Christina Battista is saving up to buy a bicycle. A few credits short of a bachelor's degree in psychology at Rhode Island College, she needs a bike to get to class. And she has her eye on a particularly expensive bicycle--a recumbent model--because she can't use her arms.

Luckily for her, she lives in one of 15 states now offering Cash & Counseling, a Medicaid program that allows disabled or elderly beneficiaries to use Medicaid dollars to buy goods and services that will help them live at home and in the community rather than in an institution.

Some might be surprised to learn that Medicaid money is being spent on bicycles, not to mention washer/dryers, BlackBerrys and other items that participants have bought through the program. But according to recent studies, such purchases are worth it: Cash & Counseling participants are healthier and happier than those in other home-care programs and less likely to be admitted to hospitals or transferred to long-term-care facilities.

With baby boomers aging and an increasing number of disabled people coming onto Medicaid rolls, many states are looking for ways to rebalance the way money is spent in their long-term-care programs. The aim is not only to provide services that people prefer but also to veer toward less expensive home and community care and away from more costly nursing home and other institutional care. That rebalancing act is creating a lot of interest in the experiences of the 15 Cash & Counseling states.


Between 1998 and 2003, three states--Arkansas, Florida and New Jersey--piloted demonstration programs for Cash & Counseling. By 2004, the Centers for Medicaid & Medicare Services allowed every state to apply to add this home-care option to its Medicaid package. Twelve more have signed on so far, and those numbers are likely to grow. The 2006 Deficit Reduction Act made it even easier for states to add self- direction to their existing personal or home and community-based services.

The allure for states, both those in the program and those who may sign up, is the ability to provide better care without spending more money--or perhaps even saving money--on the long-term-care side of their Medicaid ledger. Based on the track record of demonstration states, savings are likely to materialize--but it may take a while for them to show up.

When Arkansas compared costs for participants in traditional home- care plans against costs for those in the self-directed program, they got mixed fiscal news. In the first year, Cash & Counseling participants ran up bills for personal-care services that were almost twice as high as those in the traditional plan--largely because participants in self-directed care had access to a greater portion of authorized home-care services than those in traditional care. At the same time, thanks to this improvement in delivery of services, they stayed healthier than the control group and that showed up in fewer admissions to the hospital or transfers to nursing homes.

Year one's decline in hospital and nursing home costs did not, however, make up for the upswing in spending for personal-care services. Year two's costs came close to a draw. Although data are not yet available, the year-two findings suggest that states could see savings if self-directed patients continue to thrive at home and avoid institutionalization.

Although the cash side of the program has been capturing attention, the 15 Cash & Counseling states are finding that the key to success lies in the other half of the equation: To succeed, the program needs effective counseling.


Cash & Counseling is as straightforward as its title. Participants get a monthly cash allowance of some of the Medicaid money allotted for their care. They can use it to make adaptive home repairs, hire aides--friends, family members or professionals--for help with personal care, and save for big-ticket items, such as recumbent bicycles. There is also a no-can-do list. The cash can't subsidize the rent or grocery bills or be blown on tobacco, booze or lotto tickets.

Participants receive help managing the money. The counseling ranges from simple budgeting advice to more sophisticated assistance with state and federal employer taxes and regulations. Participants may also need guidance with the fine points of being an employer, such as how to fire an aide.

Cash & Counseling can be an added twist on existing Medicaid offerings. But New Mexico went one step further. The state revamped its long-term-care program and incorporated the self-directed program as its centerpiece.

The first step was taken in 2004 with the creation of a cabinet-level Department of Aging and Long-Term Services, which worked with health and human services agencies to craft a Cash & Counseling variation it dubbed Mi Via--Spanish for My Way. The second step called for representatives of various disabled and elderly groups--with roots in native, Hispanic and Anglo communities--to forge consensus about how the program could best serve their constituents' needs. At first, the elderly community and the younger disabled populations were at odds over the goals and limitations of self-direction. Older folks wanted more focus on dealing with impairments, while younger people tended to be concerned with engaging in life. It took two years of meetings, but the factions finally agreed on ways to integrate alternative sources of assistance.

The stakeholder group also wanted to make sure that people throughout the state who could benefit from Mi Via would know about it. Toward that end, they took it on the road, literally. Instead of relying solely on static brochures or Web site information, the program put on a traveling road show--a two-act theatrical called "Mi Via: Who's in the Driver's Seat?" The show played in venues throughout the state and starred a Mi Via participant, Tony Chavez, who played himself as he explored the differences between Cash & Counseling (in which the protagonist drives) and the traditional personal-care model (in which our hero sits in the backseat).

Chavez, whose disability--a brain injury--left him in need of a driver, had introduced the motorist's metaphor at the stakeholder discussions. Today, Chavez, with help from a BlackBerry purchased with his Mi Via allowance, counsels others in the program.

New Mexico's overhaul is paying off in terms of rebalancing long- term-care spending. The state's aging and long-term-care department reports that 70 percent of Medicaid funding for long-term care goes to home- and community-based services. In 1995, home-care spending was less than 10 percent.


New Mexico also provides, as do all state Cash & Counseling programs, fiscal employer agents. These FEAs help participants manage the purse. They administer the financial paperwork, such as paychecks and purchasing documents, and handle all of the back-office complexities, such as taxes and compliance with Medicaid regulations. They can also provide common sense financial guidance. For instance, FEAs from Public Partnerships, a company that provides FEA services to several state programs, uses a budget planner, "Family Friendly Report," that is available in English, Spanish or pictogram. It helps participants track how much has been budgeted for particular expenses, how much has been spent and how much money is still available to be spent.

Comprehensible money management tools such as these help resolve one issue that makes some state officials uneasy about Cash & Counseling: Will participants squander the money? After all, they are given an allowance--a monthly Medicaid allotment--with very few strings attached.

So far, there has been little evidence of misuse of funds. In part, that's because the program is just beginning to move out of its demonstration phase and pilot programs have a way of looking good-- they're small and carefully controlled. But a survey in the three demonstration states reinforces the notion that participants in the program take their fiscal responsibilities seriously. The survey found, for instance, that participants were uneasy about handling lump sums of cash and hungry for counseling help.

States with self-directed programs have been responding to this need. Most have encouraged or even mandated a personal representative for participants who may find self-direction a challenge. For these folks, says Rhonda Richards, senior legislative representative of AARP, "the counseling and other support services become even more important."

With so much riding on the support mechanisms, it makes sense for states to be cautious about ramping up enrollment. A slow rollout, says Dianne Kayala, Rhode Island's Cash & Counseling director, allows a state to "deal with issues as they develop rather than have a crisis." She also suggests that as states implement their programs, they employ more counselors than they think they'll need.

Striking a balance between a heavy regulatory hand and a flexible one is probably the biggest challenge. While there are dangers in too much autonomy, Kevin Mahoney, the Boston College professor who devised Cash & Counseling and is director of the national program, suggests that self-direction will not prosper if burdened by too many rules. People in the program have chronic needs, he says, and are good at solving the predictable daily problems of their own long-term care--how to get to school with just the right bike or what modifications to make to roll a wheelchair through the backyard.

But rules are on the way. CMS is at work spelling out guidance for those states that adopt Cash & Counseling under provisions of the Deficit Reduction Act. Mahoney says he is working with CMS to keep the program as flexible and expansive as it can be.


Kevin Mahoney, Cash and Counseling's national director, identifies the key factors that make the self-directive program effective:

  1. The advantage of personal control offers both practical and psychological benefits ("I'm in the driver's seat").
  2. The flexibility of the program allows participants to use Medicaid money more efficiently. For instance, traditional services usually offer blocks of time during business hours; Cash & Counseling is perfect for those who need only 10 minutes of help early in the morning.
  3. Although independence is the byword, the program is more about family and community intervention than rugged individualism. Because the program allows payment to family and friends, many can now provide time and help that was previously unfeasible financially.

This last point may turn out to be the most important. A recent study released by the Urban Institute foresees a growing shortage of long- term-care workers as baby boomers age. Cash & Counseling opens a whole new labor market. Often, when the person they were caring for passes away, Cash & Counseling assistants decide to help other participants. Iowa, for one, is taking advantage of this phenomenon by building a network to make these connections.