Earlier this week, U.S. Representative Thomas Suozzi introduced the WISH Act (H.R. 4289) to create a public catastrophic Long-Term Care Insurance program funded by a new payroll tax. The acronym stands for "Well-Being Insurance for Seniors to be at Home Act" (click here to read H.R. 4289).
The program is to be financed by a payroll tax of 0.3 percent for workers and 0.3 percent for employers; and it would pay out a monthly cash benefit of about $3,600 (indexed to inflation). This amount is estimated to pay for about six hours of in-home care daily. Family members would not be eligible to receive payment; and the individual entitled to the benefit must comply with State and Federal laws relating to minimum wage and withholding of payroll taxes and other employment-related taxes.
The following chart shows how 2021 payroll taxes would be increased by this new program:
Including the proposed Long-Term Care (LTC) Tax, W-2 employees would pay total payroll taxes of 7.95% with self-employed workers paying 15.9% (employee plus employer portion).
The WISH Act conditions benefit eligibility on reaching full Social Security retirement age, and having a severe cognitive impairment or needing assistance in at least two activities of daily living (ADLs). Full benefits would be paid to those who contributed to the program for at least 10 years (people would be eligible for partial benefits once they paid into the system for six quarters).
The program proposes to pay benefits after an enrollee required a high level of care for a varying amount of time based on a beneficiary’s average indexed earnings. Those with the lowest incomes could receive benefits after one year; a median income worker would be eligible after twenty months; and the highest income workers would begin to receive benefits after five years.
Funding for the WISH Act is not limited to the LTC Tax noted above. In addition, there is appropriated to the Federal Long-Term Care Trust Fund out of moneys in the Treasury: $12,000,000 for program establishment in each of Fiscal Years 2022-2024; and another $50,000,000 for educating the public.
An immediate question that comes to mind is whether it would be allowed to opt out of the federal program, for instance if a taxpayer already owns private Long-Term Care Insurance. It should be noted that an opt out provision was included in a Washington State program passed into law earlier this year.
The new Washington State Long-Term Care program mandates public Long-Term Care benefits for Washington residents. The Long-Term Care Act was created to reduce pressure on the Medicaid system and is paid for by 0.58% tax on employee wages. Under current law, residents have one opportunity to opt out of this tax by having private Long-Term Care Insurance in place by November 1st, 2021.
The WISH Act's sponsor said he is hopeful the program also will have an effect on the private Long-Term Care Insurance market, increasing opportunities for insurance companies and their agents to offer Long-Term Care Insurance to supplement the federal program. That just may be WISH-ful thinking.
Until next time,
Andrew Herman, President
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