You asked us to explain why State Supplement payments are so much lower for people living independently in the community than they are for people residing in RCHs.

SUMMARY

State Supplement benefits are higher for people living in RCHs because it probably costs more for an individual to live in an RCH than it does for him to live more independently in the community. But the disparity also exists, at least in part, because the state's system for setting the benefits factors an individual RCH's reported operating costs, including inflation, into the benefit amount. (Not all of an RCH's reported costs are built into the benefit. ) The State Supplement that a recipient living in the community receives is based on his expected housing costs, plus a flat amount to cover his other needs in a given month. These need "standards" are much lower and have not been adjusted for inflation in over 10 years.

A State Supplement benefit is meant to supplement an elderly or disabled person's monthly income (typically SSI) to help meet his basic needs. In general, DSS sets the State Supplement benefit amount by comparing a person's monthly need to his income. If a person's income is less than his need, he gets a benefit. When determining eligibility, DSS deducts certain amounts or "disregards" from a person's earned and unearned income. These disregards have not been adjusted over time. Since an RCH resident's benefit (RCH daily rate) includes inflation, the impact of not having disregards adjusted has not been as severe as it has been on recipients living in the community who do not have their needs adjusted by inflation.

The maximum benefit paid to someone living independently in the community consists of a housing allowance, which cannot exceed $ 400, and a personal needs allowance, which is $ 164. 10.

For an RCH resident for whom numerous services are available, the State Supplement benefit amount varies, but the average is $ 67. 52 per day, with a range of $ 29. 40 to $ 110. 24 (the monthly average would be $ 2,053), plus a $ 28. 90 personal needs allowance.

STATE SUPPLEMENT-CALCULATING THE BENEFIT

State Supplement benefits are based on a person's living arrangement and income. DSS essentially calculates what it considers to be the person's monthly needs (which includes a personal needs allowance) and subtracts it from his income (minus disregards). The difference is the amount of the State Supplement benefit.

To qualify initially, an applicant must meet the program's basic eligibility criteria. His gross monthly income cannot exceed 300% of the federal SSI limit, which is currently $ 1,635. And his assets, if single, cannot exceed $ 1,600 ($ 2,400 if married). Once he passes these tests, the state uses a number of different standards to determine his monthly needs.

Need Standards

For community applicants and recipients, DSS calculates a monthly housing standard by taking the actual housing (rent or mortgage) obligation, which cannot be more than $ 400 per month for someone living alone or $ 200 a month for someone living in shared housing. To this, it adds a personal needs allowance of $ 164. 10.

For people residing in licensed boarding facilities (e. g. , RCH), DSS takes the home's rate, which it sets for each home based on its reported operating costs (see below for more details about rate setting) and adds to it $ 28. 90 in a personal needs allowance.

The department then subtracts the person's housing and personal needs from his net income (i. e. , gross income minus disregards) to determine any unmet need, which becomes the basis for the State Supplement benefit.

Disregards

DSS subtracts from a State Supplement applicant's gross income a portion of his earned and unearned income. The unearned income disregard varies, depending on the person's living arrangement. Table 1 shows the program's three different unearned income disregards.

Table 1: Unearned Income Disregards in the State Supplement Program

In addition to these deductions, DSS subtracts from gross income a portion of a person's earnings, if any. In general, it deducts $ 65 per month plus one-half of the remainder. DSS also deducts impairment-related work expenses for people with disabilities once they have begun receiving benefits. (The program rules vary even more for applicants or recipients who are blind. )

Calculating the Benefit

When computing the monthly benefit, DSS first adds up the person's unearned income and subtracts the appropriate disregard. To this, it adds monthly applied earnings. To arrive at this latter figure, DSS takes gross monthly earnings, subtracts the appropriate disregard, and subtracts one half of the remainder.

The total is deducted from the person's monthly need. If the difference is remaining income, no benefit is paid. If it is remaining need, the benefit equals the need.

RCH Rate Setting

DSS sets the daily rates for the state's RCHs, among other licensed boarding facilities. The legal bases for its rate setting authority can be found at CGS § 17b-340(h) and Connecticut Agency Regulations, § 17-311-51.

Using a cost-based method, DSS sets new rates for each facility effective July 1 of each year based on the facility's most recent annual cost report filing. If a facility does not file a cost report, DSS pays a minimum daily rate of $ 29. 40 (2002), which is inflated annually (§ 17-311-54). Homes that file reports have the allowed costs for the reporting period (October to September) inflated forward to the rate period (July to June). For example, rates set effective July 1, 2001 were based on the 2000 annual cost report (October 1999 to September 2000).

The rate setting system includes limits on allowable salaries for the facility administrator and owners and related parties. For example, the allowable salary for an administrator of a 20-bed facility is $ 35,689 and salaries paid to individuals related to a home's owner are currently limited to $ 29,834. This means that DSS will not build into the rates any costs above these amounts.

In addition, the system includes year-to-year cost increase limits for housekeeping, laundry, and dietary services. If a home's costs for any of these services increase by more than inflation, DSS will only reimburse it at the inflated level. DSS currently inflates costs using the Gross Domestic Product (GDP) deflator (currently 2. 7%) plus 2%, as required by statute.

Facilities may also qualify for efficiency payments if their per day costs for any of the above services are below the 80^th percentile for all facilities' per diem costs. This payment is 20% of the difference between the facility daily cost for the services and the cost per day at the 80^th percentile for all facilities.

Lastly, a facility's property costs are factored into the rate. The rate reflects property and fixed assets based on a fair rental value method in lieu of associated interest and depreciation costs. The fair rental allowance is calculated by amortizing the costs of the asset over its useful life with an application of a rate of return (ROR)(tied to Medicare program). For example, if a facility spends $ 150,000 to renovate, and the renovation has a useful life of 30 years, using an ROR of 8. 3% would yield a fair rental allowance of $ 13,740 per year.

Needs Met By RCHs

In addition to shelter and food, RCHs provide the following services:

1. 24-hour security (comes with having round-the-clock staffing: 1 to 25 staff-client ratio);

2. some recreation;

3. daily housekeeping services, including laundry;

4. medical management;

5. transportation to and from appointments or recreational activities;

6. some assistance with personal funds management;

7. assistance with bathing or dressing;

8. assistance in dealing with government agencies (e. g. , Social Security); and

9. companionship.

State law requires RCHs to be licensed, thus they must meet extensive physical requirements for both the buildings and the services offered as a condition of licensure (CGS § 19a-491, et. seq. and Connecticut Agency Regulations, § 19-13-D6). (See copy of OLR report 2001-R-0177 for additional information about the services RCHs provide. )

How this Translates to State Supplement Payments

While the RCH rate is supposed to reflect what it costs the homes, on average, to serve a State Supplement recipient, the amount the home actually receives is based on the number of State Supplement recipients it serves and the amount of benefits for which they are eligible. DSS issues a monthly check to the recipient, which is the difference between the monthly rate DSS sets for the home plus the personal needs allowance and his applied income. Once the person receives the check, he turns it over to the RCH except for the $ 28. 90 personal needs allowance, and the $ 90. 70 in the unearned income disregard. (A State Supplement recipient who works may be able to keep even more. )

COMMUNITY VS. RCH BENEFITS-DO BENEFIT LEVELS KEEP PACE WITH INFLATION?

The maximum monthly benefit that a community State Supplement recipient could receive is $ 564. 10, which is the $ 400 shelter allowance plus the $ 164. 10 personal needs allowance for someone living alone in the community. The actual amount recipients receive is probably less since DSS expects State Supplement recipients to have some other source of income on which to live, which would lower the benefit amount. (Community State Supplement recipients may also qualify for Food Stamps and housing subsidies. )

Although the gross income limit for the State Supplement program has been rising each year (it is tied to the benefits paid in the SSI program), the law has frozen both the need standards and income disregard amounts for over 10 years (CGS § 17b-106). This has meant that when someone's earnings or unearned income (e. g. , SSI) have risen, his State Supplement benefit has decreased by the same amount. (See OLR report 2002-R-0209 for further discussion of this phenomenon. ) Thus over time, the value of the State Supplement has eroded, resulting in many recipients' overall incomes not keeping pace with inflation.

RCH and other licensed boarding facility residents eligible for State Supplement benefits (e. g. , certain group home residents), have not experienced these same hardships. Although the disregards have remained the same, the need standard (RCH's daily rate that DSS sets), has been rising. And an RCH cannot attempt to get more money from a State Supplement recipient to make up the difference between what the resident pays and what the home would charge a private-paying person. As discussed above, the current inflation factor DSS uses is the GDP deflator plus 2%, which is currently 4. 7%.

RC: eh