This is the fifth article in a six-part series on long-term care.

OK, class, it's time to talk once again about long-term care. To review, in our last lesson we learned that only about 4% (or 1 in 25) of the elderly reside in a nursing home at any point in time. Nevertheless, we also learned that one out of five people aged 65 and older has self-care or mobility limitations, while one out of nine has cognitive/mental limitations. Therefore, a substantial portion of the elderly still require some long-term care services even when they don't reside in a nursing home. And the older a person gets, the more likely that such assistance will be required. Today, we'll look at some sources of long-term care typically available outside of a nursing home.

The Georgetown Long-Term Care Financing Project states that some 83% of people who need long-term help live in the community, and more than three-fourths who do so rely on unpaid assistance from family, friends, or volunteers. Only 8% rely solely on paid help. Even two out of three of those who require assistance with three or more activities of daily living (ADLs) rely exclusively on unpaid help. Family, friends, and volunteers, then, provide the bulk of assistance to those who receive long-term care outside of nursing homes, and they do so largely at no charge.

I think we can agree that no one wants to enter a nursing home unless it's absolutely necessary. But in today's society, families are frequently geographically separated, thus making substantial help from family members less likely. Given a preference for remaining at home and given the increasing likelihood that family assistance may not be available, other sources of assistance may be required to meet our needs as we age. Highlighted below in ascending order of typical costs, these sources of care include community-based services, home care, independent living (sometimes called congregate housing), assisted living, and continuing care facilities. Each provides a large measure of independence for as long as possible at varying costs based on the care provided.

Community-based services
Many communities provide services and programs to help seniors with a variety of personal activities. These community-based services include Meals-on-Wheels, transportation services, personal care, chore services, adult day care, and a variety of activities in senior centers. These services are usually free or at low cost to individuals who qualify. Local organizations, usually called Area Agencies on Aging, coordinate these services to promote the independence and dignity of older adults. Good sources of referrals for these services besides the local area Agency on Aging include senior centers, fraternal and religious organizations, friends, and neighbors.

Home care
Home care is exactly what it sounds like. A person dependent on others for some essential activity receives that service while living at home. The services can range from skilled medical care to ordinary household chores. Depending on the activity involved, the cost can range from nothing to $19 per hour for a home health aide. If skilled care is needed, this option can be quite costly and, at its worst, can even exceed the cost of a nursing home. Home care is probably best suited for those who are still reasonably independent and mobile, but who need some help with tasks such as house cleaning, maintenance, cooking, laundry, and shopping. The cost of some home care services may be offset by long-term care insurance, depending on the type of policy purchased and the assistance rendered.

Independent living arrangements
In general, independent living (or congregate housing) involves either the ownership or rental of a unit in a retirement community within which one may receive a variety of services. These may include (but are not limited to) shared recreational facilities, common dining, housecleaning, 24-hour security, transportation, organized activities, and health monitoring. The arrangement affords private living coupled with available assistance for those needing help with limited health services, cooking, shopping, transportation, and housecleaning. Costs vary depending on location but typically range between $500 and $4,000 per month, depending on the unit and services provided. Note, though, that those costs can be much higher. Typically, the resident covers the majority of expenses in these facilities. However, long-term insurance may pay for some services, depending again on the type of policy purchased and the assistance rendered.

Assisted living
Assisted living is much like independent living in that it still affords a measure of independence and private accommodations. But it's most appropriate for those who are less independent in caring for their personal needs. It's a living arrangement suitable for someone who is mentally capable but physically impaired, or physically capable but suffering from cognitive difficulties. In addition to the services commonly provided by congregate housing, assisted living will provide greater assistance with medications, ambulating/transferring, bathing, eating, dressing, and laundry. Monthly rates will depend on the location, services provided, and facility involved, but in 2003 they averaged $2,379 nationally. These charges can range up to nearly $7,000. Assisted living facilities are most beneficial for those who require some daily assistance but not continuous nursing care. Most of the expense will be borne by the resident, but some long-term care insurance now provides coverage for many of these expenses. Because of the expanded skilled medical services available, assisted living facilities are licensed by the states, and Medicaid might cover the cost for residents who qualify.

A continuing care retirement community (CCRC) contract provides lifetime housing and care over a wide variety of services to include medical and nursing home care when needed. While the resident must be independent on entry, if that person later becomes disabled, then extensive personal, health, and nursing services will be provided by the facility. Although these arrangements run the gamut of lifestyles from totally independent living through 24-hour nursing care, they are quite expensive. According to AARP, an entrance fee of $20,000 to $400,000 is required, and monthly fees ranging from $200 to $2,500 will be assessed for maintenance, household work, and other personal services. The entrance fee may or may not be refundable. Almost all of the expense of a CCRC must be borne by the resident. In some CCRCs, residents own their living space, and in others the space is rented. Because a CCRC is a contractual arrangement and because these contracts are complex, legal advice is a must prior to entering such an agreement. A CCRC is perhaps best suited to someone who is wealthy enough to afford the fees and who wants to provide for health needs as he or she ages without having to relocate.

The Foolish bottom line
Remember that most long-term care is not provided in a nursing home. And note that most policies usually won't pay for needed long-term care services outside of a nursing home unless the recipient meets some very stringent criteria in the area of ADLs and IADLs (instrumental acitivities of daily living) or is willing to pay a substantially increased premium for having such coverage. Regardless, as we age, the likelihood of our need for long-term care outside of a nursing home increases. Long-term care insurance may help meet this need, and so may the options discussed above. We each must decide for ourselves what option, with or without insurance, is most appropriate for us.

Next: A conclusion.

Fool contributor Dave Braze is a retired financial planner who answers questions on the Rule Your Retirement Q&A discussion board. Sign up today and receive Stocks 2006 (a $69 value) free! The Motley Fool is investors writing for investors .