There is a growing need to strengthen the workforce — both paid and unpaid — that cares for older adults and individuals with disabilities at home. While the COVID-19 pandemic shed new light on the importance of supporting family caregivers and direct care workers (DCWs) caring for these populations, this workforce’s need for support long predates 2020 and will persist after the pandemic has ended.

States are well positioned to use financing and payment strategies to better support this workforce. These strategies allow states to support an array of policy objectives, including to reward value over volume of care, target resources to high-value services, improve health care delivery, and provide better outcomes for patients. Managed care contracting is one way for state Medicaid agencies to signal their priorities and influence health systems, managed care plans, and providers to improve care for target populations or address gaps. Since strengthening supports for family caregivers and DCWs is increasingly a priority for many states, payment mechanisms can help address these needs.

What issues face this workforce right now?

DCWs include professionals employed in home-based settings, adult day centers, and long-term care facilities, and may have job titles such as home health aides, nursing assistants, personal care aides, and certified nursing assistants. DCWs have demanding jobs, both physically and emotionally, and are paid at such low rates that they frequently leave for other jobs, such as fast-food services.

Family caregivers — often the adult children, spouses, or close friends of an older adult or individual with disabilities — provide unpaid care that would normally be provided by a DCW. Many family caregivers report experiencing burnout and adverse health conditions as a result of their caregiving duties, which may include activities of daily living; managing medications; providing wound care; offering emotional support; coordinating care needs while managing household chores and their day jobs; and parenting for those in the “sandwich generation.”

The Federal government has passed legislation to support family caregivers, and many states are thinking about how they can support DCWs by raising wages, creating task forces dedicated to retention, and establishing workforce registries. States are already planning to use American Rescue Plan Act dollars to bolster the wages of DCWs as well as provide pay, training, and respite services to family caregivers, but additional efforts are still needed.

How can states use payment levers to support family caregivers and DCWs?

States can use a variety of payment strategies, including managed care contracting, to incentivize or require health systems, plans, or providers to change the way they pay for or deliver services. These include, for example:

  • Strengthening managed care requirements to direct funding and resources toward more effective practices. Contracting requirements also serve as a way for states to signal priorities and change the behavior of health care stakeholders. States can follow AARP’s guidance, which compiled examples of managed long-term services and supports contract language related to supporting family caregivers. These examples include incentives or requirements for plans to provide an assessment of the physical and mental well-being of family caregivers, provide services and supports to family caregivers, and develop quality or performance metrics that involve family caregivers. Some states already mandate that family caregivers are identified and assessed as a part of their MLTSS contracts.
  • Developing payment reform programs to motivate plans and providers to transform care delivery models in a more equitable direction. In recent years, states and other stakeholders have considered using payment reform strategies to change how plans and providers address social determinants of health or health equity. States could explore the feasibility of creating incentive pools based on withhold arrangements that provide funds to plans or key partners like Area Agencies on Aging (AAA) that meet key quality metrics of supporting direct care workers. Hawaii’s Kupuna Caregiving Program uses a withhold arrangement to provide direct financial supports to family caregivers. The program pays unpaid family caregivers $350/week to help offset the financial burden of caregiving responsibilities.
  • Tailoring payment strategies to improve care for priority populations. States, for example, can use withhold arrangements to create funding pools for reinvestment programs similar to Arizona’s program that seeks to incentivize more integrated care delivery in fields like behavioral health. States can use the levers described above, including managed care contracting levers or targeted incentive pools, to channel resources toward stakeholders that support older adults and individuals with disabilities, including family caregivers, direct care workers, and AAAs.

Moving Forward

There are many potential pathways for states to support DCWs and family caregivers, and while states have many competing priorities for their limited resources, there are still opportunities to push resources toward individuals who support older adults and people with disabilities. Using payment levers like managed care contracting or financing reinvestment programs to support this vital workforce is a relatively new undertaking for many states, but will likely reap long-term rewards and improve well-being and quality of life for family caregivers and DCWs as well as those receiving critical at-home care supports.

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