Roper: $15 minimum wage would impact Medicaid/Medicare costs by $50 million

Rob Roper

Rob Roper is the president of the Ethan Allen Institute.

By Rob Roper

The Vermont Department of Disabilities, Aging & Independent Living (DAIL) testified that if the Vermont Legislature were to adopt a $15 minimum wage, as is seems poised to do, “it may also result in unintended consequences.” That’s an understatement. The report submitted that the increased price for labor would cost Medicaid $41,904, 930 and Medicare $9,086,865.

DAIL identified 12,634 workers across the support services network who currently earn less than $15 per hour, all of whom would require an increase in salary if the higher wage mandate becomes law. These employees work in “hospitals, nursing homes, home health agencies, designated agencies, specialized service agencies, assisted living facilities, residential care homes, therapeutic community residences, and by consumers themselves in their own homes under Choices for Care.”

The funding sources for these services is overwhelmingly Medicaid and Medicare. In the case of Medicaid, the higher labor cost would require more spending. In the case of Medicare, according to the testimony, “Increases to Medicare reimbursement is extremely unlikely,” meaning other revenue sources would have to be tapped or services cut.

Overall, DAIL concluded:

In cases where services are based on an allocated individual support budget from appropriated Medicaid budgets (eg Developmental Disabilities, Choices for Care, Traumatic Brain Injury program), an increase in the minimum wage would lead to:

  • Significant increases in state appropriations and Medicaid spending;
  • Significant decreases in numbers of people served, including changes in eligibility;
  • Significant decreases in individual services, some of which would be impossible and/or subject to appeals and continued benefits during appeals;
  • Significant reductions in worker benefits (eg health insurance) among those employers that offer currently offer benefits; and/or
  • Additional financial pressures form wage compression among groups of workers at specific facilities and agencies.

 

These numbers do not account for the upward pressure a $15 minimum wage would place on labor costs for those currently working at or just above $15 per hour now, so we can expect the actual impact to be greater.

Seriously, where is AARP stepping in on this issue to advocate for its membership?

Rob Roper is president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.

Image courtesy of Wikimedia Commons/Jamain
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One thought on “Roper: $15 minimum wage would impact Medicaid/Medicare costs by $50 million

  1. Mr. Roper points out just one adverse effect. But the best way to explain the consequence of political market manipulation, be it wage or price controls of any kind, is to predict outcomes. Let it happen. Then be sure to hold the policy perpetrators accountable.

    Unfortunately, the majority of us being unprepared for these outcomes (or unconvinced by reasonable predictions like these) will suffer. None the less, reasonable thinking individuals can mitigate the ill effects of these policies and I suggest they begin their preparations now, if they haven’t already done so.

    After all, as I commented on the David Coates commentary: ‘Vermont has a negative net worth…’ https://vtdigger.org/2019/02/26/david-coats-vermont-negative-net-worth/?is_wppwa=true&wpappninja_cache=friendly
    …on VT Digger (yes, they published it):

    “Legislators are elected by special interest groups feathering their nest at taxpayer expense. When more than 30% of Vermont GDP is represented by the fastest growing segment of its economy – nonprofit and governmental agencies – we find ourselves confronting a dysfunctional majority electorate that won’t repair the waste of its system until it runs out of other people’s money….or, in this case, until other people can no longer borrow the money to support them. Only when taxation becomes intolerable to those milking the cow, as they become the only ones left to feed it, will this cronyism stop.”

    With our current State legislator mix, I don’t think we have long to wait.

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