One of the most rapidly growing jobs in the U.S. is a home care worker. The population is aging, and most people who need support with daily activities such as bathing, eating, and taking medications prefer living in their home over a nursing facility. Through state programs, Medicaid pays for the largest share of long-term care. 

In a study supported by an LDI pilot grant, LDI Senior Fellows Pilar Gonalons-Pons, Allison Hoffman, and Norma Coe, with former LDI Associate Fellows Amanda Kreider and Kate Miller, found that as state Medicaid spending for home-based services increased, home care worker wages remained stuck in the $11-$12 an hour range. 

Gonalons-Pons discussed the results, their meaning, and how to improve the job for home care workers.

Why did you study the relationship between home services spending and worker wages?

I study care penalties—the idea that providing care can result in economic losses. Providing direct care can pay less than jobs with comparable qualifications, like in the food industry, and often without benefits such as health insurance. Many home care workers are women of color with kids who are their family’s primary earner. It’s important, challenging work but 49% of workers rely on public benefits like food stamps. Poor job quality can affect workforce stability and patient care.

We determined associations among Medicaid spending on home and community-based services, and workforce size, hourly wages, and hours worked. We used 2008-2019 data on Medicaid spending by 36 states and American Community Survey data on employment and income. We adjusted for factors such as state minimum wage laws and demand for home care.

How did spending on home care affect the workforce and wages?

The results are surprising in a way. Average state spending on home care services doubled from 2008 to 2019, from $773 million to $1.5 billion, but worker wages were stagnant at $11 to $12 an hour.

We had expected one of two outcomes: Increased Medicaid spending would raise worker wages, or it would affect workforce size but not wages, if home care agencies hired more workers but didn’t raise their pay. The results didn’t fit neatly into either outcome.

Average state workforce size and hours worked increased, but only slightly. Using our results about spending, and industry data on the cost of a new worker, our back-of-the-envelope calculation, adjusting for changes in demand, estimated that every $1 million in increased spending should add five to seven new workers but it added only one. We need more research on spending patterns and workforce investments, but we didn’t find evidence that the higher Medicaid expenditures increased the workforce or wages.

What accounted for the increased spending?

The money could be going to increase care without raising pay, if workers provide more services for the same wages. In fact, we found that increased expenditures were linked to a slight increase in the probability of working more than 41 hours a week. It could also be going to administrative work—states have many Medicaid-funded home and community-based care programs, with fragmented, complicated policies. Simplifying Medicaid’s structure for these programs would make services easier to receive and administer and might reduce spending.

What else do your results suggest for improving the home care workforce?

Home care jobs must be more attractive to reduce worker turnover—an important factor in care access and quality. Since the COVID-19 pandemic, we’ve seen large exits from long-term care jobs, particularly from nursing homes, and low wage growth and inflation hit the entire workforce very hard. 

This has led to some positive actions. A Biden administration rule will require 80% of states’ Medicaid home service payments to go to worker compensation instead of administration or profit. Some states have similar “pass-through” policies, requiring home care agencies to use a percentage of Medicaid funding for labor costs or wages. As of 2022, there are 22 states and the District of Columbia with pass-through laws in place that might improve wages and care quality. Pass-through policies are not enough when Medicaid reimbursement rates are too low to start with, though. Increasing minimum wages could also increase worker pay without affecting employment. 

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The study, “Increasing Expenditures on Home- and Community-Based Services: Do Home Care Workers Benefit?” was published on October 18, 2024 in Health Services Research. Authors include Katherine E. M. Miller, Norma B. Coe, Amanda R. Kreider, Allison Hoffman, Katherine Rhode, and Pilar Gonalons-Pons.

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