Freedom Foundation

Federal regulation could end skimming of union dues from Medicaid

Today, the federal Centers for Medicare and Medicaid Services (CMS) released a Notice of Proposed Rulemaking announcing its intention to repeal an Obama-era regulation that some states — including Washington, Oregon and California — have used as justification for collecting union dues from Medicaid payments to home caregivers serving the disabled and elderly.

As the Freedom Foundation has discovered in its interactions with thousands of caregivers over the past several years, the practice has enabled unions to exploit hundreds of thousands of caregivers around the country by skimming hundreds of millions of dollars from their wages.

Even after the U.S. Supreme Court’s 2014 ruling in Harris v. Quinn rendered unconstitutional state laws forcing caregivers to pay union dues and fees, unions and their political allies in state governments have worked to put in place coercive measures designed to maintain unions’ dues collection from caregivers.

Consequently, the Freedom Foundation began calling for federal action to end dues skimming last year.

Federal Medicaid laws require, as a general rule, that payment must be made in full to the provider of services. There is no authority under federal law for states to divert portions of caregivers’ Medicaid payments to private, third-parties that provide no services to Medicaid clients.

Despite the lack of statutory authority to do so, the Obama administration adopted a rule allowing states to make deductions from caregivers’ pay for “benefits customary to employees.” While union dues are not specifically mentioned, the vagueness of the regulation has given states and unions some small measure of cover for the dues skim.

Repealing this regulation makes it clear that dues skimming has always been illegal under federal Medicaid law and must come to an end.

The press release from CMS states:

“Today, the Centers for Medicare & Medicaid Services (CMS) proposed changes to the Medicaid Provider Reassignment regulation that would eliminate state’s ability to divert Medicaid payments away from providers, with the exception of payment arrangements explicitly authorized by statute. This proposed regulatory change is designed to ensure that taxpayer dollars dedicated to providing healthcare services for low-income vulnerable Americans are not siphoned away for other purposes.

‘The law provides that Medicaid providers must be paid directly and cannot have part of their payments diverted to third parties outside of a few very specific exceptions,’ said Tim Hill, Acting Director for the Center for Medicaid and CHIP 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 payment must be clearly allowed under the law.’

Section 1902(a)(32) of the Social Security Act generally prohibits States from making payments for Medicaid services to anyone but the provider. The statute provides only a few specific exceptions to this requirement, such as withholding payment due to a court order for wage garnishments, child support orders, or judgments for monies that are owed to the state.

In 2014, CMS revised the regulation to provide for a new exception to the direct payment requirement for certain providers, which primarily include independent in-home personal care workers. This new regulatory exception authorized a state to divert part of the Medicaid payment to third parties that could then be used to fund other costs on behalf of the provider. After further review, CMS has determined that the new exception created by the 2014 rule is not consistent with the statute, may have resulted in provider payments being diverted in ways that do not comport with the law, and, in some cases, may have occurred without the express knowledge of the provider.”

The explanation accompanying the proposed rule observes, “(O)ne such potential impact of the proposed rulemaking would be that states stop reassigning homecare workers’ dues to unions.”

Congressional leaders like Rep. Cathy McMorris-Rodgers (R-WA) and Sen. Ron Johnson (R-WI) are also working to protect caregivers and the integrity of the Medicaid program by taking states out of the union dues collection business.

Notably, the regulation would not prevent any caregiver who wished to join and support a union from doing so. They would simply have to pay the union directly themselves; the state could not seize the dues from their paychecks.

As the Freedom Foundation told the Daily Caller,

“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. This illegal and exploitative 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.”

Today’s announcement is a significant step in the right direction, but much work remains to be done. The Freedom Foundation will continue to work to ensure federal policymakers follow through with appropriate action and end the dues skim once and for all.