A requirement that 80% of Medicaid payments for Home and Community Based Services (HCBS) go to wages for direct care workers has been finalized in the Ensuring Access to Medicaid Services final rule, released April 22.
Referred to as the "80/20 rule," the requirement will go into effect six years after the rule is implemented, meaning mid-2030. The proposed rule had suggested a four-year delay.
In the final rule, CMS noted a handful of other changes to what had been proposed, including adding a definition of excluded costs, clarifying that clinical supervisors are inlcuded in the definition of direct care workers and allowing states to set certain standards for small providers.
Industry leaders have been against the 80/20 requirement, noting the other costs that the rule doesn’t account for and the potential that this will negatively impact access to home care services as some agencies are expected to close or exit the Medicaid program.  
“We know that CMS has good intentions and a desire to improve the lives of workers, but this policy is ill-advised and will have serious negative impacts on providers and their clients around the country,” says Jennifer Sheets, co-chair of the National Association for Home Care & Hospice (NAHC) Medicaid Advisory Council.  
NAHC remains committed to overturning the policy, says NAHC President Bill Dombi. Instead, the group is advocating for “more feasible and rational policies that address the root causes of low worker compensation.” 

There is precedent to overturn the rule

Prior to the announcement Monday, Home Health Line spoke with Damon Terzaghi, NAHC’s director of Medicaid advocacy, about the road forward in terms of challenging the rule. 
Regulations can be altered or rescinded after finalization, so this isn’t necessarily the end-all-be-all, but it takes time, Terzaghi says. 
A good example of this is the Medicaid Reassignment Rule, which was first enacted in the Obama Administration, repealed during the Trump Administration, and reinstated during the Biden Administration, Terzaghi explains. 
This sets precedent for retracting a rule once it is finalized, but as this is an election year, it depends on who the president is and what their priorities are, he adds. 
There is also potential for court intervention. “Multiple independent legal analyses have determined that the 80/20 provision is legally dubious and that the statute cited to support the policy does not appear to actually provide authority for such a mandate,” Terzaghi says. 
The actual viability of a legal challenge will be up to the courts though. 

The provision could lead to closures

NAHC and other national home care organizations surveyed their members about the assumed impact of this provision, and the results were unequivocal: some providers would close and others would exit Medicaid and shift to other payment sources if the rule is finalized, Terzaghi says. 
“The reality of the proposal is that it is well-intentioned, but it is poorly constructed,” he adds. 
 Everyone agrees that workers need to be paid more and that their crucial work should be recognized, valued and paid according to the important role it plays in our society, Terzaghi says. 
However, the rule doesn’t address the chronic underfunding of Medicaid Home and Community Based Services programs, nor does it recognize that many of the functions it denigrates as administrative overhead are important as well as federally required functions that ensure a quality system of care for participants, he adds. 
Administrative spending is necessary to adhere to mandates like Electronic Visit Verification, quality reporting, health and welfare oversight, nurse supervision and other state and federal requirements, Terzaghi says. 
“The rule is an inherent contradiction where it tries to increase requirements for all of those crucial functions while restricting the ability to finance the very things it seeks to improve,” he explains. 
In lieu of the 80/20 provision, NAHC has recommended that CMS create an independent rate development process that includes line-items for the federal and state requirements, a specific livable wage for workers, and a process to ensure that the rates are updated in a timely manner, Terzaghi says. 
At the end of the day, the 80/20 provision doesn’t address the chronic underfunding of Medicaid, which is the underlying cause of poor worker wages, he adds. 
“If CMS wants to improve the lives of workers, they must ensure that the process to develop rates includes both a fair salary for the employees as well as funding to accomplish the various requirements included in state and federal HCBS regulations,” Terzaghi says.
Editor’s note: Greg Hambrick provided additional reporting. Read the full announcement from the White House at https://tinyurl.com/9ehsbnju. Read the final rule at https://public-inspection.federalregister.gov/2024-08363.pdf.