Don’t Scare Seniors with Prop. 206

October 14, 2016

Mark Young, President of the Arizona In-Home Health Care Association,  in recent opinion pieces in the Arizona Capitol Times “How Proposition 206 will impact seniors”  (http://azcapitoltimes.com/news/2016/10/13/how-proposition-206-will-impact-arizona-seniors/) and Arizona Republic “Proposition 206 will affect seniors” (http://www.azcentral.com/story/news/local/arizona-contributor/2016/10/12/my-turn-proposition-206-affect-arizona-seniors/91953708/) suggests a potentially catastrophic scenario where home health services prices increase by 25 to 50 percent due to Prop. 206, leading to a decline in use, and consequently hospitalizations rise dramatically costing millions of dollars in Medicaid (and presumable Medicare) expenditures.  Halloween may be approaching, but this is not the time to use Prop. 206 to scare seniors.

The Grand Canyon Institute recently released an independent evaluation of Prop. 206 finding that nearly 800,000 workers would benefit from a $12 min. wage with employment losses ranging from around zero to 26,000 with 13,000 seeming most likely.  Half the benefits would go to households making under $40,000 and women would benefit more than men. Business prices would rise between 0.5 and 1.6 percent. More low wage intensive sectors would see higher price increases around 6 percent.  Businesses would be pressed to make new efficiencies and some may experience a decline in profits.  (http://grandcanyoninstitute.org/raising-the-minimum-wage-to-12-an-hour-the-impact-of-prop-206-on-arizona/)

The Grand Canyon Institute does not take a formal position on the initiative.

Mark Young suggests that a $12 minimum wage in 2020 might price in home health services out of the market for some elderly and disabled people with hourly prices jumping from “$20 to $24 per hour” to likely exceeding “$30 per hour.” That’s a price increase of 25 to 50 percent. Pretty scary.

That’s exaggerated.  Home Health Aides have demanding physical jobs that improve lives and help reduce overall healthcare costs. The median wage of a home health care aide in Arizona is currently about $11 an hour.  GCI projects nearly 75 percent of them would see a wage increase under Prop. 206 with the typical raise amounting to about $1.40 per hour. Labor costs in the industry would rise on average 10 percent. If these workers are about half of total costs, as Young implies, prices would rise only 5 percent, not 25 to 50 percent.

Under Prop. 206, the workers are not getting a $6 to $10 an hour raise (even including added employer taxes tied to wage levels), so it’s illogical to presume that the cost of providing services would go up that much.

Dave Wells is research director for the Grand Canyon Institute, a centrist think focused on fiscal and economic policy issues in Arizona. Go to GrandCanyonInstitute.org.