A $25 minimum wage for California’s health care workers could increase retention, but at what cost?

When she moved from Ghana to Chula Vista to be with her husband, who was serving in the U.S. Navy, Amina Abdulai needed a new career.

So she enrolled in a three-week training program in January 2020 to become a certified nursing assistant. Once employed, Abdulai earned $14.25 an hour, working long shifts at a nursing home during the early months of the COVID-19 pandemic. Then she found out she was pregnant and was advised by her doctor to leave the job at seven months pregnant.

She said she would have gone back after giving birth if the pay compensated for the heavy workload. Instead, she pursued a new career as a real estate agent.

“I did love the fact that I was helping people,” she said. “I would sing, I would dance for my residents. If the money had been great, definitely, I would have gone back.”

As the health care workforce continues to be short-staffed, state legislators are considering a bill to increase the minimum wage across the industry.

Senate Bill 525, which the Senate passed in June, will head to the Assembly later this month when legislators return from summer recess.

If it passes, minimum wage for all workers at acute care hospitals, psychiatric hospitals, medical offices, clinics, behavioral health centers and residential care centers would increase to $21 an hour as of June 1, 2024, with another raise to $25 the following year. The bill would also require that all salaried workers who are exempt from overtime pay earn a monthly income that is at least 150 percent of the health care worker minimum wage, or $78,000 per year.

Some cities in California have already passed a $25 per hour health care worker minimum wage law, including Los Angeles, Long Beach, Downey and Lynwood. In San Diego County, the increase has been supported by the La Mesa City Council, and last week, speakers urged the Chula Vista City Council to adopt a policy implementing an increase. In June, two petition drives were launched in San Diego that would allow voters to decide whether to raise the minimum wage for health care workers and limit compensation for health care executives.

SB 525 supporters — among them, the SEIU United Healthcare Workers West union — say the increase is a necessary move to fairly compensate some of the health care industry’s lowest paid employees.

In San Diego County, some current job listings for positions at skilled nursing facilities on ZipRecruiter offer as little as $13.75 per hour for roles in kitchen, laundry and maintenance services, and as low as $16 an hour for those working caregiver and certified nursing assistant positions.

SEIU spokesperson Renée Saldaña said many of the issues the health care industry has faced were exacerbated further due to COVID-19.

“Health care workers have been leaving the profession in high numbers,” she said. “A lot of this — in what we’re hearing directly from our members — is due to trauma from the pandemic, poor working conditions and what they’re saying is low pay that’s not keeping up with the cost of living.”

But the bill is opposed by California hospital systems, clinics, business organizations and universities because it does not provide additional funding for the increased labor costs.

The California Chamber of Commerce has SB 525 listed as a “job killer” on its website, and the No on SB 525 Coalition has support from 82 organizations throughout the state, including the San Diego Regional, Santee, Carlsbad and Oceanside chambers of commerce. Other members of the coalition include the University of California, California Taxpayers Association, California Senior Advocates League and Scripps Health.

The No on SB 525 Coalition says the bill will increase the cost of insurance premiums and reduce the number of health care jobs and access to care for patients. They also say that it treats workers unfairly as positions such as janitors, housekeepers and landscapers would be earning more than their counterparts outside the health care industry.

A study funded by the coalition found that the bill’s passage could tack on an additional $8 billion in labor costs within the medical industry.

“These providers just don’t have that, and so the only way to make up for that significant cost is to figure out where to cut somewhere else,” said Kathy Fairbanks, No on SB 525 Coalition spokesperson. “The cuts will no question trickle down to patient access and services provided to patients.”

The proposed increase is coming at a time when hospitals are already impacted financially following years spent addressing the pandemic.

In April, the California Hospital Association reported that 20 percent of the nearly 400 hospitals in the state are at risk of closing, and that 52 percent of hospitals are losing money. The organization reports that California hospitals lost $8.5 billion in 2022 alone.

Saldaña proposed that some of the money to support the increased labor costs could come from the Managed Care Organization or MCO tax. The tax on insurance plans expired in December, but was reinstated through the end of 2026 when the Legislature passed the budget in June.

First charged in 2005, the state’s Legislative Analyst’s Office reports that the MCO tax on health insurance plans is later paid back to insurance providers, with about 65 percent of the funding coming from the federal government and 35 percent coming from state. The newly approved plan is expected to generate $19.4 billion through 2026.

Saldaña also said there are executives in the health care system receiving hefty paychecks.

California Association of Health Facilities — a nonprofit representing about 900 skilled nursing facilities and 450 intermediate care facilities for the developmentally disabled — initially called for a $25 per hour minimum, said Craig Cornett, president and CEO.

But during its negotiations for a new Medi-Cal financial deal in 2022, the organization underscored how funding would need to be provided by the state.

In the skilled nursing industry, Cornett said a significant portion of the care is funded by the government through Medi-Cal and Medicare insurance. Nursing homes also can’t use balanced billing where a care provider bills for the difference between the cost and the amount covered by insurance.

“There’s no other place to get money: we can’t raise insurance rates, there’s no balanced billing as there is in other places in the (health care) sector,” he said.

Right now, Cornett said, about 36 percent of California skilled nursing facilities are operating at a loss, which is why CAHF opposes the bill unless it’s amended to clearly provide state funding.

“Without money for this, it would be a major disaster,” Cornett said. “Facilities will go under, they will not be able to afford it.”

One San Diego County health care provider concerned about the potential minimum wage hike is Indian Health Council CEO Orvin Hanson.

Located on the Rincon Indian Reservation, IHC and its 180 employees serve about 6,000 patients in rural North County. The clinic receives federal funding through Indian Health Services, but also receives a mix of grants from the state, San Diego County and private foundations.

Being on tribal lands, IHC may not be required to increase its wages for staff immediately, but it would eventually have to compete with other North County clinics for the same pool of employees. Hanson fears that may mean having to do layoffs, increasing wait times or decreasing programs and the number of patients they serve.

“We want to of course respect our workers, we want them to get what they deserve, but how do we do this without an increase of resources or input?” Hanson asked. “How do we fund that without taking away services for the rest of our patients and tribal community?”

Even though Abdulai chose to go a different route when returning to the workforce after giving birth to her two sons, who are now ages 2 and 1, she still thinks fondly of her interactions with patients while working for a nursing home. But she also thinks about her co-worker who excelled at her job and had worked in the health care industry for two decades, yet she was only making $15 an hour.

“You need a lot of love to be able to take care of these residents,” Abdulai said. “I have met a couple of other CNAs who you see them and you see that they are wholeheartedly giving their all to these people.”

Certain jobs like being a CNA are a calling, Abdulai said, and she hopes SB 525 will pass so health care roles like these will be fairly compensated.