Since you have a choice of different types of contracts that will affect your payment for care the rest of your life, it is important to understand your options. The contracts vary as to whether or not they require you to pay a large entrance fee that gives you access to low cost health care the rest of your life, or whether you receive advanced health care services as needed at market rates.
There are generally three contract options to consider, each with its own level of risk and benefits. The risk of being faced with high monthly expenses as your care needs change is essentially bought down in the initial upfront payment: The more you pay up front, the lower your risk of incurring higher monthly costs.
Most CCRCs offer more than one contract option, giving you the ability to choose the one that is best suited to your needs and financial situation.
The three standard CCRC contract options are described here.
Life Care Contract (Extended Contract)
This option is the most expensive in terms of upfront fees, but offers the lowest risk of incurring higher monthly fees later as your care needs change. Financially, this contract can have significant benefits in the long term, since you will continue paying only minimal monthly payments should you need additional healthcare as you grow older.
Generally, you start out living independently in a house or apartment with the cost of your housing, meals, and activities covered by the monthly fee. If you were to end up needing to transition to an assisted living or skilled nursing unit, you would not have to pay any additional monthly costs. This provides priceless peace of mind knowing that all healthcare needs will be covered as you grow older.
Modified Contract
This type of contract has a lower entrance fee than a life care contract, but you are not guaranteed the lowest-cost advanced healthcare as your needs change. With this type of contract, the monthly fee will stay the same as long you or your spouse remain in independent living. This option is usually less expensive initially, but may grow to be more expensive if assisted living or skilled nursing care is required.
Under a modified contract, assisted living or advanced nursing care is covered for an agreed upon length of time. After that, monthly fees increase to cover additional care. In some cases the costs are still constrained and offered at a guaranteed or discounted market rate, depending on the contract.
Fee for Service Contract
A fee for service contract differs from life-care and modified contacts in that you pay a much lower initial entrance fee. This is a more affordable option initially, but it does not provide any guarantee of low cost healthcare should you or your spouse’s health decline. If you end up needing additional care, such as assisted living or skilled nursing care, you will be expected to pay the full market rate.
This can be a particularly good option if you can live independently, but your spouse requires more advanced care. This way you would be able to live close to each other on the same campus. Many find that this option provides the best way for a healthy individual to see a spouse who requires additional healthcare on a daily basis.
Rental Agreement
If you want to live in a vibrant senior community without committing to one of the three long-term contracts described above, you may be able to arrange for a rental agreement instead. Rather than paying an entrance fee, you would simply pay the first and last month’s rent.
One disadvantage of this type of arrangement is that you are not guaranteed access to advanced healthcare on-site if you should need it since priority is given to those who have this type of care included in their contracts.