With a new rule, the U.S. Department of Labor is increasing the number of workers who qualify for overtime pay, a move that disability providers say will further tie them down amid a workforce crisis. (Chuck Myers/TNS)
Millions more workers will soon qualify for overtime pay, and advocates warn the changes will likely further erode the availability of services for developmental disabilities.
The U.S. Department of Labor has begun gradually raising the salary threshold at which employees are eligible for overtime pay under a new rule which came into force this summer.
Starting July 1, most wage earners earning less than $43,888 are eligible for overtime if they work more than 40 hours a week. That cap will increase to $58,656 in January and will be updated every three years based on wage data starting in July 2027.
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The changes, which the Labor Department estimates will affect more than 4 million workers in the first year, are putting disability service providers in a particularly tough spot, advocates say. That’s because providers rely on Medicaid funding and have no way to pay their employees more if reimbursement rates aren’t adjusted.
“With 60 percent of community providers already considering closing additional programs and 77 percent of providers denying new referrals before the overtime rule went into effect, we are deeply concerned about the impact on access as providers unable to shoulder additional, unfunded expenses close programs and services,” said Lydia Dawson, vice president of government relations at the American Network of Community Options and Resources, or ANCOR, which represents 2,100 disability services providers nationwide. “Given the fragility of the community services system, increasing the cost of providing services without also ensuring adequate and proportionate Medicaid funding will undoubtedly further reduce access to services for people with intellectual and developmental disabilities.”
Last year, ANCOR released a report estimating that the higher threshold for overtime pay would result in an additional $1 billion in expenses for disability service providers in the first year. In a survey of more than 700 providers from 45 states that was included in the report, one-third said they would have to eliminate positions, nearly half said they would limit overtime, and 61 percent indicated they would switch salaried employees to hourly workers.
While the initial increase that took effect in July worried providers, advocates say they are especially wary of the next increase coming in January.
“As our members work through the budget process for next year, we are learning that community providers are considering closing more programs and services to meet the January increase. Because state funding for Medicaid services is allocated through state budgets, there is little to no opportunity to apply for funding to cover the new costs before the implementation date,” Dawson said.
So far, warnings about the impact on disability services have been largely ignored. The Labor Department said in April, when the rule was finalized, that it would work with the Administration for Community Living and the Centers for Medicare and Medicaid Services on the issue. More recently, however, a Labor Department spokesperson did not respond to questions about what the agency is doing to address the specific concerns of Medicaid-funded disability service providers.
“The department has provided guidance, outreach and education, as well as issued technical assistance to help employers comply with the (Fair Labor Standards Act) and will continue to coordinate across the administration,” the spokesperson said.
The Centers for Medicare and Medicaid Services said states are responsible for setting Medicaid reimbursement rates.
“States may set their own payment rates for Medicaid providers, within federal requirements, and generally pay for services through fee-for-service or managed care arrangements,” the agency said. “While states may set their own payment rates, they generally must ensure that the rates are consistent with efficiency, economy, and quality of care and are sufficient to recruit enough providers to make access to care available.”
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