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Reform Long-Term Care Financing to Strengthen Direct Care Jobs

A stronger financing approach to long-term care would improve job quality for direct care workers.

Poor job quality in direct care has persisted for decades—and it has been primarily shaped by inadequate public investment in long-term care and its primary payer, Medicaid. As this country rapidly ages and individuals live longer, this problem will intensify as the demand for direct care workers surges, further straining Medicaid resources and making it nearly impossible for policymakers and employers to create good direct care jobs. From strengthening Medicaid (including raising this program’s funding levels and providing adequate reimbursement rates to providers) to designing new social insurance programs in long-term care at the state and federal level, significant policy action is needed to bolster financing in this sector and transform direct care jobs.


To ensure that long-term care financing programs address the profound needs of workers and consumers, we recommend the following:

Protect and strengthen Medicaid to cover more individuals and improve direct care jobs. Medicaid plays a significant role in the long-term care sector, providing health coverage to many direct care workers, assisting low-income people with long-term services and supports (LTSS), and funding providers to deliver care and support their workforces. Despite its large-scale benefits, Medicaid remains politically contested and underfunded, leading to prohibitive eligibility requirements, long waiting lists, and service caps for consumers—sand financially straining providers, which prevents them from creating high-quality direct care jobs. Federal and state policymakers should protect and strengthen Medicaid while integrating direct care workforce measures into its funding and delivery systems.

Increase reimbursement rates to bolster job quality in direct care. Inadequate reimbursement rates under Medicaid (and other public payers) prevent many long-term care employers, including self-directing consumers, from offering competitive wages and investing in direct care job quality. These public reimbursement rates should be increased—with requirements that employers spend a meaningful percentage of their reimbursements on improving wages, benefits, training, and other pillars of job quality. Similarly, managed care plans should be required to provide a minimum base rate to employers that covers these vital workforce investments. To ensure adequate and accurate reimbursement rates, policymakers should follow a rigorous and transparent rate-setting methodology, drawing from cost reports and other input from stakeholders.

Create a stronger public financing approach for long-term care and the direct care workforce. New social insurance programs should be created to make long-term care affordable to all older adults and people with disabilities, regardless of their income and assets. These programs should also be designed to proactively strengthen the direct care workforce. Long-term care leaders should convene work groups and commission new studies to inform the design and development of new long-term care programs, with explicit attention to direct care workforce concerns.

Key Takeaways

Low wages and meager annual incomes contribute to high turnover among direct care workers.
If paid caregivers lose their health coverage, will older people lose their paid caregivers?
Wage increases must be met with appropriate Medicaid funding and reimbursement rates.

By the Numbers: Financing


Percentage of long-term services and supports spending in 2018 attributed to Medicaid. Source: Kaiser Family Foundation, 2019

$54,000 to $106,000

Yearly estimated median costs for long-term services and supports. Source: Genworth, “Cost of Care Survey 2020”


Number of state-based social insurance programs in long-term care (Washington State). Source: National Academy of Social Insurance

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