On July 3, the Centers for Medicare and Medicaid Services (CMS) issued an informational bulletin to assist states in understanding Medicaid reimbursement options that will enable them to account for the cost of overtime and travel time that may be compensable as the result of the changes to the Department of Labor's (DOL's) regulations regarding domestic service employment under the Fair Labor Standards Act (FLSA). The guidance comes shortly after the DOL issued guidance on third-party and joint employment under the new rule. (See WICs article, "DOL Issues Guidance on Third-Party Joint Employment Under New FLSA Rule", June 20, 2014.)
The CMS bulletin summarizes the economic realities test to be used to determine whether an employment relationship is present for purposes of the FLSA. It then identifies issues that states will need to address in self-direction programs to ensure that overtime hours and travel time are compensated appropriately. Specifically, it notes two major issues: 1) Overtime costs which are not attributable to any one person's use of services, but which must be paid by the third-party employer and 2) Compensable worker time associated with travel between beneficiaries that is not directly attributable to any one beneficiary.
The bulletin notes that long-standing Medicaid policy does not consider overtime costs and compensable travel time costs to be administrative costs in the Medicaid program. In order to be reimbursable under Medicaid, these costs must be allocated as reasonable costs of delivering a covered Medicaid service. It says that the cost of compensable travel time under FLSA may be considered a reasonable cost of delivering a unit of Medicaid service.
CMS urges that states ensure that overtime or travel costs that are beyond an individual's control not be deducted from the individual's self-directed budget. Rather, it says that costs incurred from a provider working for multiple beneficiaries could be distributed across all the individuals served by a joint employer without being deducted from the individually controlled self-direction budget.
The guidance provides two examples of approaches states could take in self-direction programs to address the operational considerations that occur under these situations. It concludes by urging states to consult the DOL's guidance, as well as contact CMS for specific technical assistance to support compliance with the FLSA.