Starting Jan. 1, 2022, most employees in the state of Washington will begin paying into a program signed into law by Governor Jay Inslee in 2019 that’s similar to Social Security and will fund their long-term care. The payroll tax-based program, called WA Cares Fund, will begin paying out $36,500 a year (adjusted annually for inflation) in 2025 to those who participate and are eligible for benefits. This plan anticipates saving $3.9 billion a year in Medicaid expenses.
How do employees participate in this plan?
Washington State residents who participate will pay 58 cents for every $100 they earn. For example, a person making $50,000 per year will pay $290 annually in payroll taxes for this program. Employees have the option of opting out of the plan if they have a long-term care insurance policy.
Eligibility is restricted to those who’ve paid into the fund for at least 10 years, without a break of five years or more, or contributed for three of the past six years when they apply for the benefit. In addition, only residents of Washington are eligible, which means those who live outside the state and commute to work in Washington or who telecommute at a company in the state don’t qualify to participate in the plan.
How can the benefits be used?
For caregivers, this money could help get additional support and services their loved ones need and cover respite costs for caregivers to take time off to recharge and rest. Other services the long-term-care fund can be used for that can ease the caregiving burden include:
- Professional nursing care, whether at home or in an assisted living community
- Home delivered meals
- Dementia support
- Home modifications for an older adult’s safety and access
Opposition to the program
Not everyone is in favor of the new program. Concerns include the $36,500 annual payout, which may not be enough to cover all long-term-care expenses, especially for those with memory loss or chronic illness that requires round-the-clock care. According to Genworth, the median cost of a caregiver for eight hours a day in the United States is $4,576 every month (nearly $55,000 a year), an amount that by itself exceeds the benefit payout.
A lawsuit has also been filed on behalf of three employers and six workers that claims the payroll tax violates several federal and state laws, particularly the Employee Retirement Income Security Act of 1974 (ERISA). The suit alleges that older workers will be penalized because they generally earn more money than those newer to the workplace. In addition, because a person must pay into the fund for at least 10 years, those who work for nine years but have to leave the workplace for an unforeseen reason forfeit their benefits. There is debate among lawmakers and employers as to whether this program constitutes a health care benefit (tax payment) or is an optional benefit such as life insurance (premium payment). How this payment is viewed may be determined by the lawsuit’s outcome.
Will this program be used in other states?
The WA Cares Fund is the first of its kind. Other states are watching to see the outcome of the lawsuit filed, the challenges by state lawmakers who respond to their constituents’ concerns, and the projected economic challenges of fulfilling all the benefits requested.
State Senator Lynda Wilson told Clark County Today, “There are far too many problematic issues with this law. It has a $15 billion actuarial long-term deficit already projected. The payroll rate would have to immediately be increased to $.66 to cover that deficit. So, the cost is likely going up before it’s even implemented.”
Seven Washington Democratic leaders are in talks with Governor Inslee to delay the implementation of the program until January 2023 after an unexpectedly high number of people chose to opt out. In a letter to Inslee, they expressed support for the program but shared reservations about it and the need to hear more from the public about their opinions, approval or rejection of the plan.
“We continue to support the goals of the WA Cares Fund, but we also recognize that changes to the program are needed,” they wrote. “Delaying the program will give us time to analyze recent data.”