The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Nice Thought ?

12/08/2019

Genworth is a huge insurance company in Richmond that has long been a leader in long-term-care (LTC) insurance.  It is to their benefit to over-estimate the monthly expense of long term care, so they can scare more people into buying LTC policies.  With that caveat, they have recently estimated the monthly cost of care in a nursing home at $8,517 and $4,051 in an assisted-living facility, and $4,385 for home-health-care.  So, let’s say Genworth over-estimated by 25%, that means a month in a nursing home still costs $6,388.  That’s 76,656 after-tax or $106,467 pre-tax at 28%.

For good reason, paying for long-term costs is one of the greatest fears of aging.  Of course, any politician would like to take credit for easing this fear.  Senator Pat Toomey of Pennsylvania rose to the challenge, by introducing a bill permitting workers to take $2,000 from their IRA or 401K each year, without paying taxes on it.  Great – we can rob our retirement to cover a tiny share of costs.  Dumb deal!

It has become an increasing problem as we live longer AND as nuclear families disappear.  In the past, it was not uncommon for an elderly parent to live with a child’s family.  In many cases, that would be more cost effective than paying minimum wages to third parties.

If home-health-care costs $4,000 monthly, how about offering a $1,000 monthly tax deduction for families with an elderly relative living with them?  It would cost the Feds only the marginal tax rate, say 28%, of the $1,000 deduction or $280.  It would preserve retirement assets.  Because a $12,000 annual deduction is a larger portion of income for lower-income families, it would induce some to remove relatives from more expensive Medicaid facilities, those governmental expenses would decrease, to offset the new deduction.

I have long felt that assisted-suicide is greatly under-appreciated and under-considered.

At any rate, thank you, Senator Toomey, for thinking about the problem, including more votes for doing so little!

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