SUPPORT FUNDING TO COVER THE INCREASES IN
MINIMUM WAGE & RESTORE THE EPD ALTCS SYSTEM

Caregiving for the Elderly and Physically Disabled Is

Total Additional General Fund Dollars Needed to Restore EPD ALTCS Providers Above the Executive Budget for FY 2023 is $30M

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The Problem

Organizations that provide Home and Community Based Services to the Elderly and Physically Disabled (EPD) populations under the Arizona Long Term Care System (ALTCS) - AHCCCS umbrella have been under unsustainable financial stress due to a lack of appropriate funding for nearly a decade.

During the Great Recession, reimbursement rates were reduced by 16% and have only been partially restored. The hourly minimum wage increases mandated by Prop. 206 combined with inflation, industry changes, and new requirements from the Affordable Care Act, Direct Care Workers Training and Testing, Companion Exemption rule change, pay for Travel time and Paid Sick Leave have left providers woefully underfunded.

As a result, providers are in crisis and businesses are beginning to close. Lutheran Social Services is closing their homecare division in Maricopa county March 2019. We can expect more providers to close their doors beginning January 2020 if adequate funding is not restored.

The Ask

In addition to the funding provided in the Executive’s budget request for the EPD ALTCS population in AHCCCS, the Elderly and Physically Disabled Providers Alliance – EPDPA encourages your support in providing funding that will restore the ability of service providers to pay their direct caregiving staff above the minimum wage, adjust rate reimbursement levels to compensate for changes in minimum wage and inflation so direct care workers can earn a living wage and the home care network can remain intact supporting people who chose home.

EPD ALTCS Issues

Prior to the enactment of Prop. 206, EPD direct caregiving staff were paid, on average, 16.5% above minimum wage. After the increase in the minimum wage, direct caregiving staff, on average, make less than 2.6% above the minimum wage (2018 AHCCCS Network Adequacy Study). As a result, wages have fallen significantly below the starting wages for positions in competing markets that were previously minimum wage jobs requiring much less skill and compassion.

Before Prop. 206, providers were able to pay up to $2.00/hour over minimum wage. This allowed for providers to successfully recruit and retain qualified caregivers. Following Prop. 206, beginning in January 2017 providers have only been able to pay qualified caregivers at the minimum wage. Not being able to pay above minimum wage caused the industry to lose 1,530 direct caregivers in Arizona for the first time - in a marketplace that has a growing need and is facing the prospect of needing to add 25,290 caregivers by 2026.

In FY 2008 the AHCCCS Rate for code S5125 (the most often billed code) EPD ALTCS providers was $18.00 when minimum wage was $6.90. In 2011 that rate was reduced to $15.52 - a 16% reduction. Today, in FY 2019 the current rate for S5125 is only $18.60 and minimum wage is $11.00 heading to $12.00 January 2020. The actual rate needed to restore the EPD Providers to FY 2008 levels in FY 2020 and to be able to pay direct caregivers over minimum wage would be $25.83 which is a 38.9% increase.

Compounding the problem, EPD Providers only receive, on average, 90% of the published rate by AHCCCS as the state’s 3 managed care program contractors who administer the program take, on average, 10% off the top.

Minimum Wage increases every year are indexed to CPI, making it critical to fund this ongoing need every budget cycle – first to meet the new minimum wage and second to address the need to pay the DCWs $15-$17/hr.

2026 Key Message

HCBS-EPD funding is nearly $6.00/hour below what is needed to sustain the Direct Care Workforce.
HCBS-EPD is underfunded by $30 million to meet Arizona’s minimum wage, according to the 2023 Mercer Rate Study.
No legislative funding increases were provided in FY24, FY25, or FY26, despite rising minimum wage and workforce costs.
Direct Care Work is not a minimum-wage job. DCWs must meet rigorous training and compliance requirements and provide essential care that supports the health, safety, and independence of Arizonans.
Workforce demand continues to outpace supply, increasing the risk of service gaps for elderly and physically disabled Arizonans.
MCOs take an average of 10% of AHCCCS-approved, state-funded rates, further reducing the funding available to providers.
FY27 Funding Ask: $2.5 million to begin addressing the gap between HCBS-EPD reimbursement and the cost of sustaining the Direct Care Workforce.