To estimate
the maximum affordability and effect of this approach, all individuals
or couples who can afford the policy for 5 percent or less of
their income and who have at least $10,000 in nonhousing assets
are assumed to purchase a policy at age 67. Age 67 was chosen
because most elderly have left the work force by then and is
living on their retirement income. In 1987 only 25 percent of
men and 14 percent of women aged 67 were in the labor force.
Since the elderly already spend about 12 percent of their income
on health care, the 5-percentof-income test would mean a significant
increase in out-of-pocket medical care costs for the elderly
and is an assumption favorable to insurance. The $10,000-asset
test assumes that few elderly will purchase insurance unless
they have at least a modest level of assets to protect.