Long-term care: suddenly everyone (in Washington) has a plan. What does it do?
Eric Franklin
May 16, 2021
I am writing today to give you my thoughts on one of the most interesting, and most confusing, initiatives in the news today. At least in Washington state. It’s the Washington State Long Term Care Trust Act.
Long-term care insurance is something that we started advising clients about as they reach age 50. Before that age, most people have higher-priority savings and spending goals than paying for insurance they may not need for decades, if ever. That isn’t to say that those needs never come around before age 50. Accidents can happen that leave a person unable to work or with a permanent injury that brings along other chronic health conditions.
The combination of uncertainty about when disaster could strike, and the enormous financial impact that it can have, are the matters that this new Washington law seek to mitigate. As the first law of its kind in the United States, it provides a great background to provide you with some basic information about long-term care, Medicare, Medicaid, and what your options are in this new environment.
Before I dive into the effects of the law, let’s take a moment to look at the current landscape for people needing long-term care.
The current landscape
Long-term care can take many forms—in-home skilled or unskilled assistance, respite care, adult day care, assisted living facilities, or a nursing home. A person is generally considered to be in need of some assistance if they are unable to perform two (or sometimes three) of the five basic activities of daily living (ADLs):
· Personal hygiene—bathing, grooming, nail care, oral care
· Dressing and undressing
· Eating—being able to feed oneself, whether or not capable of preparing the food
· Maintaining continence—using the toilet and keeping tidy
· Transferring/mobility—being able to stand from a sitting position and get in and out of bed, and the ability to walk independently from one location to another.
Most insurance provides no coverage for assistance services, or only for very brief help after an acute health event. Medicare provides a limited benefit for days 0-3, and days 20-100 of long-term care coverage. In the donut hole, and after day 100, you are essentially on your own.
Medicaid does provide assistance once you have spent down to your asset limit: $2,000 plus some personal effects, a vehicle, and your home for as long as you live there. After that, you are able to access Medicaid funding, but the available service you need may be far away or unavailable for some period of time.
Medicaid is also a pretty expensive proposition for states, since the cost of services is high, lifespans are improving even for very sick people, and there are so many people needing this help. Medicaid is also expensive for the state, since only about ½-2/3 of the cost is contributed by the federal government. This is always subject to change, as we have seen several times over the past decade or two.
So that is the current landscape: the state sees high costs, high needs, and a national political climate that makes it difficult to rely on a steady funding level.
The new law
Very briefly, the new law imposes a 0.58% tax on all income, or $580 per $100,000 of income. That buys your participation in a state trust that provides a benefit of $36,500 per person (365 days at $100 per day). In order to receive the benefit, you need to be a Washington resident. Given how likely litigation is to skew the final implementation of the law, I don’t want to spend too much more time on the details now. The point is, it’s well-intentioned but not a great solution for many of our clients.
So obviously this gives rise to some basic concerns: how much is this going to cost my family, with no cap on the contributions? Will we still live in the state when we need to access the benefit? Are there better options?
Your options
Your options are essentially to go along or to opt out. We’ve touched on the costs of going along. What about opting out?
To opt out, you must demonstrate to DSHS that you have a sufficient level of private coverage. To date, the rule only states that the coverage must last for a year. Proposed rules seem to be silent on the actual amount of coverage needed, but it is safe to assume that it would require at least $100 per day to match the state program. Applications for exemption from the long-term services and supports trust program will be accepted by the department only from October 1, 2021, through December 31, 2022, so you don’t have to decide right away whether to participate, but you only have through the end of 2022 to make that decision. Once you’re out of the program, you may not later join.
As a way to think about the costs, we recently saw a policy that covered one person for $100 per day but for 750 days. That policy cost $200 per month every year until age 95. So to compare the state plan and the private plan, a single person earning $100,000 per year would pay $580 per year while working, and would have to contribute for 10 years to receive the state benefit. Or that same person could pay $2400 per year whether working or not, but would have access to the benefit after the 90-day waiting period outlined in the policy.
Regardless of your feelings about the state program, and which path you want to pursue, I am very grateful for the opportunity to begin discussing this topic with anyone, and to the state for prompting so many people to consider their future health concerns starting now. I have family members, as you may, who at this moment are struggling to make decisions about chronic illnesses and the care they require. So much is outside of our control when that day comes, and the opportunity to make a decision is far in the past. Luckily for us, that day is here now, and regardless of your choice, choose something. Don’t let future health care decisions be made by you deciding today not to think about it.
Nothing in this post should be construed as legal advice, interpretation of the statute, offers of insurance, insurance advice, or personalized financial advice. We are happy to discuss this topic with you and make recommendations specific to your situation.
I am writing today to give you my thoughts on one of the most interesting, and most confusing, initiatives in the news today. At least in Washington state. It’s the Washington State Long Term Care Trust Act.
Long-term care insurance is something that we started advising clients about as they reach age 50. Before that age, most people have higher-priority savings and spending goals than paying for insurance they may not need for decades, if ever. That isn’t to say that those needs never come around before age 50. Accidents can happen that leave a person unable to work or with a permanent injury that brings along other chronic health conditions.
The combination of uncertainty about when disaster could strike, and the enormous financial impact that it can have, are the matters that this new Washington law seek to mitigate. As the first law of its kind in the United States, it provides a great background to provide you with some basic information about long-term care, Medicare, Medicaid, and what your options are in this new environment.
Before I dive into the effects of the law, let’s take a moment to look at the current landscape for people needing long-term care.
The current landscape
Long-term care can take many forms—in-home skilled or unskilled assistance, respite care, adult day care, assisted living facilities, or a nursing home. A person is generally considered to be in need of some assistance if they are unable to perform two (or sometimes three) of the five basic activities of daily living (ADLs):
· Personal hygiene—bathing, grooming, nail care, oral care
· Dressing and undressing
· Eating—being able to feed oneself, whether or not capable of preparing the food
· Maintaining continence—using the toilet and keeping tidy
· Transferring/mobility—being able to stand from a sitting position and get in and out of bed, and the ability to walk independently from one location to another.
Most insurance provides no coverage for assistance services, or only for very brief help after an acute health event. Medicare provides a limited benefit for days 0-3, and days 20-100 of long-term care coverage. In the donut hole, and after day 100, you are essentially on your own.
Medicaid does provide assistance once you have spent down to your asset limit: $2,000 plus some personal effects, a vehicle, and your home for as long as you live there. After that, you are able to access Medicaid funding, but the available service you need may be far away or unavailable for some period of time.
Medicaid is also a pretty expensive proposition for states, since the cost of services is high, lifespans are improving even for very sick people, and there are so many people needing this help. Medicaid is also expensive for the state, since only about ½-2/3 of the cost is contributed by the federal government. This is always subject to change, as we have seen several times over the past decade or two.
So that is the current landscape: the state sees high costs, high needs, and a national political climate that makes it difficult to rely on a steady funding level.
The new law
Very briefly, the new law imposes a 0.58% tax on all income, or $580 per $100,000 of income. That buys your participation in a state trust that provides a benefit of $36,500 per person (365 days at $100 per day). In order to receive the benefit, you need to be a Washington resident. Given how likely litigation is to skew the final implementation of the law, I don’t want to spend too much more time on the details now. The point is, it’s well-intentioned but not a great solution for many of our clients.
So obviously this gives rise to some basic concerns: how much is this going to cost my family, with no cap on the contributions? Will we still live in the state when we need to access the benefit? Are there better options?
Your options
Your options are essentially to go along or to opt out. We’ve touched on the costs of going along. What about opting out?
To opt out, you must demonstrate to DSHS that you have a sufficient level of private coverage. To date, the rule only states that the coverage must last for a year. Proposed rules seem to be silent on the actual amount of coverage needed, but it is safe to assume that it would require at least $100 per day to match the state program. Applications for exemption from the long-term services and supports trust program will be accepted by the department only from October 1, 2021, through December 31, 2022, so you don’t have to decide right away whether to participate, but you only have through the end of 2022 to make that decision. Once you’re out of the program, you may not later join.
As a way to think about the costs, we recently saw a policy that covered one person for $100 per day but for 750 days. That policy cost $200 per month every year until age 95. So to compare the state plan and the private plan, a single person earning $100,000 per year would pay $580 per year while working, and would have to contribute for 10 years to receive the state benefit. Or that same person could pay $2400 per year whether working or not, but would have access to the benefit after the 90-day waiting period outlined in the policy.
Regardless of your feelings about the state program, and which path you want to pursue, I am very grateful for the opportunity to begin discussing this topic with anyone, and to the state for prompting so many people to consider their future health concerns starting now. I have family members, as you may, who at this moment are struggling to make decisions about chronic illnesses and the care they require. So much is outside of our control when that day comes, and the opportunity to make a decision is far in the past. Luckily for us, that day is here now, and regardless of your choice, choose something. Don’t let future health care decisions be made by you deciding today not to think about it.
Nothing in this post should be construed as legal advice, interpretation of the statute, offers of insurance, insurance advice, or personalized financial advice. We are happy to discuss this topic with you and make recommendations specific to your situation.
I am writing today to give you my thoughts on one of the most interesting, and most confusing, initiatives in the news today. At least in Washington state. It’s the Washington State Long Term Care Trust Act.
Long-term care insurance is something that we started advising clients about as they reach age 50. Before that age, most people have higher-priority savings and spending goals than paying for insurance they may not need for decades, if ever. That isn’t to say that those needs never come around before age 50. Accidents can happen that leave a person unable to work or with a permanent injury that brings along other chronic health conditions.
The combination of uncertainty about when disaster could strike, and the enormous financial impact that it can have, are the matters that this new Washington law seek to mitigate. As the first law of its kind in the United States, it provides a great background to provide you with some basic information about long-term care, Medicare, Medicaid, and what your options are in this new environment.
Before I dive into the effects of the law, let’s take a moment to look at the current landscape for people needing long-term care.
The current landscape
Long-term care can take many forms—in-home skilled or unskilled assistance, respite care, adult day care, assisted living facilities, or a nursing home. A person is generally considered to be in need of some assistance if they are unable to perform two (or sometimes three) of the five basic activities of daily living (ADLs):
· Personal hygiene—bathing, grooming, nail care, oral care
· Dressing and undressing
· Eating—being able to feed oneself, whether or not capable of preparing the food
· Maintaining continence—using the toilet and keeping tidy
· Transferring/mobility—being able to stand from a sitting position and get in and out of bed, and the ability to walk independently from one location to another.
Most insurance provides no coverage for assistance services, or only for very brief help after an acute health event. Medicare provides a limited benefit for days 0-3, and days 20-100 of long-term care coverage. In the donut hole, and after day 100, you are essentially on your own.
Medicaid does provide assistance once you have spent down to your asset limit: $2,000 plus some personal effects, a vehicle, and your home for as long as you live there. After that, you are able to access Medicaid funding, but the available service you need may be far away or unavailable for some period of time.
Medicaid is also a pretty expensive proposition for states, since the cost of services is high, lifespans are improving even for very sick people, and there are so many people needing this help. Medicaid is also expensive for the state, since only about ½-2/3 of the cost is contributed by the federal government. This is always subject to change, as we have seen several times over the past decade or two.
So that is the current landscape: the state sees high costs, high needs, and a national political climate that makes it difficult to rely on a steady funding level.
The new law
Very briefly, the new law imposes a 0.58% tax on all income, or $580 per $100,000 of income. That buys your participation in a state trust that provides a benefit of $36,500 per person (365 days at $100 per day). In order to receive the benefit, you need to be a Washington resident. Given how likely litigation is to skew the final implementation of the law, I don’t want to spend too much more time on the details now. The point is, it’s well-intentioned but not a great solution for many of our clients.
So obviously this gives rise to some basic concerns: how much is this going to cost my family, with no cap on the contributions? Will we still live in the state when we need to access the benefit? Are there better options?
Your options
Your options are essentially to go along or to opt out. We’ve touched on the costs of going along. What about opting out?
To opt out, you must demonstrate to DSHS that you have a sufficient level of private coverage. To date, the rule only states that the coverage must last for a year. Proposed rules seem to be silent on the actual amount of coverage needed, but it is safe to assume that it would require at least $100 per day to match the state program. Applications for exemption from the long-term services and supports trust program will be accepted by the department only from October 1, 2021, through December 31, 2022, so you don’t have to decide right away whether to participate, but you only have through the end of 2022 to make that decision. Once you’re out of the program, you may not later join.
As a way to think about the costs, we recently saw a policy that covered one person for $100 per day but for 750 days. That policy cost $200 per month every year until age 95. So to compare the state plan and the private plan, a single person earning $100,000 per year would pay $580 per year while working, and would have to contribute for 10 years to receive the state benefit. Or that same person could pay $2400 per year whether working or not, but would have access to the benefit after the 90-day waiting period outlined in the policy.
Regardless of your feelings about the state program, and which path you want to pursue, I am very grateful for the opportunity to begin discussing this topic with anyone, and to the state for prompting so many people to consider their future health concerns starting now. I have family members, as you may, who at this moment are struggling to make decisions about chronic illnesses and the care they require. So much is outside of our control when that day comes, and the opportunity to make a decision is far in the past. Luckily for us, that day is here now, and regardless of your choice, choose something. Don’t let future health care decisions be made by you deciding today not to think about it.
Nothing in this post should be construed as legal advice, interpretation of the statute, offers of insurance, insurance advice, or personalized financial advice. We are happy to discuss this topic with you and make recommendations specific to your situation.
7724 35th Ave NE #15170
Seattle, WA 98115-9955
(971) 716-1991
hello@prosperowealth.com
Prospero Wealth, LLC (“PW”) is a registered investment advisor offering advisory services in the States of Washington, Oregon, and California and in other jurisdictions where exempted. We are conditionally registered in Texas.
© Prospero Wealth 2024. All rights reserved.
7724 35th Ave NE #15170
Seattle, WA 98115-9955
(971) 716-1991
hello@prosperowealth.com
Prospero Wealth, LLC (“PW”) is a registered investment advisor offering advisory services in the States of Washington, Oregon, and California and in other jurisdictions where exempted. We are conditionally registered in Texas.
© Prospero Wealth 2024. All rights reserved.
7724 35th Ave NE #15170
Seattle, WA 98115-9955
(971) 716-1991
hello@prosperowealth.com
Prospero Wealth, LLC (“PW”) is a registered investment advisor offering advisory services in the states of Washington, Oregon, California, and in other jurisdictions where exempted.
© Prospero Wealth 2024. All rights reserved.