Dirk suffered a heart attack and was rushed to the hospital where heart surgery was performed, in February 2019. He stayed in the hospital for 3 days. His total bill for medical service was $50,000, and there was $0 copayment. Dirk has a health insurance policy with a $100 monthly premium, a $1,000 calendar-year deductible and a $5,000 out-of-pocket limit. His coinsurance percentage is 20 percent. Assume this hospitalization was the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy. Dirk currently has financial capital of $10,000 in his savings account and earns $50,000 a year. In any given year, Dirk saves 10% of his income and the rest is spent on necessary and discretionary consumptions. Dirk is currently 45 years old without any disabilities.
Two months ago, Dirk purchased long-term care insurance with $100 daily maximum for a year, with an elimination period of 90 days. This would reduce Dirk’s financial responsibility for his hospitalization expenses by: