DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
                      SMD # 09-007
             
November 19, 2009 
 
 
Dear State Medicaid Director: 
 
This letter provides additional guidance on the implementation of section 6087 of the Deficit 
Reduction Act of 2005 (DRA), Public Law Number 109-171.  Section 6087, the Optional 
Choice of Self-Directed Personal Assistance Services (PAS) (Cash and Counseling), amended 
section 1915 of the Social Security Act (the Act) by adding a new subsection (j).  Section 1915(j) 
of the Act allows States to amend their Medicaid State plans to provide individuals with the 
option to self-direct their PAS, which became effective January 1, 2007.  On October 3, 2008, 
the Centers for Medicare & Medicaid Services (CMS) published a final rule in the Federal 
Register (73 Fed. Reg. 57,854) providing guidance to States that choose to administer self-
directed PAS through their State Medicaid plans, as authorized by the DRA.  In response to 
comments to the final rule, we indicated that we would provide additional guidance in certain 
areas, and this letter serves to provide additional clarification and guidance for section 
1915(j)(4)(B)(ii) of the Act, which permits States to allow participants to use their individual 
budget for permissible purchases (i.e., to acquire items that increase independence or substitute 
for human assistance) to the extent that expenditures would otherwise be made for the human 
assistance.  The guidance in this letter also applies to section 1915(c) Home and Community-
Based Services (HCBS) waiver programs in which States elect to offer the self-direction 
opportunity and to permit participants to purchase individual directed goods and services.   
 
Background 
 
An optional feature in self-direction programs under sections 1915(c) and (j) of the Act is the 
States ability to permit participants to save or accumulate funds from their budgets for the 
purchase of goods, services, supports, equipment, supplies, or items (goods and services) that 
will increase independence or substitute for human assistance.  Experience under the section 
1115 and section 1915(c) Independence Plus self-direction programs indicated that when 
participants were given the option to purchase items that increased their independence or 
substituted for human assistance, they exercised that option prudently and effectively.  We also 
learned that States had various approaches to what they approved and how they approved these 
purchases consistent with their individually designed self-direction policies and operations.   
 
Medicaid Authorities 
 
In developing instructions to States applying for approval of section 1915(c) waivers, CMS has 
described the purchase of individual directed goods and services in the section 1915(c) waiver 
application instructions as follows:   
Page 2  State Medicaid Directors 
 
[S]ervices, equipment or supplies not otherwise provided through this waiver or 
through the Medicaid State Plan that address an identified need in the service plan 
(including improving and maintaining the participants opportunities for full 
membership in the community) and meet the following requirements:  the item or 
service would decrease the need for other Medicaid services; AND/OR, promote 
inclusion in the community; AND/OR, increase the participants safety in the 
home environment; AND, the participant does not have the funds to purchase the 
item or service or the item or service is not available through another source.  
Individual Directed Goods and Services are purchased from the participant-
directed budget.  Experimental or prohibited treatments are excluded.  Individual 
Directed Goods and Services must be documented in the service plan.  
 
Similarly, section 1915(j)(4)(B)(ii) of the Act allows participants, at the States option, to use 
funds allocated in their budgets to acquire items that increase their independence or substitute 
for human assistance, to the extent that expenditures would otherwise be made for that human 
assistance.  We adopted the statutory provision for permissible purchases in our final rule on 
the self-directed PAS State plan option, and, at 42 CFR section 441.482(a) and (b), we require: 
 
(a) Participants, or their representatives, if applicable, may, at the States option, 
use their service budgets to pay for items that increase a participant's 
independence or substitute (such as a microwave oven or an accessibility 
ramp) for human assistance, to the extent that expenditures would otherwise 
be made for the human assistance.   
 
(b) The services, supports, and items that are purchased with a service budget 
must be linked to an assessed participant need or goal established in the 
service plan. 
 
We also require, at 42 CFR section 441.470(d), that the State set forth a procedure that governs 
how such items are to be included in the service budget: 
 
(c) The procedure(s) that governs how a person, at the election of the State, may 
reserve funds to purchase items that increase independence or substitute for 
human assistance, to the extent that expenditures would otherwise be made for 
the human assistance, including additional goods, supports, services or 
supplies. 
 
Criteria 
 
The following criteria are intended for States use in determining the goods and services they 
will permit to be covered as individual directed goods and services under a section 1915(c) 
HCBS waiver program, or as permissible purchases under the section 1915(j) self-directed 
PAS State plan option.  It should be noted that a key criterion is that the purchase be related to a  
need or goal identified in the participants State-approved person-centered service plan.  By 
requiring a link to the person-centered service plan, States ensure that the goods and services    
Page 3  State Medicaid Directors 
 
purchased are consistent with a participants State-approved service plan and promote the 
integrity of the Medicaid program.   
 
Criteria for Covered Individual Directed Goods and Services and Permissible Purchases: 
States should determine that all of the following criteria are satisfied.  The goods, services, 
supports, equipment, supplies, or items: 
  Are related to a need or goal identified in the State-approved person-centered service 
plan;  
  Are for the purpose of increasing independence or substituting for human assistance, to 
the extent the expenditures would otherwise be made for that human assistance;  
  Promote opportunities for community living and inclusion;  
  Are able to be accommodated within the participants budget without compromising the 
participants health or safety; and 
  Are provided to, or directed exclusively toward, the benefit of the participant. 
 
Examples of Individual Directed Goods and Services and Permissible Purchases that have 
been purchased when a State allows the goods and services option include:  small kitchen 
appliances such as microwave ovens; accessibility ramps/home modifications; transportation; 
laundry service; durable medical equipment; and pharmaceutical supplies.  This list of examples 
is not intended to be exhaustive, and States may consider other goods and services based on a 
participants person-centered service plan and individualized budget plan. 
 
Examples of Individual Directed Goods and Services and Permissible Purchases not covered 
when a State allows the goods and services option include: services covered by third parties or 
services that are the responsibility of a non-Medicaid program or service; room and board, 
including rent and mortgage payments; experimental treatments; social or recreational purchases 
that are not related to a need or goal identified in the person-centered service plan; or, vacation 
expenses (except for the cost of services the participant may need while on vacation). 
 
Support and Monitoring 
 
Requirements in the Act and regulations govern the support system that must be available and 
the assurances and oversight that must be provided by State Medicaid agencies.  Consistent with 
those requirements, we expect States that offer self-directed programs or State plan options to 
have in place a support system that consists of appropriate information, counseling, training, and 
assistance, as needed or desired by participants, to enable participants to effectively direct the 
service planning and budget planning process, develop their service plans and individualized 
budget plans, and manage and direct their service and budget plans.  To implement this support 
system effectively, we expect that States also have available supports brokers/consultants that 
will assist participants, as needed or desired, from the time they express interest in self-directing 
section 1915(c) HCBS or section 1915(j) PAS, and throughout the time that they are enrolled in 
the self-directed section 1915(c) HCBS program or section 1915(j) PAS State plan option.   
  Page 4  State Medicaid Directors 
 
We further expect that supports brokers/consultants would possess an understanding of the 
philosophy of self-direction, person-centered and directed planning, the ability to facilitate 
participants independence and preferences, the ability to develop budget plans and ensure 
appropriate documentation, and knowledge of the resources available in the participants 
community and how to access them.  Accordingly, we expect that States will furnish participants 
who are self-directing section 1915(c) HCBS or section 1915(j) PAS with a supports 
broker/consultant and sufficient information, counseling, and/or training about the criteria for 
covered individual directed goods and services and permissible purchases, the procedure for 
how they will be able to access these goods and services if the State elects this option, the States 
approval process for the purchase of goods and services, and any assistance needed or desired in 
adjusting their budget plans to reflect the amount to be saved and the purchase intended to be 
made with the savings.   
 
We also expect that State Medicaid agencies ensure oversight for proper implementation of the 
criteria by designing procedures that will effectively govern how participants will reserve funds 
for the purchase of goods and services, if elected by the State.  We expect these procedures to 
include that the annual reassessment of participants by the State Medicaid agency takes into 
account purchases of goods and services that substitute for human assistance and any 
adjustments for the need for human assistance.   
 
Compliance with the Guidance 
 
We note that other provisions of the Act that permit the opportunity to self-direct services are not 
impacted by this guidance.  CMS staff are available to furnish technical assistance on our 
requirements for supports brokers/consultants and support systems. 
 
The CMS contact for this guidance is Ms. Terry Pratt, Acting Director, Disabled and Elderly 
Health Programs Group, who may be reached at 410-786-9499.   
 
            Sincerely, 
 
                /s/ 
 
            Cindy Mann 
            Director 
 
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
 
Ann C. Kohler          
NASMD Executive Director 
American Public Human Services Association 
  Page 5  State Medicaid Directors 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christine Evans, M.P.H. 
Director, Government Relations 
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy