “modest benefit at an affordable cost.”
The program provides everyone with the basic “modest” benefit level, and people who want more coverage can buy supplemental private LTCI or other types of insurance like critical care insurance, much like how Social Security and qualified retirement plans (IRAs, 401(k)s, etc.) work together.
The modest benefit has a lifetime limit of $36,500, which will pay for about 12 months of part-time home care or 4 months of nursing home care. The limited benefit amount may work for families with lower incomes and fewer assets because they’ll qualify for Medicaid, but middle-income families will find it to be a band-aid when long-term care is needed for even an average length of time (the average duration of long-term care is 3.7 years for women and 2.2 years for men).
Anyone seeking relief from long-term care costs in Washington is going to have to wait at this point. The WA Cares Fund was to begin collecting money for the program through the mandatory payroll tax in January of 2022, which was delayed while lawmakers made adjustments.
Payroll deductions are now scheduled to start in July 2023. Benefits will begin being paid in July 2026. However, there are concerns about the program's long-term solvency and the cost to workers.
Workers can be granted an exemption if they have private LTCI, which has much richer benefits than the state’s plan and is customizable to meet the needs of each insured as opposed to a state program.
Certain other groups can also opt-out, including:
- Non-residents from neighboring states who work in Washington
- Spouse of military service members who are unlikely to make the state their permanent home
- People planning to retire before the three year waiting period for benefits are paid
- Workers on temporary visas
According to projections, 3.1 million workers will begin paying into the program out of a possible 3.6 million.
The cost of long-term care is startling.
National monthly median costs in 2021
- Homemaker services: $4,957
- Home health aide: $5,148
Community & assisted living
- Adult day health care: $1,690
- Assisted living facility: $4,500
Nursing home facility
- Semi-private room: $7,908
- Private room: $9,034
(Courtesy of Genworth’s 2021 Cost of Care Survey)
Other than a private LTCI policy or assistance from a government program, consider these options to help you pay for long-term care:
- Add a rider to an existing life insurance policy.
- Buy a critical care insurance policy.
- Open a health savings account (HSA).
- If you’re eligible, take advantage of veteran benefits.
- Use personal savings.
The best time to apply for long-term care insurance is when you’re younger (mid-30s to mid-50s) and in good health. Take the time now to determine what will best meet your needs long before it’s time to pay for the long-term care you’ll likely need.
[ Related: How much does long-term care insurance cost? ]
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