HHS Finalizes Rule Barring Union Medicaid Dues-Skimming

A half-decade ago, the Obama administration, in apparent defiance of federal statutes, issued a rule authorizing states to deduct union dues from home care providers whose income is partly or fully Medicaid-derived. The experiment now has ended. Yesterday, May 2, the Department of Health and Human Services (HHS) issued a final rule to protect non-joining independent providers from having a portion of their paychecks deducted and routed to a union. Public-sector unions have generated an estimated $200 million a year this way. Mark Mix, president of the National Right to Work Committee, calls the reversal “an encouraging action toward stopping union bosses from unlawfully using public payment systems to intercept tax dollars intended for providers caring for those in need.” The rule is set to take effect on or about July 5.

Union Corruption Update examined this issue at length last year. On July 12, HHS posted a Notice of Proposed Rulemaking to bar states from relying on Medicaid funds as a revenue source for unions representing home care workers. Workers still would have the right to join a union. But if they don’t want to join, they would not have to pay dues simply because they are covered by an active collective bargaining agreement. The proposal would override an Obama-era adjustment to the Medicaid Provider Reassignment Regulation, first published in the Federal Register on January 16, 2014. The rule change was a virtual gift to organized labor. It gave states the authority to divert a portion of Medicaid payments to third parties, such as labor unions, on behalf of independent home care providers. Within several years, more than a dozen non-Right to Work states exercised this option. Unions with a public-sector presence, especially the Service Employees International Union (SEIU) and the American Federation of State, County and Municipal Employees (AFSCME), were delighted with this new method for filling their coffers.

The U.S. Supreme Court that June, in Harris v. Quinn, threatened this arrangement. The Court ruled that nonunion private-sector health care workers cannot be forced to support a public-sector union simply because some or all of their wages are Medicaid-derived. But public-sector unions still had monopoly bargaining power, courtesy of the High Court’s 1977 decision in Abood v. Detroit Board of Education. As such, they still could compel nonunion employees under union contract to pay dues or face termination. That’s when they formed partnerships with state governments. A subsequent Supreme Court decision handed down last June, Janus v. AFSCME, however, threw panic into these arrangements. The Court, by 5-4, ruled that nonmember government employees cannot be required to pay partial dues (“agency fees”) to a union representing them. Any dues deductions would require a worker’s affirmative consent. The decision effectively overturned Abood.

In response, the Health and Human Services Department’s Centers for Medicare & Medicaid Services (CMS) a couple of weeks later proposed a rule change to undo the Obama initiative. After subsequently receiving more than 7,000 public comments, CMS released its final rule last Thursday. The agency administrator, Seema Verma, explained the action: “State Medicaid programs are responsible for ensuring that taxpayer dollars are dedicated to providing healthcare services for low-income, vulnerable Americans and are not diverted in ways that do not comply with federal law. This final rule is intended to ensure that providers receive their complete payment, and that any circumstance where a state redirects part of a provider’s payment is clearly allowed under the law.”

The law doesn’t allow for many exceptions either. Section 1902(a)(32) of the Social Security Act bars states from making payments for Medicaid services to anyone except the provider except in unusual circumstances such as court-ordered garnishments or prior contractual arrangements between the provider and a billing agent. Union leaders believe otherwise. “The thinly-veiled motive in this rule change is to defund home care unions,” said Doug Moore, executive director of the United Domestic Workers of America, an AFSCME affiliate representing over 110,000 home care workers in California. “But in their zeal to destroy a political adversary, this administration is endangering the lives of millions of people.” As for the SEIU, the union and an allied group, the National Employment Law Project, have indicated they will file a lawsuit to reverse the new rule change.

This sort of overkill obscures the real issue. Many of the affected providers are caretakers of immediate family members or relatives. The idea of forcing such caregivers to join a union simply because a portion of their pay comes out of a state Medicaid program borders on the absurd. These are not doctors, nurses or lab technicians. Their incomes are very modest even with union representation. Dues represent a sizable portion of their incomes. Each dollar diverted from Medicaid to a union represents a dollar taken from an intended beneficiary.

There is a lot riding on this. Home care is a rapidly growing industry. The U.S. Bureau of Labor Statistics projects that the demand for such services will increase by 41 percent for the period 2016-26, significantly faster than for the work force as a whole. The median annual wage/salary for the nation’s roughly three million home aides in 2018 was $24,060, or $11.57 per hour. Unions are fully aware of the opportunities for organizing. Indeed, they have organized many such workers. In California alone, about 250,000 home care workers, mostly independent, belong to a statewide SEIU affiliate. To the extent that these people pay union dues, that decision should be theirs and not one of a union or a state agency.