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

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. Location may also affect cost. Families of seniors who are comparing and investigating CCRCs might benefit from the resources that are made available by the National Continuing Care Residents Association.

Finally, most CCRCs require an entrance fee (also known as a buy-in), but some offer rental options without an entrance fee. Rental costs vary by the amenities the resident chooses and the services he needs.

Before making other decisions, it is important to consider whether to invest in a CCRC that charges an entrance fee. Communities that do not charge entrance fees might also offer less protection against increases in monthly fees than a resident might have after paying an entrance fee. The monthly charges in communities that do not require an entrance fee may be higher or lower than those charged in comparable communities that charge entrance fees.

Cost comparisons between communities that charge entrance fees and those that don’t should be based on the projected cost of living in the community for a lifetime. While the initial costs are higher in communities that charge entrance fees, their residents may achieve savings in monthly charges and service fees that add up over time.

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 AARP, entrance fees can range from about $40,000 to more than $2 million, with an average initial payment of about $402,000. 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 average monthly fee in 2023 for residents who did not live in an assisted-living or memory care unit was $3,907.

On the other hand, the monthly fee charged by a CCRC that does not require an initial buy-in might be greater. When a resident pays an entrance fee, the contract may cap increases in the monthly fee by, for example, limiting price hikes to the inflation rate. When the resident pays monthly rent without the protection that an entrance fee purchases, the resident may face higher rent adjustments that track the housing market.

Comparing monthly fees of different CCRCs can be difficult. In 2023, residents who rented units in CCRCs that did not charge entrance fees paid an average monthly rent of $3,450, although charges ranged from $1,000 to $6,000, depending on unit size, location, and amenities. That average cost is lower than the 2023 average monthly cost of residing in a CCRC that charges an entrance fee, but residents who paid an entrance fee might benefit from services and amenities (such as discounted meal plans) that are included in the fee.

Regulation of CCRCs

The regulation of CCRCs lacks uniformity. CCRCs have no federal regulatory oversight. Among states, regulation may address some CCRCs but not others. For example, states are more likely to regulate CCRC contracts that charge entrance fees than those that don’t. States might also subject some services a CCRC provides (such as assisted-living or nursing home care) to regulation simply because the state regulates those same services when they are provided outside the environment of a CCRC.

About 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.

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. Its accreditation standards are available at https://carf.org/accreditation/our-standards/.  A search function on CARF’s website allows users to determine whether a particular CCRC has been accredited.

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.

(This article has been revised in September, 2024 since it was originally published in March 2017.)