[Federal Register Volume 76, Number 73 (Friday, April 15, 2011)]
[Proposed Rules]
[Pages 21311-21317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-9116]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 441

[CMS-2296-P]
RIN 0938-AP61


Medicaid Program; Home and Community-Based Services (HCBS) 
Waivers

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the regulations implementing 
Medicaid home and community-based services (HCBS) waivers under section 
1915(c) of the Social Security Act by providing States the option to 
combine the existing three waiver targeting groups as identified in 
Sec.  441.301. In addition, we are proposing other changes to the HCBS 
waiver provisions to convey expectations regarding person-centered 
plans of care, to provide characteristics of settings that are not home 
and community-based, to clarify the timing of amendments and public 
input requirements when States propose modifications to HCBS waiver 
programs and service rates, and to describe the additional strategies 
available to CMS to ensure State compliance with the statutory 
provisions of section 1915(c) of the Act.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 14, 2011.

ADDRESSES: In commenting, please refer to file code CMS-22296-P. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2296-P, P.O. Box 8016, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2296-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT: Kathryn Poisal, (410) 786-5940.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    Section 1915(c) of the Social Security Act (the Act) authorizes the 
Secretary of Health and Human Services to waive certain Medicaid 
statutory requirements so that a State may offer Home and Community-
Based Services (HCBS) to State-specified group(s) of Medicaid 
beneficiaries who otherwise would require services at an institutional 
level of care. This provision was added to the Act by the Omnibus 
Budget and Reconciliation Act of 1981 (Pub. L. 97-35, enacted August 
13, 1981) (OBRA'81) (with a number of subsequent amendments). 
Regulations were published to effectuate this statutory provision, with 
final regulations issued on July 25, 1994 (59 FR 37719). In the June 
22, 2009 Federal Register (74 FR 29453), we published the Medicaid 
Program; Home and Community-Based Services (HCBS) advance notice of 
proposed rulemaking (ANPRM) that proposed to initiate rulemaking on a 
number of areas within the section 1915(c) program. We received 313 
comments (which can be accessed at http://www.regulations.gov/) and 
held teleconferences with stakeholders. The correspondence included 
comments from States, health care and community support providers and 
associations, consumer groups, and social workers, and others. In the 
following sections, we discuss comments relating to questions

[[Page 21312]]

posed by the ANPRM and addressed in this proposed rule.
    Along with our overarching interest in making improvements to the 
Medicaid HCBS program, we seek to ensure that Medicaid is providing 
needed strategies for States in their efforts to meet their obligations 
under the Americans with Disabilities Act (ADA) and Supreme Court's 
decision in Olmstead v. L.C., 527 U.S. 581 (1999). In the Olmstead 
decision, the Court affirmed a State's obligations to serve individuals 
in the most integrated setting appropriate to their needs. A State's 
obligations under the ADA and section 504 of the Rehabilitation Act are 
not defined by, or limited to, the scope or requirements of the 
Medicaid program; however, the Medicaid program provides an opportunity 
to obtain partial Federal funding to assist in compliance with these 
laws through the provision of Medicaid services to Medicaid-eligible 
individuals.
    We believe that these proposed changes will have numerous benefits 
for individuals and States alike. In addition to providing clarity 
around individual and stakeholder input, these proposed changes will 
move the system forward by enabling services to be planned and 
delivered in a manner driven by individual needs rather than diagnosis. 
These changes will enable States to realize administrative and program 
design simplification, as well as improve efficiency of operation. The 
changes related to clarification of HCBS settings will support the use 
of waiver authority to maximize the opportunities for waiver 
participants to have access to the benefits of community living and the 
opportunity to receive services in the most integrated setting 
appropriate.

A. Responses to Comments Received on ANPRM

1. Target Groups
    Under section 1915(c) of the Act, the Secretary is authorized to 
waive section 1902(a)(10)(B) of the Act, allowing States not to apply 
comparability requirements and target an HCBS waiver program to a 
specified Medicaid-eligible group or sub-group of individuals who would 
otherwise require institutional care. A single section 1915(c) waiver 
may, under current regulation, serve one of the three target groups 
identified in Sec.  441.301(b)(6). As provided in the rule, these three 
target groups are: ``Aged or disabled, or both; Mentally retarded or 
developmentally disabled, or both; and Mentally ill.\1\'' States must 
currently develop separate section 1915(c) waivers in order to serve 
more than one of the specified target groups. A Federal regulatory 
change that permits combining targeted groups within one waiver would 
remove a barrier for States that wish to design a waiver that meets the 
needs of more than one target population. This regulatory change would 
enable States to design programs to meet the needs of Medicaid-eligible 
individuals. For example, a growing number of Medicaid-eligible 
individuals with intellectual disabilities reside with aging caregivers 
who are also eligible for Medicaid. The proposed change would enable 
the State to design a coordinated section 1915(c) waiver structure that 
meets the needs of the entire family that, in this example, includes 
both an aging parent and a person with intellectual disabilities. In 
this illustration, the family would occupy two waiver slots, but with 
the proposed change, both could now be served under the same waiver 
program. We also believe the capacity to combine multiple target groups 
in one waiver may offer some administrative efficiencies for States.
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    \1\ Although this terminology is still used in the statute and 
regulations, it is not consistent with the preferred language to 
describe target groups. In the spirit of Rosa's Law [Pub. L. 111-
256], CMS will use the term, ``individuals with intellectual 
disabilities'' instead of ``mentally retarded or developmentally 
disabled'' where possible.
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    Through the ANPRM, we proposed to initiate rulemaking to allow 
States the flexibility to combine any or all of the three target groups 
in one HCBS waiver (74 FR 29453). We sought public comments on how we 
may establish criteria related to the removal of an existing regulatory 
barrier that currently prevents States from designing cross-disability 
section 1915(c) HCBS waiver programs. The comments provided on this 
provision were largely positive, advising CMS to consider carefully 
quality elements and protections needed to ensure that all target 
groups are protected sufficiently in such a structure. Through this 
proposed rule, we include expectations that each individual within the 
waiver, regardless of target group, has equal access to the services 
necessary to meet their unique needs.
2. HCBS Settings
    Through the ANPRM, we also sought public input on strategies to 
define home and community-based settings where waiver participants may 
receive services. Additionally, the request for input was in response 
to isolated situations that have emerged where States or other 
stakeholders are expressing interest in using HCBS waivers to serve 
individuals in segregated settings or settings with a strong 
institutional nature. For example, some proposed settings are on 
campuses of institutional facilities, segregated from the larger 
community, and do not allow individuals to choose whether or with whom 
they share a room, limit individuals' freedom of choice on daily living 
experiences such as meals, visitors, activities, and limit individuals' 
opportunities to pursue community activities.
    We received several comments to the ANPRM strongly urging CMS to 
clarify in regulations that HCBS funding is not intended to be used for 
people in segregated facilities. One comment referenced large, campus-
based programs and stated ``[s]uch settings clearly do not meet the 
basic understanding of home and community-based settings.'' Another 
comment, expressing concern about segregated, residential campuses, 
added, ``that HCBS funding is not intended to be used for these 
segregated facilities.''
    More recently, we received a significant amount of correspondence 
from stakeholders across the country in response to a specific State 
proposal contemplating a campus-based, segregated setting for HCBS. One 
correspondent wrote ``* * * congregate settings are being planned on 
the grounds of existing Intermediate Care Facilities for Individuals 
with Mental Retardation (ICF/MRs) or in other segregated settings in 
several States, with the intent of using Home and Community-Based 
(Services) Waiver (HCBW) funding. This type of effort is incompatible 
with the goals * * * as defined by CMS. Both ADA and Olmstead require 
that services are provided in the most integrated settings appropriate 
to an individual's needs.'' Another writer expressed the following 
concern: ``[My son] is very well known in the community and we know he 
is much safer in the community than in an institution. There are simply 
more eyes and ears in the community who would certainly telephone us if 
they even suspected abuse of any kind. The success of my son, and my 
desired success for those 5000 people * * * with developmental 
disabilities who are desperately waiting for services, is my motivation 
to oppose the use of the HCBW for a cluster of large group homes on a 
campus. They simply will not have the opportunities for growth as human 
beings * * *.''
    As a result of the significant comments we received and the 
subsequent feedback through correspondence and other stakeholder input 
opportunities, we propose that HCBS settings: must be integrated in the

[[Page 21313]]

community; must not be located in a building that is also a publicly or 
privately operated facility that provides institutional treatment or 
custodial care; must not be located in a building on the grounds of, or 
immediately adjacent to, a public institution; or, must not be a 
housing complex designed expressly around an individual's diagnosis or 
disability, as determined by the Secretary. In addition, we propose 
that the settings must not have qualities of an institution, as 
determined by the Secretary. Such qualities may include regimented meal 
and sleep times, limitations on visitors, lack of privacy and other 
attributes that limit individual's ability to engage freely in the 
community. We invite comments on this portion of the regulations.
    Through the ANPRM, we received comments suggesting that we 
carefully consider any adverse impact that a rule change may have on 
American Indians and Alaska Natives who reside on Tribal lands where 
living settings may differ according to cultural norms. To that end, we 
were advised to be careful that the language of a regulation does not 
unintentionally prohibit normative cultural living practices. We note 
that this proposed rule change does not exclude from home and 
community-based settings culturally appropriate settings on Tribal 
lands when the individual is an Indian or resides on Tribal lands where 
culturally acceptable group living arrangements are an integral aspect 
of the Tribal community. Specifically, Indian means any individual 
defined at 25 U.S.C. 1601(c), 1603(f), or 1679(b), or who has been 
determined eligible as an Indian, under 42 CFR 136.12. This means the 
individual:
    (1) Is a member of a Federally-recognized Indian Tribe;
    (2) Resides in an urban center and meets one or more of the four 
criteria:
    (a) Is a member of a Tribe, band, or other organized group of 
Indians, including those Tribes, bands, or groups terminated since 1940 
and those recognized now or in the future by the State in which they 
reside, or who is a descendant, in the first or second degree, of any 
such member;
    (b) Is an Eskimo or Aleut or other Alaska Native;
    (c) Is considered by the Secretary of the Interior to be an Indian 
for any purpose; or
    (d) Is determined to be an Indian under regulations promulgated by 
the Secretary.
    (3) Is considered by the Secretary of the Interior to be an Indian 
for any purpose; or
    (4) Is considered by the Secretary of Health and Human Services to 
be an Indian for purposes of eligibility for Indian health care 
services, including as a California Indian, Eskimo, Aleut, or other 
Alaska Native.
    The comments noted that persons who are older with and without 
disabilities may choose to live together in assisted living facilities 
and urged CMS to allow them to exercise this preference and receive 
waiver services. Similarly, some persons who are older may desire to 
live in retirement communities, such as continuing care retirement 
communities. As a result, in accordance with a person-centered plan, we 
will allow such settings to be permissible under the section 1915(c) 
HCBS program for older persons under certain circumstances, which are 
noted below.
    However, as previously noted, the Medicaid program's rules do not 
define or limit other obligations States may have under the ADA and 
section 504 of the Rehabilitation Act for individuals who seek more 
integrated settings than assisted living settings (ALS) or other 
settings not covered by this regulation.
    For the purposes of this regulation, we note that ALS for persons 
who are older, without regard to disability, would not be excluded from 
home and community-based settings when the following conditions are 
met:
    <bullet> Individual has a lease.
    <bullet> Setting is an apartment with individual living, sleeping, 
bathing and cooking areas, and individuals can choose whether to share 
a living arrangement and with whom.
    <bullet> Individuals have lockable access to and egress from their 
own apartments.
    <bullet> Individuals are free to receive visitors and leave the 
setting at times and for durations of their own choosing.
    <bullet> Aging in place, or allowing individuals to remain where 
they live as they age and/or support needs change, must be a common 
practice of the ALS.
    <bullet> Leases may not reserve the right to assign apartments or 
change apartment assignments.
    <bullet> Access to the greater community is easily facilitated 
based on the individual's needs and preferences.
    <bullet> An individual's compliance with their person-centered plan 
(in the event that the individual has shared his/her plan or the 
landlord is also the provider of services) is not in and of itself a 
condition of the lease.
    We are particularly interested in gaining comments on these aspects 
of the proposed rule. In addition, we note that this proposal in no way 
preempts broad Medicaid requirements, such as an individual's right to 
obtain services from any willing and qualified provider of a service.
    Recognizing the imperative to provide clear guidance to States and 
in consideration of recent proposals that have clearly exceeded 
reasonable standards for HCBS, we are proposing to clarify now that 
certain settings are not home and community-based because they are not 
integrated in the community. A setting that is integrated in the 
community is a setting that enables individuals with disabilities to 
interact with individuals without disabilities to the fullest extent 
possible. Further, we believe that such settings do not preclude 
individuals' ability to access community activities at times, 
frequencies and with persons of their choosing. Such settings are not 
segregated based on disability, either physically or because of setting 
characteristics, from the larger community. In addition, such settings 
will afford individuals choice in their daily life activities, such as 
eating, bathing, sleeping, visiting and other typical daily activities. 
We will continue our dialogue with a wide variety of stakeholders on 
other issues related to the characteristics of HCBS settings.
3. Person-Centered Planning
    Underpinning all aspects of successful HCBS is the importance of a 
complete and inclusive person-centered planning process that addresses 
health and long-term services and support needs in a manner that 
reflects individual preferences. To fully meet individual needs and 
ensure meaningful access to their surrounding community, systems that 
deliver HCBS must be based upon a strong foundation of person-centered 
planning and approaches to service delivery. Through the ANPRM process, 
we received favorable comments regarding our interest in ensuring a 
person-centered approach to services and support plan development, with 
recommendations that we articulate expectations for such an approach.
    The person-centered approach is a process, directed by the 
individual with long-term support needs, and may also include a 
representative whom the individual has freely chosen. The person-
centered plan shall identify the strengths, preferences, needs 
(clinical and support), and desired outcomes of the individual. The 
person-centered process enables the individual to choose others to 
serve as important contributors and members of the team in the planning 
process.
    These participants in the person-centered planning process enable 
and

[[Page 21314]]

assist the individual to identify and access a personalized mix of paid 
and non-paid services. This process and the resulting service and 
support plan, also called a plan of care, will assist the individual in 
achieving personally defined outcomes in the most integrated community 
setting. The process is conducted in a manner that reflects what is 
important for the individual to meet identified clinical and support 
needs determined through a person-centered functional needs assessment 
process and what is important to the individual to ensure delivery of 
services in a manner that reflects personal preferences and choices and 
contributes to the assurance of health and welfare. The person-centered 
plan may also reflect whether and what services an individual may 
choose to self-direct. The plan should act as the basis for the 
building of an individual's budget, and the individual's ability to 
make decisions regarding the resources available to him or her. In 
collaboration with those that the individual has identified, he or she 
chooses planning goals to achieve these personal outcomes and to meet 
personal clinical and support needs. The identified personally-defined 
outcomes, preferred methods for achieving them, and the training 
supports, therapies, treatments, and other services the individual 
needs to achieve those outcomes become part of the written services and 
support plan.
    In addition to being driven by the individual receiving services, 
the person-centered planning process would--
    <bullet> Include people chosen by the individual;
    <bullet> Provide necessary support to ensure that the individual 
has a meaningful role in directing the process;
    <bullet> Occur at times and locations of convenience to the 
individual;
    <bullet> Reflect cultural considerations of the individual;
    <bullet> Include strategies for solving conflict or disagreement 
within the process, including strategies to address any conflict of 
interest concerns among planning participants;
    <bullet> Include opportunities for periodic and ongoing plan 
updates as needed and/or requested by the individual; and,
    <bullet> Offer choices to the individual regarding the services and 
supports they receive and from whom.
    The plan resulting from this process should reflect the individual 
strengths and preferences, as well as clinical and support needs (as 
identified through a person-centered functional assessment). The plan 
should include individually identified goals, which may include goals 
and preferences related to relationships, community participation, 
employment, income and savings, health care and wellness, education, 
and others. The plan should reflect the services and supports (paid and 
unpaid) that will assist the individual to achieve identified goals and 
who provides them. The plan should reflect risk factors and measures in 
place to minimize them. The plan must be signed by all individuals and 
providers responsible for its implementation, and should reflect the 
approach in place to ensure that it is implemented as intended. A copy 
of the plan must be provided to the individual and their 
representative(s). We invite comment on the person-centered process and 
planning elements of this proposed rule.
4. Summary
    It is in this context and with the valuable input from the ANPRM 
that we propose modifications and additions to the regulations 
governing section 1915(c) HCBS waiver programs. We further seek to use 
this opportunity to clarify expectations regarding timing of amendments 
and public input requirements when States propose modifications to HCBS 
waiver programs and service rates, and strategies available to CMS to 
ensure State compliance with the statutory assurances of section 
1915(c) of the Act.

B. Strategies To Ensure Compliance With Statutory Assurances

    Our primary concern in the oversight of the section 1915(c) waivers 
is the health and welfare of the individuals served within the 
programs. Section 1915(f) of the Act requires the Secretary to monitor 
implementation of waivers to assure compliance with all requirements 
and provides for termination of waivers where the Secretary has found 
noncompliance. This authority and the process for termination of 
waivers is currently addressed in the regulations at Sec.  441.304(d), 
Sec.  441.307, and Sec.  441.308. We seek to add provisions describing 
other strategies CMS may employ only after all other efforts have not 
yielded necessary results, to ensure compliance, short of termination 
or nonrenewal. At present, when we identify serious quality issues, 
such as potential harm to individual health and welfare or significant 
financial concerns, and States fail to take appropriate remedial 
action, the only enforcement options addressed in the regulations are 
for CMS to refuse to renew the waiver or terminate the waiver, as 
described at current Sec.  441.304(d). Such action could have a 
significant detrimental impact on the individuals served (for example, 
loss of waiver services or Medicaid eligibility). We are interested in 
specifying a broader array of approaches CMS may take to achieve and 
maintain full State compliance with the requirements specified in or 
under section 1915(c) of the Act in addition to waiver termination. We 
invite comment on the discussion of compliance strategies in this 
proposed rule.
    CMS issues these proposed rules to address issues that are pressing 
in the design, operation, and oversight of the section 1915(c) waiver 
program. However, we are committed to continuing a dialogue with all 
interested stakeholders on issues related to designing services and 
supports that meet individual needs, and that offer meaningful 
community participation opportunities.

II. Provisions of the Proposed Regulations

    The provisions of this proposed rule would apply to all States 
offering Medicaid HCBS waivers under section 1915(c) of the Act.
    As noted above, our ANPRM encompassed three main areas: Removal of 
regulatory barriers to serve more than one target group in a single 
waiver; definition of home and community characteristics; and, 
underpinning each of those areas, requirements for person-centered 
planning. Comments were supportive of our interest in setting forth our 
expectations regarding person-centered service and support plans that 
reflect what is important for the individual and to the individual. The 
proposed revisions to Sec.  441.301(b)(1)(i) would require that a 
written services and support plan be based on the person-centered 
approach. This provision includes minimum requirements for this 
approach.
    In new paragraph, Sec.  441.301(b)(1)(iv), we would include 
clarifying language regarding settings that would not be considered 
home and community-based under section 1915(c) of the Act. We clarify 
that HCBS settings are integrated in the community and may not include: 
facilities located in a building that is also a publicly or privately-
operated facility that provides inpatient institutional treatment or 
custodial care; or in a building on the grounds of, or immediately 
adjacent to, a public or private institution; or a disability-specific 
housing complex designed expressly around an individual's diagnosis, 
that is segregated from the larger community, as determined by the 
Secretary.
    We note that this proposed rule change does not exclude living 
settings on Tribal lands that reflect cultural norms, or ALS for 
persons who are older

[[Page 21315]]

regardless of disability, when the conditions noted above in the 
background section are met.
    The proposed revisions to Sec.  441.301(b)(6) would allow States to 
combine target groups. We recognize that some States and stakeholders 
want additional flexibility to combine target groups in order to 
provide services based upon needs rather than diagnosis or condition, 
and for administrative relief from operating and managing multiple 
section 1915(c) waiver programs. Under this proposal, States must still 
determine that without the waiver, participants would require 
institutional level of care, in accordance with section 1915(c) of the 
Act. The proposal will not affect the cost neutrality requirement for 
section 1915(c) waivers, which requires the State to assure that the 
average per capita expenditure under the waiver for each waiver year 
not exceed 100 percent of the average per capita expenditures that 
would have been made during the same year for the level of care 
provided in a hospital, nursing facility, or ICF/MR under the State 
plan had the waiver not been granted. We will provide States with 
guidance on how to demonstrate cost neutrality for a waiver serving 
multiple target groups.
    In an effort to ensure that safeguards are in place to protect the 
health and welfare of each waiver participant, we are proposing in a 
new paragraph Sec.  441.302(a)(4) that to choose the option of more 
than one target group under a single waiver, States must assure CMS 
that they are able to meet the unique service needs that each 
individual may have regardless of target group, and that each 
individual in the waiver has equal access to all needed services. In 
addition, to ensure that services are provided in settings that are 
home and community-based, we are proposing in a new paragraph Sec.  
441.302(a)(5) that States provide assurance that the settings where 
services are provided are home and community based, and comport with 
new paragraph Sec.  441.301(b)(1)(iv). While we are not changing the 
existing quality assurances through this rule, we are proposing to 
clarify that States must continue to assure health and welfare of all 
participants when target groups are combined under one waiver, and 
assure that they have the mechanisms in place to demonstrate compliance 
with that assurance.
    At Sec.  441.304, we would make minor revisions to the heading to 
indicate the rules addressed under this section.
    We are proposing to revise Sec.  441.304(d) and redesignate current 
Sec.  441.304(d) as new Sec.  441.304(g). The new Sec.  441.304(d) 
would codify and clarify our guidance (Application for a section 
1915(c) Home and Community-Based Waiver, V. 3.5, Instructions, 
Technical Guide and Review Criteria, January 2008) regarding the 
effective dates of waiver amendments with substantive changes, as 
determined by CMS. Substantive changes may include, but are not limited 
to changes in eligible populations, constriction of service amount, 
duration, or scope, or other modifications as determined by the 
Secretary. We would add regulatory language reflective of our guidance 
that waiver amendments with changes that we determine to be substantive 
may only take effect on or after the date when the amendment is 
approved by CMS, and must be accompanied by information on how the 
State has assured smooth transitions and minimal adverse impact on 
individuals impacted by the change.
    Additionally, given the important requirement at Sec.  447.205, 
which describes States' responsibilities to provide public notice when 
States propose significant changes to their methods and standards for 
setting payment rates for services, we propose to add a new paragraph 
Sec.  441.304(e) to remind States of their obligations under Sec.  
447.205. We would further include a requirement at a new proposed 
paragraph Sec.  441.304(f) that States establish public input processes 
specifically for HCBS changes. These processes, commensurate with the 
proposed change, could include formalized information dissemination 
approaches, conducting focus groups with affected parties, and 
establishing a standing advisory group to assist in waiver policy 
development. These processes must be identified expressly within the 
waiver document and utilized for waiver policy development. The input 
process must be accessible to the public (including individuals with 
disabilities) and States must make significant efforts to ensure that 
those who want to participate in the process are able to do so. These 
processes must include consultation with Federally-recognized Indian 
Tribes in accordance with Federal requirements and the State must seek 
advice from Indian health programs or Urban Indian Organizations prior 
to submission of a waiver request, renewal, amendment or action that 
would have a direct effect on Indians or Indian health providers or 
Urban Indian Organizations in accordance with section 5006(e) of the 
American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5, enacted 
on February 17, 2009). We would be interested in comments on this 
proposed addition to strengthen the public input process on changes 
proposed to services and other changes to the structure and operation 
of the section 1915(c) waivers.
    In new paragraph, Sec.  441.304(g), we propose to add language 
describing additional strategies CMS may employ to ensure State 
compliance with the requirements of a waiver, short of termination or 
non-renewal. Our proposed regulation at the new Sec.  441.304(g) 
reflects an approach to encourage State compliance. We are interested 
in working with States to achieve full compliance without having to 
resort to termination of a waiver. Therefore, we are proposing 
strategies to ensure compliance in serious situations short of 
termination. These strategies include use of a moratorium on waiver 
enrollments or withholding of a portion of Federal payment for waiver 
services or for administration of waiver services in accordance with 
the seriousness and nature of the State's noncompliance (that is, 
health and welfare concerns and significant financial issues). These 
strategies could continue, if necessary, as the Secretary determines 
whether termination is warranted. Our primary objective is to use such 
strategies rarely, only after other efforts to resolve issues have not 
succeeded as necessary to ensure the health and welfare of individuals 
served.
    Once CMS employs a strategy to ensure compliance, the State must 
submit an acceptable corrective action plan in order to resolve all 
areas of noncompliance. The corrective action plan must include detail 
on the actions and timeframe the State will take to correct each area 
of noncompliance, including necessary changes to the quality 
improvement strategy and a detailed timeline for the completion and 
implementation of corrective actions. CMS will determine if the 
corrective action plan is acceptable.
Selecting Strategies To Ensure Compliance
    In consideration of whether and which strategies will be used to 
ensure compliance, and in accordance with the seriousness and nature of 
the State's noncompliance (that is, health and welfare concerns and 
significant financial issues), we will consider such areas as the 
following:
    <bullet> The areas of noncompliance and whether they pose immediate 
concerns or otherwise compromise the State's ability to assure 
participant's health and welfare.
    <bullet> The nature and duration of the identified area of serious 
noncompliance.

[[Page 21316]]

    <bullet> The State's history of noncompliance in general, and 
specifically with reference to the cited area of serious noncompliance.
    <bullet> The significance of the deficiencies and whether they 
indicate a system-wide failure to provide quality services.

III. Collection of Information Requirements

    This proposed rule does not contain any new information collection 
requirements; however, it does make reference to information collection 
requirements currently approved by OMB. Specifically, the burden 
associated with the information collection requirements contained in 
this proposed rule (HCBS Waivers) is currently approved under OMB 
control number 0938-0499 with a July 31, 2012, expiration date.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-2296-P] Fax: (202) 395-6974; or E-mail: <a href="/cdn-cgi/l/email-protection#aee1e7fceff1dddbccc3c7ddddc7c1c0eec1c3cc80cbc1de80c9c1d8"><span class="__cf_email__" data-cfemail="034c4a51425c7076616e6a70706a6c6d436c6e612d666c732d646c75">[email protected]</span></a>.

IV. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive 
Order 13132 on Federalism (August 4, 1999) and the Congressional Review 
Act (5 U.S.C. 804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This rule 
does not reach the economic threshold and thus is not considered a 
major rule.
    The RFA requires agencies to analyze options for regulatory relief 
for small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $7.0 million to $34.5 million in any 1 year. Individuals 
and States are not included in the definition of a small entity. We are 
not preparing an analysis for the RFA because we have determined, and 
the Secretary certifies, that this proposed rule would not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
proposed rule would not have a significant impact on the operations of 
a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2011, that 
threshold is approximately $136 million. This rule will have no 
consequential effect on State, local, or Tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 441

    Aged, Family planning, Grant programs-health, Infants and children, 
Medicaid, Penalties and Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services would amend 42 CFR chapter IV as set forth below:

PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC 
SERVICES

    1. The authority citation continues to read as follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

Subpart G--Home and Community-Based Services: Waiver Requirements

    2. Section 441.301 is amended by--
    A. Revising paragraphs (b)(1)(i) and (b)(6).
    B. Adding new paragraph (b)(1)(iv).
    The revisions and addition read as follows:


Sec.  441.301  Contents of request for a waiver.

* * * * *
    (b) * * *
    (1) * * *
    (i) Under a written services and support plan (also called plan of 
care) that is based on a person-centered approach and is subject to 
approval by the Medicaid agency.
    (A) Person-Centered Planning Process. In addition to being led by 
the individual receiving services, the person-centered planning 
process:
    (1) Includes people chosen by the individual.
    (2) Provides necessary support to ensure that the individual has a 
meaningful role in directing the process.
    (3) Occurs at times and locations of convenience to the individual.
    (4) Reflects cultural considerations of the individual.
    (5) Includes strategies for solving conflict or disagreement within 
the process, including any conflict of interest concerns.
    (6) Offers choices to the individual regarding the services and 
supports they receive and from whom.
    (7) Includes a method for the individual to request updates to the 
plan as needed.
    (B) The Person-Centered Plan. The person-centered plan must reflect 
the services that are important for the individual to meet individual 
services and support needs as assessed through a person-centered 
functional assessment as well as what is important to the person with 
regard to preferences for the delivery of such supports. Commensurate 
with the level of need of the individual, the plan must:
    (1) Reflect the individual's strengths and preferences.

[[Page 21317]]

    (2) Reflect clinical and support needs as identified through a 
person-centered functional assessment.
    (3) Include individually identified goals, which may include, as 
desired by the individual, items related to relationships, community 
living, community participation, employment, income and savings, health 
care and wellness, education, and others.
    (4) Reflect the services and supports (paid and unpaid) that will 
assist the individual to achieve identified goals and the providers of 
those services and supports.
    (5) Reflect risk factors and measures in place to minimize them, 
including back-up strategies when needed.
    (6) Be signed by all individuals and providers responsible for its 
implementation.
    (7) Be understandable to the individual receiving services and the 
individuals important in supporting him or her.
    (8) Include a timeline for review.
    (9) Identify the individual and/or entity responsible for 
monitoring the plan.
    (10) Be distributed to everyone involved (including the 
participant) in the plan.
    (11) Be directly integrated into self-direction where individual 
budgets are used.
    (12) Prevent the provision of unnecessary or inappropriate care.
* * * * *
    (iv) Only in settings that are home and community based, integrated 
in the community, provide meaningful access to the community and 
community activities, and choice about providers, individuals with whom 
to interact, and daily life activities. A setting is not integrated in 
the community if it is:
    (A) Located in a building that is also a publicly or privately 
operated facility that provides inpatient institutional treatment or 
custodial care; in a building on the grounds of, or immediately 
adjacent to, a public institution; or a housing complex designed 
expressly around an individual's diagnosis or disability, as determined 
by the Secretary; or
    (B) Has qualities of an institutional setting, as determined by the 
Secretary.
* * * * *
    (6) Be limited to one or more of the following target groups or any 
subgroup thereof that the State may define:
    (i) Aged or disabled, or both.
    (ii) Individuals with Intellectual or Developmental Disabilities, 
or both.
    (iii) Mentally ill.
    3. Section 441.302 is amended by adding paragraphs (a)(4) and 
(a)(5) to read as follows:


Sec.  441.302  State Assurances.

* * * * *
    (a) * * *
    (4) Assurance that the State is able to meet the unique service 
needs that particular target groups may present when the State selects 
to serve more than one target group under a single waiver, as specified 
in Sec.  441.301(b)(6) of this subpart.
    (5) Assurance that services are provided in home and community 
based settings, as specified in Sec.  441.301(b)(1)(iv) of this 
subpart.
* * * * *
    4. Section 441.304 is amended by--
    A. Revising the section heading as set forth below.
    B. Redesignating paragraph (d) as new paragraph (g).
    C. Adding new paragraphs (d), (e), and (f).
    D. Revising newly designated paragraph (g).
    The additions and revisions read as follows:


Sec.  441.304  Duration, extension, and amendment of a waiver.

* * * * *
    (d) The agency may request that waiver modifications be made 
effective retroactive to the first day of a waiver year, or another 
date after the first day of a waiver year, in which the amendment is 
submitted, unless the amendment involves substantive changes as 
determined by CMS.
    (1) Substantive changes may include, but are not limited to, 
revisions to services available under the waiver including elimination 
or reduction in services, and changes in the scope, amount, and 
duration of the services. Substantive changes may also include a change 
in the qualifications of service providers, changes in rate methodology 
or a change in the eligible population.
    (2) A request for an amendment that involves a substantive change 
as determined by CMS, may only take effect on or after the date when 
the amendment is approved by CMS, and must be accompanied by 
information on how the State has assured smooth transitions and minimal 
adverse impact on individuals impacted by the change.
    (e) The agency must provide public notice of any significant 
proposed change in its methods and standards for setting payment rates 
for services in accordance with Sec.  447.205 of this chapter.
    (f) The agency must establish and use a public input process, for 
any changes in the services or operations of the waiver.
    (1) This process must be described fully in the State's approved 
waiver application and be sufficient in light of the scope of the 
changes proposed, to ensure meaningful opportunities for input for 
individuals served, or eligible to be served, in the waiver.
    (2) This process must include consultation with Federally 
recognized Tribes, and in accordance with section 5006(e) of the 
American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5), Indian 
health programs and Urban Indian Organizations.
    (g)(1) If CMS finds that the Medicaid agency is not meeting one or 
more of the requirements for a waiver contained in this subpart, the 
agency is given a notice of CMS' findings and an opportunity for a 
hearing to rebut the findings.
    (2) If CMS determines that the agency is substantively out of 
compliance with this subpart after the notice and any hearing, CMS may 
employ strategies to ensure compliance as described in Sec.  
441.304(g)(1) of this paragraph or terminate the waiver.
    (3)(i) Strategies to ensure compliance may include the imposition 
of a moratorium on waiver enrollments, other corrective strategies as 
appropriate to ensure the health and welfare of waiver participants, or 
the withholding of a portion of Federal payment for waiver services 
until such time that compliance is achieved, or, ultimately, 
termination. When a waiver is terminated, the State must comport with 
Sec.  441.307 of this subpart.
    (ii) CMS will provide States with a written notice of the impending 
strategies to ensure compliance for a waiver program. The notice of 
CMS' intent to utilize strategies to ensure compliance would include 
the nature of the noncompliance, the strategy to be employed, the 
effective date of the compliance strategy, the criteria for removing 
the compliance strategy and the opportunity for a hearing.

    Authority: Catalog of Federal Domestic Assistance Program No. 
93.778, Medical Assistance Program.

    Dated: December 1, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: January 28, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-9116 Filed 4-14-11; 8:45 am]
BILLING CODE 4120-01-P


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