Society of Certified Senior Advisors: Talking About Long-Term Care Insurance

It's important to use the correct terms and understand the available options when talking about long-term care insurance.

By Mickey Batsell, CLU, CASL, MBA, FLMI, CLTC, CSA

When someone hears or sees the words “long-term care,” the first thing that often comes to mind is a nursing home. This association has negative connotations for most of us, who assume that: (1) the only place for long-term care is a nursing home; (2) we never want to go there; and (3) we certainly do not want to talk about it. In order to have an open and honest discussion about the subject, we need to have a better understanding of its scope, and to phrase the conversation in a manner that creates a more positive reaction. It is helpful to educate your audience with some basics.

Using the Right Words

The first suggestion is to use the term “extended care” instead of “long-term care”. Extended care is assistance that a person needs because he or she has a long-term impairment. The care can be provided in different settings, including at home, an adult day care center, an assisted living facility, or a nursing home.

The two types of impairments that require extended care are acute and chronic. An acute impairment is a sudden event that requires immediate medical attention under a plan of care created by a physician and executed by skilled medical and nursing staff. The expectation is that some degree of recovery is possible and, if treated in time, a full recovery is expected.

A chronic impairment is a condition that cannot be cured but can be managed. Most extended care events are driven by a chronic impairment or a combination of chronic impairments. The chronic impairments that relate to someone needing extended care are either physical or cognitive. As these chronic conditions progress, they compromise an individual’s ability to get through the most basic daily routines, called activities of daily living (ADLs).

The six ADLs are:

Mobility/Transferring
Toileting
Bathing
Dressing
Eating
Continence

A cognitive impairment is the deterioration or loss of intellectual capacity, as certified by a licensed health care practitioner. It is measured by clinical evidence and standardized tests that reveal memory or reasoning loss. The biggest concern for those with cognitive impairment is for their safety.

The two levels of care that an impairment may require are skilled or custodial. Skilled care is provided by a licensed physician, a nurse, or some other licensed professional under a plan of care created by a physician. Custodial care is provided by non-skilled personnel. This custodial care can fall into the category of informal or formal. Informal care is provided by family, friends, or volunteers and is not paid. Formal care means those performing the care are receiving compensation and are employed by a home care company or are licensed independently.

The Next Step

“I have Medicare, so I don’t have to worry about extended-care costs,” is something that many people have erroneously stated. Medicare is health insurance, and it pays for skilled care that is provided by licensed medical personnel, occupational and physical therapists, and other related medical costs. It does not pay for custodial care of any type. In addition, it may pay for approved medical devices. This same response would apply to those younger individuals who do not yet have Medicare but are covered by an individual or group health insurance plan.

As we learned above, custodial care is either informal or formal. The cost of formal custodial care is paid for from private funds (usually by the patient) or out of a long-term care insurance policy, or a combination of the two. The informal care is provided by friends, family, and volunteers. Although there may or may not be a monetary cost for informal care, there is certainly a physical and psychological cost that cannot be ignored.

Cost of Custodial Care

The cost of care varies by the geographic location of the person needing care and the setting in which the care is provided. It also varies by the length of time someone requires extended care.

Formal home care from an agency can cost between $18 and $30 per hour. Most agencies require a minimum of four hours per day. Many times, home care will begin with two or three days per week. The primary motivation is for the informal caregiver to be relieved of duty to take care of other responsibilities or just get a short respite break.

If the need for formal care increases to a point where around-the-clock care is needed, then the cost can be over $20,000 per month. By contrast, the monthly cost of an assisted living facility is typically between $4300 and $6000. A nursing home typically costs twice as much as assisted living.

According to the U.S. Department of Health and Human Services’ Administration on Aging (AOA), around 70% of people over the age of 65 will require some form of extended care during their lifetime. The average woman will need 3.7 years and the average man 2.2 years. There is no mention of where the care will be provided, but a large portion is at-home care.

The AOA further states that if care is provided in an assisted living facility, the average stay is 28 months. The average stay in a nursing home is 485 days. The AOA reports that 43% of the residents of nursing homes were there for less than 100 days, leaving 57% with a stay of more than 100 days.

Suggestions

There is no doubt that an extended care event can be not only emotionally draining, but also financially draining. The key to being prepared for the possibility of experiencing an extended care event is to plan. Older adults should find a professional who can assist in preparing a customized plan that fits their unique circumstances.

Look for members of the financial services community that hold the following designations: CLTC (Certified in Long-Term Care); CASL (Certified Advisor for Senior Living); or CSA (Certified Senior Advisor).

Seniors can also ask friends and associates if they have a relationship with a financial professional who is competent in the extended care arena. Their financial services professional can also recommend a competent professional.

Guest author Mickey Batsell is an experienced industry professional who specializes in long-term care and retirement planning. He is also an instructor for SCSA’s Working with Older Adults course. Over 40 years of professional and personal experience have given him an in-depth understanding of the challenges his clients face. Mickey can be contacted at mickeybatsell@mickeybatsell.com or call him at 512-260-0051.