The ‘Strange Tension’ That Exists Between Consumer-Directed Models, Regulations Surrounding Them

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At some point in their lives, most Americans will need some type of in-home care support. The issue is that — due to the caregiver shortage, the rising cost of care, Medicaid qualifications and a number of other factors — many of them won’t be able to afford it.

As a way around the more expensive and traditional at-home care, many seniors have been turning to alternative home-based care models that offer consumers flexibility and cost-effectiveness.

The rise of consumer-directed care and the use of family caregivers is one of those, and is well-documented. However, there is a tension that exists between the demand for those alternative care models and the regulations from the federal government that could drastically affect them.


“You have one arm of the government that is promoting these kinds of programs that are looking for these 1099 and alternative models to provide coverage at a lower cost,” Angelo Spinola, the co-chair of the home health and home care at the law firm Polsinelli, told Home Health Care News. “But then you have the Department of Labor and some other arms of the government that are utilizing tests and standards that would suggest that those workers can’t be classified as 1099. So there’s this strange tension.”

Regulatory tension

Medicare covers home health care, but not personal care, which generally helps seniors deal with activities of daily living. Seniors not supported by Medicaid or Veterans Affairs (VA) are left to pay out of pocket for services that can often be very expensive.

In fact, only 14% of American seniors can afford to do so, according to an analysis conducted by the Joint Center for Housing Studies of Harvard University.


Self-directed or consumer-directed care can often be pointed to as an alternative, often cheaper, form of home care.

After the pandemic, states increased self-directed and family caregiving opportunities for HCBS beneficiaries. In 2020, only 36 states allowed legally responsible relatives to be paid caregivers. Two years later that number was 48, according to the Kaiser Family Foundation.

There are many benefits to offering consumer-directed care, especially for patients who would rather be cared for by a caregiver of choice. States see it as a win-win, because it lowers the cost of care and gives families their preferred option.

But as Spinola points out, there is that “strange tension” between states and the federal government that creates gray areas for consumers and providers.

“Florida is a great example,” Spinola said. “The Florida law requires the nurse registry to use independent contractors. That’s what the model is. You get regulated based on that nurse registry licensure. But then the Department of Labor will come in and take a position that oftentimes those workers really should be employees and not contractors. So it’s very difficult to comply with both sides of the equation, and it leaves a lot of confusion. And the standards and enforcement positions seem to change pretty regularly.”

Earlier this year, the U.S. Department of Labor (DOL) issued a final rule that was aimed at addressing the misclassification of workers as independent contractors.

At the same time, the rule could potentially lead to an increase in FLSA violations in home care as the federal government tries to crack down on the misclassification of employees and independent contractors.

“When you look at what the consumers want, they want their Ubers and their Postmates,” Spinola said. “And the workers want their flexibility. I think we’re going to see — how state labor laws are — a hodgepodge of programs where something would be acceptable – something in Florida that isn’t acceptable in New York or Connecticut or Massachusetts.”

Essentially, the industry could see self-directed or consumer-directed care platforms emerge from providers that are compliant with one arm of the government without coordinating with another arm of the government. As Spinola pointed out, through no real fault of their own.

Other discrepancies

There are other smaller discrepancies that could emerge from these competing motives, especially as it pertains to the rights of workers.

“While CMS has and continues to move states to offer more self-directed options to consumers, that can diminish the rights of workers,” Darby Anderson, chief government relations officer of Addus HomeCare Corporation (Nasdaq: ADUS), told HHCN in an email. “There are certainly some states where the state — or MCO — views the self-directed worker as an independent contractor. However, these states also generally view the consumer as the employer. It’s interesting that the DOL is looking for greater enforcement of FLSA among home care agencies while CMS is endorsing more self-direction.”

A self-directed consumer would generally employ one or two employees at any given time and therefore, Anderson believes, would be exempt from FLSA and most state labor laws.

Another possible disconnect is that FLSA requires overtime payments. In many self-directed programs, states have limited the number of overtime hours per worker.

“FLSA enforcement requires that if a worker were to exceed that overtime limitation, they must be paid for all hours worked that would qualify for overtime,” Anderson said. “The worker can be disciplined — even terminated — for exceeding the overtime hour limitation, but they must be paid. I am not sure that is happening in self-directed programs.”

Which will win out?

Self-directed care’s upside is too great for governments to completely ignore, but its future does hang in the balance in certain markets.

“I believe that these alternative models can and should coexist,” Spinola said. “Some of it, to be honest, is a competition and a challenge between the two models. The W-2 models don’t really care for the 1099 models because they can deliver a product or a service at a lower cost without being on the same ‘level playing field,’ as the DOL has said.”

A possible solution to the issue may be to logistically separate the two services. Realistically, someone who needs help with ADLs doesn’t need the same oversight as someone with dementia.

“Somebody that has a physical disability and strong mental acuity, they can direct their own care,” Spinola said. “They’re not going to be taken advantage of. They just need a good, trained caregiver that can support them. And there should be room for that. I think that starts with having models that are different enough where it’s OK that you’re getting a different level of care.”

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