“A racket.” That’s how Governor Kathy Hochul has bluntly described a key part of what is unquestionably New York City’s biggest job-creating industry: Medicaid-financed home care. Without home care increases, New York City’s job count would still be less than pre-pandemic.

Hochul wants to save an estimated $500 million a year by putting now widely dispersed home care worker human resources functions, such as payroll administration, in the hands of one outside contractor. Opposing her: the Alliance to Protect Home Care, which includes fiscal organizations that now handle a lot of home care HR, and also groups advocating for the elderly and disabled. They have mounted an internet ad blitz – often featuring unflattering images of Hochul – castigating her latest proposed plan to contain State expenditures for home care.

Welcome to the latest installment in the long, so-far futile, and too often counter-productive saga of restraining ever-growing State Medicaid spending on home care – which came to $18 billion last year, $9.1 billion paid by the state and accounts for 27 percent of all New York State Medicaid spending.

The new HR system is supposed to take effect next April 1st. However, some of the legislators who okayed it just a few months ago are now having buyer’s remorse. In part, that’s because of the checkered record of the Geargia-based company that’s since been awarded the HR contract, and in part, it’s out of not unreasonable misgivings about the payroll snafus that might occur in moving the records of some 280,000 clients and workers from about 600 fiscal middlemen to just one.

Will Hochul’s plan realize the anticipated savings even if it comes off without a hitch? If history is any teacher, it’s far more likely she will instead be the latest in a parade of governors to see efforts to reform home care come to naught. Over the years, despite such moves, the State has continued to spend more, not less in the home care realm. Much of it has lined the pockets of State-anointed middlemen, the very groups who are organizing opposition to the governor’s plans. 

Containing home care costs was, for example, a key charge newly elected Governor Andrew Cuomo gave his Medicaid Redesign Team (MRT) in 2011. Unfortunately, its home care program was brought down by unrealistic expectations and unrealized cuts. The team assumed that local social services, particularly in New York City, were over-allocating care hours to clients. Reducing hours would lead to significant cost savings. 

In response, the MRT promoted a "care management" model, expecting that more active oversight would reduce the need for hands-on care.  Enrollment in a managed long-term care (MLTC) plan was made mandatory for home care recipients as it already was for other Medicaid beneficiaries. 

However, most home care recipients were eligible for both Medicare and Medicaid. And by federal law, Medicare makes the choice of medical care plan entirely voluntary. Few beneficiaries were willing to give up traditional Medicare in favor of managed care, so the MLTCs were limited to “managing” only non-Medicare services – namely chronic home and personal care. 

The State gave MLTCs, many owned by large insurance companies, authority to determine the hours of service each client needed, then pass State funding on to agencies that recruited, trained, supported, supervised, and organized the workforce. But funding formulas squeezed out many dedicated community-based agencies by undervaluing and underpaying them. In the cold dollars and cents world of the MLTCs, the fewer hours a client received, the more money the MLTC would retain.  In the years since they came on the scene, State spending has tripled. And the MLTCs have also done just fine, pocketing an estimated $2.4 billion in profits in the past four years alone.

Then in another eventually problematic spasm of reform, the State decided to massively enlarge what is called the Consumer-Directed Personal Assistance Program (CDPAP). Once confined to a relatively small universe of Medicaid recipients (the parents of severely disabled children and what were defined as “self-directing” disabled adults), CDPAP in 2015 expanded to make any Medicaid-approved long-term care client (or the client’s representative) whose medical condition is stable and who reports being self-directing to be the "employer" of a home care worker. 

Unlike agency workers, those hired through CDPAP could be clients’ friends or relatives and were not required to have formal training or certifications. New clients are offered the choice of CDPAP or agency-supported assistance. Anyone opting for CDPAP was presumed to have the knowledge and skills to train the worker for day-to-day needs.

State policymakers completely missed the boat. Assuming demand was fixed, they anticipated no budgetary impact: CDPAP workers would replace licensed agency employees. But thousands of families had a better grasp of the opportunity: they took up the State’s offer to pay family caregivers.  

Hundreds of fiscal intermediaries (FIs) also sprang up to take advantage of this new bonanza. They are low-risk, money-making ventures requiring very little start-up capital. Every CDPAP case guarantees a monthly fee payment.  And as a recent report from State Comptroller Thomas DiNapoli found, the money flows freely even when required verifications of actual service performed are missing.

In 2017, the State made CDPAP work more desirable. A 2017 “wage parity” law extended the cash equivalent of the dollars allocated for agency worker fringe benefits to CDPAP.  As a result, the pay packets of CDPAP workers are larger than those of their agency counterparts. The increase generated an avalanche of subway ads by FIs recruiting clients and workers, promising: “Get Paid to Be a Family Care Giver.” 

As the chart below shows, home health aide employment, which was already rising, accelerated rapidly as a result. CDPAP has rapidly become the dominant home care mode. For elderly and disabled clients with complex medical, psychological, and social needs, the care often falls short. Unlike their colleagues working under agency sponsor, CDPAP workers have no RN or social worker on call to help.  Workers, as at-will employees of the client, are not protected against excessive demands or abusive behavior from clients or family members.  

Meanwhile, Local 1199 of the Employees International Union, which represents agency-employed health aides, has seen its membership in the home care sector shrink by half.

In the 2024 State legislative session, Hochul’s attempts to rein in runaway elements of this system were stymied by heavy lobbying from MLTCs and CDPAP fiscal intermediaries – augmented by groups representing the disabled intent on guarding consumer-directed prerogatives.  But she succeeded in getting a last-minute provision to replace the fiscal intermediaries with a single contractor included in the adopted State budget. 

The September 30th announcement of Public Partnerships Limited (PPL) as the single FI was enthusiastically endorsed by 1199SEIU. A single FI, named as co-employer (with the client) offers the union a chance to reclaim and expand its home care membership.  PPL also pledged to move 1,200 of its 3,000 employees from elsewhere in the nation to an unspecified location in the state.

Nevertheless, PPL brings other baggage to the state, too. That it includes its roots in private equity ownership and its rapid and repeated turnover in leadership. Then there’s its track record: contracts to manage much smaller FI programs have been terminated in other states, according to Spectrum News.  

So, at this point it’s reasonable to ask: Is actual reform possible?

The answer is “no,” if reform only means reducing Medicaid home care spending, but “yes” if the objective is to support good and effective home care services.

First as to any savings from the PPL deal: Details matter and the Department of Health has not published the terms of the PPL contract. Eliminating State arrangements with MLTCs who have their hands seriously in the Medicaid till would be much more fiscally consequential. 

Past reforms have, in fact, added both unnecessary layers to the home care program – the MLTCs and the fiscal intermediaries. In the process, the State has undercut much of the mission-driven, nonprofit sector. And it has short-circuited the drive for better wages, working conditions, and recognition of home care workers by stressing the domestic, rather than medical, part of the work. 

It is not that New York spends too much on home care.  It just spends too much money on things that don’t matter to clients and workers, and too little on those that do. And finally, can the Governor really afford to mess with 250,000 New York City jobs?

Barbara Caress has worked for many years in non-profit, union, and public agency health care policy and administration. She teaches public health policy at Baruch College.

Photo by: Mount Sinai