`Life care' meets a need - at high cost. RETIREMENT PLANNING
``Life-care used to mean a widow sold her husband's farm and gave the money to a church which would take care of her for the rest of her life,'' says David Crowley, chief administrator at the National Association of Senior Living Industries. Today, the concept includes church-run and proprietary centers. And what was once a common pool of widows' estates has evolved into a full-service institution, many of which cater to the affluent. Major developers like the Marriott Corporation are in the process of building proprietary luxury complexes to house the growing population of independent elderly.
Simply put, buying into a continuing care retirement community (CCRC) involves signing a contract, putting down a substantial amount of money - ranging from $40,000 to $96,000 - for an apartment, and paying monthly fees for a range of added services.
Depending on how many services residents want, they can get a fee-for-service, modified, or all-inclusive contract, with fees starting at $900 a month and reaching $2,500 a month for the most inclusive, according to the National Continuing Care Data Base.
Many include such extras as libraries, exercise programs, religious services, private dining, and saunas. And about two thirds of all CCRCs will refund the residents' down payment when the person leaves.
But the real plus is the provision of nursing care, whenever and for however long it is needed.
``They're mini-mutual SHMOs,'' or health maintenance organizations that are also social organizations, says Larry Laird, who is an executive at the Forum Group, an Indianapolis developer who has worked in both church-run and corporate-owned CCRCs.
The up-front cost is typically equivalent to the price of the house most residents sell before they move in. By getting this money at the beginning, the facility doesn't have to borrow in the commercial market, which greatly reduces its costs and keeps its monthly fees down. Lower costs are what enable the life care community to provide nursing care to its residents at a discount rate.
It is for this reason that residents are accepted only if they can lead an independent life style, says Jesse Lee, executive director at North Hill, a life-care community in Needham, Mass. To keep costs down, she says, they can't require care from Day 1. If they need care after that, however, it is available.
There are now about 600 CCRCs in 40 states, housing more than 120,000 elderly residents. Many have extensive waiting lists. Several studies indicate that the number of CCRCs may double in the next decade.
``There is a great deal of interest in providing full-service communities for the elderly,'' says Deborah Cloud, an official of the American Association of Homes for the Aging, ``because of the increasing number of older people and their improved financial status.''
Several recent failures, however, have drawn increased attention to the fact that the industry is not directly regulated by the federal government.
Although the life-care concept itself is not new, its more recent sophisticated packaging and growing size is, and as a result, most states haven't had much contact with them.
But they are catching on. Consumer protection statutes have been passed in 21 states. And in states that already have several CCRCs, they are ``well watched,'' Ms. Cloud says. The American Academy of Actuaries recently published a set of standards for judging continuing-care communities.
Most developers attribute the financial troubles of certain life-care facilities to mistakes that are equally common to other industries. ``It all boils down to good management and development,'' says Laird. Inexperience and unreasonably high expectations have put some institutions on rocky turf.
``Many of them had contracts that didn't allow them to raise their costs with inflation,'' Cloud says. ``The traditional insurance model was that you had to guess how many would need nursing care, and how many wouldn't stay.... There weren't any good actuarial studies to show how continuing care should be priced.''
By and large, the industry has done very well. Obviously, for many aging Americans, CCRCs are a popular alternative to traditional retirement homes.
Not only do they promise security, they provide that security in an active atmosphere with a lot more diversity than the typical retirement home.
``It's a very comforting thing for people who want to know their future needs - whatever they may be - are going to be met,'' Cloud says.
Though some are very expensive, and are tailored to the upper-level income bracket, many others are accessible to those with middle-range incomes.
Three-quarters of CCRC residents were homeowners, Cloud says, so continuing care is not out of their range. ``In order for the community to succeed,'' Crowley says, ``it has to be adequately priced.
Because of the diversity of CCRCs, prospective residents need to look carefully behind the management of each one and find out exactly what they offer, and for what price.
As with all investment managers, prospective residents should look for a good track record. ``If the CCRC doesn't have one yet, its manager should have one,'' says Laird at the Forum Group.
There are ways to protect yourself or a family member against poorly managed or poorly planned communities:
Find out if the facility is correctly defined as a continuing-care retirement community (CCRC), and ask if it is registered with the state. Now that some state legislation regulating CCRCs exists, developers may try to avoid being defined as CCRCs, thus exempting them from the legislation.
Look at who owns or sponsors the CCRC. Does he have experience running a CCRC or a comparable facility? Even new CCRCs - those that do not have track records - are required by law to give you extensive financial information. Financiers recommend, however, that you review this information with an experienced financial adviser.
Find out precisely what services - meals, transportation, laundry, nursing care, or health care - are covered by the contract. Many CCRCs charge more for certain services than others.
Because the specifics about health care vary, find out exactly what is provided and at what cost. You should know who decides when you are moved from one level of care to another, where you will go if you require additional care not available at the center itself, and who pays for it .
Most important, talk to the residents. They are the best source of information about the living environment, the quality of care and services, and the dependability of the management.