U.S. Department of Health and Human Services

An Evaluation of the Veterans Administration Housebound and Aid and Attendance Allowance Program

Executive Summary

John M. Grana, Ph.D., and Sandra M. Yamashiro, M.P.A.

Project HOPE, Center for Health Affairs

April 15, 1987

This report was prepared under grant #84ASPE150A between the U.S. Department of Health and Human Services (HHS), Office of Social Services Policy (now the Office of Disability, Aging and Long-Term Care Policy (DALTCP)) and Project HOPE. For additional information about the study, you may visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. The e-mail address is: webmaster.DALTCP@hhs.gov. The Project Officer was Cleonice Tavani.

The views expressed in this paper are those of the authors and do not necessarily represent those of the Department of Health and Human Services or Project HOPE.

1.0 INTRODUCTION AND EXECUTIVE SUMMARY

There is an incongruity in the way noninstitutional services are subsidized in this country. Disabled persons in the general population with money make decisions daily so to the makeup of their living environments, buying a mix of goods and services which best promotes their independence. In contrast, most disabled persons without sufficient resources have very little freedom of choice: Rather than being provided with a cash supplement which they, too, could spend to maximize independence, the poor in general either are restricted to choices from a narrow list of services paid for by public monies (known as vouchers), or, more commonly, are limited to the type and quantity of services they can receive as dictated by agents of a public authority (known as in-kind transfer payments). Our society is implicitly saying that the financially needy disabled cannot manage their resources as well as all other disabled persons and should not be trusted to do so.

This is not the case in almost every other country in the world. In most countries, including virtually all industrialized nations, public subsidies for noninstitutional long-term care are in the form of cash as well as in-kind (Tracy, 1974). These cash disability grants for long-term care, called "attendance" or "attendant care" allowances in recognition of the need for assistance by another person, are usually the first, and sometimes the only public intervention used to help noninstitutionalized frail elderly cope with the additional burdens imposed by their functional disabilities (Grana, 1983). Recipients who qualify on the basis of medical need, and in most cases on the basis of financing need as well, receive unrestricted cash grants which can be spent on anything they wish.

Attendance allowances were generally adopted first by agencies charged with the affairs of war veterans. The U.S. Veterans Administration (VA) is no exception. The Housebound and Aid and Attendance Allowance Program of the VA provides cash grants to 220,000 disabled veterans and surviving spouses a year in lieu of formally provided homemaker, personal care and other services needed for assistance in activities of daily living and other help at home. VA has been providing these allowances for over 35 years--legislative authority for this program is provided by Public Law 82-149, enacted on November 1, 1951. The program is means-tested for nonservice-connected disabilities under the general pension program (185,160 beneficiaries in 1985); grants for service-connected disabilities are made on the basis of medical need only (35,422 beneficiaries in 1985). Implicit VA policy is to allow competent disabled persons to decide how best to meet their own needs, not to make all those decisions on their behalf.

The advantages of cash compared to in-kind benefits have long been noted by economists. Competent consumers know best how to allocate their scarce budgets among all possible commodities and services to maximize the satisfaction of their needs and wants; they are more efficient than any other person in promoting their own personal well-being, happiness and independence. The cash equivalent of an in-kind transfer will permit a beneficiary to achieve a higher level of well-being and happiness, and in this sense, the cash transfer is socially optimal and more efficient. A cash benefit has the additional advantage (in most cases) of being easier and less costly to administer.

Cash benefits are used extensively in other public programs in the U.S. For recipients of an old age or survivor's pension, or of supplemental security income, the government does not try to purchase housing, food and clothing in the right quantities for each individual. The task of equating the complex needs and preferences of each individual to a set of in-kind transfers is clearly an impossible one. Instead, the level of entitlement of need is set, and checks are sent to beneficiaries who spend their monies on needed goods and services just like everyone else. Since the need for long-term care also is multidimensional, why, then, should not assistance for help at home be in the form of cash?

Critics of cash disability allowances would argue that most old disabled persons don’t know what they need in the way of services, or are not competent to judge what is good for them: that people will squander their grants on unnecessary items, purchase an insufficient amount of needed services, become more frail and ill, need more intensive acute and long-term care, and eventually fall back on the social safety net at an even greater cost to society. They feel that care decisions must be made on behalf of the elderly, and that subsidies should be in the form of in-kind services which leave little decision-making in the hands of the recipient. Others might argue that the number of claims for a cash benefit would be much greater than for an in-kind benefit, so that screening, and hence administrative, costs of the cash benefit could actually be greater.

This project had two major goals. This first was to describe the workings of a successful, large-scale, cash disability allowance program from an administrative perspective. The VA allowance program is described in detail, to provide a benchmark for future research and program design. The second goal was to examine the question whether recipients of a cash allowance for long-term care are worse off than similar persons who receive in-kind subsidies. This study does so by examining the life circumstances of 139 recipients of the VA Housebound Allowance or Aid and Attendance Allowance. The health, functional needs, and use of services of these persons are compared with those of 610 persons interviewed in the 1983 National Long-Term Care Survey who received services in-kind. This report represents the first outside evaluation of this program.

The analytical results of the study suggest that recipients of the cash disability allowance received similar levels of long-term care and were no worse off than the comparison group with regard to acute health care utilization. Evidence on hours of care per week and the direct (non-administrative) costs of the VA cash allowance program suggest that the cash benefit may be the more cost-effective alternative for many beneficiaries. One interesting by-product of the analysis was the finding that the substitution of subsidized, in-kind care for informal effort was significant and approximately one-to-one.

The full report is organized as follows: Section 2.0 lays out the conceptual issues underlying the use of cash versus in-kind subsidies, and summarizes the literature pertinent to these topics. Section 3.0 describes the VA Housebound and Aid and Attendance Allowance Program, including program benefits, eligibility criteria, and administration. Section 4.0 describes the study research design and methodology. Section 5.0 presents the analytical results and findings, including implications for policy and further research.