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October 15, 2018  |  

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New State Budget Leaves Towns to Aid At-Risk Elderly

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 OPM Letter(PDF)

In the four months the state operated without a budget, towns faced a possible worst-case scenario that would have cut most state aid to schools, among other cuts. With the state budget signed into law on Oct. 31, it seems that most educational support will remain and that some towns, including Westbrook and Old Saybrook, will receive more overall than they budgeted for earlier this year—but now towns may have to shoulder additional costs for social services programs, as the state budget includes reductions in health care and rent assistance for elderly and disabled residents.

Because the budget passed and was signed after the fiscal year began on Oct. 1, its provisions are already effective, retroactive to Oct. 1. That has town social services directors all over the state worried about what will now become of their most financially fragile clients.

Social Services Changes

The biggest surprise in the new state budget was language that zeros out the state’s financial commitment to help low income elderly and disabled homeowners pay their property taxes or rent. Under the Circuit-Breaker Program, the state for years reimbursed towns the cost to offer property tax credits to low-income seniors and disabled homeowners. For those who rent, the state offered the renter’s rebate program: Low income seniors and the disabled were sent a check by the state each October to help offset the costs of rent.

Rent Rebate Cuts

The low-income elderly and disabled residents eligible and qualified for the rent rebate program, normally receive their rent rebate checks from the State of Connecticut by Nov. 1. This year, with the rent rebate program left unfunded in the budget, those checks won’t come. Town officials say they are concerned this will make it difficult for low-income elderly and the disabled to pay other bills, and they say they are worried that many may not even know the programs has been discontinued.

“There are 43 Old Saybrook residents qualified for the state’s rent rebate program. The [value of the] rebate checks that should have been mailed to them on Oct. 27 is $19,944. The recorded message on OPM’s voice mail says that ‘The approved state budget transfers the administration of the renter’s rebate programs to local municipalities’ and that OPM will not be making payments to renters,” said Old Saybrook Social Services Coordinator Sue Consoli.

Consoli doesn’t know how she will tell these low-income seniors and disabled individuals that the checks they expected to arrive last week won’t be coming.

Circuit-Breaker Cuts

The state’s Circuit-Breaker Program reimburses towns the cost of providing a property tax credit to income-qualified elderly and disabled homeowners. The goal of the program is to help the elderly poor and disabled to stay in their homes. The credits are assessed for the prior year’s property tax obligation. The Town Assessor’s office takes and reviews Circuit-Breaker applications and the supporting documentation to verify each property owner’s eligibility.

In Old Saybrook, the town has 147 homeowners already qualified this year by income and/or disability to participate in the state Circuit-Breaker program. The value of the credits they receive is $78,578; with this budget, the town will not receive state reimbursement for these tax credits this year.

First Selectman Carl Fortuna, Jr., said last week that the town would fund the promised Circuit-Breaker tax credit for eligible homeowners for the current budget year despite the state decision to end support for it. With the town receiving $155,000 more in state revenue grants than was budgeted for this year, the town has a cushion to help support this move.

Medicare Savings Program Cuts

The budget provision with the biggest impact on Old Saybrook’s low-income elderly and disabled population is the state budget provision that changes eligibility for a Medicaid-funded program, the Medicare Savings Program, that helps them cover health care costs for hospitalization, medical, and prescription drug costs.

The old threshold for low-income seniors and the disabled participation in the Medicare Savings Program (MSP) was $25,447. The state budget’s new threshold for help is half that annual income or $12,060 or less per year.

Since the average monthly Social Security payment in the U.S. is about $1,300 per month, the average annual Social Security income for a retiree would be $15,600. Many seniors rely entirely on the Social Security payments to live. Under this budget, those low-income seniors and disabled getting the average payment would no longer qualify for the MSP benefits.

Based on the structure of Medicare (see “How Medicare Works” at DIR), the annual health care budget for a retiree will range from $5,625 per year to $9,000 per year for those with high drug costs. For a senior with a chronic health condition and an annual income solely from Social Security of $15,040, their health care costs alone would consume one-half of their income.

MSP is a Medicaid-funded program that functions as a Medicare Part B, MediGap, and Medicare Part D drug plan all in one for eligible individuals. In the last state budget, retirees and the disabled making up to $25,040, the lowest income tier, qualified for full MSP benefits. The new state budget cut MSP eligibility to $12,060, the 2017 Federal Poverty Level for Connecticut.

In Old Saybrook, potentially 220 registered low-income elderly and disabled individuals who received MSP benefits last year will lose them. Now those individuals, with incomes of $13,000 to $25,000 per year, have to buy health care coverage previously provided by Medicaid-funded MSP benefits. That means paying about $5,000 a year in Medicare Part B, MediGap, and Medicare Part D plan premiums not paid last year.

Consoli said that many of these low-income elderly clients also have chronic health conditions that require them to take expensive medications. These clients may reach the Part D drug cost cap by April each year, and for the rest of the year, they must pay out of pocket for drugs, at least until the reach the upper end of the donut hole, $4,700 in costs.

For an elderly widow with a high cost medical condition, she will have to now spend $9,000 of her $15,000 annual Social Security check on health care coverage and prescription drugs. That would leave her with just $6,000 per year or $500 per month to pay for heat, food, and her home’s property taxes or rent.

For the 220 Old Saybrook low-income seniors and disabled residents registered with Social Services, the financial toll of losing MSP benefit eligibility would be at least $1.1 million in 2018, according to Consoli.

Without MSP benefits, those with an annual income of $15,600 would now have to make new outlays of $5,004 or more per year (32 percent of their annual income) to pay for health care alone.

“This change would leave seniors with next to nothing. They will have make a choice: Do I buy this Medicare and MediGap coverage or do I buy these drugs? And what if you rent? How are you going to live on $400 per month?” said Consoli. “My fear is that I won’t be there when an elderly person makes that choice between paying for food, heat, and medications. I am sure that some will stop taking their medications. This could really mean a life or death situation for someone.”

These low-income retirees, suddenly without the MSP benefits, will need to decide by Dec. 7 whether to buy Medicare Part B, D, and Medigap coverage with their limited resources because the annual open enrollment period for Medicare for 2018 began on Oct. 15 and ends on Dec. 7.

Retirees also can purchase Medicare Advantage Plans that, with one payment, provide coverage comparable to Medicare Part A, Part B, Part D, and MediGap. These Advantage plans may have more limited networks of providers than some of the more robust Medigap plans, but do provide an alternative to selection of the individual Medicare and Medigap plan policies.

Consoli does not even know how she will contact all of her 220 clients impacted by this budget to tell them they’ve lost their health benefits and have to now buy health care plans.

Some Good News on the Budget

The budget had some good news for town leaders, though, since the threatened cuts in state revenue-sharing grants were lower than had been previously proposed.

Westbrook First Selectman Noel Bishop is pleased with the additional revenue the signed budget will send to the town, though he’s skeptical that the state will fulfill its funding commitment.

Nonetheless, the new state budget commits to send Westbrook $350,464 more in state grant revenue than the $295,652 the Board of Finance budgeted for the current 2017-’18 fiscal year. The BOF assumed last spring that the town would receive no Education Cost Sharing (ECS) grant funds, based on early state budget proposals, but the adopted and now signed state budget will actually send Westbrook $66,873 in ECS funding. For Municipal Revenue Sharing, the town budgeted $80,601 and will receive that amount. The state’s Mashantucket Pequot & Mohegan Grant to the town was budgeted at $10,683, but will actually be $16,186. The biggest variance, though, is in state grant funding for municipal project. The town’s budget had set this amount at zero, but the adopted state budget would give the town $267,405.

Like Bishop, Fortuna maintains a healthy skepticism about state revenue promises while also being pleased Old Saybrook will receive more than it budgeted for last spring. The current 2017-’18 town budget assumed the state would only send $375,000 in state grant funding, but the adopted state budget would send the town $530,000, an increase of $155,000 above the budgeted figure.

Will the state stand by its promised revenue-sharing plan? Fortuna is not so sure.

“I guarantee you that the state’s 2017-’18 budget will actually be in deficit,” said Fortuna.

As a result, he expects in spring 2018, as the state government has done in each of the last three fiscal years, mid-year state grant cuts will be announced.

For information about your town’s social services programs, contact:

Clinton Social Services: 860-669-7347 or www.clintonct.org

Old Saybrook Social Services: 860-395-3188 or www.oldsaybrookct.org

Westbrook Social Services: 860-399-3090 or westbrookct.us

How Medicare Works

 

Why are Medicare Savings Program (MSP) benefits so critically important to the low-income elderly? To explain the answer, readers first need to understand how the Medicare program, a federal medical insurance program covering the elderly and the disabled, works.

When a U.S. citizen turns 65 years of age or is disabled for two years, they become eligible for Medicare. Many mistakenly believe that once they are eligible for Medicare, their medical care is now free, however Medicare Part A (Hospitalization) and Medicare Part B (Medical) plans only cover 80 percent of each retired or disabled person’s health care costs.

No premiums is required to receive Part A (Hospitalization) coverage under Medicare, but under Medicare Part B (Medical), the coverage that pays doctors and other medical bills, the Medicare administration charges a mandatory insurance premium to receive coverage. Individuals can either pay this charge themselves or Medicare mandates that the Social Security Administration deduct it monthly from each recipients’ Social Security check. This year, the Medicare Part B premium charge is $134 per month (note: Medicare charges individuals with higher incomes a monthly premium that is double this amount or more).

To pay the 20 percent not covered by Medicare, patients can choose to tap their savings, but if the health care event is a heart attack, major surgery, or a cancer diagnosis and treatment, the consumer’s cost-share can add up to tens or even hundreds of thousands of dollars. Twenty percent of a $300,000 charge would be $60,000 owed.

To reduce financial risk in retirement, retirees who can afford it buy a separate insurance policy called a Medi-gap or Medicare Supplement policy. These policies, identified by letters such as Plan A, Plan B, Plan F, are issued by major health insurance providers; by law, each lettered plan offered carries a similar array of benefits. This allows consumers to compare apples-to-apples each provider’s Plan F, or Plan A. What all the lettered Medigap plans have in common is that they “fill the gap” at some level to help pay some or most of the twenty percent of health care costs not covered by Medicare.

Premiums for MediGap policies can range from $65 per month for a Plan K policy with a minimal level of benefits to a more robust Plan F Medigap policy with a monthly premium charge of between $250 and $300 per month.

Then there is the need for seniors and disabled individuals to pay for prescription drugs: Drug costs are not covered by Medicare Part A, Part B, or by MediGap policies. So how do they pay for them?

One option is again to pay out of pocket, but with monthly costs as high as $1,000 for those with chronic conditions, this may be too expensive, so health consumers can buy a Medicare Part D prescription drug plan; monthly premiums for these plans are about $400. When the value of the drugs purchased through a Part D plan each year reaches $3,700, spending is capped. The rest of the year’s prescription drug costs must be paid by the health consumer until the total spending reaches $4,950 (the gap is referred to as the “donut hole”). At that point, catastrophic coverage kicks in and drugs for that year are again covered.)

What this all means is that a typical retired health consumer would pay a premium of $134/month for Medicare Part B coverage ($1,608 per year), about $300 per month for a MediGap insurance policy ($3,600 per year), and $417 per month (a benchmark) for a Medicare Part D prescription drug plan ($5,004 plus up to $4,700 in drug costs that fall in donut hole). That puts the annual health care budget for a retiree at $5,625 per year or, for those with high drug costs, up to $9,000 per year.

Retirees also can purchase Medicare Advantage Plans that, with one payment, provide coverage comparable to Medicare Part A, Part B, Part D, and MediGap. These Advantage plans may have more limited networks of providers than some of the more robust Medigap plans, but do provide an alternative to selection of the individual Medicare and Medigap plan policies.

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