By Thomas "Greg" Darden, CLTC | July 3, 2020
Community care retirement communities, also known as CCRCs (or life-plan communities), are a long-term care option for older people for whom it is essential to stay in the same place as they transition through the various phases of the aging process. It is a form of ‘aging in place.’
An Introduction to CCRCs
These communities – of which more than 2,000 exist in the U.S. today – might be apartments, townhomes or cottages that share common areas and numerous amenities, plus assisted living and skilled nursing facilities.
They offer customizable services to fit the individual’s needs at each point in their life. This ensures that the best level of care is available whenever needed, including emergency medical help.
But the most significant benefit is that you have lifetime access to a continuum of care. The first phase is that of independent living, where you can handle activities of everyday life, but you might need help from time to time.
In the next phase, in assisted living, you can receive custodial care (for eating, bathing, dressing, toileting, continence, and transferring from one spot to another – such as from a bed to a chair). Next would be skilled nursing care, where you can receive 24-hour nursing, rehabilitation, and custodial care.
CCRCs can be a good option for people who want to reduce their responsibilities for maintaining a home while also living in a community that offers a variety of services and social/wellness activities within the same ‘campus,’ and that provides access to long-term care in a familiar environment if and when it is needed.
Costs and Types of CCRC Contracts
If you are considering a CCRC, the contracts are complex and should undergo a review by an elder law attorney with expertise in this area. It’s also vital to do due diligence of the finances and management of the community itself, as CCRCs are the most expensive retirement option, and you want the certainty of the operation’s sustainability.
Regarding costs, CCRCs require substantial entry fees, ranging from $100,000 to $1 million. The ongoing monthly fees typically range from $2,000 to $6,000 and can be subject to inflation-based increases. The entry fee guarantees a bed in assisted living or a skilled nursing facility but does not usually include home care for those in independent living. Some contracts may refund part or all of the entry fee upon the death of the resident.
As for contracts, the different CCRC contracts follow a typical structure. CCRCs have the benefit of being regulated at the state level, and the ‘mileage can vary.’ Let’s look at the common types of contracts:
- Type A, called ‘Extensive’ or ‘Life Care’ contracts, are the most expensive option. They offer a full range of services, including unlimited prepaid long-term care. This contract transfers all the financial risk of care to the CCRC.
- Type B, called ‘Modified’ contracts, are less expensive than Type A. They include limited long-term care services. They are subsidized or free for a certain number of days, and, beyond that, the resident covers the cost at market rates. Some of the financial risk of care is transferred to the CCRC.
- Type C, called ‘Fee for Service’ contracts, offer a lower entry fee and monthly fee. They guarantee access to care, but the resident pays market rates for all care received. In this case, the resident assumes all financial risk of care.
- Type D, called ‘Rental Agreement’ contracts, have a lower or no entry fee. The resident pays for all care. They are a more affordable option for people who don’t have an asset they can dedicate to the entry fee.
- ‘Equity’ contracts provide a slightly different model. Instead of paying an entry fee, the resident can buy a share of their residential unit. As you move to higher levels of care, the CCRC sells your unit, and you receive your initial investment back unless it is sold for a loss.
Planning Considerations: How CCRC Contracts Work with Long-Term Care Benefits
Long-term car insurance (LTCi) covers the cost of care. In turn, CCRCs guarantee access to care and cover all, some, or none of the cost of care, depending on the type of contract you sign.
As you assess the interaction between the CCRC contract and the LTCi you have, several key elements should be considered:
- The benefits payment model of your LTCi. If it’s ‘reimbursement,’ it only pays for billed expenses that qualify for payment under your policy, up to the maximum benefit. Also, care must be from a licensed health care provider. If it is ‘cash indemnity,’ it pays cash up to the full benefit, and that cash can be spent at the insured’s full discretion. Care can come from unlicensed providers as long as the insured is certified by their doctor as needing long-term care, and a plan of care is in place and approved by the insurer.
- The type of CCRC contract, where you determine how much long-term care is included in the contract.
- A cost/benefits analysis of the CCRC contract versus the LTCi.
- The status of your care decision: Do you already own LTCi when considering a CCRC? Or are you planning for LTCi now while you anticipate entering a CCRC in the future? The risk is that – if you delay purchasing the insurance but assume you will go into a CCRC – if you suffer an impairment you could become ineligible for both.
Let’s examine how different types of CCRC contracts interact with LTCi.
A Type A contract: You may not need the insurance policy at all. This might be a good option for someone who might not be insurable. Buying an LTCi policy with ‘reimbursement’ has limited value, since no services will be billed for reimbursement. Depending on the CCRC contract and your LTCi policy, part of your monthly fee assessed for prepaid long-term care might be reimbursable. A ‘cash indemnity’ benefit could be of more value, for example, if you want home care services while in independent living, or if you want an upgrade to a private bed if you enter a skilled nursing facility.
A Type B contract: Your LTCi policy benefits, whether ‘reimbursement’ or ‘cash indemnity,’ can be used to cover long-term care expenses that exceed the amount offered under the contract. It is crucial to make sure you can get LTCi coverage before entering this type of contract. ‘Cash indemnity’ provides the most flexibility and may be preferred.
Type C and Type D contracts: Your LTCi policy benefits, whether ‘reimbursement’ or ‘cash indemnity,’ can be used to cover long-term care expenses. You want to be sure you can get LTCi coverage before entering this type of contract. If you are not insurable, a Type A or Type B contract may be a better choice.
For seniors with the financial means – or with supportive LTCi coverage – a CCRC offers you the ideal environment in which to ‘age in place.’ However, because of the cost and complexity of contracts, you will want to do – or ask an expert to do – extensive due diligence to be sure you are getting precisely what you want.