Mens Health Blog. Medical Blog

In most retirement communities the focus is on recreation not health care. While housekeeping or an optional meal may be available, residents are on their own and may have to move if they need help living independently.

Continuing-care or life-care communities are different. Medical and nursing services are the most important part of the package. People choose this type of community for the security of knowing they will have a place to live and the services they need (provided they keep up their monthly payments) if they do become disabled or need nursing-home care.

As Laurence Branch of Harvard Medical School explained in a 1987 article, at the core of the continuing-care concept is nursing-home insurance. People have banded together in a self-insurance group so they will not be left penniless by going to a nursing home. All continuing-care retirement communities offer some nursing-home care, though they differ in how extensive this coverage is. Because of their health-care focus, they also usually offer more services for people with minor disabilities than a traditional retirement community would –  maid service, three meals a day, help with bathing and dressing.

Because so much more is included, a considerable financial investment is often required. Though arrangements differ, in most communities residents pay a large fee when they enter and monthly payments after that. Still, if the costs are added up, a person is likely to spend considerably less than if the services were purchased individually.

As is true of any type of housing, continuing-care communities vary in character, price, quality, and services. In some places residents have the option of paying for all services at the beginning or of paying for them as they are needed. Life expectancy is also a factor in computing a prospective resident’s fee.

There tend to be health restrictions to admission. Communities want their residents to arrive relatively healthy, so many require a physical examination. If a person fails the screening, the community generally refunds the deposit minus an application fee.

The obvious advantage of living in a continuing-care community is peace of mind. Not only are you insured (at least in part) against catastrophic illness and severe disability, but you know where you will go and the exact quality of the services you will be offered if you need protective or nursing-home care.

These advantages are offset by some definite negatives. For instance, the package deal is an even more severe limitation on choice. In continuing-care contracts many unused services are apt to be included in your bill – meals, transportation, possibly even the nursing home. And your security still depends on being able to keep up with your monthly costs. What was once paid “for life” may be extra a year later; your monthly fees may rise dramatically. There are horror stories of bankruptcies and the risk of losing everything you put in. So before investing in this type of arrangement, use extreme caution. Go in with your eyes open about everything financial that applies to the community you are considering.

According to Branch, the economic risks of continuing care are threefold: enough people have to buy into the community at its beginning stages to keep it afloat; enough healthy new residents must enter subsequently to keep costs within reasonable bounds; and the expense of caring for ill residents must not become prohibitive.

In a 1986 seminar on the problems of life-care communities, experts explained that this last condition – being in the business of providing health care for life – is what makes continuing-care retirement communities so financially vulnerable. No one can predict how much health-care costs will rise. It is also surprisingly hard to know how much in the way of services a given group of life-care residents will need. Actuarial statistics are used to compute the community’s probable health needs, leaving its residents vulnerable if an unexpected proportion of their numbers are very ill. If the illness odds go against a community, residents may have two unpleasant alternatives: a steep rise in their costs or bankruptcy. As of late 1987 there is no federal legislation to protect the life savings of people who invest in continuing care. A 1986 national survey showed that only twenty states had passed protective laws. So, though unlikely, it is possible to lose your nest egg if the worst occurs.

Because there is statistical safety in numbers, the speakers at the seminar sponsored by the National Council on the Aging urged that people interested in continuing care buy into a large community, preferably one owned by an established corporation or company. Small communities sponsored by unknown developers should be avoided.

In addition to investigating its financial health, before entering you must know if you will like what you are paying for. Visit several times, thoroughly checking out a prospective community’s quality and services.

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GENERAL HEALTH

If your needs do change and you have to move, make sure getting out will not be too difficult. How much of your investment would be refunded if you decided to leave? How easy would it be to sell your home, given that you must sell to another retiree?

There can also be financial anxieties attached to staying in a retirement community:

When I bought my apartment here in 1978, the pool, the golf course, and the health club were free, and my maintenance was a hundred dollars a month. Now all the amenities are extra and my monthly charges have increased fourfold. So far I can afford things, but I worry about the future. One of my neighbors had to move because she could not afford the increases.

Although at the time you buy your home it may be hard to predict exactly how much your future costs will rise, you can get an idea by examining the current financial health of the community you are considering. Ask for documents such as the annual report or financial statements and discuss them with a qualified person – perhaps a banker or an accountant. Learn who sponsors or owns the community and what their financial responsibility is. Assess whether the management seems to have the experience to run the community well. As I will describe in the next section, getting a full picture of a prospective community’s financial health is especially critical if you are moving to a continuing-care retirement community.

A fascinating study of thirty-six representative retirement communities conducted by a research team at the University of Florida in the early 1980s underlines that people who choose this type of housing may have more worries than they bargained for. The researchers classified the communities they studied into two ownership types. In type 1 communities, the residents own the land the community is on. Once the developer withdraws, they are responsible for running it. In type 2 communities, the residents rent the land from the owner/developer, and so the community’s fate continues to be in outside hands.

Living in each type of community entailed special anxieties. In type 2 communities, where the developers stay boss, the residents were vulnerable to their decisions. For instance, an owner might raise the rent drastically, impose new community rules, or even sell the community to another person who might change its character totally by renting to younger people. In the type 2 communities the research team studied, residents usually passively submitted to developers’ decisions because they were afraid of what might happen if they made Waves. They were particularly concerned about the ace in the hole their developers had if they made too much trouble: selling the community to someone else.

The worries of residents of type 1 communities centered on their own ability to govern themselves. What if competing resident factions vying for leadership polarized and fragmented the whole community? Or as a community and its residents grew older, what if no one wanted to assume the job of governing? This is not to say the residents were miserable or felt they had made a mistake. But they were a bit disappointed. Living in a retirement community was less like heaven and had more real-world risks than they had imagined.

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GENERAL HEALTH