Part VIII-C: Retirement Living: What Are My Options? Retirement Community Contract Types

Welcome back to the journey of finding your ideal retirement lifestyle. We’ve covered the tested and proven formula: Risks & Values + Health + Finances = Your Best Option to help you uncover some truths about what you really desire. In our last article, we discussed Rental Communities and Continuing Care Retirement Communities (CCRC). Let’s jump right back in and review the three primary types of contracts at a CCRC

Leading Age is the national organization representing the not-for-profit sector of the senior housing industry. They have designated three primary types of contracts or Residency Agreements that are the most common in the market place: Type A, Type B and Type C. However, please note that these terms are considered industry “jargon” and if you showed up at a CCRC and asked the marketing person if the community has a Type A or a Type C contract, they might not even know what you are talking about. Again, various programs or contracts are usually called fancy names, like The Traditional, The Platinum Plan, etc., and this will vary from community to community.

For simplicity sake, we’ll stick with A, B and C. Starting with an understanding of these contracts will help you more easily understand and process other “hybrids” that you may encounter in your research. The difference between these three types of contracts is this: who pays for a majority of any future long-term care cost? In other words, who is absorbing the financial risk? Is it the resident or the community? Let’s review each of the three contracts to more fully understand the concepts.

Type A Contract

Often referred to in the market place as “Lifecare,” the Type A contract is actually a form of long-term care insurance. This means the community itself functions a little like a long-term care insurance company and absorbs or underwrites a majority of the financial risk for the higher costs of assisted living, personal care or skilled nursing care. The bottom line is that you can get life-long care for about the same cost as the current monthly fee of the original residential living unit you initially invested in. If you sold your home and moved into a CCRC under a Type A contract, you would pay an entrance fee and then a monthly fee. As you aged and your care needs changed, this is what the Type A contract would look like (shown in the chart below, in red) compared to the baseline of a Type B or C contract (in blue).

Some communities will also include benevolence or charitable care as part of their contract. This means a person who qualifies financially and meets health criteria coming in the door and, through no fault of their own, runs out of money or outlives their assets, would not be forced to leave the community. There are financial measures in place for the community to absorb those costs.

The Type A contract provides the maximum risk protection against the high costs of long-term care. Unlike a long-term care policy, there are no elimination periods, maximum time or dollars etc. Again, it essentially provides unlimited, life-long care at about the same current cost as the residential living unit that was originally invested in.

What the Type A contract covers:

The cost of a place to live – This is the residential living unit (townhouse, apartment, cottage, etc.), assisted living/personal care unit (usually a one-bedroom apartment with a small kitchen area) or skilled nursing living unit (usually a bed in a private or semi-private room).
The cost of your meals or a certain meal allowance – Many residential living settings offer a more flexible dining system much like students have in college. Sometimes one meal a day is included in the monthly service fee, but again there may be variations from community to community. In the assisted living/personal care and skilled nursing levels of care, it is usually required by law that three meals a day be served to each resident. To cover these extra meals, there sometimes is a slight increase in the monthly fee at the time the resident moves to a higher level of care.
24-hour staff support – For the residential setting this usually includes a full staff during business hours, 24-hour security, and a nurse which oversees the wellness and well-being of residents functioning like a geriatric care manager. At the assisted living/personal care level of care, a nurse is usually available at least 12 hours a day and there are resident assistants 24 hours a day, so if a resident needs help in the middle of the night, someone is there to assist. The skilled nursing level of care is one notch below a hospital… there are nurses and staff on duty 24/7.

The Type A contract does NOT pay for doctor bills, hospital bills, prescriptions, therapy, bandages, oxygen, and so on. You maintain both your Medicare insurance and your supplemental health insurance policy. Those pay for your health care. The Type A contract helps pay for long-term care.

The Type B Contract

The Type B contract is like a halfway point in sharing financial risk between the A and the C contract. Not all CCRCs will offer this option, but when you encounter it you want to identify it and understand how it positions your financial risk. Usually, the resident receives 60, 90, or 180 days of assisted living/personal care or skilled nursing at little or no additional cost beyond the monthly service fee for their Residential Living unit. Afterward, the resident pays the current private pay cost for these higher levels of care, with a 10 percent discount. Sometimes this plan is referred to as the “60/10 contract option.” Please note, there are more and more creative variations on the Type B contract and this is just one common example. If you chose a Type B contract it would look like this:

The Type C Contract

In the Type C contract the resident essentially gets the benefits of the CCRC lifestyle without pre-paying for any potential future long-term care costs. This contract is rapidly becoming the most common in the market place. In fact, many new projects are offering only this option.

With the Type C contract, you have access to the assisting living/personal care and skilled nursing levels of care, you stay on the same campus connected to the community and you only pay the cost of care if and when you need it. This will sometimes be referred as “Fee for Service”… essentially a pay-as-you-go. It is common for this contract to offer a lower monthly fee, as well as higher return on the Entrance Fee. When you move on to a higher level of care, the contract with residential living is completed, and you begin a separate contract for assisted living/personal care or skilled nursing, and pay at the current full private pay rate. If you chose a Type C contract it would look like this:

To pay for your higher level of care you would rely on a pool of assets that include:

The higher return of your Entrance Fee
Money saved by paying a lower monthly fee during your time in Residential Living
Your Long Term Care Insurance (if you have one)
Your remaining assets and income

A Retirement Community with Limited Services

There are benefits to any retirement community option you explore. Look at all the choices in your geographical area. The communities that offer a simpler version of the Rental or Continuing Care Retirement Community providing more limited services may be:

More conveniently located closer to family
Significantly more affordable or available on a sliding scale based on income and assets
Larger with more living space for the investment because additional services or “bells & whistles” are not included
Better to meet the overall Risk/Values needs of you and your family

So there it is. We’ve covered the ins-and-outs of the basic options that exist in today’s senior housing market and the types of contracts to pay for them. Using your research from the risk/value, health and financial steps of our proven formula, you likely have focused in on one or two options as an appropriate fit. The next step is starting your research in your targeted geographical area.

Ready to Learn More?
If you’re ready to learn more now, a residency counselor at Warwick Woodlands is available to answer any questions you have. Unique to Warwick Woodlands, our goal is to educate mature adults on their choices and teach them about the formula for success through complimentary educational sessions. We continue to offer our monthly Dine and Discover events at the Warwick Woodlands Sales Center. For upcoming dates or additional information, including the free booklet, please call us at 717-625-6000.

Warwick Woodlands, a Moravian Manor community, will be built on 72-acres of a former landscape nursery within walking distance of downtown Lititz’s pubs, park, and shops. Based on a traditional neighborhood design—a newer trend in senior living and the first of its kind in the Lancaster area, the community will cater to individual’s age 58+ who want to plan ahead for the unforeseen while embracing a vital, active lifestyle now. It’s designed specifically to bring together people, businesses and the energy of small town living. Warwick Woodlands is now accepting early reservation deposits for Phase I homes. For more information, please call 717-625-6000.

This article was submitted by Nicole Michael, Corporate Director of Sales & Marketing at Moravian Manor, Inc.

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