The Basics of a CCRC
Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.
But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.
A Little Bit About Rae Dawson
Rae was mentioned to us by one of our clients, and after a great conversation with her on the phone, we knew that we had to invite her onto the show. She had a career in high-tech and worked in Silicon Valley.
She moved to North Carolina when she retired, and she worked with her friend, who taught a class on CCRC until 2021. Her friend eventually moved into a CCRC herself and Rae has been teaching the class on her own ever since.
What is a CCRC?
A continuous care retirement community (CCRC) is not well-defined and there are a lot of opinions on what a CCRC should include. A CCRC, by Rae’s definition, should offer:
- Community
- Independent living
- Assisted living
- Skilled nursing
- Memory care
Memory care may or may not be offered, but it’s a nice perk of these communities.
CCRCs offer a continuum of care while staying within the same community. Most residents live in these communities until they pass on. CCRCs are a topic that we cover when discussing retirement planning with clients, but many people are educating themselves on their community options.
What is the Mindset of People Attending Rae’s CCRC Class?
Educating yourself on CCRCs is important. Most people want to age in place and remain in their family home. However, planners take Rae’s class because they want to know:
- If aging in place is for them and what that looks like
- If CCRC is something they might prefer, and what criteria must be met before going into a CCRC
CCRCs are regulated and there are nuances that everyone considering these communities must know about beforehand.
Regulations on CCRCs
Note: We’re going to cover a lot here, and Rae has been kind enough to share some slides with us. We’ll be adding these slides to our YouTube channel for you.
A lot of money and resources go into CCRCs. You plan on living in one and ensuring that you receive the care you need in retirement. Regulations are a safeguard that offers you peace of mind and ensures that the community is “following the rules.”
In North Carolina, where Rae and our team are located, CCRCs are regulated by the NC Department of Insurance. Assisted living and skilled nursing facilities are also regulated by the Department of Health and Human Resources.
The NC Department of Insurance is your best resource for understanding the financial stability of a CCRC.
Luckily, in North Carolina, no CCRC has ever gone bankrupt. One almost went under, and the Department of Insurance stepped in to protect residents and help the community get back on the right financial footing.
Why?
Residents buy into these communities and make a significant investment to remain in one.
Familiarize Yourself with the Department of Insurance Website
Rae recommends that all her students familiarize themselves with the NC Department of Insurance website because it’s their go-to source for information. You can:
- Search the site for CCRCs
- Read through contract types
- Read through community disclosure documents
- Learn about the licensing requirements to be a CCRC
- Access community search tools
Community search tools allow you to use an interactive search engine or download a PDF on all CCRCs.
If you cannot find a community on the Department of Insurance website, it is not a CCRC. Often, nursing facilities may promote themselves as a continuous care retirement community, but they are not if they’re not on the site.
Browsing through the PDFs on the NC Department of Insurance website, you’ll find great information on each CCRC, such as:
- Buy-in options
- Refund options
- Low and high costs
- Meals on wheels info
- Waitlist time
A new interactive portal is also available that makes it simple to browse through all of the CCRCs in the state.
Note: If you’re not in North Carolina, you can often find similar information on your state’s website.
Wait List Notes
CCRCs have limited space, which means there’s a waitlist. We’ve had some clients wait six months, two years, or even longer to get into one of these communities. Some communities have a 12-year waitlist!
CCRC Rating Agencies
Rating agencies for CCRCs do exist, and three of the main ones are: Fitch, CARF, and CMS.
Fitch
Fitch provides primarily financial liability ratings. The main factor in the Fitch rating is the Debt Service viability. When a CCRC is expanding, the community takes on a lot of debt. However, once complete, the community will sell residency and its rating will rise because it’ll pay off the debt.
CARF
Rather than focusing on the financial aspects of a CCRC, these agencies will look at the services provided and the quality evaluations. Communities apply for a CARF (Commission on Accreditation of Rehabilitation Facilities) rating and pay for the assessment that is done.
CMS (Medicare)
Medicare will provide quality of care and staffing service ratings for skilled nursing facilities. Note that not all facilities are Medicare-certified, which may sway your decision to join one facility over another.
Note: Remember, the NC Department of Insurance also has a rating system for each community.
Understanding the 5 CCRC Contract Types
1. Extensive or Type A
An “extensive” contract is the most popular and requires a buy-in plus a monthly fee. No matter what level of care you’re living in, your monthly fee does not increase. You’re pre-paying with your buy-in with a higher upfront cost but a stable monthly cost.
Moving into a Type A CCRC does mean that your doctor will need to state that you’re likely to remain independent for a longer period of time than with other contract types.
2. Modified or Type B
A modified contract means that you’re buying in for a higher level of care at a subsidized rate or for a fee for a certain number of days. You’ll have a lower buy-in and monthly fee than an Extensive contract, but you’ll be paying more than our next contract type.
3. Fee for Service or Type C
Fee for Service contracts are exactly what they sound like. You pay for what you receive. While you live in an independent living facility, you’re paying for this level of care. When going into an assisted living area, you’ll pay the going rate for this type of care.
4. Rental
Rental communities are growing in popularity in North Carolina and do not have an entrance fee. You may need to provide a deposit of two months of rent. These communities do provide access to higher levels of care at the going rate.
What we do want to point out is that Rental communities are for-profit while the other communities that we’ve mentioned are non-profit.
Traditional CCRCs are beneficial because they will often offer a benevolent fund, which means that if you move into one of their communities and you run into money issues, they will not make you move communities. However, they may require you to move to a smaller footprint within the community that is less expensive.
Rental communities will make you move out of the community if you cannot continue paying.
5. Equity
An equity contract comes with a real estate transaction because you’re buying the residence that you move into. The real estate transaction allows you to buy the home and contract with the community for a higher level of care services.
The cost of the contract with the community is roughly 10% of the cost of the unit you purchase.
While there is not a structured classification, equity contracts are, more or less, a fee-for-service type of structure for higher levels of care.
Which CCRC Contract is Best?
Rae finds that no single community is best for everyone. If you have long-term care insurance, your choice for a community may be different than someone else’s. Why? Your insurance can help you cover the financial requirements of the facility.
Extensive contracts with long-term care are often a good choice because you may pay less once long-term care kicks in.
A few things to consider when choosing a CCRC contract are:
- Current level of health
- Family health history
- Do you think you’ll need a higher level of care for a long period of time?
Rae’s former co-teacher chose a fee-for-service community because she didn’t want to pay for any services that she may not use.
In terms of quality of care, you’ll find that the quality of care across all contracts is about the same. You will receive the same great care in a Rental community as you will in an Extensive one.
Many residents who are tired of caring for their homes will often go to a Rental community. The community allows them to avoid the buy-in and gives them the freedom to move to another community or move into their kid’s home if they wish.
Rental communities do have a lease that is 12 months, but you will need to pay some costs upfront.
We’ve asked Rae to come back onto our show, because we’ve really just covered the basics of CCRC here. We plan on covering this topic more in-depth in the future, so be on the lookout for more episodes with Rae if you want to learn more about CCRC.
If you want to learn more about CCRCs with Rae, you can contact her directly at rae01dawson@gmail.com.