Jumpstarting the Debate Over Public Long-Term Care Insurance

WASHINGTON, DC – DECEMBER 21: Rep. Tom Suozzi (D-NY) (Getty Images/Cheriss May)
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Rep. Tom Suozzi (D-NY) has sponsored legislation to establish a public long-term care insurance policy that is catastrophic. A modest increase in the payroll tax of 0.3 percent for workers and 0.3 percent for employers, or roughly $300 per year for a median wage worker, would be used to fund the monthly cash benefit, which would start at $3,600 and be indexed for inflation. For many elderly people, the plan would shift public funding for long-term care from Medicaid, which is only available to the poor, to social insurance, which is open to everyone. In contrast to Medicaid, where benefits are limited by state and federal laws, the cash benefit would provide beneficiaries a lot of flexibility in how they spend their money. It may also make it less likely that they’ll need to go to a nursing home, which is the only place where Medicaid is mandated to pay for long-term care.
The Well-being Insurance for Seniors to be at Home (WISH) Act is the name of the bill. Benefits, despite their name, can be used in any situation. It is designed to cover the cost of 6 hours of home care per day, but it might be used to pay for a variety of services and supports.
Benefits calculation
Benefits are available to people who have reached full Social Security retirement age and are severely cognitively impaired or require assistance with at least two activities of daily living (ADLs), such as bathing, eating, or toileting. Those who have contributed to the program for at least ten years will receive full benefits. After paying into the system for 1.5 years, people would be eligible for partial payments.
It would only pay benefits if an enrollee required a high degree of care for a period of time, similar to how private long-term care insurance works with a waiting period (or deductible).
The waiting period, unlike private insurance, would be determined by a beneficiary’s average lifetime earnings. After a year, those with the lowest incomes may be eligible for benefits. After 20 months, a worker with a median income would be eligible, while those with the highest income would have to wait five years.
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Benefits would be exempt from taxation. They would also have no bearing on eligibility for other federal assistance programs. However, they may reduce the amount of public assistance. For those on Medicaid, for example, the social insurance program would effectively act as the first payer, lowering Medicaid long-term care costs significantly.
Front-end coverage vs. catastrophic coverage
The payroll tax money would go into a separate trust fund from the federal general fund. Trustees would be permitted to invest donations in “conservative” marketable securities, which is a big plus.
The Long-Term Care Financing Collaborative described the basic concept of a public catastrophic long-term care program in 2016. Researchers Marc Cohen, Judy Feder, and my Urban Institute colleague Melissa Favreault came up with the idea for the income-based waiting period.
Except for the United States and the United Kingdom, practically every major industrialized country in the world has a social insurance program for long-term care. In the United States, Washington State has passed its own version. The WISH Act, on the other hand, is a catastrophic plan, whereas the Washington bill will give first-dollar coverage up to $36,500.
Current retirees would not be eligible for WISH benefits since they would have had to pay into the system through new payroll taxes (unless they go back to work). Younger people with disabilities would not be eligible because they must be at least retirement age.
A significant improvement
The WISH Act would make a significant difference in today’s resource-constrained long-term care system. Suozzi expects that by doing so, private long-term care insurance firms will be encouraged to market coverage to augment the federal benefit. Private carriers may be more eager to reenter the market without the danger of actual catastrophic insurance. Only approximately 60,000 stand-alone long-term care plans were sold in 2018, and nearly all of them were for five years or fewer.
Rich Johnson, a colleague at the Urban Institute, believes that over 70% of persons aged 65 and up will require extensive long-term care before dying. About a third of people will require it for more than two years, and 10% will need it for six years or longer.
WISH would not add to the expanding US debt because it would be totally supported through the payroll tax. That feature, however, is also its greatest political challenge: overcoming opposition to the tax hike.
Despite the fact that the increase in payroll taxes is minimal, anti-tax Republicans are almost certain to oppose it. President Biden has promised not to raise taxes on anyone earning less than $400,000, a promise that the WISH Act will break.
Biden made an ill-advised commitment, but he appears dedicated to following it. Suozzi refers to the financing mechanism as a social insurance contribution rather than a tax increase. However, that could be a difficult sell.
The president and Democratic congressional leaders are currently focused on extending Medicaid’s home and community-based care program. The WISH Act, on the other hand, would help another vulnerable group: middle-income people who aren’t poor enough to qualify for Medicaid long-term care but don’t have the financial means to pay for it themselves./nRead More