Your Home and Long-Term Care In One Package

More and more retirees are looking to solve their housing and long-term health care needs in one move. They are moving into facilities called continuing-care retirement communities, or CCRCs. These also are known as living-care communities.

A CCRC has several types of living and health-care facilities in one community. Usually there is an independent living area for people who need little or no assistance. The independent living units might be apartments or condominiums, town homes, or single family homes. Usually the community provides any lawn care or landscaping services and might offer housekeeping.

A CCRC also will have assisted living units for residents who need some assistance or medical care. The third level of housing is a nursing home. Some even have a hospital or hospital-like facilities on the premises.
CCRCs are attractive for several reasons.

A prime appeal is that for the cost of the entrance fee and monthly fees, most lifetime medical care and assistance is assured. Buying into a CCRC can be an alternative to buying a long-term health care policy. Also, there is no need to make separate searches for home care, assisted living, and a nursing home as they are needed.

Likewise, a CCRC can be a form of wealth protection. The CCRC takes the risk that the care required will cost more than the fees charged to a particular individual. The CCRC also makes costs more predictable.

CCRCs are especially appealing to couples. Visitation and care are less complicated when all the facilities are in one community. When one spouse needs a higher level of care and the other doesn’t, each knows the other is a short distance away in the same community.

Even for those without financial concerns, CCRCs have appeal. The CCRC provides a community. Some CCRCs draw the bulk of their residents from similar backgrounds, such as the military or university professors. Others are more diverse. A CCRC will have community dining rooms, exercise facilities, social areas, and will coordinate various social activities.

A CCRC traditionally is operated by a non-profit organization, such as a religious organization. There also are for-profit CCRCs, which make up only about 20% of current CCRCs. But the for-profit share is growing rapidly.

Whether for-profit or not-for-profit, CCRCs require contracts and, usually, advance payments. There are several different models, and they can be difficult to compare.

The extensive service agreement model involves a significant entrance fee paid in advance of admission plus monthly fees. In return, the facility promises that you will be cared for, often even if you no longer can pay the monthly fees.

The size of the entrance fees vary, depending on the location and how luxurious the facility is. The trend, especially with the for-profit facilities, is for higher fees.

The issue for many prospective residents is whether or not the fees are refundable. Many states have a “cooling off” period of 30 days to 90 days, during which a resident can cancel the contract. There might be a cancellation fee of 10% or so. After that, in many cases a portion of the fee is refundable based on terms set by the CCRC. But the portion that can be refunded is reduced each year until there is no refund after five years or so.

Some of the newer CCRCs have more generous refund policies, while established facilities with waiting lists are less generous.

Regardless of the refund policy, many CCRCs will pay 50% of the entrance fee to a resident’s estate at death. If you enter a CCRC that will pay out part of the entrance fee to your estate, try to negotiate the contract so that the payout goes to specific heirs instead of to the estate. That way, the payout avoids probate, taxes, and other estate issues.

Of course, there might be no refund. In most cases, a CCRC will invest the entrance fee and over time will use about half of it to pay for the care of residents and the other half to make capital improvements in the facility. For the portion that is not refunded, the CCRC essentially is saying that the entrance fee is similar to an insurance premium for the potential future care.

Another version is the fee for service model. This model charges little or no entrance fee. Instead, monthly fees are charged to cover a range of services. As additional services are needed, extra fees are charged. These CCRCs will charge extra for assisted living and nursing home care as those levels of care are needed. But a monthly-fee facility generally will not guarantee to care for someone who becomes unable to pay the fees.

There also are hybrids of the two models. They will charge a lesser entrance fee. But they will not guarantee the same range of services for that fee as the facilities that impose higher entrance fees.

When comparing facilities, look beyond the entrance fee and refund policy. Be sure to compare the services that are covered. For example, a CCRC with a generous refund policy might not automatically cover rehabilitation, medication, or other services when that care is needed.

A newer equity model offers residents a form of ownership instead of charging an entrance fee. The residents essentially are purchasing their housing units and owning part of the real estate. These CCRCs often have restrictive resale policies. Owners might be required to sell the units back to the CCRC when they leave, perhaps at a predetermined price, a formula-based price, or based on an appraisal arranged by the CCRC. There also might be a cap on the profit the resident can earn. But there is no floor on the sale price.

If the resident is allowed to sell the unit to third parties, the buyer has to be approved by the CCRC. Also, it could take a long time to find a buyer.

You also want to see what kind of service contract accompanies the equity purchase. One of the advantages of a CCRC with an entrance fee is the assurance of lifetime care at a known price. A CCRC that sells equity is likely to follow the fee for service model and provide no guarantee of future care.

All CCRCs charge monthly fees. Be sure you know what is covered and not covered by the fees. Also, be aware that the fees will increase. With an established facility, ask for a history of fees for at least the past three years. Also ask for forecasts. With a new facility, all you can ask for are projected fees for the next three to five years and histories at any other facilities run by the same owner.

There are other factors to consider before selecting a CCRC.

Check for accreditation. The Continuing Care Accreditation Commission is an independent nonprofit group that accredits CCRCs. There are other groups that might accredit one or more of the operations at a CCRC.

Also check on the solvency of the facility. Both nonprofit and for-profit CCRCs can go bankrupt. The facility might have a rating from Standard & Poor’s or Fitch’s. It also might issue public debt. You can check the rating on this. Some will provide their financial statements to prospective residents, so you can determine their debt level and cash flow.

After the finances, there are other issues to consider.

Ask how the decision to move a resident from one level of care to another is determined. Is it possible that your physician could recommend a higher level of care but the CCRC says you do not qualify for it?

Are you allowed to bring in your own nurse or other workers, or must you buy extra services from the CCRC? May family members stay overnight? If one spouse is moved to a different care level, can the other remain in their original unit or is a move to a smaller unit required? Would extra monthly fees be required if one spouse were moved to a different part of the CCRC? What power does the CCRC have to change coverage and other policies?

If you move into a CCRC, you might not need long-term care insurance, or might need only a scaled-back policy. You have to examine the services that the CCRC won’t cover and decide if you want to self-insure for them or buy a policy to cover them.

A CCRC can be an ideal choice for people who are in their mid-seventies or older. But there are significant financial consequences, and there are non-financial factors to consider. Since you probably will be in the CCRC for 15 years or longer, take the time to examine a number of CCRCs and study all facets of the arrangement.