The Department of Labor’s Caregiver Wage Initiative May Fall Short of Its Goal Unless It Also Focuses on The Funding Provided to Home Care Agencies

December 15, 2021

On November 23, 2021, the Department of Labor’s Wage and Hour Division announced an education, outreach and enforcement initiative to ensure employers pay professional caregivers minimum wage and overtime in accordance with the Fair Labor Standards Act. The initiative focuses on educating care workers on their right to receive minimum and overtime wages and targeting employers who fail to pay those wages.

This new initiative comes as the DOL spent the last several years investigating home care agencies for failing to pay overtime wages to home care workers. In 2021 alone, the DOL reports that it has recovered more than $38.7 million in back wages for healthcare industry workers.

While helping workers receive wages due to them is a worthy pursuit, the targeting of these home care agencies may not lead to increased wages for home care workers because the agencies often lack control over the caregivers’ hours and pay.

In Pennsylvania, for example, many of these agencies operate within the Commonwealth’s Medicaid Home & Community Based Services Waiver Program known as Community HealthChoices. Community HealthChoices serves individuals who are dually eligible for Medical Assistance and Medicare, older adults, and individuals with physical disabilities. A goal of Community HealthChoices is to help eligible individuals receive the care services in their homes. The eligible individuals receive the services through a small number of healthcare organizations known as Managed Care Organizations that have contracts with the Pennsylvania Department of Human Services.

In providing the program’s in-home personal assistance services, the MCOs employ or contract with service coordinators who conduct comprehensive needs assessments of the eligible care recipients and then create a service plan for the individual. The service plan details the authorized services, including the scope, amount, duration, and frequency of the services. Under the program, the care recipient has the authority to direct the services that he or she will receive and choose the providers of the services. When in-home assistance services are authorized under the plan, the care recipient often chooses a relative to provide the services.

Once the service plan is approved, an MCO sends the service authorization to a home care agency in its network to provide the services. The agency then contacts the care recipient, who will inform the agency of his or her selected caregiver, and the agency will put the caregiver on its payroll subject to the caregiver passing a background check and other requirements set by DHS.

After the caregiver meets these requirements, the caregiver may begin providing the services authorized in the service plan. The caregiver and recipient track the hours of service through an electronic verification system. The agencies submit the tracked services to the MCOs for reimbursement in accordance with a fee schedule set by DHS. The reimbursement rate for in-home personal assistance services under the agency model is a single rate for every 15-minutes of work and does not increase when the service plans require the caregivers to work overtime.

Historically, the single reimbursement rate did not conflict with FLSA overtime requirements because caregivers who provided their services through homecare agencies were exempt from receiving overtime wages. However, in 2015, a new DOL rule went into effect and purports to require the home care agencies to pay caregivers overtime at the traditional rate.

Although DHS updated its fee schedule in 2016 to incorporate an overtime rate for when the care recipients directly employ the caregivers, DHS has not updated its fee schedule to allow for overtime pay when the caregivers provide the same services through an agency.

The changed rule combined with DHS’ flat reimbursement rate puts the homecare industry on an unsustainable path. The home care agencies operate on the thin margin between the DHS’ reimbursement rate and their costs, including the amounts they pay the caregivers. When the agencies pay the caregivers overtime rates, they are often paying the caregivers more than they receive in reimbursement from DHS. Unlike traditional employers, moreover, the agencies do not set the caregivers’ hours as those hours are set by third-party service coordinators and can unexpectedly increase when a care recipient becomes sicker and requires more care. Also, unlike traditional employers, the agencies lack the ability to avoid paying overtime by hiring more workers to split the hours because the care recipients select the provider of the services. As a result of these factors beyond their control, the agencies are often unable to pay overtime wages and remain in business. Consequently, the DOL’s efforts to ensure caregivers are adequately compensated for their services may fall short of its goal unless the DOL also focuses on the funding provided to the home care agencies.

The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.