Chapter 4. Basic Features of Self-Directed Medicaid Services

Currently, federal Medicaid law offers the states several approaches to funding self-directed home and community-based services and supports, including the—

  • Home and community-based state plan services under Section 1915(i) of the Act;
  • Community First Choice Option under Section 1915(k);
  • Self-directed PAS under Section 1915(j); and
  • HCBS waiver program under Section 1915(c).

These statutory authorities may be employed separately or in combination. States may also link efforts to promote self-directed supports to other Medicaid funding authorities, such as the Money-Follows-the-Person Demonstration grant program and the State Balancing Incentive Payments program, to leverage desired systemic changes. These Medicaid funding authorities have slightly different operating policies, but they all share the same basic requirements, including the following:32

Operational Components

  1. Person-Centered Planning.  Federal statutory and regulatory policies require states to perform individualized assessments and use person-centered planning in developing service plans for Medicaid beneficiaries who choose to self-direct their supports. The process must be directed by the person receiving assistance, with or without the assistance of a representative(s) selected by the individual. The planning process must take into account and plan for possible contingencies (such as the unavailability of a regularly scheduled support worker) and include these back-up strategies in the individual’s written service plan. In addition, the state is responsible for ensuring that a risk assessment is conducted for each program participant and the results of the assessment are taken into account in developing back-up or contingency plans for the affected individual.
  2. Individual Service Plan. Each recipient of self-directed supports must have a written plan specifying the services and supports required to meet his or her preferences, choices, capabilities, and needs, as well as the assistance the recipient requires in order to direct those services and supports and remain in the community.
  3. Individualized Budget.  The amount of funds under the control and direction of the person is referred to as the individualized budget. A participant’s budget is tied to his or her service plan and developed through a person-centered planning process that emphasizes the importance of individually tailoring the budget to the person’s needs, preferences, and life goals. States are required to spell out the methods to be used in calculating the dollar value of individualized budgets based on reliable cost and service utilization data. In addition, states must specify the methods and processes to be used in adjusting a participant’s budget when service plan changes occur and delineate the procedures to be used in evaluating a participant’s expenditures.
  4. Information and Assistance in Support of Self-Direction.  States are required to provide or arrange for the provision of a system of supports that is responsive to each individual’s needs and desires for assistance. The amount and frequency with which self-directing participants use available supports is likely to vary from person to person and change in response to situations that arise. Among the types of assistance to be made available on an as-needed basis are help in developing a person-centered service plan and individualized budget, managing personal support workers and services, and performing other employer-related and budget management tasks. The state also is responsible for ensuring that participants are informed about such matters as the operation of self-directed services, individual rights and responsibilities, available resources, counseling, personal support worker supervision and training; the use of FMS, and access to an independent advocacy system. Some states have created a separate Medicaid-reimbursable service—referred to as support brokerage, individual counseling, or personal guide—to perform these functions and act as a liaison between the individual and program administrators. In these situations, the support broker, consultant, counselor, or guide usually acts as an agent of the program participant and takes direction from the participant.

Financial Management Services

Although individuals who self-direct their Medicaid HCB services may elect to assume personal responsibility for handling some or all financial management tasks, very few choose to do so. CMS defines the term "Financial Management Services" as follows:

A service/function that assists the family or participant to: (a) manage and direct the distribution of funds contained in the participant-directed budget; (b) facilitate the employment of staff by the family or participant by performing as the participant’s agent in performing such employer responsibilities as processing payroll, withholding and filing federal, state and local taxes, and making tax payments to appropriate authorities; and (c) performing fiscal accounting and making expenditure reports to the participant and/or family and state authorities.33

Principal FMS functions include helping Medicaid recipients to—

  • Understand their billing and documentation responsibilities;
  • Perform payroll and other employer-related duties on the individual’s behalf (e.g., withholding and filing required reports on federal, state, and local payroll and unemployment taxes; purchasing workers’ compensation coverage and other types of insurance; collecting and processing worker timesheets; calculating and processing employee benefits; issuing payroll checks);
  • Purchase approved goods and services authorized under the individual’s service plan;
  • Monitor and track expenditures against the individualized budget; and
  • Identify expenditures that are over or under the budgeted amount.

A state must make FMS available to all Medicaid-eligible participants who elect to self-direct their services.

Quality Assurance and Improvement

Federal quality monitoring and reporting requirements vary according to the Medicaid home and community-based funding authority a state elects to use. However, each state must have a system for continuously monitoring and improving the quality of its Medicaid-funded HCBS. This system must be based on a cyclical process of discovery, remediation, and quality improvement. The state must have a systemic approach to monitoring the quality of HCBS. When deficiencies are identified, a state must be capable of taking prompt corrective actions to restore service quality. In addition, a state must be capable of identifying systemic weaknesses in its service delivery process and instituting quality improvement projects to rectify such weaknesses. Finally, the state Medicaid agency must exercise overall responsibility for monitoring system performance and individual outcome measures.

Managing Risk, Balancing Personal Autonomy, and Protecting from Harm

In designing self-directed support programs, one of the main challenges that public policymakers face is to determine a means of affording participants greater personal freedom and control while at the same time ensuring that they are able to live safely in the community. Achieving the appropriate balance between personal autonomy and protection from harm is especially complex in the case of people with cognitive, intellectual, and psychiatric disabilities who are able to make informed choices only when they receive direct assistance and support from another person(s).

Federal and state policies require HCBS providers to adopt an aggressive posture to protect the individuals they serve from abuse, neglect, and mistreatment. Given the consequences of failing to fulfill these fundamental responsibilities, personal choices often are constrained by actual and perceived risks to an individual’s health and safety, and consequently they become the subject of negotiation between the person and the support agency rather than being viewed as an individual right. Under a self-directed program model, authority and control over a person’s health, welfare, and lifestyle are shifted to the individual, along with commensurate responsibilities. The resulting realignment of authority and responsibility necessitates changes in the manner in which services and supports are managed. But it does not alter a state’s obligation to ensure the health and safety of Medicaid recipients. Policies and practices reflecting this realignment of authority and responsibilities, therefore, must occur at the individual, program, systemic, and administrative levels of a state’s service delivery system.34  Policies must address the following concerns:

  1. Individual risk related to the decisions a person makes with respect to her or his lifestyle, health, and general welfare. To ensure that such decisions are made in an accountable manner, a state should (1) define the role of the individual in the assessment and management of risk; (2) identify the methods to be used in determining an individual’s competency to give informed consent and to describe her or his decision-making capacity; and (3) articulate a shared understanding of the meaning of risk, liability, and mitigation for self-directed services.
  2. Program risk related to the roles and responsibilities of each individual and the agency supporting her/him in determining risk-sharing relationships. State policies should (1) describe program features designed to limit risk and mitigate the consequences when necessary, (2) outline an appropriate risk management protocol to address provider agency risks, and (3) provide mechanisms for individuals receiving support and organizations providing support to resolve differences with respect to balancing personal choice with provider responsibility.
  3. Systemic risk related to the development of a comprehensive community infrastructure with the capacity to minimize risk and institute timely and appropriate responses to emergency situations. State policies should (1) identify the basic components and desired outcomes of a risk management system; (2) spell out criteria for distinguishing between reasonable and unreasonable risks; (3) ensure effective responses to identified hazardous situations; (4) specify how liability is to be managed with respect to health conditions, chronic disabilities, physical and mental impairments, personal actions, decisions, and the exercise of choice and inappropriate or criminal behavior; and (5) ensure effective oversight, monitoring, and follow-up.
  4. Administrative risk and liability associated with financial management, U.S. Department of Labor and Internal Revenue Service requirements governing wages, hours, and conditions of employment, and ensuring that support staff hired and supervised by people with disabilities is appropriately trained.

The mechanisms used to assess and respond to risk vary according to the population being served and the nature, extent, and responses of each individual to her/his disabilities. Because impairments in judgment among people with psychiatric disabilities often are episodic in nature, for example, the use of proactive planning tools such as Wellness Recovery Action Plans, Advance Psychiatric Directives, and negotiated risk agreements should be viewed as critical components of a well-designed risk management system.

There is ample evidence that people with cognitive, intellectual, and mental disabilities, with appropriate support, can successfully direct their own services. But states must ensure that appropriate policies are in place to ensure that such individuals receive the support they need to make their own choices and exercise control over their lives. As Moseley points out, "[a] system that fosters self-determination must consistently reinforce the central role of the individual receiving support."35

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