Guest Post By: Philip B. Posner, Esq.,
Part independent living, part assisted living and part skilled nursing home, a Continuing Care Retirement Community (CCRC) offers a tiered approach to the aging process, accommodating residents’ changing needs. Upon entering, healthy adults can reside independently in single-family homes, apartments or condominiums. When assistance with everyday activities becomes necessary, they can move into assisted living or nursing care facilities within the same community. CCRCs give older adults the option to live in one location for the duration of their life, with much if not all of their future care already figured out.
With the Baby Boomer generation hitting retirement age, CCRC’s are now a multibillion-dollar industry, particularly among the upper-middle class and affluent. At least 745,000 older adults now live in such communities, according to the American Association of Homes and Services for the Aging. And those numbers are expected to rise as baby boomers hit their 70s.
This Isn’t Your Grandparents’ Nursing Home
Building styles of CCRCs run the gamut from urban high-rises to mid-rise suburban campuses to garden apartments, cottages cluster homes, or single-family homes. Some are as luxurious as five star hotels. Some CCRCs provide units that are designed for people with special medical conditions, such as Alzheimer’s disease. Because of the substantial up front Entry Fee, CCRCs are targeted toward a middle and upper middle class demographic. All CCRCs have large staffs, necessary to provide the diverse and elaborate services and amenities which are provided as part of the CCRC model and are demanded by those seniors interested in this type of housing and lifestyle.
CCRC residents typically pay a hefty entry fee and a monthly fee in return for the “promise” of care for the rest of the residents’ lives. Of course, this “promise” sets CCRCs apart from over-55 and assisted living facilities and nursing homes. And CCRCs are very distinct from the ‘aging in place’ model which may require extensive adaptation of a residence for the physical needs of an aging senior and the delivery of services through various community and other means. CCRCs are designed from the ground up to provide increasingly intensive services under the ‘continuum of care’ model to accommodate the needs of their residents.
The continuum of facilities and services available to CCRC residents typically includes:
- An independent residential unit with one or more meals, housekeeping, social and recreational activities, and some transportation.
- A separate assisted living area on the same campus, where additional support services are provided. Some of these are secure for people with memory loss.
- A separate health care and skilled nursing facility on the premises, with nursing and/or physical rehabilitation, either short-term or long-term.
The on-site community, services, healthcare and activities are factors that attract many people to CCRCs. In addition entry into a CCRC requires only one major transition to a new “home” for those resident for whom stability is appealing or necessary. The facilities and options will vary widely so residents and their families considering this housing option are cautioned to thoroughly review each project on an individual and intensive basis.
It is also important to recognize that entry into the skilled nursing facility that is a part of the CCRC cannot in all cases by guaranteed. In the event that the nursing units are filled or otherwise unavailable, typical CCRC agreements permit placement of an ailing resident in an alternate nursing facility. This reality should be carefully reviewed with the CCRC and with a potential resident and information gathered with regard to the likelihood of such an event.
CCRCs generally maintain a diverse suite of on-site medical and social services and facilities. Residents may enter a CCRC while still relatively healthy and then move on to more intensive care as it becomes necessary. CCRCs offer various options for lively communal living not available in many age-limited (over-55) properties and available only with more effort for seniors who may choose to remain in their own homes.
CCRC Fee Structures: Costly, Confusing And Not Without Risk
The downside of a CCRC is the substantial cost of the Entry Fee and the confusing structure of the contracts and agreements between the CCRC and the resident. Prices depend on the amount of care provided, the type of contract, and the unit’s size and geographic location. Entry fees may range from $100,000 to more than $500,000 depending on the CCRC project, real estate market and factors such as whether or not the Entry Fee will be refunded in full or in part at such time as the resident leaves the CCRC or passes away. Monthly Service Charges and Fees range widely based, not only on the real estate market and prevailing regional costs but also the type of contract between the CCRC and the resident. Unlike other types of senior housing, the costs of CCRCs is highly variable and has been difficult to quantify in national surveys. For more info, here are links to a recent cost surveys by Metlife Mature Market Institute and Genworth Financial.
Seniors often use the proceeds from the sale of their home to pay the Entry Fee of the CCRC. However, the resident should be cautioned than in most CCRCs, the payment of the Entry Fee is not the same as the purchase of an apartment or real estate of any kind. The agreements in many cases are akin to a lease. Moreover, to the extent that the current federal and state tax law (also highly changeable) results in a taxable gain upon the sale of the residence – no “roll over” to defer a gain of potentially highly appreciated real estate will be available upon entry into a CCRC.
Nationally, CCRCs typically provide for three basic fee schedules:
- Extensive contracts, which include unlimited long-term nursing care at little or no increase in the monthly fee. This arrangement requires residents to pay a higher fee initially.
- Modified contracts, which include a specified duration of long-term nursing care, beyond which fees rise as care increases.
- Fee-for-service contracts, in which residents pay a reduced monthly fee but pay full daily rates for long-term nursing care.
CCRC contracts have evolved over time with new and confused variations within each fee schedule. For example, a CCRC might offer two different extensive contracts and one modified contract, with different levels of refundability for each. CCrcdata.org provides a national directory of CCRCs and general information regarding the amenities provided by a CCRC and the contract terms. Many facilities now provide samples of the their contract and related documents on-line in PDF format. Care should be taken, however, to review not only the CCRC contracts but also the financial information and individual project data to determine whether or not the particular CCRC being reviewed is financially stable and likely to remain so over time.
CCRC Entry Requirements
Most CCRCs require that a resident be in good health, be able to live independently when entering the facility, and be within minimum and maximum age limits. As a prerequisite to admission, facilities may also require both Medicare Part A and Part B, and perhaps Medigap coverage as well. A few are now even requiring long-term care coverage as a way of keeping fees down. Some CCRCs are affiliated with a specific religious, ethnic or fraternal order and membership in these groups may be a requirement. Of course, applicants will have to demonstrate that they have the means to meet the required fees. The applicant may be placed on a waiting list, since CCRCs have, until relatively recently been highly sought after.
CCRC residents usually self-fund their residency and care out of their own pockets. As noted above, CCRCs are generally targeted toward seniors with middle to upper class means. However, Medicare, and at times Medicaid, can be used to pay for certain services, and most CCRCs accept either Medicare or Medicaid. Although Medicare does not generally cover long-term nursing care, it often covers specific services that a CCRC resident might receive, such as physician services and hospitalization. Because the financial requirements for residence are fairly strict and the costs are relatively high, very few CCRC residents are eligible for Medicaid.
Recent Financial Challenges
According to a recent survey prepared by underwriter of financing for non-profit senior living providers, there were approximately 1850 CCRCs in the United States as of the end of 2009. Approximately 30% of CCRCs currently under development are for-profit status according to the survey. This represents a shift from the current norm of non-profit ownership of CCRCs. Profit and non profit projects alike, are developed utilizing complex financial instruments including municipal bonds, tiered financings, and oftimes complex management contracts between ongoing non-profit management companies controlled by the project developer. Moreover the CCRC “model” relies on the up front provision of large sums of money from each resident raising issues of financial management, disclosure and security of such deposits.
Due, in part, to the recent financial crises, the Erickson Retirement Communities, Inc. (the developer of the various ‘Erickson’ communities) was forced to reorganize in Chapter 11 Bankruptcy and its real estate and financial assets under management were acquired by in an auction. New capital was injected into the operations of all of the individual CCRCs by the successful bidder. Notwithstanding the financial concerns, occupancy rates and confidence in the individual Erickson communities (as well as other CCRCs nationally) has remained high.
The risk in the CCRC industry has led the U.S. Senate Special Committee on Aging to seek a Government Accountability Office investigation into CCRC operations and finances. Although the prospects for the industry remain positive, given importance to seniors of maintaining stability in their housing accommodations, a thorough review of a particular CCRCs financial position is an important component of counsel’s overall review of a CCRC project.
Despite their risks, CCRCs still hold widespread appeal. They promise to alleviate one of the biggest worries facing families with aging loved ones: how to secure, and in many cases pay for, future long-term care.
How To Evaluate A Facility And CCRC Contract
Deciding on a CCRC may be an once-in-a-lifetime choice, and it is a decision that should be made carefully and with the benefit of expert counsel. CCRC contracts are extremely complex and variable. An experienced elder law attorney’s assistance is, in my opinion, invaluable in selecting a community and reviewing its contract. Assistance from a certified financial planner may also be beneficial.
For your information, please download my own FREE CCRC Checklist For Clients.
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Philip Posner, Esq. is a Massachusetts attorney with offices in Wakefield, Massachusetts. Phil practices primarily in land-use law. Phil can be reached at [email protected] or 781-224-1900.
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