As you research senior living options, you’ll discover not only are there different types of communities, but there are different types of financial and admission agreements as well. Understanding the differences in senior living contracts will help you make an informed decision and create a smarter plan for the future.
There are three basic types of Life Care 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 Contracts (also known as Extensive Agreements)
Communities with these agreements promise to deliver those higher levels of care with little or no increase in monthly service fees. They’re able to do this because you pay an upfront entrance fee, which essentially prepays for future care. So while you pay more initially, your monthly fees are predictable, and will remain 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:
- Entrance fees will vary based on your location, residence size and number of occupants.
- Many communities offer partially refundable entrance fees, where 50%, 75% or 90% of your entrance fee is refunded to you or your estate.
Type B Contracts (also known as Modified Agreements)
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 with care.
Not all Type B contracts are the same:
- 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 a minimally discounted rate.
- Care may be billed at an equalized rate, which means if you’re an independent living resident and you need to move to a higher level of care, your monthly service fee will change to be equal to the average of all independent living monthly service fees being charged at that time.
Type C contracts (also known as Fee-for-Service)
With Type C contracts, you only pay for care you need. Entrance fees and monthly fees are typically lower than with other contract types, but if you do need a higher level of care, you pay full market rates. If you’re an independent living resident and need short-term care, to keep your residence, you’d still have to pay your monthly fee and the cost of housing and care you receive.
Life Plan Community Rental Contracts
Rental communities with a continuum of care don’t typically have entrance fees, but you’ll usually pay market rates on top of your monthly fees.
Assisted Living and Memory Care Contracts
On top of that, you’ll typically have base fees and care services fees, which you’ll pay each month.
Base fees may include:
- Rent, which is based on the size and location of your residence.
- Services such as housekeeping, meal plan, transportation, activities and programs. There may be some levels of personal assistance included.
Care services fees cover the costs of providing assistance with activities of daily living (ADLs) and personal care services. Communities differ in the way they price them.
- Tiered pricing (also known as Levels of Care pricing) — A variety of care services are grouped into tiers. Each tier allows for a certain number of hours per month. If you or your loved one doesn’t need much help (a few hours per week, for example), pricing falls into the lowest tier, which is the least expensive. The more help needed, the higher the tier and the cost.
- Fee for services — Some communities charge by how much time it takes to deliver those services. For example, if you need 15 minutes of help with grooming, 30 minutes of help with meals, and 15 minutes of help with bathing each day, that adds up to one hour of help per day at the community’s service rate.
- All-inclusive — All monthly costs, including care services, are bundled into a single monthly fee. The definition of “all-inclusive” will vary from community to community, however, so make sure you’re clear on what is included. You may be charged extra for medication management or incontinence services, for example.
Life Plan Community/CCRC Contracts
Life Plan Communities (also known as continuing care retirement communities) offer full-service housing options and a wide range of services and amenities, as well as a continuum of on-site long-term health care. Life Care contracts are what give you priority access to that care for as long as care is needed. This means you’ll know where you’ll receive care, who will provide it, and how much it will cost.
Skilled Nursing Contracts
Skilled nursing facility/nursing home contracts vary from state to state. Fees cover services such as medical care, help with ADLs, laundry, meals and activities.
What to look for in a skilled nursing contract:
- Acknowledgement of the federal Nursing Home Resident’s Bill of Rights, which protects residents.
- Cost of care (either daily or monthly).
- Cost of items not included in the daily/monthly charge.
- Policy on retaining the resident’s bed if they leave the facility temporarily.
- Statement on whether the facility is Medicare or Medicaid certified.
- Terms for involuntary discharge — why a resident may be forced to leave against their will (such as not paying rent or putting other residents at risk).
- Mandatory arbitration clause. Some facilities require disputes be settled by a third party rather than in court.
Additional Tips for Reviewing Contracts
- Ask for copies in advance, so you have time to review and make notes.
- Ask as many questions as you need to — communities want you to make fully informed decisions.
- You may want to have a lawyer or financial advisor review contracts as well.
Before you make a visit to a community, arm yourself with this information about senior living contracts so you can feel confident in planning your future.