Socialism: say how a care co-op meets Medicaid's 80% home care pay rule

Co-Authored-By: Claude Opus 5.5 <[email protected]>
Claude-Session: https://claude.ai/code/session_01QWPs69B8nQZjtPEUXMKzZx

JoshHeaps.Net/Content/Socialism/high-turnover.md

@@ -94,9 +94,38 @@ Some things make it less harsh than it sounds:
 
 A co-op can choose the short end of the ramp. This page doesn't shorten it further, because the founding plan sets that range on purpose. A longer ramp was meant to let a co-op hire without every new member cutting into everyone else's share right away. Under tax law, it only does that if the co-op pays the difference as wages for years of service ([How a Locked Co-op Is Taxed](taxes.md#the-tenure-ramp)). Whether low-margin, high-turnover co-ops should be allowed a much shorter ramp is an open question ([Open Problems](open-problems.md)).
 
+## When Medicaid decides how much goes to pay
+
+A federal rule adopted in 2024 says that at least 80% of what Medicaid pays an agency for personal care, home health aide and homemaker services has to go to the direct care workers who give it ([42 CFR 441.302(k)](https://www.ecfr.gov/current/title-42/section-441.302)). It starts on July 9, 2030, or with the first managed care contract year after that where a state pays through private plans.
+
+- **Who counts as a direct care worker.** Aides and personal care attendants, but also the nurses who give care and the staff who supervise it clinically.
+- **What counts as their pay.** Wages, benefits like health insurance, paid leave and retirement, and the employer's share of payroll taxes. Training, travel and protective equipment come off the top before the 80% is measured.
+- **What it covers.** Only these services paid under Medicaid's home and community-based waivers and three similar options. It doesn't reach Medicare, private-pay clients, or Medicaid's ordinary home health benefit, so how much it touches a co-op depends on who pays for its work. Care where the person receiving it sets the worker's rate isn't counted either.
+- **Exceptions.** A state can set a lower level for small agencies that meet criteria it sets, and exempt some agencies facing hardship, after public notice.
+
+**It may not survive.** As of September 2026 the rule is in the federal regulations unchanged. But the home care industry has fought it since it was proposed, warning it would close agencies ([Home Health Care News, 2024](https://homehealthcarenews.com/2024/04/home-cares-industry-slams-finalized-80-20-rule-warns-agency-closures-are-coming/)), and it could be changed or dropped before 2030. The model neither needs it nor depends on its failing.
+
+**What it does and doesn't do.** It sets a floor on the share of the rate that goes to care workers. It doesn't set a floor on pay: 80% of a low rate is still low pay, and an agency can meet it by spending more on health insurance with no raise. If rates don't rise, the likely costs are agencies leaving Medicaid, fewer hours for clients, and less money for scheduling and supervision. Rules like this can raise pay and can also cost access. Which one wins is an empirical question, and the model takes no side on it.
+
+For a co-op, it means conventional agencies now have to do part of what a co-op promises. A co-op's case in Medicaid home care then rests less on pay and more on steadier hours, a say in the work, and keeping people longer, which is what [the pilot](pilot-spec.md) has to show.
+
+### How a co-op meets it
+
+- **Wages, benefits and payroll taxes alone reach 80%.** The profit share and account credits don't count. The model's position is that the share is an owner's share, not pay ([Owners Are Still Workers](labor-law.md#is-the-profit-share-pay)), and a co-op can't call it pay to Medicaid and not pay to the tax office. Leaving it out also stops a co-op from holding hourly pay down and making it up with a year-end share that may not come.
+- **Any shortfall is paid out as wages.** The shared payroll service works out the ratio every quarter and shows it to members. If the year ends below 80%, for any reason, the difference is paid to the direct care workers who worked that year, as an hourly wage supplement, before any profit is shared. That's plain wages, so it counts without anyone's ruling. It runs in the same payroll pass that already recalculates overtime ([Owners Are Still Workers](labor-law.md#overtime-and-the-profit-share)).
+- **Job titles are checked.** Which roles count as direct care follows the rule's list and state guidance, and the co-op's auditor checks it each year, so an office job can't be relabeled as supervision.
+- **The rest has to fit in the 20%.** Office staff, insurance, rent, the bank's loan payments, the reserve and any profit share all come out of what's left. In Medicaid home care that means profit shares and account balances near zero, and a reserve that grows slowly. So the bank lends to a co-op doing this work only if loan payments fit inside the 20% with no profit at all, and sets its grace periods to match.
+- **Shared services are priced at cost and published.** Fees the co-op pays the federation or the bank are listed in its yearly report, at cost, so the federation can't become a way to move money out the way related-party fees do at conventional agencies.
+- **No hardship exemptions.** A co-op backed by a public bank doesn't take a hardship slot from a struggling independent agency. It can use a state's small-agency level only if it meets the state's criteria like anyone else, and only with a written plan to reach 80% within three years.
+- **Where the rates are set.** The same 2024 rules require each state to have an advisory group on these rates that includes direct care workers, and to publish its advice ([42 CFR 447.203(b)(6)](https://www.ecfr.gov/current/title-42/section-447.203)). Rates are the real limit on pay, so the federation takes part in those groups, and in the public comment where states set small-agency levels and exemptions, alongside unions.
+
+### Keeping the pilot fair
+
+Co-ops are compared with conventional firms in the same industry, region and start year ([The Pilot](pilot-spec.md#who-co-ops-are-compared-against)), but that doesn't make them equally exposed to this rule. So for co-ops and comparison firms alike, the pilot records the share of revenue from covered Medicaid services, whether the firm used a small-agency level or an exemption, its reported ratio where the state publishes it, fees paid to related companies, and whether the state bargains with a care workers' union.
+
 ## What this doesn't solve
 
-- **Ownership doesn't fix the pay.** Home care wages are low largely because much of the work is paid for by public programs like Medicaid, at rates the agencies don't set. A co-op can't pay more than it's paid. It can offer steadier hours, training and a say, and co-ops seem to keep people longer. But the pay problem needs better public rates, rules that send more of those rates to workers, and unions bargaining for them, along with [the floor](the-floor.md).
+- **Ownership doesn't fix the pay.** Home care wages are low largely because much of the work is paid for by public programs like Medicaid, at rates the agencies don't set. A co-op can't pay more than it's paid. It can offer steadier hours, training and a say, and co-ops seem to keep people longer. But the pay problem needs better public rates, rules that send more of those rates to workers, like [the 80% rule](#when-medicaid-decides-how-much-goes-to-pay), which can raise pay but may also cost access, and unions bargaining for them, including with states and through wage boards like [Minnesota's](essential-work.md), along with [the floor](the-floor.md).
 - **The numbers are rough.** Turnover varies a lot between agencies, the home care industry figure comes from a survey of agencies that chose to take part, and the co-ops' 38% comes from a small count. The pilot will measure this directly and report [results by industry](pilot-spec.md#what-gets-measured).
 - **Automatic membership hasn't been tried at a large care co-op.** It should raise membership a lot. How much, and whether default members take part in governance, is unknown.
 - **A short probation means less time to judge fit.** A co-op admits people it has known for three months, and they vote. That's the trade-off the model accepts. The ramp limits what a poor fit costs in money. It doesn't limit their vote.

JoshHeaps.Net/Content/Socialism/index.md

@@ -13,7 +13,7 @@ summary: A working model for building an economy where the people who do the wor
 
 This model doesn't buy, seize or convert anyone's company. Instead it builds new worker-owned companies alongside existing ones, then lets customers and workers choose between them.
 
-- **Workers own their company.** Every member gets one vote. A share of the profits grows with tenure until long-time members split them equally, per hour worked, which is how federal tax law lets co-ops pay tax on it only once. Salaries still exist, and hard jobs still pay more. Part of each year's profit goes into a personal account that pays it back a few years later on a fixed schedule, whether or not you've left, which is designed to keep it outside federal pension law, and part goes into a permanent reserve that keeps the business investing. Members can't drain it through high pay or let the equipment quietly wear out, and big bets get an outside opinion first. An insurance pool the co-ops pay for protects workers' last paychecks and part of their savings if the co-op fails. A fair, fast process deals with members who won't do the work, with protections so it can't be turned on the wrong people. Members are the co-op's employees, so they get the minimum wage, overtime and injury insurance like anyone else. Where the law leaves owners out, of unemployment insurance in some states or of union protection, the co-op's charter fills what it can. Membership comes automatically after a short probation, so co-ops in high-turnover work like home care don't end up run by the few who stay. Equal shares give members a reason to turn down growth into lower-paying work, so co-ops can grow by starting new co-ops they invest in instead. [Worker Ownership](worker-ownership.md), [Does Sharing the Profit Mean Less Effort?](free-riding.md), [When People Don't Stay Long](high-turnover.md), [Owners Are Still Workers](labor-law.md), [When Growing Means Sharing](growth.md), [Member Capital Accounts](capital-accounts.md), [How a Locked Co-op Is Taxed](taxes.md), [Protecting Members' Savings](savings-guarantee.md) and [Investing for the Long Run](the-long-run.md)
+- **Workers own their company.** Every member gets one vote. A share of the profits grows with tenure until long-time members split them equally, per hour worked, which is how federal tax law lets co-ops pay tax on it only once. Salaries still exist, and hard jobs still pay more. Part of each year's profit goes into a personal account that pays it back a few years later on a fixed schedule, whether or not you've left, which is designed to keep it outside federal pension law, and part goes into a permanent reserve that keeps the business investing. Members can't drain it through high pay or let the equipment quietly wear out, and big bets get an outside opinion first. An insurance pool the co-ops pay for protects workers' last paychecks and part of their savings if the co-op fails. A fair, fast process deals with members who won't do the work, with protections so it can't be turned on the wrong people. Members are the co-op's employees, so they get the minimum wage, overtime and injury insurance like anyone else. Where the law leaves owners out, of unemployment insurance in some states or of union protection, the co-op's charter fills what it can. Membership comes automatically after a short probation, so co-ops in high-turnover work like home care don't end up run by the few who stay. Where Medicaid requires 80% of home care payments to go to care workers, co-ops meet it from wages alone. Equal shares give members a reason to turn down growth into lower-paying work, so co-ops can grow by starting new co-ops they invest in instead. [Worker Ownership](worker-ownership.md), [Does Sharing the Profit Mean Less Effort?](free-riding.md), [When People Don't Stay Long](high-turnover.md), [Owners Are Still Workers](labor-law.md), [When Growing Means Sharing](growth.md), [Member Capital Accounts](capital-accounts.md), [How a Locked Co-op Is Taxed](taxes.md), [Protecting Members' Savings](savings-guarantee.md) and [Investing for the Long Run](the-long-run.md)
 - **A small public bank lends to worker co-ops.** It charges market rates, so it only succeeds if co-ops can really compete. Its whole job is to be willing to lend to a kind of company other banks won't. Spain, Italy and the US have all tried versions of this, and the pilot is built around what went right and wrong. [The Bank](the-bank.md) and [Has This Been Tried?](precedents.md)
 - **Owners who want to sell to their workers can.** The bank lends for these sales on a separate track, with its own $100 million and its own test. Only healthy firms qualify, there's no new tax break, the price is capped at an independent appraisal, the seller shares the risk, and the whole workforce votes. [When an Owner Wants to Sell to the Workers](buyouts.md)
 - **Co-ops funded this way stay co-ops forever.** They can't be sold to conventional owners, and members can't vote to cash out what earlier members built. An independent lock-holder can veto any attempt, including selling the business off piece by piece. If a co-op goes bankrupt, only another co-op can buy it whole, and its workers get a real chance to be that buyer. That needs an amendment to federal bankruptcy law, drafted here. [The Lock](the-lock.md), [When a Locked Co-op Goes Bankrupt](bankruptcy.md)

JoshHeaps.Net/Content/Socialism/labor-law.md

@@ -51,6 +51,7 @@ Members get two kinds of money: wages, paid through payroll at no less than the
 - **Tax.** The model argues it's a patronage dividend, which is how co-op tax law pays owners, and that it doesn't carry payroll tax. That's unsettled ([How a Locked Co-op Is Taxed](taxes.md#payroll-tax-on-profit-shares)).
 - **Overtime.** Federal overtime law counts almost everything an employer pays, so the co-op adds the share into the overtime rate, as above. Its definition is broader than the tax law's, so this doesn't settle the tax question either way.
 - **Pension law.** Members' accounts are designed to stay outside it even if the share were counted as pay ([Member Capital Accounts](capital-accounts.md#why-not-pay-it-out-when-you-leave)).
+- **Medicaid's home care pay rule.** From 2030, agencies must spend 80% of certain Medicaid home care payments on care workers' pay. That rule borrows the overtime law's broad meaning of pay, so the share might count. The co-op doesn't count it anyway, to keep one position everywhere, and pays any shortfall as wages ([When People Don't Stay Long](high-turnover.md#when-medicaid-decides-how-much-goes-to-pay)).
 - **State laws on paying wages.** This is the hard one. Many states require wages to be paid on time and in full, forbid employers from taking any back, require final pay within days when someone leaves, and don't let workers sign those rights away. California's definition of wages covers "all amounts for labor performed by employees," however they're calculated ([Cal. Labor Code § 200](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=200)). It's unlawful there for an employer "to collect or receive from an employee any part of wages theretofore paid" ([§ 221](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=221)), and no private agreement can set those rules aside ([§ 219](https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=219)). If a credit in a member's account counted as wages there, holding it for years, charging losses to it and pausing it in a bad year could all be illegal, for members who stay as well as those who leave.
 
 State co-op law supports the owner's-share reading, but it doesn't settle it. Massachusetts, California and Washington each have a law for worker co-ops that lets a member's share of profit be paid in "cash, credits, written notices of allocation, or capital stock," lets the bylaws "permit the periodic redemption of written notices of allocation," and forbids payouts that would make the directors personally liable ([Mass. Gen. Laws ch. 157A, §§ 8–9](https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter157A/Section9); California's is Corporations Code § 12317, [added in 2015](http://www.leginfo.ca.gov/pub/15-16/bill/asm/ab_0801-0850/ab_816_bill_20150812_chaptered.html); Washington's is [RCW 23.78.090](https://lawfilesext.leg.wa.gov/Law/RCW/RCW%20%2023%20%20TITLE/RCW%20%2023%20.%2078%20%20CHAPTER/RCW%20%2023%20.%2078%20.090.htm)). Those laws say how the money can be paid. None of them says it isn't wages, and a wage law's ban on signing rights away is the more specific rule. How far each state's wage law reaches pay that depends on the whole business's profit differs from state to state and isn't settled. So:

JoshHeaps.Net/Content/Socialism/open-problems.md

@@ -37,6 +37,6 @@ An honest list of what the model hasn't solved yet, most dangerous first.
 
 12. **Voluntary buyouts: in or out?** *(Answered.)* In, on a separate track: $100 million of its own, healthy firms only, a willing seller, no new tax break, a capped price the seller shares the risk on, a vote of the whole workforce, and its own test of money and pay, so it can't flatter the startup result ([When an Owner Wants to Sell to the Workers](buyouts.md)). Still open: whether a price set by the market is fair to workers who pay it out of their own future work, and whether about 60 deals can show more than that the loans get repaid.
 
-13. **Work where people don't stay long.** *(Partly answered.)* In home care, most workers leave within a year or two. Membership is now automatic after a short probation, the buy-in comes out of profit shares rather than pay, and pushing people out before they'd join counts against the co-op ([When People Don't Stay Long](high-turnover.md)). Still open: with a five-to-ten-year profit share ramp, only a small minority of care workers ever reach a full share, so the people who stay collect much of the profit the others helped make. A much shorter ramp for low-margin, high-turnover co-ops would fix that, but it would go against the founding plan's range and weaken the ramp's protection against under-hiring. Also open: whether default members take part in governance, and whether Social Security counts a profit share as earned income for SSI, which decides whether members on SSI lose more by joining. SSI may also count an account credit as income when it's made. Until Social Security answers, members on SSI get their share all in cash and join only if they say yes ([How a Locked Co-op Is Taxed](taxes.md#benefits)), and workers who have only an IRS taxpayer number still can't be members. How labor law treats worker-owners now has its own page ([Owners Are Still Workers](labor-law.md)). Federal labor law probably doesn't protect members' own organizing, so the charter does, and fixing the law takes a separate bill that may never pass. Some states leave members out of unemployment insurance, and whether founders' unpaid work before the co-op forms is outside wage law still needs the Labor Department's answer.
+13. **Work where people don't stay long.** *(Partly answered.)* In home care, most workers leave within a year or two. Membership is now automatic after a short probation, the buy-in comes out of profit shares rather than pay, and pushing people out before they'd join counts against the co-op ([When People Don't Stay Long](high-turnover.md)). Still open: with a five-to-ten-year profit share ramp, only a small minority of care workers ever reach a full share, so the people who stay collect much of the profit the others helped make. A much shorter ramp for low-margin, high-turnover co-ops would fix that, but it would go against the founding plan's range and weaken the ramp's protection against under-hiring. Also open: whether default members take part in governance, and whether Social Security counts a profit share as earned income for SSI, which decides whether members on SSI lose more by joining. SSI may also count an account credit as income when it's made. Until Social Security answers, members on SSI get their share all in cash and join only if they say yes ([How a Locked Co-op Is Taxed](taxes.md#benefits)), and workers who have only an IRS taxpayer number still can't be members. How labor law treats worker-owners now has its own page ([Owners Are Still Workers](labor-law.md)). Federal labor law probably doesn't protect members' own organizing, so the charter does, and fixing the law takes a separate bill that may never pass. Some states leave members out of unemployment insurance, and whether founders' unpaid work before the co-op forms is outside wage law still needs the Labor Department's answer. A federal rule due in 2030 requires 80% of certain Medicaid home care payments to go to care workers' pay. Co-ops meet it from wages alone and pay any shortfall as wages, but in that work it leaves little room for profit shares or a reserve, and whether the rule survives is unknown ([When Medicaid decides how much goes to pay](high-turnover.md#when-medicaid-decides-how-much-goes-to-pay)).
 
 *Not problems here, because nobody's company is forcibly bought:* valuing every firm in the economy, owners stripping value before a takeover, foreign capital flight, and years of payouts to former owners. The contractor boundary isn't an economy-wide problem either. Its co-op version, hiring non-members to dodge membership, is handled by [the lock](the-lock.md)'s membership requirement.