Catered Communities : Life Care: Insurance Against Age

KENNETT SQUARE, Pa. — Diners gaze through the windows at rolling green fields dotted with cherry and mulberry trees. Over coffee, they chat animatedly about the morning’s tennis game, the annoying deer that nibble at their tomato plants, the joys of recent trips to Europe.

In another wing of the sprawling single-story building, elderly women in housedresses sit quietly in wheelchairs. They live in a nursing unit whose rooms combine hospital beds with favorite personal pieces of furniture. The nurses who walk the corridors wear everyday clothing instead of traditional white uniforms.

This is Kendal at Longwood, part country club for the healthy, part nursing home for the frail--and 100% insurance against the hazards of growing old. Here and in an increasing number of other “life-care” communities scattered throughout the country, aging Americans have been lured by a tantalizing prospect: the guarantee that their basic needs will be catered to until the day they die.

For America’s growing legions of the very old, life care has become an increasingly attractive alternative to the traditional life style: hanging on at home as long as possible and retreating, if absolutely necessary, to a nursing facility.

Nationwide, an estimated 200,000 elderly live in 1,100 communities that offer some sort of lifelong care. So popular has life care become that for-profit companies, including the Marriott Corp., the giant hotel chain, are entering the traditionally church-oriented business.

Here at Kendal, which was established by the Quakers in a pastoral section of the Delaware Valley 30 miles southwest of Philadelphia and is now run by an independent board, much of what can make advanced age so difficult--isolation, vulnerability to accidents, fear of health-care costs--seems comfortably distant.

The 360 residents, whose average age is 80, know that their own future is secure--and that they will never be a burden to their younger relatives. For the rest of their lives, they have bought themselves the right to an apartment, three meals a day in the dining room, weekly maid service, linen laundering and, if they ever need it, a reserved bed in the community’s nursing facility.

“I had a grandmother who lived to be 95, and if I live to be 95 I want to make sure I’m taken care of,” said Elizabeth Harrar, 76, a former librarian who has been one of the 60 residents of Kendal’s nursing unit since her leg was amputated in 1983. Staff members plug in her electrically powered wheelchair at night, deliver her glass of apple juice at bedtime and even shut off the light “so I don’t have to hobble out of bed.”

Must Overcome Obstacles

But the life-care movement must overcome significant obstacles if it is to gain mass acceptance.

Only 14 states, including California, specifically control life-care communities, and Congress, anticipating a dramatic growth in the industry, has ordered the Federal Trade Commission to prepare a two-year study of unfair and deceptive practices. Some life-care communities have gone bankrupt and thrown the lives of their residents into turmoil.

“The promise of life care has too often been thwarted by inept management, mismanagement and outright fraud,” declared Sen. John Heinz (R-Pa.), chairman of the Senate Special Committee on Aging.

Life care remains an option largely for the well-to-do. Although medical care typically is not covered--Medicare and private insurance mostly take care of that--residents of life-care communities must pay many thousands of dollars to get in and substantial monthly charges on top of that.

Kendal, which is a modestly priced community, charges entry fees that range from $29,500 for a studio apartment to $96,000 for a couple in a two-bedroom unit. Monthly charges currently start at $968 and reach to $2,117 for the biggest apartments. Like many of the traditional communities, Kendal picks up the monthly charges for residents--20 at present--who can no longer afford them. Natural turnover--the death of aged residents--assures a fresh flow of revenue from entry fees.

Cost Diminishes Savings

For those who enter life-care communities, sale of a home usually provides the cash to meet the entry fee, and Social Security, pensions and investments provide the income needed for the monthly payments. But the cost of life care inevitably diminishes the savings that one generation can leave to the next. At Kendal and many other communities, entry fees are not refundable except for those who leave or die shortly after entering, and residents do not earn any ownership interest in their apartments.

And beyond the expense is the psychological cost to the elderly of renouncing life in society at large and agreeing to live their final years almost entirely with people their own age.

For many older people, however, the notion of moving to a supportive, campus-like setting clearly beats struggling in the youth-oriented world outside. Franklin Yellig, 76, a former international salesman for Gulf Oil who met his wife, Kay, after moving to Kendal, said: “If you think about it being the last stop (in life), well, where would you rather be? The gang here is loving and caring.”

Such goals moved church groups, notably the Quakers, to introduce life care in the 1920s. For decades the movement grew quietly, generally remaining the province of churches and other nonprofit interests. But controversy erupted in the 1970s as double-digit inflation sent costs soaring at a time when people were living longer than ever before. Scores of communities were beset with financial ills, according to the Senate Aging Committee.

At the life-care movement’s nadir in 1977, Southern California’s Pacific Homes, which then had 2,100 residents on seven campuses, went bankrupt. Aged residents, who had moved to the church-related communities for peace of mind, found themselves caught in a traumatic storm of litigation. As part of the bankruptcy settlement, the United Methodist Church lent the facilities $21 million. Mort Swales, who was hired to lead Pacific Homes out of bankruptcy and remains today as its president, said none of the residents had to leave.

Charges Monthly Rents

But by the time Pacific Homes emerged from bankruptcy late in 1981, it had drastically scaled down its promise of lifelong care. In the interest of avoiding another bankruptcy, it now simply charges newcomers monthly rents and, unlike traditional life-care communities, levies separate fees for various services.

“Sound business and management practices are as necessary in this business as in any business,” Swales said. “Without them, there are going to be failures.”

Of today’s 1,100 retirement communities that provide at least some nursing services and personal care, the American Assn. of Homes for the Aging says only about 300 fit the traditional definition of life care--hefty entry fees and monthly payments in exchange for a guarantee of lifetime care.

Many of the newer communities lack life care’s greatest appeal--the long-term obligation to provide nursing care and whatever other services their residents need. Such rental communities typically do not require large entry payments. Like Pacific Homes, they charge both monthly rents and extra fees for various services.

Whatever the arrangement, a growing number of Americans are choosing their housing and personal health care in a single, secure package. Most residents are female and many of them are widows, reflecting the fact that American women tend to live about seven years longer than men. The typical life-care resident in an apartment is about 80, with those in nursing units usually five years older, according to a University of Pennsylvania study.

Are Community’s Children

But there are plenty of exceptions. Raymond L. Vanderburg, 67, and his wife Maxine, 65, are children--literally--at Brethren Hillcrest Homes, a nonprofit community in La Verne, east of Los Angeles.

The Vanderburgs live in a comfortable two-bedroom duplex when they aren’t rambling in their sporty Honda CRX, counseling local senior citizens or taking off for 20 days in Peru, as they did recently. A mere two-minute walk away, Maxine Vanderburg’s 88-year-old mother, Beatrice Watson, has her own apartment. Watson, who has heart problems, depends on Hillcrest employees to prepare all her meals, which she takes in the dining hall, as well as to clean her apartment and do other chores.

Watson, an avid card player, actually followed her daughter and son-in-law to Hillcrest, a decision she reached when she dislocated her jaw at home in the middle of the night. “She’s busy and active and thinks she’s in bridge heaven,” Maxine Vanderburg said.

Raymond Vanderburg, a former elementary school administrator, said his decision to move to Hillcrest stemmed from the anguish of putting his own parents in nursing homes after their health declined in the 1970s. “I didn’t want to put our kids in that kind of position,” he said. His peace of mind cost him Hillcrest’s entry fee of $78,000, and he is still paying $400 a month.

If Beatrice Watson or the Vanderburgs ever need long-term care, they will get it at a 75-bed nursing home on the Hillcrest campus. Unlike the more traditional life-care arrangements such as Kendal, however, they will have to pay for it--a whopping $65 a day by current rates.

Entry Fees Are Greater

The Waterford community in Juno Beach, Fla., is a more upscale version of the traditional life-care system. Nursing care is guaranteed, but there is a slight extra charge. Although its entry fees and monthly living costs are greater than Hillcrest’s, the Waterford’s premium for nursing care is substantially less.

Dr. Robert Jordan, 78, and his wife, Mary, 76, pay $1,545 a month at the Waterford for a three-bedroom apartment. If they ever need long-term care, they will have to pay only an additional $210 a month to move into the nursing unit and eat all their meals there. That’s a bargain; the cost of a first-class nursing home could easily run to $2,000 or $3,000 a month.

“I saw firsthand what can happen to a family’s money,” recalled Robert Jordan, a retired internist. “Mary’s mother lived to be 94 and spent her last five years in a nursing home; my father had a stroke at 89 and lived to be 94.”

Added Mary Jordan, who still speaks with the soft accents of her Virginia girlhood: “I don’t like the thought of it, but you can’t stop the aging process. Maybe we’ll never need the health center, maybe we will.”

The Jordans recall the emotional upheaval of selling their spacious home, disposing of their furniture and departing for Florida from New Haven, Conn., where they had lived for 40 years. But they have adjusted to a life style that includes dressing up for dinner and meeting friends at country clubs in the area, which is near Palm Beach. “You don’t have an electric bill to write every month,” Mary Jordan said. “You don’t have to worry with the food.”

Caterer Prepares Meals

Other communities feature an extravagant range of services, at corresponding prices. The new Webster House community in Palo Alto, for example, is charging entry fees of $255,000 to $515,000, although it repays a significant portion to the estate when the resident dies. In return for the hefty entrance fee, which is supplemented by $750 a month, residents enjoy a broad range of medical coverage, meals prepared by a local caterer, a partially enclosed swimming pool and other amenities.

“We get involved in everything the residents want us to get involved in,” said Gary Worth, project manager for the nonprofit venture between a local development firm and a medical foundation. “We know we’re marketing a high-ticket item, and that goes with the territory.”

A Santa Fe, N.M., luxury condominium project, complete with a nine-hole golf course, soon will carry choices even further. Residents, charged $140,000 for a townhouse and $370,000 for single-family homes, will be faced with a decision that illustrates the vast differences among the elderly: whether an empty building on the development should be used for nursing-home beds or as a recreation center for bridge games and parties.

Communities are changing in other ways as well. All of them, the traditional ones that include nursing care and the newer ones that charge on an a la carte basis, now insist on the right to hike fees to keep pace with inflation.

The escalating fees may ultimately cost residents thousands of dollars a year. David Jackson, a husky, white-haired man of 79, an avid tennis player and gardener who has lived at Kendal for 11 years, said, “When I first came here the cost was $800 a month, and now it’s $1,900.”

Wary of Life Care

For such reasons, the public remains wary of life care. Slower-than-expected occupancy helped drive some 10% of the life-care communities financed by tax-exempt bonds between 1980 and 1983 into default, according to Edward F. Hosinger, a vice president of the investment banking firm of Matthews & Wright.

A retirement community in Coral Springs, Fla., for example, recently collapsed when it filled fewer than 40 of its 215 apartments. The project, built with $36 million in tax-exempt bonds, was converted to rental units, but the elderly who had invested as much as $159,000 in entry fees received only a portion of their money back.

Despite this, Hosinger said, life-care management is improving significantly. “I’m bullish on this industry,” Hosinger said. “There’s a crying need for someone to take a good, careful look at this business and enter in a big way.”

Assumes New Role

The Marriott Corp., known more for serving travelers than for housing the elderly, would like to play that role. In a development that has attracted much attention within the industry, Marriott has announced plans to open four life-care communities in the next four years with 90% of the entry fee refundable upon departure or death.

Marriott’s first community, scheduled to open in San Ramon, Calif., in 1989, will have entry fees starting at $125,000 for a one-bedroom apartment. Monthly fees will be $1,000, with the cost of nursing care included.

Critics wonder if profit-making ventures such as Marriott have the same sense of mission in serving the elderly as do the traditional, church-oriented managers of life care.

“Running a life-care community is not like a hotel, where someone stays for a day or a week,” observed Richard Dewees, assistant administrator of Kendal. “What if Marriott decides after 10 years to sell to Joe Blow?”

Marriott Vice President William Egbeer responded: “A resident entering a Marriott community will have the confidence that a major corporation is providing financial backing. Church-backed communities don’t have independent resources.”

Others question whether any single firm can successfully run a string of life-care communities from a central headquarters, given the challenges inherent in operating just one such community for so demanding a population as the elderly. “If Marriott decides to open 25 or 30 locations in the United States, they’re going to lay an egg,” predicted Jona Goldrich, a major California builder of housing for the elderly.

And the ultimate unknown is how many older Americans are willing to sacrifice parts of their estates and spend their final years in age-segregated enclaves in return for the extra security of life care.

This much is known: Many who have already made the choice are happy they did. “This is where we will be the rest of our lives,” said Maxine Vanderburg, who enjoys tending the corn, tomatoes and beans that “are coming on like they won’t stop” in Hillcrest’s vegetable garden. “This is where our friends are. This is where we go to church. We think it’s the greatest life in the world.”