At a glance:
- Proposed budget cuts would lower direct care labor reimbursements, reducing pay and worsening workforce shortages
- Low wages for direct care professionals already impose significant costs to Maine’s labor force, economic output, and health care capacity
- Direct care workers earn less than many low-wage jobs — raising wages to 140% of the state minimum wage is crucial for worker retention and quality care
- The state would give up about $215 million in federal money that would help people stay healthy and boost local businesses
- Lawmakers have introduced bills to raise direct care wages and ensure the wealthy and corporations pay their fair share
Maine’s budget decisions directly impact families, workers, and communities. The state faces a significant MaineCare funding shortfall while lawmakers in Washington are considering deep cuts to federal Medicaid funding. The Mills administration has made commendable efforts to protect MaineCare enrollment despite these challenges. However, proposals to cut direct care workers’ pay shifts the budget belt-tightening to some of our most essential yet undervalued workers — rather than asking top earners to contribute their fair share.
The threat to Maine’s direct care system
State lawmakers worked hard to establish our current reimbursement process for MaineCare services, including for direct care. In 2021, lawmakers committed to reimbursing direct care labor costs at no less than 125% of the minimum wage, adjusted annually for inflation. The Mills administration has implemented a rate review system to ensure providers aren’t falling far behind the actual cost of providing care. These and other initiatives helped stabilize a workforce in freefall during the pandemic.
This Mills administration’s budgets propose deep cuts, including eliminating cost-of-living adjustments (COLAs) for MaineCare services. In December, the Department of Health and Human Services unexpectedly announced it would not implement 3.5% COLAs scheduled for January 1, in violation of state law and despite having been partially funded in the previous budget. The proposed supplemental budget, which aimed to cover the immediate MaineCare funding gap, did not include COLAs. In the biennial budget, LD 210, the administration proposes to make COLAs optional and budgets no money to help workers keep up with inflation, representing a cost savings of $132 million over two years, $84 million of which is associated with direct care.1
The impact of these cuts is stark:
- Without COLAs, the average full-time direct care worker’s cumulative wages would decline by $4,875 through FY27 if the administration’s supplemental and biennial budgets were adopted. In other words, compared with current state law, every full-time direct care worker stands to lose nearly $5,000 if these budgets go through. This would worsen Maine’s workforce shortage, making it even harder to recruit and retain caregivers.
- Based on the $132 million in “cost savings” by freezing COLAs over FY26/27, the state would be forgoing approximately $215 million in federal contributions. That money would be delivered to every corner of the state, improving public health and stimulating local economies.
Why direct care investments matter
Underpaying direct care workers has far-reaching consequences. Research from Maine Center for Economic Policy (MECEP) finds the direct care workforce shortage keeps around 8,000 Mainers out of the workforce, reduces economic output by $1 billion annually, and shrinks state and federal revenues by nearly $70 million each year. Maine currently needs more than 2,300 additional full-time direct care professionals to meet demand, and that number will only grow as the population ages.2
Cutting wages and COLAs will deepen labor shortages, strain hospitals, and harm public health. Instead, Maine must invest in this workforce to ensure access to quality care and support the state’s economy.
A better path forward
Direct care workers perform critical jobs but are among the lowest-paid professionals. On average, they earn less than cooks, janitors, and customer service workers. MECEP estimates they should earn at least 140% of minimum wage to remain competitive.
Fortunately, lawmakers can take action. Speaker Fecteau has introduced a bill to raise reimbursement rates, improve training, and measure the scale of our care gap. Lawmakers can generate revenue for these investments through fairer tax policies, such as:
- A surcharge on income over $1 million per year
- Higher real estate transfer taxes on properties over $1 million
- Higher short-term lodging sales tax
- A surcharge on investment income over $500,000 for families
- Increased tax rates on corporate profits over $3.5 million
- Ending ineffective corporate tax giveaways
Maine lawmakers must reject wage cuts for direct care workers and pursue fair, sustainable funding solutions. Ensuring competitive wages and maintaining COLAs is not just fair — it’s essential for the health and stability of our state. Now is the time to stand up for direct care professionals and invest in a stronger, more equitable Maine.
Notes:
1. DHHS memo to HHS Committee, February 28, 2025
2. MECEP research on the costs of undervaluing direct care workers and the scale of our care gap: The High Cost of Undervaluing Direct Care Work | Closing the Gap: Maine’s Direct Care Shortage and Solutions to Fix It
