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Lifecare Compared

Howard Rohleder

MY IN-LAWS AND MY mother all moved into continuing care retirement communities after giving up their homes. My in-laws were not yet 70 when they moved in and my mother was age 75. They lived in two different communities about a 45-minute drive from one another.

Both communities provided excellent care, but had differing levels of service and had different ways of being paid. I’ve garnered further insights as a volunteer board member for a third continuing care retirement community (CCRC), a private, not-for-profit facility near where I live.

Much retirement planning is driven by fear of running out of money. Retirement communities that include a “lifecare” or “lifeplan” contract are a hedge against this risk. They provide a continuum of services to meet changing needs as you age, while also reserving you a spot in the appropriate care facility. The lifecare contract guarantees that, no matter what happens to your assets, there will be a place where you can receive the appropriate level of care.

Besides paying a monthly fee, lifecare residents may be responsible for an entry fee. Many people use proceeds from the sale of their home to pay it. There may be an option to pay the entry fee gradually over time, or a refund provision if you leave the community within a given period.

Lifecare services typically include three stages: independent living, assisted living and long-term care. The independent living options often include individual homes—sometimes called cottages or villas—as well as apartments. The long-term care component includes skilled nursing services. Memory care is also increasingly available as a separate unit. Usually, this array of services is located on one campus, but it can also be offered at multiple sites in a metropolitan area.

Lifecare contracts are categorized as types A, B and C. There is a D contract as well, but it doesn’t offer a lifecare guarantee. Some communities offer only one type of contract, and some offer more than one. Here are the main features of each:

  • Type A contracts require an entry fee and hold the monthly fee increase to the general level of inflation, regardless of the level of care needed. Within a given market, type A contracts are likely to be the most expensive.
  • Type C contracts have no entry fee, but you pay the going rate for each level of care when you need it. C contracts are the least expensive lifecare option initially. If you spend substantial time in the nursing home, however, it will come at a high cost. If you never need nursing home care, your lifetime outlay would be lower.
  • Type B contracts are hybrids that combine components of A and C.
  • Type D contracts are purely rentals, without a lifecare guarantee. People who run out of money during retirement would have to move out if they can’t pay the rent at some future date.

When choosing among these service levels, your health and likely longevity are the deciding factors. Look to the experiences of your elderly relatives for guidance. A second consideration is whether you’ve purchased a long-term-care insurance policy.

If you have such a policy, review its provisions in tandem with the lifecare contract. Investigate how and when the long-term-care insurance might kick in to cover the monthly fees of an A or B contract. This could allow you to afford a higher-end facility. Alternatively, a C contract might be better because you would save the entrance fees and your insurance could help pay for long-term care, should it be required.

With lifecare, both you and the CCRC have an interest in the financial health of the other. You’ll be asked to provide a financial statement of your assets to qualify for a contract. Similarly, you’ll need to evaluate the financial strength of the community you’re considering. If this is not in your wheelhouse, consider having an accountant evaluate the CCRC on your behalf.

Get the community’s financial statements and look at the standard measures of financial health, including cash on hand, debt levels, debt service coverage, and how the community has performed over time. Some retirement communities maintain a separate foundation that, among other things, supports the lifecare mission. You’ll want to include the foundation’s numbers in your evaluation.

A small number of facilities have bond ratings associated with their debt. The rating, and how it has changed over time, is another indicator of financial health. Finally, is there evidence of community growth and reinvestment in existing facilities?

You’ll also want to know exactly what’s covered by the monthly fee. Typically, it covers your rent and shared amenities. In some communities, one meal per day is also built into the monthly fee. Additional meals can be a la carte or part of an expanded plan. Unlike in college, alcohol might be included in the meal plan. Assisted living and nursing facility fees include three meals per day.

Communities may also differ on the standard cleaning services included, and how much assistance you get moving from one level of care to another. Extra services typically can be arranged at a cost.

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When my children were considering colleges, they found the right places during campus visits. Visiting multiple communities can provide a similar insight since each community has its own personality.

With our parents’ facilities, one community had a stronger religious emphasis than the other. My wife’s aunt lived in another CCRC that catered to former government and military officers. On your tour, ask to speak with current residents to see if it’s a good fit.

Evaluate all levels of care that you may ultimately use. Even if you plan to enter as an independent living resident, be sure to visit and get a feel for both the assisted living and skilled nursing facilities. The nursing home and skilled nursing care facilities aren’t just for end-of-life. They can also be a rehab stop on the way back to independent living after a hospital stay, so you’ll likely receive care there eventually.

You may find a CCRC with an excellent independent living setup affiliated with a less-than-desirable nursing home. Avoid it. When it comes to evaluating nursing homes, Medicare has online resources to compare facilities based on a five-star rating system.

This evaluation can supplement your observation and the community’s reputation. Don’t depend on the community’s website for rating information. Look it up yourself. If there’s a discrepancy, ask for an explanation.

Besides financial protection, the real value of these communities is the opportunity for socialization and active engagement. Our parents all participated in social and recreational activities, as well as volunteer opportunities, within the community. My father-in-law even served on the board of directors as a resident representative.

On your visit, do you see evidence of varied activities you might enjoy? A good open-ended question to ask is, “How do you encourage socialization?”

Then there are some practical considerations. Is the community near your family? Is it practical to continue seeing your current physician, or are you comfortable with the physicians available on site? If you intend to be a “snowbird,” what are the fees when you’re away from the community?

Make a list of your priorities. Comparing each facility against your list will go a long way toward helping you make a decision. There are many factors to consider: Whether or not you have a pet, you’ll want to understand the pet policy at the various levels of care. If you still drive, what are the provisions for cars? What about banking, barber or salon services, personal training, and internet services? Where is the grocery store and what transportation services are available?

Our parents all spent approximately 20 years at their continuing care retirement communities. For each, it was a wise choice that kept them engaged while they were younger and well cared for as they got older. While none ran out of money, the protection of their lifecare contracts was their ultimate safety net.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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Jim Wood
Jim Wood
9 months ago

Do Life Care companies ever fail?are there state guarantees in case one fails, the others must chip in?

June Elizabeth Dosik
June Elizabeth Dosik
10 months ago

An interesting article.  I actually live in a CCRC, however, I note that most comments come from persons who do not. My primary reason for moving into this lovely campus in Boca Raton was to alleviate the burden placed on my children should “Mother” succumb, and probably will at some point, to the misfortunes of old age. The advantages are too numerous to list here, I’m very active, I have a beautiful apartment (1300 sq.ft) which prompted a lot of downsizing, however, I no longer need to hear my son say “Please don’t leave a mess, Mum”!!!

parkslope
parkslope
10 months ago

Excellent article. My 99-year-old mother entered an excellent lifecare residence when she was 85. She moved from independent living to assisted living when she was 96 and to the health center last year. Her monthly fees are about $3,000 which includes a $6,500 LifeCare discount. Her buy-in fee was reasonable and included a rapidly declining partial refund for three years.

One of the things that isn’t mentioned in this article is that a portion of the buy-in fee and the annual charges is tax-deductible as a medical expense. This was 21% of her monthly charges last year. The buy-in at my mother’s facility also made her a partial owner of the facility so that she can also deduct her share of the facility’s property taxes.

Lifetime Care—Advance Payments
You can include in medical expenses a part of a life-care fee or “founder’s fee” you pay either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include is the amount properly allocable to medical care. The agreement must require that you pay a specific fee as a condition for the home’s promise to provide lifetime care that includes medical care. You can use a statement from the retirement home to prove the amount properly allocable to medical care. The statement must be based either on the home’s prior experience or on information from a comparable home. Dependents with disabilities. You can include in medical expenses advance payments to a private institution for lifetime care, treatment, and training of your physically or mentally impaired child upon your death or when you become unable to provide care. The payments must be a condition for the institution’s future acceptance of your child and must not be refundable. Payments for future medical care. Generally, you can’t include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. This rule doesn’t apply in situations where the future care is purchased in connection with obtaining lifetime care of the type described earlier.”
IRS Publication 502 page 10

mytimetotravel
mytimetotravel
10 months ago

This is a good summary. For those wanting more information I recommend Ruth Alvarez’ “CCRCs: Find the Right CCRC for Yourself or a Loved One”.
I imagine all states are different, but in North Carolina the Disclosure Statements for all CCRCs are available on the Dept. of Insurance website.

Note that wait lists for good CCRCs can be long. Four years for a one bedroom and ten-plus years for a two bedroom is not unknown in my area. You need to at least make a (refundable) deposit well ahead of time. However, in general you need to pass a health check and start in Independent Living, as well as passing the financial check.

Last edited 10 months ago by mytimetotravel
AmeliaRose
AmeliaRose
10 months ago

This is the best article I’ve read on CCRCs. Thank you.

Rick Connor
Rick Connor
10 months ago

Very good article Howard. We went through this process with my mother-in-law. Unfortunately she had a medical problem that led to emergency surgery. The surgery led to cognitive decline and wound care issues that her current facility could not accommodate. Finding a facility that would accept the wound care responsibilities was challenging. In the end my wife had to provide in-service training to many of the employees at the facility. She did not need full time skilled nursing care, but daily wound care.

R Quinn
R Quinn
10 months ago

As you note there are many variables. My wife and I briefly flirted with the idea of such a community, but looking around it seemed quite depressing. Of course, many people can benefit from such care, but it’s hard to understand why healthy and relatively young seniors would like that environment. Just my opinion.

I was shocked at the pricing. This was about eight years ago and the initial fee was $900,000 of which 90% was refundable, but no interest was paid while they held the money. The monthly fee for two of us was $7,000. I just couldn’t see putting that amount of cash out.

Howard Rohleder
Howard Rohleder
10 months ago
Reply to  R Quinn

No reader should be discouraged from looking into CCRCs based on the numbers quoted by Mr Quinn until they have validated them in their own area. Top facilities in our area have entry fees a fraction of $900K and only the largest most luxurious spaces have monthly fees in the $7000/mo range. “Nice” independent living spaces can be had for half that monthly amount, including 1 meal a day.

As noted in the article and by Mr Quinn, some times the entry fee has a refund provision. In the same facility an entry fee that is not refundable will be less than an entry fee that is refundable. You can do the math and decide which fits your circumstances best.

The comment about hiring help in the home varies with your comfort level and, as noted in another comment, the availability of those services where you live. I can hire someone to mow my lawn, or I can move into a condo where my monthly fee covers lawn care. To each his own.

Mr Quinn labels as “his opinion” the comment “it’s hard to understand why healthy and relatively young seniors would like that environment” . Be aware that moving to a CCRC appeals to some people in exactly that situation, with my in-laws being prime examples who did it and never regretted it. As you consider the size of the entry fee, living in the CCRC a long time amortizes that cost over more years.

mytimetotravel
mytimetotravel
10 months ago
Reply to  R Quinn

Did you only visit one? When I was choosing I visited three (and read the brochures for several more). I found that the one I expected to be my first choice didn’t feel right. Everyone I have met at the one I chose, and that includes a number of residents, has been friendly and interesting.

Those prices are certainly high. There is a wide range, and of course some of it depends on where you live. I have a deposit on an apartment in a new building currently going up at an existing non-profit CCRC, and the entry fee for my two bedroom with den is only half of the number you quote, although it is not refundable. (Whether I leave a legacy is a matter of indifference to me.) The monthly fee for Independent Living is also considerably lower. As with anything else, it pays to shop around. Given my health status I expect to need Assisted Living at some point, and I will not want to have to chose a facility at that time, while at the CCRC I will be able to move on site.

Guest
Guest
10 months ago
Reply to  R Quinn

That is a stunning amount of money and I can’t imagine the value one sees in that! If one has that level of wealth they might as well live in their own home and hire folks to help out. My parents lived in a CCRC in a beautiful part of coastal CT for a few years before they passed away. It was priced 1/4 of that and the monthly rent 1/2 that. In fact, I’d love to live in the CCRC my parents lived in.

Jo Bo
Jo Bo
10 months ago
Reply to  Guest

I tend to agree you about wanting to stay in one’s home. My partner and I have done as much as possible to make our home accessible to our future selves. But as much as that is the intention, the reality is that hiring others probably would not be easy. Where we live, good help is scarce. Even some of the federal veteran’s homes in the area are closing because they can’t find enough staff. The challenges associated with locating help could also be more difficult for those of us without children. I have no guarantee that my future mind will be nimble enough to navigate the process alone.

AmeliaRose
AmeliaRose
10 months ago
Reply to  R Quinn

For that much money I’d rather stay in my condo and hire people when I need help.

Marilyn Lavin
Marilyn Lavin
10 months ago
Reply to  AmeliaRose

I suspect right now the real issues — whether in a CCRC or at home — are the affordability and quality of care. I’ve noticed that the CCRC I think is probably best in my area is continually advertising for workers — even on bus wraps. I wonder how much they have to pay to attract workers as entry level wages continue to rise and whether they can compete against many other employers. And while the state prioritized the Covid vaccine for health care workers, an huge percent refused the shots.

Last edited 10 months ago by Marilyn Lavin

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