The broader American labor market has cooled in 2026, but healthcare remains an exception. In July 2026, the overall U.S. economy shed 23,000 jobs, while healthcare continued adding positions, gaining 22,000 jobs that month alone. This difference reflects a labor market unique to healthcare, one shaped by an aging workforce, rising patient demand and a widening skills gap. However, hiring is still falling short of demand. According to the U.S. Bureau of Labor Statistics, healthcare and social assistance posted a job openings rate of 5.7% in July 2026, the highest of any industry tracked, underscoring just how far job growth still lags behind employer need. For employers, these dynamics carry real financial consequences. Healthcare wages are climbing faster than the broader economy, and those labor costs are a key driver behind rising medical cost trend projections for 2027 and beyond.
This Healthcare Cost Spotlight article examines what’s driving the healthcare talent shortage and how it’s affecting healthcare costs for employers.
The State of the Healthcare Labor Shortage
Demand for healthcare workers is significantly outpacing supply. According to The Conference Board, the healthcare industry posts more than 700,000 job openings each month, while only about 306,000 unemployed workers are available to fill them nationwide. This gap is projected to widen in the years ahead. The U.S. Health Resources and Services Administration (HRSA) projects a shortage of over 141,000 physicians and more than 108,000 registered nurses by 2038, along with shortages across nearly every allied health and behavioral health occupation it tracks. Primary care access is expected to be hit particularly hard, with the National Institute for Health Care Management projecting that 47 states will face a shortage of primary care physicians by 2037.
Even as healthcare continues to add jobs, growth has slowed. The 22,000 jobs added in July 2026 marked a notably slower pace than the average monthly gain of 36,000 recorded over the prior 12 months, with hospital employment essentially flat for the month. Most of the recent job growth has come from ambulatory care settings, such as physician offices and home healthcare, rather than hospitals.
What’s Driving the Shortage
The aging population—Americans age 55 and older make up about 30% of the population but account for 57% of total healthcare spending. As this population grows, so does demand for physicians, nurses and specialists, particularly in primary care and chronic disease management.
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- Workforce approaching retirement—The clinicians needed to meet this rising demand are themselves aging out of the workforce. Nearly 47% of practicing physicians are age 55 or older, and physicians age 65 and older now make up about 20% of the active clinical workforce, with another 22% between ages 55 and 64. More than 4 in 10 physicians are within a decade of traditional retirement age.
- Persistent burnout—Physician burnout, while somewhat improved from pandemic-era highs, remains elevated and continues to push experienced clinicians out of the workforce ahead of schedule. A 2026 poll from the Medical Group Management Association found that 1 in 3 medical groups reported a physician retiring or leaving in the past year due to burnout, up from 27% in a similar poll conducted in 2024.
- Demand for behavioral health services—HRSA projects shortages of nearly 100,000 mental health counselors, nearly 100,000 psychologists and more than 43,000 psychiatrists by 2038, even before accounting for the currently unmet need. Utilization of behavioral health services has risen 62.6% since 2018, and continues to grow faster than overall medical utilization.
- A shrinking talent pipeline—Internationally trained physicians and nurses have historically helped fill U.S. workforce gaps, particularly in rural and underserved areas. However, a new $100,000 federal fee on H-1B visa petitions is expected to reduce this pipeline going forward, with rural communities, low-income areas and smaller employers likely to be affected the most, since many operate on thin margins and cannot absorb a flat per-hire fee the way larger health systems can.
- Residency bottlenecks—Medical school enrollment has expanded significantly over the past two decades, but the number of federally funded residency positions has not kept pace, creating a bottleneck that limits how many graduates can enter practice each year. At the same time, rising medical school costs and student debt are leading some high-performing students to choose other, less debt-intensive professions instead of medicine.
- Slow productivity growth—Healthcare lags behind other service sectors in productivity gains due to administrative burden, fragmented care delivery and payment systems that reward volume over efficiency. While emerging technology and artificial intelligence hold promise for easing some of this burden, regulatory hurdles have slowed adoption.
Summary
The healthcare workforce shortage is a structural challenge shaped by an aging population, an aging workforce, rising behavioral health demand and a narrowing talent pipeline. These pressures are already showing up in rising labor costs and, in turn, higher medical cost trend for employer health plans. While employers can’t resolve the shortage on their own, understanding its root causes can help inform smarter benefit design, vendor selection and cost management strategies. Staying informed on these evolving workforce dynamics will be essential for employers navigating an increasingly costly healthcare landscape.
Article Published By: Zywave, Inc.
