Long-term care planning is a critical component of retirement planning. It is considered the most overlooked aspect of insurance and financial planning in America. Experts estimate about 60% of individuals retiring today will need extended care during their lifetime. A long-term or extended care event and associated expenses pose the most significant risk to a retiree’s financial security and the emotional and financial well-being of their loved ones.

This article will clarify definitions of impairments, the broad spectrum of services to provide care, the various residential settings, and the potential caregivers.

What is Long-Term Care?

Long-term care or extended care is not a place or a condition. It is a life-changing event that occurs when a person’s health becomes compromised in a way that they can no longer function safely in their environment without assistance. Two types of impairments can compromise a person’s health. 

An Acute Impairment is a sudden event that requires immediate medical attention under a plan of care created by a physician and executed by a skilled medical and nursing staff. In most cases, if treated in time, the individual can make a full recovery. A heart attack, aneurysm, broken bone, and stroke are examples of acute impairments. 

A Chronic Impairment is a condition that cannot be cured or fixed, but the condition can be managed. A chronic impairment drives most long-term care events. Chronic, ongoing impairments, either physical or cognitive, can compromise an individual’s ability to function safely in their environment. These chronic impairments are the type that requires long-term care services. 

Physical Impairments and The Activities of Daily Living

A physical impairment is caused by a chronic illness or injury that could be managed with therapy, medication, and/or personal care but usually cannot be cured. As a physical impairment progresses, it compromises the person’s ability to get through the most basic daily routines, called activities of daily living (ADLs). The six most common ADLs used in long-term care planning are: 

• Transferring – Getting into or out of a bed or chair. 
• Toileting – Including getting to and from or, on and off the toilet with a reasonable degree of hygiene.
• Bathing – The ability to bathe, including the ability to safely get into and out of the tub or shower.   
• Dressing – Putting on or taking off clothes or adaptive devices.
• Eating – Getting prepared food into the body, including by IV or tube feeding. The eating ADL does not include the preparation of food. 
•  Continence – Maintaining bladder or bowel continence and the ability to manage incontinence adequately. 

Not being able to do at minimum two of these without assistance is considered to be chronically ill within the context of long-term care insurance. The ability to perform ADLs is a clear line where a physical 

Cognitive Impairment

Cognitive impairment is the deterioration or loss of intellectual capacity, as certified by a licensed health care practitioner and measured by clinical evidence and standardized tests. Most often, cognitive impairments are also referred to as memory or reasoning loss.

A cognitively impaired person may be able to fully perform the ADLs, but it compromises the person’s ability to interact safely with others and their environment as the condition progresses.

Custodial Care versus Skilled Care

Custodial care and skilled care are terms used by the medical community and health care plans such as health insurance, Medicare, Medicaid, and the Veteran’s Administration. They are used to differentiate care provided by medical specialists or care provided by aides, volunteers, or family members.

Skilled care is medical care. Skilled care is so complex it can only be provided by a physician or under a care plan created by a physician and executed by skilled nursing staff or other licensed professionals. Inpatient or formal rehabilitative services are considered skilled care.

Custodial care is non-skilled care: physical assistance with ADLs or supervision of a cognitively impaired person. Custodial care can be provided either formally, by paid professionals, or informally, by family and friends with no special training in health care. It also consists of homemaking services such as cooking and cleaning the house and direct personal care to help the person get through their daily routine.

Custodial care alone is not covered by health insurance or Medicare and therefore becomes the primary care for long-term care planning. It is given in a variety of settings.

Informal Care is “non-paid” care, which is typically provided by family members-spouses. Professional Care or formal care is paid care.

Home Care

Most Americans would prefer to remain home at all costs if they should need care. The formal, professional services that may provide home-care are: 

• Social workers provide assessment and counseling services as well as referrals to form caregivers and support groups. They can write a care plan and act as an efficient guide through the steps to create an appropriate care plan. 
• Care managers assist care recipients and their loved ones to ensure the care plan is being followed and the care recipients and their loved ones are receiving the support they need.  
• Homemakers are people who complete light household tasks, run errands, shop, laundry, or prepare meals. They may also assist with care recipients getting to doctor’s appointments and provide an essential role in respite care – substituting for informal caregivers. 
• Home care aides are trained to assist people with their ADLs and provide basic supervision for cognitive impairments, but they do not provide skilled medical care. When needed, they work jointly with nurses and therapists who provide medical care as needed.  
• Skilled medical care providers are doctors, registered nurses, licensed practical nurses (LPNs), physical therapists, speech therapists, occupational therapists, and nutritional therapists who can provide both generalized and specialized care in the care recipient’s home.
• Adult daycare centers are community-based services provided on a formal basis. They are intended not just as a form of support for the person needing care, but as respite care for the family members providing informal care. They are a critical element of the care recipient’s ability to continue living at home. 

Residential Care

There are two primary types of residential care facilities that specialize in providing care to residents. 

Assisted living facilities or assisted living communities (ALFs) focus on providing increasing levels of formal care for people who have some difficulties with ADLs or cognitive impairment. They generally provide a secure, home-like environment where residents live in their own apartments. In addition, they provide meals and services in community areas for residents. ALFs do not always offer skilled medical care. 

Skilled nursing facilities (SNFs) are licensed by the state and federal governments to provide skilled or rehabilitative services. These facilities have two components: 

• A unit that offers skilled rehabilitative services as defined by Medicare. 
• A unit that provides extended non-skilled custodial care. 

Care calculator

Creating a care plan

The most important thing about long-term care planning is to have a plan. Having a plan does not mean purchasing insurance. There are various methods and sources to help fund care, including Medicare, Medicaid, and Veteran’s Benefits. People can self-fund their care or utilize a variety of insurance tools.

But not including long-term care as part of your retirement planning builds more risk into retirement and estate plans.