Virginia Direct Care Workers Face Financial Challenges Due to Benefits Cliffs

A recent study by PHI, LeadingAge Virginia, and PositiveAge highlights the economic challenges faced by direct care workers in Virginia due to the "benefits cliff." This phenomenon occurs when modest wage increases lead to significant reductions or loss of public benefits, such as Medicaid and SNAP, often resulting in little to no net income gain for the workers. The research finds that on average, 35% to 37% of a $5,000 pay raise is offset by reduced benefits and increased taxes, with up to 16% of direct care workers potentially encountering at least one benefits cliff after successive raises.

Medicaid is identified as the primary factor contributing to these benefit cliffs, followed by nutrition assistance programs and childcare subsidies. The report warns that these financial disincentives can exacerbate economic instability for direct care workers, potentially driving them to leave the profession amid high demand for their services.

In response to upcoming federal budget measures that may cut Medicaid and SNAP funding, LeadingAge Virginia recommends that state policymakers prioritize protecting gains made in public benefit access to support this workforce. The study includes qualitative insights from interviews with 12 Black direct care workers in Virginia, shedding light on their financial challenges and reliance on public assistance to supplement low incomes.

This research underscores significant systemic issues in how income thresholds and benefit program eligibility intersect, emphasizing the need for policy adjustments to prevent disenfranchisement of crucial frontline care workers. Understanding and addressing these barriers is critical for sustaining the workforce essential to senior and disability care services in Virginia and similar markets.