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In Brief: Paying for Quality Care: State and Local Strategies for Improving Wages and Benefits for Personal Care Assistants


From the perspective of someone receiving personal care services (PCS), the most basic "quality" issue is straightforward: Can I find a qualified worker to provide the services I need? While many factors influence the adequacy and stability of the workforce available for delivering PCS, growing evidence shows that the wages and benefits paid to personal care workers play a fundamental role in determining the quality and quantity of workers.

In light of the critical interconnections between the quality of jobs and the quality of care, this report examines state and local initiatives to improve wages and benefits for direct-care workers delivering Medicaid PCS. Seven strategies for improving direct-care wages and benefits are identified and effective practices for states are highlighted.


1. In most states, wages for agency workers delivering Medicaid PCS are not set by the state but rather are determined by employers. However, a number of states do set wages for consumer-directed PCS workers.

2. The ability to provide access to affordable health insurance for direct-care workers is an issue of growing concern around the country.

3. States, localities, and advocates have engaged in seven types of strategies to improve direct-care wages and benefits:

  • wage pass-through legislation;
  • rate enhancements linked to provider performance goals or targets;
  • reform of methods for rebasing and updating reimbursement rates for home and community-based services (HCBS) so that they are based on actual costs and/or competitive market rates;
  • litigation against state Medicaid agencies;
  • collective bargaining by direct-care workers;
  • living wage ordinances and minimum wage improvements; and
  • health insurance initiatives targeted at direct-care workers.


This review of state and local efforts to improve compensation for direct-care workers suggests several important issues and implications for advocates, policymakers, researchers, and providers.

1. Lack of Federal Oversight and Guidance. Federal oversight of and guidance to state Medicaid rate-determination methods and procedures have been minimal but should be strengthened to help improve workforce adequacy and the quality of services received by consumers. Useful guidance could include:

  • Standards for assessing the adequacy and reasonableness of rates.
  • Guidelines concerning the minimum frequency with which rates should be revised.
  • Options regarding the economic and financial information to be considered when establishing and/or revising base rates as well as updating them.
  • Options for creating rate enhancements.

2. Existing Direction to States. Court decisions as well as federal statutes and regulations arguably provide the following direction to state Medicaid agencies:

  • Payments for services must be consistent with efficiency, economy, and quality of care.
  • The state Medicaid agency's payments must be sufficient to enlist enough providers so that services under the plan are available to recipients at least to the extent that those services are available to the general population.

3. Ad Hoc Reimbursement Rate-Setting Methods. Most states set reimbursement rates for Medicaid PCS in a relatively ad hoc manner:

  • No systematic process is in place to regularly update or rebase rates taking into account relevant economic and financial information, including provider costs.
  • Most states do not know what the provider agencies they contract with pay their workers.

4. Problematic Rate Setting. Most current approaches to PCS rate setting and wage determination are problematic for several reasons:

  • Rates tend to be state budget-driven.
  • Providers are subject to considerable uncertainty regarding their year-to-year funding.
  • There is a danger that rate increases will not reach workers.
  • Lack of an integrated approach to rate setting across Medicaid HCBS can lead to unrelated and inconsistent rate setting across departments and programs.

5. No Single State Solution. Exemplary approaches to improving wage rates and benefits for personal care workers usually are unique to particular state contexts.

In sum, ensuring good quality care hinges on the ability of policymakers to address the adequacy of the wages and benefits paid to direct-care workers. Most states appear to be at the earliest stages of designing comprehensive and systematic approaches to setting payment rates for PCS workers.

Written by Enid Kassner, AARP Public Policy Institute
October 2006
©2006 AARP
All rights are reserved and content may be reproduced, downloaded, disseminated, or transferred, for single use, or by nonprofit organizations for educational purposes, if correct attribution is made to AARP.
Public Policy Institute, AARP, 601 E Street, NW, Washington, DC 20049

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