Chapter 1
Introduction to Long-Term Care

In the United States today, we are at a demographic threshold. Not only are people generally living longer, but the members of the baby boom generation-a population cohort of 78 million people born between 1946 and 1964 -- are approaching the age of 60. As a result, our country's elderly population will increase substantially in the coming years, putting a serious strain on employer-sponsored retirement plans, the Social Security system, the healthcare delivery system, the Medicare program, and other services and programs for the aged.

But the needs of the elderly are not limited to retirement income and medical care. As people age they become more likely to develop a chronic condition that prevents them from functioning normally-they may not be able to move about easily or dress or feed themselves, or they may suffer from disorientation or impaired memory. When such a loss in physical or cognitive functioning occurs, a person needs long-term care-home healthcare, assisted living, nursing home care, or other services.

These services are expensive, and if they are needed for an extended time, the cost can be substantial. How can the average person pay for long-term care? And how can we as a society ensure that the need for long-term care is met without placing such a burden on government benefit programs that they become no longer viable? That is the focus of this course.

Providing for Long-Term Care Needs

Relying on Family

In the past, when a person developed a loss in functioning, he or she was usually cared for by a family member. And course, this is still common today-many people provide care to a spouse, an elderly parent, or another relative. But changes in society and in family structure are making this a less feasible solution for many people. Life expectancies are longer and families are smaller than in the past, so there are simply more older people needing care in proportion to the number of younger people available to provide it. There are also more single people and childless couples, so many people have no adult children to rely on. And while in the past many women did not work outside the home and were able to provide care, this is much less common today. Consequently, today when a person needs long-term care, there may be no family member to provide it. Or there may be one person who must take on the entire burden herself, or a married couple must try to raise their children, care for an elderly relative, and hold down full-time jobs all at the same time.

Clearly then, many people need to receive long-term care services from paid personnel. Can they simply pay for these services out of their own income and assets? Because of the cost and the anticipated impact of inflation, this is difficult if not impossible for all but the wealthy.

Amber is 45 years old. She is concerned about her long-term care needs and has been told that if she entered a nursing home in her area today and remained there for two-and-a-half years (the average nursing home stay), it would cost her $150,000. But she does not expect to enter a nursing home anytime soon-she wants to plan for her needs 30 years from now. Based on the recent past, her financial planner assumes an average annual increase in long-term care costs of 5 percent. At this rate, costs double about every 15 years, so the cost of two-and-a-half years in a nursing home in Amber's area 30 years from now will likely be about $600, 000. And this does not cover the home health care services or assisted living that Amber may need for months or even years before she enters a nursing home.  

Of course, Amber has 30 years to save and invest. But still, it will take an enormous effort. And at the same time she must pay for current living expenses and save and invest for her children's college education and her own retirement.

There are other problems associated with paying for long-term care out of one's own financial resources. Even if a person is able to pay for the care she needs, in doing so she may deplete family assets. What then becomes of her surviving spouse? He may see his standard of living lowered or even be forced into poverty. And how will he pay for his own long-term care?

The use of personal assets to pay for long-term care may also mean that inheritances are not left to children and grandchildren. This is particularly troubling when liquidated assets include a family business or farm.

Finally, what if long-term care is needed sooner than expected? To return to the example of Amber, what if she plans to accumulate in 30 years an amount sufficient to cover her needs, but after only 15 years she suffers a debilitating illness and requires care? She will not yet have the necessary funds.

Many people believe that the Medicare program will cover their long-term care needs after they retire. They are mistaken. Medicare focuses on medical care, such as physician visits and hospital stays. While it does pay benefits for home health care or nursing home care, these benefits are available only for a very limited time while a person is recovering from an acute illness or injury. Medicare benefits do not cover the care needed for an indefinite time by those with a chronic impairment. And neither Medicare supplement insurance nor Medicare Advantage plans provide any significant additional coverage for long- term care.

Other people plan to rely on Medicaid, the federal-state health benefit program for the poor. This is possible, as Medicaid does provide extensive benefits for long-term care services. However, those who are not already poor must generally deplete their life savings and assets before they can qualify for Medicaid, and while receiving Medicaid benefits they must spend almost all their income on care. Moreover, because many state Medicaid programs focus on nursing home care and because Medicaid does not usually pay providers as much as they get from private patients, care options are often limited for Medicaid recipients.

Long-Term Care Insurance
Because of the limitations and problems associated with depending on family members, paying for care out of one's own resources, or relying on government benefits, private long-term care insurance (LTCI) makes sense for a large segment of the population. A person can purchase an LTCI policy and pay regular premiums of an amount she can afford, and when she needs care, the policy will provide benefits to help pay for the services she requires. There are several advantages to this approach:
The insured knows that when she needs care, there will be funds to help pay for it.
The policy's benefits will help preserve the insured's savings and assets.
The insured pays premiums of an amount that is known in advance and can be budgeted for, instead of paying the entire cost of care, the amount of which is unpredictable and could be very great.
The policy can cover a range of care options, allowing the insured to receive the services that meet her needs and enable her to maintain her independence as long as possible.
The policy's benefits can ensure access to high-quality care, not always available to those relying on Medicaid or limited personal funds.

State Long-Term Care Partnership Programs

An approach has been devised to help achieve two goals: enabling individuals to provide for their long-term care needs and at the same time relieving the financial pressure on the Medicaid program that is sure to increase as the elderly population grows. This approach is the creation of state long-term care partnership programs. Under these programs, state governments modify the rules of their Medicaid programs to allow applicants who have purchased long-term care insurance policies that meet certain requirements to qualify for Medicaid benefits while retaining assets that they would normally be required to spend on care.

In essence, a state LTC partnership program works like this: A person buys an LTCI policy that meets the requirements of her state's program. If she later needs long-term care, the benefits of the policy help cover her costs, so that she does not have to apply for Medicaid and the state Medicaid program does not have to bear these costs. In compensation for this, if the person eventually does apply for Medicaid (because she needs care for a long time and her LTCI benefits run out), she is not required to spend all her assets in excess of eligibility limits, as are other applicants. In this way the individual preserves some of her assets and the state's monetary outlay is reduced.

Eli purchases an LTCI policy that meets the requirements of his state's long-term care partnership program. Several years later he needs nursing home care, and the policy covers most of the costs. But after three years the maximum amount of benefits provided by the policy, $150,000, has been paid and benefits end. Eli then applies for Medicaid. The state normally requires applicants to spend almost all their assets on care before Medicaid benefits begin. But because Eli participated in the partnership program, he is allowed to keep an additional $150,000 (the amount of insurance benefits he received).

Four states, California, Connecticut, Indiana, and New York, were the first to establish LTC partnership programs. In these programs, the assets of participants are protected not only while they are living but also after their death-that is, the state Medicaid program cannot take these assets after the participant dies under Medicaid estate recovery rules. However, as of 1993 the federal government required that any new LTC partnership programs established by other states subject such assets to estate recovery. This requirement made partnership programs much less attractive, and consequently no additional states established them. However, this has now changed-the federal Deficit Reduction Act (DRA) of2005, effective February 8,2006, removed the estate recovery requirement, and as a result, a major expansion of partnership programs is underway.

Long Term Care

To fully understand long-term care funding, long-term care insurance, and state partnership programs, which will be discussed in the chapters that follow, we must first understand long-term care itself. What exactly is meant by long-term care? When is it needed? What services and settings does it include? And how much do these services cost? This chapter lays the groundwork for the remainder of the course  by addressing these questions.

What Is Long-Term Care?

Long-term care is a broad range of services provided over a prolonged period, the purpose of which is to minimize or compensate for a person's loss of physical or mental functioning resulting from an illness, disability, cognitive impairment (such as Alzheimer's disease), or simply the frailties of old age.

To understand long-term care, it is helpful to understand how it differs from acute care.

Acute care is medical treatment for an illness or injury. Its purpose is typically to cure the patient and restore previous levels of functioning. Acute care is provided by physicians, nurses, and other medical professionals, and it normally takes place in a hospital, clinic, or doctor's office. It typically lasts a relatively short time.
Long-term care, unlike acute care, is not primarily intended to cure or treat a medical condition. Instead, it focuses on coping with a person's reduced level of physical or cognitive functioning over an extended time, sometimes indefinitely. Some long-term care services are rendered by healthcare professionals, such as nurses and therapists, but it is more often provided by nonprofessional personnel, such as home health aides, or by informal caregivers, such as family and friends.

Coping with a person's reduced level of functioning can include medical treatment, skilled nursing care, and various kinds of therapy. But it more typically involves assisting a person with the following:

basic functions, such as bathing, dressing, getting in and our of bed, going to the toilet, and eating (called activities of daily living, or ADLs-see below);
household chores, such as meal preparation and cleaning;
life management, such as shopping, money management, and taking medications; and

Long-term care also often involves the supervision required by a person with a cognitive impairment so that he will not harm himself or others.

Long-term care can take place in a number of different settings. These include the home of the person receiving care, community-based facilities (such as adult day centers), residential facilities (such as assisted living residences), and nursing homes. And as mentioned above, long-term care is provided by a variety of individuals, including healthcare professionals such as nurses or therapists, who provide skilled care, as well as nonprofessional personnel, family, and friends, who provide personal care (assistance with basic living functions and household chores) and supervisory care (the close supervision of a cognitively impaired person to ensure his health and safety).

When Is Long-Term Care Needed?

Whether a person needs long-term care and what care she needs are determined by a healthcare professional, such as a physician, nurse, or medical social worker experienced in long-term care. An important part of the process is an assessment of the person's ability to perform activities of daily living (ADLs), basic functions required for a person to take care of herself. The inability to perform ADLs is the most reliable and objective indicator of the need for long-term care services. The following six ADLs are commonly used to assess this need:

bathing-washing oneself by sponge bath or in a tub or shower (including getting into and our of the rub or shower);
dressing-putting on and taking off all clothing and any necessary braces, fasteners, or artificial limbs;
toileting-getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene;
transferring-moving into or our of a bed, chair, or wheelchair;
continence-being able to maintain control of bowel and bladder function or, when unable to maintain control, being able to perform associated personal hygiene (including caring for catheter or colostomy bag); and
eating-feeding oneself by getting food into the body from a receptacle such as a plate, cup, or table, or by a feeding rube or intravenously.
These ADLs are listed in the order in which people normally lose the ability to perform them. This order is quite predictable, and, interestingly, it is exactly the reverse of the order in which children acquire the ADLs. For example, eating (picking up food and putting it in the mouth) requires only gross motor skills and a limited range of motion. It is the first ADL children acquire and the last one that an impaired or aging adult generally loses. In contrast, bathing and dressing are highly complex tasks that require fine motor skills (managing buttons and zippers), balance (standing on one leg while putting on pants), and an extended range of motion (reaching back to pull on a sleeve). These are the last ADLs children attain and the first ones an adult usually loses.  

The inability to perform ADLs constitutes functional (or physical) impairment. However, some people can perform all ADLs but still need long-term care because of a cognitive impairment, a condition (such as Alzheimer's disease) that causes a significant diminishment of reasoning, intellectual capacity, or memory and results in confusion, disorientation, impaired judgment, or memory loss.

Long- Term Care Settings and Services

Thanks to new technology and new arrangements for care, today there is a wide variety of settings in which long-term care can be delivered. Improved technology means that services once provided only in hospitals and nursing homes can now be delivered at home or elsewhere. Innovative care settings include assisted living residences, adult day centers, and others. This section describes the most important long-term care settings and services.

Most people prefer to receive care in their home instead of entering a facility, and today home is where most care is provided. Remaining at home reinforces a person's sense of independence and allows him to maintain accustomed habits and daily routines. For someone with diminishing cognitive abilities, a familiar environment can provide cues for cognition, and a person with reduced physical functioning can arrange his home in way that makes coping with his particular limitations easier. In contrast, a nursing home resident lives in an unfamiliar place and must usually follow institutional regimens.

Very commonly, family caregivers make it possible for an elderly person to remain at home. But often these people are overwhelmed by the demands of providing care-many have jobs, children, and other responsibilities, and some are elderly and frail themselves. In response to this problem, an innovative approach to long-term care has developed: aging in place. Aging in place lets the person stay at home, and needed services are provided there or in the community. These services help the person avoid entering a nursing home and ease the burden on family caregivers. Aging in place is made possible by the following:

home healthcare, in which paid personnel come into the home to provide personal care, supervisory care, nursing, therapy, and homemaker/chore services;
community-based care, which includes adult day centers, senior centers, and congregate meal sites, as well as transportation services and home-delivered meals; and
residential care, which allows the elderly to maintain their own independent living spaces while also having access to needed personal care and household support services. This includes assisted living residences and continuing care retirement communities.

Many families call on a home healthcare provider when a person needing care prefers to stay at home but requires services that cannot easily or effectively be provided solely by family and friends. Home healthcare agencies deliver a wide range of services in the client's home, including medical, nursing, or therapeutic treatment; assistance with the activities of daily living; and supervision. There are also independent home healthcare providers-nurses, therapists, and home health aides who provide similar care and services but are not affiliated with an agency. States generally certify or license home health care agencies and sometimes independent providers as well.

Adult day centers are an increasingly popular way of providing community-based assistance to functionally and cognitively impaired adults. They are open during customary business hours, allowing family caregivers to work during the day and care for the impaired person during evenings and weekends. They provide supervision, personal care, help with managing medications, and other supportive services. Social, recreational, and educational activities may also be offered to participants. Many are run by nonprofit agencies, and the cost is sometimes based on the ability to pay. "

Respite care is long-term care provided for a limited period to give a family caregiver a break. It may last for a few hours so that the caregiver can take care of personal business, or it may be for several days to allow him to take a vacation or just relax. Respite care is provided by home healthcare agencies, independent home care providers, assisted living residences, and nursing homes for a fee. There may also be community-based services that provide informal respite care in homes.

Nursing homes (also called skilled nursing facilities) offer a wide range of services, including 24-hour nursing care, supervision, assistance with ADLs, and rehabilitative services such as physical, occupational, and speech therapy. Although some people stay in them for a short period of recovery and/or rehabilitation after a serious illness or operation and then return home, the traditional role of these facilities is providing long-term care for the chronically ill or disabled. Typically, families seek nursing home care when a relative's condition reaches the point where it is no longer possible to safely care for her at home, even with paid help, or when the cost of round-the-clock care at home becomes too great.

Nursing homes are highly regulated. They must be licensed by state governments, and in order to receive Medicaid and Medicare benefits, they must also be certified by those programs. Licensure and certification are intended to ensure that residents are cared for in a safe physical environment and that they receive high-quality care from qualified providers, and regulators closely monitor facilities. However, quality can and does vary from one nursing home to another.

Assisted living residences are designed for those who want a community living arrangement and who may need some household help or personal care but do not require the level of care provided by a nursing home. Residents of these facilities live in their own individual apartments (or sometimes individual rooms), but they also have access to the support services that a community setting makes possible. These services typically include up to three meals a day; assistance with personal care; help with medications, housekeeping, and laundry services; 24-hour onsite staff to respond to emergencies; and social programs. Facilities of this type are known by many different names, and they vary considerably in the type and level of services they provide and in the extent to which residents enjoy privacy or must share accommodations, with costs varying accordingly. Assisted living residences are regulated in all states, but states' requirements vary.

Continuing care retirement communities (CCRCs), sometimes called life care communities, offer several levels of care in one location. For instance, many CCRCs offer independent housing (for those who need little or no supportive care or services), assisted living housing, and a nursing home, all on one campus. An individual can obtain different services as his needs change, without having to move to a new community. Thus, a resident who is no longer able to live independently can move from the independent area to the assisted living area, or he can receive home care in his living unit. And if his condition worsens, he can enter an onsite or affiliated nursing home.

Adult foster care is much like foster care for children. Elderly adults who need help functioning or who cannot live safely on their own live with a foster family. Foster families provide room and board as well as 24-hour supervision and assistance with ADLs, either to an individual or a small group. Sometimes those receiving care pay for these services; in other instances, a government program pays for foster care. State licensure of this type of facility, as well as the terminology used for it, vary greatly.

Board and care homes (also called residential care facilities) are usually small residential facilities, with 20 or fewer residents. Residents receive all meals as well as personal care and 24-hour protective supervision. Board and care homes are not appropriate for those who need the level of care provided in a nursing home, because nursing and medical attention are usually not provided on the premises. As with adult foster care, terminology and state licensure vary greatly.

Hospice care provides services and support for the dying and their families. Hospice patients usually have a life expectancy of six months or less. The purpose of hospice care is not primarily to treat the patient's medical condition, which is incurable, but rather to improve the quality of life during the time that remains. Care focuses on pain and symptom management, social services, and emotional and spiritual support for the terminally ill and their families. Hospice care may be provided in the patient's home or in a facility. It is provided by a team that includes registered nurses, licensed professional nurses, home health aides, social workers, therapists, chaplains, bereavement counselors, and sometimes volunteers. Hospice services are generally fully or partially covered by Medicare, Medicaid, private insurers, and prepaid health plans.

The Cost of Long-Term Care

The cost of long-term care varies according to the service provided and the geographic location.  

A semiprivate room in a nursing home in the United States cost an average of $171 per day in 2006, with an average annual cost of about $62,000. The cost of a private room averaged $194 per day, ranging from $116 in Louisiana to $524 in Alaska.
The average cost of a home health aide in 2006 was $25 per hour, with local costs ranging from $17 to $49.
The average base rate for a one-bedroom unit in an assisted living residence was just under $2,700 per month in 2006, with a range of $1,716 to $4,797 according to locality. (In many residences this base rate does not include personal care or various other charges.)

The total amount a person spends on long-term care in her lifetime depends both on the price of services and on how long she uses those services. A few statistics will give an idea of what one should expect: According to one study, the average nursing home stay is 2.5 years, but 17 percent of stays exceed five years. Based on a yearly cost of $62,000, the average stay would cost about $155,000, and a five-year stay would cost more than $300,000.

But many people receive home healthcare or residential care for a considerable time, often years, before they enter a nursing home (if they ever do). For example, in 2001, the average stay in an assisted living residence was about three years. So the true lifetime cost of long-term care is typically much more than the cost of an average nursing home stay.

Moreover, these figures are based on current prices, and most people are concerned about needing long-term care in the future, not today. In recent decades, long-term care costs have been increasing by an annual rate of about 5 percent, and it is estimated that in 2030 a four-hour visit from a home health provider could cost $325, an annual stay in an assisted living residence could start at $109,300, and the yearly cost of a nursing home could be $190,600.


As the elderly population increases, the need for long-term care is a growing concern. Many people expect a family member to take care of them, but this is less often possible than in the past. Some people plan to pay for their care out of their income and assets, but given the cost of services and the impact of inflation, this is unrealistic for all but the wealthy. Many believe that the Medicare program will cover their long-term care costs after retirement, but Medicare benefits are available only for a limited time after an acute illness or injury. The Medicaid program does provide extensive benefits for long-term care, but only to those who are poor or who become poor by spending almost all their income and assets on care.

For many people, long-term care insurance (LTCI) is a good solution. A person can purchase an LTCI policy and pay regular premiums of an amount she can afford, and when she needs care, the policy will provide benefits to help pay for the services she requires. And state long-term care partnership programs allow an individual buying a qualifying LTCI policy to preserve assets in the event his insurance benefits run out and he is forced to apply for Medicaid.

Long-term care is a variety of services intended to help a person cope with a loss of physical or mental functioning. It can include medical treatment, skilled nursing care, and various kinds of therapy provided by healthcare professionals, but it more typically involves assistance with performing basic functions and supervision provided by nonprofessional personnel such as home health aides or by informal caregivers such as family and friends.

Individuals need long-term care if they have a functional impairment (an inability to perform basic functions required for a person to take care of herself) or a cognitive impairment (a condition such as Alzheimer's disease that results in confusion, disorientation, impaired judgment, or memory loss and makes close supervision necessary).

Long-term care is provided in a variety of settings, including the home, community sites such as adult day centers, residential sites such as assisted living residences and continuing care retirement communities, and facilities such as nursing homes and board and care homes. It also includes services such as transportation, delivered meals, and respite care.

The cost of an extended stay in a nursing home or prolonged use of home healthcare services is substantial, and prices are rising about 5 percent a year.