Should you make a large, upfront payment to move into a retirement community? Use NSCLC’s checklist to learn about retirement communities’ pros and cons.
(Adapted with permission from Long-Term Care Advocacy (©2009 Matthew Bender & Co., Inc., a member of the LexisNexis Group). All rights reserved. Long-Term Care Advocacy is written by Eric Carlson, Director of the Long-Term Care Project at the National Senior Citizens Law Center.)
Recently Erickson Retirement Communities filed for bankruptcy. News of the bankruptcy filing has focused attention on continuing care retirement communities (CCRCs), and particularly on the common CCRC practice of requiring large advance payments (often $100,000 or much more) from a new resident.
Are such advance payments a good deal for residents? Or, more broadly, is a CCRC the right choice in the first place? The following checklist provides some useful information.
Of course, evaluating the financial soundness of any company can be difficult, as has been demonstrated in dramatic fashion in 2008 and 2009. Consumers are advised to speak to a financial professional before making a large advance payment to a CCRC. It is well worth the extra time and expense, considering that the requested advance payment may be well over $100,000.
- Is the provider appropriately licensed with the state to operate a continuing care retirement community?
- If the provider is not licensed, why not? Is the provider trying to evade state oversight by structuring its contracts in an unorthodox way?
- Is the provider a for-profit entity or a non-profit entity?
- How long has the provider been in business? How long has the provider operated the continuing care retirement community?
- Is the provider a subsidiary of a larger entity? Is the provider a parent of smaller entities?
- Is any entity other than the provider involved in the community’s operation or management? Is that second entity for-profit or non-profit?
- Does the provider operate other continuing care retirement communities? Does the provider operate any other long-term care facilities or housing for the elderly?
- Is the community accredited by the Continuing Care Accreditation Commission of the American Association of Homes and Services for the Aging?
- How great are the provider’s assets? Liabilities?
- What financial reserves are held by the provider? What financial reserves are required by the state?
- Does the provider have a Standard and Poor’s credit rating?
- Has the provider issued bonds? What do the bond prospectuses indicate?
- What financial information is available regarding the actuarial soundness of the provider and its continuing care retirement community(ies)? Given the provider’s assets, and the residents’ age and medical conditions, how secure is the provider’s future financial condition? Has a long-term actuarial study been done regarding the provider’s future assets and liabilities? How do the provider’s current costs compare to projections made in the past?
- What financial information is required to be made available by the state?
- Has the provider been a party to any litigation? In what context? Have the provider’s principals been a party to any litigation? In what context?
- Does the continuing care retirement community have independent living units? A residential care facility? A nursing facility?
- Does the provider have the appropriate license for any residential care facility or nursing facility?
- What percentage of the community is occupied? What percentage of the beds in the residential care facility are occupied? What percentage of the beds in the nursing facility are occupied?
- Are any common areas provided? What type?
- Is transportation provided? To what extent?
- Are any recreational facilities provided? What type?
- Are residents allowed to decorate and furnish their rooms? To what extent?
- Are residents given any space to garden?
- Is storage space available?
- Are pets allowed?
- Do residents tend to be older or younger?
- Are residents generally active or sedentary?
- Do residents tend to be drawn from a particular religious denomination or fraternal organization?
- Is a monthly fee required?
- Is the monthly fee based on single occupancy or double occupancy?
- Are future fee increases limited in any way? Does the state limit future fee increases in any way? Historically, what is the frequency and extent of the provider’s rate increases?
- What services are covered by the monthly fee? What services are not covered by the monthly fee? What charges are assessed in addition to the monthly fee?
- Do rates increase when a resident moves into a nursing facility?
- Does a resident have the right to remain in the facility if he is unable to pay a monthly fee? Is payment through a public benefits program available for a resident who has exhausted his resources? Is the nursing facility certified to receive reimbursement from the Medicaid program?
2. Advance Payments
- Is a deposit required to reserve a place in the community? How large a deposit?
- Is an entrance fee required? How large an entrance fee?
- Are deposits and/or entrance fees held in escrow? If so, when and under what conditions can the deposits and/or entrance fees be released to the provider? What escrow requirements are set by state law?
- Does the resident obtain any interest in the community’s real property? Does state law give a resident a lien against the provider’s real property?
- Are deposits and entrance fees refundable? To what extent?
- Is the entrance fee tax deductible? If deductible, what percentage is deductible, based on the amount of the entrance fee allocable to medical care?
- Is a resident’s estate entitled to a refund of a deposit or entrance fee if the resident dies prior to admission? How much of the deposit fee is refundable? Is a refund required under state law? What amount of refund is required?
- Is a resident’s estate entitled to a refund of a deposit or entrance fee if the resident dies after admission? Does the contract call for a full refund or a partial refund? Is a refund required under state law? Does the law call for a full refund or a partial refund?
3. Rescission and Cancellation by Resident
- Is a right to rescind provided in the contract? How long does the contractual right to rescind last?
- Is a right to rescind provided in state law? How long does the contractual right to rescind last?
- In case of rescission, what refund is the resident entitled to under the contract? What refund is the resident entitled to under state law?
- Under the contract, does a resident have the right to terminate the contract even after the expiration of any rescission period? Is such a right guaranteed under state law?
- In case of a termination by a resident, what refund is the resident entitled to under the contract? What refund is the resident entitled to under state law?
4. Protection Against Involuntary Transfer
- Is the resident guaranteed admission to the community, regardless of his medical condition at the time?
- Is the resident guaranteed a particular room or bed?
- Under what circumstances can a resident be forced to move from one level of care to another? Who decides when a move is necessary? Does a resident have any appeal rights? Does any state law address the involuntary transfer of a resident within a continuing care retirement community?
- What arrangements are made if one spouse requires a different level of care than the other spouse? What arrangements are made if one spouse dies, but the other spouse remains in the community?
- Under what circumstances can a resident be evicted from the community? Does state law limit the justifications for eviction from a continuing care retirement community?
- Can a resident be evicted if he does not have enough money to pay the monthly fee?
- Does the resident have any ability to appeal a decision by the provider to evict him? Does state law provide for any appeal rights?
- If a resident is evicted, is he entitled to a refund? How is the amount of refund determined? Is a refund guaranteed under state law? What amount of refund is required?
5. Access to Health Care
- Is nursing facility care provided? For a limited or unlimited number of days?
- Is the nursing facility care necessarily provided in the community? If not, will the nursing facility care be provided in a nursing facility outside of the community? Can the resident have any say in whether the nursing facility care is provided inside or outside the community?
- What happens if no nursing facility bed is available when the resident requires nursing facility care?
- Who decides when the resident requires nursing facility care? If the provider decides, does the resident have any appeal rights? Does state law provide for any appeal rights?
6. Third-Party Payment
- Is the resident required to have Medicare coverage?
- Is the resident required to buy a Medicare supplemental insurance policy (“Medigap” policy)?
- Is the resident required to have long-term care insurance?
E. Resident Participation in Management
- Does the community have a resident council? Under state law, is a provider required to allow the formation of a resident council?
- According to the members of the resident council, does the provider pay attention to residents’ concerns?
- Does a resident sit on the provider’s governing board? Under state law, is a provider required to accept at least one resident on the provider’s governing board?
- According to a resident member of the provider’s governing board, do the other board members take his opinion into consideration?