By Jean Gruss
Some retirement communities offer more than just a place to live.
Continuing-care retirement communities (commonly known by their initials, CCRCs) offer peace of mind for residents and the loved ones who care for them. In exchange for a large sum of money up front, these communities pledge to take care of seniors for the rest of their lives, from independent living to assisted living and into nursing care, without significant increases in monthly fees.
But it’s important to carefully weigh the pros and cons of CCRCs in consultation with heirs because of the high upfront cost and the fact that the residents don’t own the real estate.
“I do like the fact that people can plan ahead and have the full continuum of care available,” says Bruce Rosenblatt, whose company Senior Housing Solutions helps older individuals and their caregivers explore their housing choices. “I’m a firm believer in CCRCs if they can afford it.”
Indeed, affordability is a big issue. According to AARP, entrance fees can range from $100,000 to $1 million, and monthly fees can range from $3,000 to $5,000.
But don’t dismiss CCRCs right off the bat because of the cost. Many of these communities now offer a variety of contract types that may be more palatable.
CCRCs actually have their roots in religious and community oriented senior housing, which explains why most of them are not-for-profit organizations. They generally feature a combination of independent living apartments and skilled nursing care, and many of them offer assisted living and specialized memory care, according to LeadingAge, an industry association.
Until the 1980s, CCRCs had a predominant financial model requiring a large up-front fee that would help defray the high cost of nursing care later in life without increasing monthly fees. Today, CCRCs offer a number of pricing options that involve partial refunds of entrance fees under certain terms as well as fee-for-service arrangements. These newer types of contracts make this form of long-term care an excellent fit for more seniors.
CCRCs offer social benefits as well. Some may be organized by fraternal organizations while others may have a religious, academic or hospital affiliation. Many offer dining options, recreation programs and transportation so residents can maintain an active lifestyle as well.
Residents who have paid an entrance fee do not own their units, but they do have lifetime access to the community’s different living options, including skilled nursing and even dementia care if it becomes necessary.
Entrance Fees Vary Widely
The fees that CCRC residents pay generally fall into one of three categories, according to LeadingAge.
- Type A is a life-care contract in which individuals or couples pay a significant sum (up to $1 million) for the entrance fee. In exchange, the CCRC bears the responsibility for the residents’ long-term care by accommodating them in assisted living or nursing care if needed for an unlimited time at little or no additional cost.
- Type B is a modified contract that may include assisted living or nursing care but only for a limited time period. After a certain time, the resident may have to pay a higher daily rate for this increased level of care provided over the long term.
- Type C is a fee-for-service contract. It includes an entrance fee and ongoing monthly fees but does not include any discounted health care or assisted living services. This shifts the financial risk of long-term care to the resident.
CCRCs employ actuaries to price their Type A and Type B plans. These actuaries ensure that the pricing is sound based on the likelihood that residents may need expensive skilled care as they age.
More than half of CCRCs offer a refund of the entrance fee that often declines over the residents’ length of time in the community. That money may be paid to the residents when they leave or to their estates upon their death.
The growing variety of refund options makes calculations more complicated, too. “These communities have gotten creative with their refund options,” says Rosenblatt, whose consultancy doesn’t take commissions from senior housing facilities. “It’s all marketing driven.”
For example, if you have a long-term care insurance policy, you may be tempted to opt for a Type C plan. But before you do, consider that the monthly charge in a skilled-nursing facility may exceed the benefit that your policy offers.
Searching for the Right Fit
When scouting CCRCs, look for management that willingly shares audited financial statements and annual reports. “These communities should be able to share their financials,” says Rosenblatt.
Don’t just take management’s word. Ask to speak with the residents’ council and obtain the minutes to recent meetings to get an idea of some of the issues they face.
Rosenblatt says high staff turnover can be a red flag as well. Ask how often monthly fees have been increased and, if so, by how much. “I like knowing that my clients have a predictable monthly charge,” he says.
Much like an insurance company, prospective residents need to reassure themselves that the CCRC they choose is going to be around for quite a while. Fact is, people are living for decades in retirement and CCRCs need the financial strength to weather inevitable economic downturns. To get an idea of their financial resilience, inquire how the community fared during the most recent recession and what steps management took to ride out the storm.
Standard & Poor’s (S&P) Ratings Services rates the financial strength of some CCRCs, which helps the communities borrow money to finance capital improvements and expansion. Analysts look at a variety of financial indicators, from geographic location to pricing models.
For example, occupancy above 90% is one indication of financial strength. “We look for high occupancy across the continuum,” says Stephen Infranco, a director with S&P.
In a report published last year, S&P identified 16 A-rated not-for-profit senior housing operators. This list is an excellent starting point for your search for a continuing care retirement community.
Brethren Home Community (doing business as Cross Keys Village)