Designing the Cash and Counseling demonstration and evaluation

Health Services Research, Feb, 2007 by Pamela Doty, Kevin J. Mahoney, Lori Simon-Rusinowitz

Nevertheless, the decision to base budget neutrality calculations on PMPM treatment-control group comparisons remained fraught with unforeseen difficulties for states. Under the standard budget-neutrality protocol, state Medicaid program administrators know in advance the waiver cost caps they cannot exceed. This is a clear managerial advantage. Had the standard approach been used in CCDE, program administrators could easily have set the dollar value of the CCDE allowance so as not to exceed the preestablished PMPM cost limits.

Instead, because budget neutrality would be judged by comparing treatment/control group actual costs retrospectively, CCDE project managers had to try to predict what percentage of their authorized services control group members would actually receive. State project managers were advised to research the average shortfall between authorized services and actual services delivered in a recent period (in other words, they were to compare expected versus actual costs) and to discount CCDE allowances accordingly.

In retrospect, the CCDE management team and the states did not take sufficiently into account the possible implications of self-selection on control group costs. All demonstration enrollees were volunteers. It seems quite likely that some of them may have been motivated to join the demonstration because they were dissatisfied with traditional Medicaid services for one reason or another. If their reasons included greater-than-average difficulty accessing traditional services, then CCDE volunteers randomized to the control group would use fewer traditional services, and have lower home care expenditures, than would be reflected in states' calculations of authorized or expected costs.

In any case, the question of whether and by how much to discount CCDE allowances to adjust for the authorized services that control group members would not receive from traditional service providers presented state program administrators with a dilemma. On one hand, states could not afford to incur the financial penalties CMS would impose if they failed to satisfy the budget neutrality test. On the other hand, if they discounted CCDE allowances too steeply, they could undercut the potential of CCDE to offer some Medicaid beneficiaries a means of overcoming the access and quality problems they experienced in the traditional service system.

There was much discussion and debate over whether discounting was indeed necessary to assure federal waiver budget neutrality and was justifiable administratively (i.e., procedurally fair). Florida and Arkansas officials chose to apply discounts. Arkansas, the state with the least generous Medicaid personal care benefits, actually applied the steepest discounts. Over the course of the demonstration, the Arkansas discount had to be increased because the shortfall between authorized and delivered services for control group members proved to be much greater than expected (and much greater in Arkansas than in either New Jersey or Florida). New Jersey officials elected not to discount benefits; they concluded that consumers typically received benefits quite close to what was authorized, on average, and hoped to get enough savings from reducing administrative overhead to make benefit discounts unnecessary.