Within the disability policy arena, self-direction refers to an approach to delivering home and community-based services (HCBS) that allows eligible individuals to directly control a range of services and supports—with the assistance of representatives of their choice—based on their own preferences and needs. The central goal of self-direction is to maximize an individual’s opportunities to live independently in the most integrated community-based setting of his or her choice. In contrast to traditional approaches that rely on the service provider to coordinate and deliver necessary supports, self-directed strategies shift control over resources and staffing to the individual, allowing each person to determine the role that the provider will play in his or her life. From the person’s point of view, it means going about one’s life and being able to incorporate services into the flow of daily activities. Depending on the program context, self-direction sometimes is referred to as "consumer-direction" or "participant-direction."

In a self-directed program model, a considerable degree of authority is transferred to the participant and, in some instances, a family member who is selected or legally authorized to represent the participant. This approach is in sharp contrast to a traditional service delivery model where decision-making and managerial authority is assigned to professionals who may be state employees, state contractors, or service providers. In this sense, self-direction marks a major paradigm shift in the delivery of publicly funded HCBS.

Employer Authority and Budget Authority

Medicaid HCBS policy recognizes two basic types of self-direction: employer authority and budget authority, each of which can take several forms. Participants exercising employer authority are authorized to hire, fire, and supervise personal support workers (e.g., personal care attendants, homemakers). The more comprehensive form of self-direction, referred to by Centers for Medicare and Medicaid Services (CMS) as budget authority, allows participants to purchase goods and services as well as supervise personal support workers and manage expenditures within the limits of a specified budget allocation.¹

Employer Authority

To be recognized as a form of self-direction, program participants, at a minimum, must be allowed to hire, manage, and dismiss their personal support workers. Employer control includes the following functions: recruiting job candidates, interviewing applicants and checking their references (unless the participant knows the applicant very well), deciding who to hire, setting and negotiating work schedules and determining training needs, assigning tasks to workers, supervising and evaluating the workers’ job performance, and deciding when to dismiss a worker whose performance has been unsatisfactory. Participants who self-direct their services also play a role in paying workers. At a minimum, participants should approve workers’ timesheets. In some programs, however, they also are responsible for co-signing the workers’ paychecks.

Participants typically play no role in establishing the hourly wages of workers in self-directed programs using the employer authority only. In contrast, participants in programs with budget authority may negotiate hourly wage rates and additional fringe benefits with their workers. The only requirement is that they observe applicable federal and state laws governing minimum wage, overtime pay, workers compensation, disability insurance, and unemployment insurance. In some states, participants also must abide by collective bargaining agreements with unions representing participant-directed workers.

Budget Authority

Under the budget authority model, participants are allowed to use their funding allotment to not only hire personal support workers, but also to purchase other goods and services designed to meet disability-related needs and, in the case of people with psychiatric disabilities, recovery-related supports. Some of these goods and services may substitute for human assistance or otherwise enhance the individual’s independence (e.g., assistive technology, home modifications, transportation services, laundry services, meal services, personal care supplies, noncovered prescription and nonprescription medications). Participant-directed goods and services usually include items that would not be covered under traditional HCBS programs, and these goods and services may be purchased from nontraditional sources. Each self-direction program establishes its own ground rules governing approvable purchases, with some programs being considerably more permissive than others.

Individuals receiving support may vary in the extent to which they require or desire assistance in carrying out their responsibilities under the program. Some may rely on considerable support from friends and family members to manage their services, while others may self-direct with minimal assistance. Still others may depend on a paid support broker, a navigator, or a recovery coach to establish goals, develop budgets, and navigate their way through the service system.

Individual Budgets

An individual budget expresses in dollar terms the amount of funding deemed necessary to meet the anticipated service and support needs of an individual with a disability who is enrolled in HCBS. When services are self-directed, the individual decides how all or a defined portion of his or her individual budget is to be used. Experts in self-directed services generally agree that the methodology used in establishing individual budgets must be:²

• Accurate – It must be based on a valid assessment of the individual’s needs and yield an amount sufficient to ensure that the participant’s needs are met.

• Consistent – The methodology has to be applied consistently across the entire program, state, and target population.

• Reliable – It should produce consistent results over time and with repeated applications.

• Equitable – Participants with similar support needs and circumstances should receive comparable budgets that also establish a defensible relationship between the cost of participant-directed services and agency-directed services.

• Flexible – Individual budgets should be revised in a timely manner when the participants’ circumstances, needs, and choices change.

• Transparent – The budget development process should be open to public scrutiny.

The following processes are involved in developing and using individual budgets: assessing individual needs, developing an individualized spending allocation, calculating individual budget amounts, and determining a spending plan. The order in which these activities occur varies from one self-directed program to another. Some programs begin by calculating the budget amount and subsequently assessing individual needs and developing a spending plan. This approach is referred to as prospective budgeting. Other programs begin the process by first assessing the individual’s needs, then developing a service plan to address those needs, and conclude by calculating the dollar value of the plan using a specific formula (i.e., determine the amount of the individual’s budget). This latter approach is referred to as retrospective budgeting.³

• Prospective Budget Development. The amount of an individual’s benefit is determined before the person-centered planning process begins and is based on an objective assessment of the individual’s support needs. This information is translated into a dollar figure using a statistical modeling methodology that predicts the amount of funding required to meet the person’s service and support needs. Once the total budget amount is determined, a person-centered plan is prepared and spending allocations determined, taking into account the person’s support needs, preferences, and life goals. When an individual’s budget allocation is established in advance, a state is able to predict systemwide expenditures more accurately and control costs while permitting participants to exercise broad control over their personal budgets.

• Retrospective Budget Development. In a retrospective approach, the amount of the benefit is determined by the individual’s needs through an open, interactive process designed to identify specific needs for external support and assistance, and the costs of the services to be provided. The resulting judgments on support needs may be based on expressed and observed needs rather than on empirical data. Projected costs are typically based on current payment rates or schedules. Given the state authority’s responsibility to manage both services and costs, there generally is an authorization process prior to finalizing the service plan and individual budget. Once an individual’s needs are determined, the costs of meeting those needs are assessed by using either traditional fee-for-service rate schedules or alternative methods. With the budget amount in hand, self-directing participants prepare a personalized spending plan and implementation strategy.

Regardless of the methodology used by a state, the core components of an individual budget development process include (1) an assessment of individual needs, (2) a plan for meeting those needs, (3) the establishment of a personal budget amount, and (4) the preparation of a spending plan and implementation strategy. It is important to keep in mind that determining those needs and figuring out the best approach to meeting them are part of the service planning process in self- and agency-directed services.⁴

Person-Centered Planning

Person-centered planning (PCP) is an integral part of calculating individual budgets. PCP methodologies vary from state to state and population group to population group. State/local service systems for people with developmental disabilities (DD) typically employ PCP processes that focus on identifying major life goals and making related decisions regarding living arrangements, companions, training, and employment.

DD planning processes tend to be highly structured, using assessment tools, checklists, and protocols to guide decision making. By comparison, systems serving elderly individuals and younger people with physical disabilities tend to use more informal PCP processes, focusing on identifying the services and supports necessary to allow an individual to perform essential daily living tasks (e.g., bathing and meal preparation). Regardless of the methods used, all PCP processes should adhere to the following principles:⁵

• All planning activities and decision-making are led by the participant;
• Participants receive all of the relevant information and support they need to make informed decisions; and
• Service planning decisions are built around the participant’s strengths, capabilities, preferences, desires, life goals, and support needs, rather than the availability of community supports.

Need Determination

The needs assessment process takes into account an individual’s (1) medical condition(s); (2) functional capabilities and restrictions, specifically the ability to perform activities of daily living (ADLs) and instrumental activities of daily living (IADLs); (3) living arrangements; (4) access to unpaid supports; (5) social environment; and (6) access to required behavioral supports, if required. The methods used in assessing individual needs vary significantly from state to state, from population group to population group, and sometimes even within different geographic areas of a state. For years, state DD service systems have used standardized assessment tools, such as the Individual Client Assessment Profile or the Developmental Disability Profile to assess individual needs. In programs serving elderly individuals and younger people with physical disabilities, the primary focus is on assessing ADLs and IADLs along with the person’s medical condition(s), often with a lesser reliance on standardized assessment tools.

In recent years, a growing number of state DD service systems have begun to use the Supports Intensity Scale (SIS) to assess individual needs. Using the assessment results, individuals are grouped into a series of levels based on the intensity of their support needs and this information is combined with historical service cost data to generate Individual Budget Allocations (IBAs). The resulting IBAs are used to calculate payment rates for traditional community provider agencies and determine the budgets of individuals who choose to self-direct their HCBS.⁶

In HCBS programs for elders and younger people with physical disabilities, a few states use the Minimum Data Set – Home Care (MDS-HC), a comprehensive assessment tool that gathers information on multiple need-related factors. An individual’s characteristics are assigned a weighed score based on their predictive relationship to utilization and costs. These weighed scores are added to reach a total score that is adjusted to account for regional economic conditions (e.g., variations in labor costs), historical expenditure patterns, and funding restrictions to arrive at an empirically derived individual budget.

Use of Representatives

Typically, self-directed service programs allow participants to use family members and friends to help them manage and direct their services and service budgets. Especially in the case of people with significant cognitive impairments, a representative can act as an intermediary in articulating the individual’s needs and preferences and also perform tasks that the individual is unable to carry out without assistance. In some cases, the representative may be the person’s court-appointed personal guardian or conservator, but usually representatives play a less formal, advisory, and facilitating role.

Some self-directed services programs do not require representatives to be formally designated; however, other programs mandate that potential representatives be screened to ensure that they have a strong commitment to the participant’s wellbeing, are capable of carrying out their program responsibilities, and are willing to comply with program requirements. A representative may function in an individual capacity, or a

group of individuals (often referred to as a "circle of support") may come together to ensure that a participant receives the assistance and personal support that he or she needs. In either case, one key challenge is to ensure that the views and interest of the participant remain the paramount consideration in reaching all plan-related decisions.

Employing Family Members

Most self-directed programs, including Medicaid-funded programs, now permit relatives of a program participant to act as paid caregivers. Federal Medicaid regulations prohibit legally responsible relatives from serving as paid providers of personal care/personal assistance services (PAS) (42 CFR 440.167). The meaning of legal responsibility is defined in state law and therefore varies from state to state, but generally the term refers to the parents of a minor child. Operationally, some states prohibit payments to a spouse. This prohibition is based on the presumption that legally responsible relatives should not be paid for providing supports that they ordinarily would be expected to provide to their loved ones.

Parents and other relatives (e.g., siblings, aunts, uncles, cousins, a spouse) of adults with disabilities usually are not considered under state law to be legally liable for providing care and, consequently, may receive Medicaid payments for the provision of personal care/assistance services. In addition, since the mid-2000s, CMS has permitted states to make payments to legally responsible relatives for personal care or similar HCBS when such services are deemed to be extraordinary in scope and result directly from the individual’s disability, provided that the state sets forth satisfactory criteria for authorizing such service payments.⁷ In recent years, similar policies governing payments to legally liable relatives have been applied to Section 1915(i) home and community-based state plan services and Section 1915(j) self-directed state plan PAS. An important point to keep in mind is that federal policy is permissive regarding payments to relatives and, consequently, decisions with respect to the circumstances under which relatives may serve as paid caregivers rests with the individual state.