Continuing Care Retirement Communities, an alternative to Medicaid planning?

This month in Crisis Corner, I want to take a closer look at Continuing Care Retirement Communities (CCRCs) as an alternative to Medicaid planning.  In many cases, whether because of very high resource values or simply because a client does not like the idea of Medicaid, CCRCs can provide an alternative means of ensuring that you and/or your loved ones will receive the care that they need for the rest of their lives, without worrying about being displaced if they run out of money (read the fine print).

CCRCs, in general, are communities that offer independent living, assisted living, and skilled nursing all within the same campus. They have “buy ins” that can range from around $50,000 to over $1,000,000, and monthly charges for rent and care, which can vary greatly from $2,000 per month to over $10,000 per month. When looking at CCRCs there are several key points that you should research before choosing a community.

Flat Fee.  These are used in roughly 1/3 of WA CCRCs.  They tend to have larger buy ins, but the monthly fees are relatively consistent from move in to death.  There may be annual raises in fees for inflation, but you pay the same whether you are in independent living or in skilled nursing care.  These CCRCs are more likely to sign up residents who will come in at the independent level and spend as long as possible at that level of care.  This can be a great deal if your health turns well before the end of your life, but if you are expecting a long, healthy life, you will likely pay more here than you would for independent living at a different CCRC.

Resource Requirements. The buy in is only half of the financial qualification process. Nearly all CCRCs require that you show evidence of sufficient resources to pay for some number of years. This number can vary greatly from community to community, but my limited experience with these requirements suggests that it is often roughly double the buy in fee; i.e. if you buy in with $200,000, then you have to demonstrate proof of at least $400,000. It is important to know what this number is because you may want to reduce your estate to a number that is closer to this amount before showing your resources. Most CCRC contracts, at least for the ones that guarantee that you will not be kicked out if you run out of money (all non-profit CCRCs must make this guarantee, but for profit CCRCs are not required to do so) include language that states you will not gift resources after moving in. This is not small gifts at birthdays or holidays, but it does exclude larger gifts, such as those that you might make if trying to qualify for Medicaid.

What this means is that if you move in with $600,000 in resources and you live there for 15 years, you could easily be out of money. If you only needed to have $400,000 to qualify, then you could have given $200,000 to your family before applying, still run out of money (without being kicked out), and kept $200,000 in the family. Either way, you might run out of money but, by gifting before moving, your family can hold onto money that can be used for your benefit or just so that you feel like you are protecting a legacy for your children.

Type of Contract.  There are four basic types of CCRC contracts to be aware of.  It is important to understand which type you are signing up for when weighing buy in costs and initial monthly fees.  The different types are:

  1. Flat Fee. These are used in roughly 1/3 of WA CCRCs.  They tend to have larger buy ins, but the monthly fees are relatively consistent from move in to death.  There may be annual raises in fees for inflation, but you pay the same whether you are in independent living or in skilled nursing care.  These CCRCs are more likely to sign up residents who will come in at the independent level and spend as long as possible at that level of care.  This can be a great deal if your health turns well before the end of your life, but if you are expecting a long, healthy life, you will likely pay more here than you would for independent living at a different CCRC.
  1. Pay As You Go. These are also used in roughly 1/3 of WA CCRCs.  The buy in may be smaller, but your monthly expense is based largely on the level of care that you need and can make significant jumps any time your needs increase.  You may start in independent living, paying $2,000 per month, then start needing help with dressing or bathing and find yourself paying over $5,000 per month.  In these communities, skilled nursing care is often over $9,000 to $10,000 per month.
  1. Roughly 1/4 WA CCRCs use a hybrid contract.  In these communities there is a set monthly cost for independent living, one for assisted living, and one for skilled nursing care.  The level of care needed within each classification does not affect the cost, just the classification itself.  You will pay the same for assistance with dressing as you do for assistance with dressing, bathing, and using the toilet.
  1. Month to Month. A small number of WA CCRCs have month to month contracts, where either you or the community can terminate the contract with 30 days’ notice.  In most of these CCRCs the buy in is smaller or it vests over time, so you can get a partial refund if you leave within the first five years or so.

Care Levels.  Most CCRCs have independent living, Assisted Living, and Skilled Nursing care.  However, not all have the Skilled Nursing care.  It is important to know what level of care the community can provide before spending 10-15 years there, using up all of your savings, and then being told you have to leave because your care needs exceed those that the community can safely provide.

Location, Reputation, and Atmosphere.  These can all be lumped together as the “squishy factors.”  Location is most important to those who want to be close to family, friends, or community activities.  This is something that only you can judge the importance of, but it can play a big difference in your costs.  Reputation is hard to judge from the internet or the handouts the CCRC gives you.  You will see the highlights, but it is harder to locate the bad reviews.  You should talk to a professional housing specialist for the inside scoop.  Finally, Atmosphere really boils down to how you feel about the place when you visit or tour or spend a week test-driving the place.  If it feels like home, great; if it feels like a prison, bad.

Talk to a Specialist.  There are a lot of geriatric care managers who specialize in helping find appropriate housing.  If you are thinking about moving to a CCRC, contact us for a list of companies you can contact for help.

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