Should Government Subsidize Caregiver Wages? Some Evidence on Worker Turnover and the Cost of Long-Term Care in Group Homes for Persons With Developmental Disabilities

Abstract

High rates of worker turnover have been a persistent problem in the long-term care industry. Spending on individuals with developmental disabilities represents 20 percent of all long-term care spending and 40 percent of Medicaid spending on long-term care. Using detailed data on the providers of long-term community-based residential services for persons with developmental disabilities, this research examined the consequences of high worker turnover for long-term care costs and whether a wage-subsidy policy to reduce worker turnover would have been cost-effective in this sector. Higher turnover increased state-reimbursed training expenditures, the share of workers engaged in training, and workers’ compensation costs. Turnover had no effect on training expenditures that were not reimbursed by the state, nor did it affect residential vacancies. The findings indicated that providers were unlikely to reduce turnover on their own, since its associated costs were either tolerably small or borne by others. An analysis indicated that it was likely socially beneficial for the government to reduce turnover through wage subsidization in this sector.