Unbiased Analysis of Today's Healthcare Issues

Cash and Counselling

Written By: Jason Shafrin - Apr• 28•11

Many economists claim that insurance that gives  sick people cash to pay for their medical treatments is more efficient than insurance that provides in-kind medical services directly.  Although providing in-kind services is more likely to decrease the number of false claimants than insurance that provides cash, cash benefits allow beneficiaries to control how they spend their money.  These patients will generally be more frugal since any savings in medical spending goes directly into their pocket.

The Cash and Counselling demonstration is one effort to give beneficiaries cash when they become disabled.  A Health Affairs paper by Foster et al. describes the demonstration.

About 1.2 million Medicaid beneficiaries receive disability-related supportive services in their homes. Most receive them from government-regulated agencies, whose professional staff arrange services and monitor quality, but a growing number manage their services themselves.As one model of consumer-directed supportive services, Cash and Counseling gives consumers a flexible monthly allowance to purchase disability-related goods and services (including hiring relatives as workers), provides counseling and financial assistance to help them plan and manage their responsibilities, and allows them to designate representatives (such as family members) to make decisions on their behalf.

Did it work?

Our survey of 1,739 elderly and nonelderly adults showed that relative to agency-directed services, Cash and Counseling greatly improved satisfaction and reduced most unmet needs. Moreover, contrary to some concerns, it did not adversely affect participants’ health and safety.

Rather than spending this money on formal care services, almost all beneficiaries used their cash benefit  to hire family members or friends.  Other funds were directed to pay for assistive equipment, personal care supplies, and medications.  Could the Cash and Counselling model be a viable care alternative, especially for high cost patients?

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One Comment

  1. Is there a crowding out effect? I forecast political resistance from the right who feel that it is a cash transfer to family members that would or should be providing the services in-kind.

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