A Long Term Care Tax May Be Coming to Your State
Long Term Care
More states are planning to tax those who do not own Long Term Care insurance.
The primary purpose of Long Term Care (LTC) insurance is to protect your assets and your access to quality care in the years ahead. With a rapidly aging population, increasingly high costs of care, and given that just 3% of U.S adults age 50 or older have LTC insurance, states are taking action in the form of state LTC programs funded by a payroll tax.1
Beginning in July 2023, Washington State imposed an LTC tax on residents to support a state LTC benefit program, the WA Cares Fund. Soon, those who need care and have contributed to the fund for at least three years will be able to start applying for benefits. The 0.58% payroll tax is based on total earned income, meaning that higher earners pay thousands each year.
Long Term Care Insurance Provides Options
There are many ways to pay for care when you need it and where you’d like to receive it.
The Washington law allowed those with qualified LTC coverage to opt out and avoid the payroll tax entirely, but residents were given a short period of time after the law was enacted to secure a qualified LTC policy. Not only were Washingtonians forced to scramble, but many insurers also placed restrictions on the types of coverage available for Washington residents.
Today, other states are taking steps to implement publicly funded long term care programs like Washington’s.
- Massachusetts has recently completed a study estimating that a payroll tax between 0.68% and 2.74% would be required to fund benefits for services including home care, assisted living, and nursing home care.4
- In California, a task force was developed to propose plans for a state funded program.5 It remains to be seen what legislation may pass. Depending on the success of WA Cares, a handful of other states could follow suit.
- New York is notably much closer to the implementation of such a program with a 2025 bill proposing a modest payroll tax to fund a self-sustaining program like WA Cares.6 Details are still undefined, but the legislation could move for a full vote as early as 2026.
Long Term Care Insurance Provides Options
The state programs will provide LTC coverage for those who remain uninsured, but for most people, the state benefits won’t be nearly enough. In Washington, covered residents can receive up to $36,500 in state-supplied lifetime benefits to pay for extended care. While the state promises the benefits will grow with inflation, current costs of long term care are rising at a rate higher than current rates of inflation.7
If more states consider an “opt-out” model for LTC programs like WA Cares, it’s important to put meaningful coverage in place soon. In Washington, there was a small window of time for enrollment, and many companies simply couldn’t keep up with demand. Since it can take up to two months to apply and be approved, it’s important to start planning now. With an affordable LTC policy, you can safeguard your assets from the expensive costs of extended care, including in-home care.
With an affordable LTC policy, you can safeguard your income and your assets from the expensive costs of extended care, including in-home care. With fifteen new states considering new LTC tax plans, it’s important to start your own planning now.
An important note for younger people: If you’re young and expect your earnings to increase significantly in future years, you can save significantly by buying LTC insurance sooner rather than later, especially if you reside in a state like Washington where there is no cap on the payroll tax. By securing LTC insurance while you’re younger and in good health, you’ll also benefit from lower premiums.
An important note for everyone: When considering LTC insurance, it may be tempting to purchase the lowest-cost plan available to avoid the payroll tax. But keep in mind that a robust LTC policy can help protect your future assets and lifestyle choices. With a meaningful policy, you’ll have access to high-quality care, including home care, without burdening your family.
Our experienced LTC Advisors can help you find the right coverage. Don’t delay!
1Is Life Insurance the Answer to the Growing Long-Term Care Need in the U.S? LIMRA. www.limra.com/en/newsroom/industry-trends/2025/is-life-insurance-the-answer-to-the-growing-long-term-care-need-in-the-u.s, August 28, 2025.
2WA Cares Fund. wacaresfund.wa.gov
3The evergreen model for long-term care: A state-level strategy for a persistent social policy problem. Niskanen Center. www.niskanencenter.org/the-evergreen-model-for-long-term-care-a-state-level-strategy-for-a-persistent-social-policy-problem, May 13, 2025.
4Long-Term Services and Supports Feasibility Study (Commissioned by EOHHS). Mass.gov. www.mass.gov/doc/long-term-services-and-supports-feasibility-study-commissioned-by-eohhs, June 10, 2025.
5Long Term Care Insurance Task Force. California Department of Insurance. www.insurance.ca.gov/0500-about-us/03-appointments/ltcitf.cfm
6Assembly Bill A1499. New York State Senate. www.nysenate.gov/legislation/bills/2025/A1499
7Cost of Care Survey. CareScout. www.carescout.com/cost-of-care, Retrieved February 9, 2026.
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