Reducing nursing home use through consumer-directed personal care services.

Context: Personal care services (PCS) are intended to enable beneficiaries with physical or cognitive impairments to live safely at home rather than in nursing facilities. The quality and flexibility of these services, typically provided by home care agencies, may not be sufficient to allow some beneficiaries to continue living at home.

Objective: We sought to test whether consumer direction of PCS under Arkansas's Cash and Counseling demonstration reduces nursing facility use and expenditures, compared with traditional Medicaid PCS, and how it affects total Medicaid cost.

Design: Interested adult Medicaid beneficiaries in Arkansas who were eligible to receive Medicaid PCS were randomly assigned (1) to have the option to receive an allowance instead of PCS (the treatment group) or (2) to receive traditional PCS through an agency (the control group). Between December 1998 and April 2001, 2008 beneficiaries enrolled.

Measures: : Nursing facility use and costs, PCS costs, and total Medicaid costs (according to Medicaid claims data).

Results: Nursing facility use was 18% lower for the treatment group than for the control group during the 3-year follow-up period. Among those who had received PCS before the demonstration, nursing facility savings, together with savings in other long-term care costs, fully offset the higher PCS costs. These savings did not offset the higher PCS costs of new PCS applicants, since the increase in the proportion receiving paid care was so large for this subgroup.

Conclusions: Consumer-directed PCS in Arkansas reduces nursing facility use and costs more effectively than providing services in the traditional manner. This favorable reduction in nursing facility costs was much more pronounced in Arkansas than in the other 2 states (New Jersey and Florida) where the Cash and Counseling demonstration was carried out.