What is LifeCare?

In case you missed it the first time, here’s an overview of the popular CCRC product, LifeCare:

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LifeCare is a big selling point for communities that have it. Marketing representatives love to portray LifeCare as the choice for responsible seniors, and this is partially true. There is some reason to think that LifeCare is a responsible choice. But, first, what is LifeCare?

LifeCare is one of three types of health benefits that communities can offer as part of their resident agreement:

Type A (LifeCare): LifeCare guarantees that a resident’s monthly fee will never increase beyond their official independent living fee, no matter what level of care he or she receives. In other words, following a permanent transfer to skilled nursing or assisted living, the resident pays no more than the monthly fee he or she paid in independent living.

Type B (Modified LifeCare): Is a contract where residents are offered a discount on assisted living and nursing services. For example: 10% off of higher levels of care or 10 free annual days of nursing or assisted living.

Type C (Fee for Service): The resident receives no discount for assisted living or nursing services and pays the community’s market price for the service.

In my experience, LifeCare is generally calculated as a $30,000 premium above normal entrance fees. This means that, on average, the community expects residents to consume $30,000 in higher-level care over the years they live in the community. Obviously, some residents will consume more, spending more time in nursing or assisted living. Other residents will be relatively healthy and require only limited stays in higher levels of care.

Although some communities do not offer a choice between LifeCare and a modified or fee for service contract, some communities do allow residents to choose. Here are the main considerations when choosing whether or not to purchase LifeCare:

  1. Long term care insurance. Long term care insurance offers basically the same benefits as LifeCare. If you have a long term care insurance policy, check the benefits and compare them to the LifeCare benefits offered by the community. Some communities will negotiate with residents who hold long term care policies. Others will not negotiate.
  2. Age and health. Because LifeCare is a type of insurance, all LifeCare communities require residents to pass a medical exam. This is usually conducted by the community’s head nurse or certified by your doctor. Approval is based on the community’s opinion as to whether or not you will be healthy long enough for the community to make their money back. Thus, the longer you wait to move into senior housing, the more difficult it will be to pass this physical exam. However, the younger you are when you purchase LifeCare, the lower your return on investment. It is a catch 22. If you have health problems (beyond those that are considered normal for a senior), you might have trouble qualifying. Apply sooner rather than later.

A few additional notes:

  1. Some communities call themselves “LifeCare”, but do not have LifeCare in the traditional sense. It is sometimes used as a marketing technique to indicate the presence of multiple levels of care (independent living, assisted living, memory care, and/or nursing) on the same campus.
  2. LifeCare is a type of insurance, so communities offering it are often regulated by the state department of insurance. Check with your state to see what regulations CCRCs must follow and whether or not your community has filed all of their required documentation in a timely manner. Also, you can file an open records request with the department and receive copies of all of their filings.
  3. Some communities offer gradations on their contracts whereby older seniors pay more to live in the community. This is based on the actuarial estimation of cost to the community. As people continue living longer, more communities will likely switch to this type of contract in order to accurately account for resident longevity and its impact on the community’s bottom line.