Summary
This publication summarizes a database of information
collected from Continuing Care Retirement Communities (CCRCs) in the state of
Definition of Life Care
Community. A continuing care requirement community (CCRC), or life care
community, is a long-term care alternative providing a
package of services, including housing, health care and social services, to the
elderly. More specifically, a CCRC (1) provides independent living units,
either apartments, rooms or cottages; (2) guarantees a range of health care and
social services, which may include intermediate or skilled nursing care,
usually available on the premises; (3) requires some type of prepayment,
generally an entrance fee and/or monthly fees; and (4) offers a contract that
lasts for more than one year or for life and that describes the service
obligations of the community and the financial obligations of the resident.
Journal of Housing for the
Elderly. Volume: 3 Issue: ˝. ISSN: 0276-3893 Pub Date: 1/20/1986
There are three inter-related issues for consumers to address when looking for a CCRC. These are Housing, Services and Long-Term Health Care, usually involving Assisted Living and/or Nursing Care. Another related issue is each consumer’s Estate or Financial Plan.
The question that consumers need an answer to, and which is often, the most difficult to determine, is: Who pays for long-term care and when?
This publication tries to answer that question in simple terms for consumers. In order to answer that question we need to examine and understand the marketing strategies of the retirement community industry. Marketing of CCRCs usually involves three Products:
Housing-The cost of residing in the apartment or other residence.
Services-Dining, maintenance, cleaning and activities.
Health Care-Setting aside or otherwise providing for potential costs of long-term-care for Assisted Living and/or Nursing Care.
Some CCRCs offer a bundled plan, wherein a resident pays an Entrance Fee, and a Monthly Fee, and the CCRC promises to provide Housing, Services and Health Care, at essentially no increased fee, for the life of the resident. This is referred to as an Extensive Contract, or Class A Contract. Whether the resident’s estate receives any refund of the sizeable investment (Entrance Fee) is something consumers need to understand. Refunds may provide 50%, 90% or even 100% of the Initial Entrance Fee. Services are usually covered by the Monthly Fees, while the resident is in his or her own apartment. Whether these fees also pay for Assisted Living or Nursing Care should be of great interest to consumers.
Class B or Modified Contract facilities usually provide Housing and Services, with discounted health services, often in the form of “free days” or “earned days” of health care, or discounted rates while in Nursing Care.
Class C or Fee-For-Service contracts usually provide Housing and Services, with residents “self-insuring” for health care costs.
Some CCRCs provide options to adjust Entrance Fees or Monthly Fees. If a resident wishes to self-insure for health costs, the Entrance Fee could be reduced. Or if a resident wishes not to have a refund to the estate, the fees could also be reduced. These adjustments usually occur during the purchasing process, and cannot be changed once the resident moves in.
Let me provide some specific examples, assuming the consumer wants a 2 BR, Double Occupancy..
Facility A offers the following:
Average Entrance Fee Average Monthly Fee ALU LTC FFS Refund Discount
$530,000 $4,393 Yes Yes 90%
The resident is provided with unlimited Assisted Living and Nursing Care, with no increased Monthly Fees (except for additional meals), for life. The resident’s estate would receive a 90% refund of the Entrance Fee, and there are no discounts offered.
Facility B offers the following:
Average Entrance Fee Average Monthly Fee ALU LTC FFS Refund Discount
$260,400 $2,183 Yes 100%
The resident receives Assisted Living and Nursing care on a Fee-For-Service basis (there may be a certain number of “free” days per year) and the refund is 100% of the Entrance Fee upon death. The resident would be expected to pay fees for Long-Term-Care, although many facilities allow residents to “draw down” from the Refund, if any, for this purpose. Most CCRCs have a policy that they will not force a resident to move out, if their resources are exhausted.
Facility F offers the following:
Average Entrance Fee Average Monthly Fee ALU LTC FFS Refund Discount
$281,400 $2,812 Yes Yes 90% 78%
The resident receives Assisted Living and Nursing Care, with no increased Monthly Fees (except for additional meals), for life, with a 90% Refund of the Entrance Fee. There is a Discount offered to 78% of the Entrance Fee, if the resident chooses a declining Refund balance to 0% over 10 years.
Assuming that the apartments are comparable, how does the consumer choose the “best” plan? The answer is: It depends on your estate planning, and your individual choices for long-term-care insurance and your willingness to assume risks.
Actuarial studies show that approximately 20% of the population can expect to spend time in nursing care, for up to 2 years. Nursing care currently costs an average of $250 per day, or $75,000 per year. If you have a long-term-care insurance policy that would cover some of those costs, you might consider Facility B. If you also want to preserve some of your assets to pass down to your beneficiaries, you might consider Facility A, since it refunds some of your Entrance Fee after your death.
In this study, I have shown the “List Price” for each type of residence. This is probably the highest Entrance Fee that you would expect. Many CCRCs offer only this List Price. Some facilities offer their List Price (i.e. 90% Refund with Life Care) and then offer another, lower, price for a 50% Refund, or a Declining Balance Refund (i.e. 2% per month for 50 months), or a discounted Entrance Fee for Non-Life-Care Plans (i.e. Fee-For-Services health care.). Since most consumers cannot predict how long they can expect to live, they have to decide how much risk they are willing to take to save money on the Entrance Fee, or to protect their assets for their beneficiaries. I have included a percentage value for the “Discounted Price” which would be the lowest Entrance Fee you would expect for a given size of residence.
You should understand
that these values represent approximations, ranges, averages and in some cases,
estimates of costs. You should request up-to-date information from any facility
you are interested in, and should not rely solely on this document when making
long term health care decisions.
In general, the highest
Entrance Fees will provide the most long-term care and the highest
refunds. Discounts come from accepting either lower
refunds or self-insuring for long term care.
Some statistics on CCRCs in
|
|
|
|
|
Number of CCRCs |
24 |
949 |
|
Number of
Residences, Total |
6781 |
165,042 |
|
Number of
Residences, Minimum |
64 |
8 |
|
Number of
Residences, Maximum |
1747 |
1,747 |
|
Number of
Residences. Average |
286 |
222 |
|
Number of CFP
Facilities |
4 |
547 |
|
Number of NFP
Facilities |
15 |
266 |
|
Number of FP
Facilities |
3 |
105 |
|
Number of Coop
Facilities |
2 |
39 |
|
Number of Refunds
Offered |
21 |
659 |
|
|
60-100 |
10-100 |
|
Average Refunds, if
Offered, % |
89 |
80 |
|
Number of Discounts
Offered |
21 |
355 |
|
|
66-78 |
20-93 |
|
Average Discounts,
if Offered, % |
72 |
59 |
|
Number of Discounts
Based on Refund |
2 |
343 |
|
Number of Discounts
Based on FFS |
0 |
27 |