Fiscal Fitness: How States Cope

Giving an allowance for health care: In three states, patients get more say in their care

Robert Wood Johnson Foundation-funded "cash and counseling" programs in three states have demonstrated it's possible to save money and increase patients' satisfaction with the care they receive by encouraging and helping patients to manage their own care.

An evaluation by Mathematica researchers of the Cash and Counseling Demonstration for adults in Arkansas, New Jersey, and Florida looked at how a new service delivery model of consumer direction affected Medicaid and Medicare service use and costs.

The evaluators said the traditional method of providing Medicaid personal care services through home care agencies gives consumers few choices about how and when their care is provided. Thus, some consumers may not receive the type of care they believe the need, when and how they want it. And this can lead to dissatisfaction with their care, unmet needs, and discontent over the quality of life.

The theory behind Cash and Counseling was that if consumers were given control over a cash allowance, and given assistance in managing that allowance, they would select the types and amount of services to best meet their needs and enhance their lives. The program was designed to be budget-neutral, to cost no more per recipient per month than the traditional program.

Enrollment in the demonstration projects was open to interested beneficiaries eligible for personal care services under the state Medicaid plan in Arkansas and New Jersey and under waiver in Florida. Eligible beneficiaries were randomly assigned to direct their own assistance as Cash and Counseling customers in the study group or to receive services as usual from agencies in the control group.

Cash and counseling consumers had an opportunity to receive a monthly allowance to use to hire their choice of caregivers or buy other goods or services needed for daily living. To receive the allowance, consumers had to prepare a spending plan outlining how they planned to use the cash and have it approved by a counselor. They also could ask the counselor for support and advice on managing the allowance.

Costs appear to have been higher in the Cash and Counseling group, particularly in Arkansas, which wanted its program to increase access to paid care. The evaluators said Cash and Counseling apparently increased beneficiaries' access to paid care because, even though there was a labor shortage, they could hire family and friends and this resulted in higher personal care costs for the study group.

"If agencies cannot provide the hours authorized for the care plan, costs per month of services/benefits received may be higher than they would be otherwise," the evaluation said. "In Arkansas and New Jersey, costs per month of benefits were higher for treatment group recipients than for control group recipients, mainly because the control group received less care than they were expected to, at least partly due to severe labor shortages during the study period. The treatment group in these states received allowances approximately equal to the expected cost of obtaining authorized services in the care plan. In Florida, the primary reason for the treatment group's higher costs per recipient month among the nonelderly was that allowance recipients were more likely than those in the traditional program to be reassessed and need more care than was in their original care plan."

It appears that while Cash and Counseling can reduce the need for other Medicaid services, it did not do so consistently across states and time periods. In Arkansas, consumer-directed personal care services reduced nursing facility use and costs more effectively than providing services in the traditional manner. The marked reduction in nursing facility costs was much more pronounced in Arkansas than in New Jersey or Florida.

Mathematica vice president Randall Brown tells State Health Watch that Arkansas' Cash and Counseling Program, called IndependentChoices, enrolled about 9% of Arkansas's personal care services users in the demonstration. He said those enrolled in the program were less likely than control group members to have nursing facility stays during the study period. For the full sample, he says, the magnitude of the treatment-control difference in nursing facility costs was negative and sizable, but not statistically significant. However, during the three-year study period, there were cumulative savings of about $1,900 — some 15% of the control group mean — in all Medicaid long-term care services, of which nursing facility savings were the largest single component. The long-term care savings rose gradually, from 13% of the control group mean in year one to 17% in year three.

Weigh pros and cons

Mr. Brown says states considering such a program need to weigh the pressure to cut Medicaid costs against their responsibility to provide Medicaid covered services to beneficiaries eligible for them. Personal care costs were higher under Cash and Counseling, he says, because many in the control group traditional program did not receive any care and because control group recipients received only two-thirds of the hours in their care plans. In contrast, he says, nearly all treatment group members received the full value of their discounted care plans each month, so their actual costs, and the services they received, were close to what they were expected to be.

"Because most programs that reduce nursing facility use do increase public costs," Mr. Brown says, "some have suggested that such programs might be justified because of the benefits they bring to caregivers and their families, rather than because of their cost-effectiveness. Thus, policy-makers might be willing to incur the higher costs for new personal care services applicants to reap Cash and Counseling's sizable benefits [increasing consumers' satisfaction with care, and reducing consumers' unmet needs and caregivers' emotional and physical strain] and to meet their obligation to provide consumers with authorized care."

Mr. Brown said it is unclear whether the source of Cash and Counseling's effects on nursing facility use is increased access to care, or greater flexibility of the personal care services benefit. If increasing access to personal care services is the reason, he says, improving access to care in the traditional program should lead to control group costs for both personal care services and for nursing facility services that were similar to those of the treatment group. However, if the flexibility of consumer direction is the key to reducing nursing home use, Cash and Counseling would yield net savings if control group members received all their authorized care.

Mr. Brown points out to State Health Watch that the Arkansas program was not set up to save money, but rather was focused on making people happier and improving their lives, without costing any more money.

In Florida, the demonstration was open to children and adults with developmental disabilities, frail elderly adults, and adults with physical disabilities who were receiving Medicaid home- and community-based services through the state's Developmental Disabilities or Aged/Disabled Adult waiver programs.

Time to plan

Mathematica research analyst Leslie Foster, who worked on the Florida program evaluation, said it took many consumers a long time to develop purchasing plans and begin receiving their monthly allowance, if they did so at all. Allowance delays reportedly stemmed from consumers' individual circumstances such as illness or not having family or friends to hire, staff workloads, and procedural delays (such as purchasing plan review and approval), and an initial uncertainty about whether consumers were suitable for Cash and Counseling.

Ms. Foster says consumers who received the allowance used it to meet a variety of care-related needs. Among those receiving an allowance during the nine-month follow-up survey period, 78% said they used it to hire one or more workers. Nearly 60% of the consumers hired family members, although the proportion was smaller for children than for elderly adults. Most workers helped consumers with household and community activities and personal care, and many provided assistance with routine health care and transportation.

Hiring workers was difficult for some consumers, Ms. Foster says. Some 19% of all consumers tried to hire but were not able to. Two-fifths of those who did hire said it was difficult, often because of a lack of interested or qualified candidates. Parents who hired for minor children were more likely to report difficulty than were adult consumers.

Nine months after being assigned to the Cash and Counseling study, 88% of consumers said they would "recommend the program to others who wanted more control over their personal care services." Among consumers who received the allowance, some 60% said it had "greatly improved" their lives and another quarter said it improved their lives "somewhat."

Ms. Foster tells State Health Watch the evaluation showed those in Cash and Counseling "did much better than the controls. She says it's important that all who participated in the demonstration project were self-selected and wanted to try the program. The success, she says, might not apply to a mandatory program.

Issue to consider

Mathematica says that states interested in reaping the benefits of Cash and Counseling but concerned about program costs should consider these issues:

1. Recoupment. States might want to adopt procedures for recovering funds consumers don't need. Each of the demonstration states eventually adopted such procedures, which the evaluators said can be implemented fairly if counselors give consumers adequate warning to help them avoid losing funds they may be saving for a legitimate purpose.

2. Reassessments. Programs need to ensure that care plan amounts are no more likely to be increased if consumers receive an allowance than if they participate in the traditional program.

3. Savings on Counseling and Fiscal Services. Arkansas, the evaluators said, learned a valuable lesson in how to provide counseling and fiscal services in a more cost-effective manner to more accurately reflect the level of effort that providing the services required. When the demonstration began, Arkansas paid the counseling/fiscal agencies $115 per month starting when a consumer enrolled in the program, even though the consumer was not yet receiving an allowance or using counseling or bookkeeping services regularly. The state changed to making a one-time payment after the spending plan was developed, and then paying $75 per month after the consumer started the allowance. Arkansas found the revised arrangement gave the counseling/fiscal agent an incentive to help the consumer complete a spending plan and reduced the state's costs for counseling and fiscal agent services.

4.Allowance discount factor. Mathematica says states should consider adjusting the allowance by multiplying the care plan value by a "discount" factor to ensure it is on par with costs of services that consumers would be likely to receive, on average, from an agency. States also should monitor the discount factor closely and possibly change it, the evaluators said.

A stumbling block

Ms. Foster says administrative details were a major stumbling block for program participants and it will be important for states to look at how much assistance is needed to design a budget and how much help beneficiaries need.

"When the program was designed," she says, "not enough thought was given to how hard it would be for many people to prepare a budget and do the math that is involved. When you get past that, you see that people are able to control their own personal care."

And Mr. Brown tells SHW the Cash and Counseling program "is the most effective program I've ever worked with. There has been a nice collaboration between the federal government and the Robert Wood Johnson Foundation and it was a pleasant surprise that the Arkansas program had a significant impact on nursing home care."

Cash and Counseling now has been expanded to Alabama, Iowa, Kentucky, Michigan, Minnesota, New Mexico, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia.

Information about Cash and Carry is available at Copies of the evaluation reports are available from Mathematica Policy Research. E-mail Mr. Brown at or telephone (609) 275-2393. E-mail Ms. Foster at or telephone (609) 936-3265.