How much does it cost to join a Continuing Care Retirement Community?
Because CCRC costs are not subject to outside regulation, there can be a lot of variation between continuing care retirement communities (CCRCs). A number of factors influence CCRC costs, and understanding these factors can help you determine what you’ll be paying for if you move into a CCRC. While CCRC costs may seem higher than other types of long-term care at first, they can actually be lower overall when spread out over a lifetime.
Did you know, for example, that many nonprofit CCRCs provide financial assistance to qualifying individuals to help pay entrance fees and/or monthly fees? Some nonprofit communities will also subsidize residents who run out of money. Providing financial aid helps these communities maintain their tax exempt status as a charitable organization. Ask about these policies if they are not stated in your contract.
Entrance and Buy-in Fees
Incoming residents pay a one-time, upfront entrance fee upon moving into continuing care. The entrance fee may or may not be fully or partially refundable. Because the entrance fee usually covers your health care costs, it is usually the most significant cost unless there is a buy-in fee. Entrance fees start at as low as $20,000 for a non-purchase (rental) agreement, and buy-in fees weigh in among the most expensive CCRC costs, running up to $500,000 or more depending on the size and location of your unit as well as the community.
Depending on the community you choose, continuing care costs may include a buy-in fee, which is sometimes referred to as an “ownership fee.” Buy-ins are a relatively new option offered mostly at newer CCRCs. Because they involve the purchase of real estate (i.e., you would own your unit), buy-in fees are generally much more expensive than entrance fees. In a buy-in scenario, you would pay for services and health care separately. As an owner, you would be able to sell, will or deed your unit as you would any other type of property, with respect to the CCRC’s established rules. This can be tricky, as a buyer would likely have to meet the community’s eligibility requirements.
CCRC costs can vary greatly depending upon the cost structure. Monthly fees can be as low as $500 at some communities, escalating up to $3,000 or more depending on your contract type and service plan.
Monthly fees cover continuing care costs like housing and sometimes include health care services. Expect periodic fee increases that keep pace with inflation. Also expect an increase in monthly fees as you move between housing components or levels of care—from assisted living to skilled nursing—for example.
Some CCRCs offer a pay-as-you-go option in which you would pay only monthly fees. This is essentially a month-to-month rental option, and has the potential to be very expensive if you require health care (for which you have not prepaid with an entrance fee) down the road.
Avoid hidden continuing care costs by finding out which services will be available to you and at what cost. Start by asking about the things that are not included in your contract. These could include health care, personal assistance with daily living activities, meal plans, housekeeping and beautician services, transportation and more. Identify all services which may incur additional fees before signing your contract. How much will they cost? Miscellaneous continuing care costs that you may also want to plan for include fees for:
- A waiting list (if one exists)
- Late charges (for monthly fees)
- Pet deposit
- Phone and utilities
- TV and Internet
- Wellness programs
Other factors that affect CCRC costs include:
- Whether you will rent or own your unit
- The size and location of your unit
- The services and amenities not covered by your contract
- Whether accommodations are shared or private
- Current health status
- The type of contract you sign
CCRC Contract Types
Contract type is the most significant factor when it comes to CCRC costs. The three basic types of CCRC contracts are associated with varying levels of risk; generally, the lower the risk, the higher your upfront CCRC costs.
- Extensive contracts provide a lifetime guarantee of housing and all the care that you need (low risk, highest upfront costs).
- Modified contracts are similar to extensive contracts, except that your care coverage is limited to a specified number of days, beyond which you would pay for services out of pocket (medium risk, mid-level cost).
- Fee-for-service contracts allow you to pay only for the services that you use (highest risk, lowest upfront costs).
Insurance and CCRCs
Another major factor that affects CCRC costs is health insurance, which can help bring down your share of the costs. Medicare and Medicaid pay for some skilled nursing care and medical costs for eligible residents of certified facilities, for instance.
Before you move in, some communities may stipulate that you agree to apply for Medicaid or SSI in the event that you run through your own resources and need extra help. This is a preventative measure to ensure that the community will still be paid for the services you utilize. You may also be required to enroll in Medicare Part A, Part B and/or have a Medigap policy for supplemental health insurance.
Some CCRCs require applicants to obtain long-term care insurance prior to moving in. If you have an existing policy, check it to see whether it covers some of your CCRC costs. If you buy long-term care insurance through a company recommended by the CCRC, it’s possible that your premiums could be incorporated into your monthly fees.
Tips on Paying for a CCRC
During the application process, you must show that you are able to afford the costs, both now and in the future. Paying for a CCRC always involves some amount of out-of-pocket funds. In addition, many communities require residents to have Medicare Part A and Part B coverage as well as long-term care insurance and/or Medigap coverage. Medicaid pays for some care at certified facilities.
If you itemize deductions on your income taxes, you may be eligible to deduct certain medical, dental and eye care expenses. The allowable amount (usually between 25 and 30 percent) is computed by each community on an annual basis, so ask for the current information. As a CCRC resident, you may be able to itemize a portion of your entrance fee, if it is nonrefundable. Ongoing monthly fees (not month-to-month expenses) may also be deductible as prepaid medical expenses.
Paying for a CCRC is a little different for everyone. For more information on applicable tax deductions and tax credits, visit www.irs.gov.
Written by senior housing writer Nikki Jong.