CCRCs vs life care communities

CCRCs are now called life plan communities, not to be confused with life care communities…

CCRCs are now called life plan communities, not to be confused with life care communities. Life care communities provide the same continuum of care to a resident for life, but the biggest difference is this: residents who become financially unable to pay their monthly care fees will be subsidized by the community with the same access to services and with no interruption in care or change in priority status. In other words, residents are guaranteed the same quality of care and access to care from day one through end of life regardless of their personal financial situation. In addition, most life care communities offer all healthcare services on the same campus. The idea is that after qualifying through a health and financial application process, residents will never have to move again except between levels of care as needed.  For example, a resident may be required to move from assisted living to skilled nursing as his or her care needs progress, but the new place of residence will be on the same campus. However, certain states allow life care communities to provide skilled nursing services off campus as long as it is under the ownership and supervision of the life plan provider and not through a contract agreement. There is one other significant difference. In a life care community, residents do not own real estate under their life care contract. Upon a resident’s death, the apartment (or room) that he or she occupied reverts back to the community.

The Contract Types: A, B & C

In general, there are three types of continuing care contracts: Type A (Extensive or Full Life Care), Type B (Modified or Continuing Care) and Type C (Fee-for-Service). Each contract type involves a different degree of risk to the resident and the community. The highest level of risk is assumed by communities with a Type A contract and the lowest with Type C. The opposite is true for residents, where Type A is the lowest risk and Type C is the highest. Each contract type has different fee structures which correspond to the levels of risk assumed by either party. Some continuing care communities offer only one type of contract, so contact the community you’re interested in to see which one(s) it offers. Here’s an overview of how each contract operates:

Type A: Extensive or Life Care Contract

With this type of agreement consumers assume the least amount of risk, but pay top dollar. A Type A contract provides housing, services, and amenities, as well as unlimited access to long-term nursing care at little-to-no additional cost, aside from periodic inflationary increases. The higher initial fee is based on the assumption that these residents may require and utilize higher levels of care as their needs develop over time. This can add up to substantial savings over a resident’s lifetime, considering that
Medicare does not cover custodial nursing care, which currently runs $250+ daily, for a private room in a nursing home.
In addition, the prepayment of future healthcare costs qualifies these residents for significant tax benefits (the IRS medical deduction.) Typically, residents must maintain a minimum level of Medicare coinsurance.

Who it’s good for: People who want to ensure that all of their healthcare needs will be covered for the remainder of their lifetime.

Type B: Modified or Continuing Care Contract

A Type B contract also provides housing, services and amenities, but access to long-term health care and nursing services is restricted to a specified number of days. After that, the resident is responsible for any additional care costs incurred. Some contracts allow residents to pay for the additional care at a discounted rate once they have utilized the care included in their contract. Just as with a Type A contract, residents are eligible for the IRS medical deduction. Who it’s good for: People who are able to pay for the costs of care not covered through their contract, and those who do not expect their healthcare needs to increase significantly over time.

Type C: Fee-For-Service Contract

With a Type C contract, access to health care is guaranteed, but residents must pay the full cost of the services they use. Under this type of agreement, residents receive housing, services, and amenities as defined in the contract. Some communities do not charge an entrance fee for Type C contracts, charging only a monthly fee instead. However, other communities do charge an entrance fee with the funds subsidizing a resident’s assisted living or skilled nursing care. If the cost of care exceeds the funds obtained from the entrance fee, then the resident would be charged for the full cost of any services utilized. This can happen if a resident requires extended skilled nursing care. For those who require higher levels of health care later on the cost can be extremely high. At a daily rate of $250, nursing home care costs escalate rapidly creating a major financial burden for residents without long-term care insurance or considerable financial resources. Residents do not qualify for the IRS medical deduction under a Type C contract.

Who it’s good for: People who are willing to assume the full risk of health care costs.

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