Designing the Cash and Counseling demonstration and evaluation

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

A second problem in giving an unrestricted cash payment to beneficiaries was that neither federal nor state Medicaid officials were willing to cede such a great degree of control over public funds to beneficiaries. Some senior federal officials worried that beneficiaries might use the cash benefit to buy liquor, lottery tickets, cigarettes, or illegal substances, or that family members would exploit the beneficiary and use the benefit themselves. For their part, state officials were prepared to loosen, but not eliminate, Medicaid coverage restrictions. They supported requirements that program participants use the CCDE cash benefit only to meet health and disability-related needs, not to cover general living expenses or buy luxury items. Even paying for education or training seemed inappropriate uses of Medicaid funds. Finally, state officials wanted to prevent program participants from inadvertently wasting their CCDE allowances by using them to purchase goods or services that Medicaid or other public programs already covered.

The final barrier to giving cash directly to beneficiaries was the resistance of the Medicaid fiscal intermediaries in the participating states. Fiscal intermediaries are private firms, serving as administrative contractors that operate state Medicaid Management Information System (MMIS) and associated claims payment operations. For a myriad of technical reasons having to do with the complexities and costs of making software and other changes to MMIS designed to process providers billings electronically, these contractors balked at mailing benefit checks to, or making electronic deposits to the personal bank accounts of, CCDE participants. The extra costs the fiscal intermediaries would have charged to retool their systems again raised more questions about whether cash payments could ever become widespread, even if the evaluation findings were positive.

In the end we decided that, in lieu of a direct cash payment, CCDE would provide participants with a prospectively paid monthly budget that would be managed by a fiscal-services provider at the direction of the beneficiary or a designated representative. Lest this form of consumer-directed care be too far removed from the original idea of a direct cash payment, we also decided to offer beneficiaries two options. First, they would be allowed to receive their allowance in cash each month from the fiscal-services provider if they agreed to be trained and tested on fiscal responsibilities and submit to a periodic audit (and retained receipts for all purchases with the allowance). Second, beneficiaries would be able to receive a cash advance each month of up to 10 or 20 percent of the monthly allowance for incidental purchases, such as taxi fare, that could not readily be invoiced in advance. Consumers would pay for the bulk of their expenses by submitting invoices (or timesheets, for workers' wages) to the fiscal services provider, which would write the checks. The first option was decidedly unpopular with beneficiaries--only a handful among thousands chose to manage the allowance themselves. Most chose to receive the modest cash advance, although a sizeable number took none of their allowance in cash and had all of their eligible expenses paid for directly by the fiscal agent.