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.

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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