Cost-effectiveness of self-direction
The fundamental aim of most self-direction programs is not to save money, but to give individuals with disabilities greater control over the services and supports they receive and when, by whom, and how they are delivered.
In virtually all instances, however, the increase in personal control is accompanied by requirements that total service costs are not to exceed the costs that a community provider would incur in delivering the same array of services and supports.
In some instances, the upper limit on self-directed support plans is set at 100% of the cost of provider-directed services and supports. In other programs, a discount factor is applied to self-directed support plan allocations (e.g., 90% of provider costs) to be held as a “risk pool” of funds that can be used by the state agency or provider to meet unanticipated cost increases over the course of the year.
As a result of such policies and the variability among self-directed programs across and within states, it can be difficult to draw valid comparisons between the costs of self-directed versus provider-directed services.8
In Michigan, one study reported a median reduction of 8% in the cost of serving 70 individuals with I/DD in a self-directed demonstration program. Comparisons of expenditures on behalf of these individuals were made before they entered self-directed programs and again three years following their enrollment in the program.
The study did not analyze control or comparison group data, and therefore the authors warn against generalizing from the findings of this small, single-state study.9
The same study found that program savings increased to 14% when expenditures were adjusted for inflation over the three-year period, with the median public cost per participant declining from $67,322 to $56,778 in inflation-adjusted dollars. The study also found that participants reported they had more and better choices, less professional domination and a higher overall quality of life.
Another study evaluated the cost impact of the Cash and Counseling demonstration program, a joint venture between the Robert Wood Johnson Foundation and the Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services, which was implemented in 15 states to expand self-directed services for Medicaid beneficiaries with chronic disabilities.
When personal care cost data of participants in the Cash and Counseling demonstration program were compared with those of a control group receiving provider-directed personal care services, researchers reported that:
- Participants incurred higher costs, primarily because program enrollees received more of the types of care they were authorized to receive than the control group members.
- The increased personal care costs were partially offset by lower institutional and other long-term care outlays on behalf of Cash and Counseling participants.
- The evaluation team concluded that, if a state carefully designs and monitors its Cash and Counseling program, self-directed services should not cost any more than traditional, provider-directed services.10
- The Arkansas Cash and Counseling program saved $5.6 million after nine years of operation, not including the additional savings associated with reduced nursing home utilization.11
Examining the experiences of states operating self-directed support systems for individuals with I/DD, one study found that cost savings expectations are usually built in to a state’s funding assumptions.
Typically, a state either pays a set fraction (e.g., 90%) of the total amount allowed for traditional provider-directed services, or establishes a lower allowance for self-directed administrative/overhead costs than for provider-directed administrative/overhead costs.12
Additionally, some states have created self-directed support programs with tight spending caps that are aimed at stabilizing families and preventing emergency out-of-home placements of individuals on a waiting list for full-time residential supports. By dampening demand for emergency residential placements, this comparatively low-cost option allows a state to extend services to additional, wait-listed individuals, thus reducing the gap between supply and demand.
One I/DD program administrator estimated that his state was saving more than $1 million a year by offering low-cost self-directed support options to families caring for loved ones with an I/DD in their homes.13