Home health care providers say raise for PCAs could force many to retrench

As the Minnesota Legislature enters its final week of high-stakes budget talks, a much lower-profile negotiation is underway affecting 40,000 low-income elderly and disabled people who get personal-care services in their homes from attendants whose base pay is $12 an hour.

The union representing personal-care attendants (PCAs) earlier reached agreement with the Minnesota Department of Human Services, which administers the state-federal Medicaid program, to raise the minimum wage from $12 to $13.25 an hour in an industry that is chronically understaffed.

These folks deliver critical services, such as feeding, bathing, exercising and otherwise caring for homebound disabled people who otherwise might need more expensive institutional care. The business challenge is that the "reimbursement rate" for next fiscal year only is scheduled to rise from $17.40 to $17.81, paid to the home health care agencies that provide the mostly part-time workers, from Minneapolis to Minneota. The higher reimbursement rate covers labor, technology, bookkeeping and other management expenses. And the margin will be too thin, according to the business owners.

"I'm very concerned that many agencies will shut their doors or close their services to PCA Choice [Medicaid program] this summer," said Jeff Bangsberg, a veteran advocate for the disabled and also board member of the Metropolitan Center for Independent Living. "Much of this is based on a bizarre formula from DHS. The department maintains the agencies can absorb this pay raise.

"We believe the wage data got skewed. The entry-level workers may start at $12 and the average is $12.38 an hour. The wage floor is now so tight that some employers will go out of business."

Andre Best, attorney, owner of Best Home Care, one of the larger agencies, is also an officer of the home-care employer association.

"For a company like mine, this change would amount to several hundred thousand dollars in losses," said Best, who employs 600 home-care workers and uses customized software to budget, schedule and plan. "Should the underfunded contract move forward, agencies will be forced to close. Even the future of agencies with lean and efficient operations is uncertain.

"PCA workers should receive higher wages," said Best, 44. "The PCA reimbursement rate must be increased proportionally to keep PCA agencies financially viable so they can continue providing recipients and caregivers with quality services and support.''

The PCA medical-assistance program serves about 43,000 Minnesotans at a cost approaching $900 million last year in state and federal funds, or about $20,000 per client per year. That's less than it would cost for a few months in a nursing home. Patients typically require assistance ranging from a couple hours a day to 24-hour care. They are, by virtue of qualifying for Medicaid services, low-income folks.

Key legislators note employers don't have to raise the wage a full $1.25 for employees already making more than $12.

Rep. Jennifer Schultz, an economics professor at the University of Minnesota Duluth, said the 40-cent DHS estimate to cover the employer wage gap assumes that many PCAs already make $13 or more.

"DHS has used its model in the past and we rely on them for the best information," Schultz said. "If that doesn't cover it, we will do more work. It's a priority for the DFL caucus to pay living wages in an industry where there is a workforce shortage. We want to cover the wages and have enough PCAs to protect the most vulnerable."

Sen. Jerry Relph, an attorney from St. Cloud, said Republicans are trying to develop a more comprehensive rate framework that considers average hourly PCA costs, administrative overhead and arrive at a more sustainable model in the long term.

"I'm not sure we'll get there this year," he said. "We are aware of the problem. We want to give the PCAs a raise. They do critical work, particularly in an economy where you can flip burgers some places for $15 an hour. We're also concerned with the providers themselves.''

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.