GAO Reports on DOL Home Care Rule
To address these objectives, GAO reviewed relevant provisions of the existing regulations, the proposed rule, DOL’s regulatory impact analyses, and the final rule. GAO also visited six state Medicaid programs selected in part for variation in state Medicaid program design; reviewed relevant federal regulations; interviewed government officials and representatives from 14 national organizations representing the spectrum of home care stakeholders, including NASDDDS. The report explicitly does not assess DOL’s authority to issue the Home Care Rule or whether DOL’s rulemaking procedures or analyses complied with applicable legal requirements.
As might be expected, GAO’s interviews with national stakeholder organizations yielded differing perspectives about the rule’s impact, although the agency reports that representatives of almost all of the 14 national organizations “agreed that employers will likely manage workers’ hours more closely.” Some organizations mentioned “ that employers may avoid increased costs associated with overtime pay by limiting workers’ hours,” while “a couple of stakeholders noted that these employers would have some increased costs associated with hiring and training new workers to continue providing the same level of services to consumers.” Representatives from four national organizations “said the Home Care Rule may help create more full-time employment opportunities for part-time workers,” while representatives in 4 of the 14 national organizations “emphasized how workers who are employed for more than 40 hours in a workweek may…see their hours and wages reduced by employers seeking to avoid paying overtime wages.” Extending minimum wage and overtime protections to home care workers “may help expand the workforce and reduce turnover at a time when the demand for home care services is expected to increase,” according to representatives in 8 of the 14 national organizations. On the other hand, five national organizations “predict that if some workers’ hours are reduced, the Home Care Rule could lead to higher turnover among workers and cause them to seek out other jobs, which could result in a labor shortage.” Representatives in six national organizations “said the Home Care Rule could result in better quality of care for consumers by reducing turnover among workers.” However, representatives in eight national organizations “expressed concern over how the implementation of the overtime requirements might potentially affect the continuity of care for some consumers.”
GAO reports that “effects on Medicaid home care services will vary by state.” Officials in five of the six states GAO visited (Arkansas, California, New York, Pennsylvania, Tennessee, and Vermont,) were “still in the process of trying to determine how the FLSA [Fair Labor Standards Act] joint employment principles apply to their specific Medicaid programs and whether they will have to make any changes to their programs to keep the cost of home care services affordable. Two of these states also “said they need additional time to understand the joint employment guidance in order to determine how their existing Medicaid programs may be affected by the FLSA framework and what steps they may need to take to comply,” including determining whether any of their programmatic changes would require CMS approval (CMS officials told GAO the approval process could take from 90 to 180 days, depending on the type of change). Most state officials GAO interviewed “were concerned about the potential effects of the Home Care Rule on existing programs that were structured and made affordable by means of the companionship or live-in exemptions.
Among the potential effects GAO reports hearing from the six states were:
• Consumer-directed programs. Officials “expressed concern over how the
Home Care Rule might affect the flexibility of these programs or restrict consumer choice in situations where the state may be considered an employer along with the consumer.” GAO indicates that the National Association of Medicaid Directors (NAMD) reported that “maintaining current levels of consumer choice under Medicaid either becomes more expensive in certain situations as a result of the Home Care Rule, or may be sacrificed in some situations in favor of cost control.”
• Family caregivers. Some states “may consider limiting the number of hours workers, including family members, can work in order to minimize overtime costs once the Home Care Rule goes into effect, which could potentially reduce the available workforce,” GAO reports. In addition, “some family caregivers may rely on the income they receive by providing care.” Some state officials “specifically expressed concern over situations where family members’ work hours may be reduced in response to the Home Care Rule in order to minimize overtime payments, which could reduce the family’s income.” Though DOL guidance describes the parameters of an employment relationship versus a familial relationship for the purposes of the Home Care Rule, officials from one national organization told GAO “that it may be a challenge for some consumers and their family caregivers to determine when FLSA principles apply.”
• Respite care. In one state GAO visited, officials “said a worker may easily incur overtime in overnight respite situations, which could potentially strain a consumer’s budget for care,” and “introducing additional workers to provide respite in order to avoid overtime costs may not always be practical.”
• Live-in arrangements. Some officials told GAO they were “concerned about how FLSA requirements may affect live-in care arrangements for those consumers who require substantial care and how it could be costly to comply with the FLSA in certain live-in situations.” GAO points out that “many of these live-in arrangements were designed without consideration of FLSA overtime requirements and were made affordable by reliance on the companionship and live-in exemptions. State officials in one state GAO visited “said they may redesign one of their live-in programs in response to the Home Care Rule to help keep overtime costs down,” but needed “time to reevaluate and possibly rewrite parts of existing program guidance.”
• State budgets. Officials in all six states “said the Home Care Rule has the potential to strain limited state budgets.” For example, officials in three states said that “Medicaid rates may not be sufficient to cover additional costs incurred as a result of the rule, including compensable travel time between Medicaid beneficiaries.” According to state officials in three states their state legislatures “had not yet budgeted additional funding that may be needed to comply with the Home Care Rule once it goes into effect. GAO points out that “states may have to make systems changes to track overtime among workers, for example, which could be costly and would require time to implement.”
• Capacity. In addition to implementing the Home Care Rule, state officials GAO interviewed “expressed concern over resources and having the capacity to implement and comply with other recent federal requirements,” such as the
Patient Protection and Affordable Care Act’s (ACA’s) penalties for employers failing to offer full-time employees affordable health insurance and the Centers for Medicare and Medicaid Services (CMS) regulations on home and community-based services (HCBS).
GAO reports that “states have been reexamining their roles and responsibilities under
Medicaid in order to determine if they are third party joint employers in certain situations and therefore responsible for meeting the FLSA’s minimum wage and overtime requirements. States, the brief says, are “particularly concerned about situations in which they may be a joint employer to home care workers who provide care for multiple consumers because such workers may accrue overtime.” The agency recognizes DOL’s efforts, in collaboration with national stakeholders and federal partners, to provide two major pieces of guidance aimed at assisting states to understand their FLSA obligations and to provide outreach to states and other stakeholders.
GAO concludes that “while DOL has adopted [a] phased-in enforcement strategy to promote compliance, the effects of the Home Care Rule still remain uncertain.” According to the report DOL officials told GAO “it would be premature to think about the effects of the rule since [DOL is] developing further implementation plans and focusing on providing technical assistance.” DOL officials also said “they had not made any plans for evaluating the Home Care Rule and that it is too early to design such a study.” The watchdog agency concludes that “while more home care workers will be entitled to receive federal minimum wage and overtime pay protections as a result of the Home Care Rule, the effects of the rule will remain unclear until after it is implemented” since they will “largely depend on how employers respond to overtime requirements and the changes that are made to state Medicaid programs.” DOL’s “recent announcement regarding the phase-in of its enforcement, coupled with its substantial outreach to stakeholders and revised estimate of the economic impact of the rule,” GAO argues, “highlight the challenges and complexity of implementing the rule.” GAO also observes that “the future of the Home Care Rule will depend on the outcome of pending litigation and DOL’s subsequent decisions about implementation.” However, DOL warns, “in the absence of a plan to evaluate the effects of the rule, DOL may be unprepared to collect the necessary data” to understand the rule’s impact. “Given the uncertainty of the Home Care Rule’s ultimate impact,” GAO asserts that “planning for a retrospective review is important because regulations can change behaviors and result in consequences that cannot be predicted prior to implementation.”
GAO recommends that “the Secretary of Labor should take steps to ensure the agency will be positioned to conduct a meaningful retrospective review.” These steps should be taken “in consultation with the Centers for Medicare & Medicaid Services, and could include, for example, identifying metrics that could be used to evaluate the rule, and implementing a plan to gather and analyze the necessary data.” DOL’s Wage and Hour Division (WHD) agreed with GAO’s recommendation and “said it is working to develop data collection plans and to explore a potential evaluation that is focused on “the Home Care Rule. As part of this effort, WHD noted that DOL will continue to work with the Department of Health and Human Services (HHS) and other federal partners.
FMI: The GAO report is available at http://www.gao.gov/assets/670/667601.pdf.