The Cost of Direct Care Workforce Instability: Economic and Health Impacts of High Turnover in Pennsylvania

TL;DR

High turnover in Pennsylvania's direct care workforce leads to increased healthcare costs and worse health outcomes, costing Medicaid up to $75 million annually.

Contribution

This study quantifies the economic and health impacts of direct care workforce instability in Pennsylvania, revealing significant preventable healthcare costs.

Findings

Workforce shortages are linked to a 15-20% rise in preventable emergency department visits and a 12-18% increase in hospitalizations.

Each direct care worker turnover costs providers an estimated $4,200, leading to millions in annual losses.

Pennsylvania's crisis is 10% worse than the national average, disproportionately affecting rural and low-income populations.

Abstract

Pennsylvania’s direct care workforce crisis is intensifying, with annual turnover rates between 44–65% and an estimated shortfall of over 37,000 workers by 2026. While workforce shortages in long-term services and supports (LTSS) are well-documented, the financial burden of turnover remains underexplored. This study quantifies the economic and health costs of workforce instability, focusing on avoidable emergency department (ED) visits, hospitalizations, and long-term care admissions linked to staffing shortages. Using longitudinal workforce and wage data from the Bureau of Labor Statistics (BLS), PHI, and the Pennsylvania Department of Human Services (DHS) 2025-2026 Blue Book, along with Pennsylvania Medicaid data from 2024-2025, we assess turnover trends and cost implications. We find that direct care workforce shortages are associated with a 15-20% increase in preventable ED visits and a 12-18% increase in hospitalizations, adding as much as $75 million in excess Medicaid expenditures annually. Comparing Pennsylvania’s LTSS workforce trends against national data suggests that that the state’s crisis is disproportionately severe, surpassing the national average by 10%, with rural and low-income populations disproportionately affected. Findings indicate that each direct care worker turnover costs providers an estimated $4,200, leading to millions in annual financial losses and service instability. Policy recommendations include retention-based Medicaid reimbursements, expansion of direct care worker roles in interdisciplinary care teams, and pipeline initiatives. This study underscores the need for evidence-based policy reforms to address workforce instability and prevent excess healthcare costs in the Medicaid LTSS system.