WHAT IS A LIFE CARE RETIREMENT COMMUNITY? Life Care Retirement Communities (also called Continuing Care Retirement Communities) are organized residential communities for retired people that provide long-term access to different levels of health care and other services in a single location.  The levels of care range from "independent living" to "assisted living" to "skilled nursing care." Assisted living is for seniors who need help with some activities of daily living, but do not need round-the-clock skilled nursing care.  Most of these communities provide access to these levels of care for a community member's entire remaining lifetime.  That is why they are called life care communities. Access to on-site skilled nursing care makes life care communities more comprehensive than independent senior housing alone.  Opportunities for on-site independent living and assisted living make life care communities more comprehensive than a stand-alone nursing home.  Having all three levels of care on one campus allows community members to transition between levels without life-disrupting moves. For married couples in which one spouse needs more care than the other, life care communities allow them to live nearby -- in a different part of the same community. The number of life care retirement communities in the U.S. has been growing and there are now over twelve hundred communities. Of these, over two hundred are accredited by the Continuing Care Accreditation Commission (CCAC), a national, private non-profit organization founded 1985 and sponsored by American Association of Homes and Services for the Aging.  This commission promotes quality and integrity in the retirement community industry by evaluating community financial viability, governance, quality of residential life, and health care.  In addition to review by this commission, many life care communities are also regulated by their State Insurance Departments. HOW DOES A LIFE CARE COMMUNITY PROVIDE SKILLED NURSING CARE? Life care retirement communities offer three general types of contracts for provision of skilled nursing care: (1) extensive care, (2) modified care and (3) fee for service.  All three contracts guarantee members access to skilled nursing care when needed, but they vary in whether members must pay additional charges when they receive skilled nursing care. Many life care communities charge a significant entrance fee and pledge to provide all the skilled nursing care that a community member may need for the rest of their life at no extra cost.  This is called an "extensive care" or "complete care" contract.  It works like long-term care insurance.  Most of the original life care communities offered extensive care contracts. With an extensive care contract, a community member transfers the risk of uncertain future skilled nursing care costs to the life care retirement community.  This is good for risk-averse community members -- as long as the community has sufficient financial reserves to fulfil its promise to provide skilled nursing care when needed.  This can be difficult. The community must: project health care costs based on member mortality and morbidity expectations; project inflation rates for health care labor and supplies; and wisely invest entrance fees so that it can fulfil its promise to provide care. In the late 1970's and early 1980's, some communities under-estimated the future costs of skilled nursing care and spent too much of their entrance fees on current expenses rather than saving reserves for future costs.  As a result, some communities ran into financial difficulty and were unable to deliver promised care and services to their members.  Accreditation standards, state regulations, and improved community management have helped to reduce such financial problems, but it is still important to investigate the financial health of a community when considering an extensive care contract.  Some states now require that communities: have commitments for least 50% occupancy before starting construction; do not spend too much of their entrance fees on current expenses; and maintain adequate financial reserves. Instead of offering an extensive care contract, many life care communities now offer a "modified" contract wherein they guarantee access to skilled nursing care, but only pay for a limited number of skilled nursing days per year or per lifetime.  Beyond that limited number of days, a member must pay extra for the actual skilled nursing care used. These extra payments may be at a discounted rate.  Modified care contracts generally involve a much lower entrance fee.  They are also called  "limited" contracts because the number of skilled nursing days paid by the community is limited. With modified care contracts, community members retain much of the risk of future nursing home costs and the community assumes less financial risk.  Community members may benefit indirectly if this decreases the chance that the community may have financial problems.  The reduced entrance fees for modified care contracts can make life care communities more affordable for seniors who can not afford the sizable entrance fee of an extensive care contract. Some communities carry this trend even further and offer a "fee-for-service" skilled nursing care contract wherein community members are guaranteed access to skilled nursing care, but must pay extra for whatever skilled nursing care they receive.  Fee-for-service contracts generally involve a much smaller entrance fee. Fee-for-service contracts are more affordable in the short-run, but do not offer members the financial security of extensive or modified contracts.  Fee-for-services contracts may be more attractive for: seniors who want the range of care offered by a life care community but can not afford a large entrance fee; and seniors who are in better-than-average health and do not anticipate requiring much skilled nursing care. HOW DO COMMUNITY MEMBERS MOVE FROM ONE CARE LEVEL TO ANOTHER? People often require a progression to higher levels of care as they age.  For example, a community member might start by living independently, later require assisted living services, and still later need full-time skilled nursing care.  However, movement to a higher level of care can also be temporary.  For example, a community member might need skilled nursing care to recuperate after a stroke, but could move back to assisted or independent living after recovering.  A key advantage of living in a life care community is that these transitions can all occur within the same community and life-disrupting moves are avoided. One generally thinks of HMOs or health plans when one hears the term "managed care," not retirement communities.  However, when an organization promises to provide an uncertain amount of future services in exchange for a fixed payment now, it generally must wrestle with issues of managing care.  When skilled nursing care beds or other services at a life care community are limited, it must "manage care" by making decisions about who needs limited resources the most.  For example, who can continue to live with assisted living services and who needs round-the-clock nursing care?  What services can be provided at no extra charge and what services will cost extra?  It is important to know how these decisions are made within a life care community before committing to a sizable entrance fee. Some communities have specific standards to assess when residents need a higher level of care.  This evaluation often involves the community member, the member's family, medical professionals and community staff.  This evaluation process may even be specified in the contract. Some states have guidelines for care evaluation decisions.  The Continuing Care Accreditation Commission is also working on need assessment guidelines for possible inclusion in accreditation standards. Questions concerning how need is evaluated and how care decisions are made raise the issue of community governance.  Although the number of for-profit life care communities is growing, most life care communities are non-profit organizations and are governed by an owner's association.  When community members entrust a community with a large portion of their life savings as entrance fees, it is important that they have a significant role in major decisions. WHAT OTHER SERVICES ARE PROVIDED? In addition to housing and skilled nursing care, life care retirement communities also offer many other services and facilities.  The number and scope of services vary by community.  Services may include: dining services and meals; housing and grounds maintenance; health monitoring and emergency call systems; heating, air conditioning and other utilities; home health services and assistance with daily life activities; housekeeping; laundry and linen services; recreational areas and programs, fitness center, nature trails; social facilities and activities; swimming pool, and (at more expensive communities) tennis courts and golf courses; transportation to events and shopping; security; on-site medical care and physical therapy; independent housing (apartment, villas, cluster homes); educational activities; gift shop and beauty shop; and help processing Medicare or other insurance forms. These services are paid in different ways at various communities.  They may be paid by: a one-time entrance fee; monthly fees which are fixed regardless of services used; monthly fees which vary with use of particular services; or some combination of these fees.  When investigating communities, you should find out which services are available and which ones cost extra when used. MORE ABOUT THE ENTRANCE FEE AND MONTHLY FEES The "entrance fee" (sometimes called an "endowment", "annuity" or "purchase price") is a one-time payment to join a life care retirement community.  Entrance fees vary from low-five-digit figures to mid-six-digit figures depending on: whether it pays for skilled nursing care for life; other services provided; the size of the member's residence or apartment; and whether the residence contract is an equity or rental one.  In an equity contract, the community member actually owns the unit and benefits from increased property value appreciation when the unit is sold. When an entrance fee pays for a lifetime of skilled nursing care or other services in advance, it can be contrasted to life insurance.  With life insurance you receive nothing while you live, but your estate receives something when you die.   Viewing life insurance strictly as an investment -- the sooner you die, the better it is as an investment.  With an entry fee which pays for a lifetime of care or services, your receive something while you live, but this stops when you die.  Viewing an entry fee strictly as an investment -- the longer you live, the better it is as an investment. In light of this, it becomes apparent that you take a financial risk when you pay a large entrance fee for a lifetime of care or services.  If you die or must leave the community soon after joining, then the large entry fee will have been a poor investment. To address this concern, some communities offer a partial refund of the entry fee.  Life care communities regulated under the Living Care Disclosure Act and Rules give members a partial refund for up to five and a half years after joining. Communities that offer partial refunds often view themselves as earning the entrance fee at a rate of between 1-2% per month.  Some communities offer a complete entrance fee refund no matter when a community member leaves, but they charge a higher entrance fee in order to provide this option. As mentioned earlier, life care retirement communities often charge monthly fees (also called "maintenance fees") in addition to the one-time entrance fee.  Monthly fees range from low-triple-digit figures to low-four-digit figures.  Monthly fees vary depending on the type of contract for skilled nursing care, type of housing, and other services provided.  As mentioned in the prior section on other services, it is important to know which services are included in the entrance fee or fixed monthly payments and which services cost extra when used.  Many communities require that seniors have incomes that are more than some multiple (e.g. 1.5-2) times the monthly fee. WHAT HAPPENS IF A COMMUNITY MEMBER RUNS OUT OF MONEY? Even if communities have minimum income requirements for admission, members may still run out of money when they pay fee-for-service for skilled nursing care or other services, or if their income drops.  What happens then?  Is it specified in the contract?  Many non-profit communities include affordability in their mission statement and commit to providing housing and care to community members even if they run out of money.  Community's members often look out for each other.  Assistance funds, memorials and bequests, or other charitable giving can subsidize fees for members who can no longer afford them.  If your assets and income are relatively modest, it is important to learn how communities provide for members who run out of money when investigating life care communities. HOW MANY SENIORS ARE IN LIFE CARE RETIREMENT COMMUNITIES? The number of life care retirement communities in the U.S. has been growing during the past ten years and there are now over twelve hundred communities.  However, the percentage of elderly people living in life care retirement communities is still less than 1%.  The relatively low participation of seniors in life care retirement communities may be partly due to the significant entrance fees required by many communities.  It may also be partly because many people mistakenly think that Medicare or Medicaid will pay for skilled nursing care when they need it and do not see the need to plan for long-term care coverage.  Unfortunately, Medicare only covers skilled nursing care for a short period of time after hospitalization and Medicaid only covers it after people spend down almost all of their assets and income on care. It is wise to investigate retirement housing options years before assisted living or skilled nursing care is needed.  Most retirement communities require that seniors be able to live independently to join and many of the best communities have waiting lines that are several years long. FINDING AND SELECTING A LIFE CARE RETIREMENT COMMUNITY The American Association of Homes and Services for the Aging provides a directory, available through their website American Association of Homes and Services for the Aging, that lists the majority of retirement communities across the U.S.  You can get also information on communities in a particular area by contacting the Local Area Agency on Aging for a particular county or by calling the National Elder Care Locator at 1-800-677-1116.  Once you learn which communities are operating in your area, you should visit them to see which one best meets your needs.  We hope that also you find this guide to be helpful as you investigate communities and make your selection. © 2000 LifeCareGuide.com. Used with permission.

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