Medicaid providers need a more sensible approach to Labor’s overtime proposal

In September, the U.S. Department of Labor (DOL) proposed increasing by as much as 70 percent the salary threshold that determines which workers are eligible for overtime pay. The intent of this proposal is laudable, and a regulation that disability service providers would love to fully support. But the magnitude of this increase, without a federal directive to states to increase funding to providers, greatly threatens the already fragile network of community services on which people with intellectual and developmental disabilities (I/DD) rely.

I serve as CEO for ANCOR, a nonprofit association and the leading voice in Washington for more than 2,100 providers delivering long-term services and supports that empower people with I/DD to live and work in the community, rather than being consigned to large-scale state-run institutions. Our members and their employees do it all. They support people to carry out activities of daily living, take medication, build relationships, get to and from medical appointments, find and maintain employment, and so much more. The needs of people with I/DD vary, but one thing remains the same: our members’ services greatly improve quality of life and, in many cases, are medical necessities. 

Beyond the unique work we do, there’s another factor that sets us apart from other industries: we don’t get to set the prices for the services we provide. Unlike other privately operated businesses, disability service providers pay wages based on rates set by Medicaid — the main and sometimes only source of funding for disability services.

That funding has long been inadequate, leading to a recruitment and retention crisis more than a quarter-century in the making. This crisis was made far worse by COVID-19, and more recently by a barrage of other well-intended but unfunded mandates in the form of federal regulations that require providers to spend more on just about every line item in their budgets — despite the lack of any additional resources. 

We support these policies in their aim to increase wages and improve access to and quality of services, but the cycle we’re seeing is a vicious one. With other hourly wage industries paying their employees $15-25 per hour or more, disability providers in even the highest-paying states can’t compete for workers. 

DOL’s proposed rule would represent yet another of these unfunded mandates. If this rule moves forward as is, community providers will have to make drastic and devastating changes to programs that will end up hurting the very workers DOL seeks to help, all while jeopardizing the access of people with I/DD to critical and often life-saving services.

ANCOR recently surveyed more than 700 disability providers across 45 states and found that the average estimated additional cost for compliance at providers’ current rates of employment could reach $2 million, with a combined economic impact of more than $1 billion in additional expenses in the first year alone. For most providers, those additional costs are simply untenable, and in the worst cases would force them to shutter services or close their doors for good.

Even in better-case scenarios, the only other alternatives absent additional funding involve restructuring providers’ full-time, salaried positions. According to the providers surveyed, 61 percent said they would have to convert salaried employees to hourly workers, nearly half said they would have to restrict the amount of overtime permitted, and one-third said they would have to eliminate positions altogether. In other words, the very workers the rule is designed to help might find themselves without work, or with work that is of lesser quality than the positions they hold today.

In response, we urge DOL to collaborate with other federal agencies and community stakeholders to ensure that policies will be in place that result in appropriate funding for community-based providers so they can meet the requirements of this new rule.

We believe all workers in this country deserve to earn fair wages for meaningful work. But for publicly funded private businesses like the ones I represent, there is simply no federal regulation that can make that happen without adequate Medicaid funding.

Barbara Merrill, Esq., is chief executive officer for ANCOR.