Medicaid programs brace for new home health wage rule

State Medicaid programs, the largest payers of home health services and personal care support, are ill-prepared to pay workers in that sector minimum wage, overtime or traveling expenses, which next month will be required under a new U.S. Labor Department rule.

Home healthcare agencies haven’t ever had to pay minimum wage or overtime to companionship workers who provide “fellowship, care and protection” to homebound patients. The new rule narrows that definition to those who spend no more than 20% of their time providing actual care, such as feeding and bathing. The rule will also no longer exempt companionship workers employed by third parties, such as home health agencies, from wage protections.

The industry had strongly opposed the rule, saying it would make home healthcare unaffordable for patients. States, which through Medicaid, spent more than $56 billion in federal and state dollars for those services last year, had largely remained out of the debate.

“Broadly, I’d say states are not prepared,” said Matt Salo, executive director of the National Association of Medicaid Directors. Salo said the new Labor Department rule ignores the complexity of how Medicaid pays for, administers and delivers long-term services and supports (LTSS). The department, he said, “is like a bull in a china shop. (It) changed the face of LTSS delivery with a sweep of an arm.”

Federal officials have noted a lack of preparedness as well. “This is a completely new concept for Medicaid systems around the country,” said James Toews, a senior adviser with HHS’ Administration for Community Living.

In addition, managed-care plans that oversee home health Medicaid benefits may not be aware they will be responsible for the additional costs, he said.

Medicaid plans that are aware of their new obligations are pushing for a bump in their rates.

“Our primary concern is that, should costs go up materially as a result of compliance, reimbursement rates will be adjusted accordingly to maintain their actuarial soundness,” said Meg Murray, CEO of the Association for Community Affiliated Plans.

Medicaid plans tend to subcontract with home health agencies to oversee home aid services.

Amida Care has started to receive wage-increase requests from some of its home health vendors, according to Susan Cummins Caputo, an executive vice president at the New York Medicaid plan. She’s unsure whether Amida will be able to pay its vendors more without a rate increase. States must go to their lawmakers for rate-hike approval.

Leslie Moran, a senior vice president with the New York Health Plan Association, said that the approval process has many plans worried, since it is impossible for new rates to be approved and funds to flow before the implementation deadline.

The New York State Department of Health is surveying Medicaid plans to find out how many hours home health providers currently work, so they can determine how much the rule change will cost the state, Moran said. Louisiana and Texas are taking similar surveys. All that information might not help, though.

In 2011, New York placed a cap on what the state can spend on Medicaid. The budget can’t grow more than 4% a year.

Without additional funding, many home health agencies are likely to react to the ruling by cutting workers’ hours to avoid incurring overtime expenses, according to an op-ed written by Marki Flannery, an executive vice president at Visiting Nurse Service of New York. Beneficiaries are also voicing their concerns. Athena Savides, a 25-year-old woman with cerebral palsy living in Brooklyn, wrote to the Labor Department saying that without additional government funding to comply with the new wage rule, individuals like her would be institutionalized instead of receiving care at home.

In 2014, on average, a year of home health aide services cost $45,800 on average, while care at a skilled-nursing facility averaged $87,600, according to the Kaiser Family Foundation.

But not all states are unprepared. In California, where 350,000 residents work providing personal care services to Medicaid beneficiaries, an additional $270 million was put in the state’s general fund to cover the costs of the new rule.

The Labor Department has said it will not start enforcing the rule until Nov. 13. Officials also said they would exercise discretion in deciding whether to penalize noncompliant parties. They will also take into consideration good faith efforts to comply with the law, agency officials said.