New York Long Term Care Trust Act – Part 2

In last week’s post I wrote about a bill introduced in New York that we may eventually see in New Jersey.  Modeled after a Washington state law, if passed it would mandate a payroll tax on all employees to cover an insurance policy that will provide coverage for their long term care.  As I noted last week, the Washington law has flaws in it that the draft of the New York law attempts to fix.

The New York law provides for an exemption from the tax as long as you have a long term care insurance policy in place as of January 1 of whatever year the new law becomes effective.  It does not appear likely that this will happen in 2022 but if it does occur any time in 2023 one would need to have policy in place by the end of this year.

The policy benefits are small, $100 a day for 1 year.  The total of $36,500 will not be enough for many people, since the average cost of nursing home level care can approach $168,000 or more a year, however, the feeling is that with the oldest baby boomers starting to turn 80 in 2026, any attempt to ease the increasing burden on Medicaid, the primary government program that covers long term care, is a good one.

The bill provides for the creation of a long term care commission.  Without proper funding this type of a plan can’t work.  Washington’s law requires a .58% payroll tax.  The commission in New York would need to determine the optimum tax.  It’s not clear what that amount would be, although the bill does provide for periodic adjustments which means the tax could increase over time to meet changing circumstances.

The proposal is interesting in so far as it attempts to solve a problem that will only become more acute over time.  It won’t, however, have any impact on people who are currently retired, but still healthy since they wouldn’t be subject to the tax.  Those are likely to be the majority who will need long term care in the next several years.