Among options for retirement living is the continuing care retirement community or CCRC. These communities provide a combination of two or more venues that include independent living along with assisted living, memory care and/or skilled nursing usually on one campus.
The intent is to provide the services residents require to age in place. As personal and health care needs change, services are available to enable residents to remain at the retirement community.
What’s not to like?
The range of housing on one campus might include townhouses, cottages, assisted living apartments, memory care and skilled nursing. Services usually include nursing and other health care services, meals, housekeeping, emergency assistance, personal care needs, wellness programs, recreational and social activities, 24-hour security, building and grounds maintenance. Worry-free living. What’s not to like?
Today, there are approximately 1900 CCRCs in the United States located in a range of geographical areas from urban to suburban even rural. Roughly half are faith-based with the majority, 82%, not-for-profit sponsorship. Most have fewer than 300 units.
Contracts differ …
CCRCs come in three forms: Type A, Type B and Type C. Costs and contracts vary by type and it is important to be clear about which services are included in the fees and which services are available at additional cost.
Some offer insurance to cover healthcare needs. Others require residents to have insurance. Still others require pre-payment arrangements for care costs. And some guarantee only the availability of care resources which means that all costs must be paid by the resident.
Here’s a brief description of each contract type:
Type A – Extensive or Life-Care. This type requires a substantial entry fee and ongoing monthly fees. A resident can move from independent to assisted living and has access to care for little or no extra fees. But fees may increase based on inflation or the operating costs of the CCRC.
The contract generally provides for a resident to receive the appropriate level of care on campus or at an accessible off-campus location. With this contract type the CCRC bears the majority of the financial burden for the resident’s care.
Type B – Modified. This type may require an entry fee with ongoing monthly fees or charge by the month. Some long-term care may be provided. But this model is usually set up to provide rehabilitative care for a certain number of days at no extra charge and/or at rates that are discounted. It is not designed to provide chronic care.
The CCRC covers the care expense during the covered period but the financial responsibility shifts to the resident after the covered period.
For example, care might be provided for 90 days for someone rehabilitating from a stroke. Once the 90 days of covered services are exhausted, care costs are the responsibility of the resident. The CCRC may contract with care providers and pass along negotiated discounts to residents.
Type C – Fee for Service. This type may require an entrance fee or charge by the month. Here the resident receives priority admission to on-campus care venues but the resident is responsible for all care costs.
Is long-term care insurance redundant?
We are often asked by residents of CCRCs to evaluate their need for long-term care insurance (LTCI). In order to do so we need to read their insurance contract and the CCRC contract.
We find very few Type A or life-care contracts. The majority of CCRC contracts we’ve reviewed are Type B or Type C and provide care for a certain number of days and only in the property’s care facility. This means the cost of home care in a resident’s cottage or apartment is the responsibility of the resident. LTCI is important here.
Many CCRC contracts are more restrictive than LTCI contracts and limit the policyholder’s flexibility. Additionally, care needs and covered venue choices may be at the sole discretion of the property’s medical director.
Many CCRCs require a new separate care contract when a resident moves from independent living to one of its on-campus care facility. If space is not available in the property’s care venue a resident can be moved to a facility that the CCRC has contracted with to provide care. Costs may be more than the property covers and the resident is responsible for the additional cost. LTCI is important here.
Read the contract …
Better yet, have an estate planning attorney familiar with CCRC contracts read the contract.
We view CCRCs as an option for financially secure seniors who seek a more carefree living environment. Entry fees can be hefty ranging from $50,000 to over $1,000,000 depending on location. Add monthly fees of $1500 to $5000 or more and care costs not covered by the service contract, and a CCRC can be a very expensive retirement venue.
What we’ve learned …
- Applicants don’t understand the contract. Most think the CCRC is a Type A life-care contract and assume all care needs are covered by entry fees and/or monthly fees. Very rarely is this the case in our experience. We’re yet to read a contract that covers any home care in independent living.
- Applicants overlook the financial risks if the CCRC falls on hard times. Like many other sectors of our economy, the CCRC sector was affected by the economic challenges that began in the fourth quarter of 2008. Payment defaults on debt have occurred for some CCRCs and several have filed for bankruptcy protection.
- Applicants don’t know that a health assessment is required. An applicant will be required to pass a physical and mental health exam. This helps the CCRC to assess the kind of care that may be needed in the future.
- Applicants may not understand what is involved in the financial assessment. An applicant will need to show proof of financial ability to pay the entrance fees if applicable, monthly charges and care expenses.
Most CRCCs will require applicants to show proof of Medicare Part A (hospital insurance) and Part B (medical insurance) coverage, a Medicare supplement and long-term care insurance.
Here are four key considerations to understand as you evaluate a CCRC:
- Contract. Type A – Life-care, Type B – Modified or Type C – Fee for Service. This will determine the care services you can access and who is responsible for the expense of care provided.
- Costs. Will you have an entry fee and is it refundable? What are ongoing monthly fees and what do they cover? What happens to costs if one spouse of a couple needs care?
- Health care services. What levels of care services are provided on campus? Is memory care provided on campus? Can the CCRC require that you move off-campus if health needs warrant or if space is not available? Who makes the decision? Who pays for off-campus care expenses?
- Financial stability. Review financial statements. Understand how the care expenses are funded.
The CCRC can be an attractive option for senior living. But it’s very important to understand the contract details. Is it really aging in place?
Key advisors like financial planners, CPAs, estate planning attorneys and LTCI consultants are valued resources in helping you decide if a CCRC is a prudent option for you.