Continuing care retirement communities (CCRCs) combine housing and long-term care (LTC) services, including personal and nursing home care. The amount of LTC that is prepaid varies by type of CCRC, with one-third offering extensive (fully prepaid) contracts for LTC. CCRCs are a potentially promising model for LTC delivery because they offer a full continuum of services and can substitute less expensive supportive care for institutional care. Using data on CCRCs, we tested one central hypothesis: Provision of supportive services, particularly when combined with capitation, reduces use of nursing home care. To test this hypothesis, we studied the effect of various contract types for LTC services offered by CCRCs and provision of support services on utilization of nursing home and personal care units. Compared with other types of CCRCs, those offering completely prepaid LTC coverage reduced use of nursing home care by 13 percent and personal care by 5 percent. CCRCs with prepaid LTC coverage did not use more stringent health screening at entry, so “cream-skimming” does not appear to explain this result. However, affordability is an important issue: CCRC residents with extensive contracts were wealthier than were other CCRC residents.

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