Long-Term Care Insurance is Good for America!

I want to share part of a powerful address that Tom McInerney delivered at the recent Society of Actuaries Long-Term Care Conference. His talk had great impact on me.

Mr. McInerney is the CEO of Genworth Financial, a leader in the long-term care insurance (LTCi) marketplace. He stated the federal government faces at least $40-70 trillion in entitlement liabilities (Medicare, Social Security and Medicaid). A 2009 GAO Report supports a $45 trillion number. A more recent Heritage Foundation report estimates $45 trillion for Social Security and Medicare alone. All three of these programs are “Pay-As-You-Go”, which means they need to be paid for through current payroll or income taxes.

Our current federal tax revenues are $2.7T per year (see CBO Report FY 2013 estimate). If you add $40 – 70 trillion of entitlement to our existing $17 trillion deficit, even a doubling of taxes, which would further slow our economy, wouldn’t put much of a dent on the public sector’s true liabilities of $60 – 80 trillion! To add to this dilemma, we currently have a ratio of fewer than three workers per retiree supporting Social Security. According to the Social Security Administration, this ratio gets worse every day.

Let me add that our legislators know that Medicare, Social Security, and Medicaid need reform urgently. But for their own reasons, neither party will broach this subject. I have blogged about this here and here. With each passing day, the entitlement crisis grows worse, and Mr. McInerney states that counseling that we should rely exclusively on a taxpayer-funded solution to pay for long-term care in the US is irresponsible. I don’t think it’s irresponsible. I think it is off-the-deep end unrealistic and irrational to believe publicly paid long-term care is possible! Yet such irrational, “feel good” solutions seem to prevail.

Here’s a blog that gives an example of the prevalence of such irrational points of view. It’s called “Reaming Diane Rehm“. During her show on long-term care, Diane Rehm paid most of her attention to a supporter of government paid long-term care. She did not have a single representative of the insurance industry on this show, yet plenty of time was spent smashing and bashing LTCi. I pointed out some of the many false and irrational statements made on this show in a professionally written letter I sent to Diane Rehm by surface mail and email; I never even got an acknowledgement from her or her staff.

Meanwhile, Americans haven’t saved enough to cover their long-term care costs. The private long-term care insurance market can’t cover everybody, but it can cover some of us. The more LTCi policies issued, the less pressure on Medicaid budgets and other entitlement spending in the future.