CCRC Vs Life Care – Which Contract Is Right For You?
The burgeoning elder care market has introduced a host of new concepts and terms that are easily confused. Many people believe, for example, that the life care and continuing care communities are the same thing, and use these terms interchangeably. However, life care is actually a subset of continuing care. While the offers may appear similar at first glance, don’t be fooled. Let’s take a look at the differences between the two, starting with continuing care retirement communities (CCRCs).
CCRC vs. life care communities
CCRCs offer contractual agreements to people sixty years of age and older, providing them with a continuity of services, usually on the same campus. These services include independent living, assisted living, skilled nursing, and sometimes memory care. Although all CCRCs offer continuous care, some rely on contracts with other care providers to manage higher levels of care, which may be located off campus. This means that residents moving into the independent or assisted living levels would have access to higher levels of care as their needs progress, but may need to move off campus to access those services. Most contracts require the payment of an entry fee (sometimes called a “buy-in” or “purchase” fee) and monthly fees. Some contracts include the purchase of real estate (ie, the resident’s apartment within the community), which can be willed or deeded to an heir like any other real estate purchase. However, not all contracts involve the purchase of real estate. Under these terms, the seniors would become residents of the community, but would not own any property under the contract. Buy-in or entry fees can range from $10,000 to $500,000 or more.
Life care communities provide the same ongoing care to a resident for life, but the biggest difference is this: residents who cannot afford their monthly care fees will be subsidized by the community, with the same access to services and without interruption in care or change in priority status. In other words, residents are guaranteed the same quality of care and access to care from day one to the end of life, regardless of their personal financial situation. Also, most life care communities offer all health care services on the same campus. The idea is that, after qualifying through a health and financial application process, residents will never have to move again, except between levels of care as needed. So, for example, a resident may be required to move from assisted living to skilled nursing as their care needs progress, but the new place of residence will be on the same campus. However, certain states allow living care communities to provide skilled nursing services off campus, as long as it is under the ownership and supervision of the living care provider, and not through a contract agreement. There is another significant difference. In a lifetime care community, residents do not own real property under their lifetime care contract. Upon the death of a resident, the apartment (or room) she occupied reverts to the community.
Because there is no federal agency that governs CCRCs and life care communities, terminology and requirements vary from state to state. However, the easy way to distinguish between a community life care and a CCRC is by the type of contract: type A is considered life care; Types B and C are considered continuing care.
The types of contract: A, B and C
In general, there are three types of continuing care contracts: Type A (Extensive or Whole Life Care), Type B (Continuing or Modified Care) and Type C (Fee for Service). Each type of contract involves a different degree of risk for the resident and the community. The highest level of risk is assumed by communities with a Type A contract and the lowest by Type C. The opposite is true for residents, where Type A is the lowest risk and Type C is the highest. Each type of contract has different fee structures, corresponding to the levels of risk assumed by either party. Some continuing care communities offer only one type of contract, so contact the community you’re interested in to see which one(s) they offer. Here is an overview of how each contract works:
Modality A: Extensive or Lifetime Contract
With this type of arrangement, consumers take the least amount of risk, but pay a lot of money. A Type A contract provides housing, services and amenities, and unlimited access to long-term nursing care at little or no additional cost, apart from periodic inflationary increases. The higher initial rate is based on the assumption that these residents may require, and utilize, higher levels of care as their needs develop over time. This can add up to substantial savings over a resident’s lifetime, considering Medicare doesn’t cover custodial nursing care, which currently costs more than $250 a day, for a private room in a nursing home. Plus, prepaying future health care costs qualifies these residents for significant tax benefits (the IRS medical deduction). Residents are generally required to maintain a minimum level of Medicare coinsurance.
Who it’s good for: People who want to make sure all of their health care needs are covered for the rest of their lives.
Type B: Continuous or Modified Care Contract
A Type B contract also provides housing, services and amenities, but access to long-term care and nursing services is restricted to a specific number of days. After that, the resident is responsible for any additional care costs incurred. Some contracts allow residents to pay for additional care at a discounted rate once they have used up the care included in their contract. As with a Type A contract, residents are eligible for the IRS medical deduction.
Who it’s good for: People who can afford care costs not covered through their contract and those who don’t expect their health care needs to increase significantly over time.
Type C: fee-for-service contract
With a Type C contract, access to health care is guaranteed, but residents must pay the full cost of the services they use. Under this type of agreement, residents receive housing, services and amenities as defined in the contract. Some communities do not charge an entry fee for Type C contracts, but only charge a monthly fee. However, other communities charge an entrance fee, and the funds subsidize a resident’s assisted living or skilled nursing care. If the cost of care exceeds the funds obtained from the entrance fee, the resident will be charged the full cost of any services used. This can happen if a resident requires prolonged skilled nursing care. For those who require higher levels of medical care later on, the cost can be extremely high. At a daily rate of $250, nursing home care costs rise rapidly, creating a significant financial burden for residents without long-term care insurance or significant financial resources. Residents do not qualify for the IRS medical deduction under a Type C contract.
Who it’s good for: People who are willing to take the full risk of health care costs.
Benefits of continuing care
Continuum of Care gives residents convenient access to most of the services they need, all in one place. With the exception of a Type C contract, the cost of those services is included in the rates you pay under your contract. Although medical care is the basis of the contract, it is certainly not just medical care. Let’s take a look at what’s included in a typical continuing care agreement:
* Access to an on-site doctor by appointment, five days a week.
* Home visits during illness to assess condition.
* Meal delivery during illness.
* Daily van service to an off-campus hospital.
* The option to retain services under a separate medical plan, with certain provisions.
* Three meals a day, weekly cleaning service and laundry of sheets and towels.
* Access to banking services, recreational outlets and numerous activities on site.
Regulatory Conditions
Although CCRCs and life care communities are highly regulated in some states, there is no federal agency that oversees these types of retirement communities. However, there is a system of checks and balances to protect the consumer. Is that how it works. Life care providers must submit audited financial statements and reserve reports, generally to the state Department of Social Services, annually. Continuing care contract statutes mandate various financial and reserve requirements to help ensure that providers have sufficient financial resources available to meet future obligations to residents. This is so that residents are protected from any financial hardship that may affect the life care provider. Suppliers must recalculate reserves each year. If the Department of Social Services determines that a provider is in good financial standing, it will exercise its legal authority to require that corrective action be taken.