Spoiler alert: Money doesn’t grow on trees.
Which is why the Home Care Worker Wage Increase is creating waves and a touch of panic in the home healthcare community.
As mandated by the 22-23 NYS Budget, the hourly minimum wage for NY home care workers will increase by $2.00 on October 1, 2022. A year later, on October 1, 2023, it goes up an additional dollar.
Unions and other advocates lobbied hard for this raise, and our dedicated home care workers undoubtedly deserve it. Still, the law puts home healthcare agencies in a difficult position.
To answer questions and help agencies plan, the CHC (Community Health Care Services Foundation) hosted a webinar called “Preparing for the October 1 Home Care Worker Wage Increase.” (CHC is the educational affiliate of HCP, the New York State Association Of Health Care Providers.)
The webinar featured Emina Poricanin of Poricanin Law, a recognized expert in home healthcare law. Emina addressed a broad range of concerns about the legislation, including
- Which home care workers are included?
- Do agencies need to issue new wage notices?
- How the law affects spread of hours and split pay.
- Will agencies need to negotiate the increase with their unions?
Those questions are important but beyond the scope of this article. You can access the full recording here. Pertinent to us are the ramifications for wage parity.
Wage parity and benefits can help agencies mitigate the cost of the wage increase. Let’s take an in-depth look at the law’s financial implications to understand how.
DISCLAIMER: What follows is an expert interpretation of the law based on the presentation. However, many details haven’t yet been clarified by the Department of Health (DOH.) Please discuss all questions with your counsel to avoid unpleasant fines, audits, or lawsuits.
When $2 isn’t $2
The wage increase is codified in NYS law as the “Public Health Law §3614-f: Home Care Minimum Wage Increase.”
That language is significant. Pre-October, these were the wage requirements for home healthcare aides (HHAs):
|Required Wage Parity Benefits
|New York City||$15||$4.09|
|Nassau, Suffolk & Westchester counties||$15||$3.22|
Wage parity is 100% mandatory and, since the 20-21 New York State Budget, comes with fines and criminal penalties for non-compliance. However, when paid as benefits, it’s not part of the base wage and isn’t calculated into payroll taxes or overtime. (This is why paying cash in lieu of benefits is always more expensive for an agency.)
The Home Care Worker Wage Increase seems to be a minimum wage increase, changing the chart to this:
|Required Wage Parity Benefits
|New York City||$17||$4.09|
|Nassau, Suffolk & Westchester counties||$17||$3.22|
In other words, home healthcare workers now have their own unique minimum wage in New York. And post-October 1st, payroll taxes, overtime, PTO, and more must be paid using $17 as the baseline.
Considering those costs, the $2/hr increase is effectively much more than $2.
Based on survey data, Laura Ehrich, VP of Public Policy at HCP, estimated the average actual expense to be $2.66 for downstate and $2.77 for upstate. Those are just estimates, of course, but the implications are clear.
Where’s the funding?
“Will we be fully reimbursed by our plans?”
Given the prohibitive costs of the wage increase, that’s the question on every agency’s mind. And no one knows the answer yet.
The chain of funding for Medicaid home health services goes from
- The Centers for Medicare & Medicaid Services (CMS)
- To New York State
- To Managed Long Term Care Plans (MLTCPs)
- To home health care agencies.
The recent eFMAP awards, for example, began with the CMS and went down the chain to the Licensed Home Care Services Agencies (LHCSAs). NYS initiated the current Healthcare Workers’ Bonus, but it only became law subject to federal funding approval.
Not so the October wage increase. New York State passed the law without making it dependent on federal funding. And in fact, NY State hasn’t yet received funding from the CMS.
The plans, therefore, haven’t yet received funding from NYS, although they met in August to negotiate their premiums. And if the plans don’t have the money, they can’t pay it yet to the agencies.
Regardless, the agencies have to pay aides the extra $2/hr come October 1st. How will they cover the expense until they get reimbursed? Some agencies are taking out a line of credit.
Others are using their eFMAP money. While this isn’t an approved expense for eFMAP, agencies are using it as a bridge loan until the other funds come through. Of course, they’ll have to “pay back” their eFMAP fund and use that money for an approved purpose by March 31, 2023.
All of the above applies to Medicaid-paid services. However, private-pay services are equally obligated by this wage increase. How will agencies pay? Will they pass on the entire cost increase to their clients? Many clients can’t afford it.
Laura Ehrich, VP of Public Policy at HCP, explained that HCP is lobbying intensely for funding on this issue, specifically, and the Home Care Worker Wage Increase in general. She encouraged all concerned agencies to get involved and contact their legislators.
Negotiating a rate
The delay in funding is bad enough. But even worse for agencies is that the wage increase isn’t a directed payment. That means the DOH didn’t mandate the minimum payment rates from the plans to the agencies.
Instead, agencies will individually negotiate rates with their plans. The DOH only directed the MLTCPs to ensure that LHCSAs are “sufficiently funded” and said they expect “good faith” negotiations.
But “sufficient funds” are wide open to interpretation. As we explained above, the exact cost of the wage increase isn’t clear and can change from agency to agency. “Be proactive,” recommends Emina to agencies. “It’s on you to secure your rate. Get with your CFO to figure out your true rate and initiate negotiations with your plans, coming with your numbers in hand.”
Negotiating a fair rate won’t change the reality of the plans not yet having the funds to pay you. However, it ensures that you’ll get the money once it’s there.
Wage parity and benefits
How can wage parity help? To be clear, wage parity or benefits can NOT be used to pay the $2 increase.
For example, if Agency A is currently paying $15 in base pay and $4.09 in wage parity benefits, it can NOT now pay $15 in base pay and $6.09 in benefits. Base pay must be $17 or more.
But what about Agency B, who’s currently paying $17 in base pay and $2.09 in benefits?
First, Emina clarified that Agency B is still affected by the wage increase. “There’s a misconception that an agency isn’t affected if it’s already paying $2 or more above minimum wage,” she says. “But that’s not true. Everyone must raise their rates.”
Still, Agency B has some wiggle room with their $2. It could simply pay $19 in cash wages and $2.09 in wage parity. But since it’s already paying $17 in base pay, it can use the opportunity to increase its benefits instead. The agency could, for example, pay $17 in cash wages and $4.09 in benefits, or it could pay $18 in cash wages and $3.09 in benefits.
Compensating employees in benefits offers multiple advantages to employers:
- Payroll taxes, such as FICA, worker’s comp, unemployment taxes, and more apply to every dollar you pay your employees. They don’t apply to most benefits.
Average payroll taxes are 15%, so if you pay $2 as benefits instead of cash wages, you save $.30/hr. What’s thirty cents? Multiply it by an employee’s average annual 1560 hours, and you get $468 saved per employee per year!
- Agencies must pay overtime to aides who work more than 40 hours a week. Overtime is paid at time and a half of an employee’s cash wages, but benefits aren’t added to the calculation. For Agency B in our example above, if it raises cash wages to $19, overtime is now $28.50. If it gives $2 extra in benefits, overtime is only $25.50, a $3/hr savings that add up quickly.
- Employees love benefits because they’re pre-tax and, therefore, don’t add to an employee’s reportable income. HHAs often qualify for Medicaid, food stamps, and other income-based government programs. They prefer to report less income and keep their eligibility for these programs.
“Paying wages in benefits instead of cash can save an agency thousands or even hundreds of thousands of dollars,” says Shaya Sternhill, Melody’s Head of Marketing and Business Development. “With agencies facing a cash crunch in October, those savings are more important than ever.
“Plus, benefits make employees happy and lead to better recruitment and retention.
“Be in touch to discuss which benefits are the right fit for your agency. We’re here to help.”