Biden Proposal Aims to Address Direct Care Workforce Shortage

Earlier this Spring, the Biden administration released a proposal that would require home health agencies to spend the majority of their Medicaid funds (at least 80%) on higher pay for direct care workers, rather than on overhead or profits. This proposal could be one part of the solution to the ongoing direct care workforce shortage, an urgent crisis that will only worsen as the US population continues to age.

The proposal would target a key factor contributing to the direct care workforce shortage nationwide: low pay. Across the country, one in six direct care workers lives below the poverty line; three out of four care agencies are turning potential clients away due to staffing shortages; and more than half of agencies are discontinuing programs and services due to staffing shortages.

The direct care workforce shortage is no less of a problem in Pennsylvania than it is nationally, and low pay largely drives the shortage in Commonwealth state as elsewhere. In 2019, Pennsylvania’s median wage for all occupations was $18.05, far exceeding the median wages for personal care and home health aides ($9.01-$12.01, or 150-200% of what was then the federal poverty level for a single individual). Before the pandemic, over 50% of direct care workers employed in home care, 40% employed in nursing homes, and 36% employed in residential care homes lived in households earning less than 200% of what was then the federal poverty line. Because of low wages, almost 50% of direct care workers in home care and 30% in nursing homes and residential care homes received some form of public assistance. It is not surprising, then, that before the pandemic, home health agencies had high vacancy and turnover rates.

Low pay has remained a serious barrier to hiring and retaining direct care workers in Pennsylvania in recent years. The largest percentage of Pennsylvania’s direct care workers are employed in home care, the lowest-paying long-term services and supports industry. Personal care aides (also known as home care aides and attendants) receive a median hourly wage of $11.17. The average pay for direct care workers in Pennsylvania (as of 2021) was $13-$14, in line with the national average. Vacancy and turnover rates remain high among all care workers, including among caregivers for individuals with intellectual disabilities and autism, because workers can earn higher salaries doing less strenuous work in other jobs.

The problems with pay in turn detrimentally impact consumers’ ability to access medically necessary direct care in services. The state’s waiting list for direct care funding assistance for certain programs is sometimes over two years long, and often, when people exit the waitlist and receive funding, they cannot find staffing to fill their hours. Providers are facing major staffing issues and must reduce caseloads or cut programs as a result of low state reimbursements that keep wages low, and the problem only worsens with time. Home health agencies in Pennsylvania continue to turn potential clients away due to staffing issues. Service providers have described the present situation as a system in collapse.

The direct care workforce shortage is a multifaceted and complex problem. A key cause of the workforce shortage is insufficient pay for caregivers. Home care agencies, many of which rely on Medicaid reimbursement, have noted that, given the low Medicaid reimbursement rates for home care, raising salaries for direct care workers could mean they would have to stop accepting clients whose care is paid for by Medicaid, a primary funder of home care services. Because different stakeholders in the healthcare system and government have different incentives, the direct care workforce shortage is a difficult chicken-and-egg problem both in Pennsylvania and nationwide. Hopefully, the Biden administration’s proposal to alter the Medicaid reimbursement framework can be part of the solution to this nationwide crisis.