Trump Cracks Down on Disability Skimming

New rule could cost unions $71 million

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July 12, 2018

The Trump administration is moving to block unions from collecting federal funds directed to care for disabled people, which could cost labor organizations at least $71 million.

The Centers for Medicare & Medicaid Services initiated a new rule that will prevent unions from collecting payments from home health aides, many of whom are caring for disabled relatives. Millions of dollars are paid to those caregivers each year from the federal government, but it is up to states to distribute the money. Several states have forced them to surrender portions of their dues to local unions in order to continue receiving their federal reimbursements in the past. The Center for Medicaid and CHIP Services has proposed a rule to officially prohibit such schemes.

"This proposed rule would remove the regulatory text that allows a state to make 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 proposal says. "We are concerned that these provisions are overbroad, and insufficiently linked to the exceptions expressly permitted by the statute."

The rule could put a major financial dent into union coffers if it is adopted. Labor organizations receive tens of millions of dollars taken from Medicaid and Medicare reimbursements each year, according to a department analysis of payments to several states, including union strongholds such as New York and California. The policy, however, would not hinder any recipient from volunteering to pay a labor organization.

"We estimate that unions may currently collect as much as $71 million," the proposal says. "If a state elected to maintain the same level of payment, and if homecare providers opt to continue all voluntary payments presently being reassigned, then the rule may have no impacts."

The agency acknowledged that the proposal may be overly conservative in its estimates, saying it could have significant effects on the economy "in excess of the $100 million threshold" annually. It has opened a public comment period asking stakeholders, including aides, health care systems, government agencies, and labor organizations to weigh in on the money at stake for patients, providers, and third-party groups. The agency expects some patients and aides to maintain their payments to unions even if they are freed from mandatory payments.

"Even where it may be possible to derive such estimates, such as with the example of union dues, the Department lacks information to reliably estimate the proportion of homecare providers likely to stop making payments versus those likely to continue making payments through alternative means," the post says.

Home health aide reimbursements have been at the center of numerous federal lawsuits over the past few years. Several personal aides (PAs) in Illinois sued the state for enforcing payments to Service Employees International Union under a policy set by imprisoned former governor Rod Blagojevich. The Supreme Court declared it unconstitutional in 2014's Harris v. Quinn ruling. The 5-4 majority sided with the plaintiffs because the union had no input over bargaining since the federal government sets reimbursements.

"Unlike full-fledged public employees, PAs are almost entirely answerable to the customers and not to the State, do not enjoy most of the rights and benefits that inure to state employees, and are not indemnified by the State for claims against them arising from actions taken during the course of their employment," Associate Justice Samuel Alito said in the opinion.

The ruling applied only to Illinois, rather than nationwide. Several states abandoned their forced dues policies in the aftermath of the ruling, fearing that they would not withstand judicial scrutiny in the wake of Harris v. Quinn. The new CMS policy is designed to settle the question and avoid any potential work-arounds that would allow unions to continue collecting dues while the issue makes its way through the court system.

"The law provides that Medicaid providers must be paid directly and cannot have part of their payments diverted to third parties outside of a few very specific exceptions," Acting Director Tim Hill said in a release. "This proposed rule is intended to ensure that providers receive their complete payment, and any circumstances in which a state does divert part of a provider’s payment must be clearly allowed under the law."

Labor watchdogs praised the proposal, saying it would protect patients and caregivers from seeing their checks diverted away to politically connected groups. Maxford Nelson, a labor expert at the Washington-based Freedom Foundation, said unions have taken more than $1 billion from caregivers since 2000, money that was meant for patients. The foundation has battled local unions in the state to allow caregivers to withdraw such payments from the union.

"This illegal and exploitive practice has victimized hundreds of thousands of caregivers," Nelson said in a statement. "It has only been allowed to persist because it generated significant funds for a politically connected special interest group. Hopefully the administration follows through with meaningful action and does the right thing for caregivers."

The National Right to Work Foundation, which gave legal assistance to the personal aides in the Harris v. Quinn case, welcomed the Trump administration's rule. President Mark Mix called it a "vital first step in ending the illegal dues skim that diverts public funds away from the care of Medicaid recipients and into union officials' coffers." He said in a statement that the proposal was necessary because the Obama White House turned a blind eye enforcing the legal standards set forth in 2014.

"For years, aided by a compliant Obama Administration, Big Labor has siphoned off hundreds of millions of tax dollars in violation of federal law, which is why this rulemaking is now needed make it clear that states cannot legally divert Medicaid funds into the bank accounts of politically connected union bosses," Mix said.

The agency is now receiving public comment from interested parties about the proposal, which is scheduled to be published in the Federal Register on Thursday. The comment period will end in August.