By Louis H. Brownstone
The California Legislature and Governor Newsom recently proposed establishing a statewide public long-term care insurance program. The central goals are to aid our citizens as they age and become sick and to reduce the billions of dollars of growing long-term care costs to Medi-Cal.
Citizens should make their voices heard regarding this program because as much as they would like to have long-term care protection, they would have to be taxed in order to cover the cost. They will have to weigh the costs versus the benefits and in the end will probably have to vote their preference by ballot.
A Task Force was appointed and has met some twenty-four times over the past year. At the end of 2023, an actuarial report assessing the cost and viability of such a program was submitted to the Legislature. Will the Legislature pass a bill based on the Task Force recommendations?
Few doubt the significance of the growing cost of long-term care and its impact on whole families as their older members age. According to the Genworth Cost of Care Survey, 2021 costs in California were $ 201/day for a home health aide, $ 173/day for an assisted living facility, $322/day for a semi-private room in a nursing facility, and $ 400/ day for a private room. The average period of care in a nursing home varies from about two years for males to over three years for females. Very few families can cover the cost of a long scenario.
Because most cannot afford to pay for outside help, most care today is provided by family members and friends, often at great personal sacrifice. But families are shrinking in size and care by family members is becoming less available.
The United States is the only developed country where you have to be poor in order for the Government to cover your long-term care needs. Bills to further fund long-term care are introduced often in Congress, but have not passed due to lack of funding.
The lack of Congressional action has led many states, including California, to consider their own program. The first state program is now being implemented in Washington State, covering a minimal long-term care benefit, paid for by a payroll tax on employees of Washington companies.
The issues are similar in California and were considered by the California Task Force. The California Task Force is made up of three disparate groups: (1) heads of caregiving organizations, (2) actuaries from insurance companies, and (3) members of the Department of Insurance. Due to their different backgrounds, they wound up recommending five different plan designs, not one, which vary greatly in costs and benefits, giving the Legislature a maze of alternatives to consider.
In my opinion, the only design which has a chance of passing the Legislature is one of the least expensive ones and is an adaptation of the Act in Washington State. Even with this minimal design, the tax could be about one percent of income, or $ 700 per year for a person with an income of $ 70,000. This would only create a minimal public long-term care program. Those who could afford it would want to augment their coverage with private long-term care insurance.
The Task Force assumed that employers could pay half the cost, but I believe there would be tremendous opposition by employers to being further taxed in California. This new tax could encourage more employers to move their domiciles to a state, such as Arizona or Texas, where there is no corporate income tax, thus depriving California of needed revenue.
The Legislature only has a few weeks to introduce new legislation in the 2024 session. If a new bill is not introduced by late February, nothing will be passed in 2024. Then we’ll see what happens in 2025 to enable a bill to become law, possibly by early 2026. That’s all assuming that there is wide public support for such a program. Currently, most citizens are unaware of the considerable work that has been done and the many issues involved. The selling of a program will be a major undertaking and hasn’t yet been funded.
Nothing has happened yet, but watch what the Legislature does. Stay tuned, as this issue could have a big effect on your future.