Shortly after World War II, the Veterans Administration launched a cash-benefit program to allow veterans with disabilities to hire personal attendants. With the exception of comparatively small family support and respite care programs, however, the notion of substituting cash payments for in-kind government benefits failed to take root in civilian programs until the mid-1990s, when the U.S. Department of Health and Human Services (HHS) joined forces with the Robert Wood Johnson Foundation (RWJF) to launch demonstration programs that enabled participants to manage the funding allocated on their behalf and directly control the staff who worked with them.

The advantages of providing PAS on an outpatient basis became evident in 1953 when Rancho Los Amigos Medical Center in Los Angeles hired personal assistants at a cost of $10 a day to care for 158 iron lung users, thus avoiding the $37 a day cost of providing inpatient care. This Los Angeles County program eventually was expanded statewide, becoming the California In-Home Supportive Services (IHSS) program in 1973.⁸  Initially, IHSS benefits were financed through a combination of state and local revenues, plus federal Social Services Block Grant funds authorized under Title XX of the Social Security Act. In 1993, however, California amended its Medicaid state plan to make IHSS benefits an optional coverage for individuals meeting the state’s income eligibility and disability standards. With more than 435,000 current participants⁹ IHSS is the largest public program in the nation offering self-directed services to frail elders and other people with physical, developmental, and psychiatric disabilities.

Early self-directed service models were a product of the independent living movement of the 1960s and 1970s. Several pilot programs sprung up during the late 1960s. One such program was the self-directed attendant care program at the University of California at Berkeley, founded by Ed Roberts and other disability activists. In 1972, Roberts and his allies launched a similar program for nonstudents called the Center for Independent Living using a combination of federal and private grant funds. Beginning in the late 1970s,

the World Institute on Disability, in tandem with rehabilitation professionals, began to articulate the philosophical principles underlying self-directed PAS and the ways in which these principles should guide public policies toward people with disabilities.

In 1995, RWJF launched two national programs to empower people with disabilities and chronic illnesses to make their own choices regarding long-term services and supports: the Self-Determination program for people with intellectual and developmental disabilities and the Independent Choices program for seniors and nonelderly people with physical disabilities. Various program models were explored as part of RWJF’s Independent Choices initiative with varying success. In general, the initiative stimulated some innovative approaches and focused attention on the technical challenges of designing and operating consumer-directed services for senior citizens and people with physical disabilities.¹⁰

Eighteen states received seed money grants from the foundation under the Self-Determination initiative to pilot self-directed service models for people with intellectual and developmental disabilities.¹¹  Most of the participating states were able to expand self-direction options by using the RWJF grant dollars to draw down federal matching funds through their Section 1915(c) Medicaid waiver programs. In several states, the RWJF grants were used in conjunction with a special, time-limited Medicaid funding authority called Community Supported Living Arrangements (CSLA), created by Congress in 1990.¹²  This special Medicaid authority in combination with the foundation grants led many states to build self-determination options into their Medicaid home and community-based waiver programs over the following decade.

In 1998, RWJF joined forces with HHS to launch the Cash and Counseling Demonstration program. Three states—Arkansas, Florida, and New Jersey—were selected to pilot new approaches to financing and delivering Medicaid-funded long-term services and supports and granted statutory waivers necessary to mount their programs. A Mathematica Policy Research evaluation of the Cash and Counseling program¹³ concluded that—

• The program significantly reduced the unmet needs of Medicaid participants requiring PAS;
• Participants in the demonstration experienced positive health outcomes;
• Both participants and their caregivers experienced an improved quality of life;
• Consumer control did not lead to increased misuse of Medicaid funds;
• Personal care costs were somewhat higher for demonstration participants compared to other recipients of Medicaid-funded PAS, mainly because demonstration participants received more of the care they were authorized to receive;
• Increased Medicaid personal care outlays were partially offset by reduced institutional and other long-term care costs; and
• Cash and counseling need not cost more than traditional PAS if states carefully design and monitor their programs.

Later, the Cash and Counseling model was replicated in 12 additional states. As discussed in greater detail below, the results of the Cash and Counseling and self-determination demonstrations led Congress to establish several Medicaid self-directed funding options in recent years.

Self-direction has taken longer to gain a foothold in the mental health service sector, mainly because most self-directed support options have been funded through the Medicaid HCBS waiver program and few nonelderly adults with mental illnesses are eligible to receive waiver services. The Florida Self-Directed Care Program, founded in 2002, is one of the earliest attempts to apply person-directed support principles to serving people with mental illnesses.¹⁴  In addition to the Florida program, small programs extending budget authority to people with psychiatric disabilities are under way in several other states, including pilot programs in Pennsylvania and Texas.