California Health Care Employers Now Required to Raise Minimum Pay

Cristina Cortez keeps two fuzzy blankets and pillows in her car to nap during lunch breaks in the parking lot of the hospital where she works. On a recent afternoon, she opened her trunk to reveal instant ramen packages, a gym bag with clean clothes and soft plush toys her kids gave her so she wouldn’t feel alone.

The mother of three doesn’t have enough time to sleep, see her family or cook meals because she commutes, often seven days a week, between two demanding health care jobs to make ends meet.

“What hurts me the most, is being away from my family, having to do that with the cost of everything. It’s just so expensive,” said Cortez, 44, a Los Banos resident who starts work as a dialysis technician at 4:30 a.m. in Gilroy, 30 miles south of San José.

She picks shifts up as a medical assistant at a hospital emergency room in the afternoons or overnight in nearby Hollister, where she was raised. She’s trying to make enough money to afford to move her family back there.

“It’s just been really, really hard,” she said.

Cortez is one of hundreds of thousands of health care workers expected to see paycheck raises thanks to a California law that went into effect Wednesday. After months of delays, the mandated minimum wage increase, the first in the United States to target the health care industry, aims to alleviate workforce shortages and improve patient care. The raises could help health employers recruit and retain workers in often tough, frontline jobs.

The law requires most health care employers to gradually boost their lowest wage to reach $25 an hour in the coming years. According to the phased-in schedule, large health systems must pay at least $25 an hour by mid-2026. Smaller ones will have more time to increase the pay of nursing assistants, pharmacy technicians, janitors, receptionists and other positions.

“This is a well-deserved increase,” said Tia Orr, executive director of the Service Employees International Union California, which sponsored SB 525. “This is going to prove to be more beneficial for patients, more beneficial for California, and hugely beneficial to the workers who sacrifice their lives literally every single day to provide us the health care that we all need.”

About 350,000 health care employees, most of them people of color and women, are projected to see an annual average increase of $6,400 in the first year of the policy, according to an analysis by the UC Berkeley Labor Center. In earlier estimates, the labor center calculated up to 426,000 people would be impacted, but that figure included workers at skilled nursing facilities who are currently not covered by the law, according to Laurel Lucia, who directs the center’s health care program.

California already mandates most fast-food employers pay at least $20 an hour. Fast food, as well as the retail industry, often compete with health care for workers, said Bianca Frogner, who directs the Center for Health Workforce Studies at the University of Washington School of Medicine.

“It gives health care maybe a fighting chance against other industries that might be raising wages and are competing for workers,” Frogner, a health economist, said.

Gov. Gavin Newsom signed SB 525 last fall, with an original implementation date of June 1. However, Newsom and lawmakers agreed to defer the measure twice due to concerns that costs would exacerbate a state budget deficit.

Cortez said she was crushed by the delays and kept checking social media for updates from the governor on whether the Oct. 16 implementation date would stick. Earning more at her dialysis job, she said, will allow her to spend time with her children. She said she might cry when she finally sees a paycheck from her employer, Satellite Healthcare, reflecting the raise.

“Going from $20 to $23 from one month to the next is, like, to me winning a lotto because, yeah, it’s $3, but that’s going to make a big difference for me and my family,” Cortez said.

A long list of health care employers initially opposed the measure because they worried about how to pay for it. Some said that raising their wage floor could lead to cuts in jobs or services. But many ended up supporting the bill — or withdrew their opposition — after weighing in on amendments that gave them additional time to adjust to a more expensive payroll.

Most research on minimum wage increases shows they do not lead to big job losses, as opponents often argue. Some health care employers may initially reduce hours or lay off employees, but those measures will likely be temporary, according to Frogner.

“I’m hoping that in the long run, as they see the phased-in approach of wages, that they can build that into their plan, into the future,” she said. “So it might be a very short-term challenge for a long-term gain.”

The law has already had a big impact on some workplaces.

Scripps Health, which provides a significant amount of free or discounted medical care at its four hospitals and dozens of outpatient centers in San Diego, adjusted pay for more than half of its nearly 17,000 employees, spokesperson Steve Carpowich said.

Only about 700 of those workers earned below the now required $23 an hour for large health employers, but Scripps also raised wages for others to “ensure fair pay and equity.” The move will cost Scripps about $20 million in the first year of the law’s implementation, Carpowich said.

“Scripps having to absorb the cost of this unfunded mandate comes against a backdrop of serious financial challenges for health systems,” he said in a statement. “These include government and commercial insurance payers whose reimbursements often don’t cover the cost of the care we provide; increased costs for supplies, pharmaceuticals and energy; and other unfunded government mandates, like SB 1953, the Seismic Safety Act.”

Large medical systems that serve more patients with private health insurance might have an easier time negotiating for higher rates to cover costs, according to Frogner and other health workforce experts. Community health centers, by comparison, rely heavily on more fixed reimbursements from Medi-Cal, the state’s public health insurance program.

Under the law, community and rural health clinics may apply to delay having to raise their wage floor. The Department of Industrial Relations, which issues the waivers, did not immediately respond to questions about how many clinics have applied for or received them.

The Newsom administration is considering changes to Medi-Cal rates as part of the budget process, but updates won’t be known until January, said H.D. Palmer, a spokesperson with the Department of Finance.

In its latest estimate, the department calculated the law would cost the state $1.4 billion in its first year and more later on, including higher Medi-Cal reimbursements for providers and wage hikes for about 26,000 state employees.

Katie Thompson, chief human resources officer at Clinica Sierra Vista, said the organization is dedicated to providing affordable health care to its primarily low-income patients in Fresno and Kern counties. To stay afloat, the community clinic, which started paying hundreds of its employees at least $21 per hour in May, hopes the state will increase Medi-Cal service rates.

“We’re not able to increase prices, nor do we want to,” Thompson said. “We do expect payments eventually to match the financial pressures that we are seeing. However, immediate state financial support is crucial.”