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Politico NY: State wage hike intensifies staffing challenge for health care providers

By Dan Goldberg, 3/15

Dan Brown was having trouble hiring.

Thousands of developmentally disabled men and women in the Southern Tier live in the ranch-style homes that Brown’s organization operates or rely on the community services it provides. They count on the staff at the Franziska Racker Centers to help them live full lives, whether that means driving them to museums or helping them learn to buy groceries.

But the Racker Centers’ vacancy rate had nearly doubled over the course of a year to 17 percent. Job candidates would schedule interviews but wouldn’t show.

Brown suspected he knew why.

Bed Bath & Beyond was starting employees at a little more than $11 per hour, and the Aldi supermarket was paying cashiers $11.85. Brown was offering only $10 an hour, and raising the starting wage would be an arduous undertaking for an organization that relies primarily on state funding.

Nevertheless, last year, Brown decided to offer $11 per hour, a move that he said cost his organization $150,000. That helped, but he has still has 108 openings. Raising wages higher to compete is impossible for Brown and those like him, unless Medicaid changes how it pays for their services.

“I have 18 years in the for-profit world and 16 years in the not-for-profit world, and I’m not sure I’ve faced anything harder to deal with,” Brown said.

Last summer, it got even harder.

Gov. Andrew Cuomo began pushing for a $15 minimum wage, singling out sectors of the economy he could control.

He used a state wage board to raise hourly pay for fast-food workers to $15, and in November, he raised the minimum wage for about 10,000 state workers. In January, he announced a plan to raise the minimum wage for SUNY workers.

The moves were hailed by progressives, including New York City Mayor Bill de Blasio. But few have acknowledged their effects on employers’ ability to recruit workers for the demanding, low-wage jobs that form the backbone of the health services industry.

“We’re going to have areas of the state where you’ll get $15 an hour for working with fast food, but you’ll only be able to make $10 an hour caring for somebody,” Amy Schnauber, vice president of Leading Age NY, which represents nursing homes and other senior living facilities, told lawmakers at a budget hearing in late January. “Those are very hands-on jobs. It’s a lot of hard work. It’s hard to imagine how you’re going to get quality workers under those conditions.”

Those who care for the aged, infirm and disabled must grapple with oxygen tanks, feeding tubes and medical, hygienic and emotional needs. Given the choice between such work and some other job that pays better, workers often choose the less demanding, higher-paying one.

“If they can move somewhere and only worry about burning a hamburger or not tagging an article of clothing correctly, and not having a second job, they’re going to do it,” Crys McCuin, who runs the Dutchess County chapter of the Arc, which serves and advocates for people with intellectual and developmental disabilities. “We’re all competing for the same people. We have malls, grocery stores, a ton of retail, fast food — those are also people competing for our entry-level staff.”

Her vacancy rate is already at an all-time high.

Karen Korotzer, the CEO of the Arc’s Oneida-Lewis chapter, has seen vacancy rates double, then triple over the last few years as the economy has improved and wages in other industries have risen. Like Brown, she already had a staffing problem, and Cuomo’s call to raise the minimum wage only worsened it.

“What people need to understand is that where we are right now … is already a crisis,” she told POLITICO New York. “If I were a direct support staff with a family and I was trying to make ends meet, I might look at the restaurant job.”

Employees, she says, tell her they love the work they do and feel close to those they care for, but they leave because they have families to support and need higher-paying jobs.

“People already felt underpaid and overworked, and then to hear other industries have been targeted for an increase — it really made people here who have worked here for a long time, it just made them feel less than everyone else,” she said. “If anybody should be looked at for a $15 minimum wage, it should be the employees here.”

The governor agrees in principle and has proposed a statewide $15-an-hour minimum wage in his 2016-17 budget. The increase would be phased in over time, with the minimum wage rising to $15 per hour in New York City by 2018 and in the rest of the state by 2021.

In theory, that should help recruitment and retention efforts. But the minimum wage proposal is instead causing consternation among executives who fear the rise in costs will put them out of business. The sector is in the unusual position of both supporting and opposing the proposal — likely to be one of Albany’s most hotly debated topics in the coming months.

Executives like Korotzer, Brown and several others who spoke with POLITICO New York say they want to pay their employees more and share Cuomo’s social justice leanings. But they also point out that their budgets are dictated in large part by the governor, who has given no indication he would increase state funding to offset the costs of a higher minimum wage.

The State Senate’s one-house budget did not address the minimum wage. The Assembly echoed Cuomo’s call to raise the minimum wage, and it added $200 million to a reserve fund to help providers pay for the increase. But that’s less than 10 percent of what many providers and advocates believe is needed, and it doesn’t address the structural payment problem.

More than 90 percent of a residential facility’s revenue comes from Medicaid, the insurance program for low-income New Yorkers, and it is the governor who can raise the Medicaid reimbursement rate. Because such facilities are paid by the government, they cannot pass on higher costs to customers.

If Cuomo wants a higher minimum wage, a move they are inclined to support, he must also be willing to pay for the care of the most physically and mentally fragile New Yorkers.

Brown said it would cost his organization $2 million to raise salaries for the 500 employees who now make below the minimum wage — and $3 million when factoring in the raises he’d likely have to give to the more experienced employees already making just over $15 per hour.

“If we don’t get additional funding, we’re out of business,” Brown said.

If that happens, the people living in the Racker Centers’ homes must either be moved to different facilities or become wards of the state — a far more expensive proposition.

“And how is the state going to pay for that?” Korotzer said. “We want to pay more to everybody. I agree with the governor. But he needs to commit or be prepared to completely take over the operations.”

No one argues with the math, but the state has not yet presented a solution.

“We’re going to work on this” was all state health commissioner Howard Zucker told several lawmakers at a January budget hearing.

“I hear your concerns,” he repeated.

Those have been his only public comments.

There had been hope that Cuomo would provide some relief in his 30-day budget amendments, but those came and went with nary a new cent provided.

“The Governor’s budget leaves us with the largest unfunded mandate in the history of programs for people with developmental disabilities,” Steve Kroll, executive director of NYSARC, said in an email after the amendments were released. “We support higher wages for working people — including our employees — but this is a devastating problem that can’t be solved without help from the Governor.”

There are about 275,000 health care workers who would get a raise if the minimum wage rose, according to a recent report by State Sens. Jeff Klein and Diane Savino. Currently, the average home health aide in New York State earns $10.75 per hour, and personal care aides earn about $11.73 per hour.

The increase could have a $2.9 billion impact each year on hospitals, nursing homes and home care providers once it is fully implemented, according to calculations by the Healthcare Association of New York State, which represents hospitals and other providers.

The group’s president, Dennis Whalen, urged Cuomo to include at least $916 million in new Medicaid in the 30-day amendments to fund the first two years of implementation.

“This immense cost increase is unsustainable, cannot be passed onto consumers, could jeopardize access to key health services, and will disrupt healthcare delivery system transformation,” Whalen wrote in a letter to the governor.

During the budget hearing, state legislators appeared sympathetic.

“All of us expected we would see funding for employees the state is either directly or indirectly responsible for funding,” said Savino, a member of the Independent Democratic Conference from Staten Island. “What kind of a message would we be sending as a state that it makes more sense to deliver pizzas than to deliver care for the elderly?”

Assembly Democrats are assessing what raising reimbursement rates would cost and how they could add that to the state budget, according to health committee chair Richard Gottfried.

But the situation presents no easy solution.

The state doesn’t have billions to offer, and Cuomo has taken pride in controlling Medicaid spending. Democratic legislators want to raise the minimum wage, but even if they don’t raise it, facilities will be in no better position. They still will have to compete with retailers that pay more, a wage board and a $15 minimum for state employees.

The stakes are causing a collective hysteria among providers, who let loose on Cuomo at the January budget hearing when they realized his budget contained no help.

“Unless funding is included, the enormous unfunded cost will bankrupt the entire field of developmental disabilities,” Kroll said.

He estimated that his organization will have to reduce its workforce by 4,600 direct-care workers, or 16 percent, by the end of next year, and by 7,400, or 26 percent, by the end of 2021, when the minimum wage increase is fully implemented.

Employees at residential facilities account for only part of the problem. Roughly 90 percent of home health care providers earn less than $15 per hour, according to Laurie Haight, vice president for public policy at the New York State Association of Health Care Providers.

“While home care agencies would like to be able to pay their workers more, the proposed minimum wage increase is unsustainable unless adequate funding is included in the state’s Medicaid program to reimburse these additional costs and there are guarantees that this funding goes directly to home care providers,” she said.

Then, there are the long-term care facilities and rehabilitation centers, which estimate the minimum wage increase will cost them $600 million for skilled nursing providers and more than $50 million for assisted living providers.

Assisted living facilities are under threat as well, said James Kane, the treasurer of the Empire State Association of Assisted Living Facilities. He runs eight facilities, and the impact of the minimum wage increase on them, he said, would be $1.7 million.

“Without substantial funding from the state, there is no doubt that I will have to close all eight,” he said.

At the budget hearing, Bryan O’Malley testified on behalf of consumer directed personal assisters, who provide services to chronically ill or physically disabled individuals.

“There is no more fat to trim,” O’Malley said. “There are no more efficiencies to find. The failure to fund this minimum wage increase, and adequately fund this program, will cause fiscal intermediaries to go out of business. We are discussing the potential wholesale collapse of an industry.”

O’Malley was not only critical of a budget in which “there is little to like” but also dismissive of Cuomo’s rationale, and accused the governor of playing politics with the minimum wage.

Cuomo has cited the $6,800 per year an employee on the current minimum wage receives in public subsidies and said there is no reason fast-food employers should be subsidized by the state.

“What he fails to note is that the current worker in the Medicaid system who receives a minimum wage, because that is what the state’s inadequate reimbursement allows, also costs the state $6,800,” O’Malley said.

One of Cuomo’s self-proclaimed signature health care achievements has been slowing the growth of the state’s Medicaid program, which had hampered governors for decades. It was one of his first tasks after taking office in 2011, and he managed it through dozens of Medicaid redesign initiatives, many of them lauded by hospital leaders and union employees. He also instituted a growth cap for Medicaid, which is supposed to keep spending in line.

But savings for the state means less revenue for providers, who have trimmed costs and stalled wages.

“What [Cuomo] fails to mention is that the accomplishment of his global cap and reining in Medicaid growth has come on the backs of the working poor, mostly single mothers,” O’Malley said.

“These workers do backbreaking work and cannot afford to put food on the table for their family or heat their home without benefits and subsidies from TANF, HEAP and other social safety nets,” he added. “In other words, while the governor decried McDonald’s and Burger King for using public benefits to lower their bottom line, his Medicaid program is doing just that.”

For now, the staffing shortage is having very real consequences on the care such organizations provide. With too few staff, patients can’t participate in all the activities they’d like — activities most New Yorkers take for granted.

Instead, they sit at home — maybe watching television, maybe doing nothing at all.

Shortages also mean the staff doesn’t have the time to work with those who still live in their own homes. They can’t help them learn to ride the bus, go to the library or shop for groceries.

“We do our very best to make sure those things happen,” said McCuin, who runs the Arc of Dutchess County, but with too few employees, patients “end up staying in the house.”

“We’re not helping them develop the social skills they need to be more independent,” Brown said. “A lot of that is just plain not happening.”