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Golden State, Golden Years: Long-Term Care in California
On December 15, 2023, Oliver Wyman Actuarial Consulting submitted its actuarial report to the California Long Term Care Task Force. It was the second report exploring a potential plan to establish a statewide long-term care program in the Golden State.
The report built on last year’s Feasibility Report, taking the five potential program designs and drilling down into the cost and viability of each design. The baseline estimates in the Actuarial Report show a contribution range between 0.6% and 3% of pay. That rate increases based on various factors, including whether the payroll tax funding the benefit is split evenly between employer and employee contributions or the employer contribution is only 25%, whether the fund can include investments beyond U.S. treasuries (which would require an amendment to the California Constitution), and whether the fund establishes a reserve. The table below shows the various plan designs, the baseline payroll contribution, and the impact of each of the funding factors outlined in the report.
| Design | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
|
Description |
Supportive LTC benefits |
Home care and residential care facilities (RCF) for older adults |
Lower-range comprehensive long-term services and supports (LTSS) benefits |
Mid-range comprehensive LTSS benefits |
Higher-range comprehensive LTSS benefits |
|
Overview |
$36,000 over two years in supportive LTC benefits for California’s adult population (ages 18+). Formal home care and facility care not covered. |
$110,400 over two years in targeted benefits for California’s older adult population (ages 65+). Includes formal home care and residential facility care. |
$36,000 over one year in comprehensive benefits for California’s adult population (ages 18+). Includes formal home care and residential facility care. |
$81,000 over 18 months in comprehensive benefits for California’s adult population (ages 18+). Includes formal home care and residential facility care plus care in a skilled nursing facility. |
$144,000 over two years in comprehensive benefits for California’s population (ages 18+). Includes formal home care and residential facility care plus care in a skilled nursing facility. |
|
Baseline Estimated Contribution Rate |
0.60% |
1.15% |
0.65% |
1.60% |
3.00% |
|
Invest in U.S. Treasuries only |
0.79% |
1.61% |
0.87% |
1.84% |
3.49% |
|
25% employer contribution |
0.70% |
1.32% |
0.76% |
1.84% |
3.49% |
|
Reserve after 75 years |
0.76% |
1.57% |
0.83% |
2.10% |
3.84% |
With this report, the Task Force has completed its statutory mandate. This means that any potential state Long Term Care Program is in the hands of the legislature. The legislature can choose to extend the mandate of the Task Force, asking it to continue to delve into the details of how a program would operate. The Task Force has recommended separating into six working groups, addressing outreach and education, assessment of LTSS needs for individuals with developmental and acquired disabilities in early adulthood, and coordination of the Program with private insurance as well as state and federal programs. The legislature can introduce legislation to enact a Long Term Care Program in California, or the legislature can hit pause, which might be the most likely scenario this year. Californians are emerging from two years of record inflation. The legislature and the Governor are currently addressing a $38 billion budget deficit in an election year. With this combination of factors, 2024 does not look like a year in which lawmakers are likely to enact a whole new state benefit program and a new payroll tax to pay for it.
Still, California will have to address long-term care sooner rather than later. The state’s Medi-Cal program pays for 55% of all patient days in long-term care facilities. Medi-Cal comprises a sizable share of overall state spending, ranging between 13% and 17% of General Fund spending in most of the last ten years. As a share of General Fund spending, Medi-Cal is only second to Proposition 98, which funds K-14 education. And with our state’s population aged 60 years and over expected to grow more than three times as fast as the total population, in coming years, the share of the General Fund that goes to long term care is only expected to grow.
About Amy Donovan
Amy is Keenan's Vice President of Legislative and Regulatory Affairs, authoring the firm's briefings and position papers on legislation, regulation, and litigation that impact the firm and its clients.
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