walkitout (walkitout) wrote,
walkitout
walkitout

long term care insurance

http://www.washingtonpost.com/blogs/ezra-klein/post/old-gray-and-here-to-stay/2011/10/21/gIQATcXB4L_blog.html

I'm more than a little horrified by this proposal.

A guy at Brookings proposes cobbling together a way to cover long term care needs and it includes:

"Effective at age forty, every adult would be required to purchase a long-term care insurance policy with certain specified features: a five-year term, a benefit of at least $150 per day, automatic inflation adjustment and a low deductible."

Let's do some math on what the hypothetical maximum benefit on a minimum policy meeting this criteria would be:

5 years * 150 $/day * 365 = $273750.

Why should _anyone_ who can demonstrate a net worth substantially in excess of this be required to purchase such a policy? I'd be _overjoyed_ to pay for the policies for a dozen poor people (2 dozen, even, maybe) before being required to buy one for myself, my husband, etc.

But running all this through insurance companies does not strike me as bright anyway. Insurance companies have in no way demonstrated that they can price these things correctly (the opposite, actually). By the time a law was passed requiring purchase, we'd be looking at steep premium increases or having to bail them out.

I'm still trying to figure out what the probability to payout might be. I recognize that if you're fortunate enough to make it to 80, the odds get pretty good you'll need long term care, but of course a lot of people don't make it to 80 and I don't know the odds of an arbitrary baby born in an arbitrary year needing long term care after age 40. In fact, I think that's really the nut of the problem.

The concluding paragraph is extremely silly. "But with the population getting older and more reliant on long-term care, we’re likely going to have to do something." We never fix _anything_ until it's been well and truly intolerable for at least one full political cycle (4 years), usually several.

ETA People toss around premium numbers for this stuff. It is _no joke_. The annual premium for LTCI for someone in their 40s is liable to run small number of thousands. Annual premium for someone in their 60s might run more than a few thousand. If you think people should be paying for their own long term care, it makes more sense to mandate savings/retirement funding (if you took that premium and stuck it in something that made even 5% a year and were rigidly consistent about it, you'd have most of the benefit you might collect by the time you would actually need it). LTCI is essentially whole life under another name.
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