If you needed long-term care, could you afford it?
Author
Marc Cohen
Clinical Professor of Gerontology and Co-Director LeadingAge LTSS Center; Recent Mel King Fellow at MIT Co-Lab, UMass Boston
For many Americans, especially those with a middle-class income and little savings, the answer to that question is absolutely not.
Nursing homes charge somewhere around US$100,000 a year, while frequent visits from a paid caregiver may set you back more than $5,000 a month. With long-term care so expensive for growing numbers of older Americans, and the federal government doing little to make it accessible, some states are taking matters into their own hands to find better ways to cover costs.
Washington state has gone the furthest so far, but the future of its innovative program is not ensured. In November 2024, the state's citizens will vote on whether to make paying the program tax voluntary, which would essentially make it financially unworkable.
I've spent the past few years as part of a team of four scholars examining the solutions that Washington and three other states have come up with to help the middle class pay for long-term care.
No one to foot the bill
As more Americans require long-term care, many of them are belatedly discovering they have few, if any, ways to pay for it. Some are surprised to learn that Medicare, which provides Americans over 65 with health insurance, largely doesn't cover long-term care.
Medicaid, the government's health insurance program for low-income Americans, does provide long-term care coverage, but only if someone already is low income or if they spend down their savings and then qualify for support.
About 7.2 million people over age 65 have Medicaid coverage, while a slightly higher number, roughly 7.5 million, have long-term care insurance coverage through a private insurer. Private long-term care insurance premiums for women in their mid-50s, for example, can cost nearly $1,500 a year. And that's on top of what someone is already spending on their health insurance. For someone older, their premium would be higher - about $2,700 per year for a woman buying a policy at age 65.
That leaves out at least 43 million people over 65, about 75% of Americans in their golden years, who would be stuck footing the bill should they require assisted living, in-home nursing or round-the-clock care in a nursing home.
This system isn't working for anyone. It provides low-quality care that's delivered by low-paid workers, and it can put pressure on family caregivers to make do without outside help.
Trying to fill the void
There's been relatively little progress made toward making long-term care more affordable during the Biden administration, aside from some pandemic-related supplemental payments for providers that have now ended. More recently there has been federal action in support of family caregivers.
Many states searching for solutions are looking at social insurance models as a promising approach. That is, they want to establish a universal program administered by state governments to make long-term care more affordable and accessible to the largest number of people possible.
Social Security offers a good model for these programs: People would pay into a fund during their working years through a payroll tax.
If those taxpayers should need long-term care later in life, they would have at least some guaranteed coverage.
Leading for now
Washington state is by far the furthest along in creating a new long-term care social insurance program, called the WA Cares Fund. That program began collecting a 0.58% tax out of residents' paychecks in July 2023 - or 58 cents out of every $100 earned.
Benefits are slated to begin to be paid out in 2026 and would total up to $36,500 in a taxpayer's lifetime. Only people paying into the fund will be eligible - the benefits are not available for a taxpayer's spouse, children or other dependents who aren't in the workforce.
The benefits will help many people who need long-term care, but they will clearly not cover all costs for everyone, particularly those who need extensive care in a nursing facility for more than a few months. It should also help family caregivers by enabling people to purchase paid care to supplement their own efforts.
Introducing a new tax and using that revenue to fund a new program surely sounds practical. It's not clear, however, whether the state's strategy is going to work out.
Washington's innovative and supportive program is already under fire: A measure before the state's voters in the November 2024 elections would make paying the long-term care tax optional for everyone instead of mandatory with a few exemptions.
The group Let's Go Washington, funded by hedge fund executive Brian Heywood, is trying to eliminate WA Cares by making it voluntary.
That would undermine the program's financial stability, making it unworkable. And Washington state might have to start over.
I'm very pessimistic about the potential for a voluntary approach because there's a precedent. A federal long-term care program created through the CLASS Plan, an offshoot of the Affordable Care Act, was voluntary. The law was repealed in early 2013 without even completing a pilot program.
Moving forward cautiously
California, Massachusetts and Minnesota, meanwhile, are in exploratory stages to see what might work best for them.
California has already started helping people access long-term care by expanding eligibility for Medicaid. Minnesota is trying to make private insurance for long-term care more affordable. Massachusetts has recently funded a study to look at the costs and benefits of alternative social insurance approaches.
All three are doing actuarial studies, which apply mathematical and statistical methods to assess different populations and examine the costs and benefits of different program possibilities.
These studies aim to see what trade-offs might need to be made to keep a state-run, long-term care insurance program affordable and politically tenable.
The four states have been working for upward of a decade on the issue, indicating that the road to long-term care financing reform is both bumpy and full of detours. Anyone trying to solve this problem must be ready to stick it out.
Given how much is at stake for millions of retiring Americans, it is a journey worth making. The problem is not going away and will only grow to be more challenging if not addressed sooner rather than later.
I have provided expertise to Washington State during the WA Cares program development phase and consulted to the state on issues related to program implementation;
