A Reuters item today outlined something most of us in the L/H industry already know: that the out-of-pocket medical costs for people 65 years and older are huge to the point of being unmanageable. A quote:
According to a report released on Tuesday by the Employee Benefit Research Institute, a 65-year-old woman retiring this year will need to have between $143,000 and $242,000 to cover their health insurance premiums and out-of-pocket expenses in retirement.
Due to a shorter life expectancy, a 65-year-old man retiring this year would need between $124,000 and $211,000.
Those who save the nearly $200K needed have a 90% chance of meeting their medical costs once they hit retirement (or near-retirement) age, so says EBRI, a nonprofit resesarch group.
90%? I don’t know about any of you out there, but I’ve played with dice and probabilities enough to know that a 10% margin of failure is an uncomfortably large one for me. What this financial burden says is that there should be a much bigger market of ready buyers for long-term care coverage than there already is. And yet, the market seems to be in freefall, with Hancock announcing back in September that it would crank its rates by 40% and with MetLife announcing it was stopping new sales altogether. Genworth holds steady on the line that their rates are stable, but the financial planners I have spoken to on this unanimously cry shenanigans on that.
Now, the EBRI item did caution that these figures are assuming a “risk of longevity,” and that not everybody is going to live to, say, 90, and endure health problems from the age of 65 on. That said, it is unrealistic to expect people across the board to save the huge amounts needed to cover their medical costs when they are only just beginning to claw their way out from under consumer debt (thanks in large part to the Great Recession; can you imagine how badly people’s collective debt loads would be had there been no crash?). This looks like a clear opportunity for LTC coverage and hybrid critical illness and life insurance products, yet we still don’t see either option lighting up the marketplace. Why?