Biden moves to raise pay for Medicaid home care workers. It will work?

The federal Centers for Medicare & Medicaid Services (CMS) has moved to increase pay for home care aides and others who provide personal care to frail older adults and young people with disabilities. He has proposed new rules require Medicaid home care agencies to direct at least 80 percent of program payments for personal care services to care workers’ compensation. In effect, more money would go to workers and less to administrative expenses and profits.

Since his campaign for president, Joe Biden has been pushing to increase wages and working conditions for direct care workers, including nursing home certified nursing assistants and home care workers. The new CMS proposal is a step in that direction and the agency will soon mandate a new minimum staffing for nursing home care workers.

The new rule would apply to personal care workers, homemakers, and home health aides. But it only affects Medicaid home and community-based long-term care (HCBS) services. Does not apply to Medicare home care.

a major boost

Already, 22 states have moved to direct more Medicaid payments to care workers. Some require providers to pay a minimum dollar amount to direct care personnel. CMS would follow a different model that requires companies to dedicate a set percentage of Medicaid payments to care workers.

The move could provide a major boost to their hourly wages, which currently average only about $14.15, according to the Bureau of Labor Statistics. Approximately one in seven direct care workers lives in poverty and a third are on Medicaid themselves.

However, we know very little about whether these government efforts to manage wages materially benefit home care aides. And the story may not be simple.

unintended consequences

Government attempts to put a floor on wages often have unintended consequences. It will be especially challenging with these rules because little new money is being added to the Medicaid system.

While Congress approved a short-term increase in federal Medicaid HCBS payments in 2021, it has been unwilling to increase future federal contributions. At the same time, many states have been slow to increase Medicaid HCBS payments. during the pandemic many states passed temporary bonds for Medicaid care workers, but they were rarely built into their salary base.

Without more money in the system, will the new rule deter more home care providers from even accepting Medicaid recipients? Access to Medicaid agencies can already be a problem. Although almost all agencies accept Medicare, only about three-quarters took Medicaid in 2016.

Since then, many states have moved to a Medicaid managed care model, and about 70 percent of recipients are now covered by these plans. These states pay managed care organizations a fixed monthly fee for providing all care to their Medicaid recipients. Insurers, in turn, contract with home care agencies and other service providers, often paying less in exchange for serving a higher volume of patients.

But many of the highest quality agencies already serve only the lucrative private pay market and refuse to accept Medicaid clients. This new rule could make that problem worse, which could perversely further limit the supply of home care workers for Medicaid recipients.

A related problem: When Medicaid assistants are paid more, private pay prices can also increase, both for agency assistants and the so-called gray market. That would be good for the workers. But it could make care even less affordable for millions of families who aren’t eligible for Medicaid but don’t have the resources to pay for assistance. Higher compensation for personal care attendants may force them to reduce paid help hours.

At the same time, some unscrupulous home care agencies will surely find ways to game the new system. They always do it.

Is the market adjusting?

Finally, the market may already be beginning to adjust wages. The salary of home care workers and facility aides appears to be rising as the supply of willing workers still far below what it was before the pandemic.

While the current average hourly wage of $14.15 still leaves many home care workers living in poverty, it is about 10 percent higher than the average of $12.98 in 2020. And, anecdote, both home care providers as those who work in facilities report that they have to pay even higher wages.

At a small nonprofit facility in rural Maine, staff members told management they were considering leaving because other local businesses, including a sandwich shop and even the city’s landfill, were paying more. As a result, the facility increased direct care hourly wages last fall by 14.5 percent to an average of $18.25, though it had to draw on reserves to do so.

The market is sending a clear signal: if we want enough care workers to help a rapidly growing population of frail older adults and young people with disabilities, we’ll have to pay them more and treat them better. But it remains to be seen how well government mandates will achieve those goals.