The Biden administration is attempting to roll back federal rule issued in 2019, that ended states and unions from scheming to take money from home healthcare providers working to care for America’s most vulnerable. Small business owners who provide childcare out of their homes, often to children from low-income families, are also still being victimized and losing tens of millions of dollars each year.

This is happening through a scheme known as “dues skimming,” wherein a state takes money off the top of support checks intended to help those in need and sends it to unions. While this practice has always been wrong and undermines federal and state programs for America’s most in-need populations, childcare providers are needed now more than ever to provide crucial relief to families struggling from the impacts of the COVID-19 pandemic.

These essential workers, many of whom are now providing safe places for children to learn virtually, should not need to worry that a far-off organization they never interact with is taking a cut of their support check. And, Americans should have the peace of mind knowing that their tax dollars are going to help those in need, not line the pockets of multi-billion dollar organizations like unions.

For decades, state governments have worked with unions to divert money away from people in need to unions. Prior to 2019, dues skimming was happening to both home healthcare providers—who provide care to elderly, sick, and disabled people, often family members—and childcare providers who look after low-income children from their homes. Dues skimming was costing home healthcare providers an estimated $200 million each year. The federal government attempted to prohibit the practice, but it was tied up in court and the current administration has started the process to roll back those protections.

Eleven states currently have structures in place to permit unions to skim dues from Medicaid funds that should pay caregivers. Many of these individuals take care of disabled friends and family members. Freedom Foundation of Washington state estimates that this scheme diverted $150 million to unions from Medicaid funds in 2017, totaling over $1.4 billion since 2000.

Childcare providers, who are more essential now than perhaps ever before, are still losing out to this scheme in at least nine states. The amount being taken from them is currently unknown because unions in California have recently begun skimming money from the paychecks of approximately 40,000 childcare workers. Prior to this, the dues skim was estimated to cost childcare workers $50 million each year.

Federal leaders must take the steps to ensure those funds are protected and provide relief to the families and essential workers hit hardest by the pandemic. The Trump-era protections need to be preserved and also extended to childcare workers. Congress must also stipulate that new funding for these programs may not be diverted to third parties, like unions.

Additional Background

Union-supporting governors and state legislatures in these states declared home healthcare and daycare providers “public employees” simply because they are receiving state subsidies to take care of the needy. In states that aren’t right-to-work, this means that caregivers were forced to pay union dues. A 2014 Supreme Court ruling in Harris v. Quinn questioned the “public employee” status and declared that unions could not force these caregivers to pay the unions. However, the decision did not end the problem. Unions continue to pressure and deceive caregivers into membership so they can collect dues.

State governments and unions developed unfair and confusing rules that trap caregivers in the dues skim. For example, some caregivers can only opt-out of their union during a 15-day annual period that varies by member. In Minnesota, caregivers have alleged that unions forged signatures on membership cards. Unions have similar arrangements in other states. The structure for dues skim exists in: Washington, Oregon, California, Connecticut, Illinois, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, Vermont, and Rhode Island.

A Brief History of the Regulation:

The 2014 Obama regulation created 42 CFR § 447.10(g)(4), which states:

“In the case of a class of practitioners for which the Medicaid program is the primary source of service revenue, payment may be made to a third party on behalf of the individual practitioner for benefits such as health insurance, skills training and other benefits customary for employees.”

1. Health and Human Services (HHS) repealed this regulation in 2019.
2. In November 2020, Judge Chhabria (District Court for the Northern District of California) vacated HHS’ recission of the Obama rule.
3. HHS appealed to the 9th Circuit in January.
4. The new administration asked the court to stay the appeal.

A recent nationwide survey found that a vast majority of Americans oppose dues skimming and two-thirds find the current opt-out procedures unfair. Home healthcare and childcare providers deserve a permanent fix so they can have freedom of choice to focus on providing care instead of fighting off unions that rob a portion of their payment.

While the Trump administration defends its dues skim fix for home care providers in court, childcare providers still do not have basic protections. The US Department of Health and Human Services (HHS) has the authority to fix dues skimming and prevent states from acting as unions’ dues collection agents by:

Preserving the program through issuing clarifying guidance that dues skimming is a misuse of federal child care funds and states should cease diverting these funds to unions. HHS could go a step further and declare the use of these funds for unions dues as impermissible, unrelated to the grant’s purpose and should cease immediately.
Related Resource: Agency Guidance to Minimize or Eliminate Dues Skimming (Mackinac Center for Public Policy)

Protecting childcare providers’ rights though requiring any state that skims dues to have unions annually obtain waivers from providers who want to join so they are not trapped and their First Amendment rights are protected.
Related Resource: Opt-in Requirement to Ensure Clear Consent (Mackinac Center for Public Policy)

Congress can also ensure that programs such as the Childcare Develop Block Grant are used for the right purposes, especially for any emergency appropriations for childcare providers impacted by COVID-19. Download SPN’s full memo for more information.

August 3, 2021: Biden Administration releases a Notice of Proposed Rulemaking (NPRM)

On August 3, 2021, the Biden Administration released a Notice of Proposed Rulemaking (NPRM) addressing union “dues skim.” This will roll back Trump-era reforms that closed the loophole permitting the unfair and confusing rules that trap home caregivers in unions. It also mentions voluntary consent as a nod to Janus and Harris. The new regulation would create 42 CFR § 447.10(i), to read:

“The payment prohibition in section 1902(a)(32) of the Act and paragraph (d) of this section does not apply to payments to a third party on behalf of an individual practitioner for benefits such as health insurance, skills training, and other benefits customary for employees, in the case of a class of practitioners for which the Medicaid program is the primary source of revenue, if the practitioner voluntarily consents to such payments to third parties on the practitioner’s behalf.”

May 2, 2019: DHS Ends Unfair Practice of Dues Skimming
The Department of Health and Human Services protected America’s most vulnerable people by ending a decades-long scheme that robbed homecare providers of an estimated $150 million dollars each year. Under the new rule finalized on May 2, 2019, state governments may no longer take money out of Medicaid support checks intended to improve the quality of life of America’s sick, elderly and disabled, and give it to unions. This means family members and friends who stay home to care for loved ones will keep all of the money that is owed to them moving forward, rather than seeing hundreds or over a thousand dollars each year sent to a union they may not know.

Unfortunately child care providers for low-income families are still impacted by this scheme. A recent joint report by Freedom Foundation  and Mackinac Center for Public Policy  lay out several policy solutions to address this injustice. Learn more about these efforts.

August 14, 2018: DHS Reviewing Public Comment on Proposal to End Dues Skim
The US Department of Health and Human Services (DHHS) has closed its public comment period on a proposed rule that, if enacted, will prohibit states from taking money from Medicaid checks and giving it to unions.

Comments supporting DHS’ proposed move submitted during the 30-day period explained how dues skimming jeopardizes the needed Medicaid program and falls outside its narrowly defined purpose. Other comments touched on the unfairness of dues skimming, which robs our country’s most vulnerable of approximately $150 million a year.

DHHS is currently reviewing comments. Check back for further updates on the status of this proposed rule to end dues skimming and the ongoing efforts to protect in-home caregivers from this unfair and deceptive scheme.

July 10, 2018: Department of Health and Human Services Proposes End to Dues Skim, Seeks Public Comment

State governments may soon be prohibited from allowing unions to skim millions of dollars from the Medicaid checks of people who are caring for sick friends and relatives.

Today, the US Department of Health and Human Services (HHS) announced a Notice of Proposed Rulemaking to protect the integrity of the Medicaid program by ensuring states are no longer able to take union dues from the support checks of in-home caregivers who look after our country’s most vulnerable. If the rule is enacted, people who stay at home to care for elderly, sick, and disabled loved ones will be able to keep the entirety of their Medicaid support checks; states will no longer be able to siphon money away and give it to government unions.

Each year, in-home caregivers lose an estimated $150 million from their support checks, and this proposed rule is a way to stop this unfair and deceptive scheme once and for all.

HHS said it will publish a Notice of Proposed Rulemaking (NPRM) in the Federal Register on Thursday, July 12, marking the start of a 30-day-long period during which the public may comment on what the rule would mean for them. Impacted caregivers are especially encouraged to provide comment on the personal impact of the rule to them and their families and patients.

The public comment period is now open. Comment on the proposed rule to end the Dues Skim here. All comments are due no later than 5 p.m. EST on August 13, 2018.

Additional resources:

• Notice of Proposed Rule Making
• Dues Skimming FAQ

May 2, 2018: Lawmakers voice concerns over dues skimming

US Sen. Ron Johnson (R-Wis.) sent a letter to the Centers for Medicare and Medicaid Services challenging the practice of dues skimming. He notes in his letter that it is illegal for Medicaid funds to be sent to anyone other than the caregiver, encourages CMS to look into the practice, and asks for information on whether a new law or regulation is required to stop this from happening. He joins Rep. Cathy McMorris Rodgers (R-Wash.), who also recently voiced concerns with dues skimming, signaling an end could be in sight for this deceptive scheme. Read his letter here.

Maxford Nelsen, Director of Labor Policy at the Freedom Foundation in Washington state, observed, “For over a decade, unions like SEIU have been permitted to hijack Medicaid funds meant for caregivers serving the elderly and disabled. Even though the US Supreme Court denounced this practice as a ‘scheme’ in 2014, unions and their allies in state governments continue to employ coercive practices to seize hundreds of millions of dollars in union dues from the Medicaid payments of hundreds of thousands of caregivers’ in states across the country. It is very encouraging to see Sen. Johnson and the Governmental Affairs Committee taking this issue seriously. Federal action is urgently needed to protect caregivers’ rights and to stop Medicaid funds from being siphoned off to politically influential special interest groups.”