Retirement Planning, Elder Law, and Senior Finance

2/5/2020 | By Seniors Guide Staff

Continuing care retirement communities, or CCRCs, are facilities which offer residents a range of living choices and levels of care from independent apartments to skilled nursing care. Sometimes these facilities are called Life Plan Communities. If you are involved in life care planning for a loved one – or for yourself – it’s important to understand how these communities and their life care contracts and services are structured.

CCRCs that offer this type of life care solution require residents to pay an entrance fee and fixed monthly rent. The residents then are entitled to an unlimited amount of care, no matter if they live in an independent living section of the facility or an area with more skilled nursing care. The average initial entrance payment is about $330,000, but some entrance fees can go up to $1 million in some communities. This varies, of course from community to community, and the type of life care contract makes a difference, too.

Types of Life Care Contracts

There are three main types of CCRC life care contracts: Type A (Extensive Life Care Contract), Type B (Modified Life Care Contract), and Type C (Fee-For-Service). And while they are less common, you might come across Type D and Type E contracts. All CCRC contracts cover long-term care, including basic care like meals, help with medication, bathing, dressing, and grooming. However, the three types of life care contracts do vary.

Type A Contract

The Type A contract is the most expensive, but also the most comprehensive and all-inclusive type of contract. It’s sometimes referred to as the Exclusive or Extensive Contract. CCRCs that provide Type A life care contracts require an entrance fee and then charge residents fixed monthly rent. This option is often the one that requires the most up-front fees, but guarantees a fuller range of services. It includes a residence (an independent living apartment, for example), healthcare services, and the use of all facilities on the community’s campus. Then, as the residents’ medical needs change, they can move to another level of care for little to no additional cost. Included are any medical treatment and skilled nursing services. This usually includes specialized care like Alzheimer’s or dementia care. While costly at first, the Type A contract can be beneficial when you consider the rising costs of geriatric care.

Type B: Modified Life Care Contract

A Type B contract includes almost the same services as a Type A contract. Provided are living accommodations, medical services, meals, and access to campus amenities. This contract differs in the amount of services covered in the monthly fee. However, some Type B contracts put a time limit on assisted living and skilled nursing care, so a resident may incur additional charges if they require services longer than the contract allows. Others may restrict the types of services provided, meaning that if a resident’s needs exceed the service limit, they’ll have to pay the extra costs. However, this extra cost is often billed at a lower cost than the market rate. The entrance fee and the monthly rates are usually lower than Type A contracts. A Type B contract may be the choice for those who can’t afford a higher entrance fee.

Type C: Fee-For-Service Contract

This type of contract offers a much lower initial enrollment fee; however, it requires residents to pay market prices for medical services on an as-needed basis. Market prices means that monthly fees will increase to cover the cost of additional care needed. This option might be attractive to a resident who has little to no savings to cover the up-front costs but a reliable source of income like an annuity or a pension to cover ongoing costs.

Types D and E

While rarer than Types A, B, and C, some CCRCs offer a Type D contract. This is a rental agreement for seniors looking for independent living with guaranteed services available on an as-needed basis. Type D agreements don’t usually require an entrance fee. A Type E contract, also called an “equity” or “co-op” contract lets a resident buy a home in the community. Residents have access to facility amenities, like a country club-style dining room, at a monthly fee. Medical services are available through the facility, usually at market price.

Seniors Guide Staff

Seniors Guide has been addressing traditional topics and upcoming trends in the senior living industry since 1999. We strive to educate seniors and their loved ones in an approachable manner, and aim to provide them with the right information to make the best decisions possible.

Seniors Guide Staff