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Home Health Aides and the Negative Consequences of "Fair Wage" Legislation: Why Good Intentions Aren't Enough

Until we agree, as a country, that the services provided by America's HHAs are worth finding the extra Medicare and Medicaid dollars to pay them what they deserve, then we will continue to suffer the negative consequences of piecemeal measures--however well-intended they may be.
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Sometime next month a pivotal 2013 regulation adopted by the U.S. Department of Labor, extending Federal minimum wage and overtime protections to the nation's one million home health aides (HHAs), will finally go into effect--or not. It all depends on whether a stay is granted by the U.S. Supreme Court while they decide if they will hear an appeal of the recent federal circuit court ruling upholding the regulation, in the last in a series of legal challenges to the Labor Department's fiat. An announcement on the requested stay is expected in the next few weeks. Whatever the outcome, however, the new regulation--along with the numerous court filings it has engendered--will stand forever as a classic example of good intentions gone awry.

My organization, the Visiting Nurse Service of New York, believes strongly that the nation's home health aides should be paid a living wage. In New York, these dedicated workers earn an average of $10 an hour for the work they do each week helping elderly and disabled individuals bathe, dress, eat and otherwise carry out their daily lives. For many elderly people, the daily care that HHAs provide is what allows them to continue living in their own homes, rather than enter a nursing home.

At VNSNY, we have always provided wages and benefits to our HHA employees that exceed the industry average. In recent years, however, this has become steadily more difficult, as both Medicare and Medicaid have reduced their reimbursement levels for home health services. Now, the Labor Department's regulation (assuming it goes into effect) has taken a difficult situation and made it impossible. Why? Because while the desired effect of the regulation--to increase the income of the country's HHAs--is laudable, it is missing one essential ingredient: a mechanism to pay for the increased cost.

The result, sadly, will be exactly the opposite of what was intended: Home health aides across the U.S. are likely to end up working fewer hours and earning less total income, while patients will have to endure fragmented care. We could even see a number of home healthcare agencies go out of business because they find it financially impossible to comply with the new state of affairs.

To understand why such problematic outcomes are expected to arise from such a well-intentioned measure, let me quickly walk you through the specifics of the Labor Department's regulation. The ruling actually reverses another long-standing departmental ruling, which exempted HHAs from the federal Fair Labor Standards Act. Now that this legislation is being applied to HHAs as well, agencies like VNSNY that employ HHAs will be required to do four things:

1) Pay all HHAs nationwide at least the current U.S. minimum wage of $7.25 an hour. Since a majority of states have their own minimum wages that are higher than the national minimum (including our own state of New York, which also separately mandates a $10 per hour minimum for HHAs), this is a relatively inconsequential aspect of the new rule.

2) Pay all HHAs 1.5 times their base wage for every hour of overtime (more than 40 hours per week) that they work. In New York State, the law currently requires that HHAs receive overtime pay equal to 1.5 times the state minimum wage of $8.75 an hour--instead of 1.5 times their base wage, which is somewhat higher than the minimum. While the difference in these two calculations may not seem that great, it can result in millions of dollars of extra cost per year for a large agency like ours. Unless Medicare and Medicaid agree to make up this difference, many agencies are likely to react to this ruling by cutting back on the number of hours they let their HHAs work, to avoid incurring overtime expenses. Meanwhile, patients requiring more than 40 hours of care per week will likely have to rely on multiple caregivers.

For individual HHAs, this means they will end up working fewer hours--and earning less pay--than they did before. Since many HHAs depend on overtime wages to make ends meet, one possible outcome is that they'll seek work with another home care agency on the side, leading to more hours of total work, but no overtime pay. Again, the outcome is likely to be a drop in their overall wages, plus the added headaches of engaging with two different employers.

3) Pay HHAs for all travel time between assignments. While this rule is already followed to some extent, it will now be strictly enforced. To avoid the resulting increase in HHA costs (including a greater likelihood of incurring overtime wages), many home care agencies will simply cut back on the number of daily assignments that HHAs are given--especially in rural areas, where patients may live an hour or more from each other. Once more, the result is likely to be an overall reduction in the income of individual HHAs.

4) Comprehensively document the hour-by-hour activities of live-in HHAs to determine and compensate for the exact number of hours spent delivering care. While the work of 24-hour-a-day HHAs is already regulated, this new requirement will entail significantly greater administrative expenses on the part of home care agencies. And to the extent that it increases the cost or feasibility of around-the-clock HHA care, the requirement is also likely to result in more patients going without such care.

In summary, this regulation is almost certain to hurt the pocketbooks of individual HHAs while also diminishing access to the care that elderly Americans need in order to remain in their homes. As I noted earlier, this is entirely due to the fact that the Labor Department regulation accomplished only one-half of its intended goal: It mandated an increase in HHA wages, but didn't increase the amount of money that Medicare and Medicaid--who jointly pay for the vast majority of HHA services used by Americans--will pay out to the nation's home healthcare agencies to cover the increased costs of providing HHA services.

Whether these agencies are not-for-profit corporations like VNSNY or for-profit companies, their margins are already being squeezed. Unless the federal Centers for Medicare and Medicaid, together with the Medicaid programs in America's fifty states, are willing to raise their levels of reimbursements to offset the increased HHA costs related to this new rule, the result is likely to be a disaster for home care agencies, the HHAs they employ, and the patients who utilize HHA care.

Whether this actually happens next month is up to the courts. The regulation, originally scheduled to take effect at the start of this year, was overturned in January by a federal district court, only to be reinstated in late August by a federal appeals court. A group led by the two national home healthcare associations is now appealing that decision to the U.S. Supreme Court, and has also asked the top court to grant a stay while it decides whether it will review the case. If that request for a stay is denied, then the ruling will take effect on or about October 13.

When and if that happens, VNSNY and our fellow agencies around the country will have to make some hard decisions. But the most important decision of all is one that hasn't yet been faced: If we truly want to enable our loved ones to grow older with dignity in their own homes, supported by vital home care that is affordable and that also enables their caregivers to make a decent living, then we need to address this issue together as a nation. Until we agree, as a country, that the services provided by America's HHAs are worth finding the extra Medicare and Medicaid dollars to pay them what they deserve, then we will continue to suffer the negative consequences of piecemeal measures--however well-intended they may be.