U.S. Home Care System Strained by Workforce Shortages and Medicaid Pressures

The U.S. home and community care system is under severe strain as workforce shortages, low Medicaid reimbursement rates, and a growing backlog of people waiting for services leave paid caregivers and the families who rely on them struggling to keep pace with demand. A new analysis highlights gaps in coverage, wages, and workforce stability that span nearly every state. The findings, drawn from Medicaid policy data, state workforce surveys, and immigration workforce statistics, portray a sector that policymakers and advocates increasingly describe as being in crisis. The system supports millions of Americans outside institutional settings, yet the funding and labor required to sustain it are failing to keep up with current need.

The Details

The caregivers you've never heard of are in crisis. That framing from a recent opinion piece in The Hill captures the growing urgency around a system that supports millions of Americans outside institutional settings. According to KFF, Medicaid remains the primary payer for home care, covering nearly two-thirds of all U.S. home care spending in 2023. The program serves more than 5 million people annually through home- and community-based services, making it the single largest source of funding for in-home support. While all states offer some Medicaid home care, most commonly through 1915(c) waivers, nearly all home care beyond home health is optional for states to provide. That means states decide whether and how to offer these services, and they can cap enrollment through waiver programs. In 2025, every state that responded to a KFF survey reported home-care workforce shortages. The problem is severe enough that 41 states reported permanent closures of home care providers in the prior year. Compensation is one of the clearest drivers of the shortage. More than half of states paying hourly rates for personal care providers reported those rates below $20 per hour, underscoring the low-pay conditions tied to workforce shortages. Access is also tightening across the country. KFF found that 41 states maintained waiting or interest lists for Medicaid home- and community-based services in 2025, with more than 600,000 people on those lists. The workforce itself carries additional risk. Immigrants made up 32% of the home-care direct-care workforce in 2023. That concentration makes the sector especially vulnerable to immigration restrictions and deportation policies. The result is a system where funding, labor, and access constraints are converging at the same time, leaving families and paid caregivers to absorb the pressure.

Context

The broader Medicaid policy landscape adds pressure. Under current federal rules, nursing facility care is a required Medicaid benefit. Most home- and community-based services, by contrast, are optional and often delivered through waivers that states can cap. The Centers for Medicare & Medicaid Services describe home- and community-based services as a broad set of supports used to help people remain in home and community settings rather than institutions. Those supports are now facing a possible funding squeeze. KFF reported that the 2025 reconciliation law is estimated to reduce federal Medicaid spending by $911 billion over a decade. Because states have significant flexibility in whether and how they offer these services, the estimated reduction in federal Medicaid spending carries broad implications for home care coverage, workforce stability, and family caregiver support. Those implications are especially significant for the more than 5 million people who currently receive Medicaid-funded home care and for the hundreds of thousands more who are waiting for services.

What's Next

More than 600,000 people remain on state waiting lists for Medicaid home- and community-based services. Workforce shortages and low wages continue across most states, with hourly personal care rates below $20 per hour in more than half of reporting states. Federal Medicaid spending is estimated to drop by $911 billion over the next decade under the 2025 reconciliation law, according to KFF. The home care sector also relies heavily on immigrant workers, who made up 32% of the direct-care workforce in 2023. With demand currently outstripping available services and wages remaining depressed, families and caregivers face a landscape where the sector remains exposed to policy changes in both immigration enforcement and federal health spending.