What Are Consumer Directed Services (CDS)?

Why It Matters

Traditional Medicaid long-term care is "agency-directed": the state contracts with a home care agency, the agency assigns a caregiver, and the member gets whoever shows up. Self-direction flips the arrangement. The member decides who the caregiver is, what hours they work, what tasks they do, and (within state-set budget limits) what they're paid.

For families, the practical stake is huge. Under CDS, an adult daughter already providing care for her mother can be hired and paid. The attendant's hours can flex around medical appointments. If a caregiver leaves, the family finds the replacement instead of waiting on an agency roster. For workers, CDS typically pays a higher hourly rate because the agency overhead is stripped out.

How Consumer Directed Services Differ from Agency-Directed Care

Dimension Agency-Directed Consumer-Directed
Who finds the caregiver The agency The member
Who hires / fires The agency The member
Who trains the caregiver The agency The member
Who sets the schedule The agency (within authorized hours) The member
Who pays the worker The agency The FMS, on the member's instruction
Hourly pay to worker Set by the agency Set by the member, within program limits
Who handles payroll taxes The agency The FMS
Backup coverage Agency provides substitute Member arranges (usually a backup worker they've pre-hired)
Liability for employment law Agency Member (as common-law employer)

The tradeoff is simple: CDS gives the member more control and usually puts more money in the worker's pocket, in exchange for taking on employer responsibilities.

The Employer-Employee Model

Under federal rules, self-direction can be built around one of two authorities:

  • Employer authority. The member is the common-law employer. They recruit, interview, hire, set wages (within state limits), schedule, train, evaluate, discipline, and fire. This is the authority Texas CDS uses.
  • Budget authority. The member is given an individualized budget (in dollars) and decides how to spend it across services, supports, and goods in their care plan. Budget authority can sit on top of employer authority or stand alone.

A member typically takes on the following responsibilities:

  • Writing job descriptions and posting openings
  • Interviewing candidates
  • Submitting the chosen worker's information to the Financial Management Services (FMS) entity for background checks
  • Training the worker on specific tasks (personal care, transfers, medications, behavior supports)
  • Scheduling hours within the authorized service plan
  • Approving weekly timesheets
  • Documenting electronic visit verification (EVV) check-in/check-out
  • Firing workers who don't perform
  • Recruiting replacements when workers leave

This isn't a small job. States usually require a brief training for new CDS employers and make a case manager or service coordinator available for ongoing support.

The FMS: Payroll and Compliance Partner

Every self-direction program requires a Financial Management Services (FMS) entity (called a Financial Management Services Agency, or FMSA, in Texas; a fiscal/employer agent or fiscal intermediary in other states). The FMS is the administrative counterpart to the participant-employer. It does not deliver care.

The FMS handles:,

  • Registering with the IRS and state workforce agency as the vendor fiscal/employer agent
  • Running payroll and direct deposit
  • Withholding and remitting federal and state payroll taxes
  • Conducting required criminal background checks, registry checks, and credential verifications before a new worker can start
  • Paying approved non-wage items in the budget (training, supplies)
  • Filing quarterly payroll tax returns and year-end W-2s
  • Sending the member a monthly or quarterly budget report showing what's been spent

Because the FMS is doing real work, it charges a fee. In Texas, the FMSA's monthly fee is deducted from the CDS budget before the employer's service funds become available.

Who Can and Can't Be Hired

CDS rules vary sharply by state on the question of paying family members.

Federal rules allow states to let participants hire "legally responsible" or "legally liable" relatives (typically spouses of adults, and parents of minor children). Whether a specific state actually permits it is a state choice, not a federal guarantee.

Common patterns across states:

  • Adult children: Almost always eligible to be hired under CDS.
  • Siblings, nieces, nephews, cousins, in-laws, grandchildren: Almost always eligible.
  • Friends and neighbors: Almost always eligible.
  • Spouses: Varies significantly by state. Texas prohibits paying a spouse under its Medicaid CDS programs, including STAR+PLUS, Community Attendant Services (CAS), and Community First Choice (CFC). The one exception is the state-funded Consumer Managed Personal Attendant Services (CMPAS) program.,
  • Parents of minor children: Some states allow it under specific waivers; most permanently restrict it.
  • The member's legally authorized representative (LAR): Usually cannot also be the paid worker. The roles have to be separated to prevent self-dealing.

Always check state-specific rules before assuming a family member is eligible for pay.

Trying to figure out if a family member can be a paid CDS worker? Chat with Brevy and we'll walk you through the rules for your state and program.

How Pay Works

In most CDS programs, the state or its managed care organization (MCO) sets a total hourly rate for each service. The FMS fee comes out first, then the member has a budget to split between the worker's wage and the legally required employer taxes and benefits (often called PTB, payroll taxes and benefits).

In Texas, at least 90% of the total CDS rate must be spent on service-provider compensation, and CDS employers must pay at least the federal minimum wage. Effective September 1, 2025, Texas set attendant reimbursement rates to support an average attendant base wage of $13.00 per hour, with allowable PTB of 14% for community (non-residential) settings and 15% for residential settings. That rate is fixed by the 2026-27 state budget through August 31, 2027. Actual take-home pay to an individual attendant varies by MCO and region.

Pay rates are not standardized across states. Other self-direction programs, such as California's In-Home Supportive Services (IHSS), set their own rates, so always check the program documentation from your state Medicaid agency or MCO.

Electronic Visit Verification (EVV)

The federal 21st Century Cures Act (2016) requires every state to use Electronic Visit Verification (EVV) for Medicaid personal care services furnished on or after January 1, 2020, including services delivered through CDS; a state that does not comply faces a reduction in its federal Medicaid match.

Workers clock in and clock out at the start and end of each visit, logging the time, location, service type, and member ID. In Texas, EVV has applied to all Medicaid personal care services (including CDS) since January 1, 2021, and CDS employees must use one of three Texas Health and Human Services (HHSC)-approved methods: a landline phone in the member's home, an alternative fixed device, or the EVV vendor's mobile app (the only approved method when a visit begins or ends out in the community).

EVV is mandatory. CDS employers are responsible for teaching their workers to use the EVV system correctly.

Common Questions About CDS

Are CDS workers real employees?

Yes. The member is the common-law employer, and CDS workers are W-2 employees subject to federal and state payroll taxes, unemployment insurance, and workers' compensation rules. The FMS registers as the fiscal/employer agent and processes the payroll, withholding, and tax filing that go with that employer relationship.

Do I have to run all the payroll myself?

No. That's the whole point of the FMS. You tell the FMS how many hours each worker put in, the FMS pays them, withholds taxes, and reports everything. You approve the timesheet; the FMS does the mechanics.

Can my mother hire me if I'm family?

It depends on the state and the relationship. Adult children can almost always be hired. Spouses often cannot. In Texas, a spouse cannot be paid under Medicaid CDS programs at all. See "Who Can and Can't Be Hired" above for the pattern.

Does CDS pay more than agency work?

Typically yes for the worker, because the agency markup is removed. But the member also takes on employer responsibilities. If the member or their representative doesn't have capacity to manage scheduling and timesheets, agency-directed care may be the better fit.

These related definitions all flow from the same federal self-direction framework: the two control authorities (employer authority and budget authority) and the Financial Management Services entity behind them.,

  • Self-direction / Participant direction: The federal umbrella term for CDS-style programs. Most federal documents use this language.
  • Financial Management Services (FMS) / FMSA / Fiscal Intermediary: The administrative entity that handles payroll and tax compliance for self-directed programs.
  • Employer authority: The self-direction model where the participant is the common-law employer.
  • Budget authority: The self-direction model where the participant controls an individual spending budget.
  • Electronic Visit Verification (EVV): The federally required check-in/check-out system for all Medicaid personal care and home health visits.
  • Legally Authorized Representative (LAR): A person legally empowered to make decisions for the CDS member; cannot usually also be the paid worker.
  • HCBS waiver: The Medicaid authority under which most CDS programs operate.
  • Managed Care Organization (MCO): In states like Texas, CDS services are delivered through MCOs under STAR+PLUS.

Learn More

CaregiverTexas Caregiver ProgramsFind caregiver programs in Texas including Medicaid paid caregiver options, respite care, support groups, and free resources for family caregivers in 2026. CaregiverHow to Get Paid as a Family Caregiver in TexasLearn how to get paid as a family caregiver in Texas through Medicaid CDS, CAS, VA programs, and CMPAS. Covers pay rates, eligibility, and step-by-step process. MedicaidSTAR+PLUS Waiver ProgramTexas STAR+PLUS covers Medicaid managed care for seniors 65+. The HCBS waiver income limit is $2,982/month, and Community First Choice has no waitlist. MedicaidTexas Medicaid HCBS WaiversTexas HCBS waiver programs help seniors stay home instead of a nursing facility. Learn how STAR+PLUS HCBS, CLASS, HCS, interest lists, and applying work.

Find personalized help understanding senior care benefits at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.