California lawmaker warns of 'unintended consequences' of healthcare worker minimum wage

A California lawmaker is speaking out about what she says are "unintended consequences" for hospitals related to a new law that will gradually raise healthcare workers' hourly minimum wage to $25.

Rep. Diane Dixon, a member of the California State Assembly, penned an opinion piece in the Orange County Register Dec. 2, commending the law's goal while also noting her concerns.

"The goal of ensuring fair compensation for those working tirelessly in the public and private healthcare sector is commendable," Ms. Dixon wrote. "However, it's essential to consider the potential longer-term negative effects this new law may have on public and private employers in the healthcare industry."

Her opinion piece specifically points to what she sees as three potential negative outcomes: cost burden, limited flexibility and effect on public healthcare agencies. 

"Wage increases, mandated by state law, place a considerable financial burden on healthcare employers. Most of these businesses already operate on slim profit margins due to the high costs of healthcare delivery," Ms. Dixon wrote. "This law will affect an estimated 469,000 private healthcare workers, which means that managers and their supervisors will also demand pay increases as well. Hospital workers may face layoffs if hospitals seek out-of-state solutions to reduce costs." 

She also said the wage hikes mandated in the law do not "account for the variability and complexity of the healthcare industry" and that mandating the increases without offsets by additional funding sources could strain public healthcare agencies, "leading to a ripple effect on public health programs and the overall efficiency of state healthcare services."

California Gov. Gavin Newsom signed the new law in October, and his administration has estimated the price at $4 billion in the 2024-25 fiscal year.

According to the Los Angeles Times, when asked about cost concerns last month, Alex Stack, a spokesperson for Mr. Newsom's office, said: "This is an important law to ensure California has a robust healthcare workforce. We're working with legislative leadership and stakeholders on accompanying legislation to account for state budget conditions and revenues."

The new law comes after union and hospital representatives reached agreement on how a $25 per hour minimum wage for healthcare workers could be addressed. 

Under the new law, which is focused on private healthcare providers but covers state-funded institutions, cities and counties are blocked from increasing pay via ballot measures for 10 years. The new law also factors in amendments that include gradual wage schedules, rather than an immediate increase for all healthcare workers.

Workers at healthcare facilities with 10,000 or more full-time equivalent employees will earn $23 per hour starting in 2024, with pay increasing to $24 an hour in 2025 and $25 an hour in 2026. Smaller facilities and hospitals with a high governmental payer mix will have until 2028 or 2033 to reach the $25 minimum, depending on the type of facility. 

The new law allows some healthcare facilities to apply for a temporary pause or alternative phase-in schedule of the minimum wage requirements if they have documentation proving financial distress. 

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