Federal rule change to hurt LA health care delivery

Last week, Pres. Barack Obama’s Department of Labor threw a sop to labor unions that creates yet another potential financial crisis for Louisiana.

The department issued rules regarding the Fair Labor Standards Act which wiped away the exemption to pay minimum wage and overtime to unskilled home health care workers. While a minority of states already mandates minimum wage or higher payments and/or overtime to these workers, Louisiana is among the majority that does not have to pay $7.25 an hour or time-and-a-half for any work over 40 hours. Unions long have wanted this because this boost in pay could make unionization more attractive for these workers with the potential increase in pay that could justify union dues.

While a good deal of the market involves families paying from their own resources or from insurance to a person or organization, in Louisiana a significant portion of the quarter billion dollars a year spent on Medicaid waiver programs is on reimbursements for hiring these workers. The state contracts to agencies, paying a specified rate. From that, agencies set their own wages and overtime policies with an eye to having enough left over to stay in business. Also impacted by this change would be the state’s fledgling self-direction program, where families are given Medicaid dollars to hire their own workers. These would have no choice but to pay the higher rate if they are not doing so already (which many do, given the savings from reduced bureaucracy from them taking on that function), but that reimbursement rate fluctuates with some hours budgeted as many as two bucks below $7.25, meaning depending on circumstances for some it could cause hardship.

One of the casualties of tight budgetary times in recent years in the state has been reimbursement levels. With the federal diktat beginning in 2015, upwards price pressure in the industry, already exacerbated by the inefficiency of the artificial concept of the minimum wage in other jobs when added to this will make it even more difficult to hire using a similar pot of money adjusted for expected volume growth. This makes a scenario of keeping service levels the same unlikely without additional revenues, for at the same levels agencies will pay proportionally more when already they operate on narrow margins.

While agencies could try a strategy of paying fewer people for overtime, this would create additional hiring necessities in a field that often features shortages, which in turn jacks up recruitment and training expenses, potentially actually costing more. The alternative would be reducing services, or fewer hours they are able to fill, meaning more waiver recipients unable to have services or to receive their full allotments.

But then this could cause legal problems, as the state has an obligation to provide these services to a certain level. If too many agencies can’t hire as many workers, leaving people on waiting lists for services or unable to enjoy their full allotment of medically-necessary hours, this could run afoul of legal standards that mandate the state to provide care in the least restrictive setting. To prevent that from happening, this puts pressure on the state to raise reimbursement rates, which then either beggars other parts of the budget or taxpayers by taking more out of their hides in the future.

Thus, this new rule creates greater fiscal strains on the state. About the only salutary aspect of this government interference in the proper pricing of labor is that as a response it could accelerate reform to curtail the preferential treatment nursing homes receive in funding. Money currently going to subsidize the inefficient overutilization of them at the expense of home care could be shifted to stabilize those reimbursement rates and through reducing nursing home populations in favor of greater home- and community-placements. Unfortunately, this would require changing state law and, worse, the nursing home lobby has been fighting to lock in these wasteful privileges constitutionally.

Lost in all of this is the workers themselves suffer a greater level of unemployment if there is not beggaring of other spending and/or taxpayers. The same amount would have to be spread among fewer of them, replicating that familiar flaw from an imposed minimum wage. But leftists who wrote and support the rules with their union allies instead hope to force greater government spending as a result of this, with any progressive tax increases as a bonus, to avoid this reality.

All in all, the change creates an unpalatable future both for job creation, taxation levels, and in creating efficient, optimal use of economic resources. At the very best, the state would be able to overcome the special interests behind nursing homes to mitigate the malevolent impact of the revised rule, but losing a chance to create more efficiencies in health care delivery to the developmentally disabled and elderly. The worst means more unemployment, reduced state services, and/or increased state taxes. But that’s the price that gets paid when special interests get put before the people’s interests.