An Introduction to Continuing Care Retirement Communities
Recently, my almost retired 63-year-old active neighbor has been shopping around for a comfortable community to settle down in when he is no longer able to stay in his home. He realizes that at some point maintaining the yard, climbing the stairs, and cleaning the big place will become too much. He also sees a changing neighborhood. His kids have moved on as have the kids they grew up with. Younger families have moved in and, although they are friendly, he has little in common with them.
He also wants to downsize and move to a place near people more his age who might have similar interests. And he realizes that, although he is able to care for himself now, as he gets older, he may need help.
In his search for a suitable place to move, he discovered “Continuing Care Retirement Communities” or (CCRCs). Most CCRCs provide housing, activities, and health services in one setting or campus. That description matched his vision of what he wanted in retirement. But, he had questions and concerns.
CCRCs typically offer three types of housing options: independent living; then, as the need for care increases, assisted living; and finally, round-the-clock nursing home care. CCRCs also provide 24-hour security, dining options, health and fitness programs, housekeeping, transportation, medical and personal care, and a variety of social, cultural and educational events.
But this lifestyle option and the conveniences that it offers can mean a major financial investment. Some CCRC contracts require a sizeable down payment but all require monthly fees. These are not necessarily fixed but can increase based on the facility’s operating expenses, the rate of inflation, and the type of contract signed.
The selling point of a CCRC is that it is “all in one.” In other words, everything you need or want is provided at one location. That in itself promises the security and predictability of care for seniors. Residents can stay in the same familiar community and know they will live and receive health care there for the rest of their lives. Sounds comforting and somewhat predictable financially (depending on the type of CCRC contract purchased) and it is for that reason many seniors are drawn to this type of living arrangement.
Not All CCRCs Are the Same
Some CCRCs are operated by nonprofit organizations while others are owned by for-profit companies. Since all of them have to be actuarially sound (meaning that there must be enough money coming in to balance the current costs of running the CCRC plus expected future costs), the cost of for-profits and non-profit CCRCs may be comparable.
This means that you can’t base your decision about a CCRC on cost alone. Prudently, anyone considering a CCRC should visit several. CCRCs tend to have different characteristics, both in term of their residents and amenities they provide. The overall cost may correlate with the amenities, so compare them carefully.
Location may also affect cost. While CCRCs are located throughout the country, those in some parts of the country are less expensive than in other parts, due in part to an overall cost-of-living difference. This link may help to start a search: ccrcs.com.
What You Will Pay For
Entrance fees are upfront, lump sum amounts that vary widely, depending on a number of factors, including where you live, whether you buy or rent the unit in which you will live, the type of service plan you choose, the size of your living unit, and an assessment of when you might need care.
For example, according to SeniorHomes.com, entrance fees can range from about $20,000 were you to rent your unit to several hundred thousand dollars if you buy it. However, according to Kiplinger, the entrance fee usually does not buy an interest in the unit. Rather, it permits you to live in it and to have access to long-term care at the facility per the terms of the CCRC contract. In this way it is similar to an annuity: you invest a sum of money up front in return for the promise of services later.
Some CCRCs permit you to purchase your unit, much like any other home. In that case, though, you will be liable for and should take into account real estate taxes and related costs. In others, you are renting or leasing your living quarters and don’t need to worry about those taxes.
You need to read and understand your contract carefully, including all aspects of the CCRC’s refund policy. For example, one CCRC may require that the unit be reoccupied before the refund is payable, while another may not. In some circumstances, you might get close to a full refund of your entry fee; but in other cases, none at all, and in still others, the refund may be prorated over time under certain circumstances, such as death or moving out. But there’s a caveat: if the fee is refundable, and the senior is applying for Medicaid, the refundable fee will be counted as an asset in the Medicaid financial eligibility determination.
Unlike the entrance fee, the monthly fee is an ongoing charge for the services identified in the CCRC’s contract. Like the entry fees, this fee will vary from facility to facility and is based on factors such as the type of contract purchased, the geographic location, and the service plan selected (meals, housekeeping, and activities). Some CCRCs even include a portion of medical care in the monthly fee. The monthly fees might be as little as $500 but it could be as high as several thousand dollars per month.
Regulation of CCRCs
In 2016, CCRC regulation is a hodge-podge varying by state and services, if it exists at all. CCRCs currently have no federal regulatory oversight. However, according to the My Life Site, 38 states regulate at least some aspects of CCRCs, such as finance, insurance, and health. Too, because CCRCs are risk-bearing entities, many states regulate them much as they regulate other risk-bearing entities, such as insurers. CCRCs are risk-bearing because they promise future performance in return for the up-front payment of the entrance fee. Such regulation also involves the finances of the CCRC and the language of the contracts that it uses. In addition, because CCRCs furnish health services to residents, they are also regulated by state regulators to ensure cleanliness and proper operation. As of 2013, twelve states do not have any formal regulatory system in place for CCRCs and also as of 2013, two states, Alaska and Wyoming, do not have any CCRCs.
Not surprisingly, because not all states regulate CCRCs and those that do regulate them in such different ways, no uniformity of regulation exists. However, a private, not-for profit organization — the Commission on Accreditation of Rehabilitation Facilities (CARF for short) does provide accreditation services for CCRCs. The accreditation process, including financial and health care, can be found at http://carf.org/ccrcListing.aspx. A list of all the facilities that have undergone a rigorous accreditation process, including financial and health care, is at http://carf.org/ccrcListing.aspx.
If There Is Any Bottom Line, It Is to Check Everything Carefully
Having absorbed all of this information, my neighbor decided to visit a few CCRCs, look at their contracts and fees, and then talk with some of the residents. That way he could get some idea of the costs, the layout of the facility, and find out how well his might-be neighbors liked their residence, staff and maybe, most importantly, the food. (The AARP website has a very helpful list of questions to pursue when visiting a CCRC.) But he also decided that, before he made up his mind and signed anything, he wanted a lawyer and/or an accountant to read all the fine print before he takes the next step and writes a big check.