Ep. 236 – Rae Dawson – The Basics About a CCRC

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In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Rae Dawson to discuss the basics of Continuous Care Retirement Communities (CCRC). Rae is a CCRC expert and spent her original career primarily managing people and projects in high-tech in Silicon Valley for many years before gaining an interest in CCRC.

She explains what it means for a facility/community to be a CCRC and why most assisted care facilities are not CCRCs.

Listen in to learn more about CCRC regulations in North Carolina, the importance of having a plan before moving into a CCRC, the types of CCRC financial rating sources, and the five different CCRC contract models in NC. You will also learn about the factors determining how long it might take to get into a CCRC and why it’s not too soon for you to think about getting into a CCRC when in your 50s.

In this episode, find out:

• Rae’s background career in high-tech and Continuous Care Retirement Communities (CCRC).
• What it means for a community to be a CCRC and why most assisted care facilities are not CCRCs.
• The importance of having a plan if you decide to age in place or move to a CCRC.
• The CCRC regulations in North Carolina, plus how to use the Department of Insurance website.
• Why it’s not too soon for you to think about getting into a CCRC when you’re in your 50s.
• The types of CCRC financial rating sources, what they offer, and what to consider when selecting a CCRC.
• Understanding the five different types of CCRC contract models offered in North Carolina.
• Factors that determine the type of CCRC contract model you should consider.

Tweetable Quotes:

• “To be a CCRC, a community has to offer multiple levels of care, which are independent living, assisted living, skilled nursing, and they will typically also offer memory care.”– Rae Dawson
• “If you cannot find a facility/community on the Department of Insurance website, it’s not a CCRC.”– Rae Dawson

Get in Touch with Rae:

• Email: rae01dawson@gmail.com

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:	Welcome everyone to Secure Your Retirement Podcast. We are excited about today. And when we can ever talk about a topic that is top of mind for many of our clients that we work with or individuals that we have conversations with, we know it’s going to be a good episode. And today we are talking about CCRCs. And if you don’t know what a CCRC is, hold on because we’re going to answer that for you. But we have a special guest who teaches a class on this, who helps individuals navigate this world, and her name is Rae Dawson, right here in Durham, North Carolina. So first of all, let me just say this. Rae thank you so much for coming on and having a conversation with us and sharing some of the things you know about this topic.
Rae Dawson:	Thanks. I’m happy to be here. It’s an important topic for people our age.
Murs Tariq:	Yeah, I had the pleasure of speaking with Rae over the phone and I was like, “We got to get you on our podcast. We got to get you on our podcast.” I was talking to a client and they gave me your name and I reached out to you and I said, “Hey, would you mind hopping on?” So we’ve got you today, and before we go into what we’ve prepared to discuss around the CCRC basics, and we’ll ask you the question of, well, what is a CCRC? Before we do any of that, can you just give us a little bit of your background and how you got to where you are today in a quick snapshot?
Rae Dawson:	Yes. I’m currently retired from my original job. I spent my career in high-tech, primarily managing people and projects. I lived and worked in Silicon Valley for many years, and I actually moved here in 2005 from Silicon Valley. When I retired in 2017, a friend who I met through her teaching me how to play bridge actually taught the Stay Put or Move On class at OLLI at Duke. And I might mention, the Stay Put or Move On class is the most popular class at OLLI at Duke, and we teach hundreds of classes, but it’s such an important topic. So she was teaching the class, I took the class from her and a semester later when her co-instructor decided to step down, she asked if I would join her and be her co-instructor. So I worked with her until 2021 when she retired and moved herself into a CCRC. And since 2021, I’ve been teaching the class myself on my own.
Radon Stancil:	Excellent. Well, thank you for sharing that. So let’s just talk about this and just so everybody’s clear, we had so much to talk about on this. We asked Rae could we split this into a couple of episodes because we couldn’t cover everything here. So we’re really kind of calling this the basics around a CCRC. So let’s just start with the basics, Rae. Could you tell us first and foremost, what is a CCRC? When I use that acronym, what does it really stand for?
Rae Dawson:	Right. And there’s a lot of confusion around exactly what it is. To be a CCRC, you have to offer multiple levels of care. So you have to offer independent living… A community has to offer independent living, assisted living, skilled nursing, and they typically will also offer memory care. Sometimes is a separate offering, sometimes in conjunction with assisted living. There are a lot of communities or facilities, shall we say, that are assisted living facilities standalone, but they’re not CCRCs because they don’t offer the continuum of care. So when you move to a CCRC, you will live there for the rest of your life with some exceptions. And as you need higher levels of care, you will automatically staying within the same community, move through those higher levels of care until you leave the community either through death or for some reason, you might want to move away.
Murs Tariq:	And for everyone listening, I don’t want to assume that you know what the acronym CCRC stands for. So I’m going to say it stands for a continuous care retirement community. I think with an emphasis being on care and community. So we’ve helped several clients over the past few years, help them understand the financial aspect of, “I’ve made the decision, I want to go into one of these, can I actually afford it?” That’s one conversation. But I think Rae, where you come in is you help people kind of think through, well, which one should I be looking at? What are all the nuances of each different one and everything like that. But before we even get into that, at what point from the people that you educate with or you teach on this topic, what’s going through that person’s mind? Why are they taking that class that you teach? Are they saying that I need to understand this better because I think this is in my future, or I don’t know anything about this, but people are talking about CRCCs?
Rae Dawson:	All of the above. And often statistically, most people say they want to age in place, that they want to live in their current family home, but they also recognize that at some point in their life, it’s most likely that they will need a higher level of care. And so people who really are planners and people take the class, what I’m encouraging them to do is to make a plan to decide if I want to age in place, how am I going to do that? Because it’s a lot of work. And if I’m not going to age in place and I want to move to a CCRC, at what point will I move? What CCRC might I want to move to and what are the decision criteria around how do I decide?
Radon Stancil:	Great. So I know Murs, like he said, we’ve helped with people around this and there are a variety of different things that we have to think about, the different types of CCRCs, how I enter into that and the financials behind it. So there’s a lot of different elements and we’ve got a good amount of questions. I know that in our conversation with you, Rae, you kind of had said, okay, in this basics we’ve got three things that we want to cover, which were regulation, the rating agencies, and then the contract types, which I think are just so important. So I just want to tell everybody who’s listening, we’re going to talk today for both two things. One for people that are listening to us on the podcast, but as well we do have some visuals if you are observing or looking at this on YouTube because we put it in both places.
	So if you’re listening on the podcast and you want to see something else, you can go looking at it on YouTube, but we are going to share the screen. Rae has got some slides that she’s going to share as we walk through these three different main topics. So let’s just go to the very first one, if you don’t mind, Rae, and talk a little bit about the regulation around these different facilities. And I think it’s so important to understand because there’s a lot of money that a person has to put into these as an investment in a variety of different ways. So how is it regulated?
Rae Dawson:	That’s right. Oh, I need to share my screen before I put it into presentation mode. So let me do that. All right. So in the state of North Carolina, CCRCs are regulated. They’re considered an insurance product, so they’re regulated by the Department of Insurance and their assisted living and skilled nursing facilities are also regulated by the Department of Health and Human Resources. So there’s sort of two aspects of regulators that apply, but if you’re looking for the stability of a CCRC and from a financial health perspective, the Department of Insurance is your best resource for understanding the financial stability of a particular CCRC in North Carolina.
	As it turns out, in the state of North Carolina, no CCRC has ever gone bankrupt. And to my understanding, there’s one that almost went under, but the Department of Insurance steps in if they get close and they put a plan of action in place of how to get them back to financial stability so the residents who live in that community are not affected and you don’t lose your investment. Because when you move to a CCRC in most cases, you’re making a very significant financial investment through a buy-in into that community.
	One of the things that… I don’t think I’m in slide… There we go. I always recommend to my students and to anyone that I talk to that you become familiar with the Department of Insurance website. It’s a very easy-to-use website, and you can search on the term CCRC and it will then bring up the search results. So for those of you who can’t see, there’s a very good definition of contract types, and I’m going to give you a brief description at the end, but they go into great detail about the contract definitions. Each community files a disclosure document with the Department of Insurance, and those are posted on the website. And so you can look at the financials for a community and see what they’re doing, where they’re spending their money on, how many employees do they have, et cetera. There is a definition of what are the licensing requirements to be a CCRC in the state of North Carolina.
	And then I think the most important thing for people who are trying to make a decision as to whether they want to go forward moving to a CCRC is the community search tools. There’s two ways you can search for information about communities using those search tools. One is you can download a PDF that contains information for all CCRCs in North Carolina. And the Department of Insurance just this year modified their website and they’ve kept the PDF, but they used to have this really hokey map of the state of North Carolina with a number for each CCRC and their approximate location within the state. I’m telling you, it was really hokey, but I loved it because it gave me in one place a visual of where each CCRC is. For some reason, they’ve taken that hokey map away and now instead they’ve replaced it with an interactive search engine, which allows you to explore by county or even by single CCRC by name. You can go and find this information at a summary sheet for each CCRC.
	One thing I tell my students is if you cannot find a facility or a community on the Department of Insurance website, it is not a CCRC. So there are lots of senior living communities in the triangle. There are lots of assisted living, skilled nursing, but it won’t be a CCRC unless you can find it on the Department of Insurance website.
	So this is an example of what the PDF looks like if you were to download that PDF, and I’ve simply selected The Forest at Duke at random here to give you a screenshot of what that looks like. But you can see that the PDF and the summary information that you’re going to get from the Department of Insurance is a description of the community. It’s going to give you an idea of how much they’re going to charge per month from low end to high end. It’s going to talk about what contract type this particular community offers, and it’s going to talk if there are any refund options for your buy-in, should you choose to leave the community early. It’ll tell you what their occupancy rates are, and then it gives you other information such as, does this community provide meals? Does it provide housekeeping? What kind of utilities do they pay? Et cetera.
	And then here on this slide is a picture of the new portal that the Department of Insurance just introduced this summer, and I’m simply showing all in alphabetical order CCRCs. But you can see there’s a dropdown with a search button, and if you wanted to look at a particular CCRC, you would select it there. And it’s also from the screen that you would download that PDF.
Murs Tariq:	So Rae, on the PDF, does it tell you whether or not that particular CCRC has a wait list associated with it? Because I know we have clients that have been on a wait list for six months. We have clients that have been on a wait list for a couple years and they’re just getting called up to finalize their details. So does it tell you that?
Rae Dawson:	It does, and you probably can’t see it because it’s too small here, but it shows whether they have a waiting list. And it also tells you if they’re experiencing an expansion. And if you have a client that is able to get into a CCRC in two years, they’re probably not living in the triangle because wait lists depending… And there’s a lot of factors. This is actually a pretty complex topic, believe it or not. There are a lot of things that go into how long might it take me to get into a CCRC? But if you want exactly what you want and you’re not willing to settle for anything else, some communities have up to 12 years of a wait list. So I tell people in their 50s, it’s not too soon for you to be thinking about whether or not you want to go onto a wait list for a CCRC. And I have people who take my class who are in their 50s who are preparing. Sometimes they’re coming to learn so they can assist their parents, but oftentimes they’re coming for themselves.
Radon Stancil:	That’s great. Thank you for sharing that.
Rae Dawson:	So let’s quickly just talk… I want to just briefly talk about some of the rating agencies that exist for CCRCs. And there are three primary ones in addition to the Department of Insurance. So remember that the Department of Insurance is regulating, they provide oversight onto the community. These organizations are simply assessing the financial sustainability for the organization in some cases.
	Fitch is a rating organization that is primarily providing financial viability and especially around debt service. And so, one of the things you might find is as a community is going through an expansion because they have to pay for the expansion before they can sell and move people in to new residents, they take on a fair amount of debt. And so a CCRC that has, let’s say a BBB rating in Fitch, that might be still a very financially sound organization if they’re going through an expansion at the time. And what will often happen is after the expansion is complete and they’ve now been able to sell the expanded units to residents, their Fitch rating will go back up.
	Another organization that provides accreditation or assessments of CCRCs is CARF and CCAC. And they are primarily looking at services and quality evaluations much less so than financial. And what actually happens is communities decide that they would like to apply for a CARF rating. And so they raise their hand and say, “I’d like to be rated by you.” And they have to pay for the assessment that’s done.
	And one very important aspect is the CMS and the… CMS is the Medicare organization. Medicare will provide quality of care and staffing services ratings for skilled nursing facilities. So they’re not going to provide any kind of rating on independent living or assisted living because their focus is on skilled nursing. That’s what in some cases, Medicare pays for. You should be aware though that not all CCRCs, even though they will offer skilled nursing, they are not all Medicare certified. And that might be an important consideration for you as you’d make a selection for a community. Shall I go on to the contract types?
Radon Stancil:	Yeah, no, you’re doing great. This is great. Then this is the part right here that I think is so important, which is the five different types of contracts because this is where we have lots of conversations on the financial planning side, so I’m excited for you to share this.
Rae Dawson:	Okay, great. So there are, as you said, five different contract types. The first one that we typically talk about is called extensive. And in some parts of the United States, and even here in North Carolina still, some people call this a type A contract. And a type A or an extensive contract is you pay a flat fee for independent living and skilled nursing and assisted living. So no matter what level of care you’re living in, your monthly fee does not increase. So essentially what you’re doing when you move into these communities is that you are prepaying for a higher level of care so that you don’t have to pay… It’s not quite as big a shock to the pocketbook when you need to move to those higher levels of care.
Radon Stancil:	So would you say in this one that it’s a bigger upfront on these?
Rae Dawson:	Thank you. Absolutely. So the buy-in and the monthly fee for this particular contract type, it will be higher than the subsequent contract types that we’re going to talk about. The other thing that you often find in this contract type community is that their standards… In most cases, to move into a CCRC, you have to be able to live independently for a certain amount of time. And in an extensive community, the length of time that they’re going to ask your doctor to certify that you can live independently will be longer than it will be for some of the other contract types. Because remember that their financial model relies upon you prepaying for those higher levels of care while you’re living in independent living.
	The next type of contract type is called modified. And in North Carolina and other parts of the country, this is often called a plan B. And in a modified community, you are prepaying for a portion of your higher levels of care, and it varies by community as to whether you’re making… how much and how many days of higher level of care you’re prepaying. What I’ve seen that’s typical in the triangle is about 15 days over the course of your life. So their buy-in and monthly fees are less than an extensive community, but higher than the next contract type, which is fee-for-service. And a fee-for-service is exactly what it says. You’re basically paying for… What you receive is what you’re paying for.
	So when you live in independent living, you’re only paying for independent living. And if you move to assisted living, your fees will go up to whatever the mark is in your community for that level of care. And in fact, it’s going to go up more than… You’re going to pay more than the average going rate for your community because in most cases, the care that you’re getting is going to be of higher quality than some of the other maybe the average facility within the community.
	So the next type of contract type… Oh, I’m sorry, fee-for-service is often called type C. Rental communities have been around in North Carolina since about 2008 to 2010. And in most cases, new communities that are being built in the state of North Carolina right now are mostly rental communities. And there are reasons for that that if we had a lot of time to talk about, I could tell you why, but it has to do with the regulations of the Department of Insurance. It’s very expensive and difficult to build a CCRC in the state of North Carolina. But the rules are slightly different if you’re building a rental community. And so rental communities require no entrance fee, but they typically require a deposit of two months of rent. And because they are a CCRC, they do give you access to higher levels of care at the going rate in your community.
	Typically, in North Carolina and certainly in the triangle, rental CCRCs are owned by for-profit organizations, whereas the other, the extensive modified and fee-for-service are referred to as more traditional CCRCs. And traditional CCRCs have historically been owned and managed by nonprofits. And so about the traditional CCRC contract, CCRCs, is that they will often have a benevolence fund so that if they assess your financials and agree to allow you to move into their community, they will do everything they can to ensure that even if you run out of money, they will not kick you out of the community. They may make you move to a smaller or less expensive footprint, but they will not make you move. A rental community on the other hand, has no such benevolent fund, and so if you cannot pay, you will have to move out of that community.
	The last contract type is an equity model. And in an equity CCRC, you’re actually buying the residence that you’re moving into. So there’s a real estate transaction involved, but you’re buying this home or apartment in a community and then you contract separately with that community for the higher levels of care and for the other services that you’re provided while living in independent living. Typically, the cost of that contract with the community is about 10% of the price you paid for your residence. And they typically follow, although they’re not called this, their contract types sort of follow the fee-for-service model so that as you move to higher levels of care, you’re paying the going rate for those levels of care at the time you need them.
Murs Tariq:	So what would you say of the five here, extensive, modified, fee-for-service, rental or equity, what would you say are the more common ones that people are entering into? Or is there not a common one? It’s really personal preference on do you want to give a lot of money upfront or how does someone work through even deciding which of these five do I evaluate first?
Rae Dawson:	Yeah, that’s a really complicated… Some of it has to do with do I have long-term care insurance? None of these communities require that you have long-term care insurance, but if you do, that helps you meet the financial requirements for gaining entrance to the community. Sometimes people think, “Well, if I’m already prepaying for my higher levels of care, why would I want to move to an extensive community if I have long-term care insurance?” What an extensive community will tell you, and they’ll do the financial assessment to show you, is when you move to a higher level of care, your monthly costs go down because now you’re still paying the flat fee that you paid when you lived in independent living, but now you can apply for your long-term care benefits and that lowers your monthly cost of living. That’s a consideration.
	There’s also a consideration of how old are you and how is your current health? What’s your family history look like? Do you think that you might need a higher level of care someday for a long period of time, in which case it might make sense to prepay for it and move to an extensive community. My former co-instructor chose a fee-for-service community because both of her parents… Well, her mother died at the bridge table, believe it or not, at age 64, and her father lived into his 90s, but he lived in independent living for his entire life. So based upon her family history she decided, “I don’t want to prepay for any services that I might not use.” So it’s a complicated decision really.
Radon Stancil:	One more question on this. When you talk about what we call quality of care, is there much of a difference between if you look at an extensive modified fee-for-service versus the rental version?
Rae Dawson:	No. No. There really would not be.
Radon Stancil:	Okay.
Rae Dawson:	The reason that people might want to go to a rental community, one of the best that I’ve heard of is maybe you have decided you’re tired of taking care of your house. You really would like to move into a CCRC, but you’re not positive you’re going to stay in the triangle for the rest of your life. Maybe you have children that live in other parts of the United States and you think that someday you might want to leave the triangle and go live closer to your family. In that case, because you’re not paying a buy-in fee for a rental, the monthly fees are much higher than a comparable fee-for-service community but you don’t have that buy-in that is in most cases, going to amortize over a period of 50 months. So if your plans are not firm that you’re going to be here for the rest of your life, they’re a good choice for that.
Murs Tariq:	And I assume when you go the rental route, it would be similar to having a lease agreement for a period of time, so you can’t just get in and then leave the next month.
Rae Dawson:	Correct. You typically have to stay 12 months and you’re paying typically two months deposit, and at the end of that 12 months, you either renew or you give two months notice that you want to leave.
Murs Tariq:	Gotcha.
Radon Stancil:	Great. Well, I tell you, I’m already… First of all, I did not realize that the Department of Insurance oversees CCRCs. So that’s a really good thing for me because it means it’s being regulated and being looked at. So thank you for sharing that. We want to go into more detail, but we kind of have this little thing where we don’t want to overwhelm. As I said, this is kind of our basics to CCRCs, and then from what Rae has told us, there’s much more for us to think through and talk about. So we’re going to do a part two to this very topic, and we’re going to have Rae come back. She’s been gracious enough to say that she would come back and we’re going to kind of take it to the next level as we think these things through. So for today, I’m going to say this, Rae, you did a fantastic job of walking us through this. Thank you so much for coming on and chatting with us as well as being able to share this wealth of information with all of our listeners.
Rae Dawson:	Thanks for having me.
Murs Tariq:	And also, Rae, if someone was curious about learning more about this directly from you, what would be the best way for them to get in touch with you or just to start a conversation?
Rae Dawson:	Yeah, the easiest way to reach me is through my email address and that’s rae01dawson@gmail.com.
Radon Stancil:	We’ll make sure that we include that in the show notes and have that there so people can just click on your email and send you an email.
Radon Stancil:	All right. Well, thank you very much. Have a good day.