Broker Check

September 7, 2016

Who Will Pay The Nursing Home Bill?

          Here is an uncomfortable question:  Who will pay for Mom and Dad’s nursing home bill – or yours, for that matter?  Long-term care policies written in past decades have turned into a black hole for the insurance industry.  Executives misjudged everything from how much elder care would cost to how long people would live.  As a result, the policies are costing insurers billions more than they expected.  Struggling to contain the damage, insurers are tightening standards for new policies and trying to raise premiums on existing ones.

          Insurers have to contend with three forces.  The first is the rising cost of elder care.  The median cost of a private room in a nursing home or assisted care facility has risen more than 4% annually in the past five years.  The second is that interest rates have plunged to record low levels.  Insurers need to invest funds for decades before paying out on long-term care claims.  So low rates hit profits from those policies particularly hard.

          The third problem is demographics.  Almost 25% of Americans were born from 1946 to 1964; that is more than 75,000,000 people.  By 2050, when the youngest boomer will be in their 80s, long-term elder care will devour about 3% of the U.S. economy, up from 1.3% in 2010, according to the Congressional Budget Office.

          Given that outlook, you might think more people would be buying long-term care insurance.  Just the opposite is happening.  Sales are falling and big insurers like MetLife and Prudential Financial have stopped writing policies.

          Long-term care insurance might not make sense for many people.  More than half of all elder care tends to be provided informally by family members.  Government programs cover much of the rest.  Long-term care insurance works best for people who want more costly care than is covered by Medicaid.  Bloomberg Business Week 3/23 – 4/15/15 p. 79.

          To make this a little more personal and understandable.  My mother recently died at 91 years of age and I had purchased the best long-term care insurance available for her in her 70s.  She paid about $150,000 in premiums and in the course of using first aides on an infrequent basis, rehabilitation care, assisted living facility, and finally hospice.  She used about $300,000 of $650,000 of available benefits and was able to be in choice facilities where cost was not our primary concern.

Why Was Seth Conrad Rich Killed?

          The 27 year old Democratic National Committee staffer was murdered in July in the District of Columbia.  He was found with two bullets in his back and bruises on his arms, knees, and face.  While in D.C. police said it was a robbery gone bad, his wallet, jewelry and other valuables were untouched.  WikiLeaks founder Julian Assange has offered a $20,000 reward for information leading to his killer.  Assange intimated but did not outright state that Rich was the source of the email leaks from the DNC that were released by WikiLeaks and resulted in the release of information showing the DNC actively conspired with the Clinton campaign to deny Bernie Sanders the Democratic nomination.

          For those of you who are old enough to remember, Watergate started as a ”third rate” botched burglary and the resulting investigation by the Washington Post with covert aid from Deep Throat (later found out to be the Assistant Director of the FBI) concluded with bringing down President Richard Nixon.

          I wonder when and if the investigation by the Press will occur?

What Will They Do?

          Recent U.S. election polls suggest 8,000,000 Democrats will not vote for their party’s candidate.  They also suggest 8,000,000 Republicans will not vote for their party’s candidate.

NYC Pension Problem

          The 5 separate NYC pension plans for the city’s civil workers, teachers, police and fire fighters have assumed a 7% annual rate of return (discount rate) on pension assets since 2013.  This rate has been used to calculate the present value of pension liabilities and has historically been benchmarked to high quality corporate bond yields.  If NYC was to lower its discount rate from 7%, that action would produce a higher present value amount of liabilities and would force greater annual pension plan contributions by NYC.  NYS Financial Control Board.

          NYC has been unable to achieve that rate of return for the past several years.

          Increased pension plan contributions mean less money available to run the city without tax increases or cutbacks in personnel or services or increased borrowings.

Olympic Thoughts

          The most underrepresented people in the Olympics have to be mothers.  Once I heard that swimmers and gymnasts start training between 3 & 5 years of age, it became clear that it was the mothers who got their children involved in the sports, not the person wanting to be an Olympian.  Especially, when I heard Michael Phelps does not like swimming.  The best advertisement on NBC therefore had to be Proctor & Gamble’s campaign to honor Mothers.  I agree, with the exception of Aly Raisman’s mother who clearly was terrified every time her daughter performed.

More Olympic Thoughts

          Moreover Bolt, Biles and Phelps.  There was a new record set that NBC did not cover or even highlight due to the fact it was so POLITICALLY INCORRECT.  For the first time, a Summer Olympian medaled in SIX CONSECUTIVE OLYMPICS.

          Surprising, since the Olympics were originally not about athletic prowess, but rather prowess in martial abilities.  Kim Rhode won bronze in the skeet-shooting event, having won gold in 2012 and 3 golds in total. Could it be that NBC, being politically correct, did not want to glorify shooting since gun control is on the progressives’ agenda?  Oh yes, she supports the National Rifle Association.  When brought to NBC’s attention, they said riflery is not really an athletic event.  Note  the  incredible  eye hand coordination needed to shoot 99 out of 100 skeets!

          As a winner of the U.S. Coast Guard’s Expert Pistol Shot .45 caliber medal when I was serving my country and as a former member of the Boston University Rifle Team, I can attest to the difficulty of the eye hand coordination.

          As always, if you have any questions about these or any other matters, do not hesitate to call us.
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