Choosing a CCRC: Which Contract Model is the Best?

Choosing a CCRC (continuing care retirement community or ‘life plan community’) isn’t an easy decision. It’s a housing, lifestyle, healthcare, and financial decision all rolled up in one. An important (and confusing) aspect of the decision is understanding how different residency contracts work at CCRCs. In this post we’ll provide an overview of each and a few considerations.

There are five main types of continuing care retirement community (CCRC) contracts:

Type A (“Extensive” or “Lifecare”) requires a high entry fee and a relatively stable monthly service fee that typically includes residential services, amenities, and health care. This is considered an all-inclusive option with predictable future expenses, regardless of healthcare needs that may arise. Monthly fees may adjust slightly over time, based on inflation and ancillary expenses.

Type B (“Modified Fee-for-Service”) includes most of the residential services and amenities offered through a Type-A contract, but there may be an additional cost if assisted living or skilled nursing care is required. These services are typically available at a discounted rate.

Type C (“Fee-for-Service”) offers a lower entry fee, compared to the other entry fee contracts, and covers some or all of the residential services and amenities available through Type A and B contracts. However, if assisted living or skilled nursing care is required, the resident’s monthly fee will increase to cover the full market rate for the cost of care.

Rental contracts do not require an entry fee, although there may be a nominal “community fee.” The level of residential services and amenities varies and is reflected in the monthly service fee, which may be higher than comparable entry fee communities. Rental residents often have priority access to the health care facility but are not necessarily guaranteed access, as is the case with entry fee contracts. The resident pays the full market rate for health care.

Residents in an Equity/Co-Op purchase their home or condominium in lieu of paying an entry fee, and also pay a monthly service fee or homeowners association dues. Health care services are usually offered at the full market rate, or at a slight discount.

Which is the best?

So, when choosing a CCRC, which contract is the best? This is a trick question. In theory, the contract types listed here should be actuarially equivalent, all other things equal. The answer to the question largely depends on you. If your personal experience ultimately falls outside of the averages, then one type of contract could prove to be better for you than another. But we cannot predict the future. Therefore, it comes down to making a decision that you are comfortable with after considering things like your family history with regard to life expectancy and health. Are you comfortable with a certain level of risk, as you might find with a fee-for-service contract, or do you prefer to pay more in order to “play it safe”? Do you own comprehensive long-term care insurance that compliments one type of contract better than another?

By educating yourself about the different types of CCRCs and considering your unique situation, you can make an educated decision about the type of contract that is best for you.

Learn more about CCRC contracts and other important aspects of the senior living decision process.