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Top Adding - Opportunity Cost and Your Long Term Care Decision
If you are out shopping for long term care (commonly abbreviated as LTCI or LTC), I'm going to encourage you to take a look at a way of providing long term care benefits that is probably new to you. On the
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
other hand, if you are in the crowd that thinks they will never need long term care, I would also suggest you evaluate this line of thinking.
Dick and Jane are both age 65, recently retired and models of
Dick and Jane are both age 65, recently retired and models of
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
good health. They have ignored the long term care subject until recently. They just put Jane's mother, who is 88, into a nursing home. Talk about sticker shock! She is in a nice place, but Dick and Jane a
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
re not 100% certain that her assets will allow her to stay there for the rest of her life.
Consequently, they have been out looking at long term care for themselves. They figure they can afford to insure
Consequently, they have been out looking at long term care for themselves. They figure they can afford to insure
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
portion of what it might cost them if they ever need some form of LTCI, so they are looking at a benefit of $3,000 a month. The premium is around $4,200 a year.
Here's a new concept that Dick and Jane mu
Here's a new concept that Dick and Jane mu
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
st become accustomed to now that they are retired. They both had good jobs during their working years. If they ever wanted to buy anything, it was just a question of looking at their income to see if they
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
could swing the purchase. Pretty straightforward.
Now that they are retired, most of their expenditures are going to come from investment returns on the assets they have accumulated, not income from worki
Now that they are retired, most of their expenditures are going to come from investment returns on the assets they have accumulated, not income from worki
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
g. So they need to understand the difference between premium cost and opportunity cost. Here's what I mean…
If they elect to buy this $4,200 a year long term care policy, the money has to come from somewh
If they elect to buy this $4,200 a year long term care policy, the money has to come from somewh
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ere. Chances are it's coming from the interest earned on perhaps a CD or an annuity. But there is an opportunity cost associated with paying the premiums from earnings on any asset.
Let's say they are goi
Let's say they are goi
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
ng to pay this $4,200 from the interest on a CD they own which is earning 5.4% interest. Since interest is taxable, and assuming they are in a 15% tax bracket, they would have to have $91,300 in that CD to
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
produce $4,200 after tax to pay the premium.
They can't spend the $91,300. It can't grow. Basically, they have "committed" $91,300 of their assets to pay the premium on their LTC policy. That's the one "j
They can't spend the $91,300. It can't grow. Basically, they have "committed" $91,300 of their assets to pay the premium on their LTC policy. That's the one "j
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ob" of this $91,300. The premium may only be $4,200 a year, but the opportunity cost is $91,300.
Let's take a look at another of their alternatives. It's called asset based long term care. How it works wi
Let's take a look at another of their alternatives. It's called asset based long term care. How it works wi
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ll unfold as I provide the example and contrast below.
One approach to asset based long term care involves re-positioning $91,300 of Dick and Jane's CD to a combination long term care/life insurance polic
One approach to asset based long term care involves re-positioning $91,300 of Dick and Jane's CD to a combination long term care/life insurance polic
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
y plan with an insurance company. Here's what moving this money does for them…
The money on deposit with the insurance company grows at interest, but it is tax-deferred interest so the insurance company w
The money on deposit with the insurance company grows at interest, but it is tax-deferred interest so the insurance company w
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
ll not send them 1099s every year for an amount they have to pay tax on like the bank is required to do. In 10 years, assuming current rates, the $91,300 will grow to $127,000; in 20 years $161,000. The CD
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
, remember, does not grow, as its job is to spin off interest to pay the annual $4,200 premium on the traditional LTCI plan.
If either Dick or Jane needs any form of long term care, the insurance company
If either Dick or Jane needs any form of long term care, the insurance company
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
plan will pay them $3,900 a month for 50 months--$900 a month more than the traditional plan.
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't buy it wou
But here's the real kicker.
If Dick and Jane never need long term care, then the camp that doesn't buy it wou
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
d have been right. If Dick and Jane bought the traditional long term care plan, in 10 years they would have paid out $42,000 in premiums and about $7,400 in taxes on their CD interest in order to net out t
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
he required premium. That's a total of $49,700. The $91,300 portion of their CD would still be $91,300.
However, if Dick and Jane never need long term care, chose the asset based long term care plan and b
However, if Dick and Jane never need long term care, chose the asset based long term care plan and b
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
oth die, for example in 10 years, the outcome is different. They have paid no annual premiums and the life insurance company will pay about $198,000 tax free to their kids.
Which sounds like a better plan
Which sounds like a better plan
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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