NAHC Meets with the Office of Management and Budget on Companionship Services Rule

The Office of Management and Budget (OMB) is in the process of reviewing the final rule drafted by the US Department of Labor (DoL) that would change the standards for applying the “companionship services” exemption under the Fair Labor Standards Act (FLSA). On January 15, 2013, the White House cleared the rule and forwarded it to OMB for its required review.

The proposed rule would essentially eliminate the application of the minimum wage and overtime exemption for personal care services/home care aide employees in home care. The proposal, issued in December 2011, would redefine “companionship services” to include “fellowship” activities and allow no more than 20% of the time worked on personal care for the elderly or infirm. Anything more than incidental housekeeping activities would be outside of the definition of companionship services. The proposed rule would also deny application of the revised exemption to individuals employed by a third-party rather than directly by the consumer.

The home care industry objects to the proposed changes on the basis that they would be contrary to the law passed by Congress in 1975, would be in conflict with longstanding Department of Labor interpretations, and would severely harm both consumers and caregivers. NAHC has successfully battled attempts to change this rule in the past – twice taking the issue to the U.S. Supreme Court when union representatives pursued litigation challenging the original 1975 regulations. Efforts to change the law in Congress have also failed. The regulatory process is the latest forum used by unions to attempt to change the rule.

The industry contends that implementing the proposed rule will harm consumers and caregivers alike. Since much of the paid personal care provided in the home is covered by government programs such as Medicaid, providers are unable to raise prices to cover increased costs. The alternatives to meet increased compensation requirements are limited to reducing the hourly wage of workers or restricting hours worked to avoid overtime. Caregivers thus become victims of the proposed rule change. The resulting restricted compensation will trigger higher staff turnover and reduced continuity of care as more staff are needed to care for patients/clients.

A study by the National Association for Home Care & Hospice also demonstrates that private pay home care would be negatively affected, primarily because consumers cannot afford the higher cost of care. As a result, private pay clients and their caregivers will suffer the same consequences as those with Medicaid services.

At this stage of the regulatory process, OMB is that last forum available to modify or rescind the Department of Labor proposal. Industry stakeholders and other members of the “Companionship Services Coalition” took its message to OMB on Monday. Representatives from the White House, Department of Labor, and the Small Business Administration joined OMB officials at the meeting.

The Coalition outlined five key areas of concern with the proposed rule change:

  • The Rule Change will likely increase Medicaid’s costs and impact access to care for Medicaid beneficiaries. In the proposed rule, the DoL did not adequately consider the impact of the proposal on Medicaid – focusing nearly all of its analysis on Medicare where the impact will be minimal in comparison. We have not seen any indication that DoL has conducted an appropriate study of how the proposed rule change will impact Medicaid beneficiaries.
  • Lack of information on the impact on access to care purchased privately by the elderly and disabled. The proposed rule analysis was devoid of any “private pay” market consequences in home care. There is no indication that DoL has evaluated the rule’s impact on consumers of private pay home care services or on businesses that provide such care.
  • Impact on “live-in” services. The DoL proposal included significant changes in the compensation requirements for employees providing live-in companionship services or personal care support without any evaluation of the consequences to this unique service, the workers that provide such care, or the businesses that employ them. Instead, the DoL continues to insist that it is not changing anything that would affect live-in services.
  • The rule’s development and support appears inconsistent and noncompliant with Circular A-4 requirements since the DoL has not performed the analysis necessary to determine the cost-benefits of the rule, the availability of reasonable alternatives, and the impact on state and federal spending in public programs such as Medicaid. The opportunity for such analysis is readily available. Over 20 states previously modified or eliminated the “companionship services” exemption from overtime requirements. As such, there is ample data to evaluate whether the DoL proposal actually benefits workers as the DoL suggests. NAHC’s data finds that workers in such locations actually experience a reduction in income with negligible overtime hours while consumers have less control over the use of home care services. A study request on this topic is currently pending at the Government Accountability Office (GAO) since the DoL has not undertaken the analysis on its own.
  • The DoL’s proposal is in conflict with the FLSA companionship services exemption, which was designed by Congress to protect the elderly and infirm. The proposal eliminates the intended protections by raising the cost of services and/or limiting the hours of service that a consumer can receive from a particular caregiver.

The OMB did not reveal its timetable for reviewing this rule. Questions asked by OMB officials during the meeting suggest that they are quickly discovering the full depth and breadth of the consequences such a rule change will have on both caregivers and recipients. Generally, OMB is most concerned about the budgetary impact and compliance with rulemaking processes of any rule change. The companionship services rule has clear problems in both areas.

In addition to the OMB efforts, NAHC is working with congressional allies in getting a review of the rule and its promulgation process by the Government Accountability Office. It is hoped that a GAO review can be at least partially completed before OMB acts.

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