Nationwide, workers struggle in low-paying, poverty-level jobs across all long-term care settings. Few of these jobs offer any paid sick leave or other common employee benefits, such as employer-sponsored health insurance.

In 2017, the average national wage of home health and personal care aides was $11.12 an hour. Among home care workers, 49% were dependent on some form of public assistance and over half lived below 200% of the federal poverty level.

Pay raises providing direct care workers with a living wage enhance their financial security, reduce turnover and staffing shortages, boost caregiver productivity, enhance quality of care for patients, and increase economic growth.

Recent state initiatives to increase compensation for direct care workers include temporary pandemic-era measures, initiatives to address Medicaid rate changes, 1915(c) waivers and Appendix K measures to pay family caregivers, managed care contracts, and wage pass-throughs.


Temporary COVID-Era Measures

The COVID-19 pandemic prompted several states to implement temporary measures to raise the compensation of direct care professionals or offer hazard pay. As of November 2020, 36 states temporarily increased provider payment rates through 1915(c) home and community-based services waivers. Eighteen of these states increased reimbursement for nursing home and home care.

According to analysts, permanent changes to compensation are desperately needed, including a base rate that guarantees a living wage and health and other benefits, merit and longevity pay, bonuses, childcare and transportation.

Medicaid Reimbursement Rates

Increasing Medicaid reimbursement rates and tying rates to wages is one way to provide a living wage. Approximately half the states made a commitment to increasing wages through Medicaid rate changes in 2019 and 2020. However, among states that raised reimbursement rates, the increases tended to be marginal and did not keep up with inflation. 

Illinois Gov. J.B. Pritzker signed nursing home rate reform legislation in 2022 that holds facility owners accountable by tying new funding to staffing levels and to improvement in key quality measures. A new pay scale for certified nursing assistants will increase wages based on years of experience. This reform model is believed to be the first for any state.

Other examples of recent state policy activities to improve reimbursement rates include:

  • Idaho appropriated $46.2 million to increase rates to residential assisted living facilities and $10.9 million to increase rates for personal care providers.
  • Maine increased rates for residential care and home and community-based services to implement cost-of-living adjustments and ensure care workers receive at least 125% of the state’s minimum wage.
  • New Hampshire increased Medicaid reimbursement rates by 5% for all nursing homes.
  • Pennsylvania provided a rate increase for skilled nursing facilities accepting Medicaid and requires that at least 70% of the nursing facility’s costs be spent on direct care for the resident.
  • South Dakota provided a 6% increase in Medicaid reimbursements for all nursing homes.
  • Washington increased Medicaid reimbursement rates for all assisted living facilities and included a dedicated increase for the state’s specialized dementia care assisted living rate.

Medicaid Waivers and Appendix K’s

States are allowed to develop Medicaid 1915(c) waivers for home and community based services to meet the needs of people who prefer to receive long-term care services outside institutional settings. During emergency situations like pandemics, states can request amendments to their waivers to guarantee continuity of services. Appendix K was created by the Centers for Medicare & Medicaid Services “to help states accelerate changes to their 1915(c) waiver operations or to request emergency amendments.” Just a few months into the pandemic, nearly all states had an approved Appendix K, and many included language to pay family caregivers for services normally performed by direct care workers or others.

Prior to the pandemic, many states were already pursuing strategies to support family caregivers but have since accelerated the pursuit of new Medicaid flexibilities and coordination with Area Agencies on Aging and other system stakeholders to assess the needs of family caregivers and the pooling of state resources across interagency teams.

Managed Care Contracts

Some states have passed legislation to support improved benefits and worker protections for aides that are hired through managed care contracts.

  • Tennessee pays managed care organizations a nursing home rate based on quality performance, with 25% of the score focused on staffing and staff competency measures, such as retention, training and consistent assignment.
  • A 2017 Wisconsin appropriations bill increased the portion of funds in managed care contracts that goes toward aid wages, bonuses, time off and benefits. 

Wage Pass-Throughs

Some states have used wage pass-throughs, which allow an additional allocation for increasing compensation for direct care support staff.

  • Arizona’s 2017 wage pass-through law responded to the passage of Proposition 206 that raised the minimum wage from $8.05 to $12.00. The law designates a certain percentage of a reimbursement rate increase to be used for wages, and it applies to all direct care workers in facilities and in-home and community-based services.
  • Colorado, with SB19-238 in 2019, established a new hourly minimum wage for employees who provide direct care.
  • The Hawaii Kupuna Caregiver Program, which initially provided family caregivers direct payments of $350 per week has been incorporated into the state’s overall long-term services and supports program called Kupuna Care and later provided family caregivers support of up to $210 a week of services such as adult day care to ensure they can maintain employment. Due to funding, the program has ended.
  • Maryland, with HB 166 in 2019, increased the rate of reimbursement for community service providers, including direct care staff, each fiscal year.
  • Michigan direct care workers received a $2 per hour wage increase in 2020 from Coronavirus Aid, Relief, and Economic Security Act funding. The raise was bumped to $2.35 in fiscal year 2022.
  • New Jersey established a minimum wage that is $3 higher than the state minimum wage for certified nurse aides working in nursing facilities. When it reaches $15 per hour in 2024, the statewide minimum wage will be indexed to the Consumer Price Index.
  • New York’s $20 billion health care plan included in the 2022-23 state budget will allow home health care workers to receive a $2 per hour increase in the minimum wage on Oct. 1, 2022, with an additional $1 increase in October 2023.
  • Virginia law gives home health care workers one hour of paid sick leave for every 30 hours worked.

Addressing Benefits Cliffs

Increasing pay for typically low-wage direct care workers may cause some to lose access to public benefits such as Medicaid or food and nutrition assistance. This issue is often called a benefits cliff. The Federal Reserve Bank of Atlanta developed a set of tools, called the Career Ladder Identifier and Financial Forecaster, to address these benefits cliffs. The bank worked with the Oklahoma Department of Commerce to pilot these tools at job centers around the state, so workers are supported as they move into in-demand jobs and earn higher wages.

The Pennsylvania 2022-23 state budget includes $25 million to extend program eligibility to people earning higher wages for Child Care Works, a program that helps low-income families pay for child care. The budget also provided $25 million for the Child and Dependent Care Enhancement Program, a child care tax credit to benefit working families with children in daycare who already qualify for a similar federal program.

2023-24 Updates

Increasing Compensation

California raised the state minimum wage for healthcare workers from $15.50/hour to $25/hour to be phased in by 2026 for large health systems and 2033 for smaller systems.

Kansas appropriated $13 million to increase the home and community-based services frail elderly waiver reimbursement rates by 10% for FY2024 and appropriated $3 million to increase Program of All-Include Care for the Elderly (PACE) reimbursement rates by 5% for FY2024.

Minnesota established the nursing facility workforce incentive grant program, provided payments to eligible workers for purposes such as retention, recruitment, and incentive payments, payments to employee-owned benefits, education and professional development, childcare, etc. Workers may receive up to $3,000 annually. This grant is funded by a onetime appropriation in FY24 of $74,500,000, to be spent by June 30, 2029.

Oregon required entities that receive funds for certain workforce program initiatives to establish wage standards and develop training plan for individuals who participate in the program administered by entity if entity provides individuals with paid work experience. Provided that the individual that performs work for recipient under program shall be considered employee of recipient for purposes of state wage and hour laws and state laws prohibiting discrimination and retaliation. Required industry consortia representing certain industry sectors to establish wage rate standards for skilled occupations within sectors.

Rhode Island required the state to include Medicaid reimbursement rate increases of 10-20% for home care providers, based on the services provided.

South Dakota approved a 30.8% increase in nursing home reimbursement rates and a 121% increase in reimbursement for adult day services.

Washington appropriated $5.5 million in FY2024 and $5.4 million in FY2025 for a dementia-specific rate increase of $43.48 per resident/per day for specialized dementia care in all assisted living facilities;