Before You Settle On A Retirement Community

Your parents are in their mid-70s. They've slowed down a bit and are tired of household chores. Perhaps your mother's health is deteriorating, and your father wants to be close to a nursing home. They'd also like an active social life.

They may want to look into a continuing-care retirement community. A CCRC provides a range of residential, leisure, and nursing services on one site in return for large entrance fees and a monthly payment. Nearly 250,000 people--average age of 82--live in 700 CCRCs across the U. S. The number of communities is expected to double by 2000.

CCRCs come in all forms, from big-city high-rises to one- and two-bedroom cottages on rolling hills. Nursing care is provided in a facility on the grounds. All have communal dining rooms. Most have swimming pools, golf courses, social activities, housekeeping services, and transportation for shopping.

FAIL-SAFE? But if you are ready to make the move, you shouldn't choose a facility without careful research. While there are many excellent communities, the potential financial perils are enormous. In most cases, residents do not own equity in their homes, and if they move out, they could lose thousands of dollars in entrance fees. Some facilities are in such bad financial shape that they may never be able to provide the health care they promise.

Although the setting and social life are what usually lure residents, CCRCs are basically long-term-care insurance policies. The large fees go to pay for nursing care of residents who need it. Not all will, of course. A new federal study found that at least 43% of Americans who turned 65 last year will enter a nursing home at some point and that 25% will stay at least a year.

Not all these insurance programs look alike, either. Depending on how much money you have and how risk-averse you are, you can choose a community that provides one of three levels of care. Make sure you understand what's in the CCRC contract before you sign. Many people who had assumed they would be getting all-expense-paid nursing care have been disappointed when they found out the contract didn't provide for it.

The most expensive CCRCs are "extensive," or Type A, contracts, which provide unlimited nursing-home care. Many also offer the services of an aide to assist in dressing and bathing. According to the American Association of Homes for the Aging (AAHA), the median entrance fee for a one-bedroom is $58,637, and the median monthly fee is $871. But entrance fees can run as high as $250,000 for the most luxurious facilities.

"Modified," or Type B, contracts provide a specified amount of long-term care at no extra charge--perhaps 60 days a year. After that, residents must pay a daily rate of $50 to $150. The median cost: $42,259 for the entrance fee and $721 in monthly fees.

"Fee-for-service," or Type C, communities guarantee access to nursing facilities, but residents must pay the full daily rate. Residents are also charged for services such as meals and housekeeping. The median entrance fee is $34,723; the monthly fee, $583.

Your most important concern should be the financial stability of the community. A CCRC in operation for more than a year should have a reserve account for future health care, and it should amortize entrance fees over a resident's life. If a community has not set aside enough funds, it could face trouble. Have an accountant or financial adviser review the most recent audited financial statements. If a community won't provide them, shop elsewhere.

For new ventures, ask about owners, managers, and company track records. "You want people who understand the industry," says Ann E. Gillespie, director of the Continuing Care Accreditation Commission.

If you're satisfied that the CCRC is in sound shape, ask a lawyer to review the contract. Information in brochures and oral promises are worth nothing. Before you sign, be sure the following questions are answered in the contract:

-- If you're single, what will the fees be if you're transferred to a nursing facility? If you're married, what are the fees if your spouse is transferred and you stay in your apartment? Will you have to move to a smaller unit?

-- How often are fees increased, and is there any ceiling? Under what conditions are fees raised? You should ask for a fee-hike history.

-- Are entrance fees refundable if you leave? If you die without receiving long-term care, will your estate get a refund? Is the refund amount related to the length of time you have been at the CCRC?o determines whether you will be transferred to a nursing facility?

-- How many meals a month are included? What about laundry and housekeeping?

Before deciding, visit the community and talk to residents. If you have questions, call your state insurance department or office on aging. Read Communities for the Elderly in the February, 1990, issue of Consumer Reports ($3 from Consumers Union Reprints, 101 Truman Ave., Yonkers, N. Y. 10703). Or send a self-addressed stamped envelope to the AAHA at 901 E St. N. W., Washington, D. C. 20004 for a free brochure: The Continuing Care Retirement Community.

As the population ages, such communities are bound to become more popular. Picking the right one will be as difficult as any investment decision.

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