Statement of the National Private Duty Association
in connection with Hearing on
Health Care Law’s Impact on Jobs, Employers and the Economy
January 26, 2011
Committee on Ways & Means
U.S. House of Representatives
Washington, DC
Submitted By
Sheila McMackin
President
National Private Duty Association
941 East 86th Street, Suite 270
Indianapolis, IN 46240
317 663 3637
sheila@homecarechicago.com
The National Private Duty Association, a trade association representing over 1,200 companies with 250,000+ employees throughout the United States, thanks the U.S. House Ways & Means Committee for holding a hearing on the impact of the Patient Protection and Affordable Care Act (PPACA) on jobs, employers and the economy. The PPACA will impose a substantial new cost burden on employers in low-margin, labor-intensive industries such as private duty home care. It will likely force NPDA member companies to shift to part-time employees, raise our clients’ costs, and/or, in some cases, cease operation altogether.
This in turn will give many clients—primarily elderly and/or people with disabilities—no alternative but to give up their struggles to remain independent in their own homes for as long as possible. Instead, they will have to move into institutionalized and far more expensive care.
Private duty home care may be medical or non-medical care. When providing non-medical care, caregivers keep their clients company, take them to doctors’ appointments, run errands such as grocery shopping or pick-up of prescriptions, assist with light housekeeping, prepare and serve meals, help with personal tasks such as dressing or bathing, and generally make sure that a senior individual can age in place, at home, in dignity and comfort. This is crucial to the emotional and often physical well-being of our older citizens. It is also considerably more cost-effective than the alternative—institutionalized care often paid for through Medicaid or some other government program.
NPDA members are companies who employ these caregivers. NPDA members pay wages, usually above but always at least at the federal minimum wage level. Our member companies absorb the cost of employment—they withhold and pay income taxes, pay workers compensation, and pay FICA taxes for their workers. Often there are benefits such as vacation and/or sick time. While many home care agencies provide “mini-med” plans for their employees, the PPACA’s benefits package mandates and discrimination rules will invalidate many of these existing employer-provided health insurance plans.
Our member companies work hard to establish and maintain important industry standards. NPDA identifies and disseminates information on “best practices” within the home care industry. It develops core training and education programs for caregivers, resulting in caregivers who are professional, caring and knowledgeable about the specialized needs of those who are aging or disabled. NPDA also educates the public about the benefits to seniors who seek in home companion care about receiving that care through caregivers who are trained as well as compassionate, and whose work lives are protected by employment laws.
Whether these in-home services are paid for by the seniors themselves or by their families, the service recipients are the beneficiaries of a company that can and will provide substitute quality care when a primary caregiver gets sick or takes vacation. This is very important because, as you know, a senior citizen’s need for help with the tasks of daily living do not stop when the person who is assisting the senior needs to take time off.
Private duty home care is a labor-intensive, low-margin industry. The expense of a companion caregiver is almost always borne in its entirety by the service recipient and/or his or her family. While there is no such thing as a “typical” rate charged to service recipients—it varies geographically as well as by whether any live-in or sleep-over time is required, an illustrative charge for a senior seeking regular but not full-time assistance is $20/hour, for a three or four hour minimum service block, plus the cost of traveling to the service recipient’s home. Accordingly, even a minimum service contract can and often does run into $1000 or more every month. And for many of our clients, the costs are even higher because the senior citizen in need of care requires more than the minimum time block, or needs it on a daily or more frequent basis. Many of our member companies provide their clients with competent, caring, professional caregivers who are on premises 24 hours each day. This is a huge expense for the senior. Most simply cannot afford a significant increase in the cost. The result will be having to give up hours of help and relying on family members, friends and neighbors—or worse, sitting alone without the assistance they need. The alternative—which is anathema to many aging Americans—is being forced into institutionalized care.
Of course, institutional care may take less from an individual senior’s limited pocketbook, but its cost to society and the U.S. government is significantly higher. Even without taking into account the crucially important emotional health and dignity that comes from finding a way to let a senior citizen age in place in his or her own home, the cost to society to forcing institutionalization as the only alternative is very high. Medicaid and other government programs absorb the bulk of these costs. At these times of State and federal budgets stretched to and beyond their outer limits, this is a result that is not good for anyone.
The PPACA, while laudable in its goal—we all support the notion of affordable health care coverage for all Americans—it will have a seriously adverse impact on jobs in the private duty sector, and on the very people—the caregivers themselves—whom it is crafted to help. The additional cost to either providing health insurance or paying fines for failure to do so will cripple the industry. It will result in jobs downsizing to part-time status, and/or jobs lost due to clients no longer able to afford the services NPDA companies offer.
NPDA does not have empirical data on this, but we do have anecdotal evidence of the deleterious impact of the PPACA. Our companies—from Michigan, California, Illinois and other states—tell us uniformly that they will be forced to raise prices, reduce their employees’ hours to part-time status, and in some cases they project having to go out of business altogether.
NPDA companies are usually not “small” as defined by most “small business” measures. Therefore the small business tax credit and other small business special rules in the PPACA do not mitigate the situation for them. Most of our companies have revenue in the millions, with employee rosters of 100 or more. Typically their profits are less than $50,000 in any given year. Our member companies are projecting—with inadequate cost data currently available—that the cost of compliance with the PPACA will be 10 percent or greater. This of course translates into the potential for an increase of 10 percent or more in what they charge their clients. As clients find they cannot afford these additional costs, they will cease doing business with NPDA member companies, thus accelerating the job loss that will come as a result of lost business, and threatening the existence of these low-margin high labor cost businesses.
There are very specific and difficult problems arising from the PPACA, as well as the more general concerns described above. Under the employer responsibility rules of the health reform law, by 2014 employers will have to choose between offering a mandated package of health insurance benefits or paying a fine. Employers cannot calculate either the cost of the fines—they are based on whether a worker qualifies for a federal subsidy, or “affordability.” Both the subsidy and “affordability” are calculated by measuring an as yet known cost of insurance (and employer contribution to that cost) against an individual’s household income. The employer has no way of knowing an individual’s household income—which includes spouse’s and children’s income. This is something no employer can know with respect to any individual employee. And thus no employer can ever know, in advance, whether it will be liable for fines or whether its contribution to the cost of employer-provided health care will be enough for the insurance to be “affordable” as defined under the PPACA.
Likewise, at this stage the cost of the mandated package of health insurance benefits is not only unknown, it is also at this point unknowable. Insurers are adjusting prices to reflect the cost of new mandatory benefits and compliance responsibilities. The actual package of benefits is still under development by relevant federal agencies. Therefore the actual benefits package—and its consequent cost—cannot be calculated. As a result, no employer can make plans to meet the cost of insurance, or is potential liability for assessments for not offering health insurance at all, or for not offering it on what the government decides is an “affordable” basis.
Given the historical cost of health insurance, it is likely many employers will simply choose to pay fines. An employer can calculate its maximum potential exposure to fines, but not its actual exposure, since it will have no way of knowing whether one of its employees will qualify for a federal subsidy—the trigger for fine liability. One resulting option open to an employer that has little to no profit margin to spare will be to reduce its workforce to minimize the potential for liability for fines.
Of course, reducing a work force means reducing the ability to provide services, and that means losing business. This will drive a private duty company out of business even faster than the significantly large new cost of health insurance or fines. Accordingly, many companies will instead shift to hiring employees who will not trigger assessments. This can be done by restricting an employees work hours to no more than 29 hours per week (30 hours per week is the hours worked measure that triggers fine liability). Although “part time equivalence” will assure that companies with part-time workers are subject to the employer responsibility rules, fines are assessed only on full-time workers (assuming at least one is eligible for a federal subsidy for purchasing individual health insurance through an exchange). This acts as a powerful incentive to companies facing a huge new cost that its slim profit margins simply cannot absorb to hire employees to work fewer than 30 hours per week. This will drive up a company’s administrative costs, and it will diminish the jobs available in the industry. But the cost of using full-time employees will, in many instances, simply be prohibitive. This loss of full-time jobs with benefits will hurt caregivers as well as the service recipients we serve.
Another no doubt unintended consequence of the PPACA’s employer responsibility rules is the fact that they will encourage a shift away from home care provided by trained, professional caregivers who are employees of a private duty company to a system of referrals of individuals who are working on their own—without benefit of training, supervision or back-up. These “independent contractors” frequently have no idea about how to pay their taxes and they have no protection from workers compensation, unemployment insurance or paid sick or vacation time. The seniors and their families who hire them also have no idea of their responsibilities as employers of these caregivers. The result is an anticompetitive underground business that ultimately hurts the U.S. economy as well as the workers and the service recipients they serve. This could not possibly be a result that is tolerable to those who crafted the PPACA.
In summary, early indications from NPDA members (and other employers in other industries) suggest that many employers are exploring whether to drop or decline to offer health insurance when the employer responsibility rules take effect in 2014. This is because of the interaction of two primary factors: (1) individual workers will have access (often subsidized by the government) to health insurance through the new law’s exchanges, thus relieving employers of their sense of responsibility for providing coverage to their workers; and (2) the cost of assessments for not providing coverage may be significantly lower than the cost of providing health insurance, and will certainly be more predictable. Predictability of expense is a serious issue for private sector companies. An equally serious problem unique to industries like private-pay non-medical in-home companion care is the fact that the employer responsibility rules may prove to be an incentive to companies to use a workforce comprised of independent contractors rather than employees. This will be adverse to the interests of both workers and the companies that hire them–and potentially also to the seniors and people with disabilities who are served by private-pay non-medical in-home companion care companies.
NPDA seeks Congressional help in crafting a solution to the serious economic and policy-based problems posed by the current employer responsibility rules. We want to work together with lawmakers to develop alternative approaches that will result in expanded coverage, without driving up the cost of in-home companion care to a level that is unaffordable for our clients, and that threatens our continued ability to stay in business. An alternative approach is crucial to prevent severe limitation on jobs growth and possibly even the continued viability of the private duty industry
In short, the PPACA’s employer responsibility rules are likely to cause significant job loss in the private duty industry. This in turn will force many service recipients into more costly (and less emotionally healthy) institutional care. It will cause a shift to use of part-time employers. It will encourage a caregiver to look at self-employment, without knowledge of the legal responsibilities such a choice brings both to the caregiver and to the person who hires that caregiver. It could drive some private duty companies out of business.
NPDA encourages Congress to revisit the PPACA’s employer responsibility rules. Repeal of those rules, or modification of them to accommodate low-margin, labor-intensive industries such as ours is imperative to avoid yet more jobs loss (or jobs diminishment) along with loss of an important option for aging in place, in dignity and comfort.
NPDA extends our thanks to the Ways & Means Committee for its willingness to explore this difficult issue. We are happy to provide any expertise the committee may seek as it works through this problem.