HHS, Nonprofit Group Combat Union Medicaid Dues-Skimming Schemes

Few things say “money in the bank” to a public-sector union quite like Medicaid. A proposed federal rule would end this freebie. On July 12, the Department of Health and Human Services (HHS) posted a Notice of Proposed Rulemaking to bar states from using Medicaid funds as a source of dues for unions representing home health care providers. Workers still would have the right to join a union. But non-joiners no longer would be captive of a state agency deducting dues and forwarding them to a union. Over a dozen states now engage in this practice. For organized labor, this arrangement generates around $200 million a year. That’s why unions and the states are resisting the proposed rule in the aftermath of the Supreme Court’s Janus ruling in June. A recent development in Washington State has strengthened the hand of reluctant dues payers while the department finalizes its rule.

Medicaid ranks up there with Social Security and Medicare as the federal government’s largest “entitlement” program. In fiscal year 2017, total Medicaid spending reached $595.5 billion, up from $72.2 billion in 1990, $206.2 billion in 2000 and $401.5 billion in 2010. That’s a more than eightfold increase in less than 30 years. Through a complicated funding formula, federal and state governments share the costs. HHS now covers about 63 percent. Organized labor wants a piece of this giant-sized rock. And through state governments, it is doing just that, especially given the boosts in state Medicaid enrollment encouraged by the Affordable Care Act of 2010 (“Obamacare”). By this spring, 14 states had become authorized dues collection agents for public-sector unions representing home care providers, whether the providers liked it or not. The practice had taken off in 2014 thanks to an Obama administration rule change. The American Federation of State, County and Municipal Employees (AFSCME) and the Service Employees International Union (SEIU) in particular are making out well. Union leaders and state officials have worked in tandem to reclassify home caregivers, even if provided by immediate family members, as “public employees” for union representation purposes so long as any compensation comes out of Medicaid funds.

Affected caregivers have pushed back. In Illinois, a caregiver mom, Pamela Harris, back in 2010 filed suit against the State of Illinois, AFSCME and the SEIU, challenging the state and the unions’ authority to deduct dues from an estimated 80,000 home health workers. The state’s authority came from governor’s executive orders issued in 2003 and 2009. Eventually, the case reached the U.S. Supreme Court, which in June 2014 ruled in Harris v. Quinn that nonunion private-sector home health workers cannot be forced to support a public-sector union simply because some or all of their wages are Medicaid-derived. In Minnesota, a dozen home care providers, led by one Jennifer Parrish, sued Governor Mark Dayton and AFSCME to invalidate a new law giving the SEIU the authority to divert dues to its coffers. A U.S. Court of Appeals denied the plaintiffs standing even though the Harris ruling already had been handed down. This opened the door to an SEIU petition for a representation election on behalf of about 27,000 personal care assistants. The union won, and in so doing, received authority to take three percent off the top from caregiver paychecks. A group of dissenters, led by caregiver Kris Greene, filed a request with the National Labor Relations Board to decertify the SEIU as a collective bargaining agent. In Congress, Rep. Ron Johnson, R-Wisc., this past spring demanded that HHS take steps to rein in dues-skimming.

The use of state force to bring private caregivers under union representation, underhanded as the tactics have been, until very recently went unchallenged. So long as public-sector unions had the constitutional authority to force nonunion workers under contract to pay dues, they could cut political business deals with relative ease. The situation changed dramatically on June 27 of this year when the U.S. Supreme Court ruled 5-4 in Janus v. AFSCME Council 31 that nonmember state and local government employees cannot be required to pay partial (“fair share”) dues to a union representing them. The decision overturned more than 40 years of public-sector union monopoly power. Individual nonmembers not wishing to pay fair share dues now would have the freedom to opt out.

The ruling has had a ripple effect. Significantly, only days after the decision, an Olympia, Wash.-based nonprofit free-market advocacy group, the Freedom Foundation, filed a lawsuit seeking class-action status for Medicaid-funded home care workers. According to the foundation, the State of Washington ignored its request to adhere to Janus and continued to deduct three percent from member paychecks, forwarding the money to Service Employees Local 775 in Seattle. At $27 million a year, these deductions amounted to serious money. The effort paid off. In late August, the State and SEIU Local 775 agreed to cease deducting dues without prior authorization from home caregivers.

The Janus ruling, while blunting the impact of public-sector union overreach, likely will prove insufficient in itself to thwart the insidious practice of states serving as enablers for union dues-skimming. That’s what prompted the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) this July to issue its proposed rule. “The law provides that Medicaid providers must be paid directly and cannot have part of their payments diverted to a third party outside of a few very specific exceptions,” said Tim Hill, acting director of CMS’ Center for Medicaid and Children’s Health Insurance Program Services. “This proposed rule is intended to ensure that providers receive their complete payment, and any circumstances in which a state does divert part of a provider’s payments must be clearly allowed under the law.”

Organized labor, knowing which side their bread is buttered, is determined to stop the rule dead in its tracks. The Service Employees International Union denounced the regulation as “part of the [Trump] administration’s broad, coordinated attack against working people…a transparent attempt to interfere with workers’ freedom to choose to join together in a union…” In a prepared statement, the SEIU declared, “The proposed rule targets these home care workers and is designed to stop them from contributing their own wages to support their union in the same way that teachers, police and firefighters do.” In a similar spirit, Doug Moore, executive director of the San Diego-based AFSCME Local 3930, presented a resolution in opposition to the rule announcement at the union’s annual convention in Boston this past July. It read: “Be it finally resolved: That AFSCME urges all our union brothers and sisters across the nation to submit letters to CMS expressing opposition to this rule change and in support of home care workers, our communities and in particular those who require home care to live full and meaningful lives.”

Overheated language such as this misses the point. The decision by an individual worker to join or pay agency fees to a union belongs solely to that worker. Maxford Nelsen, director of labor policy at the Freedom Foundation, speaking in support of the Trump administration proposal, explained what’s at stake. “It is very heartening to see this administration taking the first practical steps to stop states and unions from deducting money from the Medicaid checks of home caregivers serving our society’s disabled and elderly,” he told The Daily Caller. “This illegal and exploitive practice has victimized hundreds of thousands of caregivers. It has only been allowed to persist because it generated significant funds for a politically-connected special interest group.” Mark Mix, president of the Springfield, Va.-based National Right to Work Committee, had this to say when HHS announced its rule: “For years, aided by a compliant Obama administration, Big Labor has siphoned off hundreds of millions of tax dollars in violation of federal law, which is why this rulemaking is now needed to make it clear that states cannot legally divert Medicaid funds into the bank accounts of politically connected union bosses.”

Medicaid offers a large pot of money. Combined federal and state annual spending on the program is now around $600 billion, if not higher. More than $40 billion of that goes to the states through Home and Community-Based Services waivers. Public-sector unions are using these waivers to skim Medicaid funds and ultimately pay for organizing, bargaining and lobbying. Union leaders insist that this practice is a matter of social justice. It is nothing of the sort. Every dollar exacted by state governments on behalf of organized labor represents one dollar less available for personal care for the elderly and the handicapped. The proposed rule change is a welcome sign that the Department of Health and Human Services favors the interests of the needy over those of the greedy.