$15 Minimum Wage Would Impact Medicaid/Medicare costs by $50 million

February 26, 2019

by Rob Roper

The Vermont Department of Disabilities, Aging & Independent Living (DAIL) testified that if the Vermont legislature were to adopt a $15 minimum wage, as is seems poised to do, “it may also result in unintended consequences.” That’s an understatement. The report submitted that the increased price for labor would cost Medicaid $41,904, 930 and Medicare $9,086,865.

DAIL identified 12,634 workers across the support services network who currently earn less than $15 per hour, all of whom would require an increase in salary if the higher wage mandate becomes law. These employees work in “hospitals, nursing homes, home health agencies, designated agencies, specialized service agencies, assisted living facilities, residential care homes, therapeutic community residences, and by consumers themselves in their own homes under Choices for Care.”

The funding sources for these services is overwhelmingly Medicaid and Medicare. In the case of Medicaid, the higher labor cost would require more spending. In the case of Medicare, according to the testimony, “Increases to Medicare reimbursement is extremely unlikely,” meaning other revenue sources would have to be tapped or services cut.

Overall, DAIL concluded:

In cases where services are based on an allocated individual support budget from appropriated Medicaid budgets (eg Developmental Disabilities, Choices for Care, Traumatic Brain Injury program), an increase in the minimum wage would lead to:

  • Significant increases in state appropriations and Medicaid spending;
  • Significant decreases in numbers of people served, including changes in eligibility;
  • Significant decreases in individual services, some of which would be impossible and/or subject to appeals and continued benefits during appeals;
  • Significant reductions in worker benefits (eg health insurance) among those employers that offer currently offer benefits; and/or
  • Additional financial pressures form wage compression among groups of workers at specific facilities and agencies.

These numbers do not account for the upward pressure a $15 minimum wage would place on labor costs for those currently working at or just above $15 per hour now, so we can expect the actual impact to be greater.

Seriously, where is AARP stepping in on this issue to advocate for its membership?

Rob Roper is president of the Ethan Allen Institute.

{ 2 comments… read them below or add one }

SHAZZAM February 26, 2019 at 7:20 pm

As the new Trump administration and Congress came to power in early 2017, the Affordable Care Act (ACA) / Obamacare, was targeted for dismantling. AARP vigorously opposed the effort and Peter Welch listened to them by voting NO.

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Deanne March 8, 2019 at 11:56 pm

There are none so blind as those who will not see.

The people who don’t like these conclusions will ignore them or dismiss them or avoid them or claim the study is biased. They will not and can not allow any possibility that disagrees with their preconceived ideas.

So, the big question is… how to help people consider the these possibilities. The elected officials in Vermont have been elected, at least in part, due to their stance on this issue. Their job is at stake if they bail out midstream.

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