Taxation without representation: WA long-term care bill

Washington State instituted a plan (WA Cares Fund) to provide long-term care benefits to residents. People could opt out if they provided proof of (expensive, hard to get) long-term care insurance coverage. The scheme was financed out of people’s paychecks – 58 cents for every $100 gross earnings. So what’s that, on average? $300 per year? With the cost of medical services, including long-term care, that doesn’t sound like much of a burden.

But there’s a catch.

Everyone has to pay into the fund, but not everyone is eligible to receive benefits. If you’re nearing retirement age, you don’t get anything out of the plan you paid into. Naturally, there was a backlash. (Oh, BTW, I don’t recall this being on a ballot. It seemed to materialise out of Olympia.) The fund has been modified so that people born before 1968 can get 10% of the full benefits. Ten. Percent.

What, are older workers second-class citizens? As second-class citizens, is it OK to tax them without ‘representation’ (services rendered)?

They get to vote for (or against) the people approving the taxes.

That’s not what “representation” normally means in that phrase. It means that you have a say, through your representative. Doesn’t mean that you’ll benefit from a taxpayer-funded program. Most people over 18 pay taxes to fund schools, for instance, but they don’t attend the schools.

Aren’t people over 65 eligible for Medicare ? If you’re covered by another programme, makes sense that you wouldn’t be covered by a programme designed for under 65 people.

That’s not what “representation” means, and there are many many taxes that go to pay for services that the taxed person is not eligible for.

People without children pay taxes that support playgrounds and public schools. People who live abroad pay taxes that build and maintain highways. People with terminal diseases who will not reach retirement age pay Social Security taxes.

Taxes are not pre-paid use fees levied on the users of government services. They are collective payment as a society for things that society, through its elected governmental representatives, deems worthy of paying for. This is basic high-school civics-level stuff.

There was a method to get out of paying it but you had to buy your own policy. The idea a lot of people had was to buy a policy, obtain the exemption, then choose not to renew when the time came. Nearer to the deadline for obtain the policy, many insurance companies were no longer willing to sign people up (or so I’ve read).

More recently there has been a delay on imementation in order to try and address the multitude of issues that have been brought up.

Also, this is rich. Almost every major policy enacted in the last 100 years has been a massive transfer from young people (who are on average poorer) to old people (who are on average richer). Social security, Medicare, the ACA : all are massive wealth transfers from young poor people to old rich people.

I know that. Geez, whatever happened to rhetoric? But ‘Taxation without getting any benefits’ isn’t catchy, and ‘representation’ (which I did put in quotes so nobody would think I was talking about actual representation) is being used metaphorically.

The difference is that the young people collect on Social Security and Medicare when they get older. I disagree that the ACA is a ‘massive wealth transfer from young poor people to the old rich people.’ Young, poor people are covered by the ACA as well. Without ACA, millions of young, poor people would not have health coverage. And again, everyone gets to collect when they need it. WA Cares says people have to pay into it, but they’ll never be allowed to receive any benefits.

Most people have a choice to have children, either naturally, medically-aided, or through adoption. However nobody has a chance to go back and be born later.

That doesn’t make it not a transfer. When (if) they do collect, it will be a transfer from the current young to the current old. And of course given demographics, the current transfer rate is unsustainable. Today’s young people are extremely unlikely to receive the same level of benefits they are financing.

The ACA is large and complex, so it is many things. Some of them are neutral or not a generational transfer. But the part that is a transfer is the requirement that the ratio between the lowest premium and the highest be at most 3:1. Young people’s actual medical expenses are much much less than 1/3 of old people’s, so in practice this ratio means that young people are greatly overcharged for health insurance, subsidizing old people who are greatly undercharged.

I’m not sure how that’s relevant.

Imagine that, just like the tax law you mentioned, the state of Washington decided to tax people more money for a new benefit for children. People who are near retirement would be in the same situation: taxed, but unable to enjoy the benefits of the new program. People near retirement are generally biologically unable to have children and not eligible for adoption. Would you argue that it’s unjust for the state to tax them for a benefit they couldn’t reasonably receive?

My tax dollars also support programs that benefit the poor, even though I hope and expect that I’ll never be poor enough to need them, and programs that benefit veterans, even though I’ll never be a veteran, and programs that benefit people yet to get a college degree, even though I already have a degree, and programs that benefit women, even though I’m quite certain that I’ll never be a woman. My taxes, in fact, support quite a lot of programs that don’t and never will directly benefit me. Thus has it always been; thus shall it always be. And I’m fine with that, but if I weren’t, I could vote for new leaders who would reduce or eliminate those programs.

The law is crap. I generally favor social welfare legislation, but this law taxes everyone, but provides benefits so inadequate it doesn’t solve any problem. Also, as pointed out, many can never collect any benefit because they didn’t pay in long enough or live (or move) out of state. I got a private LTC policy that provides better benefits but is very expensive. I opted out of the state system and won’t pay any of this tax. Once you opt out, you’re out forever (they state this like it’s a threat, and not a benefit) I can cancel my new policy now and have successfully evaded this tax forever. Nonetheless, I think it should be repealed.

Medicare doesn’t pay for long-term care.

Medicaid pays for long term care, but that’s a means tested program for people with no assets. A lot of eldercare legal planning in the US revolves around transferring assets to family members with enough time to qualify for Medicaid long-term care when it’s needed (there’s a look-back period).

That is not true about Social Security. It is supposed to be a trust fund paid for by workers for their own retirement years. If Congress didn’t keep looting the fund, it would be financially healthy based on the contributions of everyone who has already paid into it, for the people who now need to take money out of it. I could afford to live without social security, but I paid for it and I’m going to continue to draw from it.

I am frankly not sure about how they handled the finances in the first 20 years or so – benefits were immediately available to people over 65 but the trust fund hadn’t had time yet to build itself up. Maybe the fund was supplemented by taxes for those first years. But the model actually works and could continue to work if the funds were left alone.

Medicare is at least partially the same, but it is subsidized by general taxes.

ACA funds come from general funds, and the benefits are for everyone. If you are arguing that older people need more and more expensive health care, I won’t argue that point. But Medicare already takes care of that, and ACA is not for people covered by Medicare, i.e. people over 65.

So of the three programs, only Medicare qualifies as a transfer of wealth to people over 65. This does not seem to me to have any relevance to the WA law under discussion. That law appears to be modeled on Social Security (with a very specific purpose) but without the immediate benefit for those who are already over a certain age.

I like that you said that Social Security isn’t a transfer, then said that it was supposed to not be a transfer, but that really it is because of actual laws that Congress passed.

There have been many threads and arguments over the years whether the trust fund is a thing that matters at all, but we don’t need to rehash that here, because that question is not actually relevant to whether SS is a transfer. It is a transfer. The bonds held in the trust fund are not measured in GDP because they do not represent real economic activity. At times in the past it’s been a more demographically stable and fiscally reasonable transfer than it is at the moment, but it is and has always been a transfer from the young to the old.

That doesn’t make it a bad policy! I think that Social Security is generally good policy and we should have it. But it’s frustrating to see arguments from older generations about tiny little taxes that fall somewhat heavily on the old and ignore that the vast vast majority of financial policies are in their favor.

I don’t think any of this is correct.

Firstly, the “trust fund” doesn’t exist and to the best of my knowledge has never existed other than on paper. It’s a notional account, in which the government issues a “IOW” to itself. The government doesn’t “loot” the trust fund, it “borrows” from it, paying it interest, such that the amount attributed to the “trust fund” grows with interest.

The SS solvency issues have nothing to do with the government “looting” the “trust fund”. They have to do primarily with people’s life expectancies increasing, such that the ratio of working years to SS-eligible years keeps decreasing. So the same amount of working people making withholding payments supports fewer people receiving SS retirement benefits than it used to. Projections into the future are that this will be an ongoing problem, and that the nominal amount in the SS “trust fund” will eventually turn negative.

What that means as a practical matter is that it’s likely that future generations of retirees will pay more into the “fund” and/or receive less benefit as compared to current retirees, and in that sense it’s a generational transfer to current retirees.

There are many facets of ACA, and you would need to consider all of them. (I’m not sure what you mean by “ACA funds”.)

One aspect of ACA which is definitely a transfer from young to old is the pricing of insurance sold on the ACA exchanges (which cover pre-65 people). The maximum ratio of age-based rates is 3:1 (for adults). This is substantially less than the actual cost ratio as would be priced by actuaries. As a result, the costs for younger people are kept artificially high and the costs for older people articially low, which is effectively a wealth transfer. (That’s why there was so much concern about whether enough “young invincibles” would sign up for the plans - they were needed to subsidize the costs for older people.)

I’m a Washington State resident. Not only that, but I am an employee of the Washington State government. I’m directly impacted by this.

I didn’t like it at first because it seemed like I’d never get out of it what I paid into it, even though I’m not that old (I’m basically the same age as Tom Brady). But I crunched the numbers and eh, it’s okay. In theory I’d at least get out what I put in (possibly more), assuming no other mitigating factors.

I do like the idea of long-term care benefits. I opted for the most I could get as far as life insurance, AD&D insurance (accidental death and dismemberment, this isn’t insurance for resurrecting a dead paladin), long term disability, and so on. I also like making this available to everyone as a safety net.

I don’t think it was implemented well, though. I was able to get my own private long-term care insurance (for myself and my wife) before the deadline so that I could opt out. It was something my union set up for us as an alternative. The care is better for the cost, and unlike the WA Cares plan it can move with you. See, that’s another downside; if you pay into WA Cares for 20 years then move to Idaho, you can’t collect any of it.

I like the idea. The implementation was terrible. And it’s on hold for a reason. It might end up getting completely squashed. I’m still keeping my private long-term stuff though, because it’s not a bad deal and when I get old I should be taken care of if I have to go into a home or something. I won’t be a burden on my kids or anything. I feel like younger me with a good income is paying for older me who might not be able to afford it.

Another major factor is declining fertility rates and the increasing percentage of the population over age 65. Accordingly, the ratio of workers to social security recipients has decreased from 5.1 for every Social Security recipient in 1960 to 2.7 today.

Currently about 16.5% of the US population is age 65 or over. By 2040, it’ll be 21.6%.

@Johnny_L.A, I retired just before moving to Washington State, so I haven’t had to pay anything in, but I look at it as a means of helping my kids’ generation–you know, the ones who are paying for my Social Security right now and who might not have Social Security when they reach age 65.

A lot of the ratio that you describe is itself the increased longetivity that I mentioned. If at one point the average worker retires at 65 and dies at 75, and then later the average worker retires at 65 and dies at 85, then you’ll have double the number of retirees in the system with the same number of active workers, along with a higher percentage of the population being 65 or older, even with the same birthrate.

I’m not sure how much declining fertility plays into it, reason being that it’s somewhat offset by immigration, which tends to skew young. But it could definitely also be a factor. (It wouldn’t be a factor at all if there was a true “trust fund” in which workers contributed towards their own future benefits, but that’s not the case at all as previous.)

If you take care to buy long-term care insurance at the right age, and you’re reasonably healthy, it’s neither expensive nor hard to get. A typical 55-year-old can buy a policy for roughly $80-85/month, which is WAY less than what a lot of people spend on health insurance.
https://www.marketwatch.com/picks/guides/insurance/long-term-care-insurance-cost-everything-you-need-to-know/