CCRCs — the move-once model

The contract types, and who takes on the risk

GAO is a federal watchdog agency that reviewed this industry. It lays out the contract types. The useful way to read them is to ask: who pays for the care you might need in fifteen years?^[1]

• Type A, life care. A large entrance fee, but unlimited health care with only small monthly increases. In GAO's words, the community absorbs "the risk of any increases in the cost of providing health" care as residents move to higher levels of care. The community takes on the risk.
• Type B, modified. A lower entrance fee than Type A, but only a limited amount of health care is included. Once a resident uses that up, they "pay the market daily rate or a discounted daily rate." The risk is shared at first, and then it passes to you.
• Type C, fee-for-service. Residents pay the going rate for all the health care they need. GAO says: "The risk of higher long-term care expenses rests with the resident." You take on the risk, in return for a smaller payment at the start.
• Type D, rental. No entrance fee. Monthly fees are based on the size of the unit and the services used.^[1]

Whatever the brochure calls it, the promise is what the signed contract says. That includes what it leaves out, how increases are set, and the terms for getting money back.

The part that is easy to miss

GAO found that residents face real risks. One finding should be read slowly. Entrance fees — often "hundreds of thousands of dollars or more" — can be lost completely if a CCRC goes bankrupt. That is because any claim a resident has on the community "is subordinate to the claims of secured creditors."^[1] In plain words: lenders whose loans are backed by the property get paid first.

You are not one of those lenders. You are in line behind the bank.

GAO also names other risks: surprise increases in the monthly fee beyond what a resident can pay, being made to move from one level of care to another, and having to leave if a community closes.^[1] None of that makes a CCRC a bad choice. It means the community's financial health is part of what you are buying. That is why you cannot skip the next section.

Note the date on all of this. GAO's report is GAO-10-611, from June 2010, and it looked at eight CCRCs in eight states.^[1] The contract types and the order of who gets paid in a bankruptcy have not changed. Any number from it is history.

What to ask for, in writing, before signing

Rules differ from state to state, and there is no federal oversight. GAO found 12 states with no rules written for CCRCs in 2010. Among states that do have rules, they differ a lot in how closely they watch the money and what the community must tell you.^[1] Where the state does less, the checking is up to you.

So ask for:

• The current disclosure statement, if your state requires one.
• Audited financial statements for the last two years. ("Audited" means an outside accountant has checked them.)
• How full the community is now, and how that has changed in recent years.
• Any actuarial study. This is an expert's report on whether the community has set aside enough money to keep its promises. It matters most for a Type A or B contract, since the promise is only as good as the money behind it.
• The full refund schedule: what you can get back, how fast, and if a refund depends on someone new moving into the unit.
• What happens to the monthly fee when your person moves to assisted living or nursing care, under this contract.
• The terms for care off campus: what happens if the care someone needs is not offered on site.

An earlier version of this page gave target numbers for these, such as being at least 90% full, and a warning about communities under eight years old that still owe money on construction. We could not confirm the source, so the targets are gone and the questions stay. A community that will not answer them has given you its answer.

Have an elder-law attorney, or a financial planner who charges a flat fee and earns no commission, read the contract before you sign. Next to a six-figure entrance fee, that review is cheap.

What only the documents can tell you

Is this community financially sound? Which contract fits your person's money? Those answers are in papers we cannot see.

Who to ask: the community itself, for the papers above; your state's CCRC regulator, if it has one; and an elder-law attorney or flat-fee financial planner to read the contract.

What to ask them:

• Does this state regulate CCRCs? Which office does it? Is this community in good standing?
• May we see the last two audited financial statements and how full the community is now?
• Can we get the entrance fee back? On what schedule? What happens to it if we leave or die?
• Under this contract, what exactly happens to the monthly fee at each level of care?
• What was the monthly fee in each of the last five years?
• If the community were sold or went bankrupt, where would our entrance fee stand?

Quick answers

What is the difference between CCRC contract types A, B, and C?

They differ in who takes on the risk of future care costs. GAO, a federal watchdog agency, describes them this way. Type A (life care) has a large entrance fee but includes unlimited health care with only small monthly increases. The community takes on the risk of rising costs as a resident moves to higher levels of care. Type B (modified) has a lower entrance fee but includes only a limited amount of health care. Once that is used up, the resident pays the going daily rate or a discounted one. In Type C (fee-for-service), residents pay the going rate for care, so "the risk of higher long-term care expenses rests with the resident." GAO also describes Type D (rental), with no entrance fee. [1]

How much does a CCRC cost?

We took out the averages this page used to give (about $300,000–$350,000 to enter and about $4,166 a month), because we could not open the industry source behind them. What GAO does say is that entrance fees are often "hundreds of thousands of dollars or more." Ask the community for its own current list of fees, in writing, for the exact contract type and unit. Ask what the monthly fee was in each of the last five years. [1]

Are CCRCs regulated?

It depends on the state, and there are no federal rules. GAO's 2010 review found that "12 states do not have CCRC-specific regulations." Among states that do have rules, they differ a lot in how closely they watch the money and what the community must tell you. That report is from 2010, so treat the count as history. Ask your own state if it regulates CCRCs today and which office does it. [1]

Where to go next

• The in-between options
• What care costs
• The five-year window