Innovation in Long-Term Care

 An innovative payroll tax to pay for long-term care hits headwinds in Washington state.

By Jason Bloome

The prospect of success was good. The bill had bipartisan support, made economic sense and provided financial relief for frail seniors at risk of blowing through their savings to pay for long-term care. Washington state’s innovative proposal was to charge a  payroll tax to cover $3,000/month in long-term expenses for a year for eligible seniors to help pay for care at home, in an assisted living or at a skilled nursing facility (SNF).

Since states pay for Medicaid (called Medi-Cal in California) they are increasingly worried about the fiscal impact of having to pay for nursing home care for frail seniors who are forced to exhaust their savings to pay for their long-term care expenses. When a senior who requires care is impoverished the state ends up picking up the Medicaid tab. The Kaiser Family Foundation estimate at least 62 percent of senior in SNFs are funded by Medicaid.

The novel idea was to charge a payroll tax of .49 percent, or $22.30/month on average.  A $100/day benefit for a year would be earned by people paying into the system over a certain number of years.  Eligible candidates would be people who needed help with more than three activities of daily living (e.g. help with dressing, bathing, help out of bed).  The $100/day benefit could be used to pay for a caregiver at home, allowing the senior to stay at home for as long as possible, or could be applied to pay a portion of an assisted living or a SNF. After 365 days, the benefit would be exhausted and applying for Medicaid would be an option.

Despite its good intentions, ultimately the bill failed.  One significant reason was the opposition by AARP as to who would quality as a caregiver and as to how that person would be trained to provide care. In Washington, as in many other states, there is a shortage of in-home caregivers.  Stepping into the gap usually are relatives who oftentimes forfeit their own earnings to provide the care.

The coalition supporting the bill all agreed relatives should be covered but realized not every caregiver is qualified to provide care. Thorny questions arose: Should elderly spouses receive the $100/day benefit when many have challenges lifting a person or helping with certain conditions?  What type of training should be given to qualify someone as a caregiver?  Who would pay for the training?  With so many questions left unanswered AARP urged their members to write letters in opposition to the bill and ultimately the bill’s sponsors pulled the bill from consideration for a full vote.

The bill is expected to be reintroduced next year and with more negotiation it is quite possible it will become law in the future. Other states, like California, should sit up and notice; Washington state is poised to be a pioneer in long-term care payment innovation.

Sources:

https://www.nytimes.com/2018/03/09/your-money/washington-state-long-term-care.html

https://www.kff.org/infographic/medicaids-role-in-nursing-home-care/

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