For JoAnn Holmes, a 65-year-old home health aide with 30 years of experience, getting by on $10 an hour was always difficult. It got harder last year when her company cut her work back to three days a week. When she asked her employers for a reason, they said, “We don’t have enough work to give.”
Holmes wasn’t the only one to see a reduction in hours during that time period. Last year, the Department of Labor approved a new rule which resulted in home care employers to significantly cut down their workers’ hours. And industry experts warn the experience carries lessons for the next big change coming to the industry: a big increase in the minimum wage.
The rule was meant to help direct care works like Holmes by making them eligible for federal minimum wage, time-and-a-half pay for overtime, and pay for time spent traveling between clients under the fair labor standards act.
But instead, home care employers responded by cutting back hours to prevent overtime and hiring more part time workers because they did not have enough money. As a result, the people who were hurt the most were the ones rule was trying to protect.
So now Holmes currently works from 9 a.m. to 1 p.m. for three days per week, earning roughly $100 per paycheck and tries to pay $800 per month for her apartment in Harlem. She turns to her sister and granddaughter to pay her bills.
“It’s tough,” she said. “They have been helping me.”
With fewer hours per week to work, Holmes is even more excited for the upcoming increase in New York’s minimum wage. She hopes, what she has lost in hours, she can make up in increased pay.
But experts fear that due to the unique nature of health care industry, this increase in minimum wage might end up hurting the workers instead, just like the home care rule. Unless the state steps in and pays the full cost of the increase to the home care employers, which is estimated to be $2.19 billion.
There are around 2 million home care workers in the U.S., which are mainly divided into home health aides and personal care aides. New York State is the largest employer of the former and second largest for the latter, with the hourly mean wage $2 more than the current minimum wage.
So even though not everyone in this industry is at minimum wage, they difference is enough for the workers as well as employers to feel a significant jump.
Industry leaders say workers deserve to get paid a living wage, but they argue the state needs to reimburse the cost of this raise or a lot of agencies won’t be able to operate.
“We aren’t like Papa Jones, who can increase its prices, we can only change what they state reimburses,” said David Totaro, chief Government affairs officer of BAYADA Home Health Care.
Unlike the fast-food sector, the health care industry cannot easily pass on the cost of increased wages to its consumers. They only way they can fund this change, without cutting down the workforce, is by asking the state for more money, unless they are under private management.
The majority of home care services in New York are reimbursed through public sources, like Medicaid and Medicare, at levels set by the government, said Roger Noyes, director of communications at Home Care Association of New York. And the state is obligated to provide funding for in cases like these.
But it doesn’t always work out that way. For instance, with the home care rule approved last year, the state was meant to cover the additional costs, but there were significant delays and no clear guidelines, Noyes said.
“The agencies started paying their workers more in October but the state support is just now starting to arrive and in a unevenly distributed manner and it’s not even clear how the state has calculated those add-ons,” Noyes said.
In some cases, the state has paid by implementing rate changes for the middleman, which are managed care providers and left it up to them to negotiate with the home care agencies, Noyes explained. While in other cases the providers are deemed ineligible and they are waiting to talk to their main care plan to talk about the distribution.
This has raised more concerns regarding the state reimbursement being implemented for minimum wage the same way as they were for fair labor standards act. Especially since the amount decided by the state is falling far short of what home care industry claim to need.
“Fast forward to January, if state starts implementing add-ons for the minimum wage and the numbers aren’t already going to match the real cost impact and if there is a duplication of the process of fair labor standards acts, then that’s a big cause of concern,“ said Noyes.
The state has committed to $211 million for home health agencies for offsetting the effect of this increase but that amount is roughly one third of the help required by home care industry according to experts.
The result could be job cuts. Almost 60 percent of home care agencies reported a need to reduce staff and other expenses to function, according to a recent survey conducted by Home Care Association of New York.
This isn’t simply of matter of paying someone five more dollars, said Carol Rodat, NY Policy Director for Paraprofessional Healthcare Institute. An hour of aide’s services currently costs $20 after adding taxes and benefits, for a high-end agency, so if the wage increases, the end costs will be much more.
“So you can see how the increase in wages will change things,” said Rodat. “They need more money and they are right.”
Rodat is confident that the state will pay for the whole increase. “Because this is [New York Gov. Andrew] Cuomo’s signature policy, I would say the state is going to cover the cost,” she said.
If the state is won’t cover the cost and enact a plan with timely reimbursements then closures are imminent, said Noyes.
“Service reductions, layoffs, inability of providers to make payroll eventually, that’s all in the horizon,” he said.