| Return to the Brecht Associates Site Continuing Care Retirement Communities and Assisted Living Communities:The Costs and the Contracts by Nicole Muller CONTINUING CARE RETIREMENT COMMUNITIES Active and independent seniors often choose to move to a continuing care retirement community (CCRC) to remove the worry of future health care needs as they age. A CCRC offers all of the benefits of living independently combined with the peace of mind in knowing that personal care and nursing care are available should they ever be required. The CCRC concept allows someone to move to the community while they are healthy and progress through the continuum as needed. Traditionally CCRCs have charged substantial entrance fees which are a form of insurance toward future health care costs. These contracts are known as life care contracts, meaning that you will be taken care of for life. Many CCRCs require an entrance fee, some are non-refundable while others can be partially or fully refundable. A monthly fee is also paid and normally includes services such as utilities, maintenance, housekeeping, meals, transportation, activities and medical needs. There are many types of CCRCs available, with numerous contracts and financial arrangements to consider. Generally there are three types of CCRC contracts: Extensive Contracts A CCRC with an extensive or all-inclusive contract charges an up-front entrance fee which serves as a form of insurance to guarantee that a resident's health care needs will be met in the future. In addition to the entrance fee, there is a monthly service fee which remains the same, except for slight inflation increases, regardless of the level of care needed. These all-inclusive agreements are guaranteeing that your health care needs will be met for the rest of your life in any level of care within the retirement community and for many, this option gives the most peace of mind. Modified Contracts CCRCs with modified contracts provide the same lifetime guarantee and amenities as the all-inclusive type CCRC but limit the amount of nursing care or health care days included in the contract. Once this specified amount of care is received, the resident pays for the health services rendered, usually at a reduced rate. A community offering this type of contract may appear to have lower monthly fees than the extensive contract communities but realize that your future health care costs become a possible financial risk to you rather than the community. Fee-for-Service Contracts Fee-for-service contracts typically offer the lowest monthly fees initially and then are inflated as the level of care required increases. This type of contract allows the resident to pay for only the services they need. A resident will initially pay less in the form of an entrance fee and monthly fee with this type of community. If health care assistance is required in the future, however, costs can become much higher and you risk financial difficulties. Some fee-for-service communities do not require an entrance fee, known as rental CCRCs, and therefore can't guarantee that care in the health center will be available at the time you need it. Costs It is almost an impossible task to compare the cost of continuing care retirement communities (CCRCs). With a variety of entrance fee options to consider, monthly fees which vary according to the apartment size selected and the services included, and the amount of future health care coverage provided, the issue becomes even more confusing. In some cases, if the entrance fee is higher, the monthly fee will be lower and vice versa. Review the contracts carefully and only compare pricing for similar contracts and options. Entrance Fees Most CCRCs in the Philadelphia area charge entrance fees which are adjusted according to the size of the apartment or cottage selected, the type of contract provided and refundability options. Entrance fees for CCRCs with extensive or all-inclusive contracts are the highest because they serve as an insurance policy toward future health care costs. Because this risk burden is shifted to the resident rather than the community, a fee-for-service community offers the lowest entrance fees. Entrance fees can be fully refundable, partially refundable, non-refundable or refundable on a declining basis. The non-refundable entrance fees are the least expensive and the fully- refundable fees are the most expensive. Be careful not to assume that the refundable option is best, you may be in a better position to invest the additional upfront money that would be required. In the Philadelphia region, typical CCRC entrance fees range from $20,000 to $200,000 and some reach as high as $350,000. Monthly Fees Monthly fees also vary according to contract type, size of the apartment and level of care being provided. For independent living within CCRCs, monthly fees cover the cost of services such as utilities, meals, housekeeping, maintenance, transportation, activities and medical needs. Fee-for-service communities offer the lowest monthly fees because they "unbundle" the service package and allow residents to choose only the services they desire. Most monthly fees in the Philadelphia area range from nearly $500 to $4,000. Can you afford a CCRC? The Philadelphia area is home to numerous CCRCs with various contract options and financial arrangements suiting a variety of budgets. As Kathy Wilson, general manager of the Quadrangle in Haverford explains, CCRC,s can be the most affordable alternative if nursing care is needed in the future; considering the cost of a nursing home, which can be up to $6,000 per month in the Philadelphia area. When determining whether you can afford to move to a CCRC, there are many things to consider. Affording a retirement community may be more manageable than you think. Start by listing all of the housing expenses that you would no longer incur including rent or mortgage payments, taxes, utility bills, insurance, housekeeping and household maintenance charges. Add to that the cost for food, medical care, transportation, entertainment and activities, and security system costs. After calculating your current expenses, you will be able to compare them with the fees of the CCRC,s you are considering. In addition, the Internal Revenue Service may allow you to claim a percentage of your entrance fee and/or monthly fee as a medical deduction. Each CCRC has a unique formula for calculating whether a prospective resident is financially qualified to move into the community. A combination of assets and income as well as age and health are taken into consideration to determine affordability. "Typically the sale of a home pays for an entrance fee in a CCRC and the remaining proceeds can be invested to produce additional income," suggests Barbara Terinoni, retirement counselor at Wood River Village in Bensalem. Once you are seriously considering a particular community, an experienced counselor will work with you to determine whether your financial situation is suited to the community. When considering whether monthly fees are affordable, realize that a portion of your income should be available for discretionary spending including travel and purchases. As Marge Cain, director of marketing for The Evergreens in Moorestown, New Jersey notes, each person,s lifestyle is different and therefore the amount of money needed to support that lifestyle can vary considerably. "Monthly fees within a CCRC should generally not exceed 60 percent of a resident,s monthly income," according to Bob Supper, Senior Vice President of Operations and Finance for Dunwoody Village, Newtown Square. For example, if a studio apartment in a CCRC is $2,000 per month, the resident should have a monthly income of approximately $3,300 or $40,000 in annual income. Some communities offer a general guideline which estimates that monthly income should be one and a half times the monthly fee. ASSISTED LIVING Assisted living communities, also known as personal care homes in Pennsylvania, provide a home-like environment to residents who need some support but do not require nursing care. These communities provide three meals daily, housekeeping and laundry services, activities, transportation and personal care services as needed including assistance with bathing, dressing and eating. Assisted living can be found in a freestanding facility, within a CCRC or along with a nursing home. Specialized Alzheimer,s care is also available in some communities. Because assisted living communities do not guarantee future nursing care, as is found in the CCRCs, in most cases there are no large upfront entrance fees. Some communities do charge an application or deposit fee of a few hundred dollars and others also charge what is known as a community fee which can equal the first month,s rent or can be a set amount of up to about $7,000. Because assisted living communities do not charge a large up-front fee, it is likely that there will be more assets available for investment which will help make monthly fees more affordable. Contrary to CCRCs, residents in assisted living communities may spend 80 to 100 percent of their monthly income to pay for monthly fees. In addition, assets may be used to help offset the monthly costs. Monthly fees vary depending on the type of apartment selected and the amount of personal care services provided. In this area, typical monthly fees range from $2,000 to $4,000 for a private room or apartment. Some communities provide shared accommodations and therefore offer a more affordable option. Because communities are required to provide basic services including three meals daily, housekeeping and activities, the price differences are often caused by the amount of personal care included in the monthly fee. In addition, some communities charge extra for personal laundry, transportation costs, telephone and cable television. It is important to understand how personal care services are provided and how they are billed, either by time increments, service or on an unlimited basis. "Typically, a medical assessment is conducted to determine physical and cognitive levels and determine an appropriate level of care," explained Lori High, vice president of sales and marketing of Sunrise Assisted Living. It is equally important to ask whether nursing staff is available round-the-clock or only during certain hours. "Seniors and their families should know exactly what they are getting for their money and where every penny is going so that there are no surprises," explained Kelly Higgins, regional director of assisted living for Brandywine Senior Care. "You do not want to be in a situation where you have agreed on a monthly fee only to receive your first bill with every towel, car ride and extra dish of chocolate ice cream billed." Fee-for-Service Some communities charge residents for only the services they require. In this type of assisted living community, monthly fees may appear lower and as the personal care needs increase, the costs can become significantly higher. Communities offer fee-for-service or "unbundled" pricing in a variety of ways. Some use pricing tiers and group residents into appropriate levels of care with established fees. Others charge incrementally for personal care services based on the amount of assistance or time given to a resident. All-inclusive An all-inclusive monthly fee is the same for all residents regardless of the amount of personal care needed. These monthly fees may appear higher than those within a fee-for-service community because all of the services are provided as needed with no additional charges. In the long-run, this type of community may be more affordable as the need for personal care services increases because the costs are spread among all residents. In addition, the resident is aware of the specific monthly fee without worrying about additional costs. For the most part, assisted living is currently not reimbursed through Medicare or private insurance. However, some long-term care insurance policies are now covering the cost of assisted living and some states, including New Jersey, are experimenting with Medicaid Waiver programs. Contact your local Area on Aging to determine which programs are available in your area. "As you start realistically listing the expenses of maintaining a home, from paying the boy next store to mow the lawn or shovel the driveway, to having a nurse stop in daily, to relying on the neighbor for occasional grocery shopping or transportation to doctor,s appointments, you begin to realize that entering an assisted living community is not a straight numbers issue," explained Kelly Higgins, regional director of assisted living for Brandywine Senior Care. The following worksheet "Affordability of Assisted Living" was graciously provided by Brandywine Senior Care, assisted living providers in Delaware, New Jersey and Pennsylvania.
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