The state of Hawaii is about to have a fascinating debate over whether to create a first-in-the-nation universal long-term care insurance program. The benefit would be modest—about $70-per-day for a year– but it would be available to all long-term residents of the state and be funded through a broad-based tax.
The measure will be introduced by Senate Commerce, Consumer Protection and Health committee chair Roz Baker, according to a report in the American Prospect magazine. Hawaii has been working on this issue since the 1990s—not surprisingly since the state has a rapidly growing population of those 75 and older and has a cultural traditional of caring for older adults.
Sen. Baker has introduced long-term care insurance bills in the past but they have gone nowhere due to concerns about costs and the legislature’s reluctance to raise taxes. This year, supporters are more confident though winning support for a tax increase in an election year will still be an uphill battle, even in a deep blue state such as Hawaii.
The idea of a public long-term care insurance program was buttressed by a 2014 report by state’s Department of Health. That paper, by University of Hawaii professor Larry Nitz and colleagues, described and priced several alternative versions of the front-end insurance plan Baker will introduce.
Benefits would be triggered once someone requires assistance with at least two activities of daily living or suffers from severe cognitive impairment, just as they would with private long-term care insurance. After a 30-day waiting period, beneficiaries would receive $70-a-day for up to 365 days to reimburse their long-term care costs. The benefit is expected to increase annually by roughly 3 percent to protect buyers against rising care costs.
The program would be financed with a surtax of 0.5 percent on the state’s 4 percent General Excise Tax—a gross receipts tax levied on nearly all businesses and usually passed on to consumers. Because the state’s economy is heavily tourist-dependent, state officials estimate that visitors would end up financing about one-third of the program’s cost. Revenues would go to a special trust fund that is operated by an independent board. The program, which must remain financially solvent over 75 years, would begin paying its first benefits five years after it begins.
Anyone who files a Hawaii tax return would be eligible to participate. To prevent people from moving to the state just to access the insurance, residents would vest 10 percent of the maximum benefit for each year they file a tax return, thus would receive full benefits only after 10 years.
Hawaii is not the only state looking to experiment with long-term care insurance. For example, Minnesota has been exploring possible alternatives, though it seems more interested in finding ways to enhance private insurance than to create a Hawaii-like social insurance program.
It may still be years before the federal government can agree on long-term care financing reform, though over the next few months at least three separate non-government groups are expected to recommend solutions. Until Congress acts, state experiments may teach us a great deal about how different models work.
Keep an eye on Hawaii over the next couple of years. If the plan is enacted, it will be a great test to see if public long-term care insurance reform is financially—and politically–viable.