By Peggy Qualls, Community Relations Manager — Kendal at Granville
Many people realize that a Life Plan community fits well with personal goals for an independent lifestyle, financial predictability and security—including freedom from worry about future long-term care costs. The next step? Determine which contract type is best for you!
There are advantages and disadvantages for each contract type, so it is important to understand the differences among the options. But first, let’s review the basics of how Life Plan Communities are structured, for this differs from other types of housing or care facilities.
According to the IRS website under Elderly Housing:
Continuing Plan Retirement Communities (CCRC) offer seniors a facility that combines housing, services (such as maintenance, meals, housekeeping), and health care, allowing seniors to enjoy a private residential lifestyle with the opportunity of independence and the assurances of long-term health care. Unlike other types of housing, a CCRC provides a commitment to take care of residents regardless of any changes in their health, for as long as they reside in the community. Within the CCRC, there are three types of care available, providing a phased approach to elderly living accommodations: 1. Independent living, in which the person lives on their own in an apartment or cottage-style housing; 2. Assisted-living, offering some level of assistance for residents; and 3. Skilled nursing care, for residents whose health is deteriorating. This type of community is sometimes referred to as a Life Plan community because of the opportunity for the continuum of care.
Life Plan communities assume different levels of financial risk for the cost of residents’ services. How that risk is shared with residents is defined by the Life Plan Contract. Normally, these are lifetime contracts between the community and the individual residents. CCRCs, the precursor of today’s Life Plan Communities like Kendal at Granville, have long recognized three broad categories of care contracts.
Type A (Traditional, Extensive, Full Risk)
In the Traditional (Type A) contract, the Life Plan community assumes the financial risk for covering the cost of long-term care, except those costs that may be reimbursed by third parties such as Medicare. This type of contract generally requires a one-time Entrance Fee, as well as a Monthly Fee. These fees include prepayment for long-term care costs, similar to an insurance arrangement. Because of this prepaid health care, there is the opportunity for significant tax savings. The Monthly Fee may increase based on changes in operating costs and inflation adjustments. Typically the most expensive of the three options, the Type A contract offers the resident assurance of coverage for future health care needs and costs.
Type B (Modified, Limited Services)
These contracts identify the pre-defined conditions and circumstances where the Life Plan Community is at partial financial risk for the costs of long-term care. Modified (Type B) Agreements offer the same access to health care as extensive agreements; however, the financial risk of long-term care is shared between the resident and the community. The community pays some but not all of the costs of long-term care services for residents beyond those reimbursed by third parties such as Medicare. Financial risk to the Life Plan Community is limited by a cap on the amount of long-term care services for which the community will pay. A specified maximum number of days of long-term nursing care are normally provided within the contract at no additional cost. However, once the resident has reached the contract cap, the resident is at full risk for the cost of additional long-term care services. Residents will normally pay an Entry Fee and Monthly Fee, which are generally lower than the Type A contract arrangements. Monthly Fees may increase as levels of care increase, and/or residents may receive a discounted rate over the current market pricing for their long-term care. Type B contracts are typically less expensive than Type A but provide no assurance to the resident against the possibility of significant increase in future health care expenses.
Type C (Non-Traditional)
In this arrangement, Life Plan Communities are not at risk for the cost of long-term care services. Residents have access to the full spectrum of care provided within the Life Plan Community, but the residents are fully responsible for all costs of health care when and if they are needed, without the benefit of resident discounts or any free long-term care days. These types of arrangements require residents to pay for services they use through a combination of an Entry Fee and a Monthly Fee (Type C) or a strictly rental agreement with only a Monthly Fee, Type D (Rental). These contract types offer lower fees up front as the resident is assuming all the risk for long-term care expenses. Obviously, Monthly Fees escalate as one utilizes a higher level of care and service. Type C and D contracts are less expensive than Type A and B contracts, because they oblige the resident to meet health care costs through other means (such as long-term care insurance or personal savings).
The most significant advantage of all these agreement types is the simplest of all: peace of mind. By belonging to a community where a full continuum of services is available, you and your family are assured that arrangements for future health care are already in place, even in a moment of crisis.
Reprinted from the Kendal.org website at https://blog.kag.kendal.org/life-plan-contracts-easy-as-a-b-c