We have focused a lot on the EFCA in the past few weeks, but another aspect of a new administration and a Democratically controlled Congress was the potential for the Companionship Services exemption to be revisited.
The Companionship Services exemption is an exemption to the minimum wage and overtime requirements of the Federal Fair Labor Standards Act ("FLSA"). (note: state laws may vary) It applies to employees who provide companionship services and it has been widely used in the homecare and hospice industries. (There is a four part test to determine if an employee is an exempt companion, but I won't bore you with those details.) If an employee qualifies as an exempt companion, they are not entitled to minimum wage and/or overtime under the FLSA. (Because this is a federal law, state laws may vary and some states have eliminated this exemption.)
As you may recall, a few years ago SEIU financed a test case to challenge the use of the Companionship Services exception by home health, hospice, and private duty providers. SEIU argued that the exemption should only be available to individuals who employed "companions" directly, not to employers who employed the companions and placed them in a client's home. The Supreme Court ultimately ruled that third party employers could continue to use the companionship services exemption.
This ruling was based upon DOL regulations and, therefore, could be "reversed" by the DOL changing its regulations. SEIU and others are advocating that DOL change its regulations to eliminate the use of this exemption by providers. SEIU acts like aides are not getting minimum wage, but frankly, I don't know of an agency that is not paying significantly more than minimum wage. The market is to competitive.
Well, now its happening, 15 Senators are asking the DOL to "provide the same workplace rights" to home care workers. Senator Harkin and his group are overlooking a number of factors and the interplay between home care employee wages and Medicare/Medicaid reimbursement costs. At a time when everyone in Washington is clamoring to reduce health care costs and increase access, eliminating this exemption will most likely increase health care costs and/or reduce access.
The problem that these Senators, SEIU, and others are overlooking is that eliminating this exemption is not done in a vacuum. It is done within the larger context of Medicare/Medicaid reimbursement policy. Providers are limited by the amount of reimbursement they receive, which is dictated by Medicare and Medicaid policy makers. At the same time Harkin and others are proposing an action that would increase costs for home care and hospice providers, the Obama administration and state medicaid agencies are proposing rate cuts for these same services. With the fixed reimbursement/rate cuts as a backdrop, there are several possible negative results of this change.
First, is a reduction in hours for employees. Many home care and hospice providers pay their staff with money earned from Medicare and Medicaid reimbursement. Medicare and Medicaid reimbursement is relatively low (especially Medicaid) and agencies are very focused on controlling costs. Agencies only receive a set amount of reimbursement whether it is per episode or per visit and, barring an increase in reimbursement, there is not a lot of money to pay overtime. This means agencies are limited in what they can pay and stay in business. Most agencies, when presented with the requirement that they pay overtime will simply limit the hours they assign to aides. This is not out of spite or meanness, but simply a result of not having the money available to pay overtime, due to limited reimbursement. The agency will simply limit employees to forty hours a week. For many companion workers, this will be a reduction in wages. They will then hire additional staff to provide the services.
Some agencies will limit hours, but not be able to find additional staff. They will simply reduce the number of clients they serve. This will lead to a reduction in access to home and hospice care at a time when the population who receives these services is growing and will continue to grow at a rapid pace.
The other outcome is that providers will pass overtime costs through to the payer/client. In this case, agencies continue as before and start paying overtime and hope to muddle through until a rate increase. The providers would be banking on Medicaid rates going up as a result of the increase in costs. For states where provider cost is a factor in rate setting, an increase in the costs to providers would result in Medicaid agencies paying more for services to cover these costs. This means state governments would have to find more money for their Medicaid budgets at at time when funding current levels is a problem. Many states and the feds are looking at reducing reimbursement rates, not increasing them.
For private pay, this cost will be passed through to the individual clients. This will result in clients spending retirement savings faster or, more likely, reducing the amount of care they receive, because they are limited in their resources as well.
The Bottom line is that these Senators should not demand DOL remove the companionship services exemption without considering the conflicting health care policies that will be impacted by this change. The Senators and SEIU seem to think that removing this exemption will automatically lead to more wages for caregivers with no effect to anyone but employers, but that is not the case. Patients and employees will be impacted in ways these Senators have not considered. There needs to be a conscious consideration of how this kind of change will affect one of the fastest growing sectors of Medicare and Medicaid, before any such change is made. A decision that will affect health care policy in this fashion should be considered in terms of health care policy, not just in union sloganeering.
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