The Hidden Workforce Problem

Direct Support Professionals (DSPs) are essential to the care and wellbeing of individuals with intellectual and developmental disabilities (I/DD). They form the backbone of support services, yet the systems that define their role (and fund their work) are fragmented, outdated, and inaccurate.

You may have heard the term "Direct Support Professional classification" tossed around in discussions about funding, labor law, or audits. But few leaders realize just how foundational this issue is across the industry. DSPs are misclassified across nearly every system that touches their work: labor, tax, Medicaid, insurance, and workforce reporting. That misclassification leads to underfunding, legal exposure, workforce instability, and most critically, burnout.

According to recent data from ANCOR, 88% of agencies reported moderate or severe staffing challenges in 2025, a slight improvement from 90% in 2024. However, the problem persists at scale.

This is a systemic misalignment that affects everything downstream: from providers to the individuals that DSPs serve every day.

What People Mean by “DSP Classification Code”

Let’s clear something up early: there is no single, universal DSP classification code.

Depending on which system you're looking at - federal labor stats, Medicaid reimbursement, payroll, or insurance - DSPs are placed in entirely different buckets. Some are classified as home health aides. Others as personal care attendants. Some… don’t show up at all.

This is where the issue becomes clear: fragmented classification leads to issues across funding, oversight, and planning. It breeds confusion, inconsistent benchmarks, and poor decision-making at the leadership level. It’s hard to build policy around a role that isn't consistently defined.

5 Systems That Misclassify DSPs

Across the sector, at least five major systems contribute to DSP misclassification - each creating downstream consequences for pay, policy, and sustainability.

Federal Labor and Workforce Reporting

The U.S. Bureau of Labor Statistics groups DSPs under categories like home health aides or personal care aides. These categories fail to reflect DSPs’ real responsibilities: behavioral support, medical coordination, crisis intervention, and beyond.

As a result, workforce data underestimates the complexity of DSP work. This leads to inadequate wage benchmarks and flawed planning.

Employee vs. Independent Contractor Status

Per IRS and Department of Labor guidelines, DSPs are employees - not independent contractors. However, some organizations misclassify them to cut costs.

This creates serious risk, including:

💵 Unpaid overtime and wage violations

📉 Back taxes, interest, and penalties

🧑‍⚖️ Lawsuits and compliance audits

For organizations engaging in this practice, this is a true legal liability. 

Medicaid Reimbursement

Medicaid reimburses services, not workers. That means DSP labor is hidden inside service codes like “residential habilitation” or “community support,” which vary by state.

The result: the DSP’s labor is functionally invisible, excluded from funding models and policy analysis.

Insurance and Workers’ Comp

In many states, DSPs are placed in low-risk job classifications on paper. But in practice, DSPs regularly manage physical and behavioral risk.

Misclassification here leads to:

💲 Insurance premiums that don’t reflect reality

❌ Denied or underpaid claims

😰 Budget shortfalls for providers

Wage Pressures and Visibility

While wages across sectors are rising, DSP wages often aren’t increasing fast enough to be sustainable. Cost-of-living increases continue to outpace DSP pay, especially in Medicaid-funded environments where rates are capped and outdated.

Why This Issue Is Gaining Urgency Now

So why is this all coming to a head now?

🔽 Workforce shortages are hitting crisis levels

❗ Compliance audits are more aggressive

🚨 Lawsuits are increasing

🙅 Wages are rising system-wide but DSPs are being left behind

What was once a back-office classification problem is now a boardroom priority.

Misclassification Has a Human Cost

With Direct Support Professionals being misclassified, the impact is deeply human across thousands of hardworking individuals.

DSPs earn less than they should. They face instability, burnout, and a lack of recognition for the skilled work they do every day. Providers are exposed to legal and financial risks, from misclassification audits to rising insurance premiums, while navigating workforce shortages with limited tools.

For people with I/DD, this instability shows up as high turnover, inconsistent care, as well as fewer opportunities for meaningful engagement and support.

At the root of all this is a data problem. Without consistent classification, we get inconsistent documentation and bad data. That leads to weak policy, poor funding models, and limited reform.

If we want to fix the system, we have to start with how we see the work. That means creating clear, accurate definitions. It means documenting what DSPs actually do day-in and day-out. It means valuing that work through better tools, smarter insights, and more equitable systems.

How Technology Can Help Bring Clarity

Technology alone won’t fix classification. But it can help DSP work be seen and respected.

Modern platforms (like Kibu) can:

📝 Align documentation with actual service delivery

📊 Track outcomes in meaningful ways

🔍 Clarify role definitions for compliance, billing, and staffing

🙋 Reduce admin burden so DSPs can focus on care

Done right, technology supports both compliance and dignity. It gives leaders the visibility they need, while giving DSPs the tools they deserve.

Conclusion: Fixing Classification Starts with Seeing the Work

DSPs aren’t misclassified because they lack value. DSPs are misclassified because our systems haven’t kept pace with the complexity of their work.

Fixing that starts with visibility, clarity, and respect.

We need to stop looking past the role and start seeing it for what it is: essential, skilled, and worthy of investment.

If you're a provider, ask yourself:
How is the DSP role defined in our organization?

Now is the time to clarify, before audits, lawsuits, or workforce crises force your hand.

Frequently Asked Questions

What does “Direct Support Professional classification” actually mean?
It refers to how DSPs are labeled across different systems, including labor, tax, Medicaid, insurance, and more. The problem? There's no single, consistent classification, which leads to underrepresentation, underfunding, and legal risk.

Is there a standard DSP classification code in the U.S.?
No. DSPs are often grouped under broader categories like personal care aides or home health aides in federal data, and those don’t accurately reflect their skills or responsibilities.

Why does misclassification of DSPs matter so much right now?
Workforce shortages, rising wages, tighter audits, and increased litigation are all making this issue more urgent. Misclassification exposes providers to financial and legal risk while undermining care quality.

How does Medicaid play into DSP classification issues?
Medicaid reimburses services, not individual workers. DSP labor is embedded in those services, making it difficult to track or advocate for accurate reimbursement based on actual labor costs.

Can DSPs be legally classified as independent contractors?
In most cases, no. DSPs typically meet the IRS and Department of Labor criteria for employees. Misclassifying them can lead to back taxes, penalties, and legal action.

How does classification affect workers’ comp and insurance?
When DSPs are classified under low-risk job codes, insurance premiums may be artificially low, but this also leads to undercoverage, denied claims, and budget shortfalls when incidents occur.

What can providers do to address classification challenges?
Start by reviewing how your organization defines DSP roles. Clarify documentation, align job codes accurately, and consider tech tools that improve visibility and accountability across systems.

Can technology help fix the DSP classification problem?Yes. While it won’t solve everything, platforms like Kibu can help make DSP work visible through better documentation, compliance tracking, and service alignment. We believe that the best systems for providers take a foundational step toward structural reform by empowering DSPs.