Minimum Wage Hike, Stagnant Reimbursement Rates Claim Another Home Care Provider

A well-known nonprofit home care provider in one state that serves over 600 people has announced that it will be forced to close by April due to financial challenges.

The Farmingdale, Maine-based Home Care for Maine has been plagued by a few different factors, the main one being the hike in the mandated state minimum wage. While minimum wage has increased, the reimbursement rate for MaineCare has not, leaving the operator in an unfavorable position.

“If you’re losing as much as 50 cents an hour for every hour of work you’re providing, or hour of service, there’s no way any business, for profit or otherwise, can stay in business at that rate,” the provider’s attorney, Newel Auger, told Maine Public Radio.

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Maine’s minimum wage increased from $7.50 to $9.00 on Jan 1. of 2017, then to $10.00 in 2018, then to $11.00 in 2019; it now stands at $12.00 after another 2020 hike. The reimbursement rates under the state’s Medicaid program haven’t proportionally risen with the minimum wage increases, which puts Home Care Maine in a precarious position.

This is especially true because it primarily serves Maine’s low-income population.

The trend of in-home care providers being squeezed by rising wages and flat reimbursement rates is happening in more states than just Maine. In-home care providers could be put in vulnerable positions in the 20 other states that have increased minimum wage to kick off 2020.

Last year, Minnesota home health care providers were experiencing the same issues, for example. The minimum wage increased by $1.25 per hour and reimbursement rates only inched up 40 cents.

“The consequence is that smaller agencies will not be able to absorb the losses and some may close,” Andre Best, CEO of Best Home Care, told Home Health Care News last May. “If a number of agencies close — leaving clients and caregivers looking for a new home — that will be bad because some will not be able to find a home and some people are going to go without care.”

Home Care For Maine’s closing will leave about 365 workers without jobs and nearly 600 patients without home care. The company will try to place its workers with other agencies, but in the meantime, there will be a lot of Mainers without care.

Dr. David Macpherson, an economics professor at Trinity University, has studied the effects of multiple states’ minimum wage hikes, including Maine’s. Oftentimes, the mandated increases don’t always benefit those it’s meaning to, he told HHCN.

“In a normal marketplace, they could raise prices to offset the higher cost. But in this case they can’t, and because of that, they have to go under,” Macpherson said. “Anytime you have a fixed price with the government, you’re going to run into this problem. Even in other cases when [providers] can raise prices, higher wages will still force firms to lay off workers.”

To make matters worse, the Trump administration is aggressively making efforts to cut spending and Medicaid funding across long-term care, though predominantly targeting nursing homes.

This week, for instance, the American Health Care Association and the American Hospital Association called on federal officials to get rid of the Medicaid Fiscal Accountability Regulation (MFAR), a proposed rule that would attempt to reduce Medicaid supplemental payments for nursing homes and other long-term care facilities

“The bleak reality is that Medicaid funding is already inadequate,” AHCA CEO Mark Parkinson and AHA CEO Rick Pollack said in a joint statement. “Enacting this proposed rule would cut up to $50 billion nationally from the Medicaid program annually, further crippling Medicaid financing in many states and jeopardizing access to care for the 75 million Americans who rely on the program as their primary source of health coverage.”

As evidenced by Home Care Maine, less funding, stagnant reimbursement rates and higher mandated wages are tough on any provider in the long-time care arena. If that trend continues, it could result in more caregivers out of work and patients without care.

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