Layin' It on the Line: The long-term care crisis 2.0 — Why the government may force you to buy coverage

It started quietly in one corner of the country.

In 2022, Washington State rolled out the first program of its kind — a mandatory long-term care insurance tax on workers' paychecks. The goal? Help residents cover the crushing cost of long-term care.

But here's the catch: If you didn't buy your own private coverage early enough, you were automatically enrolled in the state plan and hit with a 0.58% payroll tax for life.

At first, many brushed it off as a one-state experiment. But now? The dominoes are lining up.

California, New York, Minnesota, Pennsylvania and several other states are actively studying or drafting similar legislation.

That's right — the government may soon force you to buy long-term care coverage.

The $100,000 problem no one wants to talk about

Most Americans still don't realize how big this problem really is.

According to Genworth's 2024 Cost of Care Survey, the average private nursing home room costs over $115,000 per year. Even assisted living averages more than $60,000 annually — and both are rising faster than inflation.

And Medicare? It doesn't cover long-term care beyond short-term rehabilitation. Medicaid can help, but only after you've spent down your assets to near poverty levels.

That leaves millions of retirees — and their families — on the hook.

I recently spoke with a couple, Tom and Linda, who faced this reality head-on. Tom suffered a stroke at 72, and after a three-month recovery, he needed help with daily living. His wife Linda, already managing her own health issues, couldn't handle it alone.

Their solution was an in-home caregiver — 40 hours a week. The cost: $6,000 per month.

After two years, they had drained more than $140,000 from their retirement savings.

Linda's words still stick with me:

"We thought we were prepared. We had good insurance, a strong retirement plan… but no one told us long-term care could destroy it all."

They're not alone. The government knows it — and that's exactly why these new state LTC mandates are spreading.

How Washington's LTC mandate works

Let's break down the first domino: Washington's "WA Cares Fund."

Every worker in the state pays 0.58% of their wages to fund the program — forever. For someone earning $100,000 per year, that's $580 annually in new taxes.

In exchange, the state promises up to $36,500 in lifetime long-term care benefits.

Sounds helpful, until you realize that $36,500 barely covers four months in a nursing facility.

Even more frustrating, if you move out of Washington, you lose the benefit — but the state keeps the taxes you paid in.

Before the program launched, residents were given a one-time opportunity to opt out — but only if they bought a private LTC or hybrid policy by a specific date.

Tens of thousands rushed to apply, overwhelming insurance companies. Many missed the window and are now permanently locked into paying the tax.

Now that other states have seen how Washington did it, they're crafting their own versions — each with slightly different rules, but the same underlying idea: Shift the long-term care burden from the state to the taxpayer.

States on deck: California, New York and Minnesota

California has been the most vocal about following Washington's lead. In 2024, the California Long-Term Care Insurance Task Force presented multiple models for a payroll-funded LTC benefit. The state Legislature is expected to finalize details soon, with potential payroll deductions between 0.5% and 1% — possibly higher for top earners.

New York is close behind. Bills have been introduced that mirror Washington's structure, with discussions about requiring residents to prove they already have private coverage or be enrolled in a state-run LTC fund.

Minnesota has studied several options as well, exploring how to integrate its program with existing Medicaid systems. Legislators there cite the same reasoning: skyrocketing care costs and an aging population straining state budgets.

Other states — including Pennsylvania, Oregon and Illinois — are quietly researching similar initiatives.

The trend is clear: What started as one state's experiment is becoming a national model.

What this means for retirees and pre-retirees

If you're still working, these mandates could mean automatic LTC taxes deducted from your paycheck.

If you're already retired or self-employed, they could influence your future taxes or benefits at the state level.

But the biggest concern? Timing.

Just like in Washington, states are likely to offer short-term opt-out windows for those who already own private long-term care or hybrid annuity policies. Miss that window, and you could be stuck paying the tax indefinitely.

That's why it's crucial to plan before your state acts.

Your best move: Beat the mandate, keep the control

Here's what proactive retirees are doing right now:

1. Securing private coverage early. By purchasing a tax-qualified long-term care policy — or a hybrid life insurance or annuity with LTC benefits — you're positioned to opt out if (or when) your state introduces a mandate.

2. Using retirement accounts strategically. Thanks to IRS rules under Section 7702B and 72(e)(11), retirees can use qualified funds — like IRAs or 401(k)s — to fund long-term care benefits nearly tax-free. This means you can reposition a portion of your retirement money to protect against future LTC costs without triggering new taxes.

3. Combining LTC with income planning. Modern fixed index annuities now offer 2-of-6 ADL (Activities of Daily Living) riders that double or triple your income if you need care. These solutions provide both growth potential and built-in protection against future health costs — without paying for "use-it-or-lose-it" traditional insurance.

The goal isn't just to avoid taxes. It's to take back control from the government and make sure your care — and your money — stay in your hands.

The emotional reality: Families on the front line

Every financial statistic hides a human story.

I recently met a woman named Sharon, whose mother developed dementia in her early 80s.

"We kept her at home as long as we could," Sharon said, "but eventually, we had to move her into a memory care facility."

The cost? $8,500 per month.

Within 18 months, the family had drained their mother's savings and started selling assets.

"We weren't angry at the system," Sharon told me. "We were angry at ourselves for not preparing."

Stories like this are what push states to act. But government mandates are blunt tools — they don't account for individual needs, assets or goals.

Proactive planning does.

The bottom line: Prepare before they decide for you

The Long-Term Care Crisis 2.0 isn't coming. It's already here.

The question is no longer if more states will mandate coverage — it's when.

Washington was the warning shot. California is the test case. And every retiree in America should be paying attention.

Because whether you pay the tax or buy the plan, one thing is certain: You'll pay something.

The smart move? Reposition now.

Use today's rules to your advantage.

Turn tomorrow's tax into today's protection.

Because when it comes to long-term care — being prepared isn't just smart.

It's freedom.

Lyle Boss, The REAL BOSS Financial, endorsed by Glenn Beck as the premier retirement advisor for Utah and the Mountain West States. Boss Financial, 955 Chambers St. Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.