Paying for Extended Care

Paying for Extended Care

Extended and Long-Term Care planning is a complex process, and discussing it can be very hard — so difficult from both a financial and emotional perspective that you might want to avoid talking about it altogether. The trick with successful extended care planning is finding the right plan that covers needs and is affordable. But how to get there? That’s the question. And the answer?

To be clear from the beginning, extended care must be funded, and a plan for that funding should be put in place as an essential part of a complete retirement plan. Funds to pay for all types of extended care will eventually come from the patient’s own retirement funds when all other sources of finance are exhausted. And this will diminish the retired person’s ability to have money to last their whole lives — this is why we plan for the eventuality and examine the means for closing this gap.

So, what is “extended care”? Extended care is assistance that a person needs because he or she has a long-term impairment requiring continuing care. We often refer to this as extended care, not long-term care, because the term “long-term care” carries many misconceptions, including a negative assumption to think only of nursing homes.

There are two different types of impairments that can impact people as they age:

• Acute
• Chronic

Acute care is generally short-term medical care, hospital-based, and the patient is expected to recover. In the case of a stroke, as one example, an acute medical need could become a chronic condition requiring extended care.

Chronic impairments are on-going conditions which can be managed but not cured. In the realm of extended care, chronic impairments are either physical or cognitive. Physically impaired people require help with activities of daily living (ADLs), things like bathing, dressing, or transferring in and out of bed or a chair; cognitively-impaired people, such as those with Alzheimer’s or dementia, have a loss of intellectual capacity, which compromises their ability to safely get through the day.

You’ll also need to understand the differences between the two levels of care so that you are clear on what’s available. Depending on the impairment and severity, there’s:

Skilled care or
Custodial care

Extended care rarely requires skilled medical care, which is needed to help a person recover from an acute medical event. Skilled care services are so inherently complex that they can only be provided by a physician or under a plan of care created by a physician and executed by a skilled nursing staff or other licensed professionals. Inpatient hospitalization or formal rehabilitative services are considered skilled care.

✓ Following an episode of acute medical treatment, a patient may well have a period of convalescence. During this period, and depending on the type of event the patient underwent, we might see a type of care called recuperative care. This specific type of care is familiar to beneficiaries of Medicare, which pays for this category of care, as well as home health care. Both require the care to be defined by a doctor’s plan of care, and should never be confused with custodial care. Recuperative care is the only type of extended care paid for by Medicare.

Custodial care, on the other hand, is what extended care is all about. Extended care requires custodial or non-skilled services: physical assistance with ADLs or supervision of a cognitively impaired person. Custodial care is provided either formally, by paid professionals, and informally, by family or friends with no particular training in health care. It is given in various settings from assisted living, to nursing homes to the patient’s own home.

Informal care is unpaid care given by family members, friends, or volunteers. It is critical to recognize that loved ones can provide care, but an effective extended care plan with meaningful funding will allow informal caregivers to maintain their own health and lifestyle even while helping those she loves. Professional custodial care is care given by anyone who is paid to provide long-term custodial services in an individual’s home or in special residential community settings. Professional providers of extended care services can be home care workers and transport staff, and those who serve in paid community-based services such as adult day care, assisted living, and nursing homes.

Care isn’t just received at nursing homes anymore. In fact, most care–nearly 80% of care–is received at home. Nursing homes have become the place of care when the home becomes unsuitable for care delivery, or unsafe.

The Practical Impacts of Extended Care

Extended care will completely alter lives, and just as importantly, the lives of those the affected person love who will have no choice but to provide care if there is not a financially sound extended care plan in place. For many, life will be radically and irreversibly different from the way it was before the impairment. The hard truth is that as impairments worsen, they compromise the person’s capacity to interact with their environment safely, which compels others to get involved.

This causes the first of two sets of irreversible consequences:

Personal consequences and
Financial consequences

Personal consequences? We’re talking about the extreme toll the impairment takes on the physical and emotional wellbeing of the caregiver. Yes, the impaired person’s life is different now, but for unpaid family members providing care, life is completely disrupted. A lot of Americans are providing unpaid care to loved ones and paying an incredibly high price in the quality of their own lives as a result. The stats on the number of caregivers who’ve given up promotions, taken unpaid leave, given up work entirely, moved home, and dismantled their lives to provide care for a relative or friend are sobering and are vital truths. The realities include such facts:: most caregivers are female and most struggle with depression, particularly those who look after cognitively impaired relatives. Elderly caregivers die sooner than they would otherwise; have health episodes far more frequently than the rest of their age group. In a word, it’s an arrangement where the caregiver ends up paying dearly.

The lack of planning earlier in life for the possibility of extended care, places enormous financial burdens on the affected families and the impaired person, often leading people to family-provided care, with the consequences outlined above, when there are no resources to pay for either in-home of institutional professional care.

So, what are the financial consequences of procuring professional extended care? In the US there is a hierarchy of available care facilities, outside the home, starting with community care, to assisted care, to congregate care facilities, to nursing homes. Each of these stages requires ever increasing amounts of money. And how is this care funded? If an extended care insurance policy, or equivalent, has not been acquired, then the costs of care must be paid for out of the accumulated assets put aside for retirement by the impaired person.

And do those retirement assets face their own integrity risks? Of course, from market risks, unexpected taxes, liquidity issues, the potential loss of legacy contributions, and so forth. The diminution of retirement assets places a great burden on the ability of the impaired person, or a couple with one impaired person, to live a retirement freed from the worry of financial burdens just to maintain a lifestyle. Even if the extended members of a family all pitch in to share costs, this places an unexpected financial burden on those families.

Hence the need to examine the multiple means of providing extended care financing and planning for people prior to their need for it. As part of the retirement income planning process, we at are poised to help you plan for these possibilities and maintain the integrity of your retirement.

**Some of the material above has been sourced from the Corporation for Certification of Long Term Care, CLTC, of which the owner of this website is a life member.