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
