Model bill requiring a specified percentage of Medicaid HCBS rate increases flow directly to direct care worker compensation — not agency overhead. Based on proven models in Minnesota, Massachusetts, and New York.
When legislatures increase Medicaid HCBS reimbursement rates, the money flows to provider agencies — not directly to workers. Without a pass-through requirement, agencies can absorb rate increases into administrative overhead, profit margins, or non-wage expenses. Workers earning poverty-level wages see nothing.
A 2023 PHI analysis found that in states without wage pass-through requirements, less than half of Medicaid rate increases translated to worker wage gains. The remainder was absorbed by agency administrative costs, overhead, and margins. Wage pass-through legislation closes this gap by mandating that a specified percentage of every rate increase reaches the workforce.
These states have implemented wage pass-through requirements with measurable results. Each represents a different approach — choose the model that fits your state’s political and fiscal context.
Minnesota requires that 72% of Medicaid HCBS rate increases flow to direct care worker compensation (wages and benefits). The requirement applies to the state’s PCA (Personal Care Assistance) program and is reinforced by strong SEIU union infrastructure. Result: Minnesota’s home care workforce is among the most stable in the nation, with mean wages above the national median and lower turnover than comparable states. The 72% threshold balances workforce investment with agency operational needs.
Massachusetts has the nation’s strongest wage pass-through requirement at 90%. Nine out of every ten dollars of rate increases must reach worker compensation. Result: Mean home care worker wage of $18.54/hr, well above the national median. PHI ranks Massachusetts #6 nationally for home care worker conditions. The 90% threshold leaves minimal room for administrative absorption and sends a clear signal that rate increases are workforce investments.
New York takes a different approach: rather than mandating a pass-through percentage, the state establishes statutory parity requirements that tie worker compensation directly to reimbursement rate structures. This model creates a legal floor that prevents the gap between rates and wages from widening, even as the Medicaid program evolves. Best suited for: states where a percentage mandate faces political resistance but where establishing a wage-rate linkage is achievable.
The 72% model (Minnesota) is the most politically viable starting point for most states — it demonstrates fiscal responsibility by preserving agency operating margins while ensuring the majority of investment reaches workers. The 90% model (Massachusetts) is strongest but faces more resistance. The statutory parity model (New York) works in states where percentage mandates are a harder sell. All three have proven track records.
Adapt this model bill to your state’s statutory framework, Medicaid program structure, and political context. Bracketed items [like this] require state-specific customization.
This Act may be cited as the “[State] Medicaid Home Care Wage Pass-Through Act of [Year].”
The [Legislature/General Assembly] finds that:
(a) Home and community-based services (HCBS) cost the state an average of $48,000 per person annually, compared to $128,000 for nursing home care — a savings ratio of approximately 2.7:1.
(b) The state’s direct care workforce experiences vacancy rates exceeding [XX]% and annual turnover rates exceeding [XX]%, threatening the viability of the HCBS system.
(c) Individuals who cannot access HCBS due to workforce shortages are five times more likely to enter nursing home care, generating additional Medicaid costs of approximately $80,000 per person annually.
(d) Previous Medicaid reimbursement rate increases have not consistently resulted in proportional wage increases for direct care workers, as provider agencies have absorbed rate increases into administrative and non-wage expenses.
(e) [Number] states have enacted wage pass-through requirements, demonstrating that such policies improve workforce stability without adverse fiscal impact.
“Direct care worker” means any individual who provides hands-on personal care, homemaker, home health aide, or companion services to a Medicaid beneficiary receiving home and community-based services, including but not limited to: personal care assistants, home health aides, certified nursing assistants providing in-home services, and self-directed care workers under [state self-directed program name, e.g., IRIS, CDCS, IHSS].
“HCBS rate increase” means any increase in the Medicaid reimbursement rate paid to providers of home and community-based services, whether enacted by statute, adopted by administrative rule, or implemented through managed care contract amendments.
“Compensation” means wages, salaries, health insurance contributions, paid leave, retirement contributions, and other benefits provided directly to or on behalf of direct care workers.
“Provider agency” means any entity that receives Medicaid reimbursement for the provision of HCBS and employs or contracts with direct care workers.
(a) Effective [date], not less than [72/80/90]% of any HCBS rate increase shall be passed through to direct care worker compensation.
(b) The pass-through requirement applies to all provider agencies receiving Medicaid HCBS reimbursement, including agencies operating under managed care contracts.
(c) For purposes of this section, compensation increases may include: (1) hourly wage increases; (2) new or enhanced health insurance benefits; (3) paid leave benefits; (4) retirement contributions; (5) training and certification stipends. Not less than [50/60]% of the pass-through amount shall be allocated to direct hourly wage increases.
(d) The [Department of Health Services / Medicaid Agency] shall incorporate this requirement into all managed care organization contracts, fee-for-service rate schedules, and self-directed program payment structures within [180/365] days of enactment.
(a) Each provider agency shall submit an annual report to [DHS/Medicaid Agency] demonstrating compliance with the pass-through requirement, including: (1) total HCBS rate increase revenue received; (2) total amount allocated to direct care worker compensation; (3) the percentage of rate increase revenue passed through; (4) average hourly wage before and after the rate increase.
(b) The [DHS/Medicaid Agency] shall audit a random sample of not less than [10/15]% of provider agencies annually for compliance.
(c) Penalties for non-compliance: A provider agency that fails to comply shall be subject to: (1) first violation — written notice and 90-day corrective action plan; (2) second violation — recovery of the non-passed-through amount plus [10]% penalty; (3) third violation — suspension from Medicaid provider enrollment pending compliance.
Direct cost: None. This Act does not appropriate funds or increase reimbursement rates. It directs the allocation of future rate increases.
Administrative cost: Estimated [$ amount] for reporting infrastructure and compliance auditing within [DHS/Medicaid Agency]. May be offset by incorporating requirements into existing MCO contract oversight.
Projected savings: Workforce stabilization reduces turnover costs (estimated at $2,600–$5,200 per worker per turnover event). Reduced nursing home admissions from improved HCBS access generate Medicaid savings of approximately $80,000 per diverted admission annually. Nevada’s comparable investment (SB 511) reduced workforce turnover from approximately 50% to 4%.
This template is designed for adaptation, not verbatim adoption. Key customization points: (1) The pass-through percentage — 72% is the most politically viable starting point; 90% is the strongest protection. (2) The definition of “direct care worker” must match your state’s Medicaid program terminology. (3) The enforcement mechanism should align with your state’s existing Medicaid provider oversight infrastructure. (4) States with managed care should ensure MCO contract language is explicitly covered. This model bill is provided as a policy resource, not legal advice. Consult with your state’s legislative counsel for statutory formatting and legal review.
This bill costs nothing — it directs the allocation of future rate increases. The real fiscal question is what happens without it. Every HCBS participant who can’t get care because there aren’t enough workers becomes a potential $128,000 nursing home resident. A 30% reduction in HCBS capacity would generate an estimated $943 million in additional nursing home costs nationally. Wage pass-through isn’t a spending bill — it’s a fiscal protection mechanism.
Nevada’s SB 511 raised Medicaid home care reimbursement to $25/hr. Result: workforce turnover dropped from approximately 50% to 4%. This is the clearest available natural experiment in what workforce investment produces. Each percentage point of reduced turnover saves recruitment, training, and care-continuity costs. The fiscal return is measurable and the evidence is available.
The FLSA companionship exemption saves an estimated $500–700 million annually — roughly 0.2% of the $313 billion HCBS system. The savings-to-risk ratio is approximately 1:1.5: the exemption saves less than the institutional cost blowback it generates. Wage pass-through legislation works within this system to ensure that when states do invest, the investment reaches the workforce.
14 states already provide overtime and wage protections beyond federal minimums. None has experienced the fiscal catastrophe opponents predict. Several — including Washington (#1 PHI ranking), Massachusetts (#6), and Minnesota — rank among the nation’s best for both worker conditions and sustainable HCBS systems. The question is no longer whether wage protections work. It’s why your state hasn’t adopted them.
72% wage pass-through model. PCA program with strong union infrastructure. Fully validated state profile with complete data across 89 metrics.
→ State profile90% wage pass-through — nation’s strongest. Mean wage $18.54/hr. PHI-ranked #6 nationally for home care worker conditions.
→ State profileFiscal impact data, both model legislation frameworks, committee testimony resources, and the 14-state precedent analysis.
→ Legislator resourcesFull 90+ metric template pre-populated with WI and MN validated data. Build state-specific fiscal impact analyses.
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