LTC Planning – What’s The States Got To Do With It?


In 1984 the Grammy Award for Best-Record-of-the-Year was given to a singer whose sobriquet within the industry was The Queen of Rock ‘n’ Roll.  It was Tina Turner’s first and only #1 Billboard hit and, at age 44, she became and remains the oldest female artist to ever achieve the honor.  Turner’s winning song, What’s Love Got to Do with It?, offers some sobering advice in its opening lyrics:

You must understand/ though the touch of your hand/ makes my pulse react/

That it’s only the thrill/ . . . You must try to ignore/ that it means more than that.

Lately it seems that all that talk about state-mandated long-term care programs is making a lot of pulses react.  But maybe, like Ms. Turner suggests, it shouldn’t amount to much and is not the important thing to which attention should be paid.

First, a few observations about what is going on in many statehouses across the fruited plain:
  • To date only Washington has enacted a government-provided long-term care. California has completed its LTC program feasibility report.  Fourteen more are giving serious consideration to their own LTC initiatives.
  • The trend suggests that the plans will be funded by a mandatory payroll tax. The one plan in force takes .58% of W-2 income with no cap.  The feasibility in the other may charge a progressive tax ranging from 1.5% to 2.5% on all earned income.
  • The Washington plan allowed a waiver period during which a taxpayer could initiate his or her own private coverage under a qualifying plan and avoid the tax levy. There is no certainty that any future legislation in any state will provide waivers for those with either existing coverage or policies purchased in anticipation state plan implementation.
So, what’s the bottom line regarding what we should be telling clients concerning all these state rumblings?  Simply this, to modify Tina Turner a bit:  What’s the state’s got to do with it? 
  • Motivation to consider private long-term coverage shouldn’t be to achieve a possible waiver and avoid the risk of a mandated levy against salary if a state plan is implemented.
  • Concern should, as always, be about the greater risk of a possible long-term care event that 1) becomes more likely and 2) more expensive to insure against with increased age.
  • At best state plans, like Washington’s, would most likely serve primarily as revenue-raising devices to shore up rapidly shrinking funding bases for current Medicaid plans. Any benefits they provide would, again, most likely prove inadequate for the level of care most clients would prefer.

It’s good that the activity of states is causing many to re-focus on the too-often overlooked need for long-term care protection.  Our job is to use this window-of-opportunity to demonstrate how a client’s future can be made truly more secure with the various forms and features of coverage available in the current marketplace. 

Contact us to discuss more!