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Lawmakers Seek Higher Pay for Personal Care, Full Funding in Doubt

No one argues that personal-care workers don’t rate a pay hike, but giving them a boost will add $131 million to the state’s Medicaid expenses over next 12 months

Nursing assistant
Credit: BLS

New Jersey lawmakers want to boost Medicaid payments for certain home-based healthcare services traditionally plagued by low wages and high turnover, but where the state will find the money remains somewhat of a mystery.

The Assembly and Senate overwhelmingly approved legislation Thursday that would, over five years, increase to $25 the hourly rate Medicaid pays for personal-care services. These deliver critical assistance with daily tasks like bathing, dressing, and using the bathroom that help elderly residents and individuals with disabilities remain more independent.

Most of this work is now reimbursed at just over $16 an hour in the Garden State, while Pennsylvania pays $19.50 and New York spends up to $23, according to lawmakers.

A perennial priority

Increasing New Jersey’s payment structure for this work has long been a priority for legislators in both parities and healthcare advocates, especially given the expanding need for these services. Roughly 30,000 residents now get help from these trained, licensed caregivers, who supplement the role of nurses and other clinical staff.

“The elderly population is growing and New Jersey must be prepared,” said Sen. Richard Codey (D-Essex), a lead sponsor of the bill along with Sen. Teresa Ruiz (D-Essex), and Assemblywomen Eliana Pintor Marin (D-Essex) and Annette Chaparro (D-Hudson). “Increasing this reimbursement rate will bolster the home-health industry and help prepare us for the future,” Codey said.

If signed by Gov. Phil Murphy, the bill — which would boost the state’s reimbursement to $20 hourly in July, then $21 in January, adding another dollar each year until 2025 — would add more than $131 million to the state’s Medicaid tab over the next 12 months. While half of that increase would be covered by federal sources, the state share would total $65.5 million.

Nevertheless, legislative representatives said the $38.7 billion budget plan lawmakers adopted for fiscal year 2020, which begins in July, includes $21 million in additional funding to increase these payments. This is enough to boost the rate by a dollar or two, experts note, but it still leaves the state at least $44 million short of what it needs to meet the wages outlined in the bill, if it is approved by Murphy.

State officials are also facing calls to increase rates for direct-support professionals, or DSPs, a separate group of licensed caregivers who undergo more advanced training in order to assist developmentally disabled people with communication, transportation, job skills, and more. These workers currently earn less than $12 an hour, on average. Lawmakers have provided $20 million in supplemental funding for this in recent years, but advocates said more is needed to properly pay, retain, and recruit the appropriate workforce.

Passing along the costs

With the personal-care services, concerns about the increased cost — and the possible lack of available funding — prompted questions from the New Jersey Association of Health Plans, which represents the five insurance companies that provide managed-care services for the state’s Medicaid. These companies would be required to pass along the increased reimbursement to the agencies that hire and train personal-care assistants.

“In order for the (managed-care organizations) to pay an increased reimbursement each year, the funding needs to be provided,” the group noted in testimony last week.

According to a statement from the Assembly appropriations committee, which approved the bill last Monday, by 2025 the measure would add $387 million in total costs to the Medicaid program, of which nearly $194 million would need to be covered by the state, after the federal contribution was taken into account. In January 2025, the reimbursement will also be subject to annual inflation increases.

In addition, AHP worried that rates set by statute would tie the hands of managed-care companies and restrict their ability to negotiate with hospitals, doctors, and other providers, reducing their ability to control costs. “As a result, we anticipate that this bill will have a significant impact on the cost of the Medicaid program for both fee-for-service and managed care,” the group told the Assembly committee.

The cupboard is bare

Any hike in personal-care service rates would build on an increase the state made in the spring of 2018, when Murphy included an extra $16.7 million in funds in that year’s budget to boost reimbursements to personal-care assistants by at least $1 an hour, to top $16. But state officials said they did not have the funding capacity to raise the payment to $19 an hour, as lawmakers had required through legislation they adopted in 2017.

After the measure passed in 2017 to raise the rate to $19, then-Gov. Chris Christie conditionally vetoed the bill, sending it back to the Legislature for changes. The governor raised questions about the availability of funding for the change — calling for the boost to be delayed until money could be identified and eliminating a cost-of-living adjustment.

In addition, in his veto message Christie took issue with the fact that the version lawmakers approved did not guarantee that the full increase would go into the pocket of the workers. He urged lawmakers to require agencies that hire these employees to file annual reports detailing where the money was spent.

“Finally, according to the sponsors of this bill, one of the goals of this bill is to allow providers to increase the pay for workers who provide these services to Medicaid beneficiaries. I fully support higher pay for these workers,” Christie wrote.

“These increases cannot and should not go to administrative costs or additional profits for the MCOs, since the sponsor and supporters contend that is not the intent of the bill,” he added.

Lawmakers adopted these changes and approved the final version in October 2017. And the original version of the latest bill, first introduced in February 2019, included this sentence: “Any and all rate increases realized pursuant to this section shall be used solely to increase wages for workers who directly provide personal-care services.”

But the measure was amended in recent weeks and that language was struck from the final version. The bill adopted Thursday is silent on how the additional money would be distributed, apparently leaving the decision up to the agencies that employ the personal-care workers. Legislative staff said this flexibility enables agencies to ensure they can cover any increase in payroll taxes or other administrative costs associated with paying their staff more.

“We cannot raise the wages on personal-care workers without realizing their employer’s costs are also rising,” Codey noted.

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