26362 Federal Register / Vol. 77, No. 86 / Thursday, May 3, 2012 / Proposed Rules 

1Affordable Care Act: Patient Protection and 

Affordable Care Act of 2010, Public Law 111–148 

as amended by the Health Care and Education 

Reconciliation Act of 2010, Public Law 111–152. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 430, 431, 435, 436, 440, 

441, and 447 

[CMS–2249–P2] 

RIN 0938–AO53 

Medicaid Program; State Plan Home 

and Community-Based Services, 

5-Year Period for Waivers, Provider 

Payment Reassignment, and Setting 

Requirements for Community First 

Choice 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

revise Medicaid regulations to define 

and describe State plan home and 

community-based services (HCBS) 

under the Social Security Act (the Act) 

as added by the Deficit Reduction Act 

of 2005 and amended by the Patient 

Protection and Affordable Care Act of 

2010 (Affordable Care Act 1). This 

proposed rule offers States new 

flexibility in providing necessary and 

appropriate services to elderly and 

disabled populations and reflects CMS’ 

commitment to the general principles of 

the President’s Executive Order released 

January 18, 2011, entitled ‘‘Improving 

Regulation and Regulatory Review.’’ In 

particular, this rule does not require the 

eligibility link between HCBS and 

institutional care that exists under the 

Medicaid HCBS waiver program. This 

regulation would describe Medicaid 

coverage of the optional State plan 

benefit to furnish home and communitybased services and receive Federal 

matching funds. As a result, States will 

be better able to design and tailor 

Medicaid services to accommodate 

individual needs. This may result in 

improved patient outcomes and 

satisfaction, while enabling States to 

effectively manage their Medicaid 

resources. 

This proposed rule would also amend 

Medicaid regulations consistent with 

the requirements of the Affordable Care 

Act, which amended the Act to provide 

authority for a 5-year duration for 

certain demonstration projects or 

waivers under the Act, at the discretion 

of the Secretary, when they involve 

individuals dually eligible for Medicaid 

and Medicare benefits. 

In addition, this proposed rule would 

provide an additional limited exception 

to the general requirement that payment 

for services under a State plan must be 

made directly to the individual 

practitioner providing a service when 

the Medicaid program is the primary 

source of reimbursement for a class of 

individual practitioners. This exception 

would allow payments to be made to 

other parties to benefit the providers by 

ensuring health and welfare, and 

training. We are including the payment 

reassignment provisions in this HCBS 

proposed rule because State’s Medicaid 

programs often operate as the primary or 

only payer for the class of practitioners 

that includes HCBS service providers. 

Finally, this proposed rule would also 

amend Medicaid regulations to provide 

home and community-based setting 

requirements of the Affordable Care Act 

for the Community First Choice State 

plan option. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m., e.d.t., on June 4, 2012. 

ADDRESSES: In commenting, please refer 

to file code CMS–2249–P2. 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 ‘‘Submit a comment’’ instructions. 

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–2249–P2, P.O. Box 8016, 

Baltimore, MD 21244–8016. 

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–2249–P2, 

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. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Kathy 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. 


wreier-aviles on DSK7SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 77, No. 86 / Thursday, May 3, 2012 / Proposed Rules 26363 

Table of Contents 

I. Executive Summary 

II. Background 

A. Expanded Access to Home and 

Community-Based Services for the 

Elderly and Disabled Under Section 

1915(i) of the Act: History of Section 

1915(i) of the Act 

B. Overview of the State Plan Home and 

Community-Based Services (HCBS) 

Benefit To Provide HCBS for the Elderly 

and Individuals With Disabilities 

1. Services 

2. Eligibility 

3. Number Served 

4. Independent Evaluation 

5. Adjustment Authority 

6. Independent Assessment 

7. Person-Centered Service Plan 

8. Self-Direction 

9. Quality Assurance 

10. Conflict of Interest 

11. Eligibility Redeterminations; Appeals 

12. Option for Presumptive Eligibility for 

Assessment 

13. Individual’s Representative 

14. Nonapplication 

15. No Effect on Waiver Authority 

16. Continuation of Federal Financial 

Participation (FFP) for Institutional Level 

of Care for Individuals Receiving 

Services as of the Effective Date of the 

State Plan HCBS Amendment 

17. State Option To Provide HCBS to 

Individuals Eligible for Services Under a 

Waiver 

18. Establishment of Optional Eligibility 

Group To Provide Full Medicaid Benefits 

to Individuals Receiving State Plan 

HCBS 

19. State Option To Offer HCBS to Specific, 

Targeted Populations 

20. Five-Year Approval for Targeted 

Section 1915(i) HCBS Benefits and 

Renewal Requirements 

21. Phase-In of Services and Eligibility 

C. Effective Date 

D. The State Plan HCBS Benefit in the 

Context of the Medicaid Program as a 

Whole 

E. Other Background 

F. Section 2601 of the Affordable Care Act: 

5-Year Period for Demonstration Projects 

G. Prohibition Against Reassignment of 

Provider Claims 

H. Definition of Home and CommunityBased Settings for the 1915(k) 

Community First Choice State Plan 

Option 

III. Provisions of the Proposed Rule 

A. State Organization and General 

Administration (Part 431) 

B. Eligibility in the States, District of 

Columbia, the Northern Mariana Islands, 

and American Samoa (Part 435) and 

Eligibility in Guam, Puerto Rico and the 

Virgin Islands (Part 436) 

C. Services: General Provisions (Part 440) 

D. Services: Requirements and Limits 

Applicable to Specific Services (Part 

441) 

E. Basis and Purpose (§ 441.650) 

F. State Plan Requirements (§ 441.653) 

G. Eligibility for Home and CommunityBased Services Under Section 1915(i)(1) 

of the Act (§ 441.656) 

H. Needs-Based Criteria and Evaluation 

(§ 441.659) 

I. Independent Assessment (§ 441.662) 

J. Service Plan (§ 441.665) 

K. Provider Qualifications (§ 441.668) 

L. Definition of Individual’s Representative 

(§ 441.671) 

M. Self-Directed Services (§ 441.674) 

N. State Plan HCBS Administration: State 

Responsibilities and Quality 

Improvement (§ 441.677) 

P. Section 2601 of the Affordable Care Act: 

5-Year Period for Demonstration 

Projects: Waiver Requirements (§ 430.25) 

Q. Prohibition Against Reassignment of 

Provider Claims (§ 447.10) 

R. Section 2401 of the Affordable Care Act: 

Community First Choice State Plan 

Option: Home and Community-Based 

Setting Requirements (§ 441.530) 

IV. Response to Comments 

V. Collection of Information Requirements 

VI. Regulatory Impact Analysis 

VII. Regulatory Flexibility Act Analysis 

VIII. Unfunded Mandates Reform Act 

Analysis 

IX. Federalism Analysis 

Regulation Text 

Acronyms 

Because of the many terms to which 

we refer by acronym in this proposed 

rule, we are listing the acronyms used 

and their corresponding terms in 

alphabetical order below. 

ADA Americans with Disabilities Act of 

1990 (Pub. L. 110–325) 

ADLs Activities of daily living 

AHRQ Agency for Healthcare Research and 

Quality 

ANPRM Advance Notice of Proposed 

Rulemaking 

CFC Community First Choice (1915(k) State 

plan Option) 

CHIPRA Children’s Health Insurance 

Program Reauthorization of 2009 (Pub. L. 

111–3) 

CMS Centers for Medicare & Medicaid 

Services 

DRA Deficit Reduction Act of 2005 (Pub. L. 

109–171) 

EPSDT Early and Periodic Screening, 

Diagnosis and Treatment 

FBR Federal benefit rate 

FFP Federal financial participation 

FPL Federal poverty line 

FY Federal fiscal year 

HCBS Home and Community-Based 

Services 

HHS Department of Health and Human 

Services 

IADLs Instrumental activities of daily living 

ICF/MR Intermediate care facility for the 

mentally retarded 

LOC Level of care 

NF Nursing facility 

OBRA’81 Omnibus Budget Reconciliation 

Act of 1981 (Pub. L. 97–35) 

OT Occupational therapy 

PT Physical therapy 

RFA Regulatory Flexibility Act 

SPA State Plan Amendments 

SSI Supplemental Security Income 

SSI/FBR Supplemental Security Income 

Federal Benefit Rate 

UPL Upper payment limit 

I. Executive Summary 

A. Purpose 

This proposed rule would amend the 

Medicaid regulations to define and 

describe State plan home and 

community-based services (HCBS). This 

regulation outlines the optional State 

plan benefit to furnish home and 

community-based State plan services 

and draw Federal matching funds. As a 

result, States will be able to design and 

tailor Medicaid services to better 

accommodate individual needs. This 

may result in improved patient 

outcomes and satisfaction, while 

enabling States to effectively manage 

their Medicaid resources. 

This proposed rule would also amend 

Medicaid regulations consistent with 

the requirements of section 2601 of the 

Patient Protection and Affordable Care 

Act of 2010 (Affordable Care Act), 

which added section 1915(h)(2) to the 

Act to provide authority for a 5-year 

duration for certain demonstration 

projects or waivers under sections 1115, 

1915(b), (c), or (d) of the Act, at the 

discretion of the Secretary, when they 

involve individuals who are dually 

eligible for both Medicaid and Medicare 

benefits. 

In addition, this proposed rule would 

provide an additional limited exception 

to the general requirement that payment 

for services under a State plan must be 

made directly to the individual 

practitioner providing a service when 

the Medicaid program is the primary 

source of reimbursement for a class of 

individual practitioners. This exception 

would allow payments to be made to 

other parties to benefit the providers by 

ensuring workforce stability, health and 

welfare, and trainings, and provide 

added flexibility to the State. We are 

including the payment reassignment 

provision in the HCBS proposed rule 

because States’ Medicaid programs often 

operate as the primary or only payer for 

the class of practitioners that includes 

HCBS service providers. 

This proposed rule would also amend 

Medicaid regulations to provide home 

and community-based setting 

requirements related to section 2401 of 

the Affordable Care Act for the section 

1915(k) Community First Choice State 

plan option. 

B. Summary of the Major Provisions 

1. Section 1915(i) State Plan Home 

Community-Based Services 

The Deficit Reduction Act (DRA) 

added a new provision to the Medicaid 

statute entitled ‘‘Expanded Access to 

Home and Community-Based Services 


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26364 Federal Register / Vol. 77, No. 86 / Thursday, May 3, 2012 / Proposed Rules 

2Although we recognize that the language used 

here is outdated, and that ‘‘intellectual disability’’ 

is the appropriate way to discuss this type of disability, the Social Security Act still refers to 

these types of facilities in this manner. 

for the Elderly and Disabled.’’ This 

provision allows States to provide HCBS 

(as an optional program) under their 

State Medicaid plans. This option 

allows States to receive Federal 

financial participation for services that 

were previously eligible for Federal 

funds only under waiver or 

demonstration projects. This provision 

was further amended by the Affordable 

Care Act. The statute now provides 

additional options for States to design 

and implement HCBS under the 

Medicaid State Plan. In April 4, 2008, 

we published a proposed rule to amend 

Medicaid regulations to implement 

HCBS under the DRA. That proposed 

rule was not finalized, and with the 

passage of section 2402 of the 

Affordable Care Act, some previously 

proposed regulations would no longer 

be in compliance with the current law 

under section 1915(i) of the Act. In 

addition, several new provisions were 

added. Specifically, the Affordable Care 

Act amended the statute by adding a 

new optional categorical eligibility 

group for individuals to provide full 

Medicaid benefits to certain individuals 

who will be receiving HCBS. It also 

authorized States to elect not to comply 

with section 1902(a)(10)(B) of the Act 

pertaining to comparability of Medicaid 

services. After closely analyzing the 

Affordable Care Act provisions, we 

concluded that a new proposed rule was 

necessary. This proposed rule retains a 

large portion of the policies contained 

within the April 4, 2008 proposed rule, 

and updates some of our previous 

proposals to reflect comments that we 

received on the April 4, 2008 proposed 

rule as well as the statutory changes that 

were made by the Affordable Care Act. 

2. Section 2601 of the Affordable Care 

Act: 5-Year Period for Certain 

Demonstration Projects and Waivers 

This proposed rule also provides for 

a 5-year approval or renewal period, 

subject to the discretion of the 

Secretary, for certain Medicaid waivers. 

Specifically, this time period would 

apply for demonstration and waiver 

programs through which a State serves 

individuals who are dually eligible for 

both Medicare and Medicaid benefits. 

3. Provider Payment Reassignments 

Section 1902(a)(32) of the Act 

provides that State plans can allow 

payments to be made only to certain 

individuals or entities. Specifically, 

payment may only be made to an 

individual practitioner who provided 

the service. The statute provides several 

specific exceptions to the general 

principle of direct payment to the 

individual practitioner. 

Over the years, some States have 

requested that we consider adopting 

additional exceptions to the direct 

payment principle to permit 

withholding from the payment due to 

the individual practitioner for amounts 

paid by the State directly to third parties 

for health and welfare benefits, training 

costs and other benefits customary for 

employees. These amounts would not 

be retained by the State, but would be 

remitted to third parties on behalf of the 

practitioner for the stated purpose. 

While the statute does not expressly 

provide for additional exceptions to the 

direct payment principle, we believe the 

circumstances at issue were not 

contemplated under the statute. 

Therefore, we are proposing that the 

direct payment principle should not 

apply because we think its application 

would contravene the fundamental 

purpose of this provision. The apparent 

purpose of the direct payment principle 

was to prohibit factoring arrangements, 

and not to preclude a Medicaid program 

that is functioning as the practitioner’s 

primary source of revenue from 

fulfilling the basic responsibilities that 

are associated with that role. Therefore, 

we are proposing an additional 

exception to describe payments that we 

do not see as within the intended scope 

of the statutory direct payment 

requirement, that would allow the State 

to claim as a provider payment amounts 

that are not directly paid to the 

provider, but are withheld and remitted 

to a third party on behalf of the provider 

for health and welfare benefit 

contributions, training costs, and other 

benefits customary for employees. 

4. Section 2401 of the Affordable Care 

Act: Community First Choice State Plan 

Option: Home and Community-Based 

Setting Requirements 

Section 1915(k)(1)(A)(ii) of the Act 

provides that home and communitybased attendant services and supports 

must be provided in a home and 

community-based setting. The statute 

specifies that home and communitybased settings do not include a nursing 

facility, institution for mental diseases, 

or an intermediate care facility for the 

mentally retarded.2 We propose to adopt 

this statutory language in our 

regulations. Additionally, to provide 

greater clarity, we are proposing 

language to establish that home and 

community-based settings must exhibit 

specific qualities to be eligible sites for 

delivery of home and community-based 

services. 

After consideration of comments 

received in response to the Community 

First Choice (CFC) proposed rule 

published on February 25, 2011, we 

decided to revise the setting provision 

and publish our proposed definition as 

a new proposed rule to allow for 

additional public comment before 

finalizing. Since CFC and section 

1915(i) both pertain to home and 

community-based services, we have 

aligned this CFC proposed language 

with the section 1915(i) proposed home 

and community-based setting 

requirements also included in this rule. 

We find the public comment process to 

be valuable in our attempt to develop 

the best policy on this issue for 

Medicaid beneficiaries. Therefore, we 

plan to fully consider all comments 

received, and align decision making and 

language pertaining to home and 

community-based setting requirements 

across CFC, section 1915(i) State plan 

HCBS, as well as section 1915(c) HCBS 

waivers. 

C. Summary of Costs and Benefits 

Provision description Total costs Total benefits 

1915(i) State Plan Home Community-Based Services.We estimate that, adjusted for a phase-in period 

during which States gradually elect to offer the 

State plan HCBS benefit, in fiscal year (FY) 2012 

the estimated Federal cost would be $80 million, 

and the estimated State cost would be $60 million.

We anticipate that States will make varying use of 

the State plan HCBS benefit provisions to provide needed long-term care services for Medicaid 

beneficiaries. These services will be provided in 

the home or alternative living arrangements in 

the community, which is of benefit to the beneficiary, and is less costly than institutional care. 


wreier-aviles on DSK7SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 77, No. 86 / Thursday, May 3, 2012 / Proposed Rules 26365 

3Note that the abbreviation HCBS does not 

distinguish between singular and plural. Where this 

could be confusing, we spell out home and 

community-based service(s). 

Provision description Total costs Total benefits 

Section 2601 of the Affordable Care 

Act: 5-Year Period for Demonstration Projects (Waivers).

No impact on Federal or State Medicaid funding. 

This rule is voluntary on the part of States.

As this provision elongates the time period under 

which States may operate certain waiver programs without renewal, it will help States to minimize administrative and renewal requirements in 

order to better focus on program implementation 

and quality oversight. 

Provider Payment Reassignments ... We do not anticipate any impact on Federal Medicaid funding. This rule is voluntary on the part of 

States.

This rule proposes additional operational flexibilities 

for States to ensure a strong provider workforce. 

There is also no impact on individual practitioners, even though the proposed rule would 

allow States to deduct or withhold portions of 

such payments under the specific circumstances 

described in the proposed rule. State budgets will 

not likely be significantly affected because the 

operational flexibilities in the proposed rule would 

only facilitate the transfer of funds between participating entities, rather than the addition or subtraction of new funds. 

Section 2401 of the Affordable Care 

Act: Community First Choice State 

Plan Option: Home and Community-Based Setting Requirements.

We do not believe there is an impact on Federal or 

State Medicaid funding as the purpose of the rule 

is merely to define home and community-based 

settings in which CFC services may be provided.

This rule will provide States with necessary guidance to support compliance with the requirement 

that CFC services are provided in a home or 

community based-setting. This rule also provides 

beneficiary protections to support an individual’s 

choice to receive home and community-based 

services in a manner that allows for integration 

with the greater community. 

II. Background 

A. Expanded Access to Home and 

Community-Based Services for the 

Elderly and Disabled Under Section 

1915(i) of the Social Security Act: 

History of Section 1915(i) of the Act 

Section 6086 of the Deficit Reduction 

Act of 2005 (Pub. L. 109–171, enacted 

February 8, 2006) (DRA) entitled 

‘‘Expanded Access to Home and 

Community-Based Services for the 

Elderly and Disabled,’’ added section 

1915(i) to the Social Security Act (the 

Act) to allow States, at their option, to 

provide home and community-based 

services (HCBS) under their State 

Medicaid plans. This option allows 

States to receive Federal financial 

participation (FFP) for services that 

were previously only eligible for FFP 

under waivers or demonstration 

projects, such as those authorized under 

sections 1915(c) and 1115 of the Act. 

Section 1915(i) of the Act was later 

amended by sections 2402(b) through (g) 

of the Patient Protection and Affordable 

Care Act of 2010 (Pub. L. 111–148, 

enacted March 23, 2010) (Affordable 

Care Act) to provide additional options 

for States to design and implement 

HCBS under the Medicaid State Plan. 

In the April 4, 2008 Federal Register 

(73 FR 18676), we published a proposed 

rule to amend Medicaid regulations to 

implement HCBS under section 1915(i) 

of the Act. This rule was never 

finalized, and with the passage of the 

Affordable Care Act some of the 

proposed regulations would no longer 

be in compliance with the statute, as 

several new provisions were added to 

the statute. Therefore, we concluded 

that a new proposed rule and a new 

period of public comment were 

necessary. This proposed rule retains a 

large portion of the policies contained 

within the April 4, 2008 proposed rule. 

However, we have updated some of our 

proposals to reflect the statutory 

changes that were made by the 

Affordable Care Act. 

B. Overview of the State Plan Home and 

Community-Based Services (HCBS) 

Benefit To Provide HCBS for the Elderly 

and Individuals With Disabilities 

The following overview describes the 

provisions of section 1915(i) of the Act 

as established by the DRA and amended 

by the Affordable Care Act. 

In the following discussion and the 

proposed regulation, we refer to 

particular home and community-based 

service(s) offered under section 1915(i) 

of the Act as ‘‘State plan HCBS’’ or 

simply ‘‘HCBS’’.3 We refer to the ‘‘State 

plan HCBS benefit’’ when describing the 

collective requirements of section 

1915(i) of the Act that apply to States 

electing to provide one, or several, of 

the authorized HCBS. We choose to use 

the term ‘‘benefit’’ rather than 

‘‘program’’ to describe section 1915(i) of 

the Act to avoid possible confusion with 

section 1915(c) HCBS waiver programs. 

The State plan HCBS benefit shares 

many features with section 1915(c) 

waiver programs, but it is a State plan 

benefit, although one with very unique 

features not common to traditional State 

plan services. 

Under section 1915(i) of the Act, 

States can provide HCBS to individuals 

who require less than institutional level 

of care (LOC) and who would, therefore, 

not be eligible for HCBS under section 

1915(c) waivers, in addition to serving 

individuals who have needs that would 

meet entry requirements for an 

institution. As it is a State plan benefit, 

section 1915(i) of the Act also does not 

require cost neutrality compared to 

institutional services. Section 1915(i) of 

the Act differs from section 1915(c) 

waivers in other ways. As with other 

State plan services, the benefits must be 

provided Statewide, and States must not 

limit the number of eligible people 

served. 

1. Services 

Section 1915(i)(1) of the Act grants 

States the option to provide, under the 

State plan, the services and supports 

listed in section 1915(c)(4)(B) of the Act 

governing HCBS waivers. The services 

specifically listed in section 

1915(c)(4)(B) of the Act are as follows: 

• Case management. 

• Homemaker/home health aide. 

• Personal care. 

• Adult day health. 

• Habilitation. 

• Respite care. 

• Other services requested by the 

State as the Secretary may approve. 


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26366 Federal Register / Vol. 77, No. 86 / Thursday, May 3, 2012 / Proposed Rules 

4Although we recognize that the language used 

here is outdated, and that ‘‘intellectual disability’’ 

is the appropriate way to discuss this type of 

disability, the Social Security Act still refers to 

these types of facilities in this manner. 

In addition, the following services 

may be provided for individuals with 

chronic mental illness: 

• Day treatment. 

• Other partial hospitalization 

services. 

• Psychosocial rehabilitation 

services. 

• Clinic services (whether or not 

furnished in a facility). 

The HCBS may not include payment 

for room and board (see additional 

discussion in section II.E.3. of this 

proposed rule). 

Section 1915(c)(4)(B) of the Act also 

permits States to request, and the 

Secretary to approve, coverage of other 

services not specifically designated in 

the list of specific services in the 

subparagraph. This authority was not 

included under section 1915(i) when it 

was created in the DRA. However, 

section 2402(c) of the Affordable Care 

Act amended section 1915(i)(1) of the 

Act to permit States to request, and the 

Secretary to approve, coverage for such 

other services in a 1915(i) benefit. 

We interpret the statute as authorizing 

States to cover in their 1915(i) benefit 

both the services specifically identified 

in section 1915(c)(4)(B) of the Act, and 

any other services States request to 

include and which the Secretary 

approves. Therefore, we would expect 

States to define State plan HCBS with 

sufficient specificity so that we can 

determine whether the nature and scope 

of the service clearly relates to those 

listed in section 1915(c)(4)(B) of the Act. 

These services are described in 

§ 440.180 of this proposed rule. 

However, we would not require the 

same standard for ‘‘other services’’ 

under section 1915(i) State plan HCBS 

that we would apply under section 

1915(c) of the Act. Since section 1915(i) 

of the Act does not require an 

individual to meet the criteria for 

institutional LOC, there is no authority 

to apply the standard that the ‘‘other 

services’’ defined and provided through 

State plan HCBS be necessary to prevent 

institutionalization. We note that for all 

services, including those in the ‘‘other 

services’’ category, States must include 

a specific and complete description of 

the scope of the service, and not include 

open-ended statements. 

We propose to review and approve 

these ‘‘other services’’ not specifically 

listed in section 1915(c)(4)(A) of the Act 

based upon the applicability to and 

consistency with the support needs as 

indicated in the needs-based criteria 

that a State defines for the HCBS 

benefit, and with assurance that the 

service will not duplicate other services 

available to individuals through the 

State’s Medicaid State plan. 

Additionally, these services must be 

offered in a manner that would comply 

with section 1902(a)(23) of the Act 

regarding free choice of providers, and 

that permits individuals to receive 

services in the most integrated setting 

possible and consistent with the best 

interests of the beneficiaries and the 

requirements of the Americans with 

Disabilities Act (ADA). Section 1915(i) 

does not incorporate waiver authority or 

other exceptions from these legal 

requirements. Therefore, the services 

offered cannot have the impact of 

limiting the pool of qualified providers 

from which individuals would receive 

services, or have the impact of 

requiring/only allowing individuals to 

receive services from the same entity 

from which they purchase or who 

provide their housing. For example, we 

would not allow States to establish 

residential HCBS in provider-owned 

and/or operated settings only, when 

they do not have comparable HCBS 

available to individuals residing in their 

own homes. 

2. Eligibility 

Eligibility for this option is based 

upon several different factors that are 

either specified by the statute or that a 

State may define. These include 

financial eligibility, the establishment of 

needs-based criteria, and the State 

option to target the benefit and to offer 

benefits differing in type, amount, 

duration or scope to specific 

populations. Due to the complex 

interaction between these provisions, 

the following section is divided into 

subsections that address eligibility for 

the benefits. These include: 

• Eligibility Overview. 

• Income Eligibility. 

• Needs-Based Criteria Overview. 

• Option to Disregard Comparability. 

• Establishing Needs-Based Criteria. 

a. Section 1915(i) of the Act: Eligibility 

Overview 

Section 1915(i) of the Act explicitly 

provides that State plan HCBS may be 

provided without determining that, but 

for the provision of these services, 

individuals would require the LOC 

provided in a hospital, a nursing facility 

(NF), or an intermediate care facility for 

the mentally retarded 4 (ICF/MR) as is 

required in section 1915(c) HCBS 

waivers. While HCBS services provided 

through section 1915(c) waivers must be 

‘‘cost-neutral’’ as compared to 

institutional services, no cost neutrality 

requirement applies to the section 

1915(i) State plan HCBS benefit. States 

are not required to produce comparative 

cost estimates of institutional care and 

the State plan HCBS benefit. This 

significant distinction allows States to 

offer HCBS to individuals whose needs 

are substantial, but not severe enough to 

qualify them for institutional or waiver 

services, and to individuals for whom 

there is not an offset for cost savings in 

NFs, ICFs/MR, or hospitals. 

One particular result of this 

distinction is that, through the section 

1915(i) benefit, States have the ability to 

provide a full array of HCBS to adults 

with mental health and substance use 

disorders. The benefit also creates an 

opportunity to provide HCBS to other 

individuals with significant needs who 

do not qualify for an institutional LOC, 

such as some individuals with Autism 

Spectrum Disorder, diabetes, acquired 

immune deficiency syndrome, or 

Alzheimer’s disease. In many cases, 

without the provision of HCBS, these 

conditions may deteriorate to the point 

where the individuals become eligible 

for more costly facility-based care. 

State plan HCBS are intended to 

enable individuals to receive needed 

services in their own homes, or in 

alternative living arrangements in what 

is collectively termed the ‘‘community’’ 

in this context. (See additional 

discussion in section II.E.2. of this 

proposed rule regarding institutions not 

considered to be in the community, and 

in which State plan HCBS will not be 

available.) 

b. Income Eligibility 

Section 1915(i)(1) of the Act requires 

that in order to receive State plan HCBS, 

individuals must be eligible for 

Medicaid under an eligibility group 

covered under the State’s Medicaid 

plan. In determining whether either of 

the relevant income requirements 

(discussed) is met, the regular rules for 

determining income eligibility for the 

individual’s eligibility group apply, 

including any less restrictive income 

rules used by the State for that group 

under section 1902(r)(2) of the Act. 

Section 1915(i)(3) of the Act permits 

States to not apply the requirements of 

section 1902(a)(10)(C)(i)(III) of the Act 

relating to income and resource rules in 

the community for the medically needy. 

Under this authority States are 

permitted to use institutional eligibility 

rules in determining eligibility for the 

medically needy. The nonapplication 

requirements are described in section 

II.B.14 of the preamble. This eligibility 

criterion was not changed by the 

Affordable Care Act. 


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5 1915(d) and (e) waivers are State options to 

provide HCBS to the elderly and to individuals 

with disabilities, respectively. Currently, no State 

elects to provide services under either of these 

authorities. 

Section 2402(b) of the Affordable Care 

Act added a new option at section 

1915(i)(6) of the Act, to allow States to 

provide section 1915(i) services to 

certain individuals who meet the needsbased criteria, who would be eligible for 

HCBS under section 1915(c), (d) or (e) 

waivers or a section 1115 waiver 

approved for the State, and who have 

income up to 300 percent of the 

Supplemental Security Income Federal 

Benefit Rate (SSI/FBR). 

Section 2402(d) of the Affordable Care 

Act also amended section 

1902(a)(10)(A)(ii) of the Act by adding a 

new optional categorically needy 

eligibility group specified at section 

1902(a)(10)(A)(ii)(XXII) of the Act to 

provide full Medicaid benefits to certain 

individuals who will be receiving 

section 1915(i) services. This eligibility 

group has two parts, and States can 

cover individuals under either or both 

parts of the group. Under this group, 

States can elect to cover individuals 

who are not otherwise eligible for 

Medicaid who meet the needs-based 

criteria of the section 1915(i) benefit, 

have income up to 150 percent of the 

Federal poverty line (FPL) with no 

resource test and who will receive 

section 1915(i) services, or individuals 

with income up to 300 percent of the 

SSI/FBR, who would be eligible under 

an existing section 1915(c), (d) or (e) 5

waiver or section 1115 waiver approved 

for the State and who will receive 

section 1915(i) services. These 

individuals do not have to be receiving 

services under an existing section 

1915(c), (d) or (e) waiver or section 1115 

waiver; the individual just has to be 

determined eligible for the waiver. 

c. Needs-Based Criteria Overview 

In contrast to the institutional LOC 

requirement for eligibility in HCBS 

waivers, section 1915(i)(1)(A) of the Act 

requires States to impose needs-based 

criteria for eligibility for the State plan 

HCBS benefit. Institutional level of care 

criteria must be more stringent than the 

needs-based criteria for the State plan 

HCBS benefit. Additionally, the State 

may establish needs-based criteria for 

each specific State plan home and 

community-based service that an 

individual would receive. 

Thus, under section 1915(i) of the 

Act, States determine eligibility for State 

plan HCBS based on the following: 

• Individuals eligible for medical 

assistance under the State plan whose 

income is below 150 percent of FPL, as 

determined by the State under the 

methodology applicable to the group, 

including any less restrictive income 

rules in place through section 1902(r)(2) 

of the Act. 

• At the State option, individuals 

eligible under the new optional 

categorical needy group 

1902(a)(10)(A)(ii)(XXII) of the Act. This 

includes: 

++ Individuals with income below 

300 percent of the SSI/FBR who are 

eligible for HCBS through a waiver 

approved for the State under sections 

1115, 1915(c), 1915(d), or 1915(e) of the 

Act and will receive section 1915(i) 

services. 

++ Individuals who are not otherwise 

eligible for medical assistance who have 

income below 150 percent and who will 

receive section 1915(i) services. There 

will be no resource test for this group. 

• The individual resides in the home 

or community. 

• The individual meets the needsbased criteria established by the State. 

• The individual meets any targeting 

criteria in accordance with CMS 

requirements that the State elects to 

establish. 

For more information about the 

optional eligibility category for 

individuals who receive services 

through the State plan HCBS benefit, 

please see section II.B.18. of this 

proposed rule. 

The needs-based criteria for coverage 

of individual services provided within a 

State’s section 1915(i) benefit are subject 

to the same requirements as the needsbased eligibility criteria for the benefit, 

and may not limit or target any service 

based on age, nature or type of 

disability, disease, condition, or 

residential setting, but could include 

risk factors or take into account service 

history. However, section 1915(i)(7) of 

the Act provides States with the option 

to target eligibility for the benefit to 

specific populations. 

d. Option To Disregard Comparability 

Effective October 1, 2010, section 

2402(f) of the Affordable Care Act, 

amended section 1915(i)(3) of the Act to 

permit States to elect not to comply 

with the requirement of section 

1902(a)(10)(B) of the Act relating to 

comparability of services. A waiver of 

comparability is a key feature of section 

1915(c) HCBS waivers, permitting a 

State to target the HCBS benefit to 

certain populations by defining which 

groups will be eligible for waiver 

services, and by having separate waivers 

for different groups. With this change, 

States may exercise the authority to 

target the section 1915(i) benefit 

similarly, but are not required to do so. 

A State must establish needs-based 

criteria for eligibility for and receipt of 

State plan HCBS regardless of whether 

it elects the option to not comply with 

the comparability requirement. For 

additional information regarding the 

option for targeting in the benefit, please 

see the discussion at (section II.B.19 of 

the proposed rule). 

e. Establishing Needs-Based Criteria 

The heading of section 1915(i) of the 

Act describes the State plan HCBS 

benefit as ‘‘for Elderly and Disabled 

Individuals.’’ However, section 1915(i) 

of the Act does not include definitions 

of the terms ‘‘elderly’’ or ‘‘disabled’’ in 

setting forth eligibility criteria, and 

instead requires eligibility to be based 

on need and on eligibility for medical 

assistance under a State plan group. 

Thus, we believe that the use of these 

terms in the statute is descriptive. 

Individuals who are eligible for medical 

assistance under a group covered in the 

State’s plan and who meet the needsbased eligibility criteria for State plan 

HCBS will be likely to have needs 

stemming either from a disability or 

from being elderly. We note that section 

1902(b)(1) of the Act prohibits the 

Secretary from approving any plan for 

medical assistance that imposes an age 

requirement of more than 65 years as a 

condition of eligibility. 

The statute does not define ‘‘needsbased.’’ We are proposing to define the 

nature of needs-based criteria to 

distinguish them from targeting criteria, 

which are permitted under the statute as 

a State option and are distinct from the 

needs-based criteria. We propose to 

provide States with the flexibility to 

define the specific needs-based criteria 

they will establish. 

We believe that the statute 

distinguishes needs-based criteria from 

other possible descriptors of an 

individual’s medical condition or 

diagnosis. We interpret needs-based 

criteria as describing the individual’s 

particular need for support, regardless 

of the conditions and diagnoses that 

may cause the need. However, as 

discussed in section II.B.19. of this 

proposed rule, States may also disregard 

comparability requirements contained 

in section 1902(a)(10)(B) of the Act, and 

thus, target the section 1915(i) benefit 

(or multiple benefits) to individuals 

with specific diagnoses and conditions. 

We interpret the statute to mean that, 

when a State elects to disregard 

comparability in order to target the 

benefit to individuals with specific 

diagnoses, those individuals must meet 

both the targeting criteria, as well as the 

State’s needs-based criteria. 


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6Under section 2001(b) of the Affordable Care 

Act, States are not permitted to establish eligibility 

standards, methodologies, or procedures that are 

more restrictive than those in place on the date of 

the Affordable Care Act’s enactment (March 23, 

2010). For adults, this requirement lasts until the 

Secretary determines that a health insurance 

exchange is fully operational in the State; for 

children under the age of 19, the requirement lasts 

until September 30, 2019. 

Because the application of LOC requirements for 

institutions and HCBS waivers may have an impact 

on Medicaid eligibility for some individuals, we 

encourage States interested in using the State plan 

HCBS to contact CMS for technical assistance in 

meeting these statutory requirements. 

7Although the statute references waivers under 

Section 1915(d) and (e), no State currently operates 

a waiver under either authority. In the event that 

a State elects to include a (d) or (e) waiver, these 

requirements would apply. 

Section 1915(i)(1)(B) of the Act 

additionally requires that the needsbased criteria for determining whether 

an individual requires the LOC 

provided in a hospital, NF, or ICF/MR 

or under a waiver of the State plan be 

more stringent than the needs-based 

eligibility criteria for the State plan 

HCBS benefit. Institutional/waiver LOC 

criteria in some States do not include 

needs-based criteria. Since the two must 

be comparable, we interpret this to 

mean that States without a needs-based 

component to their institutional LOC 

evaluation must establish needs-based 

criteria for those services, as well as for 

the State plan HCBS benefit. We also 

believe that States electing to implement 

a section 1915(i) benefit must include a 

needs-based evaluation component of 

the institutional/waiver LOC 

determination process so that stringency 

of those criteria can be compared to 

stringency of eligibility criteria for the 

State plan HCBS benefit. 

‘‘Stringency’’ is not defined in the 

statute. The requirement is simply that 

there be a differential between the 

threshold of need for the State plan 

HCBS benefit as compared to the 

threshold of need for institutional 

services. The required difference in 

criteria will be relative, specific to each 

State’s unique institutional levels of 

care, and can be constructed in several 

ways. Because we have received many 

questions on the stringency 

requirements of the statute we will 

illustrate some of the possible options. 

We want to be clear, however, that the 

requirement of section 1915(i) of the Act 

is simply that the needs-based criteria 

for institutions and for the State plan 

HCBS benefit be set so that the latter are 

lower at the time the benefit is 

implemented. There is no requirement 

that institutional criteria be higher, 

lower, or unchanged from their level 

prior to implementing the State plan 

HCBS benefit. The only test is that the 

result of all the needs-based criteria 

must be that some individuals will be 

served under the State plan HCBS 

benefit who are not eligible to be served 

by Medicaid institutional services. If 

institutional LOC criteria are changed in 

implementing the benefit, States may 

provide protections for individuals who 

lose eligibility due to the application of 

those new criteria (see section II.B.16. of 

this proposed rule). 

There are issues for States to consider 

other than section 1915(i) of the Act that 

will influence decisions on levels of 

care and needs-based criteria, that are 

far beyond the scope of this document, 

for example, statutory requirements for 

maintenance of effort (MOE) in effect at 

the time of this proposed rule, 

requirements of the Americans with 

Disabilities Act and the Olmstead 

decision, and funding constraints 6. In 

this proposed rule, we focus on the 

choices a State may make in setting up 

a State plan HCBS benefit in ways that 

are consistent with requirements of 

section 1915(i) of the Act. As an 

illustration, this proposed regulation 

would permit a State to define the 

needs-based criteria for a new HCBS 

benefit at a lower level than the State’s 

existing institutional levels of care, and 

leave the institutional criteria 

unchanged (if they already include 

needs-based criteria). This would satisfy 

the requirement that the institutional 

criteria be more stringent than the State 

plan HCBS benefit, meet a goal to 

service individuals who have not 

previously had access to HCBS because 

they have not yet reached the level of 

need for admission to an institution, 

without making any change to existing 

services. This proposed regulation 

would also permit States to take other 

approaches. A State could raise one or 

more institutional levels of care, and 

provide HCBS under the State plan 

benefit for some or all of the individuals 

who would have not yet reached the 

level of need for admission to an 

institution. The State could choose (or 

not) to also include in the benefit 

individuals below the former 

institutional level of care. This scenario 

would also satisfy the stringency 

requirement, but would be more 

complex and would require analysis of 

some of the other relevant issues 

mentioned above. 

We note that section 1915(i) of the Act 

does not modify the statutory coverage 

provisions governing institutional 

benefits. States must be cautious not to 

establish more stringent needs-based 

criteria for hospitals, NFs or ICFs/MR 

that would reduce access to services 

mandated elsewhere in title XIX, since 

those other provisions of the statute 

were not amended. For example, the NF 

benefit is defined in section 1919(a)(1) 

of the Act as an institution that is 

primarily engaged in providing to 

residents skilled nursing care, 

rehabilitation services, and ‘‘[o]n a 

regular basis, health-related care and 

services to individuals who because of 

their mental or physical condition 

require care and services (above the 

level of room and board) which can be 

made available to them only through 

institutional facilities.’’ To the extent an 

individual has a medical need for such 

health-related care and services which 

are only available in an institutional 

setting because that needed home or 

community-based health-related care 

and services are not available, the NF 

institutional benefit must remain 

available to all Medicaid eligible 

individuals described in section 

1919(a)(1)(C) of the Act. 

We interpret the reference to hospitals 

in section 1915(i)(1)(B) of the Act to 

mean facilities certified by Medicaid as 

hospitals that are providing long-term 

care services. General acute care 

Medicaid hospital services are not 

subject to LOC determinations by the 

State. 

We interpret the reference in section 

1915(i)(1)(B) of the Act ‘‘under any 

waiver of such plan’’ to apply to section 

1915(c), 1915(d) and 1915(e) waivers, as 

well as those section 1115 waivers that 

include HCBS, as specified in section 

1915(i)(6)(a) of the Act. Sections 

1915(c), (d) and (e) 7 of the Act will have 

more stringent minimum criteria than 

the State plan HCBS benefit, as the 

waivers are required to use LOC 

assessments equivalent to one or more 

of the institutional levels of care. If a 

State has an approved section 1115 

demonstration with multiple levels of 

care for institutional and/or HCBS, we 

interpret this requirement to apply to 

the least stringent institutional LOC 

criteria within that demonstration that 

would likely be the comparison for 

purposes of section 1915(i) of the Act. 

In summary, the needs-based 

eligibility criteria for the State plan 

HCBS benefit must have the effect of 

allowing some individuals who do not 

meet the needs-based criteria for 

institutionalized care to access HCBS 

through the section 1915(i) benefit, but 

may also allow access to individuals 

who meet the institutional needs-based 

eligibility criteria. States may also enroll 

individuals in both a section 1915(i) 

benefit, and a section 1915(c) waiver, as 

discussed earlier in this rule. 

3. Number Served 

Section 1915(i)(1)(C) of the Act, as 

amended by section 2402(e) of the 


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Affordable Care Act, does not permit 

States to limit the number of eligible 

individuals receiving services and to 

establish waiting lists. Instead, the 

benefit requires a State to provide to the 

Secretary a projection of the number of 

individuals expected to receive services. 

If this projection is exceeded, section 

1915(i)(1)(D)(ii) of the Act permits the 

State to constrict its needs-based 

eligibility thresholds for State plan 

HCBS (see the discussion on 

Adjustment Authority in I.B.5. of this 

proposed rule). 

Section 1915(i)(1)(C) of the Act 

requires that the State submit 

projections, in the form and manner, 

and upon the frequency as the Secretary 

specifies, of the number of individuals 

to be provided HCBS. We propose to 

follow the practice used in HCBS 

waivers to calculate the number served 

as unduplicated persons receiving 

services during a 12-month period. We 

further propose to specify that, during 

the application process, States would 

project the total number of individuals 

to be served by the benefit during the 

initial year. We further propose to 

specify that States with an approved 

State plan HCBS benefit annually 

submit both the projected number of 

individuals to be served and the actual 

number of individuals served in the 

previous year. We refer to individuals 

served under the benefit and included 

in the annual number served as having 

been enrolled in the benefit. The statute 

refers to ‘‘enrollment’’ in section 

1915(i)(1)(D)(ii) of the Act concerning 

‘‘Adjustment Authority.’’ Because there 

are a number of steps involved in an 

individual initiating service under the 

State plan HCBS benefit, ‘‘enrollment’’ 

is a useful term to indicate individuals 

for whom those steps have been 

completed, services have been 

authorized or provided, and who will be 

accounted for in the annual number 

served under the benefit. If the State 

exceeds its enrollment estimate, the 

State would report the number of 

individuals actually served in the 

required annual report to the Secretary, 

and revise the estimate for succeeding 

years. 

4. Independent Evaluation 

Section 1915(i)(1)(D) of the Act sets 

forth a requirement for an individual 

evaluation of need for each person 

seeking coverage of the State plan HCBS 

benefit. The statute here uses the term 

‘‘assessment,’’ while sections 

1915(i)(1)(E) and (H) of the Act refer to 

the initial eligibility determination as 

the ‘‘independent evaluation.’’ We 

would use the latter term for 

consistency. ‘‘Independent evaluation,’’ 

as understood in light of section 

1915(i)(1)(H) of the Act, means free from 

conflict of interest on the part of the 

evaluator. The independent evaluation 

is separate from, but related to, the 

independent assessment (as discussed 

below). 

The independent evaluation applies 

the needs-based HCBS eligibility criteria 

(established by the State according to 

section 1915(i)(1)(A) of the Act), to an 

applicant for the State plan HCBS 

benefit. Section 1915(i)(1)(D) of the Act 

establishes that determining whether an 

individual meets the needs-based 

eligibility criteria specified in sections 

1915(i)(1)(A) and (B) of the Act requires 

an individualized and independent 

evaluation of each person’s support 

needs and capabilities. We interpret 

‘‘needs and capabilities’’ to mean a 

balanced approach that considers both 

needs and strengths. However, the 

words ‘‘capability’’ and ‘‘ability’’ are 

historically connected with a deficitoriented approach to assessment, which 

is the opposite of the statute’s personcentered approach. Therefore, we would 

refer to needs and strengths in this 

discussion and in the regulation. 

Section 1915(i)(1)(D) of the Act 

indicates that the independent 

evaluation ‘‘may take into account’’ the 

inability of the individual to perform 

two or more activities of daily living 

(ADLs), (which the statute defines by 

reference to section 7702B(c)(2)(B) of 

the Internal Revenue Code of 1986), or 

the need for significant assistance to 

perform these activities. The State may 

also assess other risk factors it 

determines to be appropriate in 

determining eligibility for, and receipt 

of, HCBS. The statute does not limit the 

factors a State may take into account in 

the evaluation. For example, difficulty 

with instrumental activities of daily 

living (IADLs) or the need for cueing in 

order to perform a task could be 

considered. A State could choose to use 

a person-centered functional assessment 

tool or strategy to fulfill this 

requirement. 

5. Adjustment Authority 

Section 1915(i)(1)(D)(ii) of the Act 

permits the State to adjust the needsbased criteria described in section 

1915(i)(1)(B) of the Act in the event that 

enrollment exceeds the annual 

maximum number of individuals that 

the State has projected it would serve 

within parameters as noted above. The 

purpose of an adjustment would be to 

revise the State’s needs-based criteria to 

reduce the number of individuals who 

would be eligible for the HCBS benefit. 

To preserve the requirement of section 

1915(i)(1)(B) of the Act that more 

stringent needs-based criteria be in 

place for institutionalized care, the 

adjusted eligibility criteria must still be 

less stringent than those applicable to 

institutional levels of care in the State 

plan institutional benefit, and thus, in 

any HCBS waivers that require 

participants to meet an institutional 

LOC. If the State chooses to make this 

adjustment, it must provide at least 60 

days written notice to the Secretary and 

to the public, stating the revisions it 

proposes. 

While the adjustment authority is 

granted to States without having to 

obtain prior approval from the 

Secretary, we believe that the statute 

requires the State to amend the State 

plan to reflect the adjusted criteria. We 

believe that the State’s adjustment 

authority does not prevent the Secretary 

from disapproving a State plan 

amendment (SPA) that fails to comply 

with the statute and regulations. This 

provision of the law must be interpreted 

in light of existing Medicaid 

requirements not waived by section 

1915(i) of the Act. We have, therefore, 

incorporated within the proposed 

regulation those relevant requirements 

in addition to the statutory provisions 

within section 1915(i)(1)(D)(ii) of the 

Act. Section 441.559(c) provides the 

greatest degree of authority for 

adjustment possible within the 

constraints of other requirements. The 

Secretary will evaluate the State’s 

adjusted criteria for compliance with 

the provisions of this subparagraph and 

all requirements of subpart K. A State 

may implement the adjusted criteria as 

early as 60 days after notifying all 

required parties. Section 430.16 

provides the Secretary 90 days to 

approve or disapprove a State plan 

amendment, or request additional 

information. If the State implements the 

modified criteria prior to the Secretary’s 

final determination with respect to the 

State plan amendment, the State would 

be at risk for any actions it takes that are 

later disapproved. 

After needs-based criteria are adjusted 

under this authority, the statute requires 

that individuals served under the 

previous State plan HCBS needs-based 

criteria would continue to receive 

HCBS. As amended by section 2402(e) 

of the Affordable Care Act, section 

1915(i)(1)(D)(ii)(II) of the Act provides 

that an individual who is receiving 

HCBS before the effective date for 

modified needs-based criteria, (based on 

the most recent version of the criteria in 

effect before the modification), must be 

deemed by the State to continue to be 

eligible for State plan HCBS until the 

individual no longer meets the needsbased criteria, and targeting criteria if 


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applicable, under which they were 

originally provided the benefit. Any 

changes to the institutional LOC criteria 

under this section are subject to the 

same requirements as described in 

1915(i)(5) (see section II.B.16. of this 

proposed rule). 

However, we would remind States of 

the maintenance of efforts requirements 

discussed in section II.B.2. of this 

proposed rule. 

We note that the required processes 

for individual notification and appeals, 

contained within part 431, subpart E, 

remain in effect whenever a State 

modifies its needs-based criteria. 

Furthermore, section 1915(i)(5) of the 

Act provides protections for individuals 

who are receiving services in waivers or 

institutional settings prior to the 

modification of the LOC requirements, 

as discussed below. 

It is important to note that the 

adjustment authority is a State option; 

there is nothing in the law that requires 

a State to constrict its needs-based 

criteria if enrollment exceeds 

projections. 

6. Independent Assessment 

Section 1915(i)(1)(E) of the Act 

describes the relationship of several 

required functions. Section 

1915(i)(1)(E)(i) of the Act refers to the 

independent evaluation of eligibility in 

section 1915(i)(1)(A) and (B) of the Act, 

emphasizing the independence 

requirement. Section 1915(i)(1)(E)(ii) of 

the Act introduces the requirement of an 

independent assessment following the 

independent evaluation. Thus, there are 

two steps to the process: the eligibility 

determination, which requires the 

application of the needs-based criteria 

and any additional targeting criteria the 

State elects to require; and the 

assessment for individuals who were 

determined to be eligible under the first 

step, to determine specific needed 

services and supports. The assessment 

also applies the needs-based criteria for 

each service (if the State has adopted 

such criteria). Like the eligibility 

evaluation, the independent assessment 

is based on the individual’s needs and 

strengths. The Act requires that both 

physical and mental needs and 

strengths are assessed. These 

requirements describe a person-centered 

assessment including behavioral health, 

which will take into account the 

individual’s total support needs as well 

as the need for the HCBS to be offered. 

Section 1915(i)(1)(E)(ii) of the Act 

requires that States use the assessment 

to: Determine the necessary level of 

services and supports to be provided; 

prevent the provision of unnecessary or 

inappropriate care; and establish a 

written individualized service plan. 

To achieve the three purposes of the 

assessment listed above, the assessor 

must be independent; that is, free from 

conflict of interest with regard to 

providers, to the individual and related 

parties, and to budgetary concerns. 

Therefore, we are proposing specific 

requirements for independence of the 

assessor in accordance with section 

1915(i)(1)(H)(ii) of the Act, and we 

would apply these also to the evaluator 

and the person involved with 

developing the person-centered service 

plan, where the effects of conflict of 

interest would be equally deleterious. 

These considerations of independence 

inform the discussion below under 

section 1915(i)(1)(H)(ii) of the Act 

regarding conflict of interest standards. 

Section 1915(i)(1)(F) of the Act 

provides detailed requirements for the 

independent assessment: 

• A face-to-face evaluation of the 

individual by an assessor trained in the 

assessment and evaluation of persons 

whose physical or behavioral health 

conditions trigger a potential need for 

HCBS. To fulfill this statutory 

requirement, we would propose that the 

State must develop standards and 

determine the qualifications necessary 

for agencies and individuals who will 

perform independent assessments and 

be involved with developing the plans 

of care. Additionally, we recognize that 

many States are developing 

infrastructure and policies to support 

the use of telemedicine and other ways 

to provide distance-care to individuals 

in order to increase access to services in 

rural areas or other locations with a 

shortage of providers. To support these 

activities, we propose that the ‘‘face-toface’’ assessment can include any 

session(s) performed through 

telemedicine or other information 

technology medium if the following 

conditions apply: 

++ The health care professional(s) 

performing the assessment meet the 

provider qualifications defined by the 

State, including any additional 

qualifications or training requirements 

for the operation of required 

information technology; 

++ The individual receives 

appropriate support during the 

assessment, including the use of any 

necessary on-site support-staff; and 

++ The individual is provided the 

opportunity to request an in-person 

assessment in lieu of one performed via 

telemedicine. 

• An objective evaluation of the 

individual’s inability to perform two or 

more ADLs, or the need for significant 

assistance to perform the activities is 

required. We do not interpret 

‘‘objective’’ to refer to the independence 

required of the assessor as discussed 

above, but to refer to an additional 

requirement for reliance on some level 

of valid measurement appropriate to the 

ADLs in order to ensure that the 

assessments were applied uniformly 

across individuals in the section 1915(i) 

benefit. For example, an occupational 

therapy (OT) or physical therapy (PT) 

evaluation or a trauma screening could 

be required, the results of which would 

be utilized by the assessor. We note that 

the trained assessor is not necessarily 

responsible for performing the objective 

evaluation, but should make sure that 

the objective evaluation is performed by 

qualified individuals. We do not 

propose methods to achieve this 

requirement, as the nature of the HCBS 

to be provided and the needs-based 

criteria for the State plan HCBS benefit 

will determine the appropriate means of 

evaluating ADLs. 

Section 1915(i)(1)(F) of the Act 

defines ADLs in terms of section 

7702B(c)(2)(B) of the Internal Revenue 

Code of 1986, which includes the 

following: bathing, dressing, toileting, 

transferring, eating, and continence. 

This section of the Internal Revenue 

Code does not define the terms 

‘‘inability’’ or ‘‘significant assistance.’’ 

While States have some flexibility to 

define these factors, we interpret 

‘‘inability’’ to mean need for total 

support to perform an ADL, and 

‘‘significant assistance’’ to mean 

assistance from another individual or 

from assistive technology necessary for 

the successful performance of the task. 

An objective evaluation of inability to 

perform two or more ADLs is a required 

element of the assessment but only a 

suggested element of the eligibility 

evaluation. We conclude that partial or 

complete inability to perform two or 

more ADLs is not a statutory 

prerequisite to receive State plan HCBS, 

but is a required element of the 

assessment in order to inform the 

development of the service plan 

required by section 1915(i)(1)(G) of the 

Act. Because States may define very 

diverse needs-based criteria and HCBS 

service definitions, we do not believe it 

is possible to be more specific in 

regulation about the criteria for 

assessment. However, we would note 

that a functional assessment tool could 

be used to measure objectively an 

individual’s needs to establish 

eligibility as well as to develop an 

appropriate service plan. 

We note that we are currently engaged 

in an initiative to develop universal core 

elements to be included in an 

assessment, through work being done 


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under the Balancing Incentives Payment 

Program, created under section 10202 of 

the Affordable Care Act. For consistency 

across Medicaid programs, we therefore, 

intend to move toward States including 

any finalized universal core elements 

developed from this work in carrying 

out independent assessments under 

1915(i), as well as under 1915(k) 

Community First Choice, and in 

performing other HCBS assessments as 

determined by CMS. 

• Consultation with any responsible 

persons appropriate to the individual 

and the needed supports, including 

family, spouse, guardian, or healthcare 

and support providers. We do not 

believe the examples listed in the 

statute to be prescriptive or limiting. 

The assessor must give the individual 

and, if applicable, the individual’s 

authorized representative, the 

opportunity to identify appropriate 

persons who should be consulted 

during this process. The role of the 

assessor is to facilitate free 

communication from persons relevant to 

the support needs of the individual, 

while protecting privacy, and promoting 

the wishes and best interests of the 

individual. In necessary circumstances, 

the consultations are not required to be 

performed in person or at the same time 

and place as the face-to-face evaluation, 

so long as any ancillary contacts are 

with persons the individual has 

identified, are divulged and discussed 

with the individual/representative, and 

documented. For example, telephone 

communications with parties not 

available for an in-person meeting 

would be permitted. 

• An examination of the individual’s 

relevant history, medical records, and 

care and support needs. 

• Knowledge of best practices and 

research on effective strategies that 

result in improved health and quality of 

life outcomes, and knowledge of the 

adult and child public service systems. 

At section 1915(i)(1)(F)(v) of the Act, the 

statute requires that the examination of 

the individual’s history, medical 

records, and care and support needs be 

guided by this knowledge, and we 

would propose that this evidence-based 

approach should apply to the entire 

process for assessment and service plan 

development in a comprehensive, 

coordinated manner. Since the 

individualized service plan must be 

based upon the independent 

assessment, these requirements for the 

assessment should be used to inform 

and strengthen the service plan and, 

subsequently, the services provided to 

the individual. 

• If the State offers the option of selfdirection and the individual so elects, 

the assessment should include gathering 

the information required to establish 

self-direction of services. We do not 

propose to require States to conduct a 

separate or additional assessment 

process for self-direction. 

As long as States comply with all 

provisions related to conducting the 

independent eligibility evaluation, 

independent assessment, and 

developing the person-centered service 

plan, States have flexibility in 

determining whether they will require 

that the functions be performed as one 

activity by a single agency or individual, 

or whether they wish to separate those 

functions and have different entities 

involved. 

7. Person-Centered Service Plan 

Section 1915(i)(1)(G) of the Act 

requires that the State plan HCBS 

benefit be furnished under an 

individualized care plan based on the 

assessment. The terms ‘‘care plan’’ and 

‘‘service plan’’ are used interchangeably 

in practice. We will adopt the term 

‘‘service plan’’ in this regulation for two 

reasons. First, to be consistent with the 

terminology in use with other HCBS, 

including § 1915(c) HCBS waivers, we 

wish to avoid the misunderstanding that 

the plan is a different type of 

requirement in the State plan HCBS 

benefit than in other HCBS authorities. 

We note the reference to ‘‘service plan’’ 

for self-directed HCBS at 

1915(i)(1)(G)(iii)(II)(bb). Second, some 

individuals and advocates have 

commented that ‘‘care plan’’ has a 

medical or dependent connotation, 

inconsistent with a person-centered 

approach. Since we see no technical 

difference between the two terms, we 

propose to adopt ‘‘service plan’’. 

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. The personcentered 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. 

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. Thus, we propose to require 

such a process be used in the 

development of the individualized 

service plan for all individuals to be 

served by section 1915(i) benefit. This 

can be achieved when States 

affirmatively and creatively support 

individuals in the planning process. We 

would propose certain requirements for 

developing the service plan, but note 

that the degree to which the process 

achieves the goal of person-centeredness 

can only be known with appropriate 

quality monitoring by the State, which 

should include substantial feedback 

provided by individuals who received 

or are receiving services. 

The person-centered service plan 

must identify the strengths, preferences, 

needs (clinical and support), and 

desired outcomes of the individual. The 

person-centered planning process is 

conducted in a manner that reflects 

what is important for the individual to 

meet identified clinical and support 

needs determined through a personcentered 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. 

In addition to being driven by the 

individual receiving services, the 

person-centered planning process 

would— 

• Include people chosen by the 

individual; 

• Provide necessary support to ensure 

that the individual has a meaningful 

role in directing the process to the 

maximum extent possible, and is 

enabled to make informed choices and 

decisions; 

• Is timely and occurs at times and 

locations of convenience to the 

individual; 

• Reflects cultural considerations of 

the individual; 

• Include strategies for solving 

conflict or disagreement within the 

process, including clear conflict of 

interest guidelines for all planning 

participants; 

• Offers choices to the individual 

regarding the services and supports they 

receive and from whom. 

• Includes a method for the 

individual to request updates to the 

plan. 

• Records the alternative home and 

community-based settings that were 

considered by the individual. 

The plan resulting from this process 

should reflect that the setting in which 

the individual resides is chosen by the 

individual. The plan should reflect the 

individual’s strengths and preferences, 

as well as clinical and support needs (as 

identified through an assessment of 

functional need). 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 


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wellness, education, and others (we 

note that not all goals will have 

comparable services covered under 

Medicaid). 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, including 

individualized back-up plans. 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 individuals 

and others involved in the plan. 

Consistent with these person-centered 

principles and the requirements for 

community integration under the 

Americans with Disabilities Act, we are 

proposing that the service plan should 

be constructed in a manner that 

promotes service delivery and 

independent living in the most 

integrated setting possible. Therefore, 

we propose that the plan must not only 

address medical and support needs, but 

should also reflect other individual 

goals related to community living to the 

extent that services covered under the 

State Medicaid plan would be available 

to support such goals. Although these 

goals may include activities that may 

not themselves be funded through 

medical assistance, the coordination of 

Medicaid services with other activities 

in which the individual would be 

engaged as part of community living is 

an essential part of ensuring community 

integration. These activities might 

include employment, education, 

recreation or social activities, and/or 

other activities that occur regularly for 

individuals living in the community. 

Subject to any additional needs-based 

criteria established for individual 

services, the State must make the 

services available to all eligible 

individuals who are assessed to need 

them. We conclude that the statute 

permits determining the level of 

services required by an individual only 

according to assessment of the 

individual’s needs, not based on 

available funds. Just as significantly, 

individuals who qualify for HCBS may 

not be compelled to receive them. 

Individuals may also exercise their 

freedom to choose among qualified 

providers in the planning process. 

The State Medicaid agency may 

delegate other agents to develop the 

service plan, but remains responsible for 

ensuring compliance with all 

requirements for each service plan 

developed. While the agency may 

delegate the authority for plan 

development and approval, the 

Medicaid agency is ultimately 

responsible for ensuring that the plans 

are completed according to the 

requirements of this regulation. This can 

be done through the establishment of 

appropriate controls, including 

monitoring and a quality improvement 

process. 

Section 1915(i)(1)(G)(ii)(I)(aa) of the 

Act requires that the service plan is 

developed in consultation with the 

individual. The requirements for who is 

consulted in developing the service plan 

parallel those describing who may be 

consulted during the assessment process 

as determined by the State. As with the 

assessment, providers or others who 

may be responsible for providing 

services identified in the plan may be 

involved in the process. For example, 

providers may contribute to these 

processes by providing portions of an 

assessment and recommending a service 

plan, so long as the entity that retains 

final responsibility for the assessment or 

service plan meets all of the 

requirements of this final rule, 

including meeting the conflict of 

interest standards (See section II.B.10. 

for further discussion of conflict of 

interest). 

Section 1915(i)(1)(G)(ii)(I)(bb) of the 

Act requires that the development of the 

service plan take into account the extent 

of family or other supports, which we 

refer to as ‘‘natural supports,’’ for the 

individual, and section 

1915(i)(1)(G)(ii)(II) of the Act requires 

that such plan identify needed services. 

We interpret these provisions to 

indicate that to the extent available, 

natural supports should be explicitly 

included in the service plan. This 

means that individuals with equivalent 

needs for support but differing levels of 

family or other natural supports may be 

authorized for different levels of HCBS. 

In the context of person-centered 

planning and consultation with natural 

supports, we conclude that the statute 

requires that the service plan should 

neither duplicate, nor compel, natural 

supports. 

Section 1915(i)(1)(G)(ii)(III) of the Act 

provides that plans of care will be 

reviewed at least annually and upon 

significant change in the individual’s 

circumstances. We interpret this 

provision to indicate that diagnostic or 

functional changes are not required in 

order to adjust a service plan. Changes 

in external factors such as gain or loss 

of other supports may trigger a review. 

Additionally, an individual may request 

a review of the plan at any time. We 

would require revision of the service 

plan if the review indicates that revision 

is appropriate. By ‘‘annually,’’ we mean 

not less often than every 12 months. 

Finally, we would relate this 

requirement to the independent 

assessment, since the development or 

revision of the service plan is based on 

the assessment. Therefore, we would 

propose that the independent 

assessment (See section II.B.6.) is 

required at least annually, and when 

needed upon a change in circumstances, 

in order to comply with the requirement 

to review plans of care with that 

frequency. 

8. Self-Direction 

Section 1915(i)(1)(G)(iii)(I) and (II) 

provides that States may offer enrolled 

individuals the option to self-direct 

some or all of the State Plan HCBS that 

they require. Many States have 

incorporated elements of self-direction 

into section 1915(c) waiver programs as 

well as section 1115 demonstration 

programs. Self-directed State plan HCBS 

allow States another avenue by which 

they may afford individuals maximum 

choice and control over the delivery of 

services, while comporting with all 

other applicable provisions of Medicaid 

law. We have urged all States to afford 

waiver participants the opportunity to 

direct some or all of their waiver 

services, without regard to their support 

needs. With the release of an updated, 

revised section 1915(c) waiver 

application in 2008, we refined the 

criteria and guidance to States 

surrounding self-direction (also referred 

to as participant-direction), and 

established a process by which States 

are encouraged, to whatever degree 

feasible, to include self-direction as a 

component of their overall HCBS waiver 

programs. While section 1915(i) of the 

Act does not require that States follow 

the guidelines for section 1915(c) 

waivers in implementing self-direction 

in the HCBS State plan benefit, we 

anticipate that States will make use of 

their experience with section 1915(c) 

waivers to offer a similar pattern of selfdirected opportunities with meaningful 

supports and effective protections. 

Individuals who choose to self-direct 

will be subject to the same requirements 

as other enrollees in the State plan 

HCBS benefit. 

Section 1915(i)(1)(G)(iii)(II) of the Act 

defines self-direction, and requires that 

there be an assessment and service plan. 

We do not interpret these requirements 

to indicate assessments and plans in 

addition to those generally required in 

sections 1915(i)(1)(F) and (G) of the Act. 

Accordingly, we would propose that the 

requirements for a self-directed service 

plan under section 1915(i)(1)(G)(iii)(III) 

of the Act be incorporated as 

components of the assessment and 


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service plan required for all enrollees in 

the State plan HCBS benefit. 

Section 1915(i)(1)(G)(iii)(III) of the Act 

contains specific requirements for the 

self-directed service plan, for which we 

describe proposed regulations in section 

III. The proposed regulations are 

consistent with our requirements for 

self-direction under section 1915(c) 

HCBS waivers. Section 

1915(i)(1)(G)(iii)(III)(dd) of the Act 

requires that the service plan be 

developed with a person-centered 

process, which, as noted above, we 

would propose to require of all service 

plans for the State plan HCBS benefit. 

Section 1915(i)(1)(G)(iii)(IV) of the 

Act describes certain aspects of a selfdirected budget, which we have termed 

‘‘budget authority.’’ Section 1915(i)(1) 

(G)(iii)(III)(bb) of the Act provides for 

self-directed selecting, managing, and/or 

dismissing of providers of the State plan 

HCBS, which we term ‘‘employer 

authority.’’ We interpret selecting to 

include the authority to hire a provider, 

as well as to direct an agency to hire a 

specific provider. Currently, section 

1915(c) HCBS waivers include varying 

degrees of self-direction. The proposed 

rule explains both budget authority and 

employer authority in a manner 

consistent with section 1915(c) HCBS 

waiver policy. 

Individuals require information and 

assistance to support them in 

successfully directing their services. 

Therefore, we would require States to 

design and provide functions in support 

of self-direction that are individualized 

according to the support needs of each 

enrollee. These functions should 

include, at a minimum, information and 

assistance consistent with sound 

principles and practice of self-direction, 

and financial management supports to 

serve as fiscal/employer agents or coemployers. The availability of an 

independent advocate to assist the 

individual with the access to and 

oversight of their waiver services, 

including self-direction, is also an 

important component of a strong selfdirected system. We note that the 

adequacy of supports for successful selfdirection will be important elements of 

the State’s quality assurance strategy, 

which is required by section 

1915(i)(1)(H) of the Act. 

9. Quality Assurance 

Section 1915(i)(1)(H)(i) of the Act 

requires the State to ensure that the 

State plan HCBS benefit meets Federal 

and State guidelines for quality 

assurance, which we interpret as 

assurances of quality improvement. 

Consistent with current trends in health 

care, the language of quality assurance 

has evolved to mean quality 

improvement, a systems approach 

designed to continuously improve 

services and support and prevent or 

minimize problems prior to 

occurrences. Guidelines for quality 

improvement have been made available 

through CMS policies governing section 

1915(c) HCBS waivers available at 

www.hcbswaivers.net and published 

manuscripts available at 

www.nationalqualityenterprise.com. 

Consistent with recent legislation 

with considerable focus on evidencebased quality and measurement, we 

would require States to have a quality 

improvement strategy, and to measure 

and maintain evidence of quality 

improvement including system 

performance, individual quality of care, 

and individual experience of care 

indicators approved and/or prescribed 

by the Secretary. These measures must 

take into account the relevant, targeted 

assurances, and include measures 

established through the DRA, CHIPRA, 

Affordable Care Act, and/or any other 

relevant health care indicators or quality 

measures developed by HHS, as 

applicable to the population(s) served 

by the section 1915(i) benefit. We would 

require States to make this information 

on their identified measures available to 

CMS upon request. In the event that a 

State elects to target the section 1915(i) 

benefit to specific populations, the State 

must submit evidence of quality 

improvement no later than 180 days 

before the end of each 5-year approval 

period. (See the discussion at I.B.19 of 

this proposed rule for more information 

regarding targeting and approval 

periods). 

10. Conflict of Interest 

Section 1915(i)(1)(H)(ii) of the Act 

provides that the State will establish 

conflict of interest standards for the 

independent evaluation and 

independent assessment. For reasons 

described above under independent 

assessment, we believe that the same 

independence is necessary for those 

involved with developing the personcentered service plan. In this 

discussion, we will refer to persons or 

entities responsible for the independent 

evaluation, independent assessment, 

and the service plan as ‘‘agents’’ to 

distinguish them from ‘‘providers’’ of 

home and community-based services. 

Conflicts can arise from incentives for 

either over- or under-utilization of 

services; subtle problems such as 

interest in retaining the individual as a 

client rather than promoting 

independence; or issues that focus on 

the convenience of the agent or service 

provider rather than being personcentered. Many of these conflicts of 

interest may not be conscious decisions 

on the part of individuals or entities 

responsible for the provisions of service. 

To mitigate any explicit or implicit 

conflicts of interest, the independent 

agent must not be influenced by 

variations in available funding, either 

locally or from the State. The service 

plan must offer each individual all of 

the HCBS that are covered by the State 

that the individual qualifies for, and 

that are demonstrated to be necessary 

through the evaluation and assessment 

process. The service plan must be based 

only on medical necessity (for example, 

needs-based criteria), not on available 

funding. When local entities directly 

expend funds or direct allocated 

resources for services, in accordance 

with section 1902(a)(2) of the Act, the 

State must have a mechanism to ensure 

that availability of local funds does not 

affect access to services, such as using 

State resources to compensate for 

variability in local funding. 

In this proposed regulation, we would 

require States to define conflict of 

interest standards to include criteria 

that reflect State and Federal experience 

with the issue in administering HCBS 

waivers, and that reflect the principles 

of section 1877 of the Act. Section 1877 

of the Act prohibits certain types of 

referrals for services when there is a 

financial relationship between the 

referring entity and the provider of 

services. 

We are aware that in certain areas 

there may only be one provider 

available to serve as both the agent 

performing independent assessments 

and developing plans of care, and the 

provider of one or more of the HCBS. To 

address this potential problem we 

would propose to permit providers in 

some cases to serve as both agent and 

provider of services, but with guarantees 

of independence of function within the 

provider entity. In certain 

circumstances, we may require that 

States develop ‘‘firewall’’ policies, for 

example, separating staff that perform 

assessments and develop plans of care 

from those that provide any of the 

services in the plan; and meaningful 

and accessible procedures for 

individuals and representatives to 

appeal to the State. We would not 

permit States to circumvent these 

requirements by adopting State or local 

policies that suppress enrollment of any 

qualified and willing provider. We do 

not believe that under any 

circumstances determination of 

eligibility for the State plan HCBS 

benefit should be performed by parties 

with an interest in providers of HCBS. 


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We understand that the development 

of appropriate plans of care often 

requires the inclusion of individuals 

with expertise in the provision of longterm services and supports or the 

delivery of acute care medical services. 

As discussed previously, this rule is not 

intended to prevent providers from 

participating in these functions, but to 

ensure that an independent agent 

retains the final responsibility for the 

evaluation, assessment, and service plan 

functions. 

11. Eligibility Redeterminations; 

Appeals 

Section 1915(i)(1)(I) of the Act 

requires the State to conduct 

redeterminations of eligibility at least 

annually. We interpret ‘‘annually’’ to 

mean not less than every 12 months. 

The State must conduct 

redeterminations and appeals in the 

same manner as required under the 

State plan. States must grant fair 

hearings consistent with the 

requirements of part 431, subpart E. 

12. Option for Presumptive Eligibility 

for Assessment 

Section 1915(i)(1)(J) of the Act gives 

States the option of providing for a 

period of presumptive eligibility, not to 

exceed 60 days, for individuals the State 

has reason to believe may be eligible for 

the State plan HCBS benefit. 

We interpret this provision as follows: 

• ‘‘Presumptive’’ we interpret to 

indicate that FFP will be available for 

evaluation even when an individual is 

subsequently found not to be eligible for 

the State plan HCBS benefit. 

• ‘‘Eligibility’’ does not connote 

eligibility for Medicaid generally, as this 

provision ‘‘shall be limited to medical 

assistance for carrying out the 

independent evaluation and 

assessment’’ under section 1915(i)(1)(E) 

of the Act. For clarity, we would refer 

to this limited option as ‘‘presumptive 

payment’’. Individuals not eligible for 

Medicaid may not receive State plan 

HCBS. 

• ‘‘Evaluation and assessment’’ under 

section 1915(i)(1)(E) of the Act, is 

described as evaluation for eligibility for 

the benefit and assessment to determine 

necessary services. We believe the 

statutory phrase ‘‘and if the individual 

is so eligible, the specific HCBS that the 

individual will receive’’ is further 

describing the assessment under section 

1915(i)(1)(E) of the Act for which 

presumptive payment is available, and 

that this phrase is not offering 

presumptive payment for the actual 

services. The phrase ‘‘if the individual 

is so eligible’’ indicates that payment is 

available once the individual is 

determined eligible, and not prior to 

that point. 

• In section 1915(i)(1)(J) of the Act, 

we interpret the term ‘‘medical 

assistance for carrying out the 

independent evaluation and assessment 

under subparagraph E’’ to mean 

expenditures for both costs of evaluative 

services that are described in section 

1905(a), such as physician or other 

practitioner services, as well as 

administrative costs to determine 

eligibility for the State plan HCBS 

benefit. We interpret section 

1915(i)(1)(J) of the Act to offer the State 

an option for a period of presumptive 

payment, not to exceed 60 days, for 

individuals the State has reason to 

believe may be eligible for the State plan 

HCBS benefit. FFP would be available 

for both medical services and 

administrative costs incurred for 

evaluation and assessment activities. 

During the period of presumptive 

payment, the individual would not 

receive State plan HCBS, and would not 

be considered to be enrolled in 

Medicaid or eligible for the HCBS 

benefit for purposes of computing the 

number of individuals being served 

under the benefit. 

We invite comments that offer other 

interpretations of this presumptive 

payment option and that comport with 

existing Federal requirements. 

13. Individual’s Representative 

When an individual is not capable of 

giving consent, or requires assistance in 

making decisions regarding his or her 

care, the individual may be assisted or 

represented by another person. Section 

1915(i)(2) of the Act defines the term 

‘‘individual’s representative’’ by listing 

certain examples, but also provides that 

‘‘* * * any other individual who is 

authorized to represent the individual’’ 

may be included. We believe that 

‘‘authorized’’ refers to State rules 

concerning guardians, legal 

representatives, power of attorney, or 

persons of other status recognized under 

State law or under the policies of the 

State Medicaid program. 

States should ensure that the 

representatives conform to good practice 

concerning free choice of the individual, 

and assess for abuse or excessive 

control. States should also ensure that 

the person-centered planning process 

continues to be focused on the 

individual with HCBS support needs 

and his or her preferences and goals, 

and supports are provided so the 

individual can meaningfully participate 

and direct the process to the maximum 

extent possible. We are proposing to 

provide that the State may not refuse to 

recognize an authorized representative 

that the individual chooses, unless the 

State discovers and can document 

evidence that the representative is not 

acting in the best interest of the 

individual or cannot perform the 

required functions. 

14. Nonapplication 

As amended by the Affordable Care 

Act, section 1915(i)(3) of the Act allows 

States to be exempted from the 

requirements of two sections of the 

Medicaid statute: section 1902(a)(10)(B) 

of the Act, regarding comparability; and 

section 1902(a)(10)(C)(i)(III) of the Act, 

regarding income and resource rules for 

the medically needy in the community. 

The statute uses the terms 

‘‘nonapplication’’ and ‘‘may chose not 

to comply with’’ rather than ‘‘waive’’. 

We would use this terminology to 

maintain clarity between HCBS waiver 

programs under section 1915(c) of the 

Act and State plan HCBS under section 

1915(i) of the Act. However, it is 

important to reiterate that the choice not 

to apply these requirements applies 

only with regard to the provision of 

State plan HCBS. 

Nonapplication of the requirement of 

comparability allows States to furnish 

the State plan HCBS benefit to specific 

targeted populations, similar to section 

1915(c) waivers. Regardless of whether 

a State chooses to apply comparability 

requirements, it must define needsbased criteria to establish eligibility for 

the section 1915(i) benefit. If a State 

chooses not to apply comparability and 

to target the benefit, individuals must 

meet both the targeting criteria and the 

needs-based criteria in order to receive 

services through the section 1915(i) 

benefit. See the discussion in I.B.19 of 

this proposed rule for more detail 

regarding the option not to apply 

Medicaid comparability requirements 

and to target the benefit to a specific 

population or populations. 

The nonapplication of the 

requirements of section 

1902(a)(10)(C)(i)(III) of the Act enables 

States to provide medical assistance to 

medically needy individuals in the 

community by electing to treat the 

individuals as if they are living in an 

institution for purposes of determining 

income and resources. This would 

result in the State not deeming/counting 

income and resources from an ineligible 

spouse to an applicant or from a parent 

to a child with a disability. However, 

nonapplication of the income and 

resource rules applicable in the 

community applies only to the 

medically needy and only for the 

purposes of providing HCBS in 

accordance with the State plan 

amendment implementing section 


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1915(i) of the Act. Based on this 

language, we are interpreting the statute 

to mean that individuals made eligible 

on the basis of nonapplication of section 

1902(a)(10)(C)(i)(III) of the Act may only 

be eligible for section 1915(i) services. 

In other words, for medically needy 

applicants, the State can elect not to 

deem income from an ineligible spouse, 

or from a parent to a child. If the State 

elects not to apply the requirements of 

section 1902(a)(10)(C)(i)(III) of the Act 

for the medically needy, it would 

determine Medicaid eligibility for 

section 1915(i) eligible medically needy 

individuals using institutional rules 

rather than community rules. Once the 

individual has been determined to be 

eligible as medically needy using 

institutional rules, and has been 

determined to meet the 150 percent of 

the FPL limit, the individual would 

only be eligible for State plan HCBS 

under section 1915(i) of the Act. The 

individual would not be eligible for any 

other Medicaid State plan services. 

However, individuals who are eligible 

for Medicaid as medically needy under 

income and resource rules applicable in 

the community, and whose income does 

not exceed the 150 percent of the FPL 

limit, would be eligible for State plan 

HCBS as well as all Medicaid State plan 

services. 

15. No Effect on Waiver Authority 

Section 1915(i)(4) of the Act 

emphasizes that State election to 

provide the State plan HCBS benefit 

does not in any way affect the State’s 

ability to offer programs through a 

section 1915(b) or (c) waiver, or under 

section 1115 of the Act. We further note 

that States may consider including 

1915(i) services as a part of capitation 

under section 1915(b) waivers or other 

authorities for managed care 

arrangements. A State could use joint 

authority of 1915(b) and 1915(i) to 

provide HCBS to individuals eligible for 

the 1915(i) benefit. 

16. Continuation of Federal Financial 

Participation (FFP) for Institutional 

Level of Care for Individuals Receiving 

Services as of the Effective Date of the 

State Plan HCBS Amendment 

If the State modifies institutional LOC 

requirements so that they will be more 

stringent than the needs-based criteria 

for the State plan HCBS benefit, section 

1915(i)(5) of the Act permits States the 

option to continue receiving FFP for 

individuals who are receiving 

institutional services in NFs, ICFs/MR, 

and applicable hospitals or who are 

receiving services under a section 1915 

waiver or through an 1115 HCBS 

demonstration project that is in effect at 

the time of the modification. We 

interpret the reference to section 1915 

waivers to include waivers under 

sections 1915(c), 1915(d) or 1915(e) of 

the Act, which are the section 1915 

waivers explicitly identified in section 

1915(i)(6)(A) of the Act. Individuals 

receiving institutional care or HCBS 

under these authorities at the time that 

the institutional LOC is modified would 

not have to satisfy the more stringent 

criteria in order to continue receiving 

that care. 

FFP under the unmodified criteria 

would continue to be available until 

such time as the individual is 

discharged from the institution, waiver 

program, or demonstration, or no longer 

requires this LOC. Moving between a 

waiver and an institution at the same 

LOC, or vice versa, by definition is not 

a change in LOC. Therefore, individuals 

who transition between waivers and 

institutions (for example, transitioning 

from an institution to waiver through 

the Money Follows the person program) 

would retain eligibility for institutional 

care and HCBS until they no longer 

meet the less stringent LOC 

requirements or until they lose 

eligibility for Medicaid or for 

institutional or waiver services due to a 

reason other than the application of the 

modified LOC criteria. An example of 

this would be if the individual aged out 

of a waiver, or if an increase in income 

or resources caused the individual to 

lose Medicaid eligibility. 

In section 1915(i)(5) of the Act, the 

statute indicates that FFP remains 

available for individuals who meet the 

previous institutional criteria. We note 

that this does not create a requirement 

for States to continue to serve these 

individuals; rather, it creates an option 

for States to continue to receive FFP in 

order to provide care for individuals 

who would otherwise lose eligibility 

due to the implementation of the new 

criteria. 

Due to the current requirements on 

maintaining eligibility standards, 

methodologies and procedures, we 

encourage States to consult with CMS 

before instituting any changes to LOC 

requirements. 

17. State Option To Provide HCBS to 

Individuals Eligible for Services Under 

a Waiver 

Section 2402(b) of the Affordable Care 

Act added section 1915(i)(6) to the Act, 

specifying that States may elect to 

provide HCBS to an individual who is 

eligible for an approved waiver under 

sections 1915(c), (d), (e), or 1115 of the 

Act. Section 1915(i)(6)(A) specifies that 

individuals who are eligible for a waiver 

may receive State plan HCBS under the 

authority of section 1915(i) if they 

satisfy the needs-based criteria under 

such section and if their income is less 

than 300 percent of the supplemental 

security income (SSI) Federal benefit 

rate (FBR), as established by section 

1611(b)(1) of the Act. 

We interpret this statute as creating an 

option for States to increase the income 

limit for the State plan HCBS benefit, 

but only for individuals who are eligible 

for HCBS through an approved waiver 

within the State. We interpret ‘‘eligible’’ 

to mean that the individual meets all of 

the criteria required for entrance into a 

HCBS waiver that is approved within 

the State, regardless of whether the 

individual is actually enrolled and 

receiving services through that waiver. 

As discussed below, if a State elects this 

option, the State must cover the new 

optional categorically needy eligibility 

group specified at section 

1902(a)(10)(A)(ii)(XXII) of the Act, and 

individuals who are eligible for a waiver 

with income above 150 percent of the 

FPL, but below 300 percent of the SSI 

benefit rate, may receive State plan 

HCBS. 

When establishing whether an 

individual’s income is below 300 

percent of SSI, under section 

1915(i)(6)(B), the State should use the 

same rules that are applied for the 

special income level group specified at 

section 1902(a)(10)(A)(ii)(V) of the Act. 

Regardless of whether a State elects the 

option established by this section, the 

State could provide HCBS through both 

the section 1915(i) benefit, as well as 

through a HCBS waiver to any 

individual who meets the financial and 

needs-based criteria for both programs 

(that is, if an individual meets the 

waiver LOC criteria, and the needsbased criteria for the State plan HCBS 

benefit, and has income below 150 

percent of the FPL, the individual could 

receive services under both authorities, 

provided that the services are not 

duplicative, whether or not the State 

elects to include the higher income level 

in their section 1915(i) benefit). 

When a State elects to include this 

option, section 1915(i)(6)(C) of the Act 

allows services to differ in type, 

amount, duration, or scope from 

services provided to individuals who 

are eligible for the section 1915(i) 

benefit without also being eligible for a 

waiver. A State may choose to provide 

additional 1915(i) State plan HCBS to 

individuals who are eligible for HCBS 

under an approved waiver. If a State 

does so, it may also elect to establish 

additional needs-based criteria for those 

services. The establishment of 

additional criteria would be under the 

State authority to establish needs-based 


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criteria for any service in the 1915(i) 

benefit (see the discussion in I.B.2 of 

this proposed rule for more discussion). 

Any additional service(s) provided 

through this subsection must be 

allowable under section 1915(c)(4)(B) 

and may not include room and board. A 

State may also include ‘‘other’’ services, 

as defined by the State and approved by 

the Secretary, within the package of 

section 1915(i) services that are limited 

to individuals who are eligible for a 

waiver. However, because individuals 

eligible for a waiver must also satisfy 

the needs-based criteria established for 

the section 1915(i) benefit to receive 

State plan HCBS, a State may not 

restrict access to benefits that are 

available to other individuals who 

receive the State Plan HCBS, except 

through a targeting criteria, or through 

the establishment of a needs-based 

criteria that applies uniformly to all 

individuals. 

18. Establishment of Optional Eligibility 

Group To Provide Full Medicaid 

Benefits to Individuals Receiving State 

Plan HCBS 

Section 2402(d) of the Affordable Care 

Act creates a new optional categorically 

needy eligibility group, specified at 

section 1902(a)(10)(A)(ii)(XXII) of the 

Act, for individuals ‘‘who are eligible 

for HCBS under the needs-based criteria 

established under (1)(A) of 1915(i), or 

who are eligible for home and 

community-based services under 

paragraph (6) of such section, and who 

will receive home and communitybased services pursuant to a State plan 

amendment under such subsection.’’ 

Under this group States can elect to 

cover individuals who are not otherwise 

eligible for Medicaid. For example, an 

individual age 65 or older, who has 

chronic needs but not at an institutional 

level of care and has too much income 

and/or resources to qualify for Medical 

Assistance under a State’s Medicaid 

plan, could be eligible for section 

1915(i) services if he/she meets the 

needs-based criteria for the section 

1915(i) benefit, has income up to 150 

percent of the FPL and will receive 

section 1915(i) services. Under this 

group, States may also elect to cover 

individuals with income up to 300 

percent of the SSI/FBR who would be 

eligible under an existing section 

1915(c), (d), (e) waiver or section 1115 

waiver and who will receive section 

1915(i) services. These individuals do 

not have to be receiving services under 

an existing section 1915(c), (d), (e) 

waiver or section 1115 waiver; the 

individual only has to be eligible for the 

waiver. Individuals eligible for 

Medicaid under this group would be 

eligible for full Medicaid benefits. The 

State must also elect the option under 

section 1915(i)(6) of the Act if the State 

intends to cover individuals with 

income up to 300 percent of the SSI/ 

FBR. 

19. State Option To Offer HCBS to 

Specific, Targeted Populations 

The Affordable Care Act added 

section 1915(i)(7) to the Act, which 

allows States to target the section 

1915(i) benefit to specific populations. 

In addition, as of October 1, 2010, States 

may design section 1915(i) benefits 

without regard to the comparability 

requirements contained in section 

1902(a)(10)(B) of the Act. As a result, 

the State may ‘‘target’’ services, that is, 

either provide the 1915(i) benefit only to 

individuals in certain Medicaid 

eligibility groups, or provide different 

services within the 1915(i) benefit to 

different groups. Due to the ability to 

define targeted populations, a State may 

now propose more than one set of 

section 1915(i) benefits, with each 

benefit package targeted toward a 

specific population. A State may also 

propose one set of section 1915(i) 

benefits that targets multiple 

populations, and may offer different 

services to each of the defined target 

groups within the benefit. Additionally, 

a State may propose a section 1915(i) 

benefit that does not choose 

nonapplication of comparability and 

instead uses only the needs-based 

criteria to establish eligibility for the 

benefit. States may find this to be a less 

administratively burdensome approach, 

as there is no renewal requirement or 

limit to the approval period if the State 

does not target the HCBS benefit (see 

below for a discussion on limits to the 

approval period). 

We propose to require that a State that 

elects to target the benefit to specific 

groups of individuals must submit 

objective targeting criteria in the SPA 

implementing the HCBS benefit, subject 

to approval by CMS. These targeting 

criteria may define a target population 

or multiple target populations within 

parameters of diagnosis, disability, 

Medicaid eligibility groups, and/or age. 

Within these parameters, targeting 

criteria may be similar to those available 

through section 1915(c) waivers, as 

defined in § 441.301, but we note that 

based on experience, these target groups 

may not aptly capture the universe of 

individuals who could benefit from 

section 1915(i) of the Act. Therefore, a 

State may also establish broader criteria 

that encompass more than one of the 

three groups defined in § 441.301, or 

that target enrollees based on separate 

criteria. However, we note that the 

section 1915(i) benefit is described in 

the statute as ‘‘HCBS for Elderly and 

Disabled Individuals.’’ Therefore, we 

would expect any targeting criteria to 

apply to eligibility groups serving those 

individuals. We would also expect 

targeting criteria to align with the needsbased criteria established for the benefit. 

For example, a State could target the 

benefit package to any children under 

the age of 21 with an intellectual 

disability, a developmental disability, 

autism, or a behavioral health condition. 

A State could also target the benefit 

using traditional section 1915(c) groups. 

An example of this would be to target 

the benefit to individuals age 65 and up. 

Further, this targeting option does not 

permit States to target the benefit in a 

manner that would not comply with 

section 1902(a)(23) of the Act regarding 

free choice of providers, or that 

forestalls the opportunity for 

individuals to receive services in the 

most integrated setting possible. 

Therefore, targeting criteria cannot have 

the impact of limiting the pool of 

qualified providers from which an 

individual would receive services, or 

have the impact of requiring an 

individual to receive services from the 

same entity from which they purchase 

their housing. For example, we would 

not allow States to establish targeting 

criteria that would restrict eligibility to 

only individuals who reside in 

provider-owned and/or operated 

settings. 

If a State elects to target the benefit to 

a specific population or populations, it 

must still establish needs-based criteria 

that individuals must meet in order to 

be eligible for section 1915(i) services 

and the State may also establish needsbased criteria for individual services 

within the benefit. The needs-based 

criteria may include specific needs that 

are applicable to the targeting criteria, 

but may also include general needs that 

apply across all of the populations 

included in the benefit. 

20. Five-Year Approval for Targeted 

Section 1915(i) HCBS Benefits and 

Renewal Requirements 

Under sections 1915(i)(7)(B)(i) and (C) 

of the Act, if a State chooses to target 

State plan HCBS, the SPA approval will 

last for a 5-year period with the option 

for 5-year renewal periods. There is no 

statutory limit on the number of renewal 

periods available under this section. At 

the end of the initial 5-year period, and 

any subsequent renewals, CMS will 

review the State’s approved SPA and 

evaluate State performance based upon 

the requirements contained within that 

SPA and the State plan HCBS quality 

outcomes. 


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We propose that a State must provide 

a written request for renewal at least 180 

days prior to the end of the approval 

period. The request must be 

accompanied by a description of any 

proposed changes to the benefit, if 

applicable. Prior to renewal, CMS will 

request evidence of implementation of 

the State’s quality improvement strategy 

in order to verify compliance with State 

plan HCBS requirements. Results of the 

quality monitoring process will be used 

to identify and make recommendations 

on areas of a State’s section 1915(i) 

benefit that require modification prior to 

renewal. In accordance with section 

1915(i)(7)(C) of the Act, we will approve 

renewals based upon adherence to 

Federal requirements, including 

adherence to the State’s phase-in plan, 

as approved by CMS. 

21. Phase-In of Services and Eligibility 

Section 1915(i)(7)(B)(ii) allows States 

to phase-in the enrollment of 

individuals and/or the provision of 

services if the State elects to target the 

benefit to specific populations. The 

statute indicates that the State must 

enroll all eligible individuals and 

provide all of the services it has elected 

to include in the benefit by the end of 

the initial 5-year approval. Although the 

option to phase-in services and/or 

eligibility may seem contradictory with 

the requirements that the benefit be 

statewide and not limit enrollment, we 

interpret this section to provide States 

with the flexibility to prioritize 

enrollment to individuals with the 

highest need and/or to develop adequate 

infrastructure to ensure quality of care, 

and the health and safety of 

participants, prior to the provision of 

services. We do not interpret this option 

as providing States the authority to limit 

statewideness or to set a numerical limit 

on enrollment. 

As an example, a State could elect to 

begin the provision of services to 

individuals with higher needs prior to 

the enrollment of all eligible 

individuals, based upon the assessment 

for eligibility to the benefit. In this 

instance, the needs-based criteria would 

allow States to identify individuals at 

greatest risk for health and safety, and 

to prioritize services to those 

individuals. Services would then be 

phased-in to individuals who qualify for 

the benefit but who have less assessed 

need. 

States are permitted to modify the 

available services in a section 1915(i) 

benefit through a SPA at any time. 

Therefore, we do not believe that this 

option permits a State to include a 

service within the benefit without 

providing it to at least some enrolled 

individuals. However, at the option of a 

State, a phase-in plan might temporarily 

limit the provision of the entire benefit 

package, or of some specific services, 

based upon infrastructure 

considerations, such as the need to 

enroll an adequate number of qualified 

providers. 

We propose that a State that elects to 

target the State plan HCBS benefit and 

to phase-in enrollment and/or services 

must submit a phase-in plan for 

approval by CMS that describes, at a 

minimum: 

• The criteria used to phase-in 

enrollment or service delivery; 

• The rationale for phasing-in 

services and/or eligibility; and 

• Timelines and benchmarks to 

ensure that the benefit is available 

Statewide to all eligible individuals 

within the initial 5-year approval. 

If a State elects and CMS approves a 

phase-in of services and/or eligibility in 

the section 1915(i) SPA, the statute 

indicates that the State must enroll all 

eligible individuals and provide all of 

the services it has elected to include in 

the benefit by the end of the initial 5- 

year approval. Therefore, if a State does 

not meet its phase-in plan by the end of 

the initial 5-year approval of the section 

1915(i) benefit, the State will not be able 

to renew the benefit. 

States are also prohibited from having 

a phase-in period longer than 5 years, 

and from receiving approval for a new 

section 1915(i) submission of a similar 

design with a phase-in period when a 

similar benefit with phase-in is 

discontinued before full 

implementation. 

We are soliciting comments on 

alternative strategies and approaches for 

evaluating and approving the option to 

phase-in eligibility and enrollment. 

C. Effective Date 

The effective date on which States 

may provide HCBS through the State 

plan, as set forth by the DRA, is January 

1, 2007. The effective date of the 

amendments to the section 1915(i) 

benefit, as established by the Affordable 

Care Act, is October 1, 2010. 

D. The State Plan HCBS Benefit in the 

Context of the Medicaid Program as a 

Whole 

The section 1915(i) State plan HCBS 

benefit is subject to provisions of the 

Medicaid program as a whole. 

Therefore, it is useful to note certain 

requirements of the Medicaid program 

that have an impact on the 

administration of the State plan HCBS 

benefit and that are not explicitly 

referenced in the regulation. 

To be eligible for the State plan HCBS 

benefit, an individual must be included 

in an eligibility group that is contained 

in the State plan, including if the State 

elects, the new eligibility group defined 

at section 1902(a)(10)(A)(ii)(XXII) of the 

Act. Each individual must meet all 

financial and non-financial criteria set 

forth in the plan for the applicable 

eligibility group. 

Children included in eligibility 

groups under the State plan may meet 

the needs-based criteria and qualify for 

benefits under the State plan HCBS 

benefit. States may also choose to target 

the benefit in a manner that either 

excludes children, or limits the benefit 

solely to children. HCBS benefits that 

are not otherwise available through 

1905(a) State plan services under the 

Medicaid Early and Periodic Screening, 

Diagnostic, and Treatment (EPSDT) 

benefit may be furnished to Medicaid 

eligible children who meet the State 

plan HCBS needs-based eligibility 

criteria, and who meet the State’s 

medical necessity criteria for the receipt 

of services. In addition to meeting 

EPSDT requirements through the 

provision of 1905(a) services, a State 

may also meet a particular child’s needs 

under EPSDT through services that are 

also available through the 1915(i) 

benefit. However, all Medicaid-eligible 

children must have full access to 

services required under EPSDT, and the 

provision of 1915(i) State plan HCBS 

should in no way hinder their access to 

such services. 

We further note that the mandate 

under EPSDT applies only to services 

authorized by section 1905(a) of the Act. 

Therefore, HCBS under section 1915(i) 

of the Act are not required under the 

EPSDT program. Children who are 

eligible for the State plan HCBS benefit 

are eligible to receive medically 

necessary State plan HCBS, but the State 

is not required to provide 1915(i) State 

plan HCBS as part of its EPSDT 

program. Clinic services (whether or not 

furnished in a facility) for individuals 

with chronic mental illness are listed in 

section 1915(c)(4)(B) of the Act and 

therefore may be covered in the State 

plan HCBS benefit. If a State chooses to 

offer these services, they will be subject 

to the clinic upper payment limit (UPL) 

at § 447.321. We also note that these 

services are defined differently than 

other clinic services offered under the 

State Plan in that they include services 

whether or not they are offered in a 

facility. 

States may also elect to include 

1915(i) benefits as part of a managed 

care contract. In the event that State 

plan HCBS are included in a managed 

care contract, they must meet all 


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applicable requirements contained in 

§ 438, including actuarial soundness of 

rates, cost effectiveness of services, and 

CMS contract review and approval. 

Additionally, since this benefit is 

established through a State plan 

amendment process, section 5006(e) of 

the American Recovery and 

Reinvestment Act of 2009 (Pub. L. 111– 

5, enacted on February 17, 2009) 

requires the State to seek advice from 

Indian health programs and Urban 

Indian Organizations on the 

establishment of or modification to any 

State plan HCBS benefits. 

FFP for the 1915(i) benefit is also 

subject to deferrals, withholding and 

disallowances in accordance with the 

requirements of subpart C of 42 CFR 

part 440. In the event that CMS 

determines a State to be out of 

compliance with the requirements of the 

HCBS benefit, standard Medicaid 

compliance actions will apply. 

E. Other Background 

1. Serving All Eligible Individuals 

While Targeting Limited Resources 

As noted above, section 1915(i) of the 

Act applies the general Medicaid 

requirements regarding statewideness 

and, like other State plan options, does 

not allow States to limit enrollment. 

Nevertheless, the law offers significant 

discretion for defining the population 

served. Specifically, States may limit 

utilization of the State plan HCBS 

benefit through application of the 

following provisions of section 1915(i) 

of the Act: 

• The requirement to set eligibility 

standards built on needs-based criteria. 

States choose the needs-based criteria 

used to establish the thresholds of 

program eligibility. States must set a 

lower threshold of need, but may also 

optionally define an upper threshold of 

need beyond which individuals may not 

be served under this provision. 

• The option to target the benefit to 

specific populations. States may 

combine needs-based criteria with 

targeting criteria in order to create a 

very specific benefit that applies to 

defined groups of individuals. 

• The option to establish needs-based 

criteria to determine eligibility for each 

State plan HCBS. These criteria may 

vary from service to service, and should 

assist States in identifying the 

individuals who could benefit from 

receipt of a particular State plan HCBS. 

• The choice to offer a limited 

number of services under the State plan 

HCBS benefit. The scope of services that 

the State chooses to offer may include 

any, but need not include all, of the 

services permitted under section 

1915(c)(4)(B) of the Act. 

• The option to limit the amount or 

duration of each service, in accordance 

with all Medicaid rules and 

requirements. 

Since all State plan HCBS must be 

provided under a written service plan, 

States have the opportunity to review an 

individual’s service plan to ensure that 

HCBS continue to be responsive to the 

needs of the individual. 

Additionally, as a reminder, general 

Medicaid requirements also apply to the 

State plan HCBS benefit. All Medicaid 

services are to be provided only to those 

who need them according to medical 

necessity and needs-based criteria, as 

defined by the State. Prior authorization 

is available to the State. 

2. HCBS Provided in the Community, 

Not in Institutions 

Section 1915(i) provides States the 

option to provide home and 

community-based services, but does not 

define ‘‘home and community-based.’’ 

Along with our overarching interest in 

making improvements to Medicaid 

HCBS, we seek to ensure that Medicaid 

is supporting needed strategies for 

States in their efforts to meet their 

obligations under the ADA and the 

Supreme Court 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 of 

requirements of the Medicaid program. 

However, the Medicaid program can 

provide an opportunity to obtain partial 

Federal funding that supports 

compliance with the ADA, section 504 

of the Rehabilitation Act, and Olmstead 

through the provision of Medicaid 

services to Medicaid-eligible 

individuals. 

In the April 4, 2008 Federal Register 

(73 FR 18676), we proposed to define 

home and community settings for this 

new benefit. Then in the June 22, 2009 

Federal Register (74 FR 29453), we 

published an advance notice of 

proposed rulemaking (ANPRM) that 

solicited comments on potential 

rulemaking for a number of areas within 

the section 1915(c) HCBS waiver 

program. Specifically, we requested 

public input on strategies to define 

home and community-based settings 

where waiver participants may receive 

services. Although the ANPRM is 

specific to section 1915(c) waivers, the 

services delivered and the settings they 

are available in are parallel to the 

section 1915(i) benefit. We recognize a 

need for a consistent definition of this 

term across Medicaid HCBS. 

In response to the 1915(c) ANPRM, 

we received comments that supported 

the underlying goals to promote 

independence, community inclusion, 

and the goals of the Olmstead decision. 

However, many commenters also 

expressed concern about definitions of 

home and community-based settings 

that limited participant choice, and that 

excluded settings that may, in fact, 

promote independence and integration. 

Since that time, we have facilitated and 

participated in multiple stakeholder 

discussions related to this issue, and we 

also included proposed language for 

settings in which HCBS could be 

provided to elicit further comments on 

this issue in the section 1915(k) 

proposed rule published on February 

25, 2011 and in the 1915(c) proposed 

rule published on April 15, 2011. We 

find the public comment process to be 

valuable in our attempt to develop the 

best policy on this issue for Medicaid 

beneficiaries. Therefore, with this rule, 

we again invite public comments on 

proposed language to establish the 

qualities for home and communitybased settings under both sections 

1915(i) State plan HCBS and the 1915(k) 

Community First Choice State plan 

option. It is our goal to align the final 

language pertaining to this topic across 

the sections 1915(k), 1915(i), and 

1915(c) Medicaid HCBS authorities. 

We have included proposed language 

for settings in which section 1915(i) 

services and supports could be provided 

to elicit additional comments on this 

issue. While it is not practical to create 

one singular definition that 

encompasses all settings that are home 

and community-based, with this rule we 

propose quality principles essential in 

determining whether a setting is 

community-based. We expect States 

electing to provide HCBS benefits under 

section 1915(i) to include a definition of 

home and community-based setting that 

incorporates these principles and will 

review all SPAs to determine whether 

they propose settings that are home or 

community-based. We will permit 

States with approved section 1915(i) 

SPAs a reasonable transition period, a 

minimum of one year, to come into 

compliance with the HCBS setting 

requirements as promulgated in our 

final rule. 

Recognizing the imperative to provide 

clear guidance to States and in 

consideration of recent proposals from 

States that have clearly exceeded 

reasonable standards for HCBS, we are 

proposing to clarify now that home and 

community-based settings must exhibit 


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the following qualities, and such other 

qualities as the Secretary determines to 

be appropriate, based on the needs of 

the individual as indicated in their 

person-centered service plan, in order to 

be eligible sites for delivery of home and 

community-based services: 

• The setting is integrated in, and 

facilitates the individual’s full access to, 

the greater community, including 

opportunities to seek employment and 

work in competitive integrated settings, 

engage in community life, control 

personal resources, and receive services 

in the community, like individuals 

without disabilities; 

• The setting is selected by the 

individual among all available 

alternatives and identified in the 

person-centered service plan; 

• An individual’s essential personal 

rights of privacy, dignity and respect, 

and freedom from coercion and restraint 

are protected; 

• Individual initiative, autonomy, 

and independence in making major life 

choices, including but not limited to, 

daily activities, physical environment, 

and with whom to interact are 

optimized and not regimented; and 

• Individual choice regarding services 

and supports, and who provides them, 

is facilitated. 

In a provider-owned or controlled 

residential setting, the following 

additional conditions must be met. Any 

modifications of the conditions (for 

example to address the safety needs of 

an individual with dementia) must be 

supported by a specific assessed need 

and documented in the person-centered 

service plan: 

++ The unit or room is a specific 

physical place that can be owned, 

rented, or occupied under a legally 

enforceable agreement by the individual 

receiving services, and the individual 

has, at a minimum, the same 

responsibilities and protections from 

eviction that the tenants have under the 

landlord/tenant laws of the State, 

county, city, or other designated entity. 

We are soliciting comments as to 

whether there are other protections, not 

addressed by landlord tenant law, that 

should be included; 

++ Each individual has privacy in 

their sleeping or living unit: 

—Units have lockable entrance doors, 

with appropriate staff having keys to 

doors; 

—Individuals share units only at the 

individual’s choice; and 

—Individuals have the freedom to 

furnish and decorate their sleeping or 

living units; 

++ Individuals have the freedom and 

support to control their own schedules 

and activities, and have access to food 

at any time; 

++ Individuals are able to have 

visitors of their choosing at any time; 

and 

++ The setting is physically 

accessible to the individual. 

In addition to the aforementioned 

criteria there are two criteria that we 

have not included in the proposed 

regulation, but wish to solicit comment 

regarding whether they should be 

added. The first is related to the 

proposed requirement that in a 

provider-owned or controlled 

residential setting, any modification of 

the conditions must be supported by 

specific assessed needs and documented 

in the person centered service plan. 

This requirement is meant to address 

two issues: 

• Individuals receiving HCBS must 

not have their independence or 

freedoms abridged by providers for 

convenience, or well-meaning but 

unnecessarily restrictive methods for 

providing person-centered services and 

supports; and 

• Individuals with cognitive 

disabilities and other impairments may 

require modifications of the 

aforementioned conditions for their 

safety and welfare. 

This provision is meant to establish 

that service planning is the process in 

which these decisions are made, rather 

than ad hoc on a daily basis. While the 

proposed text establishes the 

requirement that any modification to the 

conditions are supported by a specific 

assessed need and documented in the 

person-centered service plan, we are 

also considering including language to 

explicitly set forth these activities. We 

are considering requiring the following 

points to be identified: identify a 

specific and individualized assessed 

safety need; document less intrusive 

methods that have been tried but did 

not work; include a clear description of 

the condition that is directly 

proportionate to the specific assessed 

safety need; include regular collection 

and review of data to measure the 

ongoing effectiveness of the 

modification; and establishing time 

limits for periodic reviews to determine 

if the modification can be lifted. We 

solicit comment on these points and any 

other potential requirements regarding 

modifications of the conditions set forth 

in this proposed rule. We also wish to 

solicit comment on a second criterion 

that would include a requirement that 

receipt of any particular service or 

support cannot be a condition for living 

in the unit. In discussing this specific 

criterion, we discovered that it could be 

read one of two ways. One 

interpretation is that this language does 

not require an individual residing in a 

provider owned or operated setting to 

receive HCBS from the setting provider. 

Rather the individual could choose 

another qualified individual to provide 

HCBS. The other interpretation is that 

this language would prevent the owner 

of the setting from evicting an 

individual because the individual 

refused to accept a particular service. 

This interpretation could have an effect 

on residential settings, such as housing 

programs to address homelessness. 

Some of these settings include a 

structure in which individuals are 

required to participate in treatment 

(substance use, for example) as a 

condition of residing there. We 

acknowledge the complexities that arise, 

when trying to support an individual’s 

right to choose while recognizing that 

there are programs and services that 

have been developed as a result of 

identified service needs. As indicated 

earlier, we are specifically soliciting 

comments on whether these two criteria 

should be included as regulatory 

requirements. 

We note that home and communitybased settings do not include nursing 

facilities, institutions for mental 

diseases, intermediate care facilities for 

mentally retarded, hospitals, or any 

other locations that have the qualities of 

an institutional setting as determined by 

the Secretary. In considering whether a 

setting has the qualities of an 

institutional setting, we will exercise a 

rebuttable presumption that a setting is 

not a home and community-based 

setting, and will engage in heightened 

scrutiny, for any setting that is located 

in a building that is also a publicly or 

privately operated facility that provides 

inpatient institutional treatment, or in a 

building on the grounds of, or 

immediately adjacent to, a public 

institution, or disability-specific 

housing complex. We expect to issue 

further guidance regarding such 

settings. Other characteristics that could 

cause CMS to consider a setting as 

‘‘institutional’’ or having the qualities of 

an institution would include, but not be 

limited to, settings which are isolated 

from the larger community, 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, and activities, or limit 

individuals’ opportunities to pursue 

community activities. 

We have included these provisions to 

move toward a stronger articulation of 

the qualities that make a setting a home 

or truly integrated in the greater 

community for individuals living with 


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disabilities. We believe that these 

principles of home and communitybased settings will support the use of 

the Medicaid program to maximize the 

opportunities for individuals to access 

the benefits of home and community 

living. 

We specifically invite comments on 

whether there are settings in addition to 

those currently enumerated in statute, 

that are, by their nature, location or 

administration inherently noncommunity based, and therefore, should 

be expressly excluded from HCBS. We 

also invite comments on the 

community-based qualities we have 

proposed in this rule to ascertain 

whether additional or different 

characteristics should be included. 

In considering comments received 

pertaining to this provision of the rule, 

we will also include consideration of all 

comments received pertaining to the 

aligned home and community-based 

setting requirements being proposed in 

this rule for the section 1915(k) 

Community First Choice State Plan 

Option. In recognizing the need for a 

consistent definition of this term across 

Medicaid HCBS, it is our goal to align 

the final language pertaining to this 

topic across the regulations for sections 

1915(i), 1915(k), and 1915(c) Medicaid 

HCBS authorities. 

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. 

We further note that States are not 

prohibited from funding institutional 

care under Medicaid. The exclusion of 

these settings from HCBS waivers and 

from the State plan HCBS benefit does 

not limit the availability of institutional 

and facility-based care for those 

individuals who require long-term 

services and supports, and who freely 

choose to receive services in those 

settings. However, we believe that these 

types of services should not be funded 

through authorities that are intended to 

promote community-based alternatives 

to institutional care. Furthermore, we 

believe that the fundamental 

requirement that the needs-based 

criteria for section 1915(i) be less 

stringent than that for institutional care 

creates a mandate to ensure that services 

are provided in settings that are not 

institutional in nature. 

While HCBS are not available while 

an individual resides in an institution, 

HCBS should be available to assist 

individuals to leave an institution. 

Recognizing that individuals leaving 

institutions require assistance to 

establish themselves in the community, 

we would allow States to include in a 

section 1915(i) benefit, as an ‘‘other’’ 

service, certain transition services to be 

offered to individuals to assist them in 

their return to the community. We 

propose that community transition 

services could be commenced prior to 

discharge and could be used to assist 

individuals during the period of 

transition from an institutional 

residence. Additionally, services could 

be provided to assist individuals 

transitioning to independent living in 

the community, as described in a letter 

to the State Medicaid Directors on May 

9, 2002 (SMDL #02–008). We further 

recognize that, for short hospital stays, 

an individual may benefit from ongoing 

support through the HCBS State Plan for 

physical needs over and above such 

services available in a hospital, to 

ensure smooth transition from clinical 

setting to home, and to preserve a sense 

of continuity and normalcy (a notion 

particularly important for individuals 

with intellectual disabilities, cognitive 

disabilities associated with aging, and 

behavioral health support needs). 

Importantly, these services must be 

exclusively for the benefit of the 

individual, not the hospital, and must 

not substitute for services that the 

hospital is obligated to provide through 

its conditions of participation or 

through its obligations under the ADA. 

3. Home and Community-Based 

Services Do Not Include Room and 

Board 

Payments for room and board are 

expressly prohibited by section 

1915(i)(1) of the Act. Except for respite 

care furnished in a setting approved by 

the State that is not the individual’s 

residence, no service or combination of 

services may be used to furnish room 

and board through the State plan HCBS 

benefit. 

When an individual must be absent 

from his or her residence in order to 

receive a service authorized by the 

individualized service plan, it may be 

impractical to obtain a meal outside the 

venue in which the service is provided. 

Therefore, in some instances and when 

it does not constitute a full nutritional 

regimen, the provision of food may be 

included as an incidental part of service 

delivery. When meals are furnished as 

an integral component of the service, we 

are proposing to permit the State to 

consider the cost of food in the rate it 

pays for the State plan HCBS, as the cost 

is then considered part of the service 

itself. We would not consider the meal 

to be an integral part of the State plan 

HCBS when two rates are charged to the 

public, one that includes a meal and one 

that does not include a meal. 

4. Timing of Amendments 

We seek to clarify expectations 

regarding timing of amendments when 

States propose modifications to the 

1915(i) benefit. For the purposes of the 

1915(i) benefit, we propose that 

amendments which result in a reduction 

of eligibility or services to 1915(i) 

participants must be submitted with a 

prospective, rather than retroactive, 

effective date. 

F. Section 2601 of the Affordable Care 

Act: 5-Year Period for Demonstration 

Projects 

This proposed rule includes changes 

to § 430.25 to implement section 2601 of 

the Affordable Care Act. 

Section 2601 of the Affordable Care 

Act adds a new paragraph (2) to section 

1915(h) to permit the Secretary, at her 

discretion, to approve a waiver that 

provides medical assistance for 

individuals dually eligible for Medicare 

and Medicaid (‘‘dual eligibles’’) for an 

initial period of up to 5 years and 

renewed for up to 5 years, at the State’s 

request. The statute defines a dual 

eligible as: ‘‘An individual who is 

entitled to, or enrolled for, benefits 

under part A of title XVIII, or enrolled 

for benefits under part B of title XVIII, 

and is eligible for medical assistance 

under the State plan under this title or 

under a waiver of such plan.’’ This new 

authority enhances existing tools 

available to improve and coordinate 

care and services for this particularly 

vulnerable group of beneficiaries. This 

change provides an important tool for 

States to design programs to better 

coordinate services for dual eligible 

individuals. 

While section 2601 of the Affordable 

Care Act does not provide a new type 

of waiver, it does provide an important 

opportunity for States to simplify the 

operation of existing waivers that serve 

dually eligible individuals, especially 

important when States combine waiver 

authorities that have different approval 

periods. 

A growing number of States provide 

care to dual eligible individuals in a 

managed care service system. To be 

successful, these systems often include 

community and institutional long-term 

services and supports, utilize or partner 

with Medicare managed care plans or 

fee-for-service providers to improve care 

continuity and individual outcomes, 

and minimize disincentives to 

community-based or preventive care. 

The Medicaid tools available to 

establish such an arrangement vary, but 

many States seek to use a 1915(b) 

Managed Care waiver concurrently with 

a 1915(c) Home and Community-Based 


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Services waiver. Some States interested 

in offering home and community-based 

supports to dual eligibles in a managed 

care delivery system raised concerns 

with the 2-year approval period for the 

1915(b) managed care waivers and the 

3- and 5-year approval periods for the 

1915(c) HCBS waiver program. These 

different approval periods present 

administrative challenges for States that 

pose hurdles to operational success. 

Section 2601 of the Affordable Care 

Act provides a solution for these 

situations, and others where States may 

wish to minimize administrative and 

renewal requirements in order to better 

focus on program implementation and 

quality oversight. Section 2601 of the 

Affordable Care Act includes an 

opportunity for extended approval 

periods for sections 1915(b), 1915(c), 

1915(d) and 1115 of the Act. 

For a State to apply for the extended 

approval periods, the demonstration or 

waiver program must provide services 

for individuals who are dually-eligible 

for Medicare and Medicaid. The 

approval of such periods is at the 

Secretary’s discretion, and 

determinations will be made regarding 

applications for 5-year waivers in a 

manner consistent with the interests of 

beneficiaries and the objectives of the 

Medicaid program. 

We are proposing that if a 

demonstration or waiver program does 

not serve or excludes dually eligible 

individuals, the 5-year approval period 

will not be available, and existing 

approval period requirements will 

apply. In addition, we are proposing to 

that in order for coverage-related 

waivers to be approved for 5 years 

periods, they must meet all necessary 

programmatic, financial, and quality 

requirements. 

The statute provides that the State’s 

request for extension of the waiver for 

additional 5-year periods will be 

approved unless the Secretary 

determines that one or more conditions 

of the waiver have not been met, that 

the waiver would no longer be cost 

neutral (for 1915(c) waivers), costeffective (for 1915(b) waivers) or budget 

neutral (for 1115 demonstrations), that it 

would not be efficient to extend the 

waiver, or that it would no longer be 

consistent with the purposes of the 

Medicaid program. We are proposing to 

require that quality oversight 

mechanisms must be in place and that 

the State must demonstrate compliance 

with applicable program requirements, 

as well as the terms and conditions of 

the waiver as specified by the Secretary. 

G. Prohibition Against Reassignment of 

Provider Claims 

1. Prohibition on Payment Reassignment 

Section 1902(a)(32) of the Act 

provides generally that ‘‘no payment 

under the plan for care and services 

provided to an individual shall be made 

to anyone other than such individual or 

the person or institution providing such 

care or service, under an assignment or 

power of attorney or otherwise.’’ 

The legislative history for this 

provision indicates that a primary 

purpose of the provision was to curb 

perceived abuses that stemmed from 

‘‘factoring’’ of accounts receivable by 

physicians and individual practitioners. 

Factoring is when an individual or an 

organization, such as a collection 

agency or service bureau, purchases 

accounts receivable from a practitioner 

for a percentage of their face value. 

Section 1902(a)(32) of the Act 

contains several specific exceptions to 

the general principle of direct payment 

to individual practitioners. There are 

exceptions for payments for practitioner 

services where payment is made to the 

employer of the practitioner, and the 

practitioner is required as a condition of 

employment to turn over fees to the 

employer; payments for practitioner 

services furnished in a facility when 

there is a contractual arrangement under 

which the facility bills on behalf of the 

practitioner; reassignments to a 

governmental agency, through a court 

order, or to a billing agent; payments to 

a practitioner whose patients were 

temporarily served by another identified 

practitioner; or payments for a 

childhood vaccine administered before 

October 1, 1994. 

Similar provisions were enacted in 

title XVIII of the Act governing the 

Medicare program, at sections 1815(c) 

and 1842(b)(6) of the Act. Medicare 

payment assignment regulations are 

codified at 42 CFR part 424, subpart F 

(Limitations on Assignment and 

Reassignment of Claims). Because CMS 

is not proposing to amend or revise the 

regulations governing assignment of 

Medicare payments in this notice, we do 

not further discuss the Medicare rules. 

However, we are specifically soliciting 

public comment on the issue of 

consistency with Medicare payment 

policies, as discussed below. 

2. Current Medicaid Payment 

Assignment Regulations 

Medicaid regulations at § 447.10 

implement the requirements of section 

1902(a)(32) of the Act by providing that 

State plans can allow payments to be 

made only to certain individuals or 

entities. Specifically, payment may only 

be made to the individual practitioner 

that provided the service or the 

recipient, if he or she is a non-cash 

recipient eligible to receive payment 

under § 447.25, or under one of the 

limited exemptions. In addition, the 

regulations specifically state that 

‘‘[P]ayment for any service furnished to 

a recipient by a provider may not be 

made to or through a factor, either 

directly or by power of attorney.’’ 

3. Medicaid Payment Reassignment 

The regulations at § 447.10 contain 

several enumerated exceptions to the 

general direct payment principle that 

implement and interpret the statutory 

exceptions. There is an exception for 

payment in accordance with a 

reassignment to a government agency, or 

by a court order. There is another 

exception for payment to a business 

agent, such as a billing service or 

accounting firm, that furnishes 

statements and receives payments in the 

name of the individual practitioner, if 

the business agent’s compensation for 

this service is related to the cost of 

processing the billing, and not 

dependent on the collection of the 

payment. 

There are also three exceptions for 

payments to individual practitioners 

that reflect statutory exceptions 

discussed above. 

4. Individual Practitioner Workforce 

Stability and Development Concerns 

Since the direct payment principle 

was originally enacted in 1972 and 

expanded in 1977, the definition of 

medical assistance under section 

1905(a) of the Act has been changed to 

permit States to offer coverage of 

categories of practitioner services, such 

as personal care services, that may be 

viewed as unique to the Medicaid 

program. For these practitioners, the 

Medicaid program may be the primary, 

or only, source of payment. Some States 

have sought methods to improve and 

stabilize the workforce by offering 

health and welfare benefits to such 

practitioners, and by requiring that such 

practitioners pursue periodic training. 

Several States have requested that we 

consider adopting additional exceptions 

to the direct payment principle to 

permit withholding from the payment 

due to the individual practitioner for 

amounts paid by the State directly to 

third parties for health and welfare 

benefits, training costs, and other 

benefits customary for employees. These 

amounts would not be retained by the 

State, but would be paid to third parties 

on behalf of the practitioner for the 

stated purpose. 


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While section 1902(a)(32) of the Act 

does not expressly provide for 

additional exceptions to the direct 

payment principle, we believe the 

circumstances at issue were not 

contemplated under section 1902(a)(32) 

of the Act and, therefore, that the direct 

payment principle should not apply. In 

light of the statutory silence in 

addressing this circumstance, we are 

proposing that the direct payment 

principle should not apply because we 

think its application would contravene 

the fundamental purpose of the 

provision. As noted above, the apparent 

purpose of the direct payment principle 

was to prohibit factoring arrangements. 

Therefore, we are proposing an 

additional exception to describe 

payments that we do not see as within 

the intended scope of the statutory 

direct payment requirement. Under this 

exception, a State could claim as a 

provider payment amounts that are not 

directly paid to the provider, but are 

withheld and paid on behalf of the 

provider, such as health and welfare 

benefit contributions, training costs, or 

other benefits customary for employees. 

H. Definition of Home and CommunityBased Settings for the 1915(k) 

Community First Choice State Plan 

Option 

Section 1915(k)(1)(A)(ii) of the Act 

provides that home and communitybased attendant services and supports 

must be provided in a home and 

community-based setting. The statute 

specifies that home and communitybased settings do not include a nursing 

facility, institution for mental diseases, 

or an intermediate care facility for the 

mentally retarded. Through the 

application process of sections 1915(c) 

waivers, 1915(i) HCBS State plan 

amendments and section 1905(a) State 

plan amendments, we are aware of 

settings other than those specified in 

section 1915(k)(1)(A)(ii) of the Act that 

exhibit qualities of an institutional 

setting. 

Over the past several years, we have 

sought input on how to define the 

characteristics of what makes a setting 

‘‘home and community-based.’’ In the 

section 1915(i) proposed rule published 

on April 4, 2008 (73 FR 18676), we 

proposed to define home and 

community settings for this benefit. In 

the advanced notice of proposed 

rulemaking published on June 22, 2009 

(74 FR 29453), we solicited comments 

on potential rulemaking for a number of 

areas within the section 1915(c) waiver 

program. Specifically, we sought public 

input on strategies to define home and 

community-based settings where waiver 

participants may receive services. Since 

that time, we have facilitated and 

participated in multiple stakeholder 

discussions related to this issue. In the 

proposed rule for section 1915(k) 

Community First Choice (CFC) State 

plan option published on February 25, 

2011 (76 FR 10736), we included the 

proposed language for settings in which 

CFC services and supports could be 

provided to elicit additional comments 

on this issue. In an effort to maintain 

consistency with this policy we also 

proposed similar language in the section 

1915(c) proposed rule that published on 

April 15, 2011. We received many 

thoughtful comments on the proposed 

setting provisions published in the CFC 

proposed rule published on February 

25, 2011. The comments received 

indicated to us that the proposed setting 

provisions caused more confusion and 

disagreement than clarity. In 

consideration of these comments, we 

decided to revise the setting provision 

and publish as a new proposed rule to 

allow for additional public comment 

before finalizing. We find the public 

comment process to be valuable in our 

attempt to develop the best policy on 

this issue for Medicaid beneficiaries. 

Our policy regarding appropriate 

settings for the delivery of HCBS, as 

evidenced by our review of section 

1915(c) waiver requests, has included a 

general prohibition on allowing HCBS 

in settings that are located on or 

adjacent to the campus of a public 

institution. We included this 

prohibition in the CFC proposed rule 

published on February 25, 2011. In 

response to the proposed rule, many 

commenters indicated strong support 

for this policy being incorporated into 

the final regulation, along with the 

proposal that buildings that included 

the delivery of inpatient services would 

not constitute acceptable settings for 

delivery of HCBS. Another commenter 

indicated that CMS should go a step 

further and in addition to excluding 

settings that are co-located with current 

institutions, also exclude settings on the 

grounds of former institutions to be 

clear that reorganizing and reclassifying 

an institution would not meet the 

criteria of a community-based setting. 

Many commenters believe that it is not 

possible for such a setting to ever be 

home and community-based. Others 

stated that all the characteristics of the 

setting should be given weight, and that 

we should not establish requirements 

based solely on the setting locations or 

types (for example, size or the presence 

of institutional services offered within 

the same building), which would 

automatically disqualify a setting from 

being appropriate for delivery of HCBS. 

In particular, we heard concerns that 

a general prohibition on setting 

locations or types could significantly 

restrict access to services in settings that 

promote aging in place for elderly 

individuals, disrupt effective treatment 

and support opportunities for 

individuals with significant brain 

injury, and potentially restrict access to 

services in rural areas. Commenters also 

expressed concerns that by focusing our 

policy on setting locations or physical 

characteristics, we were inappropriately 

implying that smaller or more scattered 

settings were automatically appropriate, 

regardless of the quality of care or 

degree to which individuals receiving 

services in those settings were actually 

able to participate in community life, be 

assured of health and safety, or able to 

control their own daily activities. Many 

commenters stated that listing the 

excluded settings created unintended 

consequences, and could exclude living 

arrangements for individuals receiving 

attendant services and supports that we 

did not intend to prohibit, as well as 

permit others that are not integrated and 

person-centered. 

In response to public comment, we 

have developed proposed regulatory 

language to focus primarily on those 

qualities we deem essential in 

determining whether a setting of care is 

community-based. We believe the most 

effective and consistent way to assure 

that individuals with disabilities, 

regardless of age or type of disability, 

are offered home and community-based 

services in the most integrated setting 

appropriate to their needs and 

preferences, is to focus on the quality 

and characteristics of ‘‘home’’ and 

‘‘community’’ that assure independence 

and integration from the individuals’ 

perspective. We agree with the many 

commenters who suggested this type of 

approach is most consistent with a 

person-centered system for delivering 

care and services. 

Some commenters stated that if an 

individual or his or her family 

‘‘chooses’’ a residence, it is therefore a 

‘‘home and community-based’’ setting. 

We disagree, as individuals can and do 

choose to receive services in 

institutional settings. In addition, this 

reasoning is especially suspect in 

situations where an individual may not 

be given the option of receiving services 

in a variety of settings outside of an 

institution (for example, in their own 

home or apartment or, depending on the 

service, in a competitive employment 

situation), but rather is offered services 

only in a provider-owned or operated 

congregate setting. 

We received a range of responses as 

to whether disability-specific congregate 


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settings are appropriate settings for 

delivery of HCBS. Some individuals and 

organizations are articulate about their 

right to live with anyone of their 

choosing, including those with 

disabilities. Others maintain that the 

only way to end unwanted segregation 

and forced ‘‘choices’’ is to forbid all 

segregation by disability, and that 

integration by definition means 

interaction with non-disabled 

individuals. All agree that unwilling 

segregation is a violation of civil rights. 

The Department of Justice has initiated 

a number of actions finding that States 

are violating the ADA by failing to 

provide more integrated alternatives to 

individuals in congregate settings whose 

residents are primarily or exclusively 

individuals with disabilities. States’ 

obligations under the ADA and Section 

504 of the Rehabilitation Act are 

independent of, and are not limited by, 

their obligations under Medicaid, 

including the requirements of CFC, 

section 1915(c) of the Act, or section 

1915(i) of the Act. States should 

carefully evaluate their strategies for 

offering services in community-based 

settings and consider whether 

individuals have meaningful options 

beyond a segregated option. 

In addition, some commenters stated 

that community can be defined in many 

ways, and therefore that home and 

community-based care could include 

integration into a community of peers; 

that is, in a disability-specific 

congregate or campus setting that 

includes a rich array of supports and 

activities within the setting of care. We 

acknowledge the importance of peer 

relationships but we do not agree that a 

community of one’s peers is the same as 

‘‘community based’’ in terms of settings 

in which HCBS is delivered. An 

important purpose of home and 

community-based services is to assist 

individuals to be able to live fully 

integrated in the greater, non-disabled 

community. 

To provide greater clarity, we are 

proposing language to establish that 

home and community-based settings 

must exhibit specific qualities to be 

eligible sites for delivery of home and 

community-based services. We have 

included these provisions to move 

toward a stronger articulation of the 

qualities that make a setting a home or 

truly integrated in the broader 

community for individuals living with 

disabilities. These are the qualities most 

often articulated by persons with 

disabilities as key determinants of 

independence and community 

integration. We believe that these 

principles of home and communitybased settings will support the use of 

the Medicaid program to maximize the 

opportunities for individuals to access 

the benefits of home and community 

living. We expect States electing to 

provide benefits under section 1915(k) 

to include a definition of home and 

community-based setting that 

incorporates these principles and will 

review all SPAs to determine whether 

they propose settings that are home or 

community-based. We will permit 

States with approved section 1915(k) 

SPAs a reasonable transition period, a 

minimum of one year, to come into 

compliance with the HCBS setting 

requirements as promulgated in our 

final rule. Under the regulation, settings 

must exhibit the following qualities, and 

such other qualities as the Secretary 

determines to be appropriate, based on 

the needs of the individual as indicated 

in their person-centered service plan, in 

order to be eligible sites for delivery of 

home and community-based services: 

• The setting is integrated in, and 

facilitates the individual’s full access to, 

the greater community including 

opportunities to seek employment and 

work in competitive integrated settings, 

engage in community life, control 

personal resources, and receive services 

in the community, like individuals 

without disabilities; 

• The setting is selected by the 

individual among all available 

alternatives and is identified in the 

person-centered service plan; 

• An individual’s essential personal 

rights of privacy, dignity and respect, 

and freedom from coercion and restraint 

are protected; 

• Individual initiative, autonomy, 

and independence in making life 

choices, including but not limited to, 

daily activities, physical environment, 

and with whom to interact are 

optimized and not regimented; and 

• Individual choice regarding services 

and supports, and who provides them, 

is facilitated. 

In a provider-owned or controlled 

residential setting, the following 

additional conditions must be met. Any 

modification of the conditions, for 

example to address the safety needs of 

an individual with dementia, must be 

supported by specific assessed needs 

and documented in the person centered 

service plan: 

• The unit or room is a specific 

physical place that can be owned, 

rented or occupied under another 

legally enforceable agreement by the 

individual receiving services, and the 

individual has, at a minimum, the same 

responsibilities and protections from 

eviction that the tenants have under the 

landlord tenant laws of the State, 

county, city, or other designated entity. 

We are soliciting comments as to 

whether there are other protections, not 

addressed by landlord tenant laws that 

should be included. 

++ Each individual has privacy in 

their sleeping or living unit: 

– – Units have lockable entrance 

doors, with appropriate staff having 

keys to doors; 

– – Individuals share units only at the 

individual’s choice; and 

– – Individuals have the freedom to 

furnish and decorate their sleeping or 

living units; 

++ Individuals have the freedom and 

support to control their own schedules 

and activities, and have access to food 

at any time; 

++ Individuals are able to have 

visitors of their choosing at any time; 

and 

++ The setting is physically 

accessible to the individual. 

In addition to the aforementioned 

criteria there are two criteria that we 

have not included in the proposed 

regulation, but wish to solicit comment 

regarding whether they should be 

added. The first is related to the 

proposed requirement that in a 

provider-owned or controlled 

residential setting, any modification of 

the conditions must be supported by 

specific assessed needs and documented 

in the person centered service plan. 

This requirement is meant to address 

two issues: 

(1) Individuals receiving HCBS must 

not have their independence or 

freedoms abridged by providers for 

convenience, or well-meaning but 

unnecessarily restrictive methods for 

providing services and supports; and 

(2) Individuals with cognitive 

disabilities and other impairments may 

require modifications of the 

aforementioned conditions for their 

safety and welfare. 

This provision is meant to establish 

that service planning is the process in 

which these decisions are made, rather 

than ad hoc on a daily basis. While the 

proposed text establishes the 

requirement that any modification to the 

conditions are supported by a specific 

assessed need and documented in the 

person-centered service plan, we are 

also considering including language to 

explicitly set forth these activities. We 

are considering requiring the following 

points to be identified: Identify a 

specific and individualized assessed 

safety need; document less intrusive 

methods of meeting that have been tried 

but did not work; include a clear 

description of the condition that is 

directly proportionate to the specific 

assessed safety need; include regular 

collection and review of data to measure 


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the ongoing effectiveness of the 

modification; and establishing time 

limits for periodic reviews to determine 

if the modification can be lifted. We 

solicit comment on these points and any 

other potential requirements regarding 

modifications of the conditions set forth 

in this proposed rule. We also wish to 

solicit comment on a second criterion 

that would include a requirement that 

receipt of any particular service or 

support cannot be a condition for living 

in the unit. In discussing this specific 

criterion, we discovered that it could be 

read one of two ways. One 

interpretation is that this language does 

not require an individual residing in a 

provider owned or operated setting to 

receive HCBS from the setting provider. 

Rather the individual could choose 

another qualified individual to provide 

HCBS. The other interpretation is that 

this language would prevent the owner 

of the setting from evicting an 

individual because the individual 

refused to accept a particular service. 

This interpretation could have an effect 

on residential settings, such as housing 

programs to address homelessness. 

Some of these settings include a 

structure in which individuals are 

required to participate in treatment 

(substance use, for example) as a 

condition of residing there. We 

acknowledge the complexities that arise, 

when trying to support an individual’s 

right to choose while recognizing that 

there are programs and services that 

have been developed as a result of 

identified service needs. As indicated 

earlier, we are specifically soliciting 

comments on whether these two criteria 

should be included as regulatory 

requirements. 

Additionally, in an effort to be 

consistent with other authorities 

providing home and community-based 

services, we propose to exclude 

hospitals as a community setting for the 

provision of Community First Choice 

Option. We believe this exclusion aligns 

with section 1915(k)(1)(A)(ii) of the Act 

requiring that services are provided in a 

home and community-based setting and 

section 1915(k)(3)(B) of the Act 

requiring services are provided in the 

most integrated setting appropriate to 

the individual’s needs. We would like to 

clarify that the hospital prohibition 

applies to hospitals certified for the 

provision of long-term care services. We 

recognize that individuals with 

disabilities utilize personal attendant 

services and supports for various 

activities of daily living and 

instrumental activities of daily living. 

As a result, we understand that 

individuals will likely have a continued 

need for assistance while experiencing a 

short-term stay in general acute hospital 

settings. Therefore, while services 

provided in a general acute care hospital 

are not CFC services, individuals who 

have an assessed need for assistance 

with IADLs may continue to receive 

such services while an inpatient in an 

acute hospital setting. We would like to 

invite comment on this approach. 

Lastly, we are proposing to include 

the list of the three prohibited 

institutional settings specified in 

statute, as settings in which CFC 

services and supports may not be 

provided, along with a general 

prohibition on any other locations that 

have qualities of an institutional setting, 

as determined by the Secretary. 

In considering whether a setting has 

the qualities of an institutional setting 

for implementation of CFC, we will 

exercise a rebuttable presumption, as we 

will for the 1915(i) State plan HCBS 

benefit, that a setting is not a home and 

community-based setting, and will 

engage in heightened scrutiny, for any 

setting that is located in a building that 

is also a publicly or privately operated 

facility that provides inpatient 

institutional treatment, or in a building 

on the grounds of, or immediately 

adjacent to, a public institution, or 

disability-specific housing complex. We 

expect to issue further guidance 

regarding such settings. Other 

characteristics that could cause us to 

consider a setting as ‘‘institutional’’ or 

having the qualities of an institution 

would include, but not be limited to, 

settings which are isolated from the 

broader community, 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, and activities, or limit 

individuals’ opportunities to pursue 

community activities. 

Specifically, as with the 1915(i) 

proposed rule, we would invite 

comments on the specific qualities we 

have proposed. In addition, we are 

soliciting comments as to whether there 

are settings in addition to those 

currently enumerated in statute, that 

are, by their nature, location or 

administration inherently noncommunity based, regardless of the 

nature of an individual’s disability or 

age, and therefore, should be expressly 

excluded from HCBS. Issuing the 

revised setting provisions as a proposed 

notice will allow us to consider 

additional perspectives from the public 

on the modifications. In considering 

comments received pertaining to the 

setting provision of the section 1915(k) 

rule, we will also include full 

consideration of all comments received 

regarding the aligned home and 

community-based setting requirements 

being proposed in this rule and section 

1915(i). In recognizing the need for a 

consistent definition of this term across 

Medicaid HCBS, it is our goal to align 

the final language pertaining to this 

topic across the regulations pertaining 

to sections 1915(i), 1915(k), and 1915(c) 

Medicaid HCBS authorities. 

Along with our overarching interest in 

making improvements to Medicaid 

HCBS, we seek to ensure that Medicaid 

is supporting needed strategies for 

States in their efforts to meet their 

obligations under the ADA and the 

Supreme Court 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 can 

provide an important opportunity to 

obtain Federal funding that supports 

compliance with the ADA, section 504 

of the Rehabilitation Act, and Olmstead 

through the provision of Medicaid 

services to Medicaid-eligible 

individuals. Additionally, we expect 

States through the requirement at 

§ 441.677(b) to have a comprehensive 

quality assurance system, to develop 

individual outcome measures that 

would support the State’s compliance 

with providing CFC services in 

accordance with the individual’s 

person-centered plan and in a setting 

that meets the home and communitybased setting criteria set forth in this 

regulation. 

III. Provisions of the Proposed Rule 

To incorporate the policies and 

implement the statutory provisions 

described above, we are proposing the 

following revisions: 

A. State Organization and General 

Administration (Part 431) 

In § 431.54, we are proposing to add 

paragraphs (a)(3) and (h) to include 

State plan HCBS as exceptions to 

comparability and community income 

and resource rules. 

B. Eligibility in the States, District of 

Columbia, the Northern Mariana 

Islands, and American Samoa (Part 435) 

and Eligibility in Guam, Puerto Rico and 

the Virgin Islands (Part 436) 

In § 435.219 and § 436.219, we are 

proposing to add a provision to 

implement the optional categorical 


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eligibility group created by section 

1902(a)(10)(A)(ii)(XXII) of the Act for 

individuals, ‘‘who are eligible for home 

and community-based services under 

the needs-based criteria established 

under (1)(A) of 1915(i), or who are 

eligible for home and community-based 

services under paragraph (6) of such 

section, and who will receive home and 

community-based services pursuant to a 

State plan amendment under such 

subsection.’’ By using the word ‘‘or’’ we 

interpret that the statute creates two 

distinct eligibility groups under section 

1902(a)(10)(A)(ii)(XXII) of the Act with 

two sets of requirements, as follows: 

(1) Those who are eligible for HCBS 

under the needs-based criteria 

established under section 1915(i)(1)(A) 

of the Act; or 

(2) Those who are eligible for HCBS 

under paragraph (6) of such section, and 

who will receive HCBS pursuant to a 

State plan amendment under such 

subsection. 

We believe that we have the following 

flexibility in defining eligibility for the 

first subset of this group of individuals: 

• The first subset is made up of 

individuals who are not otherwise 

eligible for Medicaid. We believe that 

this interpretation is consistent with 

Congressional intent because this policy 

allows individuals who would not 

otherwise be eligible for Medicaid 

because they are not in a category (for 

example, certain adults prior to January 

1, 2014) to become Medicaid eligible 

and receive section 1915(i) services. The 

early option established by section 

1902(k)(2) of the Act covers individuals 

who are not otherwise categorically 

eligible for Medicaid. The new group 

defined in section 1902(a)(10)(A)(i)(VIII) 

of the Act, which goes into effect in 

2014, also will cover individuals not 

eligible under the existing categorical 

groups listed in section 1902(a)(10) of 

the Act. 

• Even though the description of the 

eligibility group in the statute at section 

1902(a)(10)(A)(ii)(XXII) of the Act does 

not explicitly include an income cap we 

believe that a standard of 150 percent of 

the FPL, which is the same as the 

current income cap for individuals 

eligible under the State plan receiving 

section 1915(i) services, is reasonable. 

The needs-based criteria are described 

in section 1915(i)(1)(A) of the Act, 

which provides additional conditions 

for the provision of State plan HCBS 

under section 1915(i)(1) to individuals 

who are eligible under the State 

Medicaid plan and whose income does 

not exceed 150 percent of the FPL. In 

addition, the amendments to section 

1915(i) of the Act in section 2402(b) of 

the Affordable Care Act which establish 

a new option to cover individuals 

eligible for HCBS under a waiver, gives 

States this option ‘‘in addition to 

continuing to provide such services’’ to 

individuals satisfying the needs-based 

criteria. Prior to the effective date of the 

new eligibility group under section 

1902(a)(10)(A)(ii)(XXII) of the Act, 

States could only provide HCBS under 

section 1915(i) to those eligible under 

an existing State plan group whose 

income did not exceed 150 percent of 

the FPL and who met the needs-based 

criteria. 

• Section 1902 of the Act requires 

States to use methods of determining 

income that are reasonable, consistent 

with the objectives of the Medicaid 

program, simple to administer, and in 

the best interests of the beneficiary. For 

purposes of determining income for this 

group, we believe the SSI program’s 

rules (which are currently used in 

Medicaid for determining income 

eligibility for individuals aged 65 or 

older and people with disabilities) meet 

these criteria. Like the individuals 

covered under the SSI-related Medicaid 

eligibility category, many individuals 

eligible under this group will have 

disabilities or chronic illnesses. The SSI 

program provides for a number of 

income disregards specifically 

applicable to persons with disabilities 

that are not available under other 

program methodologies. States may also 

elect to use less restrictive income 

methodologies than are used under SSI. 

Any less restrictive methodology should 

apply to all members of the group. 

• While the rules of the SSI program 

are an example of a methodology that 

we believe meets the requirements for 

determining income eligibility for this 

group, this does not preclude States 

from describing other methodologies in 

their SPAs that they believe also meet 

those requirements. We encourage 

States considering the use of other 

methodologies to discuss them with 

CMS before actually submitting a SPA. 

• The statute does not refer to any 

resource test for this group and we are 

proposing that States may not apply a 

resource test in determining eligibility 

for this subset of the new group. We 

believe that not applying a resource test 

for this subset would be consistent with 

the absence of a resource test for the 

eligibility group described under section 

1902(a)(10)(A)(i)(VIII) of the Act and the 

option for States to cover such 

individuals prior to January 1, 2014. 

• The section 1915(i) statute does 

require that these individuals must 

receive section 1915(i) services in order 

to be eligible for Medicaid. 

• Once eligible for Medicaid in this 

group, the individual will be eligible for 

all Medicaid services, not just section 

1915(i) services. 

The second subset of this group 

consists of individuals eligible for home 

and community-based services under an 

existing State waiver or demonstration. 

In determining eligibility for individuals 

with income that does not exceed 300 

percent of the SSI/FBR, individuals 

must be eligible for an existing section 

1915(c), (d), or (e) waiver or a waiver 

under section 1115, even though they 

do not have to receive services under 

these authorities. For individuals with 

income that does not exceed 300 

percent of the SSI/FBR, we believe that 

there is little flexibility under the statue 

in determining eligibility for this subset, 

therefore— 

• The individual must be eligible for 

a section 1915(c) waiver; 

• The State must follow eligibility 

and post eligibility rules of an approved 

section 1915(c) waiver. More 

information regarding HCBS waiver 

eligibility and post eligibility rules is 

available in the HCBS waiver Technical 

Guide, online at www.hcbswaivers.net; 

• Income and resource rules of the 

special income level group apply; 

• Section 1902(r)(2) of the Act income 

disregards do not apply because income 

eligibility under the special income 

level group is determined using a gross 

income test that caps income at 300 

percent of the SSI/FBR; 

• Section 1902(r)(2) of the Act 

resource disregards apply; 

• The individual must receive section 

1915(i) services as a condition of 

Medicaid eligibility; 

• If the State elects to cover 

individuals with income up to 300 

percent of the SSI/FBR, it must elect the 

option under section 1915(i)(6) under 

the State plan; and 

• The individual will be eligible for 

all Medicaid services, not just section 

1915(i) services. 

Additionally, when electing this new 

eligibility group States will have 

multiple options. States can cover— 

(1) Individuals who meet the needsbased criteria established under section 

1915(i)(1)(A) of the Act with income up 

to 150 percent of the FPL and 

individuals who meet the needs-based 

criteria established under 1915(i)(1)(A) 

eligible for HCBS under a waiver with 

income up to 300 percent of the SSI/ 

FBR; or 

(2) The subset of individuals who 

meet the needs-based criteria 

established under section 1915(i)(1)(A) 

of the Act with income up to 150 

percent of the FPL; or 

(3) The subset of individuals who 

meet the needs-based criteria 

established under section 1915(i)(1)(A) 


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of the Act eligible for HCBS under a 

waiver with income up to 300 percent 

of the SSI/FBR. 

In order for States to elect any of the 

options listed above with respect to the 

new eligibility group, they must 

continue to cover individuals described 

in 1915(i)(1). 

This is not the first time that an 

eligibility group has been treated in this 

manner; the aged or disabled poverty 

level group described at section 

1902(m)(1) of the Act permits States to 

cover aged and disabled individuals, the 

aged only, or disabled only individuals. 

We invite comment on the eligibility 

provisions of § 435.219 and § 436.219 of 

the regulation. 

C. Services: General Provisions (Part 

440) 

In § 440.1, we are proposing to add a 

reference to a new statutory basis to 

read ‘‘1915(i) HCBS furnished under a 

State plan to elderly and disabled 

individuals under the provisions of part 

441, subpart L.’’ 

In § 440.180, we are proposing to 

revise the heading ‘‘Home or 

community-based services’’ to read 

‘‘Home and community-based waiver 

services’’ to standardize the term ‘‘home 

and community-based services’’ and 

clarify that this section concerns only 

HCBS provided through 1915(c) 

waivers. 

In part 440 subpart A, we are 

proposing to add § 440.182, ‘‘State plan 

home and community-based services’’, 

which would define a new optional 

Medicaid service for which FFP is 

available to States, as specified in part 

441, subpart K. 

In § 440.182(a), we propose that the 

services authorized in section 1915(i) of 

the Act, and meeting the requirements 

outlined in proposed subpart K, be 

known as ‘‘State plan home and 

community-based services.’’ When 

referring to the specific service(s) 

offered under the State plan HCBS 

benefit listed in § 440.180(b), we use the 

term ‘‘State plan HCBS.’’ When referring 

to overall State activities under section 

1915(i) of the Act as described in 

subpart K, we use the term ‘‘benefit’’, or 

‘‘State plan HCBS benefit’’. 

In § 440.182(b) and § 440.182(c)(1), we 

propose that the optional State plan 

HCBS benefit may consist of any or all 

of the HCBS listed in section 1915(c)(4) 

for waiver programs, as specified in 

regulation at § 440.180. Because section 

1915(i) of the Act defines services by 

reference to section 1915(c) of the Act, 

we believe that the regulatory 

requirements should be parallel, except 

for the ‘‘other’’ services which the 

Secretary has the authority to approve 

for an HCBS waiver. In HCBS waivers, 

other services must be cost-effective and 

must be necessary to prevent 

institutionalization. However, the State 

plan HCBS does not require costneutrality and some individuals will be 

eligible for section 1915(i) of the Act 

without meeting an institutional LOC. 

Therefore, we list the permitted services 

for the State plan HCBS benefit in 

§ 440.182 identically to the services 

specified in § 440.180 for HCBS waivers, 

except for ‘‘other’’ services. We require 

‘‘other’’ services to be appropriate for 

individuals who meet the needs-based 

criteria that the State defines for the 

benefit. We further specify that the 

conditions set forth in § 440.180(b) for 

services to individuals with chronic 

mental illness, and in § 440.180(c) for 

expanded habilitation services, apply to 

State plan HCBS services. 

In particular, due to concern over 

duplication of habilitation services and 

the State-defined ‘‘other services,’’ we 

propose to require at § 441.662(a)(7) and 

§ 441.662(a)(8) (regarding requirements 

for independent assessment), 

explanations of the manner in which 

non-duplication of services will be 

documented in the assessment of each 

individual receiving habilitation 

services or Secretary approved other 

services. Additionally, since some 

individuals may be simultaneously 

receiving services through a HCBS 

waiver and the section 1915(i) benefit, 

we require in § 441.662(a)(9) 

documentation that the services 

provided through 1915(c) and 1915(i) 

authorities may not be duplicative for 

the same individual. This would also 

include coordination of assessments, 

service plan development, and casemanagement to ensure that individuals 

receiving services under both 

authorities are not subject to multiple 

assessments and service plans. 

Section 1915(i) of the Act prohibits 

reimbursement for room and board. At 

§ 440.182(c), we propose to state that, 

except for respite care furnished in a 

setting approved by the State that is not 

the individual’s residence, no service or 

combination of services may be used to 

furnish room and board through the 

State plan HCBS benefit. When meals 

are furnished as an integral component 

of the service, we are proposing to 

permit the State to consider the cost of 

food in the rate it pays for the State plan 

HCBS, as the cost is then considered 

part of the service itself. We would not 

consider the meal to be an integral part 

of the State plan HCBS when two rates 

are charged to the public, one that 

includes a meal and one that does not 

include a meal. 

Finally, we propose that a State may 

claim FFP for a portion of the rent and 

food expenses that may be reasonably 

attributed as a service cost to 

compensate an unrelated caregiver 

providing State plan HCBS, who is 

residing in the same household with the 

recipient. We propose, as is permitted in 

HCBS waivers under section 1915(c)(1) 

and § 441.310(a)(2)(ii), that FFP is 

available only for the reasonable 

additional rent and food costs of the 

caregiver residing in the recipient’s 

home, not to support the cost of a 

caregiver’s household in which the 

recipient resides. We would therefore 

provide that FFP not be available for 

caregiver rent and food costs when the 

residence is owned or leased by the 

caregiver. 

D. Services: Requirements and Limits 

Applicable to Specific Services (Part 

441) 

In April 4, 2008, we issued a 

proposed rule in the Federal Register 

titled ‘‘Medicaid Program; Home and 

Community-Based State Plan Services.’’ 

In that proposed ruled, we specified that 

we would set forth our proposals in 42 

CFR part 441 initially proposed in new 

subpart K titled ‘‘State Plan Home and 

Community-Based Services for Elderly 

and Disabled Individuals,’’ consisting of 

§ 441.650 through § 441.677, which 

describes requirements for providing the 

State plan HCBS benefit. This 

construction parallels that for HCBS 

waivers, which are the subject of 

subpart G of part 441. Subsequently, we 

published a proposed rule (76 FR 

10736) on February 25, 2011 in the 

Federal Register titled ‘‘Medicaid 

Program; Community First Choice 

Option,’’ which also proposed the 

addition of subpart K to part 441. 

Therefore, we are proposing to specify 

that the proposed provisions for the 

‘‘State Plan Home and CommunityBased Services for Elderly and Disabled 

Individuals’’ in subpart K under 

§ 441.550 through § 441.577 be 

redesignated as subpart L (§ 441.650 

through § 441.677). 

In this new subpart, it is necessary in 

several paragraphs to indicate that 

certain provisions apply to an 

individual or an individual’s 

representative. To reduce redundancy, 

we indicate in those paragraphs that 

‘‘individual’’ means the eligible 

individual and, if applicable, the 

individual’s representative, to the extent 

of the representative’s authority 

recognized by the State. ‘‘Individual and 

representative’’ more accurately convey 

the person-centered process than 

‘‘individual or representative’’. This 

provision clarifies that there is no 


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implication that individuals will or will 

not have representatives. 

E. Basis and Purpose (§ 441.650) 

We set forth in § 441.650 language to 

implement the provisions of section 

1915(i) of the Act permitting States to 

offer HCBS to qualified elderly and 

disabled individuals under the State 

plan. Those services are listed in 

§ 440.182, and are described by the 

State, including any limitations of the 

services. This optional benefit is known 

as the State plan HCBS benefit. This 

subpart describes what a State Medicaid 

plan must provide, and defines State 

responsibilities. 

F. State Plan Requirements (§ 441.653) 

In § 441.653, we propose that a State 

plan that includes HCBS for elderly and 

disabled individuals must meet the 

requirements of this subpart. We would 

require that the State plan amendment 

in which the State establishes the State 

plan HCBS benefit satisfy the 

requirements set forth in this proposed 

regulation. 

G. Eligibility for Home and CommunityBased Services Under Section 1915(i)(1) 

of the Act (§ 441.656) 

We propose in § 441.656(a)(1) to 

require that if the State Medicaid agency 

elects to provide the 1915(i) HCBS 

benefit, it must provide services to 

categorically needy individuals who are 

eligible for Medicaid under an eligibility 

group that is covered under its State 

Medicaid plan and who have income 

that does not exceed 150 percent of the 

FPL. The State may also elect to provide 

the section 1915(i) HCBS benefit to 

medically needy individuals. 

To implement the intent of the 

Congress that the benefit be ‘‘home and 

community-based,’’ we would require in 

§ 441.656(a) that the individual reside in 

the home or community, not in an 

institution, according to quality 

principles for community-based settings 

prescribed by the Secretary. As 

discussed in section II.E.2. of this 

proposed rule, there are a variety of 

living arrangements that promote 

independence and community 

integration, as well as arrangements that 

do not. 

We would require in § 441.656(b) that 

the individual must meet the needsbased eligibility criteria as set forth in 

§ 441.659. We propose in § 441.656(c) 

that individuals are not eligible for the 

State plan HCBS benefit until they have 

met all eligibility requirements, 

including the need for at least one 

service provided under the State plan as 

part of the HCBS benefit at a frequency 

identified by the State. Finally, we 

require that, in the event that a State 

elects not to apply comparability 

requirements to the benefit, an 

individual must meet the State-defined 

and CMS approved targeting criteria in 

order to establish eligibility. 

We propose in § 435.219(b) and 

§ 436.219(b) that States may elect under 

section 1915(i)(6) of the Act the option 

to provide home and community-based 

State plan services to individuals 

eligible under a section 1915(c), (d), (e) 

or section 1115 waiver who have 

income up to 300 percent of the SSI/ 

FBR. 

We also propose in § 441.656(e)(1) 

that States may elect to follow 

institutional income and resource 

eligibility rules for the medically needy 

living in the community. 

Nonapplication of the requirements of 

section 1902(a)(10)(C)(i)(III) of the Act 

allows States to treat medically needy 

individuals as if they are living in an 

institution by not deeming income and 

resources from an ineligible family 

member. We use the term ‘‘not to apply’’ 

instead of ‘‘waive’’ since this is an 

election made by the State and does not 

require a waiver by the Secretary. We 

further propose that States may elect not 

to apply section 1902(a)(10)(B) of the 

Act, concerning comparability of 

services in Medicaid, which permits the 

State plan HCBS benefit to be targeted 

towards specific populations. In this 

section, we indicate that a State may 

elect to establish targeting criteria for 

the section 1915(i) benefit and for any 

specific services within that benefit, 

subject to CMS approval, based on 

factors such as age, diagnosis, and/or 

disability. These criteria provide States 

with the option to provide State plan 

HCBS services to specific populations, 

including specific Medicaid eligibility 

groups, but allows flexibility to combine 

multiple target groups within one 

benefit and to provide different services 

to each group. Targeting criteria cannot 

have the impact of limiting the pool of 

qualified providers from which an 

individual would receive services, or 

have the impact of requiring an 

individual to receive services from the 

same entity from which they purchase 

their housing. 

H. Needs-Based Criteria and Evaluation 

(§ 441.659) 

The statute uses a number of terms at 

times interchangeably. In general, in 

§ 441.659 we adopt the wording used 

most frequently in the law, and specify 

a term for each requirement. For 

example, regarding the terms 

‘‘assessment’’ and ‘‘evaluation,’’ we 

would adopt the language in section 

1915(i)(1)(H)(ii) of the Act, which refers 

to the ‘‘independent evaluation’’ and the 

‘‘independent assessment.’’ 

1. Needs-Based Eligibility Criteria 

In § 441.659(a), we propose that States 

establish needs-based criteria for 

determining an individual’s eligibility 

under the State plan for HCBS, and may 

establish needs-based criteria for each 

specific service. We do not define 

support needs, as we believe that States 

should have the flexibility to match 

eligibility criteria to the nature of the 

services they would provide under the 

HCBS benefit. By statute, the needsbased criteria would consist of needs for 

specified types of support, such as 

assistance with ADLs, IADLs, or other 

risk factors defined by the State. We 

propose to require that State-defined 

risk factors affecting eligibility may be 

included as needs-based eligibility 

criteria in the State plan amendment. 

While we do not propose requirements 

for State-defined risk factors, we believe 

that as needs-based criteria, risk factors 

should be related to support needs, such 

as lack of availability of family members 

or other unpaid caregivers willing and 

able to provide necessary care. 

We distinguish support needs from 

other types of characteristics. We 

propose that a distinguishing 

characteristic of needs-based criteria is 

that they can only be ascertained for a 

given person through an individual 

evaluation. This differentiates a 

targeting criterion such as a diagnosis, 

which many individuals may 

identically share, from a support need, 

which will vary widely among those 

individuals with the same diagnosis. 

We note that the regulation requires 

only that the needs-based criteria for the 

State plan HCBS benefit establish the 

lowest threshold of need to enroll in the 

benefit. There is an upper limit of need 

to be eligible for the HCBS benefit only 

if the State so specifies in the needsbased eligibility criteria. The more 

stringent institutional criteria required 

in § 441.559(b) of this section do not 

constitute an upper limit of need to be 

eligible for the State plan HCBS benefit. 

The institutional criteria are only a 

lowest threshold of need to receive 

institutional services. We also note that 

section 1915(i)(1) of the Act clarifies 

that State plan HCBS are not required to 

be direct alternatives to institutional 

care. The statute specifically provides 

that the State plan HCBS benefit does 

not need to meet the section 1915(c) 

requirement that, but for the services 

provided under the HCBS waiver, the 

individual would require institutional 

care. 


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8Although not included in the regulation, we 

would caution states against raising the LOC due to 

the maintenance of eligibility requirements 

included in the Affordable Care Act. 

2. More Stringent Institutional and 

Waiver Needs-Based Criteria 

In § 441.659(b), we propose that the 

State plan HCBS benefit is available to 

a State only if individuals may 

demonstrate a lower level of need to 

obtain State plan HCBS than is required 

to obtain institutional or waiver 

services. States that have functional 

LOC criteria for institutions (that meet 

the requirements in § 441.659(a)(1)), 

may have no need to modify their 

existing institutional criteria so long as 

the needs-based eligibility criteria 

established for State plan HCBS are less 

stringent. States without need-based 

institutional LOC criteria must add 

need-based requirements to their LOC 

assessments in order to establish the 

State plan HCBS benefit. 

We propose in § 441.659(b) to define 

by reference to statute and regulation 

the institutions for which section 

1915(i) of the Act requires more 

stringent eligibility criteria. NF and ICF/ 

MR are so cited. We interpret the 

reference in section 1915(i)(1)(B) of the 

Act to hospitals to mean facilities 

certified by Medicaid as hospitals that 

are providing long-term care services or 

services related to the HCBS to be 

provided under the benefit. The 

proposed regulation requires that States 

have or establish for such hospitals (if 

any), needs-based criteria for admission 

that are more stringent than those for 

eligibility in the State plan HCBS 

benefit. We further propose, when the 

State covers more than one service in 

the State plan HCBS benefit, to require 

that any needs-based criteria for 

individual HCBS may not have the 

effect of limiting who can benefit from 

the State plan HCBS in an unreasonable 

way, as determined by the Secretary. 

In § 441.659(b), we further propose to 

require that the more stringent needsbased criteria for institutions and 

waivers be part of the State’s LOC 

processes, to ensure that the criteria are 

uniformly utilized. We would require 

that these more-stringent needs-based 

criteria be submitted for comparison 

with the State plan amendment that 

establishes the State plan HCBS benefit. 

We note that needs-based criteria, as 

defined in § 441.659(a) require an 

evaluation to determine the individual’s 

support needs. Therefore, the 

assessment process for institutional 

levels of care that include needs-based 

criteria must include an individual 

evaluation of support needs. We also 

propose to require that the State’s more 

stringent institutional and waiver needsbased criteria be in effect by the 

effective date of the State plan HCBS 

benefit.8

Finally, in § 441.659(b)(2), we propose 

that if a State modifies its institutional 

level of criteria in order to satisfy the 

requirement that the levels of care be 

more stringent than the needs-based 

eligibility criteria for the State plan 

HCBS benefit, the States may continue 

to receive FFP when serving individuals 

who were eligible under the previous 

criteria. Exemption from the more 

stringent criteria is indefinite, but ends 

when the individual is discharged from 

the facility or waiver, the individual 

becomes ineligible for Medicaid due to 

factors unrelated to the LOC 

determination, or the individual no 

longer meets the criteria for the 

applicable LOC. We note that in longterm care facilities a transfer is not a 

discharge and would not cause the 

individual to lose this exemption. 

Similarly, if an individual transitions 

from an institution to a waiver it would 

not result in a separate LOC, and would 

not cause the individual to lose this 

exemption. States would determine the 

effect of any subsequent changes to 

general LOC requirements (unrelated to 

the more stringent criteria) upon 

individuals with this exemption. 

Additionally, nothing in this subsection 

would prevent the State from 

determining whether the person 

remains eligible for Medicaid based on 

other factors, such as income or 

residency. 

3. Adjustment Authority 

In § 441.659(c), we propose to permit 

States under certain conditions to 

adjust, without prior approval from the 

Secretary, the needs-based eligibility 

criteria and service criteria (if any) 

established under § 441.659(a), in the 

event that the State experiences 

enrollment in excess of the number 

projected to be served by the HCBS 

benefit. We propose a retroactive 

effective date, as approved by the 

Secretary, for the State plan amendment 

modifying the needs-based criteria 

under § 441.659(c)(1). We set forth the 

following conditions required by the 

statute. 

The State must provide for at least 60 

days notice to the Secretary, the public, 

and we would propose to require, each 

enrollee. Since the effect of adjusted 

criteria would be to reduce the scope of 

services, eligibility for services, or 

eligibility for the entire State plan HCBS 

benefit, the adjusted criteria established 

under this subsection would not apply 

to individuals already enrolled in the 

State plan HCBS. If the State also 

adjusts institutional levels of care, the 

adjusted institutional levels of care may 

not be less stringent than the 

institutional LOC prior to the effective 

date of the State plan HCBS benefit. 

Additionally, in § 441.659(b), we 

indicate that any changes to the 

institutional LOC criteria under the 

State adjustment authority contained in 

§ 441.659(c) are subject to the same 

requirements as an adjustment to the 

institutional LOC criteria under 

§ 441.659(b). 

In § 441.659(c), we further propose to 

explicitly require that the adjusted 

needs-based eligibility criteria for the 

State plan HCBS benefit must be less 

stringent than needs-based institutional 

LOC criteria in effect at the time of the 

adjustment. 

We propose that the notice to the 

Secretary be submitted as a State plan 

amendment. In order to implement the 

adjustment authority without prior 

approval of the Secretary, the Secretary 

would approve a State plan amendment 

adjusting the needs-based HCBS benefit 

eligibility criteria with a retroactive 

effective date, as early as 60 days after 

the State notified each enrollee, the 

Secretary, and the public, (or whichever 

is later). Under the provision of section 

1915(i)(1)(D)(ii) of the Act, the Secretary 

will evaluate the State’s adjusted criteria 

for compliance with the provisions of 

this paragraph and subpart L. We also 

note that while the State may under this 

provision implement the adjusted 

criteria as early as 60 days after 

notification and before the State plan 

amendment is retroactively approved, 

the State is at risk for any actions it 

takes that are later disapproved. 

Finally, we would require that the 

State notify affected individuals of their 

right to a fair hearing in accordance 

with 42 CFR part 431, subpart E. 

4. Independent Evaluation and 

Determination of Eligibility 

In § 441.659(d), we propose that 

eligibility for the State plan HCBS 

benefit be determined by an 

independent evaluation of each 

individual, applying the general 

eligibility requirements in § 441.656 of 

this subpart, and the needs-based 

criteria that the State has established 

under § 441.659(a). Independence of the 

review requires meeting the conflict of 

interest standards set forth in § 441.568, 

where provider qualifications for 

evaluators are specified. 

The evaluation must assess an 

individual’s support needs and 

strengths. We interpret this provision of 


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the statute to indicate that the 

evaluation process draws conclusions 

about supports that the individual 

requires because of age or disability, and 

supports that the individual does not 

require because of abilities to perform 

those functions independently. The 

evaluation compares those conclusions 

with the needs-based eligibility criteria 

for the State plan HCBS benefit to 

determine eligibility for the benefit. 

Section 1915(i)(1)(D)(i) of the Act 

provides that the State may take into 

account the need for significant 

assistance to perform ADLs, indicating 

that the statute does not require that 

eligibility be dependent upon assistance 

for ADLs. 

We note that appraisal of whether an 

individual has need for, and meets 

additional needs-based criteria (if any) 

for specific HCBS offered under the 

benefit, is part of the independent 

assessment and service plan 

development process. However, this 

assessment affects eligibility for the 

benefit in that we propose at 

§ 441.656(a)(ii)(5) that individuals are 

considered enrolled in the State plan 

HCBS benefit only if they are assessed 

to require at least one home and 

community-based service offered under 

the State plan benefit in addition to 

meeting the eligibility and needs-based 

criteria for the benefit. 

The evaluation process designed by 

the State would reflect the nature of the 

State plan HCBS benefit designed by the 

State. However, in order to meet the 

forgoing requirements, all independent 

evaluations require specific information 

about each individual’s support needs, 

sufficient to draw the appropriate 

conclusions. In some cases this 

information may be well documented 

and current in the individual’s existing 

records. In other cases, we would 

require that the evaluator obtain this 

information by whatever means are 

appropriate to secure a valid appraisal 

of the individual’s current needs. This 

requirement could include professional 

assessment of certain functional 

abilities. State evaluation procedures 

that rely solely on review of medical 

records would not meet these 

requirements. 

5. Periodic Redetermination 

In § 441.659(e), we propose that 

individuals receiving the State plan 

HCBS benefit must be reevaluated at a 

frequency defined by the State, but not 

less than every 12 months, to determine 

whether the individuals continue to 

meet eligibility requirements. The 

independent reevaluations must meet 

the requirements for initial independent 

evaluations specified in § 441.659(d). 

I. Independent Assessment (§ 441.662) 

In § 441.662, we propose 

requirements for independent 

assessment of need of each individual 

who has been determined by the 

independent evaluation to be eligible for 

the State plan HCBS benefit. The 

purpose of the assessment is to obtain, 

in combination with the findings of the 

independent eligibility evaluation, all 

the information necessary to establish a 

service plan. The assessment is based on 

the needs of the individual, which we 

believe precludes assessment protocols 

that primarily determine diagnoses, or 

only assess function. Assessment 

protocols must not assign supports 

automatically by functional limitation. 

The independent assessment must 

determine the specific supports needed 

to address the individual’s unique 

circumstances and needs, including 

other services available through 

Medicaid and other State and Federal 

programs. 

The assessment also applies the 

State’s needs-based criteria (if any) for 

each service. We propose that an 

individual be considered enrolled in the 

State plan HCBS benefit only if the 

assessment finds that the individual 

needs and meets the needs-based 

criteria (if any) for at least one State 

plan HCBS. This proposed requirement 

is to provide States with a mechanism 

to prevent the situation of an individual 

being eligible for the State plan HCBS 

benefit but not able to receive any of the 

services it offers; or for establishing 

Medicaid eligibility through the benefit 

without actually receiving State plan 

HCBS services. Such a circumstance 

could, among other problems, be of no 

utility to the individual, and may make 

it difficult for the State to meet an 

assessed need. Furthermore, the 

eligibility group defined in section 

1902(a)(10)(a)(ii)(XXII) of the Act 

requires an individual to receive State 

plan HCBS in order to establish 

Medicaid eligibility through that 

category. 

We propose to require in 

§ 441.662(a)(1) that the assessment 

include a face-to-face meeting with the 

individual (‘‘individual’’ meaning in 

this context, if applicable, the 

individual and the individual’s 

authorized representative). We further 

propose that a ‘‘face-to-face’’ meeting 

could be performed through 

telemedicine or other information 

technology medium, if the health care 

professional performing the assessment 

meets provider qualifications that 

includes additional training 

requirements for the operation of the 

information technology, the individual 

receives support during the assessment 

including the use of any necessary onsite staff, and the individual provides 

informed consent. In § 441.662(a)(1)(i), 

we propose to require that the 

assessment is performed by an agent 

that is independent and qualified as 

defined in § 441.668. The assessment is 

to be guided by best practice and 

research on effective strategies that 

result in improved health and quality of 

life outcomes. We further propose that 

the assessment includes consultation, as 

appropriate, with other responsible 

parties. The assessment must include an 

examination of the individual’s relevant 

history, medical records, and care and 

support needs, including the findings 

from the independent eligibility 

evaluation. 

If self-direction of services is offered 

by the State and elected by the 

individual, the independent assessment 

must include a self-direction appraisal 

as described in § 441.674. 

For individuals receiving habilitation 

services, we propose to require 

documentation that no services are 

provided under Medicaid that would 

otherwise be available to the individual, 

specifically including but not limited to 

services available to the individual 

through a program funded under section 

110 of the Rehabilitation Act of 1973. 

We believe that these documentation 

requirements would provide a clear 

method for States to comply with 

Federal requirements, focus only on the 

individuals for whom these 

circumstances could apply, and would 

not add significantly to the burden of 

the assessment. We further propose that 

the assessment must ensure that 

services received through Secretaryapproved ‘‘other’’ services are not 

duplicative of any other services 

provided through the Medicaid Stateplan or through another State or Federal 

program. We note that extended State 

plan services would not be considered 

duplicative, since those services are not 

available to individuals through the 

State plan. We further note that 

payments must also be in accordance 

with section1903(c) of the Act. Finally, 

we require that the assessment must 

ensure that any individual 

simultaneously enrolled in State plan 

HCBS and receiving HCBS through a 

waiver does not receive duplicative 

services. We would include case 

management, assessment, and service 

plan development in the services that 

may not be duplicative. This does not 

necessarily mean that an individual 

cannot have more than one case 

manager, but instead is meant to ensure 


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that services are coordinated across 

multiple programs, and that individuals 

are not required to develop multiple 

service plans. 

Finally, in § 441.662(b), we propose to 

require that the independent assessment 

of need is conducted at least every 12 

months and as needed when the 

individual’s needs and circumstances 

change significantly, in order to revise 

the service plan. 

J. Service Plan (§ 441.665) 

In § 441.665 we propose to require 

that based on the independent 

assessment specified in § 441.662, the 

State develops (or approves, if the plan 

is developed by others) a service plan 

through a person-centered planning 

process. 

We propose that the service plan must 

be developed jointly with the 

individual. While we propose several 

specific requirements for the process of 

developing a service plan, we note that 

the intent of these requirements is to 

ensure a process with shared authority 

between the individual and the agency 

or agent. To achieve this intent, States 

must affirmatively and creatively work 

to establish such shared authority. 

The assessment must include 

consultation with appropriate persons. 

While we include examples, we do not 

propose any required or excluded 

category of persons to consult. When the 

service plan is finalized between the 

parties, a written copy is provided to the 

individual. 

Also, in § 441.665(a), we propose 

certain content to be required in the 

service plan. The person-centered 

service plan must identify the specific 

State plan HCBS to be provided to the 

individual, that take into account the 

individual’s strengths, preferences, 

needs (clinical and support), and 

desired outcomes. We are proposing 

that the service plan should be 

constructed in a manner that promotes 

service delivery and independent living 

in the most integrated setting possible. 

Therefore, we propose that the plan 

must not only address medical and 

support needs, but should also reflect 

other individual goals related to 

community living to the extent that 

services covered under the State 

Medicaid plan would be available to 

support such goals. In the planning 

process, the degree of assistance with 

ADLs available to the individual outside 

of the State plan HCBS benefit may be 

taken into account in planning the 

scope and frequency of HCBS to be 

provided. Thus, the service plan 

provides for all needed services to the 

individual while preventing provision 

of duplicative or unnecessary services. 

We propose a single service plan for 

both self-directed and non self-directed 

services. When individuals self-direct 

some or all of their HCBS, the service 

plan includes the information required 

in § 441.674. 

We further propose to require that the 

service plan be reviewed and revised at 

least every 12 months, and as needed 

when the individual’s circumstances or 

needs change significantly. 

Finally, we propose that the 

individual must share the authority for 

developing and implementing the 

service plan. This shared authority 

increases the individual’s self-efficacy 

and involvement in the activities and 

outcomes contained within the service 

plan. 

K. Provider Qualifications (§ 441.668) 

In § 441.668, we propose to require 

that the State provide assurance that 

necessary safeguards have been taken to 

protect the health and welfare of the 

enrollees in State plan HCBS by 

provision of adequate standards for all 

types of providers of HCBS. States must 

define qualifications for providers of 

HCBS services, and for those persons 

who conduct independent evaluation of 

eligibility for State plan HCBS, 

independent assessment of need, and 

are involved with developing the 

service plan. 

We propose at § 441.668(b) and (c) to 

require minimum qualifications for 

individuals and agencies who conduct 

independent evaluation of eligibility for 

State plan HCBS, independent 

assessment of need, and are involved 

with developing the service plan. We 

will refer to these individuals and 

entities involved with determining 

access to care as ‘‘agents’’ to distinguish 

this role from providers of services. We 

believe that these qualifications are 

important safeguards for individuals 

enrolled in the State plan HCBS benefit 

and propose that they be required 

whether activities of the agents are 

provided as an administrative activity or 

whether some of the activities are 

provided as a Medicaid service. At a 

minimum, these qualifications include 

conflict of interest standards, and for 

providers of assessment and service 

plan development, these qualifications 

must include training in assessment of 

individuals whose physical or mental 

condition may trigger a need for HCBS 

and supports, and an ongoing 

knowledge of current best practices to 

improve health and quality of life 

outcomes. 

The minimum conflict of interest 

standards we propose to require ensure 

that the agent is not a relative of the 

individual or responsible for the 

individual’s finances or health-related 

decisions. The standards also require 

that the agent must not hold financial 

interest in any of the entities that 

provide care. Relatives and decision 

makers are required to be permitted in 

the assessment and planning process, as 

appropriate, but we do not see any 

necessity or value in family members 

being responsible for evaluation, 

assessment, or planning. Our experience 

with HCBS in waivers indicates that 

assessment and service plan 

development should not be performed 

by providers of the services prescribed. 

However, we recognize that in some 

circumstances there are acceptable 

reasons for a single provider of service 

that performs all of those functions. In 

this case, the Secretary would require 

the State Plan to include provisions 

assuring separation of functions within 

the provider entity. 

L. Definition of Individual’s 

Representative (§ 441.671) 

In § 441.671, we propose to define the 

term ‘‘individual’s representative’’ to 

encompass any party that is authorized 

to represent the individual for the 

purpose of making personal or health 

care decisions, either under State law or 

under the policies of the State Medicaid 

agency. We do not propose to regulate 

the relationship between an individual 

enrolled in the State plan HCBS benefit 

and his or her authorized representative, 

but note that States should have policies 

to assess for abuse or excessive control 

and ensure that representatives conform 

to applicable State requirements. We 

note that States must not refuse to allow 

a freely-chosen person to serve as a 

representative unless the State has 

tangible evidence that the representative 

is not acting in the best interest of the 

individual, or that the representative is 

incapable of performing the required 

functions. 

M. Self-Directed Services (§ 441.674) 

We propose in § 441.674 to permit 

States to offer an election for selfdirecting HCBS. We propose regulations 

containing the specific requirements for 

self-direction found in section 

1915(i)(1)(G)(iii) of the Act. In 

§ 441.674(a), we define ‘‘self-direction.’’ 

Provisions related to self-direction 

apply to an individual or an 

individual’s representative. In 

§ 441.674(b), we propose that when an 

individual chooses self-direction, the 

independent assessment and personcentered planning required under 

§ 441.662 and § 441.665 would include 

examination of the support needs of the 

individual to self-direct the purchase of, 

or control the receipt of, such services. 


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The evaluation should not reject 

election to self-direct based solely on 

the individual’s disability or a 

manifestation of his or her disability. 

We therefore propose to require that the 

evaluation for self-direction result in a 

determination of ability to self-direct 

both with and without specified 

supports. 

These regulations are consistent with 

our policy for self-direction under 

section 1915(c) HCBS waivers. We 

propose to require in § 441.674(b) that 

the service plan indicate the HCBS to be 

self-directed and the methods by which 

the individual will plan, direct, or 

control the services; the role of family 

or others who will participate in the 

HCBS; and risk management techniques. 

Our experience with HCBS waivers 

indicates that contingency plans are an 

important protection for the individual, 

in the absence of an agency that would 

otherwise be responsible for absent 

workers or other common problems. 

Contingency plans are most effective 

when designed for the unique 

circumstances of each self-directing 

individual. We propose that the service 

plan describe the process for facilitating 

voluntary and involuntary transition 

from self-direction. When the service 

plan is finalized between the parties, a 

written copy is provided to the 

individual, as required in the proposed 

plan on care requirements at 

§ 441.665(a). 

In § 441.674(c) and (d), we define selfdirection of services in terms of 

employer authority and budget 

authority, as we have with self-directed 

HCBS in Medicaid section 1915(c) 

waivers. In § 441.674(c), employer 

authority is defined as the ability to 

select, manage, or dismiss providers of 

the State plan HCBS. We propose that 

the service plan must specify the 

authority to be assumed by the 

individual and the individual’s 

representative, any parties responsible 

for functions outside the assumed 

authority, and the financial management 

supports to be provided as required in 

§ 441.674(e). 

In § 441.674(d), we propose to define 

budget authority as an individualized 

budget which identifies the dollar value 

of the services and supports under the 

control and direction of the individual. 

We propose that the service plan must 

specify the method for calculating the 

dollar values in the budget, a process for 

adjusting the budget to reflect changes 

in assessment and service plan, a 

procedure to evaluate expenditures 

under the budget, and the financial 

management supports, as required in 

§ 441.674(e), to be provided. We clarify 

here that while budget authority grants 

control of expenditures to the 

individual, it does not include 

performing the transactions or 

conveying cash to the individual or 

representative. 

In § 441.674(e), we propose to define 

functions in support of self-direction 

that the State must offer, based on our 

experience with self-directed HCBS in 

section 1915(c) waivers and section 

1115 demonstrations. These provisions 

are required in order to equip 

individuals for success in managing 

their services, and to comply with 

Federal, State, and local requirements, 

particularly the many tax, labor, and 

insurance issues that arise when the 

self-directing individual is the employer 

of record. Supports for self-direction 

should provide the technical expertise 

and business functions that will free 

individuals to exercise choice and 

control over their experience of the 

HCBS provided to them. 

N. State Plan HCBS Administration: 

State Responsibilities and Quality 

Improvement (§ 441.677) 

1. State Responsibilities 

We would require in § 441.677(a)(1)(i) 

that the State annually provide CMS 

with the projected number of 

individuals to be enrolled in the benefit, 

and the actual number of unduplicated 

individuals enrolled in the State plan 

HCBS benefit in the previous year. 

Section 1915(i) of the Act authorizes 

a State to elect not to apply 

comparability requirements, thus 

permitting States to target the entire 

1915(i) benefit, specific services within 

the benefit, or both. We clarify in 

§ 441.677(a)(1)(ii) that the State may not 

limit enrollee access to services in the 

benefit for any reason other than 

assessed need or targeting criteria. This 

includes the requirement that services 

be provided to all individuals who are 

assessed to meet the targeting criteria 

and needs-based criteria, regardless of 

income. This is an important distinction 

between the limits States place on the 

services to be offered when they design 

the benefit, as opposed to limiting 

access to the services that are in the 

benefit for particular enrolled 

individuals. As discussed in section 

II.E.1 of this proposed rule, States have 

a number of permitted methods to 

control utilization. We propose that 

once an individual is found eligible and 

enrolled in the benefit, access to offered 

services can only be limited by medical 

necessity. Medical necessity in the State 

plan HCBS benefit is determined by the 

needs-based criteria, as evaluated by the 

independent assessment and person 

centered service plan. By not limiting 

access, we mean that an enrollee must 

receive any or all of the HCBS offered 

by the benefit, in scope and frequency 

up to any limits on those services 

defined in the State plan, to the degree 

the enrollee is determined to need them. 

Enrollees should receive no more, and 

no fewer, HCBS than they are 

determined to require. We note that one 

function of the service plan as proposed 

at § 441.665(a)(3) is to prevent the 

provision of unnecessary, duplicative, 

or inappropriate care. 

2. Administration 

We propose in § 441.677(a)(2)(i) an 

option for presumptive payment. In 

accordance with section 1915(i) of the 

Act, the State may provide for a period 

of presumptive payment, not to exceed 

60 days, for evaluation of eligibility for 

the State plan HCBS benefit and 

assessment of need for HCBS. This 

period of presumptive payment would 

be available for individuals who have 

been determined to be Medicaid 

eligible, and whom the State has reason 

to believe may be eligible for the State 

plan HCBS benefit. We propose that FFP 

would be available for evaluation and 

assessment as administration of the 

approved State plan prior to an 

individual’s determination of eligibility 

for and receipt of other 1915(i) services. 

If the individual is found not eligible for 

the State plan HCBS benefit, the State 

may claim the evaluation and 

assessment as administration, even 

though the individual would not be 

considered to have participated in the 

benefit for purposes of determining the 

annual number of individuals served by 

the benefit. FFP would not be available 

during this presumptive period for 

receipt of State plan HCBS. 

In § 441.677(a)(2)(ii), we indicate that 

a State may elect to phase-in the 

provision of services or the enrollment 

of individuals if the State also elects not 

to apply comparability requirements 

and to target the benefit to specific 

populations. However, there is no 

authority to limit the numerical 

enrollment in the benefit or to create 

waiting lists. Therefore, we propose that 

any phase-in of services may not be 

based on a numerical cap on enrollees. 

Instead, a State may choose to phase-in 

the benefit or the provision of specific 

services based on the assessed need of 

individuals, the availability of 

infrastructure to provide services, or 

both. Infrastructure is defined as the 

availability of qualified providers or of 

physical structures and information 

technology necessary to provide any 

service or set of services. 

A State that elects to phase-in the 

benefit must submit a plan, subject to 


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CMS approval, that details the criteria 

used for phasing in the benefit. In the 

event that a State elects to phase-in the 

benefit based on needs, all individuals 

who meet the criteria described in the 

phase-in plan must receive services. If a 

State elects to phase-in services based 

upon infrastructure, the plan must 

describe the capacity limits, strategies to 

increase capacity, and must assure that 

services will be provided to all 

individuals who are able to acquire a 

willing and qualified provider. Any 

phase-in plan must provide assurance 

that the benefit, and all included 

services, will be available statewide to 

all eligible individuals within the first 

5-year approval period. 

In § 441.677(a)(2)(iii), we propose that 

a State plan amendment submitted to 

establish the State plan HCBS benefit 

must include a reimbursement 

methodology for each covered service. 

In some States, reimbursement methods 

for self-directed services may differ from 

the same service provided without selfdirection. In such cases, the 

reimbursement methodology for the 

self-directed services must also be 

described. 

In § 441.677(a)(2)(iv), we propose that 

the State Medicaid agency describe the 

line of authority for operating the State 

plan HCBS benefit. The State plan 

HCBS benefit requires several functions 

to be performed in addition to the 

service(s) provided, such as eligibility 

evaluation, assessment, and developing 

a service plan. To the extent that the 

State Medicaid agency delegates these 

functions to other entities, we propose 

that the agency describe the methods by 

which it will retain oversight and 

responsibility for those activities, and 

for the operation and quality 

improvement of the benefit as a whole. 

In § 441.677(a)(2)(v), we include a 

provision regarding the effective dates 

of amendments with substantive 

changes. 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 

1915(i) amendments with changes that 

CMS determines 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. 

In § 441.677(a)(2)(vi), we indicate that 

State plan amendments including 

targeting criteria are subject to a 5-year 

approval period and that successive 

approval periods are subject to CMS 

approval, contingent upon State 

adherence to Federal requirements. In 

order to renew State plan HCBS for an 

additional 5-year period, the State must 

provide a written request for renewal to 

CMS at least 180 days prior to the end 

of each approval period. 

3. Quality Improvement Strategy 

We propose in § 441.677(b) the 

guidelines for quality assurance 

required in the statute at section 

1915(i)(1)(H)(i) of the Act. We propose 

to require a State, for quality assurance 

purposes, to maintain a quality 

improvement strategy for its State plan 

HCBS benefit. The State’s quality 

improvement strategy should reflect the 

nature and scope of the benefit the State 

will provide. 

We propose that the State plan HCBS 

benefit include a quality improvement 

strategy consisting of a continuous 

quality improvement process, and 

outcome measures for program 

performance, quality of care, and 

individual experience, as approved and 

prescribed by the Secretary, and 

applicable to the nature of the benefit. 

In § 441.677(b), we propose to require 

States to have program performance 

measures, appropriate to the scope of 

the benefit, designed to evaluate the 

State’s overall system for providing 

HCBS. ‘‘Program performance’’ 

measures can be described as process 

and infrastructure measures, such as 

whether plans of care are developed in 

a timely and appropriate manner, or 

whether all providers meet the required 

qualifications to provide services under 

the benefit. In § 441.677(b)(1), we also 

propose to require States to have quality 

of care measures as approved or 

prescribed by the Secretary. Quality of 

care measures may focus on program 

standards, systems performance, and 

individual outcomes. 

P. Section 2601 of the Affordable Care 

Act: 5-Year Period for Demonstration 

Projects: Waiver Requirements 

(§ 430.25) 

Section 2601 of the Affordable Care 

Act provides the opportunity for the 

Secretary to approve certain waivers for 

periods of up to 5 years. The proposed 

regulation includes an addition at 

§ 430.25(h)(2)(i) and § 430.25(h)(2)(ii) to 

indicate the availability of extended 

approval periods for initial section 

1915(c) waivers which are currently 

approved for 3-year periods (the 

renewals are already 5-year intervals), 

and for initial and renewal section 

1915(b) waivers, which are currently 

approved for 2-year periods. In all cases, 

the extended approval period is only 

available for waivers that provide 

medical assistance to dual eligible 

individuals, and that meet all applicable 

statutory, regulatory, quality and 

programmatic requirements. The current 

§ 430.25(h)(2)(ii) also includes reference 

to section 1916 of the Act, which 

remains unchanged by the Affordable 

Care Act. As such, we have created a 

new § 430.25(h)(2)(iii) to retain the 

original regulatory text specific to 

section 1916 of the Act. 

Q. Prohibition Against Reassignment of 

Provider Claims (§ 447.10) 

Under title XIX of the Act, State 

Medicaid programs generally can only 

pay for Medicaid-covered practitioner 

services through direct payments to the 

treating practitioners. States can 

develop payment rates that include 

considerations for costs related to health 

and welfare benefits, training, and other 

costs. Consistent with the statutory 

provision at section 1902(a)(32) of the 

Act, and reflected in current regulations 

at § 447.10, the entire rate must be paid 

to the individual practitioner who 

provided the service, unless certain 

statutory exceptions apply. 

With respect to classes of 

practitioners for whom the State’s 

Medicaid program is the only or 

primary payer, the ability of the State to 

ensure a stable and qualified workforce 

may be adversely affected by the 

inability to withhold funds and make 

payments on behalf of the individual 

practitioner for health and welfare 

benefit contributions, training costs, and 

other benefits customary for employees. 

Withholding funds for these purposes is 

an efficient and effective method for 

ensuring that the workforce has 

provision for basic needs and is 

adequately trained for their functions. 

Direct payment of funds to third parties 

on behalf of the practitioner may 

simplify program operations for the 

State and be viewed as advantageous by 

the practitioner. In addition, direct 

payment of funds to third parties on 

behalf of the practitioners may ensure 

that beneficiaries have greater access to 

such practitioners and higher quality 

services. 

The statutory direct payment 

provision was intended to address the 

issue of factoring, and there is no 

indication that its purpose was to 

restrict State flexibility in investing in 

its workforce or quality improvement 

programs. In particular, we do not 

believe that the statutory direct payment 

provision addresses the unique 

circumstances that arise when the 

Medicaid program is the primary source 

of reimbursement for a class of 

practitioners. 


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We propose to interpret the scope of 

the direct payment provision to not 

include the circumstance when the 

Medicaid program operates as a primary 

payer for a class of practitioners, and 

assumes the ordinary responsibilities 

required in that circumstance to assure 

workforce stability and quality. This 

exception from the scope of the direct 

payment provision would be limited to 

situations in which payment is made 

under a State law that authorizes 

payments on behalf of an individual 

practitioner to a third party for health 

and welfare benefit costs, training costs, 

or other benefits customary for 

employees. The legislative history of 

section 1902(a)(32) of the Act indicates 

that such a situation is not within the 

scope of ‘‘assignments’’ or ‘‘powers of 

attorney’’ that were considered at the 

time, or even of the same nature. 

Instead, such payments are more of an 

ordinary arrangement to further 

workforce stability and quality. 

The proposed change would permit 

each State the option to elect such 

payment arrangements to the extent that 

the State determines that they would 

further State objectives; however, States 

would not be required to elect the 

payment arrangements. States will need 

to review their individual circumstances 

and workforce needs to determine if the 

measures would help ensure a stable, 

high-performing workforce for the 

benefit of the entire Medicaid 

population seeking the services. 

Within broad Federal Medicaid law 

and regulation, CMS has long sought to 

ensure maximum State flexibility to 

design State-specific payment 

methodologies that help ensure a strong, 

committed, and well-trained work force. 

Currently, certain categories of 

Medicaid covered services, for which 

Medicaid is a primary payer, such as 

home health and personal care services, 

suffer from especially high rates of 

turnover and low levels of participation. 

This proposed rule would provide to 

States additional tools to help foster a 

stable and high-performing workforce. 

Medicaid programs would be able, as 

authorized under State law, to deduct 

from the practitioner’s reimbursement 

and remit to third parties amounts for 

health and welfare benefit 

contributions, training costs, and other 

benefits customary for employees. 

We believe that permitting such 

payment arrangements would enhance 

the ability of the practitioners to 

perform their functions as health care 

professionals. The Medicaid program, at 

both the State and Federal levels, has a 

strong interest in ensuring the 

development and maintenance of a 

committed, well-trained workforce. 

We propose to provide States this 

flexibility by enumerating an additional 

exception to the payment limitations for 

individual practitioners at § 447.10(g). 

Specifically, the proposed rule would 

add a new provision at § 447.10(g)(4) to 

define permissible payments in the case 

of individual practitioners for whom the 

Medicaid program is the primary source 

of revenue to include payment 

authorized by State law to be made to 

a third party on behalf of the individual 

practitioner for health and welfare 

benefit contributions, training costs, and 

other benefits customary for employees. 

To the extent that State laws require 

practitioners to participate in such a 

payment arrangement, a State could 

elect in its Medicaid State plan that the 

payment arrangement would be 

automatic. If, however, State law does 

not require participation by individual 

practitioners in such payment 

arrangements, but authorizes voluntary 

participation, the State would only be 

allowed to deduct amounts from the 

payment rate and forward them to a 

third party with the express permission 

of each individual practitioner. In that 

instance, the individual practitioner 

would need to authorize the payment 

arrangement on a voluntary basis, prior 

to any deduction from the provider 

payment. In either case, the amounts 

remitted to a third party would be on 

behalf of the individual practitioner. 

As proposed, a State would not be 

able to claim as a separate expenditure 

under its approved Medicaid State plan 

amounts that are withheld from 

payments to individual practitioners for 

these cost categories (health and welfare 

benefit contributions, training, and 

similar benefits customary for 

employees). Under the proposed rule, 

should a State wish to recognize such 

costs, they would need to be included 

as part of the rate paid for the service 

in order to eligible for Federal matching 

funds. No Federal matching funds 

would available for such amounts apart 

from the Federal match available for rate 

paid by the State for the medical 

assistance service. These costs could not 

be claimed by the Medicaid agency 

separately as an administrative expense. 

As a result, the proposed rule would 

have little to no impact on Federal 

Medicaid funding levels. 

We are specifically soliciting public 

comments on the extent to which the 

proposed payment arrangements would 

benefit States and practitioners, as well 

as any adverse impacts it may have that 

have not been anticipated. Additionally, 

we are seeking comments on other 

exceptions to the general prohibition on 

assignment of practitioner claims that 

might similarly simplify and streamline 

States’ operations of their Medicaid 

plans and payment processes. Finally, 

we are specifically requesting comments 

on the intersection between Medicaid 

and Medicare regulations governing 

assignment of payments and any 

potential contradictions therein. 

R. Section 2401 of the Affordable Care 

Act: Community First Choice State Plan 

Option: Home and Community-Based 

Setting Requirements (§ 441.530) 

Section 1915(k)(1)(A)(ii) of the Act 

provides that a home and communitybased setting does not include a nursing 

facility, institution for mental diseases, 

or an intermediate care facility for the 

mentally retarded. We propose at 

§ 441.530 to adopt this statutory 

language in our regulations. 

Additionally, to provide greater clarity, 

we are proposing language to establish 

that home and community-based 

settings must exhibit specific qualities 

to be eligible sites for delivery of home 

and community-based services. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 


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sections of this document that contain 

information collection requirements: 

A. ICRs Regarding Individuals Receiving 

State Plan Home and Community-Based 

Services (§ 435.219(b) and § 436.219(b)) 

To cover the categorically needy 

eligibility group, the State would be 

required to submit a SPA and may elect 

to cover individuals who meet certain 

requirements in § 435.219(a) or 

§ 436.219(a). The burden associated 

with this requirement is the time and 

effort put forth by the State to complete, 

review, process and transmit/submit the 

pre-print which describes the eligibility 

criteria for the group. We estimate it 

would take each State 30 hours to meet 

this one-time requirement. We estimate 

that on an annual basis, 3 States will 

submit a SPA to meet these 

requirements; therefore, the total annual 

burden hours for this requirement is 90 

hours. We believe that a State employee, 

with pay equivalent to GS–13 step one 

($34.34 per hour) would be responsible 

for this requirement. Thus, the cost for 

each State is anticipated to be $1,030; 

this equates to an annual cost of $3,091. 

B. ICRs Regarding Eligibility for State 

Plan HCBS (§ 441.656) 

If a State elects to target the benefit to 

specific populations, § 441.656(b)(2) 

requires submission of targeting criteria 

to CMS. The burden associated with this 

requirement is the time and effort put 

forth by the State to establish such 

criteria. We estimate it would take 1 

State 10 hours to meet this one-time 

requirement. We estimate that on an 

annual basis, 3 States will submit a SPA 

to offer the State plan HCBS benefit that 

targets specific populations, and be 

affected by this requirement; therefore, 

the total annual burden hours for this 

requirement is 30 hours. We believe that 

a State employee, with pay equivalent to 

GS–13 step one ($34.34 per hour) would 

be responsible for this requirement. 

Thus, the cost for each State is 

anticipated to be $343; this equates to 

an annual cost of $1,030. 

C. ICRs Regarding Needs-Based Criteria 

and Evaluation (§ 441.659) 

Section 441.659(a) requires a State to 

establish needs-based criteria for 

determining an individual’s eligibility 

under the State plan for the HCBS 

benefit, and may establish needs-based 

criteria for each specific service. The 

burden associated with this requirement 

is the time and effort put forth by the 

State to establish such criteria. We 

estimate it would take 1 State 24 hours 

to meet this requirement. We estimate 

that on an annual basis, 3 States will 

submit a SPA to offer the State plan 

HCBS benefit, and be affected by this 

one-time requirement; therefore, the 

total annual burden hours for this 

requirement is 72 hours. We believe that 

a State employee, with pay equivalent to 

GS–13 step one ($34.34 per hour) would 

be responsible for this requirement. 

Thus, the cost for each responding State 

is anticipated to be $824; this equates to 

an annual cost of $2,472. 

Section 441.659(b) reads that if a State 

defines needs-based criteria for 

individual State plan home and 

community-based services, the needsbased institutional eligibility criteria 

must be more stringent than the 

combined effect of needs-based State 

plan HCBS benefit eligibility criteria 

and individual service criteria. Section 

441.659(b)(1)(ii) requires the State to 

submit the more stringent criteria to 

CMS for inspection with the State plan 

amendment that establishes the State 

Plan HCBS benefit. 

The burden associated with this 

requirement is the time and effort for 

the State to define the more stringent 

criteria and submit it to CMS along with 

the State plan amendment that 

establishes the HCBS benefit. We 

anticipate 3 States would be affected by 

this requirement on an annual basis and 

it would require 1 hour to prepare and 

submit this information. The one-time 

burden associated with this requirement 

is 3 hours. We believe that a State 

employee, with pay equivalent to GS–13 

step one ($34.34 per hour) would be 

responsible for this requirement. Thus, 

the cost for each State is anticipated to 

be $34; this equates to an annual cost of 

$102. This would be a one time burden 

for each responding State. 

Section 441.659(c) reads that a State 

may modify the needs-based criteria 

established under paragraph (a) of this 

section, without prior approval from the 

Secretary, if the number of individuals 

enrolled in the State plan HCBS benefit 

exceeds the projected number submitted 

annually to CMS. 

Section 441.659(c)(1) requires the 

State to provide at least 60 days notice 

of the proposed modification to the 

Secretary, the public, and each 

individual enrolled in the State plan 

HCBS benefit. The State notice to the 

Secretary will be considered an 

amendment to the State plan. 

Section 441.659(c)(2) requires the 

State notice to the Secretary be 

submitted as an amendment to the State 

plan. 

The burden associated with the 

requirements found under § 441.659(c) 

is the time and effort put forth by the 

State to modify the needs-based criteria 

and provide notification of the proposed 

modification to the Secretary. We 

estimate it would take 1 State 24 hours 

to make the modifications and provide 

notification. This would be a one-time 

burden. 

The total annual burden of these 

requirements (§ 441.659(c), 

§ 441.659(c)(1), and § 441.659(c)(2)) 

would vary according to the number of 

States who choose to modify their 

needs-based criteria. We do not expect 

any States to make this modification in 

the next 3 years, thus there is no 

anticipated burden. 

Section 441.659(d) states that 

eligibility for the State plan HCBS 

benefit is determined, for individuals 

who meet the requirements of 

§ 441.656(a)(1) through (5), through an 

independent evaluation of each 

individual that meets the specified 

requirements. Section 441.659(d)(5) 

requires the evaluator to obtain 

information from existing records, and 

when documentation is not current and 

accurate, obtain any additional 

information necessary to draw a valid 

conclusion about the individual’s 

support needs. Section 441.659(e) 

requires at least annual reevaluations. 

The burden associated with this 

requirement is the time and effort put 

forth by the evaluator to obtain 

information to support their conclusion. 

We estimate it would take one evaluator 

2 hours per participant to obtain 

information as necessary. The total 

annual burden of this requirement 

would vary according to the number of 

participants in each State who may 

require and be eligible for home and 

community-based services under the 

State plan. The individuals performing 

this assessment would vary based upon 

State benefit design, but will likely 

include individuals such as registered 

nurses, qualified mental retardation 

professionals, qualified mental health 

professionals, case managers, or other 

professional staff with experience 

providing services to individuals with 

disabilities or the elderly. While there is 

burden associated with this 

requirement, we believe the burden is 

exempt as defined in 5 CFR 1320.3(b)(2) 

because the time, effort, and financial 

resources necessary to comply with this 

requirement would be incurred by 

persons in the normal course of their 

activities. 

D. ICRs Regarding Independent 

Assessments (§ 441.662) 

Section 441.662 requires the State to 

provide for an independent assessment 

of need in order to establish a service 

plan. At a minimum, the plan must 

meet the requirements as discussed 

under § 441.665. 


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While the burden associated with the 

requirements under § 441.662 is subject 

to the PRA, we believe the burden is 

exempt as defined in 5 CFR 1320.3(b)(2) 

because the time, effort, and financial 

resources necessary to comply with this 

requirement would be incurred by 

persons in the normal course of their 

activities. 

E. ICRs Regarding State Plan HCBS 

Administration: State Responsibilities 

and Quality Improvement (§ 441.677) 

Section 441.677(a)(1)(i) reads that a 

State will annually provide CMS with 

the projected number of individuals to 

be enrolled in the benefit, and the actual 

number of unduplicated individuals 

enrolled in State plan HCBS in the 

previous year. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to annually project the 

number of individuals who will enroll 

in State plan HCBS. We estimate it will 

take one State 2 hours to meet this 

requirement. The total annual burden of 

these requirements would vary 

according to the number of States 

offering the State plan HCBS benefit. 

The maximum total annual burden is 

112 hours (56 States × 2 hours = 112 

hours). We believe that a State 

employee, with pay equivalent to GS–13 

step one ($34.34 per hour) would be 

responsible for this requirement. Thus, 

the anticipated for each State is 

anticipated to be $69; this equates to a 

maximum annual cost of $3,864 if all 56 

States elect to provide this benefit. 

There are currently six States with 

approved State plan HCBS benefits. 

Thus, we anticipate based on current 

benefits that the total annual aggregated 

burden will be $414. 

Section 441.677(a)(2)(iii) reads that 

the SPA to provide State plan HCBS 

must contain a description of the 

reimbursement methodology for each 

covered service. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to describe the 

reimbursement methodology for each 

State plan HCBS. We estimate that it 

will take one State an average of 2 hours 

to determine the reimbursement 

methodology for one covered HCBS. 

This would be a one-time burden. The 

total annual burden for this requirement 

would vary according to the number of 

services that the State chooses to 

include in the State plan HCBS benefit. 

We believe that a State employee, with 

pay equivalent to GS–13 step one 

($34.34 per hour) would be responsible 

for this requirement. Thus, the cost to 

each State for each covered service is 

anticipated to be $69; this would vary 

based upon the number of services 

covered. This would be an annual 

burden for each responding State. Since 

we have estimated that 3 States will 

annually describe the reimbursement 

methodology, the total annual 

aggregated burden associated with this 

requirement is estimated to be $207. 

Section 441.677(a)(2)(iv) reads that 

the SPA to provide State plan HCBS 

must contain a description of the State 

Medicaid agency line of authority for 

operating the State plan HCBS benefit, 

including distribution of functions to 

other entities. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to describe the State 

Medicaid agency line of authority. We 

estimate it will take one State 2 hours 

to meet this requirement. Since we have 

estimated that 3 States will annually 

request State plan HCBS, the total 

annual burden associated with this 

requirement is estimated to be 6 hours. 

This would be a one-time burden for 

each responding State. We believe that 

a State employee, with pay equivalent to 

GS–13 step one ($34.34 per hour) would 

be responsible for this requirement. 

Thus, the cost for each State is 

anticipated to be $69. 

Section 441.677(a)(2)(vi) limits the 

approval period for States that target the 

benefit to specific populations. If a State 

elects to target the benefit, this section 

requires a renewal application every 5 

years in order to continue operation of 

the benefit. Actual time to meet this 

requirement will vary depending on the 

scope of the program and any changes 

the State includes. However, we 

estimate that it will take one State an 

average of 40 hours to meet this 

requirement. This includes reviewing 

the previous submission, making any 

necessary changes to the State plan 

document(s), and communicating with 

CMS regarding the renewal. This burden 

would occur once every five years and 

would be recurring. We estimate that, 

beginning in 2016, 3 States will 

annually request renewal and the total 

burden will be 120 hours. We believe 

that a State employee, with pay 

equivalent to GS–13 step one ($34.34 

per hour) would be responsible for this 

requirement. Thus, the cost for each 

State is anticipated to be $1,374; this 

equates to an annual cost of $4,122. This 

would be a burden for each State that 

targets its benefit once every 5 years; 

however, this burden will not take effect 

until 2016. 

Section 441.677(b) requires States to 

develop and implement a quality 

improvement strategy that includes 

methods for ongoing measurement of 

program performance, quality of care, 

and mechanisms for remediation and 

improvement proportionate to the scope 

of services in the State plan HCBS 

benefit and the number of individuals to 

be served, and make this information 

available to CMS upon the frequency 

determined by the Secretary or upon 

request. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to develop and 

implement a quality improvement 

strategy, and to make this information 

available to CMS upon the frequency 

determined by the Secretary or upon 

request. We estimate it will take one 

State 45 hours for the development of 

the strategy, and for making information 

available to CMS. The total annual 

burden of these requirements would 

vary according to the number of States 

offering the State plan HCBS benefit. 

The maximum total annual burden is 

estimated to be 2,520 hours (56 States × 

45 hours = 2,520 hours). We estimate 

that the burden associated with 

implementation of the quality 

improvement strategy will greatly vary, 

as the necessary time and effort to 

perform these activities is dependent 

upon the scope of the benefit and the 

number of persons receiving State plan 

HCBS. We believe that a State 

employee, with pay equivalent to GS–13 

step one ($34.34 per hour) would be 

responsible for this requirement. Thus, 

the cost for each State is anticipated to 

be $1,545; this equates to a maximum 

annual cost of $86,537. Currently, there 

are six States with approved benefits, 

thus we anticipate an annual burden 

based on current States of $9,270. 

TABLE 1—ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation section(s) 

OMB 

Control 

No. 

Respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting ($) 

Total 

labor 

cost of 

reporting 

($) 

Total 

capital/ 

maintenance 

costs ($) 

Total cost 

($) 

435.219(b) and 436.219(b) ....... 0938–1148 3 3 30 90 34.34 1,030 0 1,030 


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TABLE 1—ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS—Continued 

Regulation section(s) 

OMB 

Control 

No. 

Respondents Responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting ($) 

Total 

labor 

cost of 

reporting 

($) 

Total 

capital/ 

maintenance 

costs ($) 

Total cost 

($) 

441.656(b)(2) ............................. 0938–1148 3 3 10 30 34.34 1,030 0 1,030 

441.659(a) ................................. 0938–1148 3 3 24 72 34.34 2,472 0 2,472 

441.659(b) ................................. 0938–1148 3 3 1 3 34.34 103 0 103 

441.677(a)(1)(i) ......................... 0938–1148 6 6 2 12 34.34 414 0 414 

441.677(a)(2)(iii) ........................ 0938–1148 3 3 2 6 34.34 207 0 207 

441.677(a)(2)(iv) ........................ 0938–1148 3 3 2 6 34.34 207 0 207 

441.677(b) ................................. 0938–1148 6 6 45 270 34.34 9,270 0 9,270 

Total ................................... .................... .................... .................... .................... 489 .................... 14,733 0 14,733 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the information collection requirements 

described above. These requirements are 

not effective until they have been 

approved by OMB. 

If you have comments on these 

information collection and record 

keeping 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–2249–P2. Fax: (202) 395–5806; or 

Email: OIRA submission@omb.eop.gov. 

VI. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993) and 

Executive 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011). Executive Orders 

12866 and 13563 direct 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). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any one year). This 

proposed rule has been designated an 

‘‘economically significant’’ rule under 

section 3(f)(1) of Executive Order 12866. 

Accordingly, the rule has been reviewed 

by the Office of Management and 

Budget. 

B. Statement of Need 

The State plan HCBS benefit is 

authorized under section 1915(i) of the 

Act. Section 1915(i) was created by the 

Deficit Reduction Act of 2005 and was 

amended by the Affordable Care Act of 

2010. The resulting statute provides 

States with authority to establish State 

plan HCBS benefits in their Medicaid 

program. 

These regulations are necessary in 

order to include the State plan HCBS 

within the Code of Federal Regulations. 

Additionally, these regulations provide 

States with direction and clarity 

regarding the framework under which 

the programs can be established. 

C. Overall Impacts 

We estimate that, as a result of this 

proposed rule, the Medicaid cost impact 

for fiscal year (FY) 2012 would be $80 

million for the Federal share and $60 

million for the State share. The 

estimates are adjusted for a phase-in 

period during which States gradually 

elect to offer the State plan HCBS 

benefit. 

D. Detailed Impacts 

1. State Plan HCBS 

State Medicaid programs will make 

use of the optional flexibility afforded 

by the State plan HCBS benefit to 

provide needed long-term care HCBS to 

eligible individuals the State has not 

had means to serve previously, or to 

provide services to these individuals 

more efficiently and effectively. The 

State plan HCBS benefit will afford 

States a new means to comply with 

requirements of the Olmstead decision, 

to serve individuals in the most 

integrated setting. 

The cost of these services will be 

dependent upon the number of States 

electing to offer the benefit, the scope of 

the benefits States design, and the 

degree to which the benefits replace 

existing Medicaid services. States have 

more control over expenditures for this 

benefit than over other State plan 

services. For States that choose to offer 

these services, States may specify limits 

to the scope of HCBS, target the benefit 

to specific populations, and have the 

option to tighten needs-based criteria 

requirements if costs escalate too 

rapidly. 

If States elect to include the new 

optional group, eligibility could be 

expanded because the group may 

include individuals who would not 

otherwise be eligible for Medicaid. 

However, costs of the State plan HCBS 

benefit may be offset by lowered 

potential Federal and State costs of 

more expensive institutional care. 

Additionally, the requirement for a 

written individualized service plan, and 

the provision of needed HCBS in 

accordance with the individualized 

service plan, may discourage 

inappropriate utilization of costly 

services such as emergency room care 

for routine procedures, which may be 

beneficial to Medicare and Medicaid 

when individuals are eligible for both 

programs. If a State targets this benefit, 

only individuals who meet the targeting 

criteria would receive 1915(i) services 

and be eligible for the group, thus 

limiting Medicaid expansion. 

After considering these factors, we 

assumed that, if all States adopted this 

measure, program expenditures would 

increase by 1 percent of current HCBS 

expenditure projections. We further 

assumed that ultimately, States 

representing 50 percent of the eligible 

population would elect to offer this 

benefit, and that this ultimate level 

would be reached in FY 2014, with a 

phase-in period until then. Based on 

these assumptions, the Federal and 

State cost estimates are shown in 

Table 2. 


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TABLE 2—MEDICAID COST ESTIMATES RESULTING FROM CHANGES TO THE STATE PLAN

[HCBS Benefit (FYs 2012–2016, in $millions] 

FY12 FY13 FY14 FY15 FY16 

Federal Share ............................................................................................................................................ $80 $120 $170 $190 $215 

State Share ................................................................................................................................................ 60 90 125 145 160 

The effect on Medicaid beneficiaries 

who receive the State plan HCBS benefit 

will be substantial and beneficial in 

States where optional 1915(i) State plan 

HCBS are included, as it will provide 

eligible individuals with the 

opportunity to receive needed long-term 

care services and supports in their 

homes and communities. 

The State plan HCBS benefit will 

afford business opportunities for 

providers of the HCBS. We do not 

anticipate any effects on other 

providers. Section 1915(i) of the Act 

delinks the HCBS from institutional 

LOC, and requires that eligibility criteria 

for the benefit include a threshold of 

need less than that for institutional 

LOC, so that it is unlikely that large 

numbers of participants in the State 

plan HCBS benefit will be discharged 

from the facilities of Medicaid 

institutional providers. There may be 

some redistribution of services among 

providers of existing non-institutional 

Medicaid services into State plan HCBS, 

but providers who meet qualifications 

for the State plan HCBS benefit have the 

option to enroll as providers of HCBS. 

This rule has no direct effect on the 

Medicare program; however, an indirect 

and beneficial effect may occur if 

individuals eligible for both Medicare 

and Medicaid are enrolled in a State 

plan HCBS program. 

E. Alternatives Considered 

This proposed rule incorporates 

provisions of new section 1915(i) of the 

Act into Federal regulations, providing 

for Medicaid coverage of a new optional 

State plan benefit to furnish home and 

community-based State plan services. 

The statute provides States with an 

option under which to draw Federal 

matching funds; it does not impose any 

requirements or costs on existing State 

programs, on providers, or upon 

beneficiaries. States retain their existing 

authority to offer HCBS through the 

existing authority granted under section 

1915(c) waivers and under section 1115 

waivers. States can also continue to 

offer, and individuals can choose to 

receive, some but not all components of 

HCBS allowable under section 1915(i) 

through existing State plan services 

such as personal care or targeted case 

management services. Therefore, this 

rule is entirely optional for States. We 

solicit comment on the analysis within 

the ‘‘Alternatives Considered’’ section. 

Alternatives to this proposed rule 

include: 

(1) Not Publishing a Rule: Section 

1915(i) of the Act was effective January 

1, 2007. States may propose SPAs to 

establish the State plan HCBS benefit 

with or without this proposed rule. We 

considered whether this statute could be 

self-implementing and require no 

regulation. Section 1915(i) of the Act is 

complex; many States have contacted us 

for technical assistance in the absence of 

published guidance, and some have 

indicated they are waiting to submit a 

State plan amendment until there is a 

rule. We further considered whether a 

State Medicaid Director letter would 

provide sufficient guidance regarding 

CMS review criteria for approval of an 

SPA. We conclude that section 1915(i) 

of the Act establishes significant new 

features in the Medicaid program, and 

that it was important to provide States 

and the public the published invitation 

for comment provided by this proposed 

rule. Finally, State legislation and 

judicial decisions are not alternatives to 

a Federal rule in this case since section 

1915(i) of the Act provides Federal 

benefits. 

(2) Modification of Existing Rules: We 

considered modifying existing 

regulations at 42 CFR part 440.180, part 

441 subpart G, Home and CommunityBased Services: Waiver Requirements, 

which implement the section 1915(c) 

HCBS waivers, to include the authority 

to offer the State plan HCBS benefit. 

This would have the advantage of not 

duplicating certain requirements 

common to both types of HCBS. 

However, we believe that any such 

efficiency would be outweighed by the 

substantial discussion that would be 

required of the differences between the 

Secretary’s discretion to approve 

waivers under section 1915(c) of the 

Act, and authority to offer HCBS under 

the State plan at section 1915(i) of the 

Act. While Congress clearly considered 

the experience to date with HCBS under 

waivers when constructing section 

1915(i) of the Act, it did not choose to 

modify section 1915(c) of the Act, but 

chose instead to create a new authority 

at section 1915(i) of the Act. 

F. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/ 

circulars_a004_a-4), in the Table 3, we 

have prepared an accounting statement 

showing the classification of the 

transfers associated with the provisions 

of this proposed rule. This table 

provides our best estimate of the 

proposed increase in aggregate Medicaid 

outlays resulting from offering States the 

option to provide the State plan HCBS 

benefit established in section 1915(i) of 

the Act and proposed by CMS–2249–P 

(Medicaid program; Home and 

Community-Based State Plan Services). 

TABLE 3—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS, FROM FYS 2012 TO 2016 

[In $millions] 

Category TRANSFERS 

Annualized Monetized Transfers ................................................................. 3% Units Discount Rate ..............

$153.0 .........................................

7% Units Discount Rate. 

$150.4. 

From Whom To Whom? .............................................................................. Federal Government to Providers


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TABLE 3—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS, FROM FYS 2012 TO 2016—Continued 

[In $millions] 

Category TRANSFERS 

Other Annualized Monetized Transfers ....................................................... 3% Units Discount Rate ..............

$114.5 .........................................

7% Units Discount Rate. 

$112.5. 

From Whom To Whom? .............................................................................. State Governments to Providers 

G. Conclusion 

We anticipate that States will make 

widely varying use of the section 1915(i) 

State plan HCBS benefit to provide 

needed long-term care services for 

Medicaid beneficiaries. These services 

will be provided in the home or 

alternative living arrangements in the 

community, which is of benefit to the 

beneficiary and is less costly than 

institutional care. Requirements for 

independent evaluation and assessment, 

individualized care planning, and 

requirements for a quality improvement 

program will promote efficient and 

effective use of Medicaid expenditures 

for these services. 

VII. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), as 

modified by the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (SBREFA) (Pub. L. 104–121), 

requires agencies to determine whether 

proposed or final rules would have a 

significant economic impact on a 

substantial number of small entities 

and, if so, to prepare a Regulatory 

Flexibility Analysis and to identify in 

the notice of proposed rulemaking or 

final rulemaking any regulatory options 

that could mitigate the impact of the 

proposed regulation on small 

businesses. For purposes of the RFA, 

small entities include businesses that 

are small as determined by size 

standards issued by the Small Business 

Administration, nonprofit organizations, 

and small governmental jurisdictions). 

Individuals and States are not included 

in the definition of a small business 

entity. 

For purposes of the RFA, we assume 

that approximately 75 percent of 

Medicaid providers are considered 

small businesses according to the Small 

Business Administration’s size 

standards (with total revenues of $35 

million or less in any one year), and 80 

percent are nonprofit organizations. 

Medicaid providers are required, as a 

matter of course, to follow the 

guidelines and procedures as specified 

in State and Federal laws and 

regulations. Furthermore, this rule 

imposes no requirements or costs on 

providers or suppliers for their existing 

activities. The rule implements a new 

optional State plan benefit established 

in section 1915(i) of the Act. Small 

entities that meet provider 

qualifications and choose to provide 

HCBS under the State plan will have a 

business opportunity under this 

proposed rule. The Secretary has 

determined that this proposed rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

In addition, section 1102(b) of the 

Social Security 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 and has fewer than 100 

beds. This proposed rule does not offer 

a change in the administration of the 

provisions related to small rural 

hospitals. Therefore, the Secretary has 

determined that this proposed rule will 

not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

VIII. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995, Pub. L. 104–4) requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any one 

year of $100 million in 1995 dollars, 

updated annually for inflation. In 2012, 

that threshold is approximately $139 

million. This proposed rule does not 

mandate any spending by State, local, or 

tribal governments, in the aggregate, or 

by the private sector, of $139 million. 

IX. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) 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 E.O. 

13132 are not applicable. 

List of Subjects 

42 CFR Part 430 

Administrative practice and 

procedure, Grant programs—health, 

Medicaid, Reporting and recordkeeping 

requirements. 

42 CFR Part 431 

Grant programs—health, Health 

facilities, Medicaid, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 435 

Aid to Families with Dependent 

Children, Grant programs—health, 

Medicaid, Reporting and recordkeeping 

requirements, Supplemental Security 

Income, Wages. 

42 CFR Part 436 

Aid to Families with Dependent 

Children, Grant programs—health, 

Guam, Medicaid Puerto Rico, 

Supplemental Security Income (SSI), 

Virgin Islands. 

42 CFR Part 440 

Grant programs—health, Medicaid. 

42 CFR Part 441 

Aged, Family planning, Grant 

programs—health, Infants and children, 

Medicaid, Penalties, Reporting and 

recordkeeping requirements. 

42 CFR Part 447 

Accounting, Administrative practice 

and procedure, Drugs, Grant programs— 

health, Health facilities, Health 

professions, Medicaid, Reporting and 

recordkeeping requirements, Rural 

areas. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 430—GRANTS TO STATES FOR 

MEDICAL ASSISTANCE PROGRAMS 

1. The authority citation for part 430 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 


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Subpart B—State Plans 

2. Section 430.25 is amended by— 

A. Revising paragraphs (h)(2)(i) and 

(ii). 

B. Adding paragraph (h)(2)(iii). 

The revisions and addition read as 

follows: 

§ 430.25 Waivers of State plan 

requirements. 

* * * * * 

(h) * * * 

(2) Duration of waivers. (i) Home and 

community-based services under section 

1915(c) of the Act. The initial waiver is 

for a period of 3 years and may be 

renewed thereafter for periods of 5 

years. For waivers that include 

individuals who are dually eligible for 

Medicare and Medicaid, 5-year initial 

approval periods may be granted at the 

discretion of the Secretary for waivers 

meeting all necessary programmatic, 

financial and quality requirements. 

(ii) Waivers under section 1915(b) of 

the Act. The initial waiver is for a 

period of 2 years and may be renewed 

for additional periods of up to 2 years 

as determined by the Administrator. For 

waivers that include individuals who 

are dually eligible for Medicare and 

Medicaid, 5-year initial and renewal 

approval periods may be granted at the 

discretion of the Secretary for waivers 

meeting all necessary programmatic, 

financial and quality requirements. 

(iii) Waivers under section 1916 of the 

Act. The initial waiver is for a period of 

2 years and may be renewed for 

additional periods of up to 2 years as 

determined by the Administrator. 

* * * * * 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

3. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart B—General Administrative 

Requirements 

4. Section 431.54 is amended by 

adding paragraphs (a)(3) and (h) to read 

as follows: 

§ 431.54 Exceptions to certain State plan 

requirements. 

(a) * * * 

(3) Section 1915(i) of the Act provides 

that a State may provide, as medical 

assistance, home and community-based 

services under an approved State plan 

amendment that meets certain 

requirements, without regard to the 

requirements of sections 1902(a)(10)(B) 

and 1902(a)(10)(C)(i)(III) of the Act, with 

respect to such services. 

* * * * * 

(h) State plan home and communitybased services. The requirements of 

§ 440.240 of this chapter related to 

comparability of services do not apply 

with respect to State plan home and 

community-based services defined in 

§ 440.182 of this chapter. 

PART 435—ELIGIBILITY IN THE 

STATES, DISTRICT OF COLUMBIA, 

THE NORTHERN MARIANA ISLANDS, 

AND AMERICAN SAMOA 

5. The authority citation for part 435 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart C—Options for Coverage 

6. Section 435.219 is added to subpart 

C to read as follows: 

§ 435.219 Individuals receiving State plan 

home and community-based services. 

If the agency provides home and 

community-based services to 

individuals described in section 

1915(i)(1), the agency, under its State 

plan, may, in addition, provide 

Medicaid to any group or groups of 

individuals in the community who are 

described in one or both of the 

paragraphs under paragraphs (a) or (b) 

of this section. 

(a) Individuals who— 

(1) Are not otherwise eligible for 

Medicaid; 

(2) Have income that does not exceed 

150 percent of the Federal poverty line 

(FPL); 

(3) Meet the needs-based criteria 

under § 441.659 of this chapter; and 

(4) Will receive State plan home and 

community-based services as defined in 

§ 440.182 of this chapter. 

(b) Individuals who— 

(1) Would be determined eligible by 

the agency under an existing waiver or 

demonstration project under sections 

1915(c), 1915(d), 1915(e) or 1115 of the 

Act, but are not required to receive 

services under such waivers or 

demonstration projects; 

(2) Have income that does not exceed 

300 percent of the Supplemental 

Security Income Federal Benefit Rate 

(SSI/FBR); and 

(3) Will receive State plan home and 

community-based services as defined in 

§ 440.182 of this chapter. 

(c) For purposes of determining 

eligibility under paragraph (a) of this 

section, the agency may not take into 

account an individual’s resources and 

must use income standards that are 

reasonable, consistent with the 

objectives of the Medicaid program, 

simple to administer, and in the best 

interests of the beneficiary. Income 

methodologies may include use of 

existing income methodologies, such as 

the SSI program rules. However, subject 

to the Secretary’s approval, the agency 

may use other income methodologies 

that meet the requirements of this 

paragraph (c). 

PART 436—ELIGIBILITY IN GUAM, 

PUERTO RICO AND THE VIRGIN 

ISLANDS 

7. The authority citation for part 436 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart C—Options for Coverage 

8. Section 436.219 is added to subpart 

C to read as follows: 

§ 436.219 Individuals receiving State plan 

home and community-based services. 

If the agency provides home and 

community-based services to 

individuals described in section 

1915(i)(1) of the Act, the agency, under 

its State plan, may, in addition, provide 

Medicaid to any group or groups of 

individuals in the community who are 

described in one or both of paragraphs 

(a) or (b) of this section. 

(a) Individuals who— 

(1) Are not otherwise eligible for 

Medicaid; 

(2) Have income that does not exceed 

150 percent of the Federal poverty line 

(FPL); 

(3) Meet the needs-based criteria 

under § 441.659 of this chapter; and 

(4) Will receive State plan home and 

community-based services as defined in 

§ 440.182 of this chapter. 

(b) Individuals who— 

(1)Would be determined eligible by 

the agency under an existing waiver or 

demonstration project under sections 

1915(c), 1915(d), 1915(e) or 1115 of the 

Act, but are not required to receive 

services under such waivers or 

demonstration projects; 

(2) Have income that does not exceed 

300 percent of the Supplemental 

Security Income Federal Benefit Rate 

(SSI/FBR); and 

(3) Will receive State plan home and 

community-based services as defined in 

§ 440.182 of this chapter. 

(c) For purposes of determining 

eligibility under paragraph (a) of this 

section, the agency may not take into 

account an individual’s resources and 

must use income standards that are 

reasonable, consistent with the 

objectives of the Medicaid program, 

simple to administer, and in the best 


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interests of the beneficiary. Income 

methodologies may include use of 

existing income methodologies, such as 

the rules of the OAA, AB, APTD or 

AABD programs. However, subject to 

the Secretary’s approval, the agency 

may use other income methodologies 

that meet the requirements of this 

paragraph (c). 

PART 440—SERVICES: GENERAL 

PROVISIONS 

9. The authority citation for part 440 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart A—Definitions 

10. Section 440.1 is amended by 

adding the new statutory basis in 

alphanumerical order to read as follows: 

§ 440.1 Basis and purpose. 

* * * * * 

1915(i) Home and community-based 

services furnished under a State plan to 

elderly and disabled individuals. 

11. Section 440.180 is amended by 

revising the heading to read as follows: 

§ 440.180 Home and community-based 

waiver services. 

* * * * * 

12. Section 440.182 is added to 

subpart A to read as follows: 

§ 440.182 State plan home and 

community-based services. 

(a) Definition. State plan home and 

community-based services (HCBS) 

benefit means the services listed in 

paragraph (c) of this section when 

provided under the State’s plan (rather 

than through an HCBS waiver program) 

for individuals described in paragraph 

(b) of this section. 

(b) State plan HCBS coverage. State 

plan HCBS can be made available to 

individuals who— 

(1) Are eligible under the State plan 

and have income, calculated using the 

otherwise applicable rules, including 

any less restrictive income disregards 

used by the State for that group under 

section 1902(r)(2) of the Act, that does 

not exceed 150 percent of the Federal 

Poverty Line (FPL); and 

(2) In addition to the individuals 

described in paragraph (b)(1) of this 

section, to individuals based on the 

State’s election of the eligibility groups 

described in § 435.219(b) or § 436.219(b) 

of this chapter. 

(c) Services. The State plan HCBS 

benefit consists of one or more of the 

following services: 

(1) Case management services. 

(2) Homemaker services. 

(3) Home health aide services. 

(4) Personal care services. 

(5) Adult day health services. 

(6) Habilitation services, which 

include expanded habilitation services 

as specified in § 440.180(c) of this 

subpart. 

(7) Respite care services. 

(8) Subject to the conditions in 

§ 440.180 of this subpart, for individuals 

with chronic mental illness: 

(i) Day treatment or other partial 

hospitalization services; 

(ii) Psychosocial rehabilitation 

services; 

(iii) Clinic services (whether or not 

furnished in a facility). 

(9) Other services requested by the 

agency and approved by the Secretary as 

consistent with the purpose of the 

benefit. 

(d) Exclusion. FFP is not available for 

the cost of room and board in State plan 

HCBS. The following HCBS costs are 

not considered room or board for 

purposes of this exclusion: 

(1) The cost of temporary food and 

shelter provided as an integral part of 

respite care services in a facility 

approved by the State. 

(2) Meals provided as an integral 

component of a program of adult day 

health services or another service and 

consistent with standard procedures in 

the State for such a program. 

(3) A portion of the rent and food 

costs that may be reasonably attributed 

to an unrelated caregiver providing 

State plan HCBS who is residing in the 

same household with the recipient, but 

not if the recipient is living in the home 

of the caregiver or in a residence that is 

owned or leased by the caregiver. 

PART 441—SERVICES: 

REQUIREMENTS AND LIMITS 

APPLICABLE TO SPECIFIC SERVICES 

13. The authority citation for part 441 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

14. Section 441.530 is added to read 

as follows: 

§ 441.530 Home and Community-Based 

Setting. 

(a) States must make available 

attendant services and supports in a 

home and community-based setting 

consistent with both paragraphs (a)(1) 

and (2) of this section. 

(1) Home and community-based 

settings shall have all of the following 

qualities, and such other qualities as the 

Secretary determines to be appropriate, 

based on the needs of the individual as 

indicated in their person-centered 

service plan: 

(i) The setting is integrated in, and 

facilitates the individual’s full access to, 

the greater community, including 

opportunities to seek employment and 

work in competitive integrated settings, 

engage in community life, control 

personal resources, and receive services 

in the community, in the same manner 

as individuals without disabilities. 

(ii) The setting is selected by the 

individual from among all available 

alternatives and is identified in the 

person-centered service plan. 

(iii) An individual’s essential personal 

rights of privacy, dignity and respect, 

and freedom from coercion and restraint 

are protected. 

(iv) Individual initiative, autonomy, 

and independence in making life 

choices, including but not limited to, 

daily activities, physical environment, 

and with whom to interact are 

optimized and not regimented. 

(v) Individual choice regarding 

services and supports, and who 

provides them, is facilitated. 

(vi) In a provider-owned or controlled 

residential setting, the following 

additional conditions must be met. Any 

modification of the conditions, for 

example, to address the safety needs of 

an individual with dementia, must be 

supported by a specific assessed need 

and documented in the person-centered 

service plan: 

(A) The unit or room is a specific 

physical place that can be owned, 

rented or occupied under another 

legally enforceable agreement by the 

individual receiving services, and the 

individual has, at a minimum, the same 

responsibilities and protections from 

eviction that tenants have under the 

landlord tenant law of the State, county, 

city or other designated entity; 

(B) Each individual has privacy in 

their sleeping or living unit: 

(1) Units have lockable entrance 

doors, with appropriate staff having 

keys to doors; 

(2) Individuals share units only at the 

individual’s choice; and 

(3) Individuals have the freedom to 

furnish and decorate their sleeping or 

living units. 

(C) Individuals have the freedom and 

support to control their own schedules 

and activities, and have access to food 

at any time; 

(D) Individuals are able to have 

visitors of their choosing at any time; 

and 

(E) The setting is physically accessible 

to the individual. 

(2) Home and community-based 

settings do not include the following: 

(i) A nursing facility; 

(ii) An institution for mental diseases; 

(iii) An intermediate care facility for 

the mentally retarded; 


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(iv) A hospital providing long-term 

care services; or 

(v) Any other locations that have 

qualities of an institutional setting, as 

determined by the Secretary. The 

Secretary will apply a rebuttable 

presumption that a setting is not a home 

and community-based setting, and 

engage in heightened scrutiny, for any 

setting that is located in a building that 

is also a publicly or privately operated 

facility that provides inpatient 

institutional treatment, or in a building 

on the grounds of, or immediately 

adjacent to, a public institution, or 

disability-specific housing complex. 

15. A new subpart L, consisting of 

§§ 441.650 through 441.677, is added to 

read as follows: 

Subpart K—State Plan Home and 

Community-Based Services for Elderly 

and Disabled Individuals 

Sec. 

441.650 Basis and purpose. 

441.653 State plan requirements. 

441.656 State plan home and communitybased services under the Act. 

441.659 Needs-based criteria and 

evaluation. 

441.662 Independent assessment. 

441.665 Person-centered service plan. 

441.668 Provider qualifications. 

441.671 Definition of individual’s 

representative. 

441.674 Self-directed services. 

441.677 State plan HCBS administration: 

State responsibilities and quality 

improvement. 

Subpart L State Plan Home and 

Community-Based Services for the 

Elderly and Individuals With 

Disabilities 

§ 441.650 Basis and purpose. 

Section 1915(i) of the Act permits 

States to offer one or more home and 

community-based services (HCBS) 

under their State Medicaid plans to 

qualified individuals with disabilities or 

individuals who are elderly. Those 

services are listed in § 440.182 of this 

chapter, and are described by the State, 

including any limitations of the 

services. This optional benefit is known 

as the State plan HCBS benefit. This 

subpart describes what a State Medicaid 

plan must provide when the State elects 

to include the optional benefit, and 

defines State responsibilities. 

§ 441.653 State plan requirements. 

A State plan that provides 1915(i) 

State plan home and community-based 

services must meet the requirements of 

this subpart. 

§ 441.656 State plan home and 

community-based services under the Act. 

(a) Home and Community-Based 

Setting. Under section 1915(i)(1) of the 

Act, States must make State plan HCBS 

available in a home and communitybased setting consistent with both 

paragraphs (a)(1) and (2) of this section. 

(1) Home and community-based 

settings shall have all of the following 

qualities, and such other qualities as the 

Secretary determines to be appropriate, 

based on the needs of the individual as 

indicated in their person-centered 

service plan: 

(i) The setting is integrated in, and 

facilitates the individual’s full access to, 

the greater community including 

opportunities to seek employment and 

work in competitive integrated settings, 

engage in community life, control 

personal resources, and receive services 

in the community, in the same manner 

as individuals without disabilities. 

(ii) The setting is selected by the 

individual from among all available 

alternatives and is identified in the 

person–centered service plan. 

(iii) An individual’s essential personal 

rights of privacy, dignity and respect, 

and freedom from coercion and restraint 

are protected. 

(iv) Individual initiative, autonomy, 

and independence in making life 

choices, including but not limited to, 

daily activities, physical environment, 

and with whom to interact are 

optimized and not regimented. 

(v) Individual choice regarding 

services and supports, and who 

provides them, is facilitated. 

(vi) In a provider-owned or controlled 

residential setting, the following 

additional conditions must be met. Any 

modification of the conditions, for 

example, to address the safety needs of 

an individual with dementia, must be 

supported by a specific assessed need 

and documented in the person-centered 

service plan: 

(A) The unit or room is a specific 

physical place that can be owned, 

rented, or occupied under a legally 

enforceable agreement by the individual 

receiving services, and the individual 

has, at a minimum, the same 

responsibilities and protections from 

eviction that tenants have under the 

landlord/tenant law of the State, county, 

city, or other designated entity; 

(B) Each individual has privacy in 

their sleeping or living unit: 

(1) Units have lockable entrance 

doors, with appropriate staff having 

keys to doors; 

(2) Individuals share units only at the 

individual’s choice; and 

(3) Individuals have the freedom to 

furnish and decorate their sleeping or 

living units. 

(C) Individuals have the freedom and 

support to control their own schedules 

and activities, and have access to food 

at any time; 

(D) Individuals are able to have 

visitors of their choosing at any time; 

and 

(E) The setting is physically accessible 

to the individual. 

(2) Home and community-based 

settings do not include the following: 

(i) A nursing facility; 

(ii) An institution for mental diseases; 

(iii) An intermediate care facility for 

the mentally retarded; 

(iv) A hospital; or 

(v) Any other locations that have 

qualities of an institutional setting, as 

determined by the Secretary. The 

Secretary will apply a rebuttable 

presumption that a setting is not a home 

and community-based setting, and 

engage in heightened scrutiny, for any 

setting that is located in a building that 

is also a publicly or privately operated 

facility that provides inpatient 

institutional treatment, or in a building 

on the grounds of, or immediately 

adjacent to, a public institution, or 

disability-specific housing complex. 

(b) Needs-Based Eligibility 

Requirement. Meet needs-based criteria 

for eligibility for the State plan HCBS 

benefit, as required in § 441.659(a). 

(c) Minimum State plan HCBS 

Requirement. Be assessed to require at 

least one section 1915(i) home and 

community-based service at a frequency 

determined by the State, as required in 

§ 441.662(a)(5). 

(d) Target Population. Meet any 

applicable targeting criteria defined by 

the State under the authority of 

paragraph (b)(2) of this section. 

(e) Nonapplication. The State may 

elect in the State plan amendment 

approved under this subpart not to 

apply the following requirements when 

determining eligibility: 

(1) Section 1902(a)(10)(C)(i)(III) of the 

Act, pertaining to income and resource 

eligibility rules for the medically needy 

living in the community, but only for 

the purposes of providing State plan 

HCBS. 

(2) Section 1902(a)(10)(B) of the Act, 

pertaining to comparability of Medicaid 

services, but only for the purposes of 

providing section 1915(i) State plan 

HCBS. In the event that a State elects 

not to apply comparability 

requirements: 

(i) The State must describe the 

group(s) receiving State plan HCBS, 

subject to the Secretary’s approval. 

Targeting criteria cannot have the 


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impact of limiting the pool of qualified 

providers from which an individual 

would receive services, or have the 

impact of requiring an individual to 

receive services from the same entity 

from which they purchase their 

housing. These groups must be defined 

on the basis of any combination of— 

(A) Age; 

(B) Diagnosis; 

(C) Disability; or 

(D) Medicaid Eligibility Group. 

(ii)The State may elect in the State 

plan amendment to limit the availability 

of specific services defined under the 

authority of § 440.182(b) or to vary the 

amount, duration, or scope of those 

services, to one or more of the group(s) 

described in this paragraph. 

§ 441.659 Needs-based criteria and 

evaluation. 

(a) Needs-based criteria. The State 

must establish needs-based criteria for 

determining an individual’s eligibility 

under the State plan for the HCBS 

benefit, and may establish needs-based 

criteria for each specific service. Needsbased criteria are factors used to 

determine an individual’s requirements 

for support, and may include risk 

factors. The criteria are not 

characteristics that describe the 

individual or the individual’s condition. 

A diagnosis is not a sufficient factor on 

which to base a determination of need. 

A criterion can be considered needsbased if it is a factor that can only be 

ascertained for a given person through 

an individualized evaluation of need. 

(b) More stringent institutional and 

waiver needs-based criteria. The State 

plan HCBS benefit is available only if 

the State has in effect needs-based 

criteria (as defined in paragraph (a) of 

this section), for receipt of services in 

nursing facilities as defined in section 

1919(a) of the Act, intermediate care 

facilities for the mentally retarded as 

defined in § 440.150 of this chapter, and 

hospitals as defined in § 440.10 of this 

chapter for which the State has 

established long-term level of care 

(LOC) criteria, or waivers offering 

HCBS, and these needs-based criteria 

are more stringent than the needs-based 

criteria for the State plan HCBS benefit. 

If the State defines needs-based criteria 

for individual State plan home and 

community-based services, it may not 

have the effect of limiting who can 

benefit from the State plan HCBS in an 

unreasonable way, as determined by the 

Secretary. 

(1) These more stringent criteria must 

meet the following requirements: 

(i) Be included in the LOC 

determination process for each 

institutional service and waiver. 

(ii) Be submitted for inspection by 

CMS with the State plan amendment 

that establishes the State Plan HCBS 

benefit. 

(iii) Be in effect on or before the 

effective date of the State plan HCBS 

benefit. 

(2) In the event that the State modifies 

institutional LOC criteria to meet the 

requirements under paragraph (b) or 

(c)(7) of this section that such criteria be 

more stringent than the State plan HCBS 

needs-based eligibility criteria, States 

may continue to receive FFP for 

individuals receiving institutional 

services or waiver HCBS under the LOC 

criteria previously in effect. 

(c) Adjustment authority. The State 

may modify the needs-based criteria 

established under paragraph (a) of this 

section, without prior approval from the 

Secretary, if the number of individuals 

enrolled in the State plan HCBS benefit 

exceeds the projected number submitted 

annually to CMS. The Secretary will 

approve a retroactive effective date for 

the State plan amendment modifying 

the criteria, as early as the day following 

the notification period required under 

paragraph (c)(1) of this section, if all of 

the following conditions are met: 

(1) The State provides at least 60 days 

notice of the proposed modification to 

the Secretary, the public, and each 

individual enrolled in the State plan 

HCBS benefit. 

(2) The State notice to the Secretary 

is submitted as an amendment to the 

State plan. 

(3) The adjusted needs-based 

eligibility criteria for the State plan 

HCBS benefit are less stringent than 

needs-based institutional and waiver 

LOC criteria in effect after the 

adjustment. 

(4) Individuals who were found 

eligible for the State plan HCBS benefit 

before modification of the needs-based 

criteria under this adjustment authority 

must remain eligible for the HCBS 

benefit until such time as: 

(i) The individual no longer meets the 

needs-based criteria used for the initial 

determination of eligibility; or 

(ii) The individual is no longer 

eligible for or enrolled in Medicaid or 

the HCBS benefit. 

(5) Any changes in service due to the 

modification of needs-based criteria 

under this adjustment authority are 

treated as actions as defined in 

§ 431.201 and are subject to the 

requirements of Part 431 Subpart E of 

this chapter. 

(6) In the event that the State also 

needs to modify institutional LOC 

criteria to meet the requirements under 

paragraph (b) of this section that such 

criteria be more stringent than the State 

plan HCBS needs-based eligibility 

criteria, the State may adjust the 

modified institutional LOC criteria 

under this adjustment authority. The 

adjusted institutional LOC criteria must 

be at least as stringent as those in effect 

before they were modified to meet the 

requirements in paragraph (b) of this 

section. 

(d) Independent evaluation and 

determination of eligibility. Eligibility 

for the State plan HCBS benefit must be 

determined through an independent 

evaluation of each individual according 

to the requirements of § 441.656(a)(1) 

through (5) of this subpart. The 

independent evaluation complies with 

the following requirements: 

(1) Is performed by an agent that is 

independent and qualified as defined in 

§ 441.668 of this subpart. 

(2) Applies the needs-based eligibility 

criteria that the State has established 

under paragraph (a) of this section, and 

the general eligibility requirements 

under § 441.656(a)(1) through (3) and 

(b)(2) of this subpart. 

(3) Includes consultation with the 

individual, and if applicable, the 

individual’s authorized representative. 

(4) Assesses the individual’s support 

needs. 

(5) Uses only current and accurate 

information from existing records, and 

obtains any additional information 

necessary to draw valid conclusions 

about the individual’s support needs. 

(6) Evaluations finding that an 

individual is not eligible for the State 

plan HCBS benefit are treated as actions 

defined in § 431.201 of this chapter and 

are subject to the requirements of part 

431 subpart E of this chapter. 

(e) Periodic redetermination. 

Independent reevaluations of each 

individual receiving the State plan 

HCBS benefit must be performed at least 

every 12 months, to determine whether 

the individual continues to meet 

eligibility requirements. 

Redeterminations must meet the 

requirements of paragraph (d) of this 

section. 

§ 441.662 Independent assessment. 

(a) Requirements. For each individual 

determined to be eligible for the State 

plan HCBS benefit, the State must 

provide for an independent assessment 

of needs, which may include the results 

of a standardized functional needs 

assessment, in order to establish a 

service plan. In applying the 

requirements of section 1915(i)(1)(F) of 

the Act, the State must: 

(1) Perform a face-to-face assessment 

of the individual by an agent that is 

independent and qualified as defined in 

§ 441.668 of this subpart and with a 


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person-centered process guided by best 

practice and research on effective 

strategies that result in improved health 

and quality of life outcomes. 

(i) For the purposes of this section, a 

face-to-face assessment may include 

assessments performed by telemedicine, 

or other information technology 

medium, if the following conditions are 

met: 

(A) The health care professional(s) 

performing the assessment meets the 

provider qualifications defined by the 

State, including any additional 

qualifications or training requirements 

for the operation of required 

information technology. 

(B) The individual receives 

appropriate support during the 

assessment, including the use of any 

necessary on-site support-staff. 

(C) The individual provides informed 

consent for this type of assessment. 

(ii) [Reserved] 

(2) Conduct the assessment in 

consultation with the individual, and if 

applicable, the individual’s authorized 

representative, and include the 

opportunity for the individual to 

identify other persons to be consulted, 

such as, but not limited to, the 

individual’s spouse, family, guardian, 

and treating and consulting health and 

support professionals responsible for 

the individual’s care. 

(3) Examine the individual’s relevant 

history including the findings from the 

independent evaluation of eligibility, 

medical records, an objective evaluation 

of functional ability, and any other 

records or information needed to 

develop the service plan as required in 

§ 441.665 of this subpart. 

(4) Include in the assessment the 

individual’s physical and behavioral 

health care and support needs, strengths 

and preferences, available service and 

housing options, and when unpaid 

caregivers will be relied upon to 

implement the service plan, a caregiver 

assessment. 

(5) Apply the State’s needs-based 

criteria for each service (if any) that the 

individual may require. Individuals are 

considered enrolled in the State plan 

HCBS benefit only if they meet the 

eligibility and needs-based criteria for 

the benefit, and are also assessed to 

require and receive at least one home 

and community-based service offered 

under the State plan for medical 

assistance. 

(6) Include in the assessment, if the 

State offers individuals the option to 

self-direct a State plan home and 

community-based service or services, 

any information needed for the selfdirected portion of the service plan, as 

required in § 441.674(b) of this subpart, 

including the ability of the individual 

(with and without supports) to exercise 

budget or employer authority. 

(7) Include in the assessment, for 

individuals receiving habilitation 

services, documentation that no 

Medicaid services are provided which 

would otherwise be available to the 

individual, specifically including but 

not limited to services available to the 

individual through a program funded 

under section 110 of the Rehabilitation 

Act of 1973, or the Individuals with 

Disabilities Education Improvement Act 

of 2004. 

(8) Include in the assessment and 

subsequent service plan, for individuals 

receiving Secretary approved services 

under the authority of § 440.182 of this 

chapter, documentation that no State 

plan HCBS services are provided which 

would otherwise be available to the 

individual through other Medicaid 

services or other Federally funded 

programs. 

(9) Include in the assessment and 

subsequent service plan, for individuals 

receiving HCBS through a waiver 

approved under § 441.300 of this 

subpart, documentation that HCBS 

provided through the State plan and 

waiver are not duplicative. 

(10) Coordinate the assessment and 

subsequent service plan with any other 

assessment or service plan required for 

services through a waiver authorized 

under section 1115 or section 1915 of 

the Social Security Act. 

(b) Reassessments. The independent 

assessment of need must be conducted 

at least every 12 months and as needed 

when the individual’s support needs or 

circumstances change significantly, in 

order to revise the service plan. 

§ 441.665 Person-centered service plan. 

(a) Person-centered planning process. 

Based on the independent assessment 

required in § 441.662 of this subpart, the 

State must develop (or approve, if the 

plan is developed by others) a written 

service plan jointly with the individual 

(including, for purposes of this 

paragraph, the individual and the 

individual’s authorized representative if 

applicable). The person-centered 

planning process is driven by the 

individual. The process: 

(1) Includes people chosen by the 

individual. 

(2) Provides necessary information 

and support to ensure that the 

individual directs the process to the 

maximum extent possible, and is 

enabled to make informed choices and 

decisions. 

(3) Is timely and 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 clear conflict-ofinterest guidelines for all planning 

participants. 

(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. 

(8) Records the alternative home and 

community-based settings that were 

considered by the individual. 

(b) The person-centered service plan. 

The person-centered service plan must 

reflect the services and supports that are 

important for the individual to meet the 

needs identified through an assessment 

of functional need, as well as what is 

important to the individual with regard 

to preferences for the delivery of such 

services and supports. Commensurate 

with the level of need of the individual, 

and the scope of services and supports 

available under the State plan HCBS 

benefit, the plan must: 

(1) Reflect that the setting in which 

the individual resides is chosen by the 

individual. 

(2) Reflect the individual’s strengths 

and preferences. 

(3) Reflect clinical and support needs 

as identified through an assessment of 

functional need. 

(4) Include individually identified 

goals and desired outcomes. 

(5) 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, including natural supports. 

Natural supports cannot supplant 

needed paid services unless the natural 

supports are unpaid supports that are 

provided voluntarily to the individual 

in lieu of State plan HCBS. 

(6) Reflect risk factors and measures 

in place to minimize them, including 

Individualized backup plans. 

(7) Be understandable to the 

individual receiving services and 

supports, and the individuals important 

in supporting him or her. 

(8) Identify the individual and/or 

entity responsible for monitoring the 

plan. 

(9) Be finalized and agreed to in 

writing by the individual and signed by 

all individuals and providers 

responsible for its implementation. 

(10) Be distributed to the individual 

and other people involved in the plan. 

(11) Include those services, the 

purchase or control of which the 

individual elects to self-direct, meeting 

the requirements of § 441.574(b) through 

(d) of this subpart. 


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(12) Prevent the provision of 

unnecessary or inappropriate care. 

(13) Other requirements as 

determined by the Secretary. 

(c) Reviewing the person-centered 

service plan. The person-centered 

service plan must be reviewed, and 

revised upon reassessment of functional 

need as required in § 441.662 of this 

subpart, at least every 12 months, when 

the individual’s circumstances or needs 

change significantly, and at the request 

of the individual. 

§ 441.668 Provider qualifications. 

(a) Requirements. The State must 

provide assurances that necessary 

safeguards have been taken to protect 

the health and welfare of enrollees in 

State plan HCBS, and must define in 

writing standards for providers (both 

agencies and individuals) of HCBS 

services and for agents conducting 

individualized independent evaluation, 

independent assessment, and service 

plan development. 

(b) Conflict of interest standards. The 

State must define conflict of interest 

standards that ensure the independence 

of individual and agency agents who 

conduct (whether as a service or an 

administrative activity) the independent 

evaluation of eligibility for State plan 

HCBS, who are responsible for the 

independent assessment of need for 

HCBS, or who are responsible for the 

development of the service plan. The 

conflict of interest standards apply to all 

individuals and entities, public or 

private. At a minimum, these agents 

must not be any of the following: 

(1) Related by blood or marriage to the 

individual, or to any paid caregiver of 

the individual. 

(2) Financially responsible for the 

individual. 

(3) Empowered to make financial or 

health-related decisions on behalf of the 

individual. 

(4) Holding financial interest, as 

defined in § 411.354 of this chapter, in 

any entity that is paid to provide care 

for the individual. 

(5) Providers of State plan HCBS for 

the individual, or those who have an 

interest in or are employed by a 

provider of State plan HCBS for the 

individual, except when the State 

demonstrates that the only willing and 

qualified agent to perform independent 

assessments and develop plans of care 

in a geographic area also provides 

HCBS, and the State devises conflict of 

interest protections including separation 

of agent and provider functions within 

provider entities, which are described in 

the State plan for medical assistance 

and approved by the Secretary, and 

individuals are provided with a clear 

and accessible alternative dispute 

resolution process. 

(c) Training. Qualifications for agents 

performing independent assessments 

and plans of care must include training 

in assessment of individuals whose 

physical or mental conditions trigger a 

potential need for home and 

community-based services and 

supports, and current knowledge of best 

practices to improve health and quality 

of life outcomes. 

§ 441.671 Definition of individual’s 

representative. 

In this subpart, the term individual’s 

representative means, with respect to an 

individual being evaluated for, assessed 

regarding, or receiving State plan HCBS, 

the following: 

(a) The individual’s legal guardian or 

other person who is authorized under 

State law to represent the individual for 

the purpose of making decisions related 

to the person’s care or well-being. 

(b) Any other person who is 

authorized by policy of the State 

Medicaid Agency to represent the 

individual including but not limited to 

a parent, a family member, or an 

advocate for the individual. 

(c) When the State authorizes 

representatives in accordance with 

paragraph (b) of this section, the State 

must have policies describing the 

process for authorization; the extent of 

decision-making authorized; and 

safeguards to ensure that the 

representative functions in the best 

interests of the participant. States may 

not refuse the authorized representative 

that the individual chooses, unless in 

the process of applying the 

requirements for authorization, the State 

discovers and can document evidence 

that the representative is not acting in 

the best interest of the individual or 

cannot perform the required functions. 

§ 441.674 Self-directed services. 

(a) State option. The State may choose 

to offer an election for self-directing 

HCBS. The term ‘‘self-directed’’ means, 

with respect to State plan HCBS listed 

in § 440.182 of this chapter, services 

that are planned and purchased under 

the direction and control of the 

individual, including the amount, 

duration, scope, provider, and location 

of the HCBS. For purposes of this 

paragraph, individual means the 

individual and, if applicable, the 

individual’s representative as defined in 

§ 441.671 of this subpart. 

(b) Service plan requirement. Based 

on the independent assessment required 

in § 441.662 of this subpart, the State 

develops a service plan jointly with the 

individual as required in § 441.665 of 

this subpart. If the individual chooses to 

direct some or all HCBS, the service 

plan must meet the following additional 

requirements: 

(1) Specify the State plan HCBS that 

the individual will be responsible for 

directing. 

(2) Identify the methods by which the 

individual will plan, direct or control 

services, including whether the 

individual will exercise authority over 

the employment of service providers 

and/or authority over expenditures from 

the individualized budget. 

(3) Include appropriate risk 

management techniques that explicitly 

recognize the roles and sharing of 

responsibilities in obtaining services in 

a self-directed manner and assure the 

appropriateness of this plan based upon 

the resources and support needs of the 

individual. 

(4) Describe the process for facilitating 

voluntary and involuntary transition 

from self-direction including any 

circumstances under which transition 

out of self-direction is involuntary. 

(c) Employer authority. If the service 

plan includes authority to select, 

manage, or dismiss providers of the 

State plan HCBS, the plan must meet 

the following requirements: 

(1) Specify the authority to be 

assumed by the individual, any limits to 

the authority, and specify parties 

responsible for functions outside the 

authority to be assumed. 

(2) Specify the financial management 

supports, as required in paragraph (e) of 

this section, to be provided. 

(d) Budget authority. If the service 

plan includes an individualized budget 

(which identifies the dollar value of the 

services and supports under the control 

and direction of the individual), the 

plan must meet the following 

requirements: 

(1) Describe the method for 

calculating the dollar values in the 

budget, based on reliable costs and 

service utilization. 

(2) Define a process for making 

adjustments in dollar values to reflect 

changes in an individual’s assessment 

and service plan. 

(3) Provide a procedure to evaluate 

expenditures under the budget. 

(4) Specify the financial management 

supports, as required in paragraph (e) of 

this section, to be provided. 

(5) Not result in payment for medical 

assistance to the individual. 

(e) Functions in support of selfdirection. When the State elects to offer 

self-directed State plan HCBS, it must 

offer the following individualized 

supports to individuals receiving the 

services and their representatives: 


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(1) Information and assistance 

consistent with sound principles and 

practice of self-direction. 

(2) Financial management supports to 

meet the following requirements: 

(i) Manage Federal, State, and local 

employment tax, labor, worker’s 

compensation, insurance, and other 

requirements that apply when the 

individual functions as the employer of 

service providers. 

(ii) Function as employer of record 

when the individual elects to exercise 

supervisory responsibility without 

employment responsibility. 

(iii) Make financial transactions on 

behalf of the individual when the 

individual has personal budget 

authority. 

(iv) Maintain separate accounts for 

each individual’s budget and provide 

periodic reports of expenditures against 

budget in a manner understandable to 

the individual. 

§ 441.677 State plan HCBS administration: 

State responsibilities and quality 

improvement. 

(a) State plan HCBS administration. 

(1) State responsibilities. The State must 

carry out the following responsibilities 

in administration of its State plan 

HCBS: 

(i) Number served. The State will 

annually provide CMS with the 

projected number of individuals to be 

enrolled in the benefit and the actual 

number of unduplicated individuals 

enrolled in State plan HCBS in the 

previous year. 

(ii) Access to services. The State must 

grant access to all State plan HCBS 

assessed to be needed in accordance 

with a service plan consistent with 

§ 441.665 of this subpart, to individuals 

who have been determined to be eligible 

for the State plan HCBS benefit, subject 

to the following requirements: 

(A) A State must determine that 

provided services meet medical 

necessity criteria; 

(B) A State may limit access to 

services through targeting criteria 

established by § 441.656(b)(2) of this 

subpart; and 

(C) A State may not limit access to 

services based upon the income of 

individuals, the cost of services, or the 

individual’s location in the State. 

(iii) Appeals. A State must provide 

individuals with the right to appeal 

terminations, suspensions, or reductions 

of Medicaid eligibility or covered 

services as described in part 431, 

subpart E. 

(2) Administration. (i) Option for 

presumptive payment. (A) The State 

may provide for a period of presumptive 

payment, not to exceed 60 days, for 

Medicaid eligible individuals the State 

has reason to believe may be eligible for 

the State plan HCBS benefit. FFP is 

available for both services that meet the 

definition of medical assistance and 

necessary administrative expenditures 

for evaluation of eligibility for the State 

plan HCBS benefit under § 441.659(d) of 

this subpart and assessment of need for 

specific HCBS under § 441.662(a) of this 

subpart, prior to an individual’s receipt 

of State plan HCBS services or 

determination of ineligibility for the 

benefit. 

(B) If an individual the State has 

reason to believe may be eligible for the 

State plan HCBS benefit and is 

evaluated and assessed under the 

presumptive payment option and found 

not to be eligible for the benefit, FFP is 

available for services that meet the 

definition of medical assistance and 

necessary administrative expenditures. 

The individual so determined will not 

be considered to have enrolled in the 

State plan HCBS benefit for purposes of 

determining the annual number of 

participants in the benefit. 

(ii) Option for Phase-in of Services 

and Eligibility. (A) In the event that a 

State elects to establish targeting criteria 

through § 441.656(b)(2) of this subpart, 

the State may limit the enrollment of 

individuals or the provision services to 

enrolled individuals based upon criteria 

described in a phase-in plan, subject to 

CMS approval. A State which elects to 

target the State plan HCBS benefit and 

to phase-in enrollment and/or services 

must submit a phase-in plan for 

approval by CMS that describes, at a 

minimum: 

(1) The criteria used to limit 

enrollment or service delivery; 

(2) The rationale for phasing-in 

services and/or eligibility; and 

(3) Timelines and benchmarks to 

ensure that the benefit is available 

statewide to all eligible individuals 

within the initial 5-year approval. 

(B) If a State elects to phase-in the 

enrollment of individuals based on 

highest need, the phase-in plan must 

use the needs-based criteria described in 

§ 441.659(a) of this subpart to establish 

priority for enrollment. Such criteria 

must be based upon the assessed need 

of individuals, with higher-need 

individuals receiving services prior to 

individuals with lower assessed need. 

(C) If a State elects to phase-in the 

provision of any services, the phase-in 

plan must include a description of the 

services that will not be available to all 

eligible individuals, the rationale for 

limiting the provision of services, and 

assurance that all individuals with 

access to a willing and qualified 

provider may receive services. 

(D) The plan may not include a cap 

on the number of enrollees. 

(E) The plan must include a timeline 

to assure that all eligible individuals 

receive all included services prior to the 

end of the first 5-year approval period, 

described in paragraph (a)(2)(vi) of this 

section. 

(iii) Reimbursement methodology. 

The State plan amendment to provide 

State plan HCBS must contain a 

description of the reimbursement 

methodology for each covered service. 

To the extent that the reimbursement 

methodologies for any self-directed 

services differ from those descriptions, 

the method for setting reimbursement 

methodology for the self-directed 

services must also be described. 

(iv) Operation. The State plan 

amendment to provide State plan HCBS 

must contain a description of the State 

Medicaid agency line of authority for 

operating the State plan HCBS benefit, 

including distribution of functions to 

other entities. 

(v) Modifications. The agency may 

request that modifications to the benefit 

be made effective retroactive to the first 

day of a fiscal year quarter, or another 

date after the first day of a fiscal year 

quarter, in which the amendment is 

submitted, unless the amendment 

involves substantive change. 

Substantive changes may include, but 

are not limited to, the following: 

(A) Revisions to services available 

under the benefit including elimination 

or reduction in services, and changes in 

the scope, amount and duration of the 

services. 

(B) Changes in the qualifications of 

service providers, rate methodology, or 

the eligible population. 

(1) Request for Amendments. A 

request for an amendment that involves 

a substantive change as determined by 

CMS— 

(i) May only take effect on or after the 

date when the amendment is approved 

by CMS; and 

(ii) Must be accompanied by 

information on how the State will 

ensure for transitions with minimal 

adverse impact on individuals impacted 

by the change. 

(2) [Reserved] 

(vi) Periods of approval. (A) If a State 

elects to establish targeting criteria 

through § 441.656(b)(2) of this subpart, 

the approval of the State Plan 

Amendment will be in effect for a 

period of 5 years from the effective date 

of the amendment. To renew State plan 

HCBS for an additional 5-year period, 

the State must provide a written request 

for renewal to CMS at least 180 days 

prior to the end of the approval period. 

CMS approval of a renewal request is 


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contingent upon State adherence to 

Federal requirements. 

(B) If a State does not elect to 

establish targeting criteria through 

§ 441.656(b)(2) of this subpart, the 

limitations on length of approval does 

not apply. 

(b) Quality improvement strategy: 

Program performance and quality of 

care. States must develop and 

implement an HCBS quality 

improvement strategy that includes a 

continuous improvement process and 

measures of program performance and 

experience of care. The strategy must be 

proportionate to the scope of services in 

the State plan HCBS benefit and the 

number of individuals to be served. The 

State will make this information 

available to CMS at a frequency 

determined by the Secretary or upon 

request. 

(1) Quality Improvement Strategy. The 

quality improvement strategy must 

include all of the following: 

(i) Incorporate a continuous quality 

improvement process that includes 

monitoring, remediation, and quality 

improvement. 

(ii) Be evidence-based, and include 

measures as determined by the 

Secretary. 

(iii) Provide evidence of program 

performance and the establishment of 

sufficient infrastructure to effectively 

implement the program. 

(iv) Measure individual outcomes 

associated with the receipt of HCBS, 

related to the implementation of goals 

included in the individual service plan. 

(2) [Reserved] 

PART 447—PAYMENTS FOR 

SERVICES 

16. The authority citation for part 447 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

17. Section 447.10 is amended by 

adding paragraph (g)(4) to read as 

follows: 

§ 447.10 Prohibition Against 

Reassignment of Provider Claims 

(g) * * * 

(4) In the case of a class of 

practitioners for which the Medicaid 

program is the primary source of 

revenue, payment may be made to a 

third party on behalf of the individual 

practitioner for benefits such as health 

insurance, skills training and other 

benefits customary for employees. 

* * * * * 

Authority 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: April 24, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: April 24, 2012. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2012–10385 Filed 4–26–12; 4:15 pm] 

BILLING CODE 4120–01–P 


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