As much as some people may not want to admit it, it’s true — aging is expensive. The older we get, the more care we’ll likely need. And unfortunately, it doesn’t matter whether the choice is made to age in your own home, with a family member, or in senior housing…it’s just not going to be cheap. For many, that can be a hard pill to swallow, to the point that a majority of adults fear not being financially prepared for unexpected medical bills, and often don’t even begin considering long-term care until it’s too late. But would that be the case if those same people knew there were actual financial benefits to some senior living options?
Out-of-pocket payment and Medicaid are not the only choices available to seniors, and they’re certainly not the most financially viable. A Continuing Care Retirement Community (CCRC), also known as a Life Plan Community, with Life Care offers seniors peace of mind, predictability, greater financial security and often the best cost/value option. It’s no wonder, then, that these contracts have increased in popularity by 7% over the last decade.1
So what makes Life Care such an attractive choice for seniors who want to maintain their independence and are considering a move to a CCRC?
“It makes sense for a lot of people, for a lot of reasons,” says Mark Trepanier, executive director at Abbey Delray in Delray Beach, Florida. “Under these contracts, the monthly fee stays within a consistent range throughout a resident’s entire tenure at the community, even if they end up moving into higher levels of care over time. It’s a smart choice, for both the pocket and the peace of mind it provides, especially when compared to the other contracts, Type B and C.”
CCRC Contract Types
Depending on the CCRC, prospective residents are offered at least one of three different contract types, A, B, and C. To best understand the benefits of Type A, it helps to have a firm grasp on the other two.
Type B, or a Modified, contract usually requires a lower monthly fee and maybe even a lower entrance fee than one with Life Care. Almost all the same residential services and amenities found in senior apartments are available. However, if assisted living or skilled nursing care is required, the resident will be responsible for some of the cost. Often, residents will have access to a predetermined number of days in the health care center at either a discounted rate or at no cost at all.
Conversely, Type C, or Fee-for-Service, contracts typically require the lowest monthly fees and possibly the lowest entrance fees compared to the alternatives. Senior living residents who move in under this option are still afforded the same services and amenities as anyone else in the community, but if their health care needs change (say, they need to move from residential to assisted living or skilled nursing), their monthly fees will increase accordingly. The lower entrance fee under these contracts is especially appealing, but the real costs for both options accumulate in the long run.
A Type A contract, while more expensive than Types B or C upfront, offers unmatched value over time. Beginning with residential living, the entrance and monthly fees are higher, yes, but the peace of mind that comes with this contract option is invaluable. Under this arrangement, almost all senior housing services, amenities and health-related services, including assisted living or skilled nursing care, are provided with little to no increase in monthly fees, beyond standard adjustments for inflation. To put it simply, a CCRC resident with a Type A Life Care contract prepays for some portion of health-related services that may be needed in the future. This grants them comfort, security and more predictable long-term expenses, regardless of how their health may change in the future.
“As the only CCRC in the Des Moines metro that offers Life Care, I can confidently say that you really can’t put a price on the comfort our residents feel,” says James Robinson, executive director at Deerfield in Urbandale, Iowa. “It has made an incredible difference. The lifestyle here is invigorating because our residents move in when they want to, when they’re healthy and excited about the possibilities that lie ahead.”
Much more than peace of mind
Life Care offers residents who choose it a kind of comfort that many other contracts can’t provide. However, its value isn’t quite as clear to see in the beginning as it is over time. Kind of a Catch-22, right? Not exactly, especially once you understand that there are significant financial benefits that come along with spending more money in the beginning.
You can’t put a price on the feeling that comes from knowing exactly how much you’ll need to pay for something long before it becomes due. With a Life Care contract, it doesn’t matter how long a stay in assisted living or skilled nursing lasts, the costs are covered for the duration. Monthly fees will apply, and may increase over time based on inflation, but the looming threat of a surprise bill that asks for far more than a resident can provide is gone. With this arrangement, health care costs remain steady regardless of what’s needed, which keeps residents, their loved ones, and their estates financially stable.
CCRC Entrance Fee Tax Deduction
In the eyes of the IRS, a portion of the entrance fee paid the year residential living begins in a CCRC, and a portion of the monthly fees that are paid from that point on, are “prepaid medical expenses.” This being the case, they can be listed as itemized health care costs for future tax deductions. Of course, this benefit varies from place to place and year to year, but the fact remains that Uncle Sam sees CCRCs as a smart money move, and is willing to reward those who choose it as the foundation for their future.
According to the 2017 Genworth Cost of Care Survey, the median monthly cost nationally for a private room in a nursing home is $8,121, or over $97,000 annually.2 This cost, however, is just the base level and not necessarily an indicator of costs yet to come. Deteriorating health will require extra care, which will undoubtedly cost more as time goes on. The monthly expenses under Type A contracts only increase slightly, and still well below market rates, regardless of changes in a resident’s health. If it’s a financially viable option in the beginning, it will remain so throughout the years.
CCRC residents are also generally healthier, with the risk of disease and disability reduced significantly. Being surrounded by friends in an active and vibrant environment also plays a role, keeping residents feeling young at heart, despite their years. Quality of life like this can’t be easily quantified by a number, but it also can’t be ignored.
Even though they’re strictly for seniors, moving into a CCRC is often a family affair. Children, grandchildren and other family members want to make sure that their loved ones are well taken care of, comfortable and happy in their new communities. They also want to ensure that their affairs are secure and in order. Some CCRCs offer tiered refundability plans, so that whenever the time comes that a loved one is no longer a resident, they or their surviving family can get back a significant percentage of their entrance fee.
From priceless peace of mind to simplified estate plans, Life Care simply makes sense. Sure, the costs at the beginning may seem like an obstacle for many, but the feelings of independence, security and the long-term benefits simply can’t be matched by any other CCRC contract type.