KOHL EXAMINES FINANCIAL STABILITY OF CONTINUING CARE RETIREMENT COMMUNITIES

WASHINGTON - Today U.S. Senator Herb Kohl, Chairman of the Special Committee on Aging, held a hearing on continuing care retirement communities (CCRCs), which provide separate housing for seniors who are able to live independently, who require help in an assisted living facility, and who require more intensive care in a nursing home. The Committee examined issues of financial stability and potential risks to consumers who pay large entrance fees - sometimes representing their life savings - in order to join such communities. One witness discussed his experience as a resident of a CCRC that went bankrupt, resulting in the loss of his refundable entrance deposit.

 

"The fact is that while CCRCs are a good residential option for many retirees, entering into an agreement with one can pose financial risk," said Kohl. "If these companies are going to take the life savings of seniors, they need to be able to guarantee they will be around to provide the lifetime of care they promise."

 

As part of the hearing, Chairman Kohl released an investigative report based on the responses received to letters of inquiry sent to five CCRC providers earlier this year. The Committee found many CCRC ownership structures to be very complex, and that financial troubles at any level can have real consequences for individual residents. Unfortunately, financial statements of a parent entity owner or owners are not always included or available in the financial disclosures of a CCRC. Evaluating the merits of a CCRC and judging the risk involved with this type of investment is extremely challenging for an individual consumer without professional assistance.  

 

As part of the report, the Committee developed its own checklist for state regulators who wish to expand or improve their oversight of CCRCs. "We are calling on state regulators to beef up their oversight. Every state should be requiring proof of their long-term viability from CCRCs and ensuring transparency and strong consumer protections for residents," said Kohl.

 

Chairman Kohl also released a study from the U.S. Government Accountability Office (GAO), which found that regulatory approaches and the agencies responsible for the oversight of CCRCs vary considerably among states. In fact, 12 states do not have any CCRC-specific regulations. Consumer safeguards and protections regarding disclosure, asset reserves, and escrow requirements differ widely, and only 17 states require CCRCs to submit studies that assess their long-term viability. Finally, only 294 CCRCs (about 16 percent) are voluntarily accredited by the Continuing Care Accreditation Commission. At the hearing, Alicia Cackley, a Director in Financial Markets & Community Investment at GAO, described the findings of their report.

 

The panel also included Kevin McCarty, Insurance Commissioner for Florida's Office of Insurance Regulation, who described Florida's CCRC regulations, which includes a data tracking system used to develop trends in financial ratios for each CCRC. Next, Charles Prine, a resident of Concordia of the South Hills CCRC in Mt. Lebanon, Pennsylvania, discussed his experience as a resident of a CCRC that went bankrupt, resulting in the loss of his refundable entrance deposit.

 

Katherine Pearson, a professor at Penn State's Dickinson School of Law and Director of the Elder Law and Consumer Protection Clinic, offered testimony on her consultation with residents of CCRCs and her research on the legal and policy issues they face. Finally, David Erickson, Vice President of Legal Affairs for Covenant Retirement Communities, testified on behalf of the American Association of Homes and Services for the Aging, highlighting recent publications released from the industry that promote best practices for CCRC disclosure and transparency to residents.

 

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A webcast of the hearing will be available within 24 hours on the committee webpage:  www.aging.senate.gov