End Union Medicaid Dues Skim


Every Medicaid dollar is statutorily required to directly fund care for the elderly or disabled. This requirement is known as the “direct payment requirement.” Congress, in enacting the Social Security Act, which created the Medicaid program, created narrow exceptions to this condition including sending Medicaid payments to governmental agencies or pursuant to an order of a court. Importantly, Congress did not delegate authority to any federal government agency to create new exceptions to who may receive Medicaid funds.

During the Obama administration, the Center for Medicare and Medicaid Services (CMS), a part of the Department of Health and Human Services, invented a regulatory exception to this direct payment requirement. CMS finalized a rule in 2014 that permitted Medicaid funds to be rerouted away from homecare providers, who care for Medicaid patients, to third parties that provide benefits customary for employees, like health insurance or skills training. 

Though this regulation appears benign, it has provided legal cover for a terrible scheme. Every year, labor unions siphon off about $150 million annually from Medicaid payments intended for homecare providers.

Thankfully, the Trump administration has issued a notice of proposed rulemaking to undo the Obama-era regulation. Today, the Competitive Enterprise Institute (CEI) submitted comments that commend the CMS rulemaking on “Reassignment of Medicaid Provider Claims,” which proposes to remove the regulatory exception to the direct payment requirement that permits states to send Medicaid payments to third parties who provide benefits customary of employees. If finalized, this regulation will ensure Medicaid funds reach their intended destination and used exclusively to care for the elderly and disabled.

CEI stresses four points in the comments:

1. The CMS exceeded its statutory authority in its 2014 Final Rule, “Provider Payment Reassignment,” and must reverse this policy;

2. 1902(a)(32) of the SSA prohibits the voluntary or involuntary reassignment of Medicaid payments to unions and any other third party not expressly permitted under the Act;

3. Unions often obtain portions of Medicaid payments from home care providers through coercive means;

4. A significant amount of Medicaid funds have been diverted from caregivers to labor unions.

It is crucial for the CMS to foreclose the ability for states to reassign Medicaid payments to third parties. Over the past decade-plus, governors have issued executive orders and states have passed legislation to make homecare providers’ public employees strictly for the purposes of collective bargaining. These homecare providers usually take care of elderly family members and receive Medicaid funds.

States implemented this government policy solely to provide an additional revenue stream for labor unions. Once unionized, these states automatically deduct union dues from a homecare providers Medicaid check, even though Medicaid payments, by statute, cannot be redirected to third parties.

Worse, many of these individuals were unionized without their knowledge. Organized labor conducted stealth organizing campaigns to unionize homecare providers, which in “no state did more than 42 percent of caregivers participate in the unionization election.”

Over the past two decades, labor unions have siphoned off about $1.4 billion from homecare providers’ Medicaid checks, according to a recent report published by the Freedom Foundation, a free-market think tank in Washington state.

Not only did labor unions organize homecare providers without their knowledge, they have made it exceedingly difficult for these individuals to escape union representation and dues payments. In many cases, caregivers only have a short, arbitrary window to opt out that coincides with the anniversary of when the employee first signed a union membership form. The time period to opt-out can be as short as 7-10 days.

The Trump administration has an opportunity to make sure that Medicaid funds exclusively finance care for the most vulnerable in society. This should be an easy lift. As I explain in the comments, CMS never had authority to create a new regulatory exception, so reversing course should not be difficult and is the right thing to do.