Cash and Counseling, a flexible, consumer-directed program in Arkansas, New Jersey and Florida, gave Medicaid beneficiaries a monthly budget, allowing them to purchase such things as personal care supplies and to hire family, friends or others as caregivers. This research examines Cash and Counseling's effects on the costs and uses of Medicaid's personal care services or home and community-based waiver services; effects on other Medicaid costs; and effects on total Medicaid costs.

Volunteers for the demonstration were randomly assigned to participate in Cash and Counseling (the treatment group) or to receive traditional Medicaid agency services (the control group). Researchers collected claims data for all enrollees in the Cash and Counseling demonstration. Enrollees included those eligible for personal care services (in Arkansas), those previously assessed to receive personal care (in New Jersey) and those already receiving home and community-based waiver services (in Florida).

Key Findings:

• Because Cash and Counseling increased Medicaid beneficiaries' access to paid care, Medicaid expenditures for personal care/waiver services were higher for the treatment group than for the control group in all three states and for every age group, except among older enrollees in Florida.
• Savings in other Medicaid services partially offset the treatment group's higher personal care/waiver costs.
• Total Medicaid costs were generally higher for the treatment group than the control group.

The authors state that although Cash and Counseling did increase total Medicaid costs, consumers and caregivers benefited significantly from the program. Higher costs, due to increased access to care, could be viewed as the amount traditional programs underspend on those who are eligible for, but unable to take advantage of, paid assistance. Overall, the study suggests that the impact of future consumer-directed programs on total Medicaid costs will be modest.