Voters in Washington State have decided to keep the state’s first-in-the-nation public long term care insurance program. On Tuesday, they easily rejected a ballot initiative that would have killed the far-reaching law.
The WA Cares law provides up to $36,500 in long-term care insurance benefits, with the amount increasing with inflation. It is funded with a payroll tax surcharge of 0.58 percent on all workers in the state. For a median income worker, who makes about $78,000, that equals about $450 annually, or about $9 a week.
The initiative was one of four ballot measures sponsored by Let’s Go Washington, a conservative political action committee led and largely funded by Brian Heywood, a hedge fund manager. With 79 percent of the vote counted, Measure 2124 was failing by roughly 55 percent to 44 percent.
Broad Impact
The defeat likely will have an impact well beyond Washington. States such as California, Illinois, Minnesota, and Massachusetts are exploring their own public long-term care financing ideas. Had the Washington initiative passed, those states would have had their own second thoughts about the political viability of a universal tax-funded public program.
The state initiatives are especially important given Donald Trump’s election as president. While there has been interest in a public long-term care social insurance program among some Democrats, it is hard to imagine federal legislation passing with Trump in office.
Perils Of Voluntary Insurance
The Washington initiative would have made participation in WA Cares voluntary, a seemingly innocuous change. But, unless the state adopted strict medical underwriting, the measure effectively would have killed the program.
According to one estimate, as many as three-quarters of workers in the state might have dropped out, most of them younger, higher-income, or healthier. The program could have become insolvent as soon as 2027. Insurance cannot function without a broad risk pool that includes both those who ultimately will need benefits and those who may not ever claim. That is how insurance works.
Congress enacted a voluntary public program called the CLASS Act in 2010 but it was repealed before even starting because premiums would be unacceptably high. And private long-term care insurance has struggled to remain actuarially sound without significant premium increases because its risk pool is so unstable.
In reality, more than half of those over age 65 will need a significant amount of long-term care before they die. What makes a tax-funded, universal public program work, and what makes it relatively inexpensive, is that almost no one knows if they eventually will need long-term care when they first start paying into the program, usually in their 20s.
The First Mover
WA Cares was enacted in 2019. Workers began paying the tax in 2023 and the state will begin paying benefits in July, 2026. It provides a benefit to those who have paid into the system for, generally, at least 10 years. However, there are exceptions for those who have had a serious medical emergency and limited benefits are available to those who have paid into the system for less than 10 years.
As the first state to adopt a public long-term care insurance program, Washington has had its share of stumbles. A one-time exemption for anyone who had purchased private insurance by Nov. 1, 2021 drove hundreds of thousands of state residents to buy coverage to avoid the tax.
Many were low-cost, low-benefit, short-term policies that would provide little support during a normal spell of long-term care needs. And many of those who purchased reportedly have since dropped coverage.
WA Cares is not without its flaws. I prefer a catastrophic public program to a front-end plan such as Washington’s. But it has been a critical first step towards a much-needed public program that helps solve the problem of financing long-term care. Now that the state’s voters have affirmed the program, it will be interesting to see if other states follow.
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