Home healthcare companies must spend 80% of Medicaid payments on workers' wages under new rule

AUSTIN (KXAN) -- The federal government will require home healthcare companies to pay workers more.

The "Ensuring Access to Medicaid Services” rule, finalized by the U.S. Department of Health and Human Services this week, requires at least 80% of Medicaid payments for home care services go to workers’ wages, as opposed to administrative overhead or other costs. 

According to the White House announcement on Monday, more than seven million seniors and people with disabilities rely on home and community-based services (HCBS), often funded by Medicaid, to provide this type of long-term care in their own homes and communities. The White House cited a study showing higher wages will likely reduce turnover and lead to a higher quality of care for people receiving these services.

The requirement was finalized alongside another new rule creating a nationwide minimum staffing standard for skilled nursing facilities for the first time ever.

Vice President Kamala Harris discussed the rule at a roundtable discussion in Wisconsin earlier this week, saying, "This is about dignity. And it’s about the dignity that we as a society owe to those, in particular, who care for the least of these." She went on to call it "God's work... to care for people who often you’ve never met before, they’re not related to you, and you care for them as though they’re a member of your family."

In her remarks, Harris said Medicaid currently pays $125 billion a year to home healthcare companies, which employ hundreds of thousands of workers.

"However, before this change in the system -- which means forever -- home care companies were not required to report how their federal dollars were being spent," she said.

Under the "Ensuring Access to Medicaid Services” rule, states will also be required to be more transparent in how much they pay for home care services and how they set those rates. Plus, they will have to create an advisory group made up of home healthcare beneficiaries and workers to consult on rates and compensation.

Costs for home healthcare have gone up by 14.2% over the past year, according to Consumer Price Index data released earlier this month and covered by The Hill. Its report showed that represented the largest percent increase in home healthcare costs during a 12-month period since the Bureau of Labor Statistics began collecting data on such costs in 2005.  

When the rule was first proposed in 2023, the Home Care Association of America and the National Association for Home Care & Hospice came out in support of parts of the regulation, such as the establishments of advisory groups. However, in a letter to the Centers for Medicare and Medicaid Services, the two groups decried the requirement to spend 80% on worker's wages. The letter states, "It is incongruous to both impose requirements that increase the administrative burden on providers while at the same time limiting the resources available to fund those same functions."

Following the rule's finalization, the National Association for Home Care & Hospice echoed its earlier concerns, calling it a "misguided policy that will result in agency closures, force providers to exit the Medicaid program, and will ultimately make access issues worse around the country."

The group's president, William Dombi, said in a statement, “We all agree that more needs to be done to support the direct care workforce; however, this policy will make things worse, not better."