California LTC Tax: Status & Planning

In the years since Washington State enacted its long-term care payroll tax, other states have watched closely — and California is no exception. Discussions about a state-run long-term care program have generated attention, concern, and in some cases, premature conclusions about what is in place.

The short answer: as of today, California has not enacted any LTC payroll tax, mandate, or opt-out requirement. What exists is a structured study of the problem — and a policy conversation that is still evolving.

Where California Stands Today

Status of the state’s long-term care study

California established a Long-Term Care Insurance Task Force (AB 567, 2019) to evaluate potential statewide solutions to the growing long-term care financing challenge. The Task Force’s work has focused on two problems: the escalating cost of Medi-Cal long-term care expenditures and the low rate of private LTC planning among California residents.

Among the structures the Task Force has reviewed:

• → A payroll tax to fund a basic state LTC benefit
• → Mandatory participation for working Californians
• → A potential opt-out pathway for individuals who already own qualifying private LTC insurance

California Task Force Timeline

The Washington Precedent

The one state currently collecting an LTC payroll tax

Washington is currently the only state collecting an LTC payroll tax. Workers pay 0.58% of all gross wages, with no income cap, into the WA Cares Fund — a program providing a lifetime benefit now capped at $36,500 (indexed for inflation), roughly three to four months of nursing home care at current rates. Collection began July 1, 2023; benefits became available statewide in July 2026.

Washington allowed a one-time opt-out window for residents who owned qualifying private LTC insurance before a specified deadline (coverage in place by November 1, 2021). That window has since closed; only about 13% of eligible workers opted out before it did. Workers who did not act are now enrolled, regardless of any private insurance they may acquire later.

Why California Is Studying This

The structural pressures driving the conversation

The pressures motivating California’s exploration mirror the conditions that led Washington to act. Several structural factors make it increasingly difficult for the state to absorb long-term care costs through Medi-Cal alone:

• →Escalating Medi-Cal expenditures. Long-term care is among the largest and fastest-growing categories of Medi-Cal spending. As the population ages, the trajectory is difficult to sustain without structural change.
• →A rapidly aging population. The share of Californians over 65 is growing sharply, and with it the volume of care events that will need to be financed.
• →Low private LTC ownership. Only a small fraction of Californians who would benefit from private LTC coverage actually have it. When those without coverage need care, Medi-Cal typically absorbs the cost after asset spend-down.

These are the same structural pressures Washington faced. They do not resolve on their own, which is why many observers expect California will eventually act — though the form, timing, and details remain undetermined.

What a Future Program Could Mean

Illustrative only — based on proposals under study, not current law

If California eventually follows a Washington-style model, the likely structure would include a mandatory payroll deduction for working Californians, a limited state benefit that falls well short of actual care costs for most professionals, and a narrow, time-limited window to opt out by demonstrating ownership of qualifying private coverage. None of this is law today; the following illustrates a proposal, not an obligation.

The Prudent-Planning Takeaway

Why many professionals evaluate coverage now

For California residents with meaningful income, retirement savings, or assets they wish to protect, the most straightforward observation is this: the planning window is currently open. LTC insurance can be evaluated, underwritten, and placed on its own terms today — without the constraints of a legislative timeline or an opt-out deadline.

Underwriting and policy issues typically take six to eight weeks. When Washington announced its opt-out window, demand surged, and several carriers suspended new application acceptance before the deadline. For most professionals, the practical time to evaluate long-term care coverage is while they are healthy and while options are fully within their control — not the day a deadline is announced.

California is not alone. Several other states — including Alaska, Colorado, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, Missouri, New York, North Carolina, Oregon, and Utah — have introduced or studied state LTC program legislation in recent years.

No Tax Today — But the Planning Window Is Open

The bottom line

California has not enacted an LTC payroll tax. Residents who have read otherwise have encountered incomplete or premature reporting. There is no deadline, no mandate, and no current obligation.

What does exist is a policy process that many observers expect will eventually produce legislation. The form, timing, and details of any future California LTC program remain undetermined — which is precisely why the time to evaluate private options is while they are fully within your control.