A Basic Overview of CCRCs
One of the decisions we all need to make in retirement is how do we want to be cared for in our later ages when we may need some assistance. I think for most people, they immediately think of long-term care insurance, which may help to offset the cost of skilled nursing care needs, but doesn’t address where or how care will be provided. An option that covers the where and how of care, and is becoming more popular today, is the Continuing Care Retirement Community or CCRC.
What is a CCRC?
Simply put, a CCRC provides a combination of independent living, assisted living, skilled nursing care and memory care all on one campus. In the independent living stage, one would live in an apartment, condo, townhome or casita on campus, but would have the option of transitioning to one of the higher levels of care if/when the need arises. Assisted living is for those residents that need help with activities of daily living, including the management of medications, bathing, dressing and personal care, but do not require intensive medical or nursing care. Skilled nursing care is often Medicare-certified and provided 24 hours a day, seven days a week by licensed nurses. Memory care is provided for those with Alzheimer’s disease or other forms of dementia. The ability to transition from independent living through the various levels of care up to memory care within one campus is often called “aging in place.” I view the CCRC option as a combination of lifestyle choice and insurance for your long-term care.
Moving to a CCRC is a proactive choice as one needs to make the decision when they are healthy and able to live independently. If you wait to make a decision after you have had a significant health issue, there is a high probability that you could be declined admittance. Since a CCRC is taking on a lot of potential risk by absorbing the cost of your long-term care needs for life, they tend to be fairly scrutinizing on the types of residents they admit. They typically do a thorough review of your personal health history and your overall financial situation prior to approving your entrance to the campus.
Potential Benefits of a CCRC
1) Provides maintenance free living – many times all interior and exterior maintenance of the property you are living in is covered. This typically includes housekeeping and possibly laundry services.
2) Dining program – often at least one meal per day is provided in a dining setting providing the opportunity to socialize with other residents.
3) Transportation – may be provided for physician visits, shopping and outside entertainment.
4) Wellness programs – on site gyms, often pools, outdoor recreation and many times a variety of fitness classes.
5) Social interaction – activities and programs to encourage social interaction.
6) Golf or other amenities – some of the higher end CCRCs may be affiliated with a golf course.
7) Future health care – the knowledge that no matter the level of care needed, it is provided in the same place with staff you are familiar with.
8) Tax advantages – typically a percentage of your initial entrance fee and your regular monthly service fee can be deducted as a medical expense.
9) Estate planning/potential refund of the entrance fee – depending on the contract chosen, you may have an option to receive a percentage of the initial entrance fee returned to your estate/heirs.
Contract Types and Fees
When you join a CCRC it is a permanent long-term financial decision. You need to sign a contract along with possibly providing a substantial entrance fee. Some of the higher end CCRCs rival many luxury resorts and their fees are reflected in the type of property and amenities they provide. CCRC entrance fees can range from $30,000 to $1,000,000. In addition, there is a monthly fee typically ranging from $1,000 to $6,000.
Most people use some or all of the equity in their home to pay for their entrance fee. Below are the three most common types of contracts. The contract you choose will define all terms of care to be provided, services to be provided, the entrance fee, monthly cost, inflation rate, any other costs you may have to pay in the future, cancellation or refund options, any insurance requirements, and a description of the CCRC’s responsibility should a resident become unable to pay fees. Some CCRCs have a Benevolent Fund, which helps to cover the cost of care if a resident is no longer able to.
Type A or Life Care – this is the most expensive option, requires a large entrance fee and monthly fee, but also provides an unlimited lifetime of care with minimal risk to cost increases other than an annual inflation adjustment to the monthly fee. The monthly fee usually varies by apartment size. Refundability of the entrance fee to your estate varies by CCRC and can range from 0% to 90%.
Type B or Modified – this contract offers a set of services to be provided for a set length of time. After expiration, services can be provided but for higher monthly fees. The initial entrance fee and ongoing monthly fees are typically lower compared to type A contracts. Similar to type A contracts, refundability of the entrance fee to your estate varies by CCRC and can range from 0% to 90%.
Type C or Fee for Service – the initial enrollment fee may be low or zero, but assisted living and skilled nursing care are paid for at market rates. The monthly fee is usually determined by apartment size. Beyond the monthly fee, you essentially pay as you go and are charged extra when care is needed. Although initially this can be the least expensive contract, it can be quite costly if a resident eventually has extensive health care needs.
How to Find the Right CCRC
There are over 2,000 CCRCs nationwide, and no two are alike. The best way to evaluate a CCRC is to visit it in person, arrange a tour and meet the staff throughout the campus. If you find a particular CCRC that you are serious about, I would consider spending a few days living on campus to get a feel for daily life there. I would ask to interview a few of the residents and consider exploring all levels of the care provided from independent living to the highest level of memory care. I would also make sure to dine on campus and get a feel for the meal accommodations. This will also give you an opportunity to interact with any residents in a casual setting.
It’s a Big Decision
There is no overstating what a big decision moving to a CCRC is. You have to do your homework, ask a lot of questions and also thoroughly review the financials of any CCRC you are considering. You may find one that has the curb appeal, culture, health care offerings and amenities to fit your lifestyle, but you also need to make sure it is financially sound and has a high probability of being around for the remainder of your life.
CARF International provides accrediting to some CCRC communities. They have an incredibly rigorous examination process. It is not required that a CCRC be accredited, but it can provide some peace of mind if a CCRC you are considering is on the CARF accreditation list.
You should also consider reviewing the financial decision with your CPA and financial advisor. Your financial advisor can determine if the entrance fee and monthly fees are within your long-term budget and reasonable in comparison with your financial resources.
Since you are signing a continuing care contract, I would also have your attorney review the legal fine points of the contract as this is a lifetime financial commitment.
Other Resources to Consider
I lightly touched on the broad aspects of a CCRC in this article. If you are serious about a particular CCRC for your long-term care and lifestyle, I would also suggest visiting the resources below as they provide a lot of helpful information that could be valuable in your decision making process.
AARP – they have a great checklist of questions to ask when considering a CCRC. They provide a thorough list of topics to review such as: general community questions, the grounds and facility location, initial impression of staff and community, staff review, resident review, housing and meal program, medical services, personal services, social life and recreation, and overall financial considerations. Here is a link to their list of questions.
CARF International – they provide accreditation to CCRCs and have an excellent consumer guide to understanding CCRC finances. Here is a link to a pdf of their guide – CCRC Consumer Guide to Financial Performance-June 2016.
Overview of Medicare Enrollment
One important area of planning for a successful retirement is to have adequate health care coverage. Health care costs have been escalating at over twice the rate of inflation for a number of years. For those wanting to retire prior to age 65, health care is typically one of the largest “bridge” expenses to cover until Medicare eligibility.
For most people, their health insurance is provided through their employer. Or, if self-employed, they likely own a private health insurance policy. But once you reach age 65, you have the opportunity to transition to the federal government’s Medicare health care system. This article will provide a quick overview of some of the options available, answer some frequently asked questions and provide some resources to help you navigate the system.
Medicare consists of four main parts:
Part A – is hospital insurance and provides coverage for inpatient hospital services, care received in skilled nursing facilities, hospice care and some home health care. There is no premium cost for this coverage. However, there are co-pays, deductibles and co-insurance when seeking medical care.
Part B – is medical insurance and provides coverage for outpatient care such as doctors’ visits, laboratory and imaging tests, medical supplies and preventative services. There is a monthly premium which is automatically deducted from your monthly Social Security check. If you are not receiving Social Security benefits, your premium will be billed to you once a quarter. In 2016 the base premium is $121.80/month. You may pay a larger premium if your annual income is higher. You can learn more about your potential premium costs by reading the article I wrote titled “How Much Will I Pay For Medicare Premiums?” Your Part B coverage generally covers 80% of your covered care expenses after a deductible has been met.
Part C – is Medicare Advantage Plans, which are Medicare approved private insurer plans that typically provide medical coverage for Part A, Part B and often include prescription drug coverage. Many of these plans provide extra coverage and may lower out of pocket costs.
Part D – is prescription drug coverage. This particular coverage is optional and has a monthly premium that varies depending on the plan you choose. Similar to Part B coverage, those with higher levels of income may pay higher premiums. The link to my article above provides a chart of premium surcharges for Parts B and D based on income level.
What is Medigap insurance?
In addition to the options mentioned above, there are approximately 12 different private insurance plans which vary by state. These extra coverage plans are often referred to as Medicare supplemental insurance or Medigap. These policies are designed to fill in the coverage gaps found in Original Medicare Parts A and B. A large percentage of those receiving Medicare are also enrolled in one of these policies.
When to apply
If you are already receiving Social Security benefits prior to turning age 65, you will automatically be enrolled in Medicare Parts A and B. If you are not receiving Social Security benefits, then you have a seven month window to apply. You can apply 3 months prior to turning age 65, the month you turn 65, and up to 3 months after you turn 65. Your Medicare benefits will generally begin approximately one month after you enroll.
How to apply
You can enroll in Medicare Part A and Part B in the following ways:
• Online at www.SocialSecurity.gov.
• By calling Social Security at 1-800-772-1212, Mon to Fri from 7am to 7pm.
• In person at your local Social Security office. It is recommended that you call first for an appointment.
How do I determine if I should choose a coverage plan for Part C, Part D or a Medigap policy?
Because each person has a unique healthy history with specific health coverage needs, you may want to consult with a local resource to help you compare and contrast your options. Every state offers a free health benefits counseling service for Medicare beneficiaries. You can click on this link and search by your state for the local SHIP office (State Health Insurance Assistance Program). This is a valuable service available to answer all of your Medicare questions. You can also seek a private, independent health insurance broker that specializes in Medicare plans.
What if I don’t enroll on time? Is there a penalty?
If you don’t sign up for Medicare Part B (medical insurance) when you are first eligible at age 65, there is a 10% penalty for every 12 months you are not enrolled on time. The current base premium for part B is $121.80. Thus you would pay an extra 10% every month for this premium going forward. If you didn’t sign up for 2 years you would pay 20% extra every month for as long as you are enrolled in Part B.
What if I didn’t enroll in Medicare because I had health coverage provided by an employer?
Medicare does provide an exception if you are covered under group health care via an employer. You need to provide a “letter of credible coverage” from your employer when you sign up and they will usually waive the penalty.
Additional resources for your Medicare questions.
Besides the SHIP link above, or an independent health insurance broker, another option is to call Medicare directly at 1-800-Medicare or 1-800-633-4227. If you prefer searching for your answer online, you can go directly to www.Medicare.gov.