Fair pay for home healthcare workers

While we’re on vacation, we’re re-posting content from earlier last year. This post was originally published on March 6, 2012. The final rule on home health workers has not yet been published.

By Liz Borkowski

Back in December, the Department of Labor’s Wage & Hour Division published a proposed rulethat would extend minimum-wage and overtime pay protections to the home care workers who assist elderly and disabled patients with their daily needs. The Fair Labor Standards Act requires that nonexempt workers be paid minimum wage (currently $7.25 per hour) and 1.5 times their pay for hours worked above 40 hours in a week. (It also prohibits most forms of child labor, but allows children to work in agriculture, as Celeste has discussed.) Many of us are exempt from these requirements because we’re salaried executive, administrative, or professional employees. There are other FLSA exemptions based on industry or job type, and one of those exemptions is for “companions for the elderly.” Under this exemption, home care workers who help clients with bathing, dressing, eating, wound care, and other essential activities are denied minimum-wage and overtime pay. The result is predictable: In 36 states, average hourly wages for Personal Care Aides are below 200% of the federal poverty level wage for full-time workers in one-person households.

As that statistic suggests, home health workers’ earnings can vary depending on the state where they work. Sixteen states (California, Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin) already extend minimum wage and overtime protection to home healthcare workers, and five states (Arizona, Nebraska, North Dakota, Ohio, and South Dakota) and DC extend minimum-wage, but not overtime, protection. The Obama administration’s proposed rule would extend FLSA protections to all home health workers, and this change would have the most impact in the 29 states that don’t currently require minimum and overtime wages for home health workers.

The main rationale for this rule change is that Congress’s intent in exempting “companions for the elderly” from FLSA protections was to make it easy for neighbors and friends to help out the elderly in their communities — not to keep two million home care workers from earning fair wages. But the Economic Analysis accompanying the proposed rule also describes some larger benefits that may not be immediately obvious.

Who will pay?
Of course, if home care workers start earning more money, someone’s going to have to pay for that, and the transition won’t be painless. According to DOL’s economic analysis, Medicare and Medicaid together cover about 75% of the payments for home healthcare services. Growth in Medicare costs certainly isn’t anything to cheer about, but DOL puts it in perspective: the additional costs are unlikely to amount to more than half of one percent of the program’s total expenditures. Medicaid expenses are shared between states and the federal government, and some states will likely struggle to cover the additional costs for home healthcare — but they might also see some savings, which I’ll get to in a minute.

More than half of the additional costs from extending the FLSA to home healthcare workers would likely be borne by reduced profits for the agencies that employ them, DOL predicts. USA Today’s Kelly Kennedy notes that the home health industry was one of the few to be profitableduring the recession, and that one of the industry’s leading companies spent a large sum fighting the proposed rule.

Another 20% of home health expenditures come from the private sector — some are paid by private insurers, and others out of pocket. Families paying for home health services entirely out of pocket would be hardest hit by the rule change, and DOL predicts that many would purchase less care. In some cases, this would mean a greater burden on unpaid family caregivers, who already face serious financial and other hardships. Some clients would shift to purchasing home healthcare in the “grey market,” which likely means that the workers would have less training and supervision and lack access to the unemployment, disability, and Social Security benefits they’d receive if they were working officially and paying payroll taxes.

Who will benefit?
The most important outcome of DOL’s proposed rule change will be higher wages for home healthcare workers who are currently receiving less than the minimum wage and no overtime pay. Some will also benefit from the FLSA requirement that they be reimbursed for time they spend traveling between clients.

These benefits to workers can in turn help their families, communities, and clients, DOL’s analysis finds. Because most of these workers have low incomes, they’re likely to spend much of their extra earnings, which will generate more local economic activity. Home care workers’ current low earnings also make many of them eligible for public programs; recent research finds that around 40% of home health workers currently get public assistance in the form of food stamps and Medicaid, for an average total of $14,800 per worker who’s getting assistance for her family. So, some of the Medicaid programs facing higher costs for home-health services might also see their beneficiary rolls diminish as formerly eligible home health workers earn more income.

Higher wages, overtime pay, and payment for travel time can also help attract and retain workers to an industry that currently has a high rate of turnover — from 44% to 100% per year, according to different studies cited by DOL. Reducing the turnover rate can save employers money and also give stability to clients, who benefit from being able to develop long-lasting relationship with the workers who attend to some of their most intimate needs.

DOL’s economic analysis also predicts that home health agencies will prefer to spread job-hours among more workers (including some additional hires) rather than pay overtime to workers who are currently putting in more than 40 hours per week. Reducing overtime can result in health benefits for both workers and their patients, DOL explains:

Many studies have shown that extended work hours result in increased fatigue, decreased alertness, and decreased productivity, negatively affecting employee health and well-being. A 2004 National Institute for Occupational Safety and Health report found that “12-hour shifts combined with more than 40 hours of work per week reported increases in health complaints, deterioration in performance, or slower pace of work.” One study that analyzed 13 years worth of data and nearly 100,000 job records notes that “long working hours indirectly precipitate workplace accidents through a causal process, for instance, by inducing fatigue or stress in affected workers.” It is therefore telling that “[d]irect care workers have the highest injury rate in the United States, primarily due to work-related musculoskeletal disorders.” The rate of days away from work (work days missed due to on-the-job injuries) for nursing aides, orderlies and attendants was almost four times greater than the all-worker rate–449 per 10,000 compared to 113 per 10,000 for all workers. One of the results of the FLSA’s overtime pay requirement is to induce employers to hire more people to work fewer hours each. Doing so in those circumstances where excessive overtime hours are worked may therefore result in fewer injuries and illnesses incurred.

Extending FLSA protections to home healthcare workers will not only correct a long-standing injustice, but provide significant benefits to workers, their families, state economies, and home health clients. While the burdens that the rule change will place on agencies and family caregivers should not be ignored (and, in the case of caregivers, should be addressed by other policies), they should also not stand in the way of achieving a stronger home healthcare workforce.

The Department of Labor has extended the public comment period for this proposed rule through March 12.

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