The California Long Term Care Insurance Task Force has been established with the support of Governor Newsom to implement a publicly funded long term care program. This task force has a committee of fifteen members, consisting mostly of California Department of Insurance employees and representatives of caregiving organizations.
The Task Force has now met four times and must report its recommendations by the end of 2022. It is looking at several programs elsewhere, but the main plan it is discussing is the recently enacted Washington State Cares Act.
The Cares Act will be funded beginning in January through a mandatory payroll tax of .58 % on all W-2 earners in the State. This will give workers a lifetime benefit of up to $ 36,500, adjusted annually for inflation by Washington’s Consumer Price Index.
The concept in Washington and potentially in California is to provide a small long term care benefit and to encourage citizens to buy wrap-around private long term care insurance. This would protect citizens and save the state many millions of future Medi-Cal dollars.
In my view, this noble effort got many things right in its design. It’s a mandatory program. It is funded by a progressive tax, so that the poor pay very little and the rich do a great deal of the funding. Its benefits are far-reaching. It has a seventy-five year vision, and the program can be adjusted to ensure its financial solvency.
However, there have been problems in Washington. Citizens pushed back, as no one likes to be taxed. Not all citizens are included and must opt-in. Those employees who live or retire out of state will have to pay the tax but will not receive benefits. Washington allowed a brief opt-out period for those who purchased private long term care insurance. This created panic buying to avoid paying the tax, and the insurance industry was swamped with applications and could not cope with the business activity.
If California uses the Washington Cares Act as its model, which I believe it will, it will attempt to overcome its shortcomings. Even with improvements, the benefits will be small and will not come close to covering most long term care scenarios. Hopefully the Task Force will adopt a large marketing plan to recommend private insurance plans as a wrap-around to its public plan.
By Louis H. Brownstone