By Jack Cumming
“Imagine the peace of mind you would have if you knew that no matter what – should you need 24-hour full-time nursing, should you not want to burden your family with caring for you, should you outlive your finances – you would be cared for, with no increase to your monthly expenses.” Imagine. You’ve just read a direct quote from the webpage of a CCRC. Sadly, not all CCRCs make that kind of promise. This article urges others to fulfill the dream, the dream of that imagined peace of mind.
Technicalities
The CCRC industry has moved away from that dream of care-inclusive pricing for residents to one that is more comfortable for executives who may not have the needed financial understanding. The perception is that fulfilling the dream is actuarial and beyond ordinary comprehension. The idea is not complex, however.
Actuaries use available historical data to project when various future contingencies are likely to occur. Actuaries also build inflation into future cost estimates and discount the results to allow for the use of the money in the interim between when the consumer-resident pays it and when it is used for the resident’s needs.
Of course, one doesn’t have to qualify as an actuary to make such determinations, but it helps. Actuarial work is no more than complicated common sense, and anyone of intellect can readily understand the process and its limitations when it is clearly explained. Still, I wouldn’t advise accountants or anyone else to wing it since there is a significant difference between an annuity and an expectancy despite the accounting pronouncements. It’s best to master contingencies and compound interest first.
Another essential observation is that reinsurance can be used, and often is, to mitigate risk exposures, provide a sufficient spread of risk, and help meet corporate fears and uncertainties. Not all actuaries are completely versed in the ins and outs of reinsurance, which is a business that is every bit as complex as the financial instruments used by top Wall Street financial firms.
Why It Matters
Part of the beauty of the Type A inclusive undertaking is that it aligns the provider’s financial interest with the desire of residents to receive care in the least costly setting possible. An obvious conflict of interest naturally becomes a barrier to a relationship of trust. It also provides an endless source of rumors and misgivings.
Trust is central to a flourishing senior living industry and, particularly, to the CCRC sector. Yet, industry leaders have not given this essential the attention it requires. The result is growing media criticism and an increasingly skeptical public reputation. That can change, though trust is the most fragile of human attachments.
My firm conviction is that senior living can be reinvented to lift lives and to provide options that are not present in today’s society. Foundational is that old people are not all that different from all people, except that they may be experiencing decline and loss in one form or another. Still, decline and loss can occur for younger people as well. As an actuary I learned early on that disability and death occur from the earliest ages to the oldest.
If we can only move past the we-they divides that separate us, to learn from each other and to find common paths to better living, we will all thrive and find the fulfillment from life that we all seek.
