Overview

This paper is one in a series addressing major systems change topic areas in the Systems Change for Community Living Grants Program. It describes the activities of 11 Grantees who received grants in fiscal years 2001 and 2002 and are using them to increase consumer-directed service options. This paper discusses program and policy issues the Grantees have encountered while implementing their consumer-direction initiatives.

The paper's primary purpose is to provide information that states and stakeholders will find useful when planning or implementing consumer-directed initiatives, whether through solely state-funded programs or the Medicaid program. In particular, the paper will highlight program and state and federal policy challenges and how Grantees are addressing them.

Because federal Medicaid policy regarding the provision of consumer-directed services continues to evolve, those interested in developing consumer-directed programs under the Medicaid program should consult the information sources listed at the end of this paper for the most current policy.

As part of President George W. Bush's New Freedom Initiative, Congress provided funds for the Systems Change for Community Living Grants program (hereafter, Systems Change Grant program) in fiscal years (FY) 2001 through 2004. In FY 2001 and 2002, the Centers for Medicare & Medicaid Services (CMS) awarded three types of Systems Change grants: Real Choice, Nursing Facility Transition, and Community-Integrated Personal Assistance Services and Supports (CPASS). CMS specified that the purpose of the CPASS grants was "to support States' efforts to improve personal assistance services that are consumer-directed or offer maximum individual control" and "to develop personal assistance systems that maximize individual choice and control." However, consumer direction initiatives were not limited to CPASS grants. Several Real Choice Grantees are also working on consumer-directed initiatives.

Principles of self-direction and choice are embodied in the service model that has come to be called consumer direction, which is both a philosophy and an orientation to the delivery of home and community services. CMS views consumer direction as a method to operationalize the philosophy of self-determination. In either case, the ultimate goal of consumer direction is to allow consumers to live in the community and retain independence and control over their lives.

States are interested in consumer-directed programs for a number of reasons. First, consumer direction is viewed as a service model that can fill gaps in service delivery and better fit consumers' needs by giving them greater choice and control over their services. Second, because consumer-directed programs provide greater flexibility in hiring workers (e.g., relatives, friends, and neighbors), they have the potential to alleviate worker shortages and may expand the pool of direct care workers. Third, consumer direction is viewed as having the potential to improve the quality of and satisfaction with services. Finally, some believe that consumer-directed programs offer the potential to provide personal assistance services more cost-effectively than agency-directed models due to lower administrative expenses.

Developing and implementing a consumer-directed service option, particularly in a Medicaid State Plan or waiver program, can be a complex undertaking. Statutes, regulations, and program policies may first need to be changed and implementation can bring its own challenges. This report highlights the experience of 11 Grantees undertaking consumer direction initiatives: Colorado, Indiana, Kansas, Maine, New Hampshire, North Carolina, Oklahoma, South Carolina, Washington, West Virginia, and Wisconsin. Their initiatives include the following activities:

conducting reviews to identify statutory and regulatory barriers to consumer-directed programs and taking action to reduce or eliminate them.
implementing a new consumer-directed option in an existing waiver program.
implementing a new consumer-directed waiver program.
implementing pilot or model consumer-directed programs; or developing, implementing, or expanding specific components of consumer-directed programs, such as outreach and training initiatives.

Operational and Policy Issues

Grantees are grappling with a number of operational and policy issues as they plan and implement their consumer-directed service options, including the use of surrogates, budgeting, allowable services, workforce, and quality assurance.

Use of Surrogates

Consumer direction requires participants to take responsibility for a variety of management functions usually performed by agencies. To do so requires the ability and the personal energy to hire, train, direct, schedule, monitor, and, if necessary, discipline and fire staff. Consequently, some people who want to direct their own care may need help doing so due to cognitive impairment or serious illness.

To address this need, some states with consumer-directed service options have provisions enabling persons with cognitive impairment and others who need assistance to participate by designating a representative or other surrogate decision-maker, such as a guardian or a person who has a power of attorney for health care. These provisions however can, in some instances, interfere with family member's ability to provide care.

For example, in New Hampshire, consumers may designate a personal care representative to help them participate in a consumer-directed program, but the state prohibits consumers' guardians and those to whom they have given a power-of-attorney from serving as a representative. Although the prohibition is intended to prevent potential conflicts of interest, many observers believe that it is overly broad and, in some instances, can prevent consumers who need a representative from participating in the program. One possible approach to address this issue would be to allow waivers from the rules on a case-by-case basis.

Budgeting and Reimbursement

A key operational issue for consumer-directed programs is the need to set maximum allowable expenditures for services in an individual budget. In determining the amount of an individualized budget in a 1915(c) waiver program, Medicaid requires states to ensure that the budget (1) meets the consumer's assessed needs and (2) does not exceed institutional costs. Two Grantees raised issues related to individualized budgets that they believed restricted services for waiver participants. The Grantee in New Hampshire had concerns about the adequacy of individualized budgets because the state limits waiver clients' budgets to 50 percent of the average annual cost of a nursing facility, calculated in the aggregate. The Grantee noted that for some persons with disabilities, this amount may be less than needed to live safely in the community. In addition, the state also includes certain one-time expenses—such as assistive technology and home modifications—in the countable expenses, which the Grantee felt limited the funds available for personal care and other essential services.

In Kansas, where the final budget amount determined by the assessment is discounted by 15 percent, the Grantee expressed concerns that the reduced budget may not be sufficient to meet consumers' needs.

Another issue relates to the use of budget savings due to variations in service use. Such variations can occur for a variety of reasons, including the inability to find workers to provide all authorized services. On the other hand, once in control of their services, consumers may use fewer services than initially anticipated in the care plan due to efficient management. States vary in whether the consumer benefits from this efficiency.

In North Carolina, if consumers save money out of their budgeted amount, they are permitted to use the additional amount to purchase items that will reduce their dependency on workers. But in New Hampshire, if an individual uses fewer services than is authorized, then the care plan is adjusted downward, penalizing the efficient client. Although budgets can be adjusted for variations in need, one stakeholder noted that the adjustment does not always occur in a timely manner. This can be a problem if a consumer becomes ill suddenly and needs more services than usual for a limited period.

Clearly, budget variations are to be expected, and states need to have a policy for dealing with them that will both meet consumers' needs and comply with Medicaid requirements. CMS is currently allowing states to test different methods for clients to keep or otherwise control savings from their individual budgets under LIFE Account Systems Change Grants.

States also vary in the extent to which they allow individual consumers to set the payment rates for their workers. Some states set the payment rate while others allow consumers to set the rate within specific limits. Allowing consumers to negotiate an hourly wage with their personal care worker—as North Carolina does—permits them to pay more for weekend or evening work, and to reward good workers they want to retain. However, such flexibility comes at a cost, as paying more reduces the number of service hours that their budget will cover.

Services

An important issue for consumer-directed programs is whether to restrict the services that participants direct, for example, to personal care services. Some states give participants considerable control over the full range of services, allowing them to purchase assistive devices, supplies and home modifications, and other services. By giving consumers control over a broader set of services, the service package can better meet the needs of individual clients.

Another issue involves limitations on where services may be provided. While limitations are most commonly imposed to control costs, they may also prevent an individual from participating in community activities such as social events. For example, West Virginia requires that personal care be provided in the client's home, unless the participant is working or seeking employment.

Limitations on who can provide certain services are also an issue. Some states allow certain services to be provided only by licensed personnel. Although these restrictions are designed to maintain quality, many observers believe they are not necessary, increasing the cost and reducing the potential efficiencies of consumer-directed programs. A closely-related restriction is the requirement in some states that certain services be provided only by agencies. In New Hampshire, for example, state Medicaid regulations require that nursing services be provided through a home health agency even though federal regulations permit the direct hiring of a nurse. The Grantee noted two potential solutions to this problem—amending state rules regarding the hiring of nurses or using individualized budgets in an Independence Plus waiver, which would allow consumers to purchase nursing services directly from a nurse.

Provider Payment in Consumer-Directed Service Models

Medicaid requirements regarding provider payment are complex and can complicate the design of a consumer-directed program. For example, South Carolina has an administrative services contract with an entity called First Data Government Solutions (FDGS), which provides fiscal intermediary services for consumer-directed workers in two of the state's waiver programs. FDGS's fiscal intermediary function is defined as a subunit of the Medicaid Management Information System claims processing system. Thus, every individual or entity from whom the program participant purchases goods or services must be a Medicaid "provider" in the very specific sense that they must each enter into a provider agreement with the Medicaid agency and bill Medicaid directly for their services.

If South Carolina used an organized health care delivery system (OHCDS) as the fiscal intermediary for its Independence Plus waiver, the OHCDS would be considered the provider and would be able to directly pay Wal-Mart and Lowe's home improvement stores for consumer purchases without having them sign provider agreements. However, the OHCDS model may not always be an option.

Workforce

Unlicensed paraprofessional long-term care workers, such as home health aides and personal care attendants, are the backbone of the formal long-term care delivery system, providing the majority of paid assistance to people with disabilities. Shortages of workers are widespread, with potentially negative consequences for access to services and quality of care. The central role of these workers in providing hands-on services makes them the key factor determining the quality of paid care. Workforce issues that state officials are addressing in consumer-directed programs include personnel shortages, the appropriateness of hiring of relatives, establishing backup systems, and personal relationships between clients and workers.

Personnel Shortages

Consumer-directed services are often proposed as a partial solution to the shortage of unlicensed long-term care staff by expanding the pool of direct service workers to include relatives and friends of beneficiaries, and individuals who do not want to work for agencies. All eleven Grantees believe that consumer-directed services can help alleviate the workforce shortage, but some noted it is not a panacea because low pay and lack of benefits continue to contribute to recruitment problems and high turnover rates. The New Hampshire Grantee reported that some consumer-directed clients are not receiving their authorized service hours because there are not enough workers to meet the demand.

While consumer-directed workers tend to receive somewhat higher hourly wages than agency workers, they receive fewer benefits, such as sick or vacation pay, or health insurance. For insurance-based benefits, the number of consumer-directed program participants is not large enough to spread the risk and be cost-effective, so insurance coverage is rare.

Lack of reimbursement for transportation costs is another recruitment barrier. In Kansas, two waiver programs cover transportation for medical appointments but only one of them covers transportation costs for shopping and neither covers transportation costs to a consumer's home or between consumers' homes. The Grantee cited a case where a consumer had no services for three months because workers could not afford the cost of the 60-mile round trip to her home.

Hiring Relatives. Although consumer direction is often conceived as an option that allows individuals to go into the marketplace to hire strangers, most beneficiaries in consumer-directed programs hire relatives or friends to be their care workers. Relatives and friends are familiar, and many consumers are more comfortable with them as providers, especially for highly personal services such as bathing. Relatives and friends are also more likely to provide services that are attuned to what clients want, and there is evidence that relatives are more likely than agency-directed staff to "go the extra mile," providing needed care even if not reimbursed. In South Carolina, for example, paid family members reportedly provide many more hours of care than they can bill for. The South Carolina Grantee noted that based on the experience of the SC Choice waiver program, since November 2004, all of the state's waiver programs have allowed relatives who are not legally responsible to be paid caregivers for personal care services.

Some policy makers have a number of concerns about hiring relatives, including whether paid care substitutes for informal care, whether legally responsible relatives should be eligible for payment under some circumstances, and how the hiring of relatives affects quality assurance. The Cash and Counseling evaluation findings speak directly to all of these issues. First, paying relatives did not substitute paid care for informal care. Generally speaking, program participants continued to receive as many total hours of unpaid care as before. At most, there is a modest respite effect in that the primary informal caregiver at baseline may report providing something on the order of 5 fewer hours of care per week. Where hours of care were reduced, the reduction included both paid and unpaid hours. This finding was unique to younger persons with disabilities; it was also related to reductions in reported unmet need at the same time that care hours declined. One interpretation of this paradoxical finding is that younger disabled people prefer to get their needs met as efficiently as possible and also prefer to substitute technologies and home modifications for reliance on human assistance whenever possible.

On all quality measures, relatives typically outperform strangers, especially agency employees.

Federal Medicaid law prohibits the payment of legally responsible relatives—a spouse or a parent of a minor child—for personal care provided under the State Plan. The purpose of this prohibition is rooted in the notion that spouses and parents of a minor child have an overriding moral and legal responsibility to provide care to disabled immediate relatives even if no payment is provided. Several Grantees cited the need for more flexibility in this policy as a way of addressing the income needs of the low-income population. Hiring spouses and parents of minors often allows these relatives to earn some money when, otherwise, their informal caregiving responsibilities would totally preclude them from employment.

Respondents in West Virginia and New Hampshire noted that the prohibition on paying legally responsible relatives poses major problems for parents who cannot work because they cannot find reliable long-term care workers for their children. Medicaid does allow the payment of legally responsible relatives under the waiver program, but only in very specific circumstances.

Backup Systems. Consumers have identified lack of backup worker coverage as an impediment to community living. Lack of backup coverage when a worker fails to report may mean that a consumer may spend the night in a wheelchair because he or she needs assistance to transfer to bed, go without a meal, or be unable to get dressed to go to work. It may also mean that relatives must take time from work to fill in for the absent worker. In agency-directed care, it is the responsibility of the agency to find a substitute worker, although it may not be able to. In contrast, in consumer-directed programs, this responsibility most commonly falls to individual clients whose service plans must include a backup strategy.

Consumer directed programs should have a system-wide strategy—an emergency backup system—to respond if an individual consumer's backup plan fails. For example, to assure that personal assistance could be provided immediately in the event of an emergency, one of the Cash and Counseling Demonstration sites serving individuals with brain and spinal cord injuries attempted to eliminate any structural barriers, such as waiving a rule that workers be Medicaid-certified if providing emergency backup services. Other approaches could include building in the flexibility to incur costs above the allocated budget if more hours were required or if an agency-based or other higher-paid worker was needed.

Some states are using Systems Change Grants to develop system-wide backup strategies. In New Hampshire, the Grantee conducted focus groups with consumers to identify a number of possible models and is currently implementing and evaluating a model using college students participating in the federal work-study program as backup workers.

Consumer/Attendant Relationships. A few Grantees reported that some consumers are unsure how to cope with the dual role of care recipient and employer, though experience in the Cash and Counseling demonstration found that this was more a theoretical problem than one that actual participants reported. In Indiana, one stakeholder noted that consumers were willing to do the hiring and sign off on time sheets, but did not want to do the more difficult management tasks, such as firing a worker. To address these issues, some stakeholders said that management training and education should be available for consumers who need and want it. Some observers believe that a peer support system for consumers is also desirable to supplement management training and to offer continued support. However, although support groups and face-to-face networking can be beneficial, many people with disabilities have difficulty traveling, so it is important to use alternative approaches for peer support, such as telephone and Internet communications.

Quality Assurance

States, rather than the federal government, are responsible for assuring the quality of Medicaid home and community services. No federal quality assurance requirements exist for Medicaid State Plan personal care services. However, states are required to assure the health and welfare of all waiver participants. In its revised draft HCBS waiver application, CMS requires states to specify how they will monitor and assure quality in their waiver programs.

A major policy issue for consumer-directed programs is determining how services should be monitored and whether service quality is adequate. Compared with agency-directed care, consumer-directed services generally lack the standard quality assurance structures of required training, supervision by professionals, and detailed reporting. In place of these formal quality assurance mechanisms, most consumer-directed programs rely on the ability of clients to fire unsatisfactory workers and to hire replacements to assure quality—in other words, market mechanisms.

Limited quantitative research on cognitively intact individuals and interviews with stakeholders suggest that the quality of consumer-directed services is at least no worse than agency-directed care and may be better because of the ability to make service conform to the preferences of the client. The Grantees highlighted in this report are addressing quality assurance issues primarily through criminal/abuse background checks and training requirements for workers.

Criminal/Abuse Background Checks. One approach to quality assurance in consumer direction is to require criminal and abuse background checks for potential workers. The goal of this screening is to keep persons with a record of misconduct from working as service providers and potentially harming a client.

Views on the use of criminal background checks vary considerably. Some believe they should be mandatory for all workers, including relatives, others contend that they are unnecessary and ineffective, and others that they should be optional. If mandatory, however, two issues must be addressed: (1) whether to exempt family members and, if so, which members; and (2) deciding who will evaluate the results, apply them in the hiring process, and establish a policy to determine which offenses disqualify an applicant.

Of the Grantees highlighted in this paper, New Hampshire, West Virginia, Colorado, North Carolina, Oklahoma, and Indiana require a criminal background check or an abuse registry check, most commonly for both agency and consumer-directed workers. Kansas and South Carolina perform criminal background checks on an optional basis. In most states, the check is only against state rather than national records and a negative finding during a background check does not automatically disqualify a potential worker. Some stakeholders reported that consumers may still want to hire individuals with criminal records.

Training for Consumer-Directed Workers. Although virtually all stakeholders agree that personal care attendants need training, there is disagreement on how formal that training should be. West Virginia requires consumer-directed workers to undergo the same training as traditional agency workers. But advocates for younger people with disabilities argue that most formal training is not useful and that consumers should be responsible for training their workers to meet their specific needs. Many clients say that formal training can be counterproductive if it interferes with responsiveness to what the consumer wants. Some stakeholders are concerned that extensive training requirements will discourage relatives from participating. Several Grantees felt that formal training should be available to those who need it but should be optional for consumers who either want to train the worker themselves or believe that their workers do not need the formal training.

Agencies pay for training out of overhead, but there is no similar source of funding to pay for training for consumer-hired workers, which is one of the major reasons why the overhead costs of consumer direction are lower and, in principle, more of the funding can go to direct services. States need to be aware that when designing a consumer-direction program, building in requirements for training and counseling can result in the same overhead costs that agencies have. CMS policy is that workers should receive the training they need to enable them to safely perform required tasks and that the training should match the specific tasks to be performed.

Conclusions

A major focus of state efforts to change the balance between institutional and non-institutional services is to give consumers more control over the services they receive in their homes and communities. Many states are using their Systems Change grants to develop political support for, and to design and implement programs that give consumers more control over hiring, training, scheduling, supervising, and firing direct care workers. This paper assessed some of the policy issues related to consumer direction by interviewing Systems Change Grantees and their partners in states focusing on these initiatives.

Systems Change Grantees have had to grapple with six major issues. First, consumer-directed services are not embraced by all long-term care stakeholders. Opponents voice concern about the quality of care and potential abuse of participants. In some cases, existing providers worry about loss of revenue and market share. Thus, making the legislative and regulatory changes necessary to implement consumer-directed care often requires the mobilization of supporters and the negotiation of compromises. It also requires detailed knowledge of federal and state statutes and regulations.

Second, some persons with severe disabilities or chronic illnesses or with cognitive impairment may need assistance to self-direct. All states in this study include or plan to include persons with severe disabilities, and most allow persons with cognitive impairment to participate, relying on surrogates to make the decisions for the consumers. Deciding on the legal arrangements for this transfer of authority can be complex because state rules designed to avoid conflicts of interest may preclude appropriate relatives from serving in more than one surrogate role.

Third, at the heart of consumer-directed programs are a number of workforce issues that need to be addressed, including recruiting workers and establishing backup systems. All consumer-directed programs allow the employment of family members as independent workers, and in most cases, consumers choose relatives as the worker. Issues such as management, training, quality assurance, and payment levels may take on a different cast if the independent worker is a family member or friend rather than a stranger.

Fourth, many consumers want to direct their own care, but are intimidated by the complexity of the paperwork needed to actually pay the workers, withhold taxes, and do other tasks necessary to be an employer. Consumers may also be frightened about possibly making mistakes and then being accused of fraud, or having to pay back money they did not know they owed and which they do not have. Consumer mistakes could also lead to financial liability for states.

States have developed a number of different types of organizations to perform the employer functions. Implementing these different approaches has sometimes required legislative changes and involvement of organizations without great familiarity with long-term care services. In other cases, states have mandated that many of these functions be performed by home health agencies, which can limit the extent of consumer direction, especially if the state requires that an agency use its own employees to provide at least one service. Federal Medicaid policies regarding the provider status of the financial management service entities needed to support consumers who want to self-direct are complex. In some instances, the policies may complicate the design and implementation of consumer-directed programs.

Fifth, states must decide how to assure that quality of care is adequate. In theory, consumer-directed care lacks the oversight provided by agencies and the state, although the extent of that oversight is often minimal in agency-directed care. Despite these concerns, the available research literature and interviews with states suggests that the quality of consumer-directed care is at least as good as, if not better than, agency-directed care. States must decide what training they will require, if any, and who can provide it. Many advocates of consumer-directed care oppose state-determined training because they believe that the client is most capable of providing the training. Additionally, there is no real evidence linking training with improved outcomes.

States must also decide what type of quality monitoring system they will develop. In place of more formal quality assurance mechanisms, consumer-directed programs have often relied on clients' ability to fire unsatisfactory workers and hire replacements to ensure quality. The current labor shortage, which makes recruitment difficult for all long-term care services, may threaten the quality of these services by undermining clients' willingness to fire poor quality workers, perhaps increasing the need for more formal quality assurance mechanisms. In most states, many public officials are also implicitly relying on the notion that relatives are more likely than strangers to provide high quality care. CMS's revised draft HCBS waiver application contains new requirements for quality monitoring and assurance that states will need to address when designing consumer-directed programs.

Sixth, almost all states continue to face substantial fiscal problems that threaten funding for long-term care services. While much of the policy interest in consumer-directed care derives from a desire to empower people with disabilities and give them more control over their lives, this approach has also been attractive to some states because of a perceived potential to lower costs. Systems Change Grantees have been cautious in this area, generally aiming at cost neutrality rather than cost savings.

In sum, the notion of consumer-directed care challenges the protective nature of most home and community service programs for people with disabilities by asserting that clients want to manage and are capable of managing their own care. Many Systems Change Grantees are successfully working to increase the options for consumers to do so.

Section 2
Overview of Consumer Direction

People with disabilities of all ages want to live as independently as possible and to have control over their lives.⁵ To do so, they want to be able to choose the services they need to help them with everyday activities and the workers who will provide them. However, people with disabilities who receive publicly-funded LTC benefits traditionally have had little control over their services because are generally provided under an agency-directed service model.

Under this model, once a professional has drawn up a service plan, the agency selects a worker and determines when and how the service will be provided. Some consumers have expressed dissatisfaction with this model, particularly due to high staff turnover that results in lack of continuity of care. Other problems include staff who are unable or unwilling to work when consumers need them, such as evenings and weekends, and workers not having the required skills.

The agency model was first challenged in the 1970s by advocates in the disability rights and independent living movements, who advocated principles of self-direction and choice in public LTC programs, particularly those that served younger persons with disabilities.⁶ A service model based on these principles has come to be called consumer direction, which is both "a philosophy and an orientation to the delivery of home and community services, whereby informed consumers make choices about the services they receive."⁷ Others—including CMS—view consumer direction as a method to operationalize the philosophy of self-determination. In either case, the ultimate goal of consumer direction is to allow consumers to live in the community and retain independence and control over their lives.

States are interested in consumer-directed programs for a number of reasons. First, consumer direction is viewed as a service model that can fill gaps in service delivery and better fit consumers' needs by giving them greater choice and control over their services.⁸ Second, because consumer-directed programs provide greater flexibility in hiring workers (e.g., relatives, friends, and neighbors), they have the potential to alleviate worker shortages and may expand the pool of direct care workers. Third, consumer direction is viewed as having the potential to improve the quality of and satisfaction with services. Finally, some believe that consumer-directed programs offer the potential to provide personal assistance services more cost-effectively than agency-directed models due to lower administrative expenses.

Consumer responsibilities vary under different consumer-directed models, and states may use more than one model in different programs. The type of model depends in large part on parameters set by the funding source. States have the greatest flexibility to design a program when implementing consumer direction in solely state-funded programs. However, under Medicaid, the authority under which the program is offered—1915(c) waiver, 1115 waiver, or the State Plan—determines program parameters. (See Exhibit 1.) Additional information about providing consumer-directed services under the three authorities can be found in Appendix A.)

In some programs, consumers are allocated a set number of hours for specific services. In others, they have an individualized budget that allows them to use their funds not only to pay for services, but to make home modifications or purchase assistive devices that reduce their reliance on paid help. The model that provides the most choice and flexibility is one in which consumers have a flexible allowance or budget to purchase a wide range of services and receive counseling to assist them in administering and managing their services. Under the Medicaid State Plan, personal care is the only consumer-directed service provided, whereas under a waiver, states have the option to cover a wide range of services.⁹

To address the heterogeneity of consumer needs and preferences, consumer-directed programs also vary in how they are administered.¹⁰ In a majority of programs, consumer-directed aides are considered to be domestic employees of the program participants who hire them. In many states, defining workers as domestic employees is legally important because domestic employees are exempt from state Nurse Practice Act regulations on training, certification, and nurse supervision, which otherwise apply to unlicensed medical personnel.

However, as the employer, the program participant also becomes legally responsible for carrying out an employer's payroll tax obligations (e.g., income tax withholding, social security and unemployment taxes). Although a few programs allow or require consumers to handle all payroll and administrative management tasks themselves, the more common model is to designate an "employer agent" (often called a fiscal intermediary or financial management service) to pay the worker and to file applicable taxes. The employer agent may be a state agency or a private organization that serves either as an administrative arm of the state or a Medicaid service provider.

In some programs, private organizations that provide financial management or other services to facilitate consumer direction assume the legal status of employer of consumer-directed workers. This is often referred to as the "agency with choice" model or as a form of co-employment because program participants continue to serve as the managing employer—that is, they hire, fire, train, and supervise their individual attendants.

An organization serving as an agency with choice must be willing to take on the legal responsibilities of an employer without, however, exercising the traditional prerogatives of an employer. For this reason, many private organizations are more comfortable serving as program participants' employer agents. On the other hand, some Independent Living Centers and other disability advocacy organizations prefer the agency with choice model.¹¹

**Exhibit 1. Parameters for Consumer-Directed Programs Under Three Medicaid Authorities**
Issue	State Plan	Section 1915(c) HCBS Waiver Authority	Section 1115 Demonstration Authority
Requirements that may be waived	None, except in targeted case management (TCM). In TCM, requirements for statewideness and comparability may be waived; state may also limit who can provide TCM to persons with mental retardation/ developmental disability (MR/DD) and persons with mental illness.	Statewideness; comparability of services; and community income and resource rules for the medically needy.	The Secretary may waive provisions of Section 1902 of the Social Security Act, if it is likely to assist in promoting the objectives of the Medicaid program. (Relatively few Section 1902 provisions may be waived.)
Cash allowance	No.	Participant does NOT manage the cash allowance directly.	Participant MAY manage the cash allowance directly.
Hiring legally responsible individuals (spouse, parents of minor children, legal guardians)	Prohibited under personal care.	Participant may hire legally responsible individuals when certain requirements are met.	Participant may hire legally responsible individuals when certain requirements are met.
Provider agreements	Required.	Required. State may allow another agency or provider to act as its agent in overseeing and maintaining provider agreement.	Not required.
Direct payment to providers	Required.	Required. States have multiple options to meet this mandate.	Not required.
Payment for services (FFS model)	Payment generally occurs after service delivery.	Reimbursement generally occurs after service delivery.	Funds available prior to service delivery.
Level of care eligibility requirements	No institutional level of care requirement. Services provided on basis of medical necessity.	ONLY Individuals meeting the waiver's targeting criteria (including institutional level of care) may be eligible.	No institutional level of care requirement. Services provided on basis of medical necessity.
Combining populations	Mandatory. Services (other than TCM) may not be targeted, but must be available on basis of medical necessity.	Combining populations is LIMITED TO aged/disabled mentally retarded or developmentally disabled mentally ill any subgroup of the above.	Generally, states MAY combine populations or include new or expanded populations.
Review process	Application/Amendment MUST be approved by CMS.	Application/amendment MUST be approved by CMS.	Application/amendment MUST be approved by CMS and an External Federal Review Team. CMS conducts a readiness review site visit.
Length of approval	Not time-limited (unless the state itself establishes a 'sunset' clause in its amendment.	Waivers are approved for 3 years and renewed in 5-year increments.	Demonstrations are approved for 5 years and generally renewed in 3-year increments.
Financial reporting	There are no cost or budget neutrality criteria.	Waiver must be COST NEUTRAL (waiver costs compared to institutional costs).	Demonstration must be BUDGET NEUTRAL over the life of the project, and may cost no more than what CMS would have paid without the demonstration.
Program evaluation	Not required.	NOT required, but States must report annually on the health and welfare of waiver participants.	Generally required.

Typically, the fiscal intermediary organization (whether its legal status is that of employer agent or agency with choice) also performs other ancillary functions that support or facilitate consumer direction. These functions may include processing criminal background checks on prospective consumer-hired aides, offering training classes to program participants on how to recruit and manage attendants, arranging workers' compensation or health insurance coverage for consumer-directed workers, and maintaining registries or job banks so that individuals in search of jobs as personal care aides can advertise their availability for hire.

However, in some programs fiscal tasks—as distinct from supportive intermediary tasks—are performed by different organizations. For example, in California, the county-based public authorities are expanding their involvement in providing supportive intermediary functions, but the state's Medicaid claims processing contractor continues to process payroll and perform all tax-related employer agent functions.

There is no one right approach to the design of fiscal and supportive intermediary services that will work for all states. States need to adopt the model that is most compatible with their existing Medicaid infrastructure as well as other state laws and regulations. CMS has recognized the need for flexibility in its new draft waiver application template, which allows states multiple options for offering these services. The new draft waiver application (1) clearly delineate CMS's expectations regarding self direction in waiver programs; and (2) allows state's to more easily incorporate self-direction in all HCBS programs, allowing a continuum of self-direction options. Once final, the application will be made widely available and will be web-based, thereby easing submission of waiver applications.¹²

States' Consumer-Directed Programs

The consumer-direction concept has been adopted by most states in at least one program. In October 2001, 49 states served 486,000 people in 139 programs that afforded some level of consumer direction. Over half of those served were in California's In-Home Support Services Program.¹³ Sixty-five percent of the programs relied in whole or in part on Medicaid funding; the remainder used a combination of state general revenues and federal block grants.

Several states—for example, California, Colorado, Michigan, Oregon, Wisconsin, and Washington—have been offering some form of consumer-directed services for many years. The Robert Wood Johnson Foundation (RWJF) and the Office of the Assistant Secretary for Planning and Evaluation (OASPE) jointly funded models of consumer direction with the Cash and Counseling Demonstrations in New Jersey, Arkansas, and Florida. The RWJF, OASPE and the Administration on Aging (AoA) are currently funding a new round of Cash and Counseling grants, which have been awarded to 11 states—Alabama, Iowa, Kentucky, Michigan, Minnesota, New Mexico, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia. The Retirement Research Fund has also funded Illinois to develop a cash and counseling option.

Focus of 11 Grantees' Initiatives

The 11 Systems Change Grantees' initiatives, which are the subject of this study, include

conducting reviews to identify statutory and regulatory barriers to consumer-directed programs and taking action to reduce or eliminate them.
implementing a new consumer-directed option in an existing waiver program.
implementing a new consumer-directed waiver program.
implementing pilot or model consumer-directed programs; or developing, implementing, or expanding specific components of consumer-directed programs, such as outreach and training initiatives.

An overview of the consumer direction initiatives undertaken by the 11 Grantees is presented in Exhibit 2. More detailed information about their initiatives is provided in Section 3 of this paper.¹⁴

Reasons for Undertaking CD Initiatives

All of the Grantees cited the desire to move away from a provider-focused system to a consumer-driven system as a major reason for undertaking their initiatives, viewing consumer direction as a means to increase consumers' independence and thereby enrich their lives. They also believed that consumer direction has the potential to improve the quality of services, and thereby, consumer satisfaction. In the words of one consumer, "when you have more control over your life, you have higher self-esteem and feel more self-worth."

Grant staff in several states noted that consumers themselves were driving the change. In Indiana, for example, a group of consumers who were interested in directing their own care became very strong vocal advocates and played a key role in the development of state legislation mandating the availability of a consumer-directed option. Care managers who were unable to meet clients' service needs due to workforce shortages also advocated for consumer-directed options.

All of the Grantees viewed consumer-directed services as a means to address workforce shortages, particularly in rural areas, where poor roads and the need to travel long distances were a major barrier to finding workers. Kansas grant staff noted that long travel distances were an issue not just because workers were not paid for their time when driving, but because some programs did not reimburse workers for mileage. In West Virginia, one respondent noted that the state has been experiencing a population decline for several decades, with the young leaving for better jobs, and the old staying behind with few to take care of them.

**Exhibit 2. Eleven Grantees' Consumer-Directed Initiatives**
Grantee	Initiatives
Colorado CPASS FY 2002	Assist in implementation of a consumer-directed option in an existing waiver program and of a new consumer-directed Medicaid waiver program. Conduct outreach, education, and training for new consumer-directed programs. Evaluate a research and demonstration consumer-directed waiver program.
Indiana CPASS FY 2002	Design and implement a pilot consumer-directed program in existing waiver.
Kansas CPASS FY 2002	Review and revise regulations and policy to allow maximum consumer direction in the state's MR/DD program. Design and implement a pilot consumer-directed program for persons with developmental disabilities.
Maine Real Choice FY 2001	Review policies and procedures to identify and address barriers to consumer direction. Develop intermediary service organization (fiscal/employer agents). Amend Medicaid State Plan and waiver programs to include intermediary service organization.
New Hampshire CPASS FY 2001	Implement a new consumer-directed option in existing waiver program.
North Carolina Real Choice FY 2001	Design and implement a pilot consumer-directed program in a new Independence Plus waiver program.
Oklahoma CPASS FY 2001	Design, implement, and evaluate a consumer-directed option for the existing waiver program.
South Carolina Real Choice FY 2001	Design, implement, and evaluate a pilot consumer-directed program in the new Independence Plus waiver program.
Washington Real Choice FY 2002	Develop training and educational materials about self-direction. Support consumer-directed payment options by developing a combined assessment and payment tool based on time and motion studies, as well as consumer input about the amount of time needed to perform care tasks.
West Virginia CPASS FY 2002	Design, implement, and evaluate a consumer-directed option for the existing waiver program.
Wisconsin Real Choice FY 2002	Study consumer-directed options and assess the feasibility of implementing those options. Review and revise regulations and policy to allow maximum consumer direction in each of the state's LTC programs. Analyze fiscal intermediary models to support self-direction.

Indiana noted that in many areas, traditional agencies are having a difficult time maintaining adequate staffing levels to meet the range of needs of individuals who require assistance to remain in their homes, particularly for individuals with severe impairments. They believe that relatives, neighbors, and friends will be able to increase the number of hours they provide care if they are paid. However, South Carolina said that neither cost nor workforce issues were driving their initiative and noted that only certain geographic areas in the state had workforce shortages.

Although a few Grantees mentioned cost-containment as a goal, it was not the primary goal. Many of the Grantees noted that they expected consumer-directed services to be cost neutral (i.e., that they would not cost more than agency services). Colorado and Indiana said that overhead costs for the fiscal intermediary and other services to support the consumer-directed program balance out agencies' administrative costs.

However, several Grantees noted that if consumer-directed services prevented institutionalization, they might result in cost savings for the state. For example, persons with a high level of need who cannot find workers are more likely to enter a nursing home.

A study conducted by the South Carolina School of Public Health (SCSPH) found that a major factor precipitating institutionalization for people with dementia was the inability to get help when caregivers needed it—as respite, as backup, on weekends—particularly in rural areas. The SCSPH recommended that the state implement a consumer-directed program because it could help to prevent institutionalization.¹⁵

Section 3
Program Challenges and Policy Issues

Developing and implementing a consumer-directed service option in a Medicaid State Plan or waiver program can be a complex undertaking.¹⁶ Statutes, regulations, and program policies may need to be changed before the new approach is implemented, and implementation can bring its own challenges. This section highlights some of the operational and policy issues with which Grantees are grappling as they plan and implement their consumer-directed service options, including the use of surrogates, budgeting, allowable services, workforce, and quality assurance.

Use of Surrogates

Many states with consumer-directed service options have provisions enabling persons with cognitive impairment and others who need assistance to participate by designating a representative or other surrogate decision-maker, such as a guardian or a person who has a power of attorney for health care. In North Carolina, a paid relative cannot be a care representative or a surrogate decision-maker, leaving the overall supervision of the services in the hands of others.

In New Hampshire, consumers may designate a representative to help them participate in a consumer-directed program, but the state prohibits anybody who serves in a guardianship or power-of-attorney capacity from being a representative. Similarly, a representative cannot also be a personal care worker. Although the prohibition is intended to prevent potential conflicts of interest, many observers believe that it is overly broad and, in some instances, can prevent an individual from participating in the program.

For example, an adult daughter who is her mother's guardian is not allowed to be a personal care representative or to be a paid worker, even though her mother does not want anyone else to perform these roles. One possible approach to addressing this issue would be to allow waivers from the rules on a case-by-case basis. Such an approach would provide flexibility to address situations where only one relative or friend is available to assist a consumer and needs to assume multiple roles.

Budgeting and Reimbursement

A key operational issue for consumer-directed programs is the establishment of an individual budget with maximum allowable expenditures for services. Box 2 presents basic Medicaid policy regarding the establishment of individualized budgets.

Box 2. Basic Medicaid Provisions Relevant to Individualized Budgets

While not specific to consumer direction, federal law requires that the average expenditures for Medicaid 1915(c) waiver participants must be the same as or less than they would have been without the waiver.¹⁷ As a practical matter, this usually means that average expenditures must be equal to or less than the average Medicaid cost of care in a nursing facility or intermediate facility for the mentally retarded.
States may set budget limits or caps that are less than institutional cost levels. However, the state must demonstrate how it will ensure the health and welfare of participants within the limit, particularly when participants reach or exceed their limit. Potential solutions to fixed limits include prior authorization for budget adjustments.
States may set coverage limits for particular services, for example, on the monthly hours of personal care provided under the waiver program.

See Appendix A for additional information.

In determining the amount of an individualized budget in a 1915(c) waiver program, states must ensure that the budget (1) meets the consumer's assessed needs and (2) does not exceed institutional costs. Two Grantees raised issues related to determining budget amounts, which they believed restricted services for waiver participants. The Grantee in New Hampshire noted that the state limits waiver clients' budgets to 50 percent of the average annual cost of a nursing facility, calculated in the aggregate, which for some persons with disabilities may be less than they need to live safely in the community. This Grantee also expressed concerns about the adequacy of individual budgets, because the state includes certain one-time expenses—such as assistive technology and home modifications—in the countable expenses, limiting the funds available for personal care and other essential services.

The Grantee in Kansas noted that the final budget amount determined by the assessment is discounted by 15 percent, based on the assumption that waiver participants typically do not use all of their authorized service hours. One rationale for doing this was the need for the state to maintain a pool of funds to respond to crises or to meet the needs of consumers with extraordinary service needs. Another rationale mentioned was that consumers would willingly accept a reduced budget in exchange for greater freedom in planning and greater dignity in directly controlling a portion of their budget. But the Grantee expressed concerns that even if consumers are willing accept a reduced budget, it may not be sufficient to meet their needs.

Another issue relates to the use of budget savings due to variations in service use. Such variations can occur for a variety of reasons, for example, a consumer may not have been able to find workers to provide all of the authorized services. On the other hand, once in control of their services, consumers may use fewer services than initially anticipated in the care plan due to efficient management. States vary in whether the consumer benefits from this efficiency.

In New Hampshire, if an individual uses fewer services than is authorized, then the care plan is adjusted downward, penalizing the efficient client. Although budgets can be adjusted for variations in need, one stakeholder noted that the adjustment does not always occur in a timely manner. This can be a problem if a consumer becomes ill suddenly and needs more services than usual for a limited period.

States also vary in the extent to which they allow individual consumers to set the payment rates for their workers. Some states set the payment rate while others allow consumers to set the rate within specific limits (e.g., they must pay at least the federal minimum wage and cannot pay more than a state-specified amount). North Carolina reported that consumers in their program are permitted to negotiate an hourly wage with their personal care worker within a range established by the county waiver agent. To a limited extent, this allows the beneficiary to pay more for weekend or evening work, and to reward workers who they want to retain because they are doing a good job. However, such flexibility comes at a cost, as paying more will reduce the number of service hours that their budget will cover.

Services

When establishing a consumer-directed program, states must decide how much flexibility consumers will have to determine how services are used. Most Grantees thought that maximum flexibility with oversight was the best approach. However, an agency registered nurse (RN) expressed concerns that consumer direction could lead to consumers getting what they want but not what they need (e.g., paying for a personal assistant to take them to the movies rather than for adequate assistance with hygiene). It is important to note that interpretations regarding "wants" and "needs" may vary, and issues that arise regarding different views are best negotiated through a person-centered planning process that is designed to level the playing field among consumer, providers, and payers.

A related issue for consumer-directed programs is whether to restrict the services that participants direct, for example, to personal care services. Some states give participants considerable control over the full range of services, allowing them to purchase assistive devices, supplies and home modifications, and other services.¹⁹ By giving consumers control over a broader set of services, the service package can better meet the needs of individual clients. Allowing consumers to purchase labor-saving appliances such as washing machines can also save a considerable amount of money in personal assistance costs over the long term.

Limitations on who can provide certain services are also an issue. There are some services that state rules and regulations allow to be provided only by licensed personnel. Although these restrictions are designed to maintain quality, many observers believe they are not necessary, increasing the cost and reducing the potential efficiencies of consumer-directed programs. A stakeholder in Colorado noted that state requirements for RNs and certified nursing assistants (CNAs) to perform certain tasks limits consumers' control and restricts their hiring options. This individual felt that removing the RN and CNA requirements would increase the size of the available workforce, and enable a major expansion of the consumer-directed program.

A closely-related restriction is the requirement in some states that certain services be provided only by agencies. In New Hampshire, for example, state Medicaid regulations require that nursing services be provided through a home health agency. Waiver participants receiving consumer-directed personal assistance services who need intermittent nursing services must receive them from agencies, even though federal regulations permit the direct hiring of a nurse. The Grantee noted two potential solutions to this problem—amending state rules regarding the hiring of nurses or using individualized budgets in an Independence Plus waiver, which would allow consumers to purchase nursing services directly from a nurse.

The ability to hire nurses directly is particularly important for individuals with serious medical conditions and families who have children with life-threatening conditions. Families may feel more comfortable leaving their child with a nurse with whom they are familiar and who has a lot of experience taking care of their child, rather than relying on an agency that cannot guarantee that it will send the same nurse every time. Additionally, hiring nurses directly as independent contractors will cost less than agency-provided nursing services, leaving the family with more funds to purchase services or other needed items.

Provider Payment in Consumer-Directed Service Models

Medicaid requirements regarding provider payment are complex and can complicate the design and operation of a consumer-directed program. (Box 3 presents basic Medicaid provisions regarding provider payments.)

For example, South Carolina uses the fiscal agency approach to provider payment thorough an administrative services contract with an entity called First Data Government Solutions (FDGS). FDGS provides fiscal intermediary (i.e., payroll) services for consumer-directed workers in the South Carolina Choice waiver program and the Independence Plus waiver program being piloted under the state's Real Choice grant.²⁰ Because FDGS' fiscal intermediary function is defined as a subunit of the Medicaid Management Information System claims processing system, every individual or entity from whom the program participant purchases goods or services must be a Medicaid "provider" in the very specific sense that they must each enter into a provider agreement with the Medicaid agency and bill Medicaid directly for their services. Workers submit timesheets and other entities submit invoices, which are regarded as a Medicaid claim being submitted to the Medicaid claims processing contractor.

The provider agreement requirement proved to be a problem when consumers wanted to purchase goods such as a washing machine or goods such as incontinence supplies from nontraditional "providers" such as Wal-Mart and Lowe's home improvement stores. These stores, who were not familiar with Medicaid provider agreements, were reluctant to sign them without legal review and approval from their corporate offices. In some instances, approval took so long that the item the consumer wanted to purchase was no longer on sale when it came through. In other instances, these types of providers did not want to comply with Medicaid requirements to keep "service" records for 3 years. To address the reluctance to sign Medicaid provider agreements, South Carolina asked CMS to simplify the provider agreement. CMS agreed to changes in the language in the agreement so that it looked more like an agreement than a contract, but did not agree to remove the record-keeping requirement. For more detailed information about this issue, see the description of South Carolina's grant initiative in Section 4 of this report.

Box 3. Basic Medicaid Provisions Regarding Payment of Providers

To qualify for Medicaid payment, an individual or entity must meet the state's minimum qualifications for provision of a service covered in the State Plan or waiver. Medicaid law requires free choice of providers, provider agreements, and direct payment by the Medicaid agency to the provider of services. However, these requirements do not prohibit a state from paying for subcontracted services in all cases. Nor do they necessarily prevent a state from using an intermediate entity in paying for waiver services. There are several methods that states can use to meet requirements for free choice, provider agreements, and direct payment.

Traditional payment method. Each provider furnishes the service directly. The provider may be an individual, a partnership, an agency, an organization that furnishes services using its own employees, or an arm of county or state government. Each provider must meet the state's qualifications for service provision (as set forth in the plan or waiver) and have a provider agreement with the Medicaid agency. (Other entities such as case managers, Area Agencies on Aging, or Departments of Developmental Disabilities may be cosignatories to this agreement.) Medicaid either pays the provider directly, using its own staff and computer systems, or uses a fiscal agent that meets all federal requirements for a fiscal agency. When a fiscal agent is used, all Medicaid Management Information System (MMIS) requirements must also be met. Medicaid is free to structure payment procedures that enable the individual to confirm a provider's bills and "trigger" Medicaid payment to the provider.

Reassignment to a government entity. Under a reassignment arrangement, providers may voluntarily assign their rights to Medicaid payments to a governmental entity (e.g., state Aging Agency), and Medicaid payments are made to this agency. Under a separate agreement, the governmental unit to which Medicaid payment has been assigned agrees to pay the provider for services furnished under a 1915(c) waiver or the state plan.

Often the governmental unit involved is also employed by the Medicaid agency to assist in the fiscal and programmatic oversight of the waiver program. For example, the governmental unit may be employed by Medicaid to compare the provider's bills to the individuals' plans of care to determine whether services billed were the same as services authorized in the plans.

Even if reassignment is the preferred reimbursement methodology, the state must make provision for direct payment of claims submitted by providers who do not choose to reassign their rights. Multiple reassignments are possible (e.g., provider reassigns to the county mental retardation agency, which reassigns to the state mental retardation agency). However, each entity to which reassignment is made must be an agency of state or local government.

Fiscal agency. When reassignment is not possible because the intermediate entity is not a governmental agency, or when a state agency other than Medicaid is to perform the actual processing of provider claims, a fiscal agency contract may be useful. In this situation, Medicaid, acting through contract or interagency agreement, designates a separate agency or entity as a fiscal agent. The state may also put into place a system whereby the fiscal agent pays claims at the behest of consumers who employ or supervise their providers. The provider of services must have a provider agreement with the Medicaid agency. This may be a multiparty agreement (three or more participants, often including Medicaid, the state or other agency operating the waiver on a day-to-day basis, the provider, and in some consumer-directed arrangements, the consumer), so long as the Medicaid provider agreement wording is included. The limited fiscal agent may, if necessary, contract with another agency for the performance of part of its work (e.g., the actual printing of checks). All contractors and subcontractors must meet the requirements of federal contracting rules pertaining to Medicaid contracts.

Under this system, the provider submits bills, which are then paid by this intermediate agency or entity, acting as a part of the state's MMIS system. If there is no MMIS in use, there can be no fiscal agent. However, since the operation of a fiscal agent—including a fiscal agent whose activity is limited to payment of home and community based services (HCBS) waiver claims—is actually a "subsystem" of the MMIS, federal financial participation (FFP) may be available at the 75 percent rate. If upgrades are necessary to enable the limited fiscal agent's computer system to be brought online with the rest of the state's MMIS system, FFP may be available at the 90 percent rate for these upgrades, if they are found necessary (in advance) by the Regional Office. States considering this option should work closely with their Regional Offices to ensure agreement on the nature and extent of the computer upgrades to be installed.

Organized health care delivery systems.²¹ An organized health care delivery system (OHCDS) is a provider under the state's Medicaid plan or waiver. To function as an OHCDS, the entity must be a system that is organized for the purpose of delivering health care. To meet this test, the entity must furnish at least one Medicaid-covered waiver or State Plan service with its own employees. In the case of an entity that furnishes more than one service directly, those individuals who actually furnish each service must meet the state's minimum qualifications for its provision. Services may be furnished under the auspices of an OHCDS when they are furnished by individuals who meet the state's provider qualifications.

However, an OHCDS is not limited to furnishing services through its own employees. So long as the entity continues to furnish at least one service itself, it may contract with other qualified providers to furnish Medicaid-covered services. A state that chooses to use OHCDSs may not require that a provider be a part of such a system. The state must preserve a method by which providers may contract directly with the Medicaid agency to furnish services under the State Plan or the waiver.

Because it is the system itself that acts as a Medicaid provider, it is not necessary for each subcontractor of an organized health care delivery system to sign a provider agreement with the Medicaid agency. This feature of an OHCDS can be very useful for consumer-directed programs, particularly for infrequent purchases from nontraditional providers, e.g., incontinence supplies purchased from Wal-Mart. The OHCDS is responsible for ensuring that services it furnishes are provided in accordance with Medicaid law and regulations—including the minimum educational/professional standards for service provision.

See Appendix A for additional information.

If South Carolina had used an organized health care delivery system (OHCDS) as the fiscal intermediary for its Independence Plus waiver, the OHCDS would be considered the provider and would be able to directly pay Wal-Mart and Lowe's home improvement stores for consumer purchases without having them sign provider agreements. However, the OHCDS model is not an option in all circumstances.

For example, an independent living center (ILC) may want to be a fiscal intermediary and counseling agency but subcontract with an accountant to do fiscal intermediary activities and subcontract with a network of counselors around the state, including people working for other entities such as Area Agencies on Aging for a percentage of their time. Even though the ILC would be accountable for keeping records and assuring that payments are made for services delivered, it would not meet CMS requirements that OHCDS providers use their own employees to provide at least one service.

Workforce

Unlicensed paraprofessional long-term care workers, such as home health aides and personal care attendants, are the backbone of the formal long-term care delivery system, providing the majority of paid assistance to people with disabilities.²² Shortages of workers are widespread, with potentially negative consequences for access to services and quality of care. The central role of these workers in providing hands-on services makes them the key factor determining the quality of paid care. Workforce issues that state officials are addressing in consumer-directed programs include shortages of personnel, the appropriateness of hiring of relatives, establishing backup systems, and personal relationships between clients and workers.

Personnel Shortages

By expanding the pool of direct service workers to include relatives and friends of beneficiaries and persons who do not want to work for agencies, consumer-directed services are often proposed as a partial solution to the shortage of unlicensed long-term care staff.²³ Indeed, all 11 Grantees believe that consumer-directed services can help alleviate the workforce shortage. It is not a panacea, however. For example, New Hampshire reported that some consumer-directed clients are not receiving their authorized service hours because there are not enough workers to meet the demand. Low pay and lack of benefits continue to contribute to recruitment problems and high turnover rates. In that state, consumer-directed workers tend to receive somewhat higher hourly wages than agency workers, but receive fewer fringe benefits, such as sick or vacation pay, health insurance, or tuition reimbursement. For insurance-based benefits, the number of consumer-directed program participants is not large enough to spread the risk and be cost-effective, so insurance coverage is rare.

An added complexity for workers is that payment policies and benefit coverage may vary across HCBS waivers. For example, in Kansas, an attendant may work in three programs, each with different rules about travel expense reimbursement. Both the Frail Elderly and the Developmental Disability waiver programs cover transportation for medical appointments; the Frail Elderly waiver program covers transportation costs for shopping; but neither covers transportation costs to a consumer's home or between consumers' homes. Grant staff cited a case where a consumer went without services for 3 months because personal attendants could not afford the cost of the 60-mile round trip to the person's home.

Hiring Relatives

Although consumer direction is often conceived as an option that allows consumers go into the marketplace to hire strangers, most beneficiaries in consumer-directed programs hire relatives or friends to be their care workers.²⁴ Relatives and friends are familiar, and many consumers are more comfortable with them as providers, especially for highly personal services such as bathing. Relatives and friends are also more likely to provide services that are attuned to what clients want, and there is evidence that relatives are more likely than agency-directed staff to "go the extra mile" and provide needed care even if it is not reimbursed.²⁵ In South Carolina, for example, paid family members reportedly provide many more hours of care than they can bill for. The South Carolina Grantee noted that based on the experience of the SC Choice waiver program, all of the state's waiver programs have allowed relatives who are not legally responsible to be paid caregivers for personal care services since November 2004

On all quality measures, relatives typically outperform strangers, especially agency employees.²⁷ Hiring spouses and parents of minors often allows these relatives to earn some money when, otherwise, their informal caregiving responsibilities would totally preclude them from employment. These responsibilities have been found to be one of the reasons why states have found it difficult to remove some mothers from the Temporary Assistance for Needy Families (TANF) program; many have disabled spouses or children whose needs conflict with outside employment.²⁸

Some observers have suggested that consumer-directed programs are largely mechanisms to support informal caregivers,²⁹ and some policymakers fear that reimbursing relatives will result in paying for services already provided for free and may result in "monetizing" the relationship between relatives. (To limit this problem, states typically pay for services only to meet clients' unmet needs, i.e., needs that informal caregivers cannot meet.) However, the vast majority of people with disabilities receive unpaid care from family and friends. ³⁰ If relatives provided care only when they were paid to do so, the costs would dwarf all current public and private spending for long-term care.³¹

Federal Medicaid law prohibits the payment of legally responsible relatives—a spouse or a parent of a minor child—for personal care provided under the State Plan. The purpose of this prohibition is rooted in the notion that spouses and parents of a minor child have an overriding moral and legal responsibility to provide care to disabled immediate relatives even if no payment is provided. Several Grantees cited the need for more flexibility in this policy as a way of addressing the income needs of the low-income population. Respondents in West Virginia and New Hampshire noted that the prohibition on paying legally responsible relatives poses major problems for parents who cannot work because they cannot find reliable long-term care workers for their children.

Medicaid does allow the payment of legally responsible relatives under the waiver program, but only in very specific circumstances. For an example of how Minnesota set specific limits on the payment of legally responsible relatives, see Box 4.

Although hiring relatives has advantages, one of the concerns of policymakers and, especially advocates for younger persons with disabilities, is that consumers may find it difficult to supervise and discipline a relative. Starkly put, it may be difficult to fire your daughter if she is doing a poor job. States have developed a number of strategies to try to address this issue.

The Grantee in Maine noted that family members are sometimes agency employees for payment purposes, which gives the agencies a formal role in supervising the family member. However, some agencies are uncomfortable with this arrangement because their supervisory authority for family members is less than that for regular employees, which raises concerns about their liability. In South Carolina, the care advisor makes face-to-face visits with the consumer partly to help address any problems that may be occurring between the worker and the consumer. The program's training guide provides guidance on how to deal with such interpersonal problems.

Box 4. Minnesota Waiver Requirements for Hiring Legally Responsible Relatives

For a legally responsible individual to be paid under a 1915(c) waiver (i.e., biological and adoptive parents of participants under 18 and spouses of adult recipients), the personal care service or support must meet all of the following authorization criteria and monitoring provisions.

Services and supports must

meet the definition of a service/support as outlined in the federally approved waiver plan.
be a service/support that is specified in the individual plan of care.
be provided by a parent or spouse who meets the provider qualifications and training standards specified in the waiver for that service.
be paid at a rate that does not exceed that which would otherwise be paid to a provider of a similar service and does not exceed what is allowed by the department for the payment of personal care attendant services.
not be an activity that the family would ordinarily perform or is responsible to perform.

The family member who is a service provider must comply with the following requirements:

A parent or parents in combination, or a spouse, may not provide more than 40 hours of paid services in a 7-day period. For parents, 40 hours is the total amount regardless of the number of children who receive services under the waiver.
Planned work schedules must be available 2 weeks in advance, and variations to the schedule must be noted and supplied to the fiscal agent when billing.
The family member must maintain and submit time sheets and other required documentation for hours paid.
Married individuals must be offered a choice of providers. If they choose a spouse as their care provider, it must be documented in the community support plan.

Monitoring requirements. In addition to case management, monitoring, and reporting activities required for all waiver services, the state is obligated to the following additional requirements when consumers elect to use legally responsible family members as paid service providers:

At least quarterly reviews of expenditures, and the health, safety, and welfare of the participant.
Face-to-face visits with the participant on at least a semiannual basis.
Monthly reviews by the fiscal agent of hours billed for family-provided care and the total amounts billed for all goods and services during the month.

For both adult and child waiver participants, the state has monitoring protocols to address the potential conflict of interest when enrollees' decision makers hire themselves to provide a waiver service.

Source: Amendments to Minnesota's HCBS 1915(c) Medicaid waivers, approved by CMS in March 2004.

Some analysts believe that it may not be as difficult to fire a relative as it is to fire a stranger; there is anecdotal evidence that consumers do fire relatives and actually feel more comfortable doing so then they would with non-relatives. Non-relatives could be unpredictable and get angry, which could be frightening for the consumer. If a consumer is too frightened of a relative to fire them, this is likely to be an issue that will need case manager involvement to assure that the consumer receives the care they need and are not being abused.³²

Some advocates for younger people with disabilities are concerned that hiring relatives can interfere with true independence; but others believe that the consumer should be able to make that decision.

Backup Systems

Consumers have identified lack of backup worker coverage as an impediment to community living. Lack of backup coverage when a worker fails to report may mean that a consumer may spend the night in a wheelchair because he or she needs assistance to transfer to bed, go without a meal, or be unable to get dressed to go to work. It may also mean that relatives must take time from work to fill in for the absent worker. In agency-directed care, it is the responsibility of the agency to find a substitute worker, although it may not be able to. In contrast, in consumer-directed care, this responsibility most commonly falls to individual clients who must have a backup strategy included in their service plans.

Consumer directed programs should have a system-wide strategy—an emergency backup system—to respond if an individual consumer's backup plan fails.³³ For example, to assure that personal assistance could be provided immediately in the event of an emergency, one of the Cash and Counseling Demonstration sites serving individuals with brain and spinal cord injuries attempted to eliminate any structural barriers, such as waiving a rule that workers be Medicaid certified if they were providing emergency backup services. Other approaches could include building in the flexibility to incur costs above the allocated budget if more hours were required or if an agency-based or other higher-paid worker were needed.³⁴

Some states are using Systems Change Grants to develop backup systems that go beyond individual consumer backup plans. In New Hampshire, the Grantee conducted focus groups with consumers to identify a number of possible models and is currently implementing and evaluating a model using college students participating in the federal work-study program as backup workers.³⁵ West Virginia is developing a Web-based and print personal assistance directory that will include the names, contact information, qualifications and availability of personal assistants. One concern that has been raised about such directories is whether workers are adequately screened prior to listing.

Consumer/Attendant Relationships

A few Grantees reported that some consumers are unsure how to cope with the dual role of care recipient and employer, though experience in the Cash and Counseling demonstration found that this was more a theoretical problem than one that actual participants reported.³⁶ The personal nature of the former role is eased by a private and intimate relationship, while the latter role requires clear boundaries and personal distance. Issues of control can arise if personal care attendants attempt to impose their own feelings or ideas as to what the consumer wants or needs. Conversely, consumers may make unrealistic demands on workers.

In Indiana, one stakeholder noted that consumers were willing to do the hiring and sign off on time sheets, but did not want to do the more difficult management tasks, such as firing a worker. To address these issues, some stakeholders said that management training and education should be available for consumers who need and want it. Some observers believe that a peer support system for consumers is also desirable to supplement management training and to offer continued support. However, although support groups and face-to-face networking can be beneficial, many people with disabilities have difficulty traveling, so it is important to use alternative approaches for peer support, such as telephone and Internet communications.

Quality Assurance

States, rather than the federal government, are responsible for assuring the quality of Medicaid home and community services. No federal quality assurance requirements exist for Medicaid State Plan personal care services. However, states are required to assure the health and welfare of all waiver participants. The revised draft HCBS waiver application requires states to specify how they will monitor and assure quality in their waiver programs.

Limited quantitative research on cognitively intact individuals and interviews with stakeholders suggest that the quality of consumer-directed services is at least no worse than agency-directed care and may be better because of the ability to make service conform to the preferences of the client.³⁷ Several Grantees highlighted in this report are addressing quality assurance issues, primarily through criminal/abuse background checks and training requirements for workers.³⁸

Criminal/Abuse Background Checks

One approach to quality assurance in consumer direction is to require criminal and abuse background checks for potential workers. The goal of this screening is to keep persons with a record of misconduct from working as service providers and potentially harming a client.

Views on the use of criminal background checks vary considerably. Some believe they should be mandatory for all workers, including family members, whereas others contend that they are unnecessary and ineffective; a third group believes that they should be an available option.³⁹ If they are mandatory, however, two issues must be addressed. First, should family members be exempted and, if so, which members? For example, does it make sense to spend resources to do a criminal background check on a woman who has been caring for her disabled niece for 5 years. Second, a mechanism must be established to evaluate the results and apply them in the hiring process, and a policy must be established to determine which offenses disqualify an applicant.⁴⁰ In New Hampshire, some stakeholders argued that a person should not be disqualified because of a misdemeanor conviction that occurred 20 years earlier.

Of the Grantees highlighted in this paper, New Hampshire, West Virginia, Colorado, North Carolina, Oklahoma, and Indiana require a criminal background check or an abuse registry check, most commonly for both agency and consumer-directed workers. Kansas and South Carolina perform criminal background checks on an optional basis. In most cases, the check is only against state rather than national records; thus, a potential worker with a criminal background in another state would not be identified. Some stakeholders report that consumers may still want to hire a person even if she has a criminal record.

In most of these states, a negative finding during a background check does not automatically disqualify a potential worker. For example, in West Virginia, consumers will be given the option to hire someone even if there is a negative report, as long as they enter into a negotiated risk agreement with the state agency, certifying that the consumer is aware of the negative background report and has accepted responsibility for the hire.

Colorado provides consumers with training on what a background check looks like and how to do reference checks. However, the consumer has the final decision whether to hire a person, regardless of the background check, but the intermediary has the right not to hire someone with assault or abuse appearing in the background check. In Indiana, although a criminal background check is required and the case manager must review the contents with the consumer, the enabling legislation does not clearly define what convictions should keep someone from becoming a personal attendant. The state intends to add language to state regulations that will prohibit anyone with a history of abuse, neglect, or exploitation of an individual from being hired as a caregiver.

Training for Consumer-Directed Workers

Although virtually all stakeholders agree that personal care attendants need training, there is disagreement on how formal that training should be. Agency providers, in particular, argue that consumer-directed workers are performing the same tasks as agency workers and need to be taught the same skills. West Virginia requires consumer-directed workers to undergo the same training as traditional agency workers (i.e., 38 hours in the areas of cardiopulmonary resuscitation (CPR) certification, nursing care delivery training, general first aid). In part, this is a conscious state strategy to reduce provider resistance to consumer direction.

On the other hand, advocates for younger people with disabilities argue that most formal training is not useful and that consumers should be responsible for training their workers to meet their specific needs. Many clients say that formal training can be counterproductive if it interferes with responsiveness to what the consumer wants.⁴¹

Advocates of hiring family members also worry that extensive training requirements will discourage relatives from participating. Many states, including North Carolina and South Carolina, have no specific training requirements for consumer-directed workers; in North Carolina, the Grantee is developing training manuals for consumers, which includes information on teaching workers what they need to know.

Agencies pay for training out of overhead, but there is no similar source of funding to pay for training for consumer-hired workers, which is one of the major reasons why the overhead costs of consumer direction are lower and, in principle, more of the funding can go to direct services. States need to be aware that when designing a consumer-direction program, building in requirements for training and counseling can result in the same overhead costs that agencies have. Several Grantees felt that formal training should be available to those who need it but should be optional for consumers who either want to train the worker themselves or believe that their workers don't need the formal training.

CMS policy is that workers should receive the training they need to enable them to safely perform required tasks, and that the training should match the specific tasks to be performed.

Conclusions

A major focus of state efforts to change the balance between institutional and non-institutional services is to give consumers more control over the services they receive in their homes and communities. Many states have been using their Systems Change grants to develop political support for, and to design and implement programs that give consumers more control over hiring, training, scheduling, supervising, and firing direct care workers. This paper assessed some of the policy issues related to consumer direction by interviewing Systems Change Grantees and their partners in states focusing on these initiatives.

Systems Change Grantees have had to grapple with six major issues. First, consumer-directed services are not embraced by all long-term care stakeholders. Opponents of consumer direction voice concern about the quality of care and potential abuse of participants. In some cases, existing providers worry about loss of revenue and market share. Thus, making the legislative and regulatory changes necessary to implement consumer-directed care often requires the mobilization of supporters of consumer direction and the negotiation of compromises. It also requires detailed knowledge of federal and state statutes and regulations.

Second, some persons with severe disabilities or chronic illnesses or with cognitive impairment may need assistance to self-direct their care. All states in this study include or plan to include persons with severe disabilities, and most allow persons with cognitive impairment to participate, relying on surrogates to make the decisions for the consumers. Deciding on the legal arrangements for this transfer of authority can be complex because state rules designed to avoid conflicts of interest may preclude appropriate relatives from serving as both a provider and a surrogate decision maker.

Some we spoke with expressed concerns that the surrogate's decisions may not be a perfect representation of the choices that the clients would have made if they were not impaired, with at least some of the decisions that surrogates make reflecting their own preferences, schedules, and interests rather than those of the client. However, others argue that when people are in interdependent relationship, the needs of both should to be taken into account.

Moreover, to a significant extent, consumer-directed programs can be viewed as supports for informal caregivers. Because so much informal care is provided at no cost to the government, the hiring of family members has traditionally raised questions of defining the incremental services that are being paid for by Medicaid. However, some would argue that this is a misplaced concern because if Medicaid authorizes 20 hours a week of services based on a participant's need, it does not cost the program more if these services are provided by a relative instead of a non-relative.

Sixth, almost all states continue to face substantial fiscal problems, which threaten funding for long-term care services. While much of the policy interest in consumer-directed care derives from a desire to empower people with disabilities and give them more control over their lives, this approach has also been attractive to some states because of a perceived potential to lower costs. Systems Change Grantees have been cautious in this area, generally aiming at cost neutrality rather than cost savings.

A study of workers in the Cash and Counseling Demonstration found that the pay differences between agency and consumer-directed workers were marginal. Most agency workers did not get benefits, so the lack of benefits for consumer-directed workers was not a major difference. One issue differentiating consumer-directed workers from agency workers is that consumer-directed workers have very different expectations. Most work part-time and are not trying to make a full-time job out of home care. Often this is a second job for them, so it is extra income. In other cases, family caregivers get some money, which they spend on medications and other caregiving-related expenses that would otherwise be out-of-pocket costs to them.

In sum, the notion of consumer-directed care challenges the protective nature of most home and community services programs for people with disabilities by asserting that clients want to manage and are capable of managing their own care. Many Systems Change Grantees are successfully working to increase the options for consumers to do so.

Section 4
Description of 11 Grantees'
Consumer Direction Initiatives

This section describes 11 Grantee's initiatives. Based on the extent of progress made, we selected two of these Grantees—New Hampshire and South Carolina—for in-depth study. These two states used their grant funds to implement consumer-directed options in waiver programs.

Methodology

We collected initial information from June through September 2004, during the third year of FY 2001 grants and the second year of FY 2002 grants. We conducted follow-up calls, as needed, from October through March 2005. In April 2005, we asked the Grantees featured in this paper to review and update information as needed.

For nine of the states—Colorado, Indiana, Kansas, Maine, North Carolina, Oklahoma, Washington, Wisconsin, and West Virginia—we obtained information about grant activities from the project director. Because they had made considerable progress on their grant activities, we conducted a more in-depth look at New Hampshire and South Carolina. To do this, we spoke not only with the project directors, but also with two to three key partners in the grant initiatives, including consumers who worked on the grant.

Based on these discussions, we prepared the written summaries of grant activities included in this section and sent them to the project director to review for accuracy. In some instances, we made follow-up calls to obtain additional information or to clarify information obtained from previous calls.

The descriptions of the initiatives that follow are not intended to be comprehensive or exhaustive, but rather to provide a summary of grant activities already undertaken at the time we spoke with the Grantees. They are intended to provide sufficient information for understanding the discussion of program and policy issues that Grantees are addressing as well as challenges and barriers they have faced in developing a system to give consumers greater control over their services.

New Hampshire

Although New Hampshire has offered consumer-directed personal assistance services (PAS) through its Medicaid State Plan personal care option since 1980, the consumer-directed PAS option is restricted to adults using wheelchairs who can self-direct and who need at least 2 hours of personal care per day. The consumer-directed option uses an agency with choice model, with Granite State Independent Living operating as the employer of record and the consumer as the managing employer of the personal care attendant.

A major barrier to expanding the availability of consumer-directed services beyond this program was a law enacted in the early 1990s requiring every citizen who needed personal care services—including those eligible for Medicaid—to receive them through a licensed home health agency (an exception was granted for services provided through Granite State Independent Living and Area Agencies for the Developmentally Disabled.) This stipulation virtually precluded the provision of consumer-directed personal assistance services in the State, even for individuals paying privately.⁴³

Despite this obstacle, Granite State Independent Living and other disability advocates in New Hampshire worked to expand consumer-directed service options and in January 2000, a bill to authorize consumer-directed services in the waiver program was introduced. The bill faced a major barrier to enactment: a concern about client safety, especially as articulated by the home health industry. To address concerns that Medicaid services needed to be overseen by agencies, the bill specified that the new consumer-directed personal assistance services option provided through Medicaid waiver programs would be available only through home health agencies or "other qualified agencies."⁴⁴ Home health agencies still opposed the bill, but a unified disability and elder community successfully advocated for its enactment.

The new law authorized a consumer-directed option for two of the State's waiver programs—the Elderly and Chronically Ill waiver and the In-Home Services waiver for children with special health care needs.⁴⁵ The law defined consumer-directed services as "personal care services under which the eligible consumer or his or her representative is responsible for:

participating in the development of the eligible consumer's service plan;
selecting the eligible consumer's personal care services provider;
setting the terms and conditions of work;
training, supervising, and evaluating the personal care services provider; and
terminating his or her relationship with the personal care services provider."

The law specifically repealed the requirements that personal care services be prescribed by a physician, reviewed by a registered nurse, and provided by an approved employee of a licensed home health agency.

The new consumer-directed waiver option offers three advantages over the State Plan consumer-directed program: (1) it allows consumers to use a representative if they are unable to self-direct, broadening the number of eligible individuals; (2) it allows family members to provide services; and (3) it allows personal care attendant services to be provided outside the home. Some consumers receive services through both the State Plan and the waiver program.

Under the new consumer-directed option, clients recruit workers and refer them to a home health agency or other qualified agency to be hired, pending a criminal background check. It is basically a co-employment arrangement. The agency is the employer of record, and the consumer is the managing employer or employer of fact, as in the State Plan consumer-directed personal assistance services program. A home health agency or other qualified agency is the fiscal intermediary and employer of record for the service. The inability to be the employer of record is not an issue for many consumers because they do not want to handle employer paperwork.

In addition to providing fiscal intermediary services, home health agencies or other qualified agencies providing consumer-directed personal assistance services are required to provide manuals with information about a wide range of topics, including (1) recruiting, interviewing, hiring and discharging providers; (2) orienting and training personal care attendants and documenting training provided; and (3) supervising and evaluating the personal care attendant's task performance. Agencies must also have a confidentiality policy and a grievance and appeal process.

CPASS Grant Initiative

While Granite State Independent Living anticipated that the law would be enacted, it also anticipated that state funds for implementation would not be forthcoming. For this reason, it applied for a CPASS grant to provide the resources to help them implement the program. The grant's primary goal was to:

Develop and implement a model consumer-directed personal assistance services program that expands services to individuals with disabilities who have not previously had access to such a program.

The Grant's primary activities to achieve that goal were to:

Design a curriculum to train other organizations to implement the consumer-directed model.
Develop certification rules for "other qualified agencies" to assure that these agencies operate according to genuine consumer-directed principles. (Other qualified agencies are certified by the DHHS Bureau of Elderly and Adult Services.)
Provide education, outreach, and technical assistance to community-based entities that support different constituencies of individuals with disabilities throughout the State.

Related activities include the development of backup coverage models, the conduct of a community services gap analysis to identify continuing system deficiencies and approaches for addressing them, and exploring methods to increase fringe benefits for the consumer-directed personal assistance services workforce to increase recruitment and retention.

Challenges Successfully Addressed

Once the bill was enacted, it was necessary to modify the Medicaid regulation limiting the provision of personal care services to home health agency employees. Because the home health agency industry had no incentive to work with the State to change these regulations and were not interested in implementing the consumer-directed option, Granite State Independent Living decided to focus on "other qualified agencies" to implement the consumer-directed waiver option.

Granite State Independent Living used grant funds to hire a consultant to develop certification rules for qualified agencies and to draft the needed amendments to the Elderly and Chronically Ill waiver program. The Grantee wanted to ensure that the qualified agencies became a viable option and would operate according to the principles of consumer direction. The CPASS grant staff developed strong relationships with key staff in the New Hampshire Department of Health and Human Services and successfully advocated to get the rules adopted.

Initially, no home health agency expressed interest in becoming certified to provide consumer-directed services, but a few eventually did and are currently providing these services.

Outcomes and Sustainable Change

The Grantee has accomplished its goals related to the implementation of the new consumer-directed option in the waiver program. There are now six qualified agencies in the State, including Granite State Independent Living. Granite State Independent Living and one other agency are located in a large rural area, and the other four are in the southern part of the State, which has a larger population. All six qualified agencies are operating self-sustaining programs. For the consumer-directed option to continue, a sufficient number of qualified agencies must be available to consumers in all parts of the State. Therefore, CPASS staff used grant funds to hire a consultant to develop a start-up manual that entities wishing to become qualified agencies can use after the grant ends.

As a result of grant activities, consumers in the waiver program can choose to receive personal assistance services through either an agency-directed model or a consumer-directed model. As of November 2004, about 300 individuals were using the consumer-directed option under the Elderly and Chronically Ill waiver, and about 170 were using the State Plan program. Individual consumers have expressed satisfaction with the program.⁴⁶

South Carolina

The State does not provide Medicaid State Plan personal care services except for children served under the State's Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program. Prior to receiving its grant, South Carolina had self-directed service options in its solely State-funded long-term care program and its Medicaid waiver program.⁴⁷ The State's Elderly/Disabled Medicaid waiver program has a self-directed option for two services: attendant care and companion services. Participants can hire their own worker for either service but must use traditional providers for other waiver services.

When using these services, participants have primary responsibility for hiring, training, and supervising their workers and developing a backup plan. Participants can also designate a representative to be responsible for these activities. The State contracts with the Center for Disability Resources (CDR) at the University of South Carolina to help people use self-directed services and to review the quality of these services. The Center trains and certifies all attendants and works with participants and case managers to develop each participant's backup plan.

A unique feature of this self-directed option is a requirement that before an attendant can be paid to work, an RN must observe the attendant working with the participant and certify that the worker is able to meet the consumer's needs. Certification is not required for companion services, because companions do not provide hands-on support. They provide supervision and socialization, and may help with routine household tasks.

The State is currently developing a fiscal management services function for the Elderly/Disabled waiver program to help participants and their providers with required taxes and other financial responsibilities.⁴⁸

South Carolina also provides self-directed options in the Older American Act-funded National Family Caregiver Support Program, which is available for people caring for a relative 60 years of age or older, and for grandparents 60 years of age or older caring for minor children. The State distributes funds available under this program through vouchers, which participants can use to purchase respite services or items to increase the independence of consumers or decrease caregiver burden. For example, a caregiver of a person with dementia could purchase an electronic security system to reduce the need for constant supervision.

Real Choice Grant Initiative

The state's Olmstead Task Force recommended that the State expand consumer-directed options for persons with disabilities and supported the State's decision to apply for a Real Choice grant to provide additional funding for this purpose.

The State applied for a 1915(c) Independence Plus waiver—called South Carolina Choice—and in October 2003, began piloting it in two areas of the State. The State chose an HCBS waiver rather than an 1115 research and demonstration waiver because it was not clear how the program would be continued after the demonstration ended. By piloting the new consumer-directed option in a 1915(c) waiver program, the State can expand the program without applying for a new waiver.

The average age of those enrolled in South Carolina Choice is 68 years; a few enrollees are 100 years old. The program first began enrollment in October 2003. By the end of the first year, it had served 41 consumers; of these four have been discharged from the program because of death or a move to a nursing home. About 85 percent of enrollees are hiring family to provide services, and about 75 percent have appointed a representative to assist and direct their care.

The State is using its Real Choice grant to further develop and implement the waiver program and to evaluate the pilot sites. The purpose of the evaluation is to identify implementation challenges and recommend program improvements before the State expands South Carolina Choice statewide. Grant funds are also being used for technical assistance, outreach activities, and the development of information materials and training manuals. To ensure that the materials were both comprehensive and easy to understand, the Grantee conducted a focus group with participants and family members from the pilot area to review them prior to distribution.

The new South Carolina Choice waiver offers more flexibility for people who direct their own services than the Elderly/Disabled waiver, primarily by giving each participant an individual budget for a 6-month period. The budget is based on the cost of services that would have been authorized under the Elderly/Disabled waiver, less the cost of the financial management fee, currently $15/month. South Carolina Choice participants may use their budget for self-directed services and for other waiver-covered services and items that address their needs, such as incontinence supplies, adult day care, and respite services. They can also negotiate a payment rate with their personal care attendants, something not allowed under the Elderly/Disabled waiver.

Unlike the Elderly/Disabled waiver, providers in South Carolina Choice do not need to be trained and certified. Instead, the consumers and care advisor determine training needs. Most of the consumers in the pilots are hiring family and friends, many of whom have experience with the consumer, which may reduce training requirements. The State offers criminal background checks, but they are not required as they are in the Elderly/Disabled waiver.

The care advisor teaches consumers the skills needed to effectively direct services, including budget management and hiring and managing workers. In the first pilot site, the State hired a care advisor without care management experience or knowledge of the Medicaid program, based on the rationale that it would be difficult for a care manager who had worked in the traditional service system to unlearn that system and work effectively in a consumer-directed system. However, in the second pilot, the State hired an experienced care manager and one stakeholder stated that this experience has been invaluable in implementing the program.

The State has an administrative services contract with FDGS to provide fiscal intermediary (i.e., payroll) services for consumer-directed workers in South Carolina Choice. FDGS is the Medicaid claims payment contractor that bills the Medicaid Management Information System (MMIS) for services and items in the service plan, and pays the personal care attendants after withholding taxes, unemployment insurance premiums, and other employer-related expenses. In effect, the fiscal intermediary function is defined as a subunit of the MMIS claims processing system. Consequently, every individual or entity from whom the program participant purchases goods or services must be a Medicaid "provider" in the very specific sense that they must each enter into a provider agreement with the Medicaid agency and bill Medicaid directly for their services.

The State pays the financial management service $2.95 each time payment is made. The consumer is charged a flat rate of $15 per month based on an estimate of five payments per month, which is deducted from the consumer's budget. The fiscal intermediary pays providers, takes care of tax withholdings for the personal assistants, and performs other administrative functions for the consumer. The consumer hires and fires the workers, but the fiscal intermediary processes employment-related paperwork. The fiscal agent provides the State with an electronic display of financial information, which the consumer can also access on the agent's Web site. The Web site provides a report on what services have been provided to the consumer, the status of the consumer's budget, and how much money is left in the budget.

FDGS uses the Care Call system—an electronic monitoring system—to keep track of services provided, and vendors submit invoices, which are regarded as a Medicaid claim being submitted to the Medicaid claims processing contractor. Workers must call a number when they arrive at and depart from a consumer's residence. Because FDGS is the Medicaid claims payment contractor, when workers call in and out, they are billing Medicaid. This system in principle eliminates the need for paper submission of time sheets, which people can forget to mail or that can get held up in the mail, resulting in delayed payments for workers. The system also can detect and document fraud, for example, if a worker calls from a location other than the consumer's home.

Exhibit 3 compares features of South Carolina's two consumer-directed care options.

**Exhibit 3. Differences between South Carolina's Self-Direction Options**⁴⁹
	Elderly/Disabled Waiver	South Carolina Choice
Supports brokerage	Traditional waiver care manager. Minimum contact is monthly phone call and quarterly in-person visit.	Care advisor, trained in person-centered planning. Minimum contact is monthly in-person visit.
Service planning	Participant chooses from a menu of services, working with a case manager.	Participant leads person-centered planning process with care advisor and others the participant invites.
Budget management	Expenditures are based on frequency and duration of services from a menu.	Participant has flexibility to choose supports within an individual 6-month budget, with support of a care advisor and the fiscal management service.
Supplies and equipment purchasing	Not self-directed; through traditional providers.	Self-directed; through traditional or nontraditional providers.
Quality assurance	Center for Disability Resources screens providers for criminal background, trains providers, and certifies participant-provider relationship for hands-on services.	Care advisor and participant determine provider training and approve providers. Criminal background screening available but not required.

Implementation Challenges

The Grantee established a management team to determine if changes to existing policies and procedures for the Elderly/Disabled waiver program were needed to implement South Carolina Choice. The Grantee did not cite any policy barriers, but did note an implementation challenge related to consumers' ability to use their budgets to purchase labor-saving appliances such as washing machines and microwave ovens.

In both pilot areas, South Carolina Choice is trying to work with vendors who have not traditionally been Medicaid providers. Establishing agreements with small local stores has proved to be easier than with large chains such as Lowe's home improvement stores and Wal-Mart. These chains expressed concerns about legal terms in the agreements that they believed might be harmful to them in the long run, and required that the agreements be reviewed and approved by an extensive bureaucracy before they would sign them.

To facilitate their participation, the State developed "one-time provider agreements" with CMS input and approval. However, vendors still find some of the requirements problematic. For example, CMS requires vendors to keep purchase records on file for 3 years. Vendors like Lowe's home improvement stores do keep computerized records of sales, but they do not necessarily meet CMS record-keeping requirements. The State offered to have a fiscal intermediary maintain the records but that did not work because Medicaid providers must meet the terms of the provider agreement, which require record keeping. CMS did not agree to remove the record-keeping requirement, which has continued to hinder larger vendors from signing provider agreements.

Because cash payments to beneficiaries are possible only in research and demonstration waiver programs, South Carolina Choice cannot give cash to waiver participants to make purchases. Among stakeholders, a consensus exists that purchasing supplies and other merchandise is the program's "biggest problem." Consumers need to obtain a quote for the price of appliances they wish to purchase, but by the time the check is sent—sometimes 2 months later—the price quote has changed. The State would like consumers to get discounted supplies, such as incontinence supplies, through a simple process like a debit card, but this is not currently available.

One approach to addressing this problem, which is used in New Jersey, is to make the purchase online. For example, the consumer identifies the products he or she wants on a web site and then calls the fiscal intermediary to direct them to make the purchase online. Using this approach, the consumer's spending plan does not have to be amended and reauthorized unless the amount of the purchase exceeds the amount budgeted for the item (or category of items) in the approved service plan.⁵⁰

Several stakeholders also cited technical problems with the State's computer systems, noting that inadequate time for testing led to "glitches." For example, one consumer had two sisters providing care at the same time—one doing housework and one driving her to a doctor's appointment. This was seen as duplication of services, and Medicaid rejected payment. The States' Care Call system, which is an electronic real-time monitoring system for workers (they have to call in when they arrive and depart) also had technical difficulties when it was first implemented, as did the system the care advisors use for assessment, service planning, and budgeting.

Because the State experienced delays getting the waiver started, they have requested a 9-month no-cost extension to finish the project. The State intends to offer South Carolina Choice statewide, but wants to assess the evaluation results and make any needed changes before doing so. The second pilot site is already self-sustaining (i.e., it has not needed any additional agency administrative costs for implementation).

Colorado

Colorado is using its grant to fund consumer-directed initiatives in four different waiver programs—two new programs and two existing programs (see Exhibit 4).^51,52 One program—called Consumer-Directed Attendant Services (CDAS)—was authorized as a pilot with participation initially limited to 150 people, but the State recently removed the enrollment cap. When designing the program, the State decided not to limit participation to those who met the nursing home level of care, and to allow family members, including spouses, to be paid for providing care. To allow this design, the State had to implement the program using a Section 1115 research and demonstration waiver.

**Exhibit 4. Comparison of Three Consumer-Directed Waiver Programs**
Program	Consumer-Directed Attendant Services (CDAS) New 1115 waiver	In-Home Support Services (IHSS) New service delivery method under two current 1915(c) waiver programs	Consumer-Directed Care for the Elderly New 1915(c) waiver
Key features	"Pure" consumer-direction model with individual budget and fiscal intermediary. Fiscal intermediary is the employer of record but will not select or supervise workers. Participants have to direct care; a relative or other surrogate cannot do it for them. Participants may have a support person to direct the financial aspects of consumer direction. Workers are exempt from the Nurse Practice Act.	Agency with choice model. Consumer can hire, direct, and fire worker. Agency employs worker. Workers can provide health maintenance activities under an exemption from the Nurse Practice Act. Participants may have a family member or other authorized representative to direct services on their behalf if they are unable to or do not want to.	"Pure" consumer-direction model with individual budget and fiscal intermediary. The CDAS fiscal intermediary will be the fiscal intermediary for this waiver. Participants may have a family member or other authorized representative to direct the services on their behalf if they are unable to or do not want to. Workers are not exempt from the Nurse Practice Act.
Target population	Medicaid recipients of home care services 18 years of age and older who are interested in directing their own care.	New or current Medicaid recipients of HCBS-Elderly Blind, Disabled (EBD) waiver services and those served under the Children's HCBS waivers who are interested in directing their own care.	New or current Medicaid recipients of HCBS-EBD waiver who are 55 years of age and older and interested in directing their own care.
Eligibility criteria	Must have received Medicaid-funded attendant support for the preceding 12 months and be able to self-direct.	Must be eligible for the HCBS-EBD or the Children's HCBS waiver and be able to self-direct, or have an authorized representative who is able to direct the client's care.	Must be 55 years of age or older, eligible for the HCBS-EBD waiver and able to self-direct, or have an authorized representative who is able to direct the client's care.

The CDAS program gives participants an individual budget and uses a fiscal intermediary to handle payroll functions. The CDAS waiver program was implemented prior to receipt of the CPASS grant. However, because many consumers are not yet aware of the program and some case managers do not understand its eligibility requirements, the State is using some grant funds to develop and distribute outreach materials and to develop training materials and establish training programs.⁵³ The State is also using the grant to support the development of an evaluation plan for this waiver program.

The State subsequently authorized two additional consumer-directed options—one to be used in two existing waivers and one in a new waiver. The first option—called In-Home Support Services—is being offered in two existing HCBS waiver programs—the Elderly, Blind, and Disabled waiver, which serves persons 18 and older, and the Children's waiver. This latter option is an agency with choice model. Participants can recruit, train, and supervise workers, and the agency employs the workers and handles budgeting and payroll tasks.

The department responsible for implementing the new consumer-directed options received a small amount of state funds for designing and developing them, but it was not sufficient to fully develop the programs, and no funding was provided for outreach and training. Grant funds are being used to make up the shortfall.

The State is planning to offer the second authorized consumer-directed option—called Consumer-Directed Care for the Elderly—in a new 1915(c) waiver for persons 55 years of age and older. The State originally planned to apply for an Independence Plus waiver, but was still in negotiations with CMS at the time of the interviews. Consumer-Directed Care for the Elderly uses the same consumer-directed model as the Consumer-Directed Attendant Services waiver—providing consumers with an individual budget and a fiscal intermediary.

The State is confronting a major challenge in implementing the In-Home Support Services programs. Because the authorizing legislation for the program included an exemption from the Nurse Practice Act for certain health maintenance activities,⁵⁴ the State had to either change the existing regulations for Medicaid home health agencies and other service entities, or create a new type of agency.⁵⁵ It chose to do the latter because changing the regulations for Medicaid home health agencies would have introduced complications in for non-HCBS services covered under the State Plan.

The State developed certification rules and survey procedures for the new agency type, which is called In-Home Support Services specialty providers. These agencies will be able to provide consumer-directed services in an agency with choice model. Due to significant staff turnover in the two state agencies that certify and survey providers, certification of the new agencies has been delayed.

The CPASS grant is being used to design the training materials and to conduct outreach and program evaluation for all of the new consumer-directed options. A key training initiative, which is planned for the third year of the grant, will develop new curricula for certified nursing assistants that will explore (1) problem solving without taking over the consumer's care and (2) how to be more sensitive to consumers' needs and rights.

The State has a strong commitment to giving consumers more control over their services. The Governor recently gave $1 million to the agency responsible for implementing the consumer-directed options. Consumers recommended that the agency use the money to expand the training and outreach initiatives funded by the CPASS grant, and the agency is doing so for all three of the waiver programs. Additionally, the State has enacted legislation granting the Department of Health Care Policy and Financing authority to implement consumer-directed services in all of the State's HCBS waivers. The bill authorizes the consumer-direction option to be modeled on the CDAS program and will allow authorized representatives to direct care if a consumer is cognitively impaired.

The Grantee noted that incremental change has resulted in three different consumer-directed options in four different waiver programs, and that consumers cannot move easily from one program to another. To offer a more seamless approach, the Grantee is planning to review the regulations to identify and remove barriers so that consumers in each waiver can select the option that best meets their needs. Once the State has sorted out the regulatory issues, it will amend the waivers.

Colorado received a Systems Change Independence Plus grant in FY 2003 and plans to use it to develop quality assurance methods for all of the State's consumer-directed programs. The grant will focus on critical incident management and emergency backup.

Indiana

Indiana's goal for its CPASS grant is to design a consumer-directed service option for participants in the Aged and Disabled Medicaid waiver, the State's largest waiver program. The State currently provides consumer-directed attendant care through a state-funded program called CHOICE (Community and Home Options to Institutional Care for the Elderly and Disabled).

The Grantee initially confronted a major implementation challenge due to ambiguity in the State's statutory language regarding requirements for fiscal intermediaries. To address this barrier, the agency had a legislative team (composed of state policy directors and legal staff) review administrative objectives and identify the issues that needed to be addressed at a legislative level. A number of other issues were clarified through the adoption of an administrative rule that will guide the development of the fiscal intermediary process. This administrative rule became official June 8, 2005.

The Grantee has completed many grant activities and is in the final stages of hiring five experienced consultants to further assist in grant implementation, and is also working with a managing consultant to develop and implement the infrastructure for the consumer-directed option.

The Grantee also noted that the State has contracted with a fiscal consultant to write the fiscal intermediary model design. Once developed, experts in Medicaid have agreed to write an amendment to the Aged & Disabled Medicaid Waiver for CMS's approval. Three additional consultants are assisting with research, analysis, education, training, and logistics. While waiting for official approval of the consultant contracts, the Grantee is moving ahead with other activities.

The Grantee is working closely with other state divisions to address their priorities, including fraud awareness and prevention and the development of a project mapping process to aid in project management.

The Grantee is continuing to work with various state divisions, project consultants, state consultants, the grant task force and stakeholders to develop (1) a model infrastructure and infrastructure enhancements for the program's fiscal intermediary system, (2) a provider registry system, (3) a quality assurance system, (4) a fraud prevention and awareness system, and (5) education and training design.

Kansas

In 1989, Kansas became an early leader in the provision of consumer-directed services, by enacting legislation permitting self-direction of personal attendant services. Self-direction was defined to include the ability to select, train, manage, pay, and dismiss attendants providing services under the MR/DD waiver program. However, in 1995, the State interpreted new quality assurance measures as requiring strong agency involvement in service delivery. Since that time, many waiver programs still have a consumer-directed option, but agencies vary in the extent to which it is provided. The Grantee noted that because agencies can provide different consumer-directed models—agency-directed, self-determination, self-direction, and fiscal intermediary—it can be difficult for some consumers to sort out the differences between the various models and choose the one best suited to their needs and abilities. The Grantee further noted that persons with developmental disabilities and their families, in particular, are not always knowledgeable about the available service options.

Kansas is using its grant to review state regulations and policies to identify barriers to self-direction and to address them. It is also implementing a pilot program targeted at persons with developmental disabilities, which allows increased self-direction. The program is being implemented by community service providers under the MR/DD waiver program in metropolitan, urban, and rural areas.

Maine

Maine offers consumer-directed options in its Medicaid State Plan, a waiver program, and two solely state-funded long-term care programs. The options vary depending on the program. In some, consumers needing guardians cannot participate; in others, persons with cognitive limitations can participate if they identify someone to direct the care on their behalf. Most programs operate according to an agency with choice model. A limitation is that if consumers do not want to use a particular agency, they may not have another option to direct their own services. Also, some participating agencies are becoming increasingly concerned about their legal liability, because while they are the employers of record, some of their usual practices around hiring and training do not apply.

A survey of consumers and surrogate decision makers demonstrated that they had a fairly high level of interest in consumer-direction but a low interest in assuming fiscal responsibilities. To address their preferences, the Grantee designed the specifications for an intermediary service organization, which the State modified to create a fiscal intermediary for the consumer-directed option under the State Plan.

The State's ultimate goal is to offer fiscal employer agent services in all of its consumer-directed programs. The State also wants to make consumer-direction an option for all disability populations, including older people, younger adults with physical disabilities, and adults with mental retardation or autism.

To facilitate this goal, the State has an ongoing project to increase consumer choice and control in all programs and to eliminate unnecessary inconsistencies across programs. This project is behind schedule, but this has worked to the Grantee's advantage. Because a state reorganization has placed all of the personal assistance programs under the umbrella of one agency, there is now increased interest in looking at inconsistencies in policies that might exist across programs, and the State now has a better inventory of cross-program policies.

The State is focusing its expansion of consumer-direction on the Medicaid State Plan and Medicaid waiver services for older persons, adults with physical disabilities, and adults with mental retardation. In addition to the development of the fiscal employer agent under the Real Choice grant and the development of training and other infrastructure under the State's Systems Change Independence Plus grant (which is being used to develop a waiver program for adults with mental retardation), the State is using its own funds to expand consumer-directed services.

The State has already adopted rules and created a fiscal agent in the State Plan Personal Assistance Services program. Contingent on the availability of start-up funds, the State also hopes to implement a new consumer-directed option for adults with mental retardation and autism in late 2005 or 2006.

North Carolina

As of July 2004, none of North Carolina's Medicaid programs had a consumer-directed option. The State does have a limited consumer-directed support program within the Division of Aging and Adult Services through the Family Caregiver Support Program funded by the Older Americans Act. This program, available in some counties, provides family caregivers with vouchers to purchase services from agencies. There is also a limited project with a consumer-direction focus within the Division of Aging and Adult Services using State/County Special Assistance funds.

The State's Division of Vocational Rehabilitation Services (VRS) has had a consumer-directed option since 1985, when it started an independent living program. The program uses a modified cash and counseling model—consumers submit a time sheet and VRS reimburses them up to a specified limit. Participants in this program must handle all payroll functions as there is no fiscal intermediary. As a result of the Grantees' consumer direction efforts, the Vocational Rehabilitation program is now considering a fiscal intermediary option for participants.

To implement a pilot consumer-directed option, North Carolina's Division of Medical Assistance obtained a new 1915(c) Independence Plus waiver. The new waiver program is called Community Alternatives for the Aged and Persons with Disabilities. The State wants to start on a small scale by piloting consumer direction in the waiver program in two geographic areas—Cabarrus and Duplin counties. The Real Choice grant provided seed money for these projects to revise and develop policies and procedures for providing consumer-directed supports, as well as to develop a financial management service.

The Grantee is behind schedule because the waiver approval process took much longer than planned—almost a year due to extended negotiations with CMS. When the program is first implemented, only individuals who have been receiving services through the traditional system will be able to select consumer-directed services. As funds are available for new service recipients, they will be assessed for services and offered an opportunity to select either the traditional or consumer-directed service delivery approach.

The State is planning in the future to amend its current HCBS waiver program to include a consumer-directed option for all participants. The State does not plan to offer a consumer-directed option through the Medicaid State Plan personal care program at this time, because it will require regulatory and policy amendments to do so.

The North Carolina Division of Aging and Adult Services developed a waiver to allow agencies piloting the Real Choice grant to use the Home and Community Care Block Grant (a combination of state and federal funds) to offer consumer-directed supports. Agencies requesting a waiver may use the Family Caregiver Support Program to enhance consumer-directed supports.

The State also has an initiative under a CPASS grant to examine all of the States' regulations and policies that could impede consumer direction.

Oklahoma

Until 1995, Oklahoma's Medicaid personal assistance services program under the State Plan was an exclusively individual provider model in which the consumer was the employer of record and state-employed nurses handled all administrative functions. When the State started its HCBS waiver program, it used an agency model and decided to begin offering this model in the personal assistance service program as well. Because the personal assistance program had had no rate increases in over a decade, when the agency model was offered and the agencies held job fairs, just about all the providers and consumers switched over.

In the individual provider model, a unit was a 3-hour period. When the switch to agency services occurred, the State redefined a unit as 1 hour and was able to reduce the number of hours authorized so that units more closely matched clients' need for services. Through this process, the switch from individual provider to agency model was basically cost-neutral even though the equivalent hourly reimbursement rate increased from $5 to $9.28. Individual providers switched to agencies because the rate change allowed agencies to pay workers a higher wage. Consumers' incentives to switch were (1) having a backup worker from an agency if the regular worker was ill and (2) having workers who were more satisfied because they were paid better.

The State plans to introduce a consumer-directed model in a waiver program and then extend it to the State Plan personal assistance services program. The State initially planned to implement the program using an 1115 waiver. However, when working with CMS to clarify details regarding the operation of fiscal intermediaries, the State decided to implement the consumer-directed model as a service option within the existing 1915(c) waiver that serves adults with disability and frail elderly persons.

Under the new program, consumers will be able to hire, supervise, and fire their own workers. An intermediary service organization will provide training and support and fiscal services. To facilitate the operation of the new program, the State amended its statutory definition of personal assistance services to include services provided outside the home, such as companion services to attend church and transportation services. Another statutory amendment allows agencies or other entities to perform intermediary service organization functions without being licensed as a home health agency.

To be eligible for the consumer-directed program, a consumer must have been in the waiver program for a year. The State believes this requirement is needed to address health and safety concerns, because it will ensure that the program has had some experience with the consumers and their service needs prior going into the consumer-directed option. They will determine if this period can be reduced to less than a year.

The State currently uses nurse delegation provisions of the Nurse Practice Act to cover some services under a waiver program. The State has determined that the current delegation provisions are also applicable to these services when provided under a consumer's direction.

Washington

Consumers have the option to hire independent providers in the Medicaid State Plan personal assistance program, and in several waiver programs, including the Community Options Program Entry System (COPES) waiver program. Consumers can hire their own workers and direct services, and an agency is responsible for paying the worker. The State believes that using independent providers helps to provide independence for consumers and control costs. Washington has made consumer direction not only a mainstream option; it is the dominant mode of service used by a substantial majority of home care beneficiaries.⁵⁶

Washington is using its grant to fund 24 Local Councils, which are made up of persons with developmental disabilities who advocate for themselves and families, community providers, and interested stakeholders for developmental disabilities services. These Local Councils are developing and implementing training and educational materials on self-directed care and services for individuals with developmental disabilities and their families. The aim of the grant funding is to make the training as broadly applicable as possible, so that no groups are excluded from self-direction. Individuals with cognitive impairment are allowed to self-direct if they have family or a representative to help them. The materials that the Local Councils developed were distributed to self-advocates at a Community Living Conference in September 2004 and continue to be available to self-advocates and their families.

Although Washington allows consumers to hire and fire their workers, the State wants to move toward a model that will give consumers control over a budget, as in the cash and counseling model. If they have charge of a budget, the Grantee believes that consumers will be cost-conscious and judicious purchasers of the services they need.

One of the grant's activities is to develop a combined assessment and payment tool based on time and motion studies and consumer input about the amount of time needed to perform care tasks. Under the current system, the payment rates are based on the number of home care hours approved. The State plans to use this system to help them determine individual budgets in a cash and counseling demonstration program, which they will be developing with a RWJF grant.

West Virginia

West Virginia demonstrates how a State can leverage funding from three different grants to achieve its goal of providing more consumer-directed options. When it applied for the CPASS grant, the State did not have a consumer-directed option in its Medicaid State Plan Personal Care program. The State's Aged and Disabled HCBS waiver program had a self-directed case management option, but it was limited; consumers were allowed to work with an agency to develop their service plan, and some agencies permitted consumers to recommend and refer workers to be interviewed and potentially hired.

The original goal of the CPASS grant was to expand consumer-directed options for participants in the State Plan Personal Care Program by developing and evaluating a consumer-directed pilot program. However, the Senior Centers that provide personal care services opposed the demonstration because they viewed consumer-directed services as a threat to their funding. Consequently, Grant staff abandoned their original goal and considered applying for an Independence Plus waiver, but the State would not approve a new waiver program due to budget constraints. However, the Bureau of Senior Services, which administers the Aged and Disabled waiver, was ready to move forward with a consumer-directed program and offered to use the CPASS grant to develop a fully operational consumer-directed option within the waiver program.

Since the Aged and Disabled waiver serves approximately 3,800 persons, this opportunity allowed the Grantee to design a consumer-directed option that would reach more consumers than would have been possible through the demonstration program. More importantly, had the Grantee conducted the originally planned demonstration program, there would have been a risk that the State would not adopt the consumer-directed option when it ended. Working to add the consumer-directed option to an existing waiver program assured that the option would continue when the grant ended. Implementing consumer direction in the Aged and Disabled waiver program also allows the State to build an infrastructure that can be used by other waiver programs in the future.

To develop the new consumer-directed option for the waiver program—called Personal Options—grant staff used the Independence Plus waiver as its model. Thus, the new consumer-directed option includes many Independence Plus components—person-centered planning, an individual budget, a financial supports service, a supports brokerage, and emergency and backup protections. The option will be available to all consumers eligible for the Aged and Disabled waiver program, including those with cognitive impairment, who will have the option of naming a representative to assist them in managing their services. The State will establish an intermediary service organization to help consumers with financial management responsibilities (such as filling out timesheets) and to handle payroll and tax withholdings.

In February 2003, the State enacted legislation allowing family members other than spouses and parents of minor children to be paid caregivers. Therefore, individuals will be able to hire relatives to provide services under Personal Options.

To avoid "reinventing the wheel," grant staff spent a considerable amount of time researching consumer-directed options in other states. They conducted extensive Internet searches and asked states to send copies of manuals and other materials. They reviewed other states' waiver applications and forms, and visited other states to learn more about their programs. The Grantee reported that New Jersey provided valuable insights on outreach and enrollment activities and the role of resource consultants. The Grantee also made use of technical assistance (TA) provided by the TA Collaborative Exchange, and a consultant who helped them identify which of nine different intermediary service organization models would be best for the State.

Grant staff have worked to assure that necessary support from the Medicaid agency is in place. The state has submitted its 5-year waiver renewal application, which includes provisions for a new consumer-directed option. Once the waiver renewal is approved, grant funds will be used to support the infrastructure development and start-up costs needed to implement the new consumer-directed option.

West Virginia is committed to further expanding consumer-directed initiatives. The State recently received a grant from RWJF to implement a Cash and Counseling demonstration program. Grant staff anticipate that the new RWJF grant will also help them implement the new consumer-directed option in the Aged and Disabled waiver program because it will provide the State with significant TA. In particular, they plan to use this TA to strengthen the evaluation of the consumer-directed option in the Aged and Disabled waiver.

In 2004, West Virginia received a Quality Assurance/Quality Improvement Systems Change grant, which will focus its activities on the Aged and Disabled waiver. During the first year of the implementation of the new consumer-directed option, activities under the new Quality Assurance/Quality Improvement grant will include implementation of a participant experience survey, which will be used to determine consumer satisfaction with the new consumer-directed program. In subsequent years, the Bureau of Senior Services will continue the survey to track both agency provided and consumer-directed care, which will allow a comparison between the two models.

Wisconsin

In Wisconsin, waiver participants may choose to hire, fire, and direct their own workers, including friends and relatives, and have them paid through a fiscal agent, but this option is not available in the State's personal care program.

One of Wisconsin's grant goals is to offer consumer-direction in the Medicaid State Plan personal care program. Currently, State policies present a barrier to consumer-direction by requiring nurse assessment and oversight. However, given current Medicaid budget problems, the State is concerned that introducing a consumer-directed option in the State Plan program could increase costs. According to stakeholders, as much as 40 percent of authorized personal attendant hours are currently unused. If consumer-direction increases the availability of providers or causes people who are providing unpaid care to seek payment, this could lead to an increase in use of authorized hours and would increase the costs of State Plan services. This has been the early experience in Arkansas.⁵⁷

Another concern is that if the State allows friends and relatives to be paid caregivers under the Medicaid State Plan, this will lead to the replacement of unpaid informal caregiving with paid family caregivers, further increasing costs. Although the cost increases would be due to payment for already authorized services (i.e., for unmet needs), stakeholders believe that trying to implement a program that might end up costing more is not considered feasible at this time.

Wisconsin has revised its grant activities for consumer direction to focus on enhancing consumer-directed options under its home and community-based services waiver programs. An internal workgroup is reviewing the status of consumer direction in the waiver programs to develop policies, procedures, and best practice guidelines. Wisconsin will also develop materials for consumers, to enable them to make informed choices about self-direction and to provide them with tools to effectively manage consumer-directed services. An external group, comprising county staff, providers, and consumers, will advise the Department of Health and Family Services in this effort.

Question	State Plan	1915(c) Waivers	1115 Waivers
Does CMS permit services such as personal care assistance to be provided via self-directed individual budgets? This is defined as:
Ability to convert authorized service hours to dollars, to be managed by the individual.	No. This would be a violation of comparability, since individual's who do not self-direct would be denied this option.	Yes	Yes
Allowing individual to hire an attendant who meets minimum state requirements (but individual may add his/her own requirements to those of the state).	Yes	Yes	Yes
Allowing individual to negotiate rates with providers (allowing for more services if providers accept lower rates)	No. This would violate comparability mandates by allowing the self-direction group more services than those who do not self-direct.	Yes	Yes
Allow the individual to be the employer of the worker (if worker is not employed by or under contract to an agency)	Yes	Yes	Yes
Allow two or more services to be combined into a single budget or limit.	No. Each service must be made available on the basis of medical necessity. Utilization of one service does not preclude an individual from using another, nor may it reduce the amount, duration, or scope of another service.	Yes, but only waiver services. The waiver of comparability does not confer the ability to limit use of state plan services (as would be necessary if they were combined with other services in an individual budget).	Yes
May a state define a waiver service to include elements of one or more state plan services?	Not applicable	Yes	Yes
May a state offer a state plan service as a waiver service?	Not applicable	Yes, under 2 different circumstances: In greater amount, duration, or scope than available under the state plan; If the definition of services (including supervisory arrangements) or provider qualifications differ from the state plan.	Yes
If a state offers the same (or similar) service under a waiver as it does under the state plan, may the individual receive both?	Yes, if medically necessary.	Yes.	Yes.
Must the individual use the state plan benefit before using the waiver service?	Yes, if the waiver service (including provider types and service delivery arrangements) and the state plan service are the same.	No, if the waiver service (or provider qualifications, or the arrangements under which the service is furnished) are different from the state plan, and more conducive to ensuring health and welfare.	No
May a state bundle a state plan and a waiver service into a single individual budget?	No, because this would cause the state plan service to be available in more/less amount, duration, or scope to waiver participants than to others under the plan.	No, but the state could bundle a "state plan-like" (e.g. attendant care) waiver service with other waiver services in an individual budget.	Yes
May a state pay legally responsible family members to provide services other than personal care?	Yes, if the individual is qualified and the service is included in the state plan.	Yes. The state may elect to impose special conditions under which it will do so.	Yes
May a state pay legally responsible family members to provide personal care?	No.	Yes. Rationale must be explained and approved in waiver request.	Yes
May Medicaid payments be made prospectively, outside managed care arrangements? For example....
May FFP be claimed for payments made before services are furnished?	No	No	Yes
May a state pay a provider before services are furnished?	Yes, but the state may not claim FFP until services are furnished to an eligible individual	Yes, but the state may not claim FFP until services are furnished to an eligible individual	Yes
May "cash" payments be made to beneficiaries...
By the state?	No. Direct payment rules prohibit this practice.	No. Direct payment rules prohibit this practice.	Yes
By providers?	No. Providers must furnish Medicaid-covered services. Furnishing cash to a beneficiary is not a Medicaid service.	No. Providers must furnish Medicaid-covered services. Furnishing cash to a beneficiary is not a Medicaid service.	Yes
Would there be any other effects on beneficiaries to whom cash is given?	Yes. Cash would be considered income for purposes of SSI and Medicaid eligibility determination. It would also be considered income by the IRS, and counted as income by other need-based Federal programs (such as section 8 housing).	Yes. Cash would be considered income for purposes of SSI and Medicaid eligibility determination. It would also be considered income by the IRS, and counted as income by other need-based Federal programs (such as section 8 housing).	Yes. Separate waiver necessary from SSA. Still considered income by IRS and other Federal programs.
Use of Organized Health Care Delivery Systems (OHCDS)
Can a State be allowed to require a provider to become an OHCDS	No	No	Could be permitted
Can a State be allowed to require an individual to receive one or more services through an OHCDS	No	No	Yes
Can a State be allowed to require a service to be provided only through an OHCDS	No	No	Yes
If an individual chooses to receive one service from an OHCDS, can a State be allowed to require that person receive other services from the same OHCDS?	No	No	Yes
Can a State be allowed to delineate which services may be provided by an OHCDS?	No, the decision is that of the provider.	No, the decision is that of the provider.	Yes
Can a State be allowed to choose to run all or part of its Medicaid program (or waiver) exclusively through the use of an OHCDS?	No	No	Yes
Can a State be allowed to prohibit an entity from including one or more specific services in the list that it will provide as an OHCDS?	No. If the entity can demonstrate that it meets provider qualifications, Medicaid may not prohibit it from furnishing the services for which it qualifies. However, the state may institute reasonable requirements to prohibit "self-referrals" and other questionable practices.	No. If the entity can demonstrate that it meets provider qualifications, Medicaid may not prohibit it from furnishing the services for which it qualifies. However, the state may institute reasonable requirements to prohibit "self-referrals" and other questionable practices.	Yes
Can a State be allowed to limit the number of OHCDS entities with which it will work?	No	No	Yes
Who must have a provider agreement?	The provider and the state must sign. When services are furnished through an OHCDS, the OHCDS is the provider.	The provider and the state must sign. When services are furnished through an OHCDS, the OHCDS is the provider	The provider and the state must sign (unless specifically waived through 1115). The OHCDS is the provider.
How is the direct payment requirement met?	Medicaid pays the OHCDS (which is the provider).	Medicaid pays the OHCDS (which is the provider).	Medicaid pays the OHCDS (which is the provider).
May an individual be an independent provider, and also have a contract with an OHCDS in which it is the provider?	Yes. However, the provider may bill only once for a covered service furnished to an eligible individual.	Yes. However, the provider may bill only once for a covered service furnished to an eligible individual.	Yes
Must the state "certify" or otherwise formally recognize an OHCDS for the entity to furnish services or receive payment?	No. The OHCDS is an organization that is a Medicaid provider. The decision to organize and the decision to become a Medicaid provider are made by the provider, not the State.	No The OHCDS is an organization that is a Medicaid provider. The decision to organize and the decision to become a Medicaid provider are made by the provider, not the State.	No

Endnotes

¹ These figures represent a slight increase in spending on home and community services. In FY 2003, reported Medicaid spending was $44.8 billion for nursing home expenditures and $11.3 billion for ICFs-MR. Expenditures for community-based long-term care services were $27.8 billion, with HCBS waiver programs accounting for two-thirds of community-based long-term care spending. Burwell, B., K. Sredl, and S. Eiken (May 25, 2004). Medicaid Long Term Care Expenditures in FY 2003. Cambridge, MA: Medstat.

² Health Care Financing Administration. (2001, May 17). Coordinated Invitation to Apply for "Systems Change Grants for Community Living": Improving Community Services for Children and Adults of Any Age Who Have a Disability or Long Term Illness, p. 25. Available from http://www.cms.hhs.gov/systemschange/backgrnd.asp. Accessed July 20, 2005

³ Health Care Financing Administration. (2001, May 17). Coordinated Invitation, p. 31. Available from http://www.cms.hhs.gov/systemschange/backgrnd.asp. Accessed July 20, 2005

⁴ Health Care Financing Administration. (2001, May 17). Coordinated Invitation, p. 9. Available from http://www.cms.hhs.gov/systemschange/backgrnd.asp. Accessed July 20, 2005

⁵ Wiener, J.M. and C.S. Sullivan. Long-Term Care for the Younger Population. In Persons with Disabilities: Issues in Health Care Financing and Service Delivery, J.M. Wiener, S.B. Clauser, and D.L. Kennell, editors. Washington, DC: The Brookings Institution, 1995, 291-324.

⁶ DeJong, Gerben, A. I. Bativia, & L.B. McKnew. "The Independent Living Model of Personal Assistance in National Long Term Care Policy." Generations. Winter 1992

⁷ National Institute on Consumer-Directed Long Term Care Services, cited in: Coleman, B. (October 2003). Consumer-Directed Personal Care Services for Older People in the U.S. AARP Public Policy Institute. Washington, DC.

⁸ National Association of State Units on Aging and the National Council on the Aging (2005). States' Experiences Implementing Consumer-Directed Home and Community Services. Available at http://www.nasua.org/consumerdirection.htm.

⁹ During a 2005 New Freedom Conference plenary session with CMS, a Grantee stated that a federal barrier to expanding home and community services was the narrow definition of personal care services under the Medicaid personal care option. This Grantee asked CMS to define personal care services to include goods and services beyond attendant care. The Medicaid statute defines "personal care services" only as "prescribed by a physician or authorized in a state approved service plan." This general definition could be interpreted to mean that physicians and the state could define personal care more broadly to include goods and services other than attendant care. As a precedent for this broader interpretation, New York has covered Personal Emergency Response Systems under its Personal Care benefit for many years.

¹⁰ The following description of consumer-directed program types is based on information provided by Pam Doty, Ph.D., Senior Policy Analyst, Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care.

¹¹ Some programs designate a different "employer of record" to serve different purposes. For example, in California, In-Home Support Services program participants are considered the employer of their attendants under common law. But for payroll tax purposes and the state's Medicaid claims processing, a private for-profit contractor acts as the program participant's employer agent, handling payroll and tax filings. At the same time, the state itself is considered the employer for purposes of workers' compensation coverage, and county-based "public authorities" are designated the employer for purposes of collective bargaining with unions to determine the wages and benefits that Medicaid will pay consumer-directed personal care attendants.

¹² Because the new draft waiver application is still under development, it has not yet gone through the OMB clearance/paperwork reduction act process. Therefore, CMS can only release it to those parties that will use it—state Medicaid agencies/operating agencies. CMS has made it widely available to states—initial versions through major associations and the most recent versions through Regional offices, but it cannot be made available to the general public until it is finalized. CMS anticipates that it will be finalized by January 2006, and will be available after that time with a full set of instructions.

¹³ Information on state programs in this section is drawn from Doty, Pamela and S. Flanagan (2002). Highlights: Inventory of Consumer-Directed Support Programs. http://aspe.hhs.gov/search/daltcp/Reports/highlght.htm, as cited in Coleman, B. (October 2003). Consumer-Directed Personal Care Services for Older People in the U.S. AARP Public Policy Institute. Washington, DC. California's In-Home Support Services program had 310,000 participants in 2004. Pamela Doty, personal communication, February 2005.

¹⁴ In some instances, Grantees are working on multiple initiatives. For a summary of all the initiatives for each grant, see Summaries of the Systems Change Grants for Community Living—FY 2001 and Summaries of the Systems Change Grants for Community Living—FY 2002 Grantees. RTI International. Available at http://www.communitylivingta.info/ (search for "FY 2001 summaries") and http://www.communitylivingta.info/moreInfo.php/source/151/doc/164/Summaries_of_the_Systems_Change_Grants (FY 2002 summaries). Accessed September 20, 2005.

¹⁵ The study's findings and recommendations influenced the state's decision to apply for a Systems Change grant. The South Carolina School of Public Health is also conducting an evaluation of the grant.

¹⁶ Respondents in a study of 39 states' consumer-directed programs cited several barriers to implementing consumer-directed home and community service programs. They include: federal and state Medicaid laws, rules, and regulations; the federal Medicaid waiver process; other state laws, rules, and regulations; resistance within a state agency; resistance from providers; and lack of funds. National Association of State Units on Aging and National Council on the Aging. States' Experiences. Available at http://www.nasua.org/consumerdirection.htm.

¹⁷ Smith, G., O'Keeffe, J., Carpenter, L., Doty, P., and Kennedy, G.(2000). Understanding Medicaid Home and Community Services: A Primer. Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging, and Long Term Care Policy. Washington, DC: U.S. Department of Health and Human Services.

¹⁸ For more information on LIFE accounts, see http://www.cms.hhs.gov/newfreedom/accomplish2.pdf. The Federal Register notice for the LIFE Account Systems Change Grants is available at http://www.cms.hhs.gov/systemschange/rc2004fr.pdf.

¹⁹ Foster, L., Brown, R., Phillips, B., Schore, J., and Carlson, B.L. (2003). Improving the Quality of Medicaid Personal Assistance through Consumer Direction. Health Affairs Web Exclusive. 26 March. Available at http://www.healthaffairs.org. Accessed December 14, 2004.

²⁰ The State Plans to evaluate the pilot and recommend program improvements before it expands South Carolina Choice statewide.

²¹ Section 1902(a)(32) of the Social Security Act requires that the Medicaid agency make payment directly to the provider of a covered service furnished to an eligible individual. Regulations at 42 CFR Part 447 establish the rules for such payment. Section 447.10(g)(4) recognizes an organized health care delivery system as an entity to which Medicaid payment may properly be made. Regulations at 42 CFR 447.10(b) define organized health care delivery systems (OHCDS).

²² Stone, R. and Wiener, J. (2001). Who Will Care for Us? Addressing the Long Term Care Workforce Crisis. Washington, DC: The Urban Institute.

²³ Ibid.

²⁴ Benjamin, A.E., Mathhias, R., Franke, T., Mills, L., Hasenfeld, Y. et al. (1998). Comparing Client-Directed and Agency Models for Providing Supportive Services at Home: Final Report. Los Angeles: University of California. Tilly, J. and Wiener, J.M. (2001). Consumer-Directed Home and Community Services Programs in Eight States: Policy Issues for Older People and Government. Journal of Aging and Social Policy, 12(4): 1-26. Wiener, J.M., J. Tilly, and A.E. Cuellar. (2003). Consumer-Directed Home Care in the Netherlands, Germany and England. Washington, DC: AARP. Available at http://www.aarp.org/research/.

²⁵ Benjamin, et al., Comparing Client-Directed and Agency Models.

²⁶ Foster, L., Brown, R., Phillips, B. and Carlson, B.L. (August 2003). Easing the Burden of Caregiving: The Impact of Consumer Direction on Primary Informal Caregivers in Arkansas. Report of Mathematica Policy Research, Inc. Dale, S., Brown, R., Phillips, B., Schore, J., and Lepidus Carlson, B. (November 2003). The Effects of Cash & Counseling on Personal Care Services and Medicaid Costs in Arkansas. Health Affairs. Benjamin, A.E., Matthias, R.E., Franke, T., Mills, L., Hasenfeld, Y., Matras, L., Park, E., Stoddard, S., and Kraus, L. (April 1998). Who's in Charge? Who Gets Paid? A Study of Models for Organizing Supportive Services at Home. University of California. Doty, P., Benjamin, A.E., Matthias, R.E., and Franke, T. In-Home Support Services for the Elderly and Disabled: A Comparison of Client-Directed and Professional Management Models of Services Delivery—Non-Technical Summary Report. Office of the Assistant Secretary for Planning and Evaluation and the University of California.

²⁷ Foster, et al., Easing the Burden of Caregiving.

²⁸ Pamela Doty, Ph.D., Senior Policy Analyst; Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care. Personal communication, February 2005.

²⁹ Wiener, et al., Netherlands, Germany and England.

³⁰ Spillman, B.C. and Pezzin, L.E. (2000). Potential and Active Caregivers: Changing Networks and the Sandwich Generation. The Milbank Quarterly, 78(3): 347-374. Available at http://www.milbank.org/quarterly/7803feat.html. Accessed December 13, 2004.

³¹ Arno, P.S., Levine, C., and Memmott, M.M. (1999). The Economic Value of Informal Caregiving. Health Affairs, 18(2): 182-188.

³² Pamela Doty, Ph.D., Senior Policy Analyst; Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care. Personal communication, February 2005.

³³ Applebaum, R., Schneider, B., Kunkel, S, and Davis, S. (August 2004). A Guide to Quality in Consumer Directed Services. Scripps Gerontology Center, Miami University. Study supported by the Robert Wood Johnson Foundation as part of the National Cash and Counseling Demonstration and Evaluation.

³⁴ Ibid.

³⁵ These efforts are described in more detail in Direct Service Workforce Activities of the Systems Change Grantees (RTI International, 2004). Available at http://www.hcbs.org/files/35/1708/CMSWorkforce.pdf.

³⁶ Pamela Doty, Ph.D., Senior Policy Analyst; Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care. Personal communication, February 2005.

³⁷ For a review of that literature, see Tilly and Wiener, Policy Issues, and Foster, et al., Easing the Burden of Caregiving.

³⁸ States are undertaking additional quality assurance activities under other Systems Change grants as well as in other initiatives unrelated to the Systems Change Grants Program.

³⁹ Applebaum, A Guide to Quality.

⁴⁰ States vary in their requirements. A review of 15 consumer-directed programs found that 8 used criminal background checks. In 5, they were mandated by state law, but 2 of them exempted family members. In the other 3 programs, they were used but not required. Applebaum, A Guide to Quality.

⁴¹ Pamela Doty, Ph.D., Senior Policy Analyst; Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care. Personal communication, February 2005.

⁴² Pamela Doty, Ph.D., Senior Policy Analyst; Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care. Personal communication, February 2005.

⁴³ New Hampshire's workers' compensation regulations state that individuals with physical and mental disabilities who hire personal care workers cannot cover them as domestic workers under the workers' compensation program. These regulations eliminate the option for private pay consumers to provide this basic health and disability coverage to workers who may sustain injuries while on the job.

⁴⁴ In 2003, the statute was amended to allow other qualified agencies to accept private pay consumers. Previously they could accept only individuals eligible for Medicaid programs. The amendment further allowed that private pay consumers could receive personal services through a private arrangement between individuals, subject to any limitations imposed by federal and state laws, rules, and regulations.

⁴⁵ SB 324 (Personal Care Service Provider Law, codified at NH RSA 161-I).

⁴⁶ New Hampshire has received a 1-year no-cost extension to enable its subcontractor—Franklin Pierce Law Center—to continue developing a backup system, which faced some initial administrative barriers that affected recruitment.

⁴⁷ More detailed information about South Carolina's LTC system can be found in Eiken, S. & A Heestand (2003). Promising Practices in Long Term Care Systems Reform: South Carolina's Services for Older People and People with Physical Disabilities. Thomson/ Medstat. Available at http://www.cms.hhs.gov/promisingpractices/scsop.pdf.

⁴⁸ The term "independent provider" is a Medicaid term that means that the beneficiary may choose to obtain care from a particular person (whether that individual is a personal care attendant or a private duty nurse or a rehabilitation therapist in private practice or an independent support broker) instead of choosing to obtain care from a provider organization, such as an agency, which assigns employees to provide direct care. The term is to be distinguished from that of "independent contractor," a term used in the tax code and labor law to distinguish individuals who are self-employed (and subject to 15 percent self-employment tax) from those who are employees, who pay only 7.5 percent tax because their employers pay a 7.5 percent payroll tax. Under labor law, self-employed persons are not required to pay and are not entitled to claim unemployment insurance or workers' compensation insurance.

⁴⁹ Table is from Eiken and Heestand, Promising Practices, op.cit.

⁵⁰ Pamela Doty, Ph.D., Senior Policy Analyst; Project Officer, Cash and Counseling Demonstration, Office of the Assistant Secretary for Planning and Evaluation, Division on Disability, Aging, and Long Term Care. Personal communication, February 2005.

⁵¹ The eligibility requirements for the three consumer-directed programs in the four waiver programs differ slightly. A comparison chart on the Web provides information for each program: http://www.chcpf.state.co.us/HCPF/Syschange/SystemChangeIndex.asp.

⁵² Using funds from a different grant, the state is developing a resource book that provides information about the Medicaid programs, including consumer-directed programs that are available to help consumers live independently in the community.

⁵³ Colorado's training/consumer manual and handbook can be found online at http://www.chcpf.state.co.us/HCPF/Syschange/SystemChangeIndex.asp. Follow links to CDAS to get to the training manual. The operational protocol is also on the Web site.

⁵⁴ Health maintenance activities are defined in statute and rules for In-Home Support Services. The rules define health maintenance activities as "those routine and repetitive Activities of Daily Living, which are necessary for health and normal bodily functioning, that an individual with a disability would carry out if he/she were physically able, or that would be carried out by family members or friends if they were available." This broad definition provides flexibility for consumers to decide which services they want the attendant to provide.

⁵⁵ The statute also requires IHHS providers to provide several core services traditionally offered by Independent Living Centers—peer counseling, information and referral, and independent skills training.

⁵⁶ Wiener, J.M. and Lutzky, S.M. Home and Community-Based Services for Older People and Persons with Physical Disabilities in Washington, prepared for the Health Care Financing Administration, (Washington, DC: The Urban Institute, 2001).

⁵⁷ Dale, S., Brown, R., Phillips, B., Schore, J., and Carlson, B.L. (2003). The Effects of Cash and Counseling on Personal Care Services and Medicaid Costs in Arkansas. Health Affairs Web Exclusive. November 19. Available at http://www.healthaffairs.org. Accessed December 20, 2004.

Skip front matter and go directly to the report.

Consumer Direction Initiatives of the FY 2001 and 2002 Grantees: Progress and Challenges

Acknowledgements

Contents

Exhibits

Boxes

Overview

Operational and Policy Issues

Use of Surrogates

Budgeting and Reimbursement

Services

Provider Payment in Consumer-Directed Service Models

Workforce

Personnel Shortages

Quality Assurance

Conclusions

Section 1 Introduction

Organization of the Paper

Box 1. CMS's Independence Plus Initiative

Independence Plus Grants

Section 2 Overview of Consumer Direction

States' Consumer-Directed Programs

Focus of 11 Grantees' Initiatives

Reasons for Undertaking CD Initiatives

Section 3 Program Challenges and Policy Issues

Use of Surrogates

Budgeting and Reimbursement

Box 2. Basic Medicaid Provisions Relevant to Individualized Budgets

Services

Provider Payment in Consumer-Directed Service Models

Box 3. Basic Medicaid Provisions Regarding Payment of Providers

Workforce

Personnel Shortages

Hiring Relatives

Box 4. Minnesota Waiver Requirements for Hiring Legally Responsible Relatives

Backup Systems

Consumer/Attendant Relationships

Quality Assurance

Criminal/Abuse Background Checks

Training for Consumer-Directed Workers

Conclusions

Section 4 Description of 11 Grantees' Consumer Direction Initiatives

Methodology

New Hampshire

CPASS Grant Initiative

Challenges Successfully Addressed

Outcomes and Sustainable Change

South Carolina

Real Choice Grant Initiative

Implementation Challenges

Colorado

Indiana

Kansas

Maine

North Carolina

Oklahoma

Washington

West Virginia

Wisconsin

Appendix A CMS Policy Regarding Self-Direction Under Three Medicaid Authorities

Endnotes

Consumer Direction Initiatives of the FY 2001 and 2002
Grantees: Progress and Challenges

Section 1
Introduction

Section 2
Overview of Consumer Direction

Section 3
Program Challenges and Policy Issues

Section 4
Description of 11 Grantees'
Consumer Direction Initiatives

Appendix A
CMS Policy Regarding Self-Direction
Under Three Medicaid Authorities