Additional studies add uncertainty to Washington’s Long Term Care program

Aug 4, 2022
Written by WR Communications

In July, Inside Washington Retail reported on two state-sponsored actuarial studies that show that the current funding structure for Washington’s Long Term Care Program will likely lead to program insolvency. The program, enacted in 2019, imposed a new 0.58% payroll tax on all employee earnings in Washington State. The payroll tax funds the newly created Washington Cares Fund, which is intended to provide financial assistance for long-term care. In 2022, the Legislature delayed implementation of the program, and the payroll tax, in response to several issues related to eligibility, questions over “opting-out” of the program, residency requirements, and the long-term solvency of the program. The two actuarial analyses show that the 0.58% payroll tax is insufficient to maintain the program as currently designed.

In addition, new studies are emerging that raise numerous policy questions about the program’s overall structure. Emerging issues include:

  • Washington workers can only receive $36,500 in lifetime benefits, which is likely inadequate.
  • Despite having paid into the program, many workers will not qualify for benefits due to residency requirements and military benefits.
  • Low-income workers will be subsidizing benefits for higher earning workers who may have other means of assistance.
  • In 2020, Washington voters rejected an amendment to the State Constitution (SJR 8212) which would have allowed investment of Washington Care Fund in a portfolio that could yield higher returns. Rejection of the constitutional amendment exacerbates the solvency challenges with the program. Without program modifications, the Legislature will be forced to consider raising the payroll tax.
  • As originally adopted, participation in the program was voluntary. A worker could opt out at any time. In 2021, however, the Legislature amended the program to make the payroll tax mandatory unless one could show they had private insurance by November 2021. More than 500,000 workers “opted out” of the program, with tens of thousands still waiting for insurance policies to be issued. The analysis underpinning the original program anticipated that nearly all Washington workers would choose to be in the program. However, it’s clear that workers increasingly prefer to be responsible for their long term care needs.

The program is now scheduled to take effect in July 2023, allowing time for the Legislature to review the current program and make program modifications in the upcoming session. If the Legislature fails to modify and reform the program in the 2023 session, then the program, and payroll tax, will take effect “as is” in July 2023. WR will continue working with business organizations, and labor and employee groups as this issue develops leading into the session.