LTC Bullet--What About the Rate Stability of the U.S. Government?

Tuesday, December 10, 2002

Washington, DC--

LTC Comment: If you think private long-term care insurance has a rate stability challenge, wait to you hear what "Capital" columnist David Wessel had to say in the Wall Street Journal about the rate stability problem facing the United States Government. After the ***news***.

*** Time is running out to renew your subscription to "LTC Bullets" and to secure donor zone access for only $100 per year. After the first of the year, the required contribution level for LTC Bullets and the donor zone increases to $150 per annum. (Still tax-deductible.) Everyone will continue receiving LTC Bullets free of charge unless and until you hear from us in a personal email that we need your support to continue sending the Bullets. But, why not grab a great deal before the first of the year? Send your $100 contribution today to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. If you prefer, you can contribute online by credit card or direct withdrawal at . Either way, after you donate, drop an email to Damon at and give him your preferred user name and password (up to 10 characters each) so he can Zone you in ASAP. The Center needs your financial support. Please give generously. ***


The strongest criticism levied today against private LTC insurance is that premiums on in-place business may have to increase someday if claims experience turns out to be worse than anticipated. This, critics say, could devastate long-time policy holders who cannot afford steep premium increases in their old age and who no longer qualify medically for new coverage. Well, that is a valid concern that insurers and regulators are taking very seriously. But what about the far more ambitious, and less achievable promises that the U.S. Government has made to seniors through Social Security and Medicare? David Wessel, in his November 21, 2002 Wall Street Journal column "Capital," titled "U.S. Promises Are in the Hole" raised that question. Here's a link to the article followed by some excerpts:,,SB103783566133388228,00.html . You will probably need a paid subscription to access WSJ articles on their website. You can, however, access the original speech on which the Wessel column was based at the U.S. Treasury's website: .

David Wessel, "Promised Benefits in U.S. Are $20 Trillion in the Hole," Wall Street Journal, November 21, 2002,,,SB103783566133388228,00.html

"A top U.S. Treasury official last week likened the U.S. government to a profligate insurance company that can't afford to make good on promises it has made. The cost of benefits the government vows to pay in the future exceeds projected tax revenues by roughly $20 trillion, he said. And that's no typo.

. . .

"'Think of the federal government as a gigantic insurance company with a sideline business in national defense and homeland security,' Mr. Fisher said. It counts premiums and payouts as they come and go and worries little about how to pay claims in the future. 'This particular insurance company, it turns out, has made promises to its policyholders that have a current value $20 trillion or so in excess of the revenues that it expects to receive,' he said.

"'An insurance company with cash accounting is not really an insurance company at all,' he added. 'It's an accident waiting to happen.'

"That's pretty strong stuff coming from the guy whose job makes him the chief salesman for U.S. Treasury debt. . . .

"The combination of an aging population -- the oldest baby boomers turn 57 next year -- and rapidly rising health-care spending is inexorably pushing up the tab for Social Security and Medicare. President Bush wants to draw the line on federal taxes at 19% of gross domestic product (the value of all of the goods and services produced in the U.S.). It isn't enough to pay for what the government is promising.

"Focusing exclusively on this year's federal deficit and the size of next year's federal debt is a mistake, and arguing about the Social Security trust fund is a diversion. Dan Crippen, head of the Congressional Budget Office, says the real issue is: How much of our children's economy are we going to take to support ourselves in retirement? Look at the world his way, and there are just two moving pieces: How much are we promising future retirees? And how big will tomorrow's economy be?

"The U.S. isn't going to raise taxes sufficiently to cover the cost of keeping current promises. It ought to take steps now to reduce future costs of Social Security, Medicare and Medicaid and to make the future economy bigger so both retirees and workers can live well. . . ."