February 26, 2013
Senator Dan Sparks
75 Rev. Dr. Martin Luther King Jr. Blvd., Room 328
St. Paul, MN 55155
Representative Ryan Winkler
100 Rev. Dr. Martin Luther King Jr. Blvd., Room 553
St Paul, MN 55155
Dear Representative Winkler and Senator Sparks:
We are writing as the Long Term Care Imperative to make you aware of our concerns with legislation proposed to increase the minimum wage.
This legislative session there have been a number of bills introduced which would increase the minimum wage. These bills vary in the proposed level of increases and mechanisms utilized. Regardless of these details, we remain concerned that any minimum wage increase would have negative impacts on long-term care providers.
Paying people a fair wage for the work that they do is a laudable goal and one we support. In fact, this year the Long-Term Care Imperative is sponsoring legislation to increase Medicaid rates by 5% for long-term care services in nursing homes and home care settings (See HF 886 (Fritz)/SF792 (Eken)). As detailed in the legislation, a portion of these rate increases would be encumbered to staff wage increases.
However, any proposal to increase the minimum wage will uniquely impact senior care providers, because they rely significantly on Medicaid rates which are controlled by the state legislature. The current state dictated Medicaid rate is $27.70 per patient/per day below allowable Medicaid costs. This underfunding is putting 85 nursing homes across the state at an operating margin of minus 5% (-5%) or greater and at risk of closure.
In addition, the state has a policy of rate equalization, which dictates that a nursing home cannot charge private pay clients a higher rate than the Medicaid rate. Because of these factors, without any corresponding increase in Medicaid rates for nursing homes and elderly waiver providers, long-term care providers will be adversely impacted by a minimum wage increase.
We have analyzed how annual increases from $8.35 in 2013 to $10.55 in 2015 in the minimum wage will impact nursing facilities and senior housing providers and have several observations:
· A change in the minimum wage will impact nursing facilities and senior housing providers, but this will vary from provider to provider.
· By 2015, the proposal will change the wage scale of an estimated 13.5% of nursing facility employees.
· Beginning August 1, 2015, the annual cost of compliance for nursing facilities is estimated to be $32.5 million.
· Our analysis of senior housing providers indicates that after August 1, 2015, the average wage will have risen by 5%, and that the proposal will change the wage scale of over an estimated 27% of employees.
Please also consider the following points:
· Without rate increases, an increase in the minimum wage will amount to an unfunded mandate for long-term care providers. Nursing home rates have been frozen for the past 4 years and senior housing providers have experienced double digit rate cuts. Our members simply have very little room to make up funding and our rates are set. There are no automatic increases for Medicaid rates in law today.
· Because of rate freezes for nursing homes and cuts to the elderly waiver program over the past 4-5 years, many long tenured employees' wages have been frozen. The proposed minimum wage increases will create issues with the wages scales as it relates to starting wages and those rewarded for tenure.
· Even if there is a Medicaid rate increase this year, the minimum wage increase and any corresponding increase will ripple all the way through the grid for a long-term care employer. This will cause significant financial issues for a profession that already has troubled financial performance.
· If the minimum wage were to increase without funding support for senior care providers, we would have to consider staff lay-offs, suspension of admissions, and other mechanisms that would allow us to stay open and serve the elderly population.
Thank you for consideration of these issues.
Sincerely,
Toby Pearson Kari Thurlow
Cc: Speaker Paul Thissen
Majority Leader Erin Murphy
Majority Leader Tom Bakk