Admin Halts Disability Dues Scheme

Regulation will no longer allow unions to take dues money from Medicaid checks

Seema Verma
Seema Verma / Getty Images

Labor organizations will no longer be allowed to skim dues money from the checks of Medicaid patients under new rules adopted by the Trump administration.

The Department of Health and Human Services's Center for Medicare and Medicaid Services adopted a new regulation that will prohibit states from siphoning money from caregiver reimbursements to third parties. The rule takes direct aim at state policies enacted to enrich union coffers.

"State Medicaid programs are responsible for ensuring that taxpayer dollars are dedicated to providing healthcare services for low-income, vulnerable Americans and are not diverted in ways that do not comply with federal law," CMS Administrator Seema Verma said in a release. "This final rule is intended to ensure that providers receive their complete payment."

Several states have used forced dues schemes in the past to automatically deduct union fees from the reimbursement checks intended to pay for the care of disabled citizens. In many cases that money has gone to family members who serve as full-time caregivers to their severely disabled relatives. The new rule will prevent states from enforcing those policies in the future.

"This final rule removes the regulatory text that allows a state to make Medicaid payments to third parties on behalf of an individual provider for benefits such as health insurance, skills training, and other benefits customary for employees," the regulation says.

The issue gained national prominence when the Supreme Court struck down a coercive dues scheme adopted by imprisoned former Gov. Rod Blagojevich in Illinois. The Court ruled in Harris v. Quinn that the state policy was unconstitutional because it treated home health aides as government employees for the purpose of paying labor giants Service Employees International Union and American Federation of State, County, and Municipal Employees, but otherwise received no other benefits or services from state government. The 5-4 ruling, however, only struck down the scheme in Illinois, leaving other states free to continue similar policies.

Labor organizations collected more than $50 million from home health aides over a five-year period following Blagojevich's policy. CMS found that tens of millions of dollars continued to flow from disabled clients to unions despite the Harris ruling, thanks in part to an Obama administration rule that allowed state governments to direct payments to third parties. Of the 7,000 public comments filed to the agency in the wake of the proposal, one estimated that more than $1.4 billion has been redirected since 2000.

"We estimated that unions may currently collect as much as $71 million from such assignments," the regulation says. "We estimated that the amount of payments made to third parties on behalf of individual providers for the variety of benefits within the scope of this rulemaking could potentially be in excess of $100 million."

The new rule would still allow caregivers to voluntarily pay labor organizations if they choose to be represented. The key difference is that those payments will come from the caregiver directly, rather than an automatic withholding by state government.

Labor watchdogs welcomed the new rule. The National Right to Work Foundation, which successfully argued Harris before the Supreme Court, said the regulation was a welcome development to preventing future coercive dues schemes. Foundation president Mark Mix called it "long overdue," adding that it would need to be vigilantly enforced to ensure unions do not attempt to continue deducting money from caregivers.

"This long-overdue rule closes the illegal loophole created by the Obama Administration that that has provided union officials with legal cover to siphon hundreds of millions of dollars in Medicaid funds into union political and lobbying activities," Mix said in a statement. "While the rule will still need to be robustly enforced, today's announcement is an encouraging action toward stopping union bosses from unlawfully using public payment systems to intercept tax dollars intended for providers caring for those in need."

The Freedom Foundation has also successfully challenged forced union dues schemes at the local level. The pro-free market think tank based out of Washington state said the rule will ensure that taxpayer dollars end up in the pockets of the disabled and their caregivers, rather than politically powerful interest groups.

"Repealing this illegal regulation is a major victory for caregivers and those who care about protecting Medicaid from being looted by special interests," Maxford Nelsen, the foundation’s director of labor policy, said in a statement.

Trey Kovacs, a labor expert at the Competitive Enterprise Institute, said such schemes were only made possible by backroom deals negotiated by unions and their political allies and "stealth organizing campaigns." In no case did unions win exclusive representation rights with the support of more than half of caregivers. When federal courts began putting an end to state schemes, many caregivers encountered obstacles and red tape when they tried to cut off dues payments, according to Kovacs.

"Labor unions made it difficult for homecare providers to cancel the state’s deduction of dues from their pay," he said. "This final rule finally ends dues skimming, ensuring Medicaid funds reach their statutorily required destination—to fund care for the elderly and disabled."

The new HHS rule is scheduled to take effect after 60 days.