What You Should Know When Choosing a Continuing Care Retirement Community
By Ray Hawkins, CFP®, ADPA®, AWMA®, RICP®
It’s no secret that choosing a Continuing Care Retirement Community (CCRC) that fits your needs, desires and budget can be a lengthy and involved process. That’s because CCRCs offer the broadest array of services in the senior housing market, usually with independent living, assisted living, memory care, nursing home and end-of-life care offered all on a single campus.
You have two options for paying for long-term care in the United States:
- You pay (completely) out of pocket or you pay out of pocket, until
- You get to the point where you impoverish yourself and then go on Medicaid
The national median monthly rate in 2014 for a one-bedroom unit in an assisted living facility is $3,500, that's $42,000 per year.
The long term care costs cited below are national averages
Assisted living is need-driven:
- They need help with their daily lives.
- They need help with bathing, medication management, cooking and managing finances.
- Sale of current home
- Existing assets
- Bridge loan
- Reverse mortgage
- VA assistance for veterans
Evaluate the type of contracts available. There are three basic types of continuing care contracts.
• Type A or extensive or life-care contracts
- Include housing, residential services and amenities — including unlimited use of healthcare services at little or no increase in the monthly fee.
- These contracts typically feature the highest entrance fees. The CCRC absorbs the risk that more residents than projected will need higher levels of care.
• Type B or modified contracts
- Typically offer lower entrance and monthly fees.
- Type B contracts limit the amount of health care services that may be accessed without any increase in the monthly fee.
- For example, some may offer a limited stay in the skilled-nursing facility with no increase in the monthly fee (for example, up to 30 days every four months).
- If the resident requires an extended stay, the monthly fee will increase but still be below the average cost of a stay in other skilled nursing facilities in the area.
• Type C or fee-for-service contracts
- Include similar housing, residential services and amenities as Type A and B contracts but require residents to pay market rates for any health-related services under an as needed arrangement.
- Type C contracts offer lower entrance fees and monthly fees but the risk of large long-term-care (LTC) expenses remain with the resident — the risk is not shifted to the facility.
The Fee Structure:
- The fees will vary substantially, depending on whether there is a life service or a modified contract.
- There is a large variation in entrance fees, depending on the area the community is located in and the type of housing available.
- Most CCRCs require the resident to pay an entrance fee plus a monthly fee.
- The entrance fee may or may not be refundable.
- Some contracts provide that the portion of the entrance fee that is refundable decreases with each month of residency, e.g., the refundable portion decreases two percent per month until a specific length of time and, after 50 months in the facility, there is no remaining refundable amount.
- Should the resident move out or die with a refund due, they (or the heirs), the refund may not be paid until a new tenant is found for the unit and the entrance fee is paid.
The monthly fee is set in the contract and typically increases annually to cover any increase in the cost of operations.
- In a CCRC, residents begin their stay in the independent living unit. If they are required to move to assisted living or skilled nursing, the monthly fee may increase due to the increased cost of care.
- This is not always the case. Some CCRCs charge a very high entrance fee with the promise that the monthly fee will not increase as the need for care increases.
- Whether the monthly fee increases as the need for care increases or not depends on the type of contract the resident signs.
- Allow a loved one to choose where he receives care. If Medicaid pays for care, a nursing home is the only option.
- An LTC policy can give options on you want to receive care: in a nursing home, in the community, at home, or in an assisted living facility.
- Expand the range of services a loved one receives, including: care from visiting nurses, home health aides and friendly visitors programs; home-delivered meals and chore services; and time in adult daycare centers and respite services for caregivers.
- Health Care Services - provided by the facility and what you must pay out of pocket for
- Financial Status of the CCRC- this is not a place to disregard. Applicant are entitled to review audited financial statements
- Safety & Security. Campus security, and your safety while moving about as your mobility changes
- Record of Complaints – in the community and by residents
- Quality of Care- Check out Nursing Home Compare to learn how the community scored on its most recent health inspection.
- Accreditation- Is the facility accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF)? Accredited communities have met stringent standards regarding operational and financial performance as well as resident care.
- Lifestyle- Consider services and amenities, but also review the community’s policies on breaking your contract, pets, overnight guests, moving between components on campus, and living with a spouse, for example. Is it a good fit for your lifestyle?
- Many nonprofit CCRCs still offer lifetime care even if the resident runs out of money.
- For this reason, a prospective tenant will be required to submit financial information.
- Based on the information provided, the CCRC may deny admittance if the assets and income are considered insufficient given the prospective tenant’s life expectancy.
In addition, there can be restrictions on the resident transferring assets to family members. Such transfers, if discovered, may result in the resident failing to qualify for the charitable provision.