Opinion: As new payroll tax nears, state continues trying to make WA Cares look prettier

Elizabeth Hovde points out that starting in July, WA Cares’ regular diet of payroll taxes will take income away from households that could have been used for life’s many needs

Elizabeth Hovde
Washington Policy Center

A state commission overseeing the WA Cares Fund met Tuesday after a months-long, legislative-session hiatus.

The meeting began with a WA Cares Fund refresh for the commission. The state-imposed social program for long-term care will be funded with a new payroll tax of 58 cents for every $100 that W-2 workers in Washington state earn during their working years. That payroll tax begins in July.

The prize for workers who end up qualifying for a fund benefit someday is $36,500. But remember, qualification for this inadequate benefit for most long-term-care needs is only a maybe. First, you may never need long-term care. Second, if you do need it, you’ll have to meet health qualifications determined by the state. You’ll also need to live in the state, as the benefit is not portable. You can’t retire in Arizona, need care and receive money from WA Cares.

Finally, you have to be vested in the fund. For most people, being vested means you have paid the required payroll tax for 10 or more years without a break of five or more years. (Given a tweak to the law last year, near-retirees who won’t have 10 years of taxes paid in before their retirements can receive a portion of the funds based on the number of years they contributed.)

For people who meet all those qualifications, the $36,500 can go toward long-term-care costs that the state approves, including paying a family member or other caregiver. That is a primary reason for WA Cares. The law (House Bill 1087) was heavily lobbied for by Service Employees International Union 775, a union representing more than 45,000 caregivers.

In addition to having taxpayers pay the wages of long-term caregivers, supporters hope money gathered will be used to cost-shift a portion of the state’s Medicaid costs onto workers.

You can learn more about this program that you won’t necessarily benefit from on the WA Cares website or in my policy analysis here. View the May 16 meeting presentation slides here or watch the meeting on TVW. My legislative memo on a b i ll that could have repealed the misguided long-term-care program this past legislative session, but didn’t even get a hearing, is here.

Communication going strong

Much of the meeting after the refresh was spent listing communication efforts being made to inform workers and employers about the WA Cares program. A toolkit is available to help employers understand how they’ll be required to take money from employees and send it to the state. And workers throughout the state are being targeted in various ways with a strong, costly marketing campaign that strives to create favorable opinions about the WA Cares Fund before workers see their pay cuts.

The marketing effort fails to paint a complete picture of who will and won’t benefit from WA Cares, giving workers false hope.

More work needed

The meeting also included an ask for more commissioners to be on workgroups that will help put the finishing touches on WA Cares — including minimum provider qualifications and benefit eligibility determination. Another workgroup will explore the idea of program benefits becoming portable. (Portability is unlikely, however, as it would require cost offsets in an already solvency-challenged fund.)

Ongoing exemptions

Exemption applications are being handled in a timely manner, the state reports, although there are many more workers who are eligible to seek exemption. How many? Travis Fish in the Employment Security Department’s Leave and Care Division tells me, “We don’t have enough data on individual employees to determine how many people are potentially eligible for each exemption category, but we’re doing everything we can to target those populations with information that will help them make a choice by July 1.”

If eligible workers want to opt out of the program and tax but don’t apply in time, they will be assessed the payroll tax. If they eventually are approved for exemption, they will not be reimbursed for prior deductions.

While opting out of WA Cares is no longer a possibility for people who have or want to purchase private long-term-care insurance (and nearly 500,000 did), Washington-based workers who live out of state, non-immigrant visa holders, some disabled vets and military spouses can seek voluntary exemptions. So far, between January 1 and May 17, the total number of exemption applications received from people in those four groups was 9,572. Most of them have been approved (8,228).

Solvency for the program?

While solvenc y conc erns have existed since 2019, a recent, updated actuarial report that the state commissioned shows that the WA Cares fund has a chance of staying solvent at the current tax rate of 0.58% under some scenarios. Under other scenarios, it won’t.

The commission was reminded that the tax rate required is partly based on participation rates, which is still varying, and that the actuarial report said a tax rate between 0.52% and 0.63% will be needed to keep the program solvent. This will continue to be monitored.

As one presenter Tuesday said, WA Cares is a “new animal.” It will be an ongoing challenge to figure out the right tax to satisfy program needs.

Public comments

Several members of the public suggested reopening an exemption window for people who have or who want to obtain private insurance policies, for a variety of reasons. If an aggressive marketing campaign had existed concerning this now-expired opt-out provision, many workers wouldn’t feel like they were kept in the dark.

Some in the long-term-care-insurance industry say having more people insured privately, with better benefits, could save the state’s bottom line even more than a payroll tax on the deserters would. I urged the commission to explore that.

I also asked the commission to again recommend that the Legislature tweak the language surrounding the primary pathway to qualified individual status. A total of 10 years “without interruption of five or more consecutive years,” as the law states, should be changed to “a total of ten years.” Eliminating the requirement for no extended work interruption would have a negligible effect on expected program finances and would allow for consideration of workers who take time away from formal work to raise children or care for aging parents. This law is meant to help caregivers, right?

Better solutions

I’m discouraged the LTSS Trust Commission has to keep meeting like this, trying to make a misguided, poorly thought-through program and tax more palatable to the people who have to fund it. Legislators should have freed them from the task by repealing the law.

WA Cares is not about people in need or even people in need of long-term care. It is about creating a new jobs program for caregiver services — paid by taxpayers — and alleviating some of the state’s Medicaid payments for long-term care.

Instead of creating this administration-heavy fund that many Washington workers won’t benefit from, state leaders could have been increasing Washingtonians’ awareness about the needs and costs of a graying population. They also could have worked to end the abuse of Medicaid — the safety net already set up to catch people in need of long-term care services. Discontinuing taxes and limitations on insurance products in the state also would have helped the state’s long-term-care crisis.

This “new animal” has gobbled up way too much money already. And starting in July, WA Cares’ regular diet of payroll taxes will take income away from households that could have been used for life’s many needs — not just long-term care.

Elizabeth Hovde is a policy analyst and the director of the Centers for Health Care and Worker Rights at the Washington Policy Center. She is a Clark County resident.