Navigating Long-Term Care in Washington

Washington participates in the Long-Term Care Insurance Partnership program helping residents protect their hard-earned assets from the future costs of long-term health care. Owners of qualified LTC Insurance can enjoy dollar-for-dollar asset protection. 

However, rapidly increasing costs for care services are becoming burdensome on residents and their families for those who do not have Long-Term Care Insurance. 

While residents who don't own Long-Term Care Insurance pay a tax, making them eligible for a minimal benefit through the Washington Care Fund, that benefit will barely address the substantial cost of future long-term health care. Many families will need an LTC policy to fund additional care needs.

There are a wide variety of care options available in Washington for those who require long-term health care services, including 

• adult day care centers
• assisted living facilities
• continuing care retirement communities
• home health care providers
• memory care facilities
• rehabilitation facilities
• traditional nursing homes

Federal Partnership Program

The State of Washington participates in the federal/state long-term care partnership program. The program, as authorized by federal law, provides “dollar-for-dollar” asset protection if a policyholder exhausts the benefits from his/her qualified LTC insurance policy.

The Long-Term Care (LTC) Partnership Program is a joint Medicaid/private company venture designed to encourage individuals to purchase long-term care insurance so families can protect savings and the state government can protect the budget for the Medicaid program. When people plan for their own long-term care expenses with private LTC insurance, it places less pressure on the state programs that would otherwise need to provide assistance for those expenses.

Policy Example

This allows families to protect their assets for estate preservation in an amount equal to the benefits paid by the qualified long-term care policy. For example, if your Washington Long-Term Care Partnership policy paid $300,000 in benefits that same amount would be disregarded in the calculation for the spend-down requirements for Medicaid. The Partnership Program also protects those assets after death from Medicaid estate recovery.

Reciprocity

Most states have reciprocity with other states' long-term-care partnership programs including Washington. This means if you move from or to Washington your partnership asset protection follows you as well.

Medicaid

Long-Term Care Medicaid spend down is $2,000.

A spouse’s minimum asset allowance is minimum of $59,890 up to a maximum of one-half of countable assets up to $130,380. Your spouse’s minimum monthly income allowance is $2,178. * The home equity limit is $603,000.

For more information about the Medicaid program visit www.medicaid.gov

Rate Stability Rules

In addition, Washington consumers enjoy additional peace-of-mind as the state has adopted Long-Term Care Insurance Rate Stability Rules.  These rules, developed the National Association of Insurance Commissioners, makes it much harder for an insurance company to get an approved rate increase.

Washington Long-Term Care Trust Act

This is a tax support long-term care benefit program providing state residents with up to $36,500 in benefits to pay for care at home and other services. To qualify for these benefits, you first must need assistance with normal activities-of-daily-living like eating, bathing, toileting or even with assistance with medications.

The program is funded with a payroll tax of 0.058 percent on employees. The state won’t start to collect the tax until July of 2023, and won’t start paying benefits until 2025. 

Gov. Inslee signed into law on January 27, 2022, delaying the program's implementation until July 1, 2023. Employees who have already had premiums deducted from their paychecks will get refunds. 

The governor also signed into law changes that allow those who live out of the state and work in Washington, military spouses, and some veterans with disabilities can opt-out of the tax. 

State residents who purchased Long-Term Care Insurance to opt-out of the tax will need to continue their coverage to maintain their ability to opt-out of the tax. 

Keep in mind, despite the name, this really isn’t “long-term care”. It also provides a small benefit. While not a replacement for Long-Term Care Insurance, it can be helpful for many people and will work well with qualified Long-Term Care Insurance policies.  The benefits paid by the state program will NOT count toward asset protection under the partnership program.

Things to Know About the Trust Act/Washington Cares Fund

The Washington State Long-Term Care Trust Act (now known as the Washington Cares Fund) is not a solution for long-term health care for most people. It is, however, helpful for many people who otherwise would have few options available to address the costs and family burdens that long-term care places on people in Washington State.

Here are a few additional facts to know:

• The program will only pay for a small amount of care and services. It has a $36,500 lifetime maximum benefit.
• The trigger for benefits is your need for help with at least  3 of 10 daily living activities. These activities are: medication management, personal hygiene, eating, toileting, transferring, body care, bathing, ambulation/mobility, dressing, and cognitive impairment.
• You are required to use providers from a list approved by the state.
• It takes ten years to fully vest in the program. If you are retired or disabled today you are not eligble. To be eligible for benefits, you must have paid into the system for three years within the past six years or for a total of 10 years, with at least five of those years paid without interruption. In addition, you must receive the benefits within the State of Washington.

Comprehensive but Limited Benefits

The plan's benefits are comprehensive, although, in theory, because the benefit is small, it will probably be used primarily for in-home services. These are covered services provided by the Trust Act:

• Nursing Homes
• Assisted Living Facilities 
• Adult Family Homes
• In-Home care services (skilled and custodial) 
• Meals on Wheels
• Transportation to and from the doctor
• Wheelchair ramps
• Medication management
• Dementia education
• Care coordination

Benefits Could Increase or Decrease

The benefits are only offered within Washington State. The benefits start at $100 and will be adjusted annually at a rate no greater than the Washington Consumer Price Index." An eight-person council will vote annually to decide whether to increase or decrease the benefits to ensure the program's solvency. In other words, the benefits are not exactly guaranteed.

Exemption for LTC Insurance

Owners of private Long-Term Care Insurance have the opportunity to opt-out of the program permanently by applying for an exemption.

You can apply for an exemption from the payroll tax deduction if you have purchased Long-Term Care Insurance before November 1st, 2021, as ordered by the Washington State Legislature).

The following types of Long-Term Care Insurance plans qualify:

• Traditional Tax-Qualified (TQ) Long-Term Care Insurance policies
  • Individual plans - including Partnership plans
  • Employer group plans
  • Certain grandfathered older Non-Tax-Qualified plans
• Life insurance riders that meet federal guidelines under U.S. Code 7702B(b) 
  • Certain life insurance policies and/or annuities that supplement Long-Term Care Insurance

Washington State's Employment Security Department makes the final determination. Once you opt out of the tax, and the program, you can not later opt back in.

People who are retired are not allowed to participate in the program. The first time anyone in the program may qualify for benefits would be January 1st, 2025.

Tax Opt-Out Procedure

The Washington State Cares Act announced they have opened the opt-out window for those Washingtonians who already own qualified Long-Term Care Insurance or recently bought it.

If you own a qualified Long-Term Care Insurance policy you must complete the proper paperwork to avoid the payroll tax.

Follow these steps:

Go to this website - Apply for an Exemption – WA Cares Fund and read the instructions. You will need to create a SecureAccess Washington account.

The Employment Security Department (ESD) will review your application and notify you if you’re eligible for an exemption from the tax. The opt-out window is open until December 31, 2022. The department is expected to be overwhelmed with applications, so it may take a while before you receive your letter from them. 

When you receive your letter from ESD you will show that to your Human Resources department at your employer.

Products Approved in Washington

A variety of products are approved in Washington for Long-Term Care planning including traditional plans, along with certified partnership policies, and asset-based “hybrid” policies.

A majority of insurance companies have suspended sales of their Long-Term Care Insurance products in the State of Washington through Novemeber of 2021.

Tax Incentives

Washington does not offer any state tax incentive for qualified long-term care insurance. Federal tax incentives are available.

Reverse Mortgages in Washington State

In Washington, residents have an option to use reverse mortgages to help them in retirement. A reverse mortgage is a loan that you don't have to pay back - or make payments on as long as you are still living. 

The tax-free money from a reverse mortgage can be used for many things, including 

• Reduce expenses 
• Income 
• Fund Long-Term Care Insurance 
• Provide resources for in-home care if you are unable to obtain LTC Insurance due to poor health

You must be at least 62 years old, and at least one owner must live in the house most of the year. 

Eligible homes include single-family dwellings, two to four-unit, 

owner-occupied dwellings, and some condominiums and manufactured homes. 

By law, you can never owe more than your home's value when the loan is repaid. So, in the event your home loses value, you are protected. You don't make mortgage payments, but you still must pay the property taxes, insurance and properly maintain the residence.

Learn more about reverse mortgages by clicking here.

_{*The federal government sets a new minimum and maximum amounts each year, but states can set their own minimum requirements at any level between the federal limits. This information is based on the best available sources.}