Yesterday, I attended a meeting at my mother’s retirement community and got a very good reminder about why monopolies are bad for consumers. Without breaching privacy, I can tell you this: the retirement community is one in which residents pay a significant buy-in fee, which they are told is applied to their tenancy for the first ten years. Thus, if they leave the community at any time within the first ten years, they are entitled to have refunded an increasingly small percentage of their original buy-in fee. If the resident dies within the first ten years, the fee is not refundable to the resident’s estate. For current residents, depending when they bought in, these fees range from $150,000 to $250,000.
In addition to the buy-in fee, the residents pay a sizable monthly rental for room, food, amenities (such as a pool and small library), and services. These services include drivers to local malls and doctor’s appointments. Almost without exception, in order to fund the buy-in and rental, the residents sell the homes in which they lived. Unless the residents are quite wealthy, they are then locked in, because they no longer have the wherewithal to go anywhere else.
Unfortunately for the residents, their monthly rentals have been going up at a rate in excess of inflation. This is disturbing enough but, worse, the services and food they receive for this increased rent, rather than staying the same or even becoming better, are diminishing. Favored service employees are being squeezed out and either not replaced or replaced with less qualified people,* and the food is less appealing — something that’s a problem for elderly people who have aging taste buds and delicate appetites to begin with.
The home is also accepting primarily older and sicker residents who are more likely to die within a short time of moving in. Doing this ensures a greater supply of those non-refundable buy-in fees. A younger, healthier population, of course, results in lower turnover. This admission policy diminishes the community’s vitality, which used to have a good spread of people ranging in age from 65 to 105, but now tends to an older, sicker demographic (something I’ve noticed when visiting my mother).