A money-saving maneuver in the newly enacted Medicaid budget could end up increasing costs in the long term – by paving the way for more unionization of the state’s burgeoning home health workforce.

In an overhaul of Medicaid’s Consumer Directed Personal Assistance Program, or CDPAP, lawmakers voted to consolidate payroll processing and other functions under a single statewide “fiscal intermediary” – replacing hundreds of companies and organizations that currently service the program’s beneficiaries. The Hochul administration has said the change would save Medicaid hundreds of millions of dollars per year.

However, switching to a single fiscal intermediary would also facilitate unionization, because one large employer would be easier to organize than lots of smaller ones.

The policy change thus handed a strategic victory to the health-care union 1199 SEIU, which used its considerable clout to advance the proposal late in budget negotiations.

The union, which already represents many agency-based home care aides, has been seeking to organize CDPAP workers for several years and has succeeded in some cases. The new budget gives it a chance to gain hundreds of thousands of members and tens of millions in additional dues revenue.

The restructuring of the program was opposed by many of its disabled beneficiaries, who fear disruption of the services they depend on for their well-being. Also in opposition were most existing fiscal intermediaries, who face losing a source of revenue or being put out of business.

For home care aides employed through the program, the change would be a mixed blessing. Collective bargaining could be expected to boost wages. At the same time, low-income people caring for their elderly relatives or disabled children could find themselves mandated to pay dues-like fees, as has happened in some other states.

CDPAP is an alternative to traditional home care for elderly and disabled Medicaid recipients. Instead of relying on workers employed by home-care agencies, the CDPAP clients hire, train and manage caregivers of their own choosing, who can be family members or friends, with Medicaid paying their wages.

Fiscal intermediaries play a middle-man role in the program, handling payroll processing and other administrative duties in return for fees from the state.

The previously little-known program has mushroomed in recent years, with enrollment spiking from 12,000 to 250,000 – a more than 20-fold increase – between 2015 and 2023, and costs soaring into the billions of dollars.

In her January budget proposal, Governor Hochul proposed to contain this spending by making CDPAP caregivers ineligible for “wage parity” supplements mandated for downstate home care workers.

The Assembly and Senate rejected that idea and proposed instead to eliminate the insurance companies, known as managed long-term care plans, that oversee CDPAP, traditional home care and other long-term care benefits under contract with the state.

As negotiations dragged beyond the March 31 budget deadline, 1199 threw its support behind establishing a single fiscal intermediary – an idea that had previously received little discussion in Albany.

The proposal drew bitter opposition from both fiscal intermediaries and their clients, who staged protests at the Capitol. It also met with resistance from rank-and-file legislators.

Behind the scenes, 1199 lobbied legislators to support the plan. It also brokered a compromise with some opponents – requiring the statewide fiscal intermediary to subcontract with certain long-standing fiscal intermediaries, allowing them to stay in business.

Despite lingering opposition, the proposal made its way into the final version of the health and mental hygiene budget bill, A. 8807 and S. 1507, which was made public on April 19 and approved by both houses later that same day.

This would not be the first time that state policy has promoted unionization of the program. The budget for fiscal 2020 mandated that the Health Department conduct a procurement process for fiscal intermediaries that was meant to winnow their ranks.

In its procurement guidelines, the department said winning bidders would have to “acknowledge their status as a joint employer” of CDPAP caregivers – which would put them in a position to negotiate contracts on their behalf. Previously, the aides’ only official employer was the CDPAP client.

That earlier procurement was canceled as part of the just-enacted budget – but the “joint employer” requirement can be expected to reappear in the contract for a single fiscal intermediary.

The abrupt approval process for the new restructuring plan raises doubts about its design, viability and impact.

According to the adopted legislation, the Health Department must publish a request for proposals, receive bids, identify a contractor, negotiate a contract and implement the changeover of more than 250,000 CDPAP recipients before April 2025, when most existing fiscal intermediaries will be legally barred from continuing to do business.

This schedule will be challenging to keep, even in the absence of court challenges – which are almost certain to come. (It’s worth noting that the previous procurement process had taken four years before being canceled.)

The state also faces the task of switching hundreds of thousands of recipients to a new provider when many of their existing providers have little incentive to cooperate.

Another question is how much the state can expect to save, and when. 

The consolidation could be expected to create economies of scale. It would also give state officials an opportunity to limit or abolish the type of marketing that has been done by existing fiscal intermediaries, which has contributed to surging enrollment.

However, the Hochul administration has tentatively estimated that the changeover will reduce spending by $200 million in the current fiscal year – coincidentally the same amount the governor projected would be saved by her original plan to trim wage supplements. Since the new system is unlikely to be in place before next spring, it’s hard to see how those early savings would be generated.

Given these doubts and complexities, state officials will almost certainly have to revisit and rethink the switch to a single fiscal intermediary before it comes to pass.