At least 22 states and localities are increasing minimum wages on July 1. At the same time, the House of Representatives is expected to vote on whether to raise the federal minimum wage to $15, more than double the current rate of $7.25.
While many people are celebrating the pay hikes as a victory for low-income workers, leaders in the home-based care industry continue to voice their concerns as it relates to reimbursement, recruitment and retention.
Basic math suggests that if home-based care agencies have to pay caregivers and aides more, their bottom line will take a hit.
While private-pay agencies can choose to offset their losses by raising prices for consumers, that’s not an option for everyone, namely providers whose services are largely reimbursed by Medicare and Medicaid.
“We are absolutely supportive of raising wages, whether it’s minimum wage or otherwise,” Darby Anderson, chief development officer at Addus HomeCare Corporation (Nasdaq: ADUS), previously told Home Health Care News. “The problem is they have to be funded.”
And in many states, reimbursement is not increasing proportionately with minimum wage increases. In other words, providers are expected to provide the same level of high-quality care with less money.
Take New Hampshire for example, where there’s a proposal to increase the $7.25 minimum wage by 40% to $10 in 2020. Meanwhile, proposed increases to Medicaid reimbursement lag far behind at 3.1% for 2020.
“There are serious disparities here and passage of the minimum wage increase without addressing provider rates will be disastrous,” a recent op-ed in the Concord Monitor argued. “There are two sides to this equation and both sides need to be addressed simultaneously.”
If not, some worry Medicaid and Medicare home-based care companies will be forced to go out of business or change their service offerings.
“It is a field where many of the agencies have very slim margins,” Susan Misiorski, vice president of workforce innovations at research and consulting organization PHI, previously told HHCN said. “There’s no question that employers who are heavily dependent on public reimbursement for their business revenue are more vulnerable, particularly in states that are not adjusting their reimbursement as they increase minimum wage requirements.”
States and localities raising their minimum wages in July include Oregon, New Jersey, Chicago and several cities in California, among others.
In many places, the minimum wage is set to rise as high as $15 in the years to come.
Proponents of the increases say higher wages will help with recruitment and retention of caregivers — a growing struggle in the home-based care industry, which is plagued by an 82% caregiver turnover rate.
“A $15 minimum wage means reduced worker turnover and more dependable caregivers and service workers who aren’t working two or three jobs to survive,” Greg Kelley — president of SEIU Healthcare Illinois, a union of health care, child care, home care and nursing home workers — previously told HHCN. “A higher minimum wage also attracts other qualified workers to our professions.”
However, opponents fear the opposite: If workers can make the same amount of money at less demanding jobs — such as doing order fulfillment at Amazon — why would they become caregivers?
On top of that, some states and localities that have raised minimum wage have struggled because of it, experiencing lost hours and even business closures.