How does the 80/20 rule affect home care?

In working at CareTime, I’ve seen a legal landscape full of sea changes in the home care space. The proposed 80/20 rule, though, has a uniquely heavy impact on our industry, the people who receive care, and the caregivers who provide it —whether you support or oppose it.

So what is it?

In the insurance world, the 80/20 rule states that 80% (or more) of premium dollars go toward healthcare costs or quality improvement.

The Centers for Medicare & Medicaid Services has gone bigger in proposing the Medicaid Access Rule. It states: “[W]e propose to require that at least 80 percent of all Medicaid payments, including but not limited to base payments and supplemental payments, with respect to the following services be spent on compensation to direct care workers: homemaker services, home health aide services and personal care services.”

This applies exclusively to Medicaid personal care services, so it doesn’t affect other payer sources (at least not directly). Aside from the 80/20 portion of the rule, CMS proposes to:

• Increase oversight and monitoring of services
• Require states to establish grievance systems for members to share feedback
• Have states form an advisory group to advise and consult on provider payments/caregiver pay.

What this proposed rule does on its face is act as a lever to increase caregiver wages. Caregiver pay rates are historically low and have led to 1 in 4 direct workers living below the federal poverty line, according to PHI. With further analysis and peering deeper into the surface, this puts more pressure on home care agencies to get more mileage out of their margins.