In recent years, several states have sought new ways to address the growing demand for long-term care among their aging residents.
Washington state became the first state to enact a state-run long-term care program, now known as the “WA Cares Fund”, financed by a payroll withholding tax. Similar legislation has also been introduced in Pennsylvania and California, and in May 2022, New York legislators introduced their own version of the program, known as the Long Term Care Trust Act (Senate Bill 9082).
If enacted, New York’s Long Term Care Trust Act would establish a state-run long-term care trust program to provide a public benefit for individuals who require assistance with three (3) or more activities of daily living. Unlike Medicaid, the proposed legislation does not impose any income or resource limit for eligibility.
Under the proposed legislation, eligible individuals could receive long-term care benefits with a lifetime cap of $36,500 (adjusted for inflation), with benefits paid retroactively to the date a claim was filed. Moreover, New York’s benefits would be portable and apply even if the eligible individual receives care outside of New York State.
To finance the program, New York would institute a payroll withholding tax, set by the state’s comptroller at “the lowest amount necessary to maintain actuarial solvency” of the plan, with payroll deductions to begin two (2) years after the law is enacted. Under Washington state’s program, this payroll deduction is 0.58%, though it is estimated that New York’s deduction could be slightly higher. Significantly, because the payroll tax is a small percentage of earned wages, high-earning individuals might pay more than their eventual benefits under the program.
Some New Yorkers would have a limited opportunity to opt out and avoid incurring the payroll tax, including self-employed individuals and individuals who own a long-term care policy with an effective date no later than January 1 of the year the law was passed.
Washington state’s WA Cares Fund began collecting payroll taxes to fund its mandatory long-term care plan in July 2023, and New York legislators will certainly be watching as the program rolls out to examine the benefits and pitfalls of the program.
For now, the New York Long Term Care Trust Act remains in committee in the New York State Senate. However, if the proposed legislation were to be enacted, it would provide many more New York residents with access to long-term care benefits to offset at least a portion of the costs of their care.