Shortage of Direct Support Workers Persists as Service Providers Brace for Medicaid Funding Reductions

New report finds that habilitation services for people with I/DD are most frequently eliminated due to staffing challenges, while recent federal Medicaid cuts risks gutting of home- and community-based supports

NATIONWIDE — Today ANCOR, the leading voice in Washington for providers of long-term support services for people with intellectual and developmental disabilities (I/DD), released its annual report detailing the severity of the direct support workforce crisis, which remains the greatest barrier to people with I/DD and their families accessing critical home- and community-based services (HCBS). In the past year, states lost COVID-era funding that propped up direct service worker wages and benefits and helped providers stem a mass exodus of workers from the field. Now providers are grappling with how to plug future budget shortfalls left by the $1 trillion in Medicaid cuts in the budget reconciliation legislation signed into law on July 4. The State of America’s Direct Support Workforce Crisis 2025, now in its sixth year, reveals how these factors may accelerate a reversal of the modest improvements seen in 2024.

While turnover rates continue to hover near 40% nationally, with vacancy rates between 12-15%, the impact on access to services has intensified. Most alarmingly, 52% of providers are now considering further program cuts absent significant improvement in staffing challenges, a dramatic increase from just 34% in 2024, signaling heightened uncertainty about the future of community-based supports and the ability of people with I/DD to access them.

The crux of this problem remains insufficient Medicaid reimbursement rates for HCBS, which subsequently leaves community-based providers unable to offer wages competitive with employers in hourly wage industries like fast food restaurants or retail and convenience stores. This fundamental challenge continues to drive direct support professionals (DSPs) from the field, creating dangerous gaps in care and forcing people with I/DD into more expensive and restrictive settings, such as hospitals and institutions. When new federal Medicaid funding restrictions go into effect, states that have not yet been forced to consider cuts to optional Medicaid programs, like community-based supports for people with I/DD, are likely to do so.

The research also found that among providers that had discontinued existing services, residential habilitation services were the most commonly axed (42% of respondents). These services offer individually tailored supports that include around-the-clock care that makes it possible for people with I/DD to reside successfully in their homes. The elimination of these types of supports — whether by providers who cannot staff them, or by states who do not fund them — means that people with I/DD aren’t being empowered to reach their full potential. It also drastically increases the risk of unnecessary and expensive hospitalizations and institutionalizations, as well as reliance on costlier support down the road.

“Even before massive federal Medicaid funding cuts go into effect, our national system of community-based disability services was facing an array of substantial challenges, threatening to undo the progress that had been made in recent years. Add to it the nearly $1 trillion in funding cuts passed earlier this year in the budget bill and it’s not hard to understand why people with disabilities are gravely concerned about the future of their services,” said Barbara Merrill, ANCOR’s chief executive officer. “The resulting pressure on state budgets will leave many with no choice but to consider cuts to ‘optional’ services, when we know that these services should never have been optional in the first place given how critical they are in empowering people with I/DD to lead meaningful, independent, full lives and keep them out of emergency rooms and large public institutions. Meanwhile, providers are already shuttering programs, already turning away people with I/DD seeking services, and already delaying innovations and the development of new programs designed to support people in underserved areas and those with highly specialized needs. Without immediate action to address inadequate Medicaid reimbursement rates, we risk reneging on the fundamental promise of community inclusion for all.”

Key Findings from The State of America’s Direct Support Workforce Crisis 2025 include:

• 88% of providers experienced moderate or severe staffing shortages in the past year, a slight improvement from 90% in 2024.
• 62% of providers reported turning away new referrals due to inadequate staffing, down from 69% in 2024 but still well above pre-pandemic levels.
• 29% of providers were discontinuing programs or service offerings due to staffing shortages, a modest improvement from 39% last year.
• 59% of providers intended to delay the launch of new programs, down from 64% in 2024.
• 52% of providers were considering further cuts to programs if recruitment and retention challenges failed to subside, a dramatic increase from 34% in 2024, representing the single greatest year-over-year increase.
• 56% of providers reported their organization delivers services in an area where few or no other providers offer similar services, comparable to 57% in 2024.
• 59% of providers who offer case management services struggled to connect people with services due to a lack of available providers, an increase from  57% in 2024.
• 36% of providers were experiencing more frequent reportable incidents, which survey findings indicate are contributed to by high turnover and vacancy rates, down from 45% in 2024.
• 62% of providers indicated they were struggling to achieve quality standards due to staffing challenges.

This report edition also highlights the unique challenges facing providers that serve rural areas:

• 54% of respondents reported serving rural residents.
• 42% of respondents indicated they recruit and retain workforce talent in rural areas.
• 20% of respondents reported networking with other health care providers to support access to care.
• 18% of respondents reported utilizing technology-driven solutions to support access to care in rural areas.

“Providers, the direct support professionals they employ, and the people with I/DD they support all need immediate federal and state action to address the workforce crisis,” said Lydia Dawson, ANCOR’s vice president for government relations. “Most urgently, policymakers must closely assess the implementation of the budget reconciliation bill to ensure that people with I/DD are not adversely impacted by unintended consequences. A healthy and robust direct support workforce is integral to the long-term viability of community-based services for people with I/DD. Without meaningful investment in Medicaid, which in turn allows providers to pay their workers living wages, both the workforce and people who depend on them will be cut off from living full and independent lives in their homes and communities.”

The 2025 edition of The State of America’s Direct Support Workforce Crisis garnered responses from 469 distinct providers of community-based I/DD services, representing 48 states and the District of Columbia.

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