On July 5, 2019, a Centers for Medicare & Medicaid Services (“CMS”) regulation (proposed by the Trump administration in July 2018) went into effect, prohibiting automatic union dues deductions from paychecks of home health workers directly paid by Medicaid.  The regulation will affect 350,000 workers who pay approximately $71 million annually in union dues nationwide.

The regulation overturns an Obama administration policy that allowed for such deductions, along with deductions for other fees such as health benefits. Specifically, it prohibits states from diverting Medicaid dollars meant for home care providers to third parties, including employers and labor unions.  The regulation stems from CMS’ interpretation of a federal law that prohibits Medicaid funds meant to help the poor and disabled to be paid to anyone other than a Medicaid provider unless ordered by a court.

 The new regulation will affect home care workers who are paid by the state and hired and/or fired by their clients. Home care workers who are employed by a conventional employer that receives Medicaid funds will not be affected, and their employer can still make any deductions (including deductions for union dues) as required by applicable state laws.

In addition, while the new regulation prohibits union dues paycheck deductions for such home health workers, it does not prohibit home care workers from unionizing or accessing benefits. Rather, these workers may continue paying union dues and/or contributing to other organizations. It forecloses, however, a worker’s option to assign a portion of his or her Medicaid payment to a union (or other organization). Unions representing self-directed care home health workers will now be responsible for collecting union dues from such workers either by manual payment methods or automatic bank account deductions.

Several states and the Service Employees International Union have sued CMS regarding the regulation, and that litigation remains pending as of the date the new rule became effective.