Representative Tom Suozzi (D-NY) introduced a bill to create a catastrophic public long-term care insurance program. The monthly cash benefit, initially around $ 3,600 and indexed to inflation, would be funded by a modest payroll tax increase of 0.3% for workers and 0.3% for employers , or about $ 300 per year for an employee at the median salary.
For many seniors, the plan would shift public support for long-term care from Medicaid, a program limited to the poor, to social insurance available regardless of income. The cash benefit would give recipients substantial flexibility in how they spend aid, unlike Medicaid where benefits are limited by state and federal rules. It may also make them less likely to have to relocate to a nursing home, the only setting where Medicaid is required to provide long-term care benefits.
The bill is called the Elderly Home Welfare Insurance Act (WISH). Despite the name, the perks could be used in any context. It is intended to cover the equivalent of 6 hours per day of home care, but could be used to pay for a wide range of services and supports.
Calculation of benefits
People who reach full Social Security retirement age and have severe cognitive impairment or need help with at least two activities of daily living (ADLs), such as bathing, eating or going to the bathroom. toilets, would be eligible for benefits. Full benefits would be paid to those who contributed to the program for at least 10 years. People would be eligible for partial benefits after they had contributed to the system for a year and a half.
It would only pay benefits after a member needs a high standard of care for a period of time, much like the waiting period (or deductible) in private long-term care insurance .
However, unlike private insurance, the waiting period would be linked to the beneficiary’s average lifetime earnings. Those with the lowest incomes could receive benefits after one year. A median-income worker would qualify after 20 months, and the highest-income workers would have to wait five years.
The benefits would not be taxable. And they would not affect eligibility for other federal benefit programs. But they could reduce the amount of public benefits. For those receiving Medicaid, for example, the social insurance program would effectively act as the first payer, a feature that could significantly reduce Medicaid long-term care costs.
Catastrophic coverage vs. frontal coverage
Payroll tax revenues would be paid into a trust fund, separate from the federal general fund. It is important to note that the Trustees would be allowed to invest their contributions in “conservative” marketable securities.
The basic framework for a catastrophic public long-term care program was described in 2016 by the Long-Term Care Financing Collaborative. The Income-Based Waiting Period was an innovation pioneered by researchers Marc Cohen, Judy Feder, and my Urban Institute colleague Melissa Favreault.
With the exception of the United States and England, almost every major developed country in the world has a social insurance program for long-term care. And in the United States, Washington state adopted his version. However, the WISH law is a catastrophic plan while the Washington law will provide first dollar coverage limited to a maximum of around $ 36,500.
Since beneficiaries must have contributed to the system through new payroll taxes, current retirees would not be eligible for WISH benefits (unless they return to work). Because they must be at least of retirement age, young people with disabilities either.
A major improvement
The WISH law would be a major improvement on the current long-term care system, which is under-resourced. Suozzi hopes this will encourage private long-term care insurance companies to sell coverage to supplement the federal benefit. Without running the risk of true catastrophic insurance, private carriers may be more willing to re-enter the business. In 2018, they only sold about 60,000 stand-alone long-term care policies and almost all of them lasted five years or less.
My colleague at the Urban Institute, Rich Johnson, estimates that about 70% of people aged 65 and over will need a high level of long-term care before they die. About a third will need it for more than two years and about 10 percent will need it for 6 years or more.
Because WISH would be funded entirely by the payroll tax, it would not add to the growing debt of the United States. But this characteristic is also its greatest political challenge: overcoming resistance to its tax hike.
While his payroll tax hike is modest, anti-tax Republicans are almost certain to oppose it. And President Biden has vowed not to raise taxes for those earning $ 400,000 or less, a promise the WISH Act would violate.
Biden’s promise was misguided, but he seems determined to keep it. Suozzi calls the funding mechanism a social insurance contribution, not a tax increase. But it can be a tough sell.
Right now, the President and Democratic leaders in Congress are focused on expanding Medicaid’s home and community care program. But the WISH Act would help support another hard-pressed population, middle-income people who are not poor enough to qualify for Medicaid long-term care but who do not have the financial resources to pay for the care themselves.