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 Peggy Qualls, writer for Kendal at GranvilleBy Peggy Qualls, Community Relations Manager —

Research is fairly convincing that adults who reach age 65 will eventually require long-term care.  According to the US Department of Health and Human Services, at least 70% of people over age 65 will require some long term care services during their lifetime, and more than 40% will need skilled (nursing home) care. 

While many people express the desire to stay at home as long as possible, in fact, there is a natural progression for aging which looks something like this:

  • A senior has a health incident that leads first to home health care, and this may last many months
  • Eventually, the individual is deemed not safe to live alone, and they move into an Assisted Living apartment, where the average stay is about 2.5 years
  • Finally, the last chapter of life may include skilled nursing care, which is usually from 9 months to 2 years.

That’s a total of about 4 to 5 years of long term care, which conservatively may cost over $300,000, in addition to the “normal” costs of ongoing doctor’s appointments, medications, et cetera.1

Of course, assuming that you WILL need long term care raises a myriad of other questions, perhaps the most important being, “How do I plan for these costs? And, where will I go?”

To answer these questions, realize that there are basically two choices:  pay as you go, for whatever you need; or, plan ahead and find a place where you can contract to pre-pay for future health care needs.

Option one is by far the most popular.  In this scenario, much like the natural progression listed above, an individual will find providers to address health care needs as they arise, and then pay the fair market rate for each service as needed.

However, there is another option: choosing to move to a Life Plan Community, where the full continuum of services is available on one campus, and residents may move to various levels as their care needs change, traditionally with no additional cost for the higher degree of care.

Continuing Care Retirement Communities (CCRCs, now more commonly known as Life Plan Communities) originated in Europe with faith based organizations as a means to care for and shelter the elderly.  In the early 1900s, there were seven CCRCs in the United States, but as the aging population continues to grow, so have the number of these communities. Most of the 2,000-plus provider organizations are still non-profits; often, with religious affiliations and a mission to serve seniors.

Unlike other types of housing, Life Plan Communities provide a commitment to take care of residents regardless of any changes in their health, for as long as they reside in the community. Residents are signing a contract that essentially pre-pays a portion of anticipated future costs for long term care, and often there are tax advantages for this prepayment.

Potential residents are offered a contract stating that the community will offer a private residence, social activities, a list of services and amenities, and access to on-site levels of health care. Within the community, there are at least three levels of care available, providing a phased approach to elderly living accommodations:

  1. Independent living, in which the person lives on their own in an apartment or cottage-style housing;
  2. Assisted-living offering some level of assistance for residents; and
  3. Skilled nursing care, for residents requiring ongoing nursing care

A Life Plan Community/CCRC’s financial risk for residents’ care is defined in lifetime contracts between the CCRC and the individual residents, and there are various types of contracts with differing levels of risk for each party (the provider and the resident).  Potential residents normally pay a one-time entrance fee as well as a monthly service fee for the maintenance and management of the facilities. The contract then provides residents with long-term security and a lifelong assurance for care.  In addition, the entrance fee may be fully or partially refundable under certain conditions (i.e. resident leaving the community or upon death).3    Entrance fee refunds are usually a win/win: a peace-of-mind option that ensures long term care AND provides an inheritance!

What are the advantages of a Life Care Plan?  Here are the top four:

  • Pre-planned Care —residents never have to make health care decisions in a crisis
  • Quality of life —freedom from caregiving chores and home maintenance provides more time to pursue hobbies and other interests
  • Financial stability and predictability —Many tax advantages and control for future health care costs
  • Estate Protection —out of pocket expenses are minimized, and refund options for entry fees may provide a legacy

If you have questions about whether a Life Care Plan is a good option for you, please feel free to contact the author.

SOURCES:

1http://www.mylifesite.net/blog/post/so-ill-probably-need-long-term-care-but-for-how-long/

2 http://medicine.jrank.org/pages/368/Continuing-Care-Retirement-Communities-Definition-history.html

https://www.irs.gov/pub/irs-tege/eotopicg04.pdf

 

 

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