LTCI Watch: Pot of gold

“It’s just not a panacea or a no brainer for many, many people,” Bruyette said.

Thoughts:

First, if you’re one of my readers, and you e-mail him, and you’re passionate about LTCI: Please be polite!! He’s trying to help consumers, just as you are, and simply coming at the topic from a different perspective than many of the readers of this blog probably are.

Second, it seems as if the current strange, ultra-low-rate environment makes the current present value of the $252,000 in lifetime LTCI premiums seem very high. If interest rates jump up, that might make the amount of cash needed to fund the premiums look like a lot more attractive to consumers, just as that could make the amount of cash needed to fund LTCI benefits obligations look a lot more attractive to insurance companies.

Third, let’s say that, in a world with normal interest rates and insurance companies that go back to enjoying writing LTCI, 50-year-olds really need a net worth of, say, $750,000 to fund LTCI.

Of course, antiselection makes individual LTCI expensive. Say we all have LTC coverage through some universal insurer with deep pockets — let’s call it the government — and that, maybe, if the universal insurer eliminated antiselection issues, the real amount of funding needed would be something like, say, $200,000.

I think the median age of the 300 million people who live in the United States is about 35. My level of energy to search for Web calculators to mask my ignorance of math has waned, but I’ll take a wild guess that the fact that the median age of the U.S. population is 35, rather than 50, means that the U.S. government needs only about $100,000 in present value per person, or about $30 trillion altogether, to fund LTC services for each of us.

According to Wikipedia, total U.S. financial net worth amounts to $54 trillion. The United Nations has estimated that the total wealth of the United States — including financial assets and human capital — is about $118 trillion. 

In other words, if all of these ballpark estimates are actually in the ballpark: The country as a whole already is, kind of, sort of, using about 25 percent of its total wealth and close to 60 percent of its financial wealth to fund LTC services.

Of course, that’s not really true. Scientists will probably find ways to prevent, cure or control Alzheimer’s and other debilitating conditions soon and cut that total in half, but that would still mean that the country is really devoting about 30 percent of its financial wealth to funding future LTC services without consciously realizing it.

See also:

• LTCI Watch: Stockton
• LTCI Watch: Archives
• LTCI Watch: Promises