CCRC refundable entrance fee options

[cb2008]

can anyone share their rationale and calculations for selecting a 50% or 90% refundable entrance fee option versus forfeiting all of their entrance fee?

Thanks.

 

[RetiredHappy]

Forfeit all the entrance fee is cheaper than when you select refundable entrance fees. I don't see CCRC in my future but if I were to do so, I would choose 90% refundable entrance fee. My cynical belief is that there is no incentive to not hasten your early demise if you choose non-refundable fee.

 

[Koolau]

The CCRC that I toured reluctantly showed me their last "phase" of health care. It looked like a scene from the movie "Coma" with a dozen or more folks crammed in a room with tubes sticking out of them - and no staff anywhere in sight . No, thanks. YMMV

 

[lemming]

Wow this is the question I have been trying to solve. It is not a set math equation because there are non monetary reasons to choose one over the other. Like the social security question I do think the Organization has made it neutral on their end.

In my scenario a 50% vs 90% saves 60k upfront. If I dole that out over 5 years it makes the difference between my ss amount and my monthly fees. My portfolio would go up by 140k from home equity after the buy-in. There is plenty of money in financial assets to provide for me before I add this.

Longevity is the unknown factor of course. If you die the first year then you gave up a lot to the landlord but there is no way to measure. I feel like a 50% refundable is best for me considering all the numbers. Zero refund is a bigger gamble to reduce monthly fees by a thousand a month.

 

[aja8888]

The CCRC that I toured reluctantly showed me their last "phase" of health care. It looked like a scene from the movie "Coma" with a dozen or more folks crammed in a room with tubes sticking out of them - and no staff anywhere in sight . No, thanks. YMMV

I would guess the discount care version doesn't come with the tubes!

 

[Koolau]

I would guess the discount care version doesn't come with the tubes!

What I noticed was that EVERYTHING else was 1st class! Client rooms, "health club", dining area, food, "'singles' bar" and staff.

 

[foxcreek9]

My wife's uncle died 1 week after moving in. In reasonably good health, just died of a heart attack during the night.

 

[RetiredHappy]

My wife's uncle died 1 week after moving in. In reasonably good health, just died of a heart attack during the night.

Suspicious minds...

 

[Koolau]

My wife's uncle died 1 week after moving in. In reasonably good health, just died of a heart attack during the night.

Suspicious minds...

I wouldn't usually be suspicious but I've seen where several CCRCs have "reorganized" or gone bankrupt. Inquiring minds...

 

[foxcreek9]

I wouldn't usually be suspicious but I've seen where several CCRCs have "reorganized" or gone bankrupt. Inquiring minds...

Well, they didn't get much, he had the refundable option. My understanding the family got "most" of his deposit back.

 

[braumeister]

can anyone share their rationale and calculations for selecting a 50% or 90% refundable entrance fee option versus forfeiting all of their entrance fee?

Thanks.

I'm not sure "forfeiting all of their entrance fee" is exactly correct. The places I'm familiar with amortize your entrance fee by about 2% a month. So if you move out, you still get some of your fee back. Seems like a couple of years should be plenty of time to decide if it's really right for you, so at that point you would get half your fee refunded.

 

[ncbill]

What I noticed was that EVERYTHING else was 1st class!

Client rooms, "health club", dining area, food, "'singles' bar" and staff.

From what I've read recently, CCRCs are eliminating/not offering skilled nursing beds.

You get to go outside the campus if you require skilled nursing care.

Sadly, at least around here, CCRCs remain the best places for that level of care.

I got to see plenty of stand-alone SNFs when Mom was sick, and they were not any place I'd want to be.

So I'll be buying LTCi before age 60 for home/supplemental ALF care...yes, it is expensive.

 

[braumeister]

From what I've read recently, CCRCs are eliminating/not offering skilled nursing beds.

You get to go outside the campus if you require skilled nursing care.

I don't know anything about that, but there are many that offer excellent care.
You can see what kind of rating they have at the Medicare rating site:
Find & compare providers near you

All the ones I've been interested in are rated either "Above average" or "Much above average".

 

[RetiredHappy]

I bought a fairly generous LTCI 15 years ago. I figure my end stage may require 24x7 care at home and worst case I will need to supplement the LTCI payout by $200K a year. Hopefully I won't last that long at that point. Even if I stretched out 5 years, it's only a $1M more out of pocket.

 

[RetiredHappy]

I don't know anything about that, but there are many that offer excellent care.
You can see what kind of rating they have at the Medicare rating site:
Find & compare providers near you

All the ones I've been interested in are rated either "Above average" or "Much above average".

The issue is that many SNFs also do rehabs, and rehabs (short-term) typically bring much higher ratings than long term care. They are combined together in the ratings. SNFs are hell of a miserable place to be in. CNAs usually turn a death ear to residents ringing the bell for help. I witnessed a poor old man ringing the bell for an hour. A CNA would show up, turn off the alarm and say "I will be right back" without even asking what the poor guy wanted. I had seen it first hand many times in my prior career, which involved visiting patients in SNFs.

 

[ncbill]

The issue is that many SNFs also do rehabs, and rehabs (short-term) typically bring much higher ratings than long term care. They are combined together in the ratings. SNFs are hell of a miserable place to be in. CNAs usually turn a death ear to residents ringing the bell for help. I witnessed a poor old man ringing the bell for an hour. A CNA would show up, turn off the alarm and say "I will be right back" without even asking what the poor guy wanted. I had seen it first hand many times in my prior career, which involved visiting patients in SNFs.

Yes, I don't think most people realize SNFs often have entirely separate areas for short-term, Medicare rehab versus long-term, custodial care.

Relative came out of a hospital to a Medicare rehab bed in a private room at a SNF.

But since they couldn't improve (bedridden due to terminal cancer) within just a couple of weeks they had to move to a semi-private room on one of the custodial care hallways at that SNF.

Which they hated, so I moved them to a private room in an ALF near me. Lived only a few months more.

 

[nwsteve]

With refundable deposit options be sure you understand the math on the refund. In our CCRC, the refund is calculated on the original price--no allowance is made for inflation and does not reflect the price the unit will be resold. Also there will be "restoration" costs to return the unit to same condition as when purchased. These costs maybe sizeable. We chose the immediate savings off the entry fee and took the lower entry price which was amortized over five years--no refund after five years.
You will be long gone so it is really the heirs that will end up with a much lower real dollar return. In the meantime, I suspect if you stuck the difference in an total market fund and reinvested the dividends, your heir would have a much larger stash coming their way without the hassle of negotiating with the CCRC over restoration fees.

 

[harllee]

I live at a very nice CCRC (with top notch skilled nursing, memory care, rehab, and assisted living). It is a type A life care community which means that your monthly fees do not increase if you have to move to a higher level of care. There are only 2 options here when you move in--a 75% refund option and a no refund after one year option. It was an easy decision to make--the 75% refund option was $200,000 more than the no refund option. No way the 75% refund option makes financial sense so no one choses that option. We have lived here over a year and love it. There is very long wait list--we were on the wait list for 10 years. I have a separate thread about my experiences at my CCRC.

 

[donheff]

What I noticed was that EVERYTHING else was 1st class! Client rooms, "health club", dining area, food, "'singles' bar" and staff.

Isn't that "final care" room up to you? My heath care directives are based on the movie, "They Shoot Horses Don't They?" That awful end-of-life scenario you saw is repeated in nursing homes and hospitals everywhere. I assume you can opt for hospice and stay in your own room in a CCRC, can't you? If not, they would be off the table for me.

 

[harllee]

Isn't that "final care" room up to you? My heath care directives are based on the movie, "They Shoot Horses Don't They?" That awful end-of-life scenario you saw is repeated in nursing homes and hospitals everywhere. I assume you can opt for hospice and stay in your own room in a CCRC, can't you? If not, they would be off the table for me.

It is not so easy as that. My mom age 93 has Alzheimers, she was diagnosed with it 4 years ago and has been going downhill ever since. She lives in a CCRC and was able to stay in her independent living apartment with 6 hours of caregivers per day until 6 months ago when she started wandering away and falling. The CCRC said she had to have full time caregivers to be able to stay in her apartment (way too expensive with the caregivers costing $30 per hour). We investigated Hospice and they said she did not qualify because she had not been giving a diagnosis that she would die n 6 months (her doctor says she could live many more years) plus Hospice is not a 24 hour thing, they just come a few hours a day. We had to moved her to skilled nursing/memory care in her CCRC. She has a private room and it is very nice and clean with good staffing but it costs over $10,000 per month (her CCRC is a fee for service type). Mother has Long Term care Insurance (It took me about a year of constant work to get them to pay). The LTC insurance pays $6000 per month but it is only a 3 year policy and she has already used over half of the policy between caregivers and skilled nursing. She has some assets but they will be gone fast once the insurance runs out. Her CCRC does offer charity care once she runs out of money but she will have to move to a double room. Alzheimers is a major problem.

 

[donheff]

It is not so easy as that. My mom age 93 has Alzheimers, she was diagnosed with it 4 years ago and has been going downhill ever since. She lives in a CCRC and was able to stay in her independent living apartment with 6 hours of caregivers per day until 6 months ago when she started wandering away and falling. The CCRC said she had to have full time caregivers to be able to stay in her apartment (way too expensive with the caregivers costing $30 per hour). We investigated Hospice and they said she did not qualify because she had not been giving a diagnosis that she would die n 6 months (her doctor says she could live many more years) plus Hospice is not a 24 hour thing, they just come a few hours a day. We had to moved her to skilled nursing/memory care in her CCRC. She has a private room and it is very nice and clean with good staffing but it costs over $10,000 per month (her CCRC is a fee for service type). Mother has Long Term care Insurance (It took me about a year of constant work to get them to pay). The LTC insurance pays $6000 per month but it is only a 3 year policy and she has already used over half of the policy between caregivers and skilled nursing. She has some assets but they will be gone fast once the insurance runs out. Her CCRC does offer charity care once she runs out of money but she will have to move to a double room. Alzheimers is a major problem.

I agree harllee. Dementia throws a wrench in everyone's end of life planning. But I hope once someone is terminal or vegetative, the same directives we use everywhere else would have the same effect in a CCRC unit - e.g., no tubes, DNR, etc. Outside of that, once you become mentally incompetent you lose most control over death with dignity wherever you are. Unless you take your own life before you become incompetent (in other words, before you would likely prefer) you are SOL.

 

[cb2008]

With refundable deposit options be sure you understand the math on the refund. In our CCRC, the refund is calculated on the original price--no allowance is made for inflation and does not reflect the price the unit will be resold. Also there will be "restoration" costs to return the unit to same condition as when purchased. These costs maybe sizeable. We chose the immediate savings off the entry fee and took the lower entry price which was amortized over five years--no refund after five years.
You will be long gone so it is really the heirs that will end up with a much lower real dollar return. In the meantime, I suspect if you stuck the difference in an total market fund and reinvested the dividends, your heir would have a much larger stash coming their way without the hassle of negotiating with the CCRC over restoration fees.

 

[cb2008]

Thank you nwsteve. We already confirmed that we don’t have to wait for the unit to be resold to get the refund, but I need to asked about restoration costs. Have you done or thought about how to “do the math” on taking a refundable versus nonrefundable option?

 

[harllee]

I agree harllee. Dementia throws a wrench in everyone's end of life planning. But I hope once someone is terminal or vegetative, the same directives we use everywhere else would have the same effect in a CCRC unit - e.g., no tubes, DNR, etc. Outside of that, once you become mentally incompetent you lose most control over death with dignity wherever you are. Unless you take your own life before you become incompetent (in other words, before you would likely prefer) you are SOL.

in our CCRC you give the them a copy of all your health directives when you move in and they are on your chart and as far as I can tell they follow your directives (don't know what would happen if a family member objected). As for my mom with Alzheimers, she has signed all the health directives too and here CCRC has a copy of everything. But as of now she can still feed herself, etc so the directives do not apply.

 

[harllee]

Thank you nwsteve. We already confirmed that we don’t have to wait for the unit to be resold to get the refund, but I need to asked about restoration costs. Have you done or thought about how to “do the math” on taking a refundable versus nonrefundable option?

Wouldn't you value the right to get a refund similar to valuing a lump sum annuity--You pay a certain amount extra now for the promise to get back a certain amount at the end of your life expectancy. I would think you could use one of the online annuity calculators. But watch out--CCRCs that have a large liability for future refunds are more likely to go bankrupt. A large well respected CCRC in Charlotte is in bankruptcy now because they do not have the money to pay back all the refunds. I like the fact that my CCRC has very little refund liability (the reason they have so few refunds is that the refund option is too expensive) .