The ABCs of CCRCs

A major threat to financial independence in old age is the need for long term care. That is, what happens if you are no longer able to care for yourself and you need help? Such so-called "custodial care" is not covered by Medicare or health insurance policies. The available financing solutions are:

►   Family members

►   Medicaid

►   Your own resources

►   Continuing Care Retirement Communities

►   Long Term Care insurance

I briefly evaluated each of these in our summer 2014 newsletter, but I would like to address Continuing Care Retirement Communities (CCRCs) more fully in this issue. They are a uniquely attractive solution for the following reasons:

1. You will have nursing care at a preferred facility, predetermined by you before you need it.
    
2. Married couples may have different health care needs as they age and the CCRC model can accommodate this. That is, if you are in your home and your spouse needs care in a facility, you may be unable to visit them as often as you would like. In fact, you may not be mobile enough to visit them independently at all. In a CCRC, the units that provide care are close by.
    
3. The quality of life is quite appealing and includes a social network. Those who live independently often end up isolated.

There are basically three types of contracts and here's how each of them works. This is for illustrative purposes only and may not be indicative of your situation.

Type A:

You pay a sizeable upfront fee, think 250K plus, and a monthly fee, say $3,000 plus. Typically you obtain the funds for the upfront fee from the sale of your long-time residence. Then, if you need additional care, you move into a section that provides additional care with no increase in your monthly fee. Some have assisted living, some have Memory Care (one in four adults will experience some form of dementia), and all have a Skilled Nursing facility on the campus. In the Boston area, these facilities have an arrangement where they will return up to 90% of your upfront fee if you leave or when you pass away. Examples in the Boston area are North Hill in Needham (www.northhill.org), Brookhaven in Lexington (www.brookhavenatlexington.org), and The Commons in Lincoln (www.thecommonsinlincoln.com).

Type B:

Here you pay a smaller upfront fee, say 150K and a monthly fee, say $2,000. Then when you need care you are guaranteed space in Assisted Living, Memory Care or Skilled Nursing, but the fee goes up. In the Boston area, the same 90% refund applies. Brooksby Village, in Peabody, MA (www.ericksonliving.com/brooksby-village) follows this model.

Type C:

Here everything is "a la Carte." With Type A you are prepaying for care you may not need. An attractive feature of Type C, along with Type B to a lesser extent, is that if you pass away without needing care you have saved money. This is a likely outcome -- most people do not need long term care. Locally, Newbury Court in Concord (www.newburycourt.org) and North Hill in Needham (www.northhill.org) offer this type of arrangement.