Senior care is expensive. A family member required nursing home care for just over two years and her costs added up to about $275,000 over the course of her stay. She was only able to remain in her own home after her husband died because she had a companion to help with household chores. I have written about the so-called Golden Girls solution, with seniors sharing homes with others. Yet, at some point individual seniors may need more care than can be provided in a home.
The continuum of care, as it’s often called, begins with housing, living expenses and the care needed in old age. As seniors’ health declines they gradually become less able to perform activities of daily living. This may start with the inability to maintain their lawn. It can lead to being unable to drive, cook, bathe themselves, feed themselves or even walk.
Senior living arrangements include apartments or condominiums where seniors live independently but with assistance. For example, maids may assist with cleaning and laundry. An on-site cafeteria provides meals for those unable to cook. Transportation for medical care is available for those who cannot drive. This type of care is expensive, compared to living alone without assistance. There are often additional services available, all for monthly fees. However, sometimes seniors pay an upfront, buy-in fee guaranteeing housing for life at a fixed cost regardless of whatever care they may ultimately need. According to The New York Times:
C.C.R.C.s, or life plan communities, provide levels of increasing care on a single campus, from independent and assisted living to nursing homes and memory care. Unlike most senior living facilities, they’re predominantly nonprofit.More than 1,900 C.C.R.C.s house about 900,000 Americans, according to LeadingAge, which represents nonprofit senior housing providers. Some communities offer lower and higher refunds, many avoid buy-in fees altogether and operate as rentals, and others are hybrids.
One problem with this model appears to be on the rise: bankruptcy of the care homes after seniors have made significant investments. A senior may have sold their house and invested the funds, along with their life savings, into a senior living facility for an apartment for life. But they have no deed or ownership stake should the retirement home run into financial problems.
But when C.C.R.C.s fail, residents and families face not only the physical and psychological ordeal of relocating, but also the possible loss of their life savings.In bankruptcy, residents entitled to refunds “are at the very bottom of the list” among creditors seeking payment, said Nathalie Martin, a University of New Mexico law professor who has written about insolvent C.C.R.C.s.Secured lenders with collateral have the first crack at collecting what they’re owed, followed by lawyers, accountants and employees.Because the people who live in a C.C.R.C. that has promised refunds are unsecured lenders, “residents are in a very vulnerable position, and they don’t know it,” Ms. Martin said. Without refunds, they may be unable to afford to pay for care elsewhere if forced to move.
The federal government regulates nursing homes but other living arrangements within a C.C.R.C. are regulated by a patchwork of state regulations that differ from state-to-state. Advocates for seniors argue for more oversight, with audits by forensic accountants, and requiring greater financial reserves. However, advocates for the life plan communities counter that more regulations and larger capital reserves will translate into fewer facilities being built and operated. According to The New York Times:
One solution for elder care shoppers: Selecting a C.C.R.C. that operates as a rental, without expensive buy-ins or refunds. That route makes potential financial failure less threatening, though it also means that monthly costs rise with increasing levels of care.
Whether you’re a client looking for a solution to your long-term care needs, or a C.C.R.C. looking for customers, it’s often a gamble. Seniors are hoping to lock in an arrangement where they are no longer at risk of running out of money if their care needs increase. Care facilities are hoping for easy-to-care-for residents who pay their bills but drop dead of a heart attack before needing labor-intensive nursing care that was covered by the upfront payment. When it goes wrong, it can end badly for both seniors and the care facilities that house them.
Read more at: When the Retirement Community Goes Bankrupt