A new law designed to help fund long-term care services could mean big business for home care providers down the road.
On May 13, Washington Governor Jay Inslee officially signed the Long-Term Care Trust Act into law. The groundbreaking tax could be the first of several of its kind to sweep the nation.
The law requires state residents to pay into a long-term care program through an employee payroll tax starting no later than January 2022. Eligible individuals would then have access to up to $36,500 in financial support for things like in-home care, meal deliveries and home modifications.
To be eligible under the law, recipients would need assistance with at least three activities of daily living (ADLs), in addition to meeting several other requirements.
Local industry insiders — including Jeff Wiberg, CEO of Liberty Lake, Washington-based Family Resource Home Care — have been heavily involved in lobbying for the law since last year.
“Most people are not thinking about long-term care insurance or long-term care costs,” Wiberg, who also serves on the board of the Washington Home Care Association (WHCA), told Home Health Care News. “This becomes a way to deal with a lot of the gaps associated with long-term care. It operates somewhat similar to the long-term care insurance that we as an industry are used to dealing with.”
With more than 750 employees and a base of roughly 1,000 clients, Family Resource Home Care is one of the largest independent providers of home care services in the Pacific Northwest.
Meanwhile, WHCA is the Seattle-based state chapter of the Home Care Association of America (HCAOA), a trade association that represents almost 3,000 at-home care companies across the U.S.
Washington is the first state to pass this kind of long-term care support law, though rising health care costs may trigger other states to follow suit.
While in-home care is often the most affordable option for older adults, it’s still costly.
On average, non-medical home care costs $4,004 per month for seniors whose caregivers work 44 hours per week, according to the latest Genworth Cost of Care survey. Seniors who pay for a private room in a nursing home, however, pay an average of $8,365 per month.
Brent Korte, executive director of home care services at EvergreenHealth, also voiced support for the Long-Term Care Trust Act.
Kirkland, Washington-based EvergreenHealth is a two-hospital healthcare system that offers a wide range of services and programs.
“It’s really meant to be a support for the vulnerable and aging population in the state,” said Korte, who also serves as a board member for the Seattle-based Home Care Association of Washington (HCAW). “This is meant to fill in the gaps that current insurances, including Medicare and Medicaid, don’t cover.”
HCAW is a not-for-profit trade association for home health, hospice and home care agencies.
A boon for home care
To qualify for the benefit, Washington residents must be 18 or older and work at least 500 hours a year. Additionally, residents must have paid the payroll tax for 10 years without interruption in five consecutive years — or in three of the previous six years.
The state won’t begin paying benefits until January 2025.
While there aren’t any definitive analyses on industry impact at this point, experts believe the Long-Term Care Trust Act will be particularly impactful on home care agencies compared to other post-acute service providers.
To some extent, that’s simply due to consumers’ overwhelming preference to age in place.
“I believe that most of the utilization will actually go into home care because studies have shown that most prefer to stay in their homes for as long as they can,” Wiberg said. “Given this particular program, it’s really going to facilitate that choice. The Washington state benefit will give [providers] the ability to serve more people without the cost being a barrier.”
The new law has likewise been lauded by LeadingAge, one of the largest aging services advocacy organizations in the country.
“We are pleased to see that Washington legislators, with the help of a broad coalition of stakeholders, enacted the Long-Term Care Trust Act,” Ruth Katz, senior vice president of public policy and advocacy for LeadingAge, told HHCN. “With 10,000 people in the U.S. turning 65 each day – and knowing that a 65-year-old today has a 50/50 chance of needing some paid long-term care at some point before the end of their life — we are going to have to act to find a way to pay for this care.”
Most Americans often don’t save enough to pay for a healthy retirement, according to Katz, much less to cover the costs of long-term care.
“Our hope is to see Congress respond to the growing need [for paid long-term care], but in the meantime, we anticipate the other states will follow Washington state’s example and come up with state-based programs,” she said.
Desperate to reduce Medicaid spending
Already, states like Michigan and Illinois are looking to create similar long-term care financing models, while California is considering a ballot initiative on a public long-term care financing program, according to experts.
In many ways, the home care industry is at a tipping point, with more and more states recognizing the inherent value providers bring to the table — not only related to aging in place, but also when it comes to reducing hospital readmissions and avoiding trips to the emergency room.
“I would anticipate more of these bills in the coming years, as states become desperate to reduce Medicaid spending on [long-term services and supports], which will prove to be a great opportunity for home care Providers,” Kerin Zuger — corporate vice president of business development and strategic partnerships at RiseMark, Right at Home’s parent company — told HHCN.
Omaha, Nebraska-based Right at Home is a home care franchise network with nearly 500 U.S. locations.
Until more policies catch on, the Washington measure is a step in the right direction, Zuger said, especially because it also requires potential home care providers to be licensed by the state.
“It is good to see that the bill requires that any provider be licensed, which ensures a better quality of care and protects patients,” she said.
The payroll tax would be 0.58% on Washington employees’ earnings. Based on the per capita average income in Washington of about $37,000, the average monthly contribution would be about $18 per person.