Posts Tagged ‘Prof. Katherine Pearson’

Interested In a CCRC? Here Are Some Issues to Consider

Wouldn’t it be nice if you could find a place to live for the rest of your life? That is, a place that is comfortable for active and engaged seniors, but with an assisted living component and even a nursing home — so that as you (or your spouse) required more care, you wouldn’t have to leave your complex, break off friendships and support systems, or face the uncertainties of future care needs? That’s the basic idea behind “continuing care retirement communities” (CCRCs), a relatively recent development in housing alternatives for seniors.

By most accounts (definitions can vary somewhat) the Tucson area has just three CCRCs in operation now. They are more common in other areas of the country, and there are likely to be more of them in Southern Arizona in coming years. Law Professor Katherine Pearson, who teaches at the Dickinson School of Law at Pennsylvania State University, explained the CCRC phenomenon for us, and gave us some tips on things to watch for:

Continuing Care Retirement and Life Care Communities (collectively referred to as CCRCs) are vibrant places, reminiscent of college campuses (minus the beer kegs and frat parties). Often, CCRCs serve as models for engaged living, with residents supporting each other through activities and social connections and management providing easy access to several levels of services and on-site health care.

The CCRC industry saw strong growth throughout the 1990s and early 2000s. One report in the 1980s estimated there were between 300 and 600 CCRCs operating in the United States, with a population of between 55,000 and 100,000. By 2009, the estimate was 1,860 CCRCs with a population in the region of 800,000. The 2008 economic recession and corresponding plunge in home prices, however, put the CCRC industry’s growth on “pause” – while also taking a toll on some recent entrants to the market.

In late 2012, as the real estate market begins to improve, operators, developers and financiers for CCRCS are hoping their market will regain strength.

For prospective residents, pricing structures are diverse and can be challenging for a layperson to analyze. They include a range of refundable, partially refundable, or non-refundable entrance fees, plus monthly and other periodic service fees. The market has both “for profit ” and “not-for profit” providers — and a few “hybrids” where for-profit developers or managers team with non-profit operators — adding to the challenge of evaluating the impact of pricing structures, especially with respect to concerns about how to predict increases in future service fees.

CCRCs have long attracted interest from academics, state regulators and federal legislators concerned about the soundness of any financial structure that combines large up-front “cash” and long-term service promises. The attention of regulators tends to peak during financial downturns, especially when large players in the industry file for protection of the bankruptcy courts, as occurred most recently in 2009-10 with the reorganization of Erickson Retirement Communities. Erickson was based in Maryland and had facilities in multiple states. Overall, the regulatory interest of outsiders tends to be episodic, responding to crises.

That is where residents are increasingly stepping onto center stage. Residents of CCRCs, the folks who can pay $100k, $500k or even a million in entrance fees, tend to be interested in how their money is spent — and why.

For a number of years, I have been listening to residents from CCRCs around the country, often as a guest in their homes or communities. From my discussions with residents, I have come to believe there are 7 core finance-related concerns shared by residents at CCRCs:

  1. The right for residents to organize and advocate;
  2. The right to be free from retaliation when pursuing their desires or rights;
  3. The right to receive regular, accurate and detailed financial information that affects current and future operations at their CCRC (including, when appropriate, financial information about any parent organization);
  4. The right to financial information in a form that is understandable to the majority of current and prospective residents (especially in a form that would permit comparability in the market place);
  5. The right to an effective “resident voice” in financial decisions that may impact present and future stability of their community;
  6. The means to enforce resident rights through reasonable process; and
  7. The right of “affordable stability,” by which I mean reassurances that the fees residences have paid and will continue to pay, including any increases, will be affordable to them and will be only what is reasonably necessary to maintain the stability and success of their community.

Obviously CCRC operators and managers believe they are fully engaged in protecting such rights. And in the many top-notch CCRCS operating in the nation, that is very true. But even in the best run CCRCS, the trust of residents can be enhanced through greater transparency, including involvement of the residents in governance.

Recently I addressed a working group on CCRCs in the Commonwealth of Virginia. The group’s interest was motivated by concerned residents who want systemic answers to questions about finances, especially on how entrance fees should be used. As of December 2012, it appears that Virginia will work with stakeholders to keep a dialogue open that is responsive to the concerns of residents, although the industry may be able to avoid new laws or formal regulations. I think it is safe to say that Virginia residents will not be satisfied with superficial changes.

CCRCs that ignore or downplay residents’ requests for greater accountability may be overly paternalistic — or overly reliant on a shared interest in avoiding public discussions about any particular facility’s problems. Further, the many “strong” and “good” players in the CCRC industry should resist the temptation to ignore the attempts by weak players to hide their finances. There is a flaw in a theory of silence, especially if motivated by a concern that bad news for one is bad news for all; such a theory allows problems to fester and become dangerous to the larger industry. The internet has empowered residents to share information and stay abreast of common concerns and developments. More open, objective and understandable information about CCRCs is now critical to proper growth of the industry. Future residents need to understand there are strong, viable choices.

For more on how CCRCs and residents can work to build trust and stronger communities, you can read Professor Pearson’s written testimony before the Virginia Housing Commission’s Working Group on Continuing Care Retirement Communities. Regular readers of this newsletter may recall Prof. Pearson’s earlier contribution on a somewhat related topic: the so-called “filial support” laws still extant in many states.

“Filial Support” Laws: Making Children Pay for Their Parents’ Nursing Home

JULY 30, 2012 VOLUME 19 NUMBER 29
When your parents go to the nursing home, could you be liable for their bills? That may seem unlikely, but as the country’s leading authority on the subject (Prof. Katherine Pearson from the Dickinson School of Law at Pennsylvania State University) notes, there are laws on the books in many states which could make children pay for their indigent parents’ care. Prof. Pearson guest-authored this week’s Elder Law Issues, and she explains the problem and trends:

The latest controversial effort to reduce public costs for long term care may come not from the budget cutters at state and federal offices for Medicare or Medicaid, but from nursing homes, assisted living facilities or personal care homes. Pennsylvania is the proving ground for the test – and other states are watching.

Over the course of several years, nursing homes have increasingly turned to Pennsylvania’s filial support law as a tool to compel children to either help a parent qualify for Medicaid — or be at risk of paying for the parent’s bills out of their own pockets. Pennsylvania’s provision dates to colonial times, but a 2005 transfer from the welfare laws to the domestic relations code increased its visibility. The law provides that a child has the “responsibility to care for and maintain or financially assist” a parent, if the parent is deemed “indigent.” The statute does not define the term, but case law has given it a practical meaning by holding a parent is indigent if he or she does not have sufficient means to pay for care.

Occasionally a suit is brought by a needy parent against a child. In 1994, in the case of Savoy v. Savoy, an uninsured mother who had $10,000 in unpaid medical expenses sued her son. The result: a modest award of $125 per month, perhaps more significant for its symbolic value than for the economic effect in the case itself.

Since then, a series of cases and decisions has expanded the importance of the law in Pennsylvania. The latest case was decided by an intermediate appellate court in May, 2012. In Health Care & Retirement Corporation of America vs. Pittas, the Pennsylvania Superior Court affirmed a trial court award of more than $92,000 against the son of a woman who had received six months of care at a facility. The son raised several challenges to the trial court ruling, including the argument his mother could not be deemed “indigent” because she had modest monthly income of $1100. The son argued this income, plus her husband’s retirement income, was enough for the couple if they had not had the auto accident that led to hospitalization and extraordinary costs for her subsequent care in a nursing home. The court rejected the argument and repeatedly cited the “plain language” of the statute as the reason for the harsh result.

The son also argued unsuccessfully that he could not be held solely liable because other family members had not been sued. While the court said it was “sympathetic with the [son’s] obligation to support his mother without the assistance of his mother’s husband or her other children,” it was up to the son to join those individuals in the case if he wanted proportionate relief. The court also rejected the son’s argument that the suit should be stayed or set aside because of a pending Medicaid application, noting that any successful award could reduce his liability. In fact, although not acknowledged in the opinion, the Medicaid application had been denied, apparently because of questions raised during the application process, and the time for appeal had lapsed.

The Pittas opinion is significant because, unlike prior court rulings such as the 2005 ruling in Presbyterian Medical Center v. Budd, the court made no findings that the family had engaged in transfers or other unsuccessful efforts to avoid Medicaid eligibility rules. The court found the son’s claim of “inability” to pay for his mother’s care to be lacking in credibility, noting he had at least $85,000 in net annual income. But the court did not suggest the son was at “fault” for his mother’s indigent status. This was not a case where liability was tied to a family member’s efforts to divert assets.

Could a Pittas-style filial support ruling be coming soon to a state court near you? The answer is already “yes” in South Dakota. In 1994 and again in 1998, South Dakota appellate courts used South Dakota’s filial support law to enforce liability against adult children for health care or long-term care expenses of a parent. However, in those cases, it appears the rulings were tied to attempts to divert or hide the parent’s assets. According to news reports, some states, such as North Dakota, have already expressed interest in the Pittas ruling. Another state, Idaho, went the opposite direction in 2011 by repealing its filial support law entirely, citing the potential for confusion for families with nursing home costs.

Approximately 28 states have some type of civil or criminal filial support law on their books, although the enforceability of many of the state laws have been blocked or limited because of state rules on Medicaid. In most states filial support laws have been largely ignored in recent years. Pennsylvania is one of the few states that expressly provides for suits by care facilities or similar third-parties. The Pennsylvania statute permits a petition to be filed by the indigent person “or any other person . . . having any interest in the care, maintenance or assistance of such indigent person.”

Filial support laws carry various labels, with modern terms tending to suggest moral overtones that emphasize a family’s obligation to share “responsibility” for care. States seeking to provide nursing homes with collection tools that reduce the need for Medicaid may seek to follow the Pennsylvania route to a new frontier. The 2005 transfer of the filial support statute to the domestic relations code was rushed through the Pennsylvania legislature quickly and packaged with a cost-savings statute that tightened the state’s rules for Medicaid eligibility. Interested persons in other states will want to keep their eyes open.

Interested in the area, or wondering what your state’s laws might be with regard to filial support? For a more expansive discussion of such laws, including the roles they play in other countries, see Prof. Pearson’s recent article: “Filial Support Laws in the Modern Era.” As Prof. Pearson notes, these laws are sometimes described in terms of filial “responsibility” — as long ago as 1995 we wrote about an attempt to extend “family responsibility” laws by federal action (it came to nothing, as it turned out), and we have described individual cases attempting to impose filial support concepts before. The trend Prof. Pearson describes, however, could go well beyond previous attempts to hold children liable for their parents’ long-term care costs.

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