What is Long-Term Care?

When people consider the subject of long-term care, they often think about nursing homes. In fact, long-term care has little to do with nursing homes.  Understanding the difference can help you protect your family and your finances.

Long-term care encompasses the care, services, and housing you will need when you live a long life. Think you won’t live a long life? Think back 25 years ago. If you had cancer or a stroke, you simply died. Few ever heard of Alzheimer’s or Parkinson’s disease. Today they are the leading cause for long-term care services. The longer you live, the more likely you are to need care. The question is not who will take care of you, but rather what providing that care will do, not only to your finances, but to theirs too.

Long-term care is defined as needing assistance with your activities of daily living (toileting, bathing, dressing, eating, getting in and out of the bed or chair, and maintaining continence). Another type of long-term care is the supervision that is needed for someone with severe memory loss.

If you need on-going, custodial care, chances are it will be delivered in the community, not in a nursing home. Every study conducted finds that care is overwhelmingly provided at home. The key question, of course, is who is going to pay for it?

Medicare, the primary health care program for retirees, DOES NOT pay for custodial care, it pays only for skilled, medically oriented or rehabilitative care, in any venue. Medicaid, a federal and state (Medi-Cal in California) program for financially needy individuals will pay for custodial care, but primarily in nursing homes. Funding for home care and assisted living is very limited and based on availability of funds. 

Veterans believe that the VA will pay for home care, adult day care or assisted living. As with Medicaid, funding is limited and generally based on service-related disability. 

The result is that consumers are forced to pay privately for their care. Unfortunately, the best thought-out retirement plan rarely takes into consideration living a long life. Put another way, those assets and income have been allocated to pay for retirement, not for the consequences of living a long life. As a result, one of seniors’ greatest fears - that of outliving their assets - may literally come true if invading principal and diverting income is needed to pay for that care.

The use of long-term care insurance has become an important part of planning for disability resulting from living a long life. The coverage serves to not only keep families together but keeps your retirement portfolio intact for the purpose it was intended, namely retirement. 

From a family perspective, think about who will be providing your care. Chances are your children will play a key role. Long-term care insurance doesn’t replace the need for family involvement in providing care but rather builds on it. It pays professionals to assist the person with the toughest tasks such as toileting, bathing, feeding and continence. This, in turn, frees the family to provide better care for a longer at-home period of time. 

The options for paying for an extended health care need at any age are limited to self-funding, Medicaid (for those who are impoverished), and long-term care insurance.  Each of these options is appropriate for certain people in certain circumstances.  None of these is right for everyone.  It is important to make an informed decision, in advance, as to how to best fund an extended health care need and then to communicate that decision to your family.  The emotional challenges of a health care crisis are easier to handle when the financial aspect has already been addressed.

JIM LAWLESS, MBA has over four decades of experience university and college lecturing in economics, finance, and accounting which makes him adept at client education, finding stable, creative, and usable solutions. He helps his clients plan for financial independence and identify solutions for economic stability through insurance solutions. He has been a member of the Wellness Village since July 2019.