24 Feb What Is a Life Care Contract?
Posted at 14:35h
As you research senior living options, you’ll discover that not only are there different types of communities, there are different types of financial agreements, too. Understanding the differences in senior living contracts will help you make an informed decision and create a smarter plan for the future.
Life Plan Community/CCRC Contracts
Life Plan Communities (also known as continuing care retirement communities) offer independent Living, a wide range of services and amenities, and a continuum of on-site long-term care. The types of services offered in that continuum vary from one community to another but often include assisted living, memory care, skilled nursing, and rehabilitation. Life Care contracts are what give you priority access to that care with little or no increase in the monthly fee you were paying in independent living. Having Life Care means knowing where you’ll receive care, who will provide it, and how much it will cost.
You’ll find three basic types of contracts – Type A, Type B, and Type C. Some communities will offer only one type, while others will give you options to choose from.
Type A – Life Care
Communities with these agreements promise to deliver higher levels of care with little or no increase in monthly fees. They’re able to do this because you pay an upfront entrance fee, which assures you of lifetime residency and priority access to the on-site continuum of care. So while you pay more initially, and your monthly fees may be higher than at a community offering a Type B or Type C contract, those fees will remain virtually the same even if you need care, which can give you substantial savings in the long run.
Other things to know about Type A contracts:
- Some communities may increase monthly fees by the cost of two additional meals per day when you move into a different care level.
- Entrance fees may be high, and will vary based on the residence location, residence size, and number of occupants.
- Many communities offer partially refundable entrance fees, with up to 90% of your entrance fee being refundable to you or your estate.
Type B – Modified Agreement (also known as Modified Plan)
Communities with Type B contracts typically have lower entrance fees and provide health care services as needed. While health care costs may be lower than you’d pay outside the community, your monthly fees will increase based on the care you receive.
How Type B contracts differ:
- You may receive a limited number of free days in the health center, with additional care billed at daily market rates.
- Care may be billed at an ongoing minimally discounted rate.
Type C – Fee For Service
With a Type C contract, you pay only for the care you need, if and when you need it. Entrance fees and monthly fees are typically lower than at communities with Type A or Type B contracts, but if you do need a higher level of care, you’ll pay full market rates. If you’re an independent living resident and need short-term care, in order to keep your residence, you’d still have to pay the monthly fee on that residence, plus the cost of housing and care you receive to address your higher-level care needs.
So as you compare the costs of different communities, make sure you know what kind of contracts they offer, and think about how those costs could impact you over time.
Understanding the Value of a Life Care Contract
The cost of senior health care isn’t cheap now, and that’s not likely to change any time soon.
- According to a Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2020 may need approximately $295,000 saved (after taxes) to cover health care expenses in retirement.
- The 2020 Genworth Cost of Care Survey finds the median cost of a private skilled nursing room in Greenville, SC, is currently $8,866 per month. That cost is estimated to increase to $11,568 by 2030.
And since the U.S. Department of Health and Human Services estimates 70% of seniors over 65 will need some form of long-term care, it’s worth exploring ways to make that care more affordable for yourself.
Let’s say you enter a Life Plan Community with a Type A Life Care contract, like The Woodlands, as an independent living resident. If you later need a higher level of care, such as assisted living or skilled nursing, your monthly service fees will remain relatively unchanged, converting to the equivalent of a two-bedroom, two-bath residence plus the cost of two additional meals daily. That’s significant savings over what you’d pay at a community with a Type B or Type C contract. And it’s also much less than the monthly cost of skilled nursing in a private Greenville facility.
With a Life Care contract, you have all the benefits of a maintenance-free independent living lifestyle now, plus you’ll have a plan for receiving quality care in a place you know, at a predictable cost that’s far less than the market rates.
If you’d like to know more about Life Care at The Woodlands, feel free to reach out – we’re happy to answer any questions you have.