Consumer-Directed Care for Medicaid Recipients

Along with education, health care consumes the largest part of state budgets. Medicaid is often the single most expensive state program—and the state’s largest health insurer. Nationally, 60 million low-income Americans are enrolled in Medicaid. Children and their parents represent nearly three-fourths—44 million—of all Medicaid enrollees, but they account for only about one-third of Medicaid spending. The other two-thirds are consumed by the six million elderly and ten million disabled people covered by Medicaid, who require ongoing and costly care.1

In 1999, the U.S. Supreme Court ruled that people with disabilities have the right to receive services “in the most integrated setting possible.”2 Before Olmstead, many disabled and elderly people were forced to live in institutions to receive services. As a result of the case, states must face the challenge of how to provide cost-effective, community-based care.

Medicaid enrollees who receive long-term care services at home often have little input into their own care—home health workers are chosen by agencies and care is limited to a standard set of services. Consumer-directed care generally allows patients to select their own caregiver and personalize the type of care they receive. Patients may choose to pay a relative or neighbor with whom they feel comfortable to perform services, instead of an unfamiliar person chosen by an agency. Other times, patients may elect to purchase items that make it easier to care for themselves rather than having someone come over to help them daily or weekly. For example, patients may buy a microwave rather than having someone else prepare meals, or a chair lift to eliminate the need for mobility assistance.

In the states with the longest-running programs (AR, FL, NJ), consumers who used a consumer-directed model of care reported fewer unmet needs and greater satisfaction than consumers who used agency-directed services.3 In Arkansas, 71 percent of 18- to 64-year-old participants in the consumer-directed care model said they were “very satisfied” with their overall care arrangements versus just 42 percent of their counterparts who received agency-directed services.4 Long-term health care recipients are less likely to utilize more expensive services, such as nursing homes and emergency rooms, when they have adequate care provided to them in their homes. The reduction in use of these higher-cost services offsets the cost increases that result when previously uncompensated informal caregivers are paid for their services.5 A program in which “money follows the person” can also cut costs by eliminating administrative overhead costs.

Many states face healthcare workforce shortages. The recruitment and retention of front-line long-term care workers is a particular problem for nursing homes, assisted living facilities, and home care as rising demand outstrips the supply of such workers. The limited supply of agency workers means that many consumers do not receive all of the care they require and to which they are entitled.6 A consumer-directed model addresses this problem by allowing family and friends to provide care—and, unconstrained by business hours, to do so in a more timely fashion. Studies have also shown that some relatives and friends paid as caregivers remain in the field.

States can apply for federal grants to create home care pilot programs that determine whether the Medicaid program saves money by providing intensive at-home care rather than paying for the cost of nursing home care. Seven states (MD, MO, NV, ND, TX, UT, VT) have already established such programs. In 2006, Connecticut passed legislation that authorizes the application to the federal government for money to launch its own program and details how the money would be used.7 Other states have become demonstration states for the Cash and Counseling program operated by The Robert Wood Johnson Foundation. Arkansas, Florida and New Jersey were the original demonstration states, and the program’s success has led to its expansion to 12 other states (AL, IL, IA, KY, MI, MN, NM, PA, RI, VT, WA, WV).