Title: Conquering the Real Long-Term Care Insurance Hurdle: Splitting the Cost
In the upcoming months, Representative Tom Suozzi (D-NY) will resurrect his WISH Act, proposing a public catastrophic long-term care insurance program. Suozzi is actively seeking support from Republicans, insurance companies, healthcare providers, and advocacy groups to establish a system that caters to older adults and people with disabilities.
The main challenge lies in financing this program. Suozzi's 2021 bill advocated for payroll taxes, a strategy prevalent in many developed nations. However, the 2025 proposal may initially omit a specific tax structure if Suozzi decides to focus on building support for the insurance idea initially, then tackle the funding issue down the line.
Mandatory and Self-Sustaining
Creating a mandatory or universal insurance program has two primary objectives. First, it ensures that everyone participates, preventing premiums from skyrocketing when only those in need join. Second, the mandatory nature lends self-sustainability to the program by establishing a steady revenue stream via taxes or contributions.
The CLASS Act of 2010—a voluntary program—was one such example of the pitfalls of optional participation. Premiums were found to be much higher than expected, prompting the Obama Administration to abandon the idea.
A Modest Tax Burden
If a program needs to be self-sustaining, it will require some form of tax or contribution to provide the necessary funding. In 2016, the Long-term Care Financing Collaborative, a collective I contributed to, proposed a public catastrophic insurance plan funded by a 0.6% payroll tax. This is equivalent to a $7-weekly premium for a median income full-time worker earning $60,000 annually. After ten years of regular payments, individuals would be eligible for benefits.
In comparison, private long-term care insurance premiums averaged around $2,100 for men and $3,600 for women in 2023 for policies with a $165,000 coverage. It is worth mentioning that as many as one-third of individuals may be denied private insurance due to pre-existing medical conditions or family history. A public program, however, ensures coverage for everyone.
Industry Support
Despite initial reluctance, long-term care insurance companies are now recognizing the potential of a public catastrophic plan. Genworth, a prominent insurer, openly supports the idea, noting that it could revive their struggling business by complementing government programs with private policies. This collaboration could lead to more affordable coverage and a higher awareness of the need for long-term care across the country.
Financing Challenges
Despite these advantages, Republican lawmakers seem hesitant to endorse an unfunded social insurance program or approve tax hikes to finance it. However, Washington State voters defied expectations last November by rejecting a referendum aimed at abolishing their tax-funded long-term care insurance program, suggesting potential political momentum.
Moreover, a public insurance program could drastically reduce Medicaid's annual long-term care costs by as much as a third, benefiting older adults and those with disabilities by offering insurance alternatives to the current Medicaid system.
As the population ages and long-term care costs continue to rise, a public insurance program becomes increasingly crucial. However, building broad bipartisan support is critical to ensure its availability to future generations. To overcome political resistance, measures that make the program more palatable—such as targeted tax increases or private-public partnerships—need to be explored.
- Representative Tom Suozzi's WISH Act, which aims to establish a public catastrophic long-term care insurance program, has gained support from various sectors, including insurance companies like Genworth, who see potential in complementing government programs with private policies.
- If the WISH Act is enacted, it could dramatically reduce Medicaid's annual long-term care costs, as a public insurance program could provide an alternative to the current Medicaid system for older adults and individuals with disabilities.
- While some Republican lawmakers express hesitancy about endorsing a new tax-funded program or increasing taxes, the success of Washington State's tax-funded long-term care insurance program in a recent referendum suggests potential political momentum for similar initiatives at the federal level.
