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This article appears in the Summer 2015 issue of The American Prospect magazine. Subscribe here.
Laddie Read, a 69-year-old with cerebral palsy, can’t get up without help. When he awoke one morning last April expecting to find his home-care aide and instead saw a complete stranger at the foot of his bed, Read was terrified. “I had no idea who was there,” he recalls. “If you were bedridden and somebody just walked into your house,” he says, “how would you feel?”
Read requires help to move from room to room, get into his wheelchair, use the bathroom, dress, and bathe. He can’t cook, shop, or clean the house. To assist with all these tasks, the Portland, Oregon, resident relies on home-care aides seven days a week. It turned out that the stranger was a replacement. His usual aide couldn’t come in—but no one bothered to tell Read. While abruptly losing caregivers isn’t uncommon in Read’s decades of using the service, it was no less upsetting. The new aide couldn’t understand what Read was saying—his caregivers must be trained to understand his severely impaired speech—and had no clear idea of how to perform the job. “It felt like hell,” Read said, speaking through an interpreter. “When this happens, my whole world stops.”
Thousands of people dependent on home-care workers face similar disruptions every day. Turnover in the industry is extreme. In 2014, the median rate topped 60 percent, as documented in an industry study—that’s six out of ten caregivers leaving the job every year. It’s not surprising that so many workers flee the profession, which has intense physical and emotional demands—and poverty wages. The median earnings are less than $21,000 a year. That’s well below the annual median across all occupations, which is almost $35,000, and just above the federal poverty line for a family of three. Earnings are so low that about half of all at-home caregivers are on some form of means-tested public assistance, including Medicaid and food stamps, according to the Paraprofessional Healthcare Institute, a research organization.
Why is pay so bad for these workers? One explanation is that home-care aides comprise several traditionally marginalized groups. About 90 percent of home-care workers are women; almost half are of color. And since the job doesn’t require a high school diploma, most have low education levels. America’s chronic devaluing of care work, be it for children, the ill, disabled, or aging, reinforces a vicious cycle of low status and low pay.
So entrenched is the discriminatory view of caregiving that the country’s most important labor law deliberately shuts these workers out. When the Fair Labor Standards Act (FLSA) was passed in 1938, it transformed the lives of American workers by setting the eight-hour day and establishing other basic protections, including extra pay for overtime. However, the law excluded domestic caregivers. Astonishingly, it still does. As a result, home-care aides do not even have the right to receive minimum wage and overtime pay.
At-home caregivers have a range of titles, including personal care assistants, home-care aides, home health aides, homemakers, and companions. As defined by the Bureau of Labor Statistics, there are two basic types of home-care workers, “personal care aides” and “home health aides.” Both help with daily tasks like dressing, bathing, and cooking, but home health aides also perform basic medical duties, such as giving medication and taking vital signs. The country’s 875,000 home health aides most often work with clients short-term, in the days after they’ve returned from the hospital after treatment for an acute condition. Personal care aides, of which there are 1.2 million, are the helpers who stay with clients for the long haul, sometimes for decades.
Under federal law, personal care assistants do not need any licensing or training but home health aides must have 75 hours of instruction to carry out their medically oriented duties. While home health aides must have this extra training, their median earnings are not even a dollar an hour more than those of personal care assistants.
The median earnings for home-care workers are less than $21,000 a year—well below the annual median across all occupations. The Fair Labor Standards Act, which set basic protections for American workers such as the eight-hour work day, has excluded domestic caregivers since its passage in 1938, which means those workers do not have the right to minimum wage and overtime pay.
Instead of deficient wages and high turnover, these workers could enjoy proper compensation and be rewarded with raises and promotions for receiving ongoing training and honing their skills, which rarely, if ever, happens today. There are pathways to achieve these ends, which include granting home-care workers overtime and the minimum wage, allowing them to unionize, shifting the industry to a direct public employee model to remove the profit motive and, most vitally, increasing government reimbursement rates.
The government doesn’t keep good statistics on how home care is financed. Funds come from multiple sources, the biggest being Medicaid and Medicare, according to estimates by Candace Howes, an economist at Connecticut College who chairs both the economics and the gender and women’s studies departments. In determining these numbers for the Department of Labor, Howes’s modeling shows that public money pays for 83 percent of wages for both home health and personal care aides. Medicare is a federal program; Medicaid dollars come from both federal and state coffers and it is administered differently by each state. The remaining funding that pays for at-home care comes through other federal programs, including the Department of Veterans Affairs, as well as private health insurance and out-of-pocket payments by the consumer.
Low reimbursement rates are at the heart of the problem. Based on a sampling of 15 states conducted by Health Management Associates, a consulting firm, the average Medicaid allocation in 2012 was $17.70 an hour. Even when workers win wage increases thanks to unionization drives, they will soon max out their earning potential. And if reimbursement rates don’t grow, then workers can only advance so far. The increased commercialization of the sector also plays a role, by diverting funds that might otherwise flow directly to caregivers.
Commercial Caregiving Meets a Devalued Profession
There are two broad categories of employers of home-care workers—private agencies and public registries. Both entities match people seeking help with qualified caregivers and oversee management and payroll. In contrast to the state-affiliated registries, most private agencies operate as for-profit businesses.
Among the private agencies there is a range of models, including for-profit companies, franchises, nonprofits, and a handful of worker-owned cooperatives. Due to the absence of monitoring and data collection, there’s no comprehensive picture of how much of the market each type of agency commands. However, piecing together what data there are can shed some light on the money flows.
The burgeoning franchise home-care companies are the fastest-growing piece of the industry. They include such national chains as Comfort Keepers and Homewatch CareGivers. An exact breakdown of how many workers are employed by chains compared to other types of agencies isn’t clear. It is obvious, though, that much of the revenue at the chains goes straight to the top. Their gross profits range between 30 and 40 percent, as reported by Franchise Business Review. Gross profit represents the portion of money left over after subtracting from revenues the direct costs of providing the service. In this case, these expenses primarily include employee pay. CEO compensation at the four publicly traded national home health care chains, adjusted for inflation, has increased more than 150 percent since 2004, a report by the National Employment Law Project (NELP) finds. In sharp contrast, when adjusted for inflation, the report says average hourly wages for home-care workers over that same time have declined by nearly 6 percent.
Even good providers run up against insufficient reimbursement resources. For example, Cooperative Care is a worker-owned company based in central Wisconsin that was established in 2001. Its 60 home-care aides provide services for about 150 clients. The agency is for-profit, but because its mission includes maintaining good working conditions, its profit margins are considerably slimmer than the chains’.
According to the company’s board president, Tracy Dudzinski, the current Medicaid reimbursement rates Cooperative Care receives via a regional managed care organization (in other locations, the state dispenses funding) range from $20 to $15 an hour. The typical reimbursement is $17 an hour, she says.
From this sum, the co-op pays its overhead, including rent and insurance, as well as employees’ hourly wages. And, anomalous in the industry, the co-op also uses its reimbursements to cover overtime, travel time (some aides visit multiple clients a day), holiday pay, and paid time off, including sick days and vacation time. In addition to this, the company foots the bill for ongoing training to build its aides’ skills.
An aide with no experience would start at $9 an hour and could work up to earning $11.10, according to Dudzinski. While that’s only slightly above the national median, Dudzinski says, these workers take home far more than that hourly rate. To illustrate the point, she gave an example of the income of a representative full-time employee. This caregiver earned about $30,500 in 2014, including more than $3,000 in overtime, another $3,000 in mileage, and a profit-sharing payout of $600. This annual income is almost 50 percent higher than the industry median.
After previously working at a private agency and having put in 11 years at the co-op, Dudzinski, who is also a caregiver and the agency’s administrative coordinator, says she now sees how much money owners can skim off the top. “They don’t pay their workers well because they want to line their own pocket,” she says.
Indeed, overtime alone adds up to a tidy sum, according to the industry’s own numbers. A report commissioned by the International Franchise Association found that among agencies in states without overtime protections (in the absence of federal requirements, some states have adopted their own), 89 percent of caregivers routinely worked overtime. Among the agencies surveyed for the report, workers averaged about eight overtime hours per week. At the median hourly rate of $9.83 for personal care aides, a company with 300 workers that refused to pay extra compensation would retain more than $520,000 a year. Conversely, a worker making $10 an hour and compensated for eight overtime hours weekly would keep an additional $2,000 a year.
In response to worker advocates’ demands for labor-law protections, in 2013 the Department of Labor (DOL) at last promulgated a rule allowing caregivers minimum wage and overtime under the FLSA. The rule was set to take effect at the start of 2015, but private agency owners have been fiercely defending their turf. Trade groups, including the Home Care Association of America, opposed the rule, claiming agencies can’t afford to pay $7.25 an hour, let alone overtime. These groups say that if private care agencies must follow standard labor protections, they’ll be forced to raise prices beyond what the ill and disabled could manage. And they have succeeded in holding up the new regulation’s implementation with a legal challenge. Last January, U.S. District Judge Richard J. Leon in Washington, D.C., vacated the DOL’s rule, saying it contravened the language of the FLSA. The DOL is currently appealing this decision.
Although industry groups claim that paying home-care workers according to normal wage and hour rules would break the bank, Cooperative Care demonstrates this is a fallacy. Another way to ratchet up compensation is with a direct-employee model operated through the state. These caregivers are matched with clients through registries operated by states and counties. The state government determines wages, issues paychecks, and handles administrative work. Similar to the cooperative model, this does away with the middleman and thus far has more readily lent itself to unionization, which in turn has raised wages in some states, most notably Oregon.
The Oregon Example
In the summer of 2013 in a hotel in Portland, about two dozen home-care workers and a few staff from their union, the Service Employees International Union (SEIU) Local 503, huddled in a conference room. They had been negotiating their most recent contract with the state for the previous seven months. About 20,000 caregivers who work through the state registry are represented by SEIU.
Home-care workers in Los Angeles rally in Los Angeles in April for higher wages. Many low-wage labor advocates argue the unionizing is key to raising wages and improving work conditions.
Everyone in the conference room was tired, including Andrew Boeger, a researcher with the union. He’d been hunched over a laptop running numbers on spreadsheets for hours. Then two workers and the union’s chief negotiator stepped into the room. They’d struck a deal to raise their hourly base wage from $10.40 to $13.75. “There were women who were crying,” Boeger says. “One woman said, ‘Now I can afford to fix my car,’” he recalls. “People were literally weeping.”
The keys to getting higher pay in Oregon were the ability to bargain collectively and to maximize Medicaid funds through the Affordable Care Act (ACA) expansion. To this end, first the union worked with state lawmakers to ensure more federal money would be in Oregon’s purse. Since Medicaid is administered by the states, each sets its own reimbursement rates for at-home caregivers. The Medicaid budget comes from each state’s contribution, coupled with federal matching funds for which states must apply. SEIU lobbyists toiled with sympathetic state lawmakers to take full advantage of the Medicaid higher spending under the ACA. They crafted Oregon’s Medicaid policies so that the state secured almost two-thirds of its Medicaid money from federal coffers, according to Heather Conroy, executive director of Local 503. This put Oregon among the top half of federal Medicaid recipients in the country. Crucially, the union negotiated a bigger slice of that additional revenue for home-care aide pay.
This win was significant. Non-union at-home caregivers in Oregon perform the same tasks as those employed by private agencies, yet are paid considerably less. Joy’e Willman, who works for a private agency and has been one of Laddie Read’s caregivers for more than 20 years, was earning just $9.90 an hour with no overtime and no benefits. She just got her first raise in six years—a mere 35 cents an hour more.
Many low-wage labor advocates argue that unionization is key to improving conditions. To that end, SEIU is currently leading a high-profile national campaign called the Fight for $15—an effort to raise the floor on earnings. Low-wage workers, mostly in the fast-food industry, have been grabbing headlines—and raises—through picketing and walkouts. And as of last fall, increasing numbers of home-care aides have signed on.
A Federal Fix?
The raise Oregon’s caregivers secured may seem momentous, but it falls short of a living wage. At-home aides in other states have made some strides in establishing unions and shifting to direct public employment with similar outcomes. Among these states are California, Washington, New York, and Massachusetts, which have median hourly rates ranging from $10.34 to $12.86. Even when workers hold the purse strings, as they do in co-ops, they face a fundamental barrier to higher pay—the reimbursement rates for Medicare and Medicaid are insufficient. After all, $17 an hour can only go so far. Squeezing out waste and firing the middleman aren’t enough to get home-care pay up to a level commensurate with the demands of the work and the needs of workers.
Another problem is that not only are the wins limited, they are also fleeting. Within the current system, the sums available to fund at-home caregiving can fluctuate with every state budget cycle and political changeover. Governors and legislators friendly to publicly funded programs might work hard to get Medicaid dollars and may set acceptable reimbursement rates for workers. But new leaders with a divergent agenda could easily roll back those victories in the next budget. Consequently, some caregiver advocates contend that, ultimately, the answer lies in hiking federal Medicare and Medicaid funding rather than just pushing state lawmakers to give more.
According to Irene Tung, senior policy researcher at NELP, increasing federal reimbursement rates for caregivers would go a long way toward fixing the wage problem and the threat of inadequate home care. “The federal government needs to kick in greater resources and those need to be tied to specific wage standards,” she says. Those standards would require that a certain percentage of public dollars go directly to worker pay and benefits. “I think, collectively as a nation, if we’re going to meet the challenges of this growing workforce, federally we have to pay more for Medicaid—it can’t just happen piecemeal, state by state.”
Research by Howes, the economist, has shown that what most effectively reduces turnover among the larger caregiving workforce is higher wages. That means these workers will remain on the job longer, gaining more expertise to deliver higher-quality care. “That’s how we meet the need for more people who want to age at home”—as do the majority of boomers—says Howes.
Dudzinski agrees. “The federal government needs to increase the Medicaid reimbursement rate so you can pay your workers what they’re worth,” she says. “If this is what they choose for a career, let them make a living at it instead of leaving them to live in poverty.”