The Enigma of Continuing Care Retirement Communities (CCRC)
As experts in the field of elder law, you most certainly have had a client who lives in a CCRC or is considering moving to one.
These types of communities have been around for over 100 years and continue to confound families, lawyers and elder care experts alike. To be clear, while the model itself has a core set of “must haves” to be considered a CCRC, each community differs significantly from its competitors on a few key factors all of which can be distilled down to one word: CONTRACT.
Any CCRC must provide a continuum of care. That continuum includes: Independent living (apartments or stand alone cottages); Assisted Living; Memory Care (usually); Skilled Nursing, and; Long Term Care. The assumption is that when a senior buys into a CCRC, they agree to move through the continuum based on their level of need and guided by the medical and social work CCRC staff. Contract review by an Elder lawyer is imperative to ensure that would-be residents fully understand the impact of the contract they are signing. ElderTree often consults with families about these contracts to ensure they are choosing the right model for their level of physical, psycho-social and financial need -- but we always defer to lawyers for review from a contractual point of view.
When your client buys into a CCRC, an entrance fee is paid which is amortized over their life expectancy. All CCRCs must adhere to strict financial reporting requirements which vary by state. In the state of Virginia, CCRCs are regulated by the Bureau of Insurance. Entrance fees at each community are set to be cost-neutral to the community no matter which independent living unit the new resident may choose. The larger the unit, the greater the entrance fee. If a couple moves in, a “secondary resident” fee will be rendered upon entrance which is intended to cover that individual’s actuarial impact over time. Each year, based on life expectancy, the CCRC may recognize the actuarially-appropriate amount of that entrance fee into operating income. The remainder for each individual CCRC resident must be held in escrow for future care. Adherence to this rule is overseen by the State Board of Insurance.
Further complicating CCRC contracts are the entrance fee refundability options.
CCRCs generally provide four options: non-refundable; declining balance refundable based on number of months living at the CCRC; partially refundable upon death based on an agreed upon percentage (usually 70-90%) and; fully refundable. Years ago these options didn’t exist and all entry fees were non-refundable. Beginning in the 1990s the different options began appearing and now, to remain competitive, most CCRCs offer more than one contract option.
Seniors who choose a CCRC are generally more social than the average person, fiercely independent, highly educated and planners by nature.
They like the idea of taking control of their future care and knowing that financially there will be a presumed decrease in ambiguity for the cost of that care in the future. They also generally don’t want their children involved in decision-making, though being type A planners, these seniors did do appropriate estate planning and recognize that eventually their POAs may need to assist them in the future.
The culture of the CCRC matters a lot to the quality of life for the residents.
Some CCRC will stringently enforce the continuum and guide the residents through the appropriate level of care at each juncture. Residents begin in independent living and, depending upon the culture on the campus, may or may not choose to utilize the embedded continuum of care they paid a premium for upon entry. For example, in Northern Virginia, there are a number of CCRCs in which residents stalwartly refuse to migrate to either assisted living or long-term care because they have become indoctrinated by other residents that “that’s where you go to die”.
At these CCRCs, residents try mightily to stay in independent living, to the detriment of their health and their wallet, hiring private duty aides sometimes around-the-clock to maintain their “independence”. The CCRC administrations at these particular communities allow this to happen because it saves them money when the senior refuses a higher level of care and continues to pay out of pocket for additional services otherwise provided at a lesser cost by the CCRC.
When evaluating a CCRC for your client, along with the contractual obligations, consider reviewing whether the CCRC is accredited.
Accreditation is a voluntary process and is granted through the Council on Accreditation of Rehabilitation Facilities (CARF). Accreditation is granted for a period of five years following an extensive year-long self study, peer review and site visit, along with annual updates and monitoring. This process is modeled after the JCAHO accreditation for hospitals. Additional information about the accreditation process and a list of accredited CCRCs can be found here.
Since entrance fees for continuing care retirement communities can be in excess of 500,000 in some premium communities, due diligence is imperative. To gain entrance to the community each resident must pass a medical and cognitive exam as well as an in depth financial assessment to be certain the prospective resident is right for the community.
A good rule of thumb is any potential CCRC resident should have at least $1,000,000 in total assets prior to paying the entrance fees, be cognitively intact and relatively physically able. The average age at entry has remained steady over the years at 78 and the average independent living resident is 82.
The majority of CCRCs remain non-profit entities, with a few exceptions nationwide. Not all CCRCs offer Medicaid long term care. For tax purposes, non-profit CCRCs have a 501C-3 status requiring a non-profit oversight board. CCRCs oftentimes have a mirrored resident board for accountability. Additional financial reporting can also be found with annual financial disclosure statements filed with the state of Virginia. Since the 1990’s, CARF has also been producing a Financial Ratios and Trend Analysis for accredited communities which gives advocates and educated consumers additional insight into the financial health of continuing care retirement communities as a whole.
ElderTree has a wealth of knowledge about CCRCs which we are happy to share with the Elder Law community. If you would like to talk further about this model of care, please contact us directly and we are happy to help!
