The State of New York’s recently approved budget for Fiscal Year 2023 required that home care and hospice aides be paid at least $2 more than the state’s $15 standard minimum wage.

While these workers are among the lowest paid in health care, this could put providers in a bind without corresponding increases to reimbursement.

The U.S. Centers for Medicare & Medicaid Services (CMS) uses the wage index to account for regional labor costs when it calculates hospice per diems. However, these data are not collected in real time. It could be at least two years before wage index data catches up to the New York pay raise.

Though the dollar amount seems small, the financial impact could be large for hospices, according to Jeanne Chirico, president & CEO of the Hospice and Palliative Care Association of New York State (HPCANYS).

“The impact to hospices could be substantial, especially if they haven’t already been increasing their minimum wages to attract a workforce,” Chirico told Hospice News. “To be hit with this bottom-line cost could essentially erode what’s already a very nominal margin for many providers, many of which are considered smaller nonprofit hospices.”

The lag time for the wage index likely means most providers would not recoup the increased labor expenses in the near term, which would be unsustainable for some organizations, according to Chirico.

While this increase is specific to New York state, the issue of wages has national implications. Initiatives in large, populous states like New York or California often set trends that other states start to follow.

Even without a multi-state drive to raise the pay of home care aides, several states have already increased their standard minimum wage for all workers.

Effective the first of the year, 21 states increased their minimum wage in 2022, according to the Economic Policy Institute. This ranged from a 22-cent adjustment in Michigan to $1.50 in Virginia.

While the federal level the minimum wage remains at $7.25 per hour, the U.S. Department of Labor last year launched education, outreach and enforcement programs designed to ensure that home-based, paid caregivers were paid fairly.

Some see the increases in New York and other states as necessary first steps in what must become long-term investment into the health care workforce.

“Bonuses for direct care workers and a higher minimum wage for home care aides are the first steps in what must now become an ongoing investment, every year, going forward,” New York State Assemblyman Richard Gottfried said in an email to Hospice News. “We cannot assure our communities that they will receive home care and hospice services in their hours of need if we do not assure the workers who provide those services that they can make a living doing such difficult and valuable work.”

Hospices have called for higher reimbursement to offset minimum wage hikes, particularly in the face of COVID headwinds and ongoing labor shortages. They are in fierce competition for new hires, often with better capitalized organizations like health systems, which is also where most clinicians receive their training.

The challenge of mandated wage increases could make it even more difficult for hospices to stay in pace with other providers, Chirico told Hospice News.

With government-led wage increases and high demand for labor, some hospice providers are finding themselves between a rock and a hard place.

Even without government action, many hospices will likely need to raise wages of their own volition to stay competitive in the competitive labor market, according to Michael Kaminski, president and CEO of Hudson Valley Hospice.

“To attract staff, we have to raise the rate above what the state requires, even without any ability to be reimbursed,” said Kaminski. “Whatever happens now compounds later on as employees work overtime or competitors decide to raise rates even higher above minimum wage next year. It could jeopardize some hospices’ bottom line, having losses that they can’t sustain through. Though it’s not a big lift for us, it could be for smaller hospices running a risk of being financially fragile.”

Lacking hospice utilization indicates a lack of access and education around these services, according to Chirico.

The need to balance wages with payment is basically a “consumer protection” issue for patients and families that could benefit from hospice services, Chirico told Hospice News. Without enough staff to support demand, hospice care could continue to fall short in improving access and utilization, she indicated.