Labor Dynamics and Wages in the Health Care Sector: A Q&A with Professor David Grabowski

As a health care worker shortage lingers across the US, how could the industry adapt? Are there policy responses that could affect current dynamics in US health care labor markets?

The American Hospital Association estimates that the US could experience a shortage of up to 3.2 million health care workers by 2026. To counter that possibility, federal policymakers have suggested changes to US health care staffing and wage regulations in the country. Research shows, however, that higher wages alone may not be sufficient to address US health care labor shortages. 

Principal Brian Ellman and Vice President Yao Lu discussed this topic with Analysis Group affiliate David Grabowski of Harvard Medical School. Professor Grabowski is a health care economics policy expert who focuses on long-term, post-acute, and nursing home care. He has testified before Congress and in litigation on health care payment and quality issues and has offered his expertise to several US government agencies – including the Medicare Payment Advisory Commission (MedPAC) – on how policy can be leveraged to improve health care delivery.

In this conversation, Professor Grabowski touches on a range of issues relevant to US health care labor markets, such as wages, retention, quality of care, and emerging policies and regulations.

A key challenge facing the US health care industry today is staffing, with a variety of organizations facing high turnover rates and difficulty in filling open positions. Based on your research, how has that challenge affected health care delivery, and what can be done to mitigate its effects?

My research shows that increased staffing levels can lead to better patient experiences and that labor shortages can have negative downstream effects on the quality of care available to patients.¹ However, during and after the COVID-19 pandemic, a discernible share of health care workers opted to leave the profession.

During this period, research has also shown evidence of increased average wages for certain health care professions. Despite these increased wages, which from an economic perspective should attract additional workers, labor supply shortages across numerous health care markets persisted. This could indicate that higher wages alone are not sufficient for addressing persistent health care labor shortages.

And, when one worker leaves, others may follow. In surveys of health care professionals who have left or considered leaving their jobs, it has been observed that inadequate staffing is often listed as a primary explanation. There may be no singular way to stop this from happening, but enacting regulations around staffing minimums and increasing reimbursement rates for providers are current approaches being used to attract and retain more workers.

 

Turning to your expertise in long-term care, how have staffing shortages specifically affected labor dynamics in the industry?

By early 2022, we saw a decline of over 400,000 nursing home workers nationally. Although the workforce has grown since that time, staffing in these facilities is still down by about 80,000 workers from pre-pandemic levels. In response to staffing shortages, some facilities have relied on temporary staffing resources. These temporary workers can allow a nursing home to address gaps in staffing and continue operating, but the nursing home may also incur higher costs and may see a decline in quality of care.

In April 2024, the Biden administration released updated minimum staffing guidelines for nursing homes, introducing thresholds for minimum staff mandates and rebalancing staff-to-patient ratios in these facilities over the next few years. However, some facilities – such as those in states with more aging residents and a smaller long-term care workforce – could struggle to meet these guidelines.

What factors have influenced how nursing homes navigate staffing shortages?

Many of the certified nursing assistants (CNAs) in long-term care facilities around the country are immigrants. My research shows that nursing homes located in states with more immigrant CNAs are associated with more CNA hours, which may be linked to higher-quality health care.

One way that staffing shortages were mitigated in nursing homes during the pandemic was through immigrant workers remaining in the workforce.² Although immigration may not solve the health care worker shortage on its own, just as in other industries across the US, the contribution of immigrants to the long-term care workforce is significant.

Are there policy tools that could influence retention rates or wage growth for US health care workers? If so, how could those policies affect health care quality?

Medicare and Medicaid policies loom large over the US health care industry, and changes to those policies can have broad implications for health care delivery across the nation. While enrollment in Medicare and Medicaid is generally based on age or income, these programs cover a substantial portion of the US population.

For example, in the long-term care and post-acute care space, most care is paid for by Medicare or Medicaid, which have administratively set reimbursement rates that may limit the ability of nursing homes to increase wages for workers. My research has shown that increasing these reimbursement rates can lead to increased staffing and may improve quality of care across a variety of clinical indicators.

Could you highlight some emerging federal policies or regulations under consideration that could impact health care quality or wages?

Medicare has been considering and implementing payment systems based partly on the quality of care that is provided to patients. A limitation of those systems could be their likely need for accurate and consistent generation of quality metrics. Because health care quality measurement can have many different dimensions and may be related to aspects of health care beyond the bedside, successfully implementing these systems across a variety of health care settings could be challenging.

When it comes to wages, targeted wage pass-through policies – which could require increases in government payment rates to be spent on workers – come to mind. I’ve observed that these policies could increase staffing and wages, which may lead to higher-quality care.³

In analyzing challenges to labor markets in the health care industry, are there considerations that are particularly relevant?

It’s important to remember that the health care workforce is made up of a group of highly specialized professionals operating within idiosyncratic labor markets. With a range of education, training, and licensure requirements that vary depending on the occupation, area of specialization, and geography to consider, understanding and addressing health care workforce concerns can require detailed data to capture the unique characteristics of these labor markets.

For example, in the last 12 years, the number of US nurse practitioners has more than doubled, which may have helped to bridge care gaps caused by physician shortages.⁴ Understanding the variety of factors impacting labor market conditions across different types of health care professionals could help us to better understand trends and challenges we are seeing at the macro level. ■

 

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Endnotes

1. Grabowski, D.C., Jonathan Gruber, and Brian McGarry. Immigration, the long-term care workforce, and elder outcomes in the US. National Bureau of Economic Research (no. w30960) (2023).  
2. Jun, H. and David C. Grabowski. Nursing Home Staffing: Share Of Immigrant Certified Nursing Assistants Grew As US-Born Staff Numbers Fell, 2010–21. Health Affairs, vol. 43, issue 1 (2024).
3. Grabowski, D.C. and John R. Bowblis. Minimum-staffing rules for US nursing homes—opportunities and challenges. New England Journal of Medicine, vol. 389, issue 18 (2023).
4. Hnath, J.G.P., Betty Rambur, and David C. Grabowski. Earnings, job satisfaction, and turnover of nurse practitioners across employment settings. Health Affairs Scholar, vol. 1, issue 3 (2023).