§ 441.302 State assurances. Unless the Medicaid agency provides the following satisfactory assurances to CMS, CMS will not grant a waiver under this subpart and may terminate a waiver already granted: ( a ) *Health and Welfare* —Assurance that necessary safeguards have been taken to protect the health and welfare of the beneficiaries of the services. Those safeguards must include— ( 1 ) Adequate standards for all types of providers that provide services under the waiver;
( 2 ) Assurance that the standards of any State licensure or certification requirements are met for services or for individuals furnishing services that are provided under the waiver; and
( 3 ) Assurance that all facilities covered by section 1616(e) of the Act, in which home and community-based services will be provided, are in compliance with applicable State standards that meet the requirements of 45 CFR part 1397 for board and care facilities.
( 4 ) Assurance that the State is able to meet the unique service needs of the individuals when the State elects to serve more than one target group under a single waiver, as specified in § 441.301(b)(6). ( i ) On an annual basis the State will include in the quality section of the CMS-372 form (or any successor form designated by CMS) data that indicates the State continues to serve multiple target groups in the single waiver and that a single target group is not being prioritized to the detriment of other groups.
( ii ) [Reserved]
( 5 ) Assurance that services are provided in home and community based settings, as specified in § 441.301(c)(4).
( 6 ) Assurance that the State operates and maintains an incident management system that identifies, reports, triages, investigates, resolves, tracks, and trends critical incidents. ( i ) *Requirements.* The State must: ( A ) Define critical incident to include, at a minimum— ( 1 ) Verbal, physical, sexual, psychological, or emotional abuse;
( 2 ) Neglect;
( 3 ) Exploitation including financial exploitation;
( 4 ) Misuse or unauthorized use of restrictive interventions or seclusion;
( 5 ) A medication error resulting in a telephone call to, or a consultation with, a poison control center, an emergency department visit, an urgent care visit, a hospitalization, or death; or
( 6 ) An unexplained or unanticipated death, including but not limited to a death caused by abuse or neglect;
( B ) Use an information system, as defined in 45 CFR 164.304 and compliant with 45 CFR part 164, that, at a minimum, enables— ( 1 ) Electronic critical incident data collection;
( 2 ) Tracking (including of the status and resolution of investigations); and
( 3 ) Trending;
( C ) Require providers to report to the State, within State-established timeframes and procedures, any critical incident that occurs during the delivery of services authorized under section 1915(c) of the Act and as specified in the beneficiary's person-centered service plan, or occurs as a result of the failure to deliver services authorized under section 1915(c) of the Act and as specified in the beneficiary's person-centered service plan;
( D ) Use claims data, Medicaid fraud control unit data, and data from other State agencies, such as Adult Protective Services or Child Protective Services, to the extent permissible under applicable State law to identify critical incidents that are unreported by providers and occur during the delivery of services authorized under section 1915(c) of the Act and as specified in the beneficiary's person-centered service plan, or occur as a result of the failure to deliver services authorized under section 1915(c) of the Act and as specified in the beneficiary's person-centered service plan;
( E ) Ensure that there is information sharing on the status and resolution of investigations, such as through the use of information sharing agreements, between the State and the entity or entities responsible in the State for investigating critical incidents as defined in paragraph (a)(6)(i)(A) of this section if the State refers critical incidents to other entities for investigation;
( F ) Separately investigate critical incidents if the investigative agency fails to report the resolution of an investigation within State-specified timeframes; and
( G ) Demonstrate that it meets the requirements in paragraph (a)(6) of this section through the reporting requirement at § 441.311(b)(1).
( ii ) *Minimum performance at the State level.* The State must demonstrate, through the reporting requirements at § 441.311(b)(2), that it meets the following minimum performance levels: ( A ) Initiate an investigation, within State-specified timeframes, for no less than 90 percent of critical incidents;
( B ) Complete an investigation and determine the resolution of the investigation, within State-specified timeframes, for no less than 90 percent of critical incidents; and
( C ) Ensure that corrective action has been completed within State-specified timeframes, for no less than 90 percent of critical incidents that require corrective action.
( iii ) *Applicability date.* States must comply with the requirements in paragraph (a)(6) of this section beginning 3 years after July 9, 2024; except for the requirement at paragraph (a)(6)(i)(B) of this section, with which the State must comply beginning 5 years after July 9, 2024; and in the case of the State that implements a managed care delivery system under the authority of sections 1915(a), 1915(b), 1932(a), or 1115(a) of the Act and includes HCBS in the MCO's, PIHP's, or PAHP's contract, the first rating period for contracts with the MCO, PIHP, or PAHP beginning on or after 3 years after July 9, 2024, except for the requirement at paragraph (a)(6)(i)(B) of this section, with which the first rating period for contracts with the MCO, PIHP or PAHP beginning on or after 5 years after July 9, 2024.
( b ) *Financial accountability—* The agency will assure financial accountability for funds expended for home and community-based services, provide for an independent audit of its waiver program (except as CMS may otherwise specify for particular waivers), and it will maintain and make available to HHS, the Comptroller General, or other designees, appropriate financial records documenting the cost of services provided under the waiver, including reports of any independent audits conducted.
( c ) *Evaluation of need.* Assurance that the agency will provide for the following: ( 1 ) *Initial evaluation.* An evaluation of the need for the level of care provided in a hospital, a NF, or an ICF/IID when there is a reasonable indication that a beneficiary might need the services in the near future (that is, a month or less) unless he or she receives home or community-based services. For purposes of this section, “evaluation” means a review of an individual beneficiary's condition to determine— ( i ) If the beneficiary requires the level of care provided in a hospital as defined in § 440.10 of this subchapter, a NF as defined in section 1919(a) of the Act, or an ICF/IID as defined by § 440.150 of this subchapter; and
( ii ) That the beneficiary, but for the provision of waiver services, would otherwise be institutionalized in such a facility.
( 2 ) *Periodic reevaluations.* Reevaluations, at least annually, of each beneficiary receiving home or community-based services to determine if the beneficiary continues to need the level of care provided and would, but for the provision of waiver services, otherwise be institutionalized in one of the following institutions: ( i ) A hospital;
( ii ) A NF; or
( iii ) An ICF/IID.
( d ) *Alternatives* —Assurance that when a beneficiary is determined to be likely to require the level of care provided in a hospital, NF, or ICF/IID, the beneficiary or his or her legal representative will be— ( 1 ) Informed of any feasible alternatives available under the waiver; and
( 2 ) Given the choice of either institutional or home and community-based services.
( e ) *Average per capita expenditures.* Assurance that the average per capita fiscal year expenditures under the waiver will not exceed 100 percent of the average per capita expenditures that would have been made in the fiscal year for the level of care provided in a hospital, NF, or ICF/IID under the State plan had the waiver not been granted. ( 1 ) These expenditures must be reasonably estimated and documented by the agency.
( 2 ) The estimate must be on an annual basis and must cover each year of the waiver period.
( f ) *Actual total expenditures.* Assurance that the agency's actual total expenditures for home and community-based and other Medicaid services under the waiver and its claim for FFP in expenditures for the services provided to beneficiaries under the waiver will not, in any year of the waiver period, exceed 100 percent of the amount that would be incurred by the State's Medicaid program for these individuals, absent the waiver, in— ( 1 ) A hospital;
( 2 ) A NF; or
( 3 ) An ICF/IID.
( g ) *Institutionalization absent waiver.* Assurance that, absent the waiver, beneficiaries in the waiver would receive the appropriate type of Medicaid-funded institutional care (hospital, NF, or ICF/IID) that they require.
( h ) *Reporting.* Assurance that the agency will provide CMS with information on the waiver's impact, including the data and information as required in § 441.311.
( i ) *Habilitation services.* Assurance that prevocational, educational, or supported employment services, or a combination of these services, if provided as habilitation services under the waiver, are— ( 1 ) Not otherwise available to the individual through a local educational agency under section 602 (16) and (17) of the Education of the Handicapped Act (20 U.S.C. 1401 (16 and 17)) or as services under section 110 of the Rehabilitation Act of 1973 (29 U.S.C. 730); and
( 2 ) Furnished as part of expanded habilitation services, if the State has requested and received CMS's approval under a waiver or an amendment to a waiver.
( j ) *Day treatment or partial hospitalization, psychosocial rehabilitation services, and clinic services for individuals with chronic mental illness.* Assurance that FFP will not be claimed in expenditures for waiver services including, but not limited to, day treatment or partial hospitalization, psychosocial rehabilitation services, and clinic services provided as home and community-based services to individuals with chronic mental illnesses if these individuals, in the absence of a waiver, would be placed in an IMD and are— ( 1 ) Age 22 to 64;
( 2 ) Age 65 and older and the State has not included the optional Medicaid benefit cited in § 440.140; or
( 3 ) Age 21 and under and the State has not included the optional Medicaid benefit cited in § 440.160.
( k ) *HCBS payment adequacy.* Assurance that payment rates are adequate to ensure a sufficient direct care workforce to meet the needs of beneficiaries and provide access to services in the amount, duration, and scope specified in beneficiaries' person-centered service plans. ( 1 ) *Definitions.* As used in this paragraph— ( i ) *Compensation* means: ( A ) Salary, wages, and other remuneration as defined by the Fair Labor Standards Act and implementing regulations (29 U.S.C. 201 *et seq.,* 29 CFR parts 531 and 778);
( B ) Benefits (such as health and dental benefits, life and disability insurance, paid leave, retirement, and tuition reimbursement); and
( C ) The employer share of payroll taxes for direct care workers delivering services authorized under section 1915(c) of the Act.
( ii ) *Direct care worker* means any of the following individuals who may be employed by a Medicaid provider, State agency, or third party; contracted with a Medicaid provider, State agency, or third party; or delivering services under a self-directed services delivery model: ( A ) A registered nurse, licensed practical nurse, nurse practitioner, or clinical nurse specialist who provides nursing services to Medicaid beneficiaries receiving home and community-based services available under this subpart;
( B ) A licensed or certified nursing assistant who provides such services under the supervision of a registered nurse, licensed practical nurse, nurse practitioner, or clinical nurse specialist;
( C ) A direct support professional;
( D ) A personal care attendant;
( E ) A home health aide; or
( F ) Other individuals who are paid to provide services to address activities of daily living or instrumental activities of daily living, behavioral supports, employment supports, or other services to promote community integration directly to Medicaid beneficiaries receiving home and community-based services available under this subpart, including nurses and other staff providing clinical supervision.
( iii ) *Excluded costs* means costs that are not included in the calculation of the percentage of Medicaid payments to providers that is spent on compensation for direct care workers. Such costs are limited to: ( A ) Costs of required trainings for direct care workers (such as costs for qualified trainers and training materials);
( B ) Travel costs for direct care workers (such as mileage reimbursement or public transportation subsidies); and
( C ) Costs of personal protective equipment for direct care workers.
( 2 ) *Requirement.* ( i ) Except as provided in paragraph (k)(2)(ii) of this section, the State must demonstrate annually, through the reporting requirements at paragraph (k)(6) of this section and § 441.311(e), that it meets the minimum performance levels in paragraph (k)(3) of this section for furnishing homemaker, home health aide, or personal care services, as set forth at § 440.180(b)(2) through (4), that are delivered by direct care workers and authorized under section 1915(c) of the Act.
( ii ) *Treatment of certain payment data under self-directed services delivery models.* If the State provides that homemaker, home health aide, or personal care services, as set forth at § 440.180(b)(2) through (4), may be furnished under a self-directed services delivery model in which the beneficiary directing the services sets the direct care worker's payment rate, then the State does not include such payment data in its calculation of the State's compliance with the minimum performance levels at paragraph (k)(3) of this section.
( 3 ) *Minimum performance at the provider level.* Except as provided in paragraphs (k)(5) and (7) of this section, the State must meet the following minimum performance level as applicable, calculated as the percentage of total payment (not including excluded costs) to a provider for furnishing homemaker, home health aide, or personal care services, as set forth at § 440.180(b)(2) through (4), represented by the provider's total compensation to direct care workers: ( i ) Except as provided in paragraph (k)(3)(ii) of this section, the State must ensure that each provider spends 80 percent of total payments the provider receives for services it furnishes as described in paragraph (k)(3) of this section on total compensation for direct care workers who furnish those services.
( ii ) At the State's option, for providers determined by the State to meet its State-defined small provider criteria in paragraph (k)(4)(i) of this section, the State must ensure that each provider spends the percentage set by the State in accordance with paragraph (k)(4)(ii) of this section of total payments the provider receives for services it furnishes as described in paragraph (k)(3) of this section on total compensation for direct care workers who furnish those services.
( 4 ) *Small provider minimum performance level* — ( i ) *Small provider criteria.* The State may develop reasonable, objective criteria through a transparent process to identify small providers that the State would require to meet the minimum performance requirement at paragraph (k)(3)(ii) of this section. The transparent process for developing criteria to identify providers that qualify for the minimum performance requirement in paragraph (k)(3)(ii) of this section must include public notice and opportunities for comment from interested parties.
( ii ) *Small provider minimum performance level.* The State must set the percentage for a small provider to meet the minimum performance level at paragraph (k)(3)(ii) of this section based on reasonable, objective criteria it develops through a transparent process that includes public notice and opportunities for comment from interested parties.
( 5 ) *Hardship exemption.* The State may develop reasonable, objective criteria through a transparent process to exempt from the minimum performance requirement at paragraph (k)(3) of this section a reasonable number of providers determined by the State to be facing extraordinary circumstances that prevent their compliance with paragraph (k)(3) of this section. The State must develop these criteria through a transparent process that includes public notice and opportunities for comment from interested parties. If a provider meets the State's hardship exemption criteria, then the State does not include that provider in its calculation of the State's compliance with the minimum performance level at paragraph (k)(3) of this section.
( 6 ) Reporting on small provider minimum performance level and hardship exemption. ( i ) States that establish a small provider minimum performance level under paragraph (k)(4) of this section must report to CMS annually the following information, in the form and manner, and at a time, specified by CMS: ( A ) The State's small provider criteria developed in accordance with paragraph (k)(4)(i) of this section;
( B ) The State's small provider minimum performance level developed in accordance with paragraph (k)(4)(ii) of this section;
( C ) The percentage of providers of services set forth at § 440.180(b)(2) through (4) that qualify for the small provider minimum performance level at paragraph (k)(4) of this section; and
( D ) A plan, subject to CMS review and approval, for small providers to meet the minimum performance requirement at paragraph (k)(3)(i) of this section within a reasonable period of time.
( ii ) States that provide a hardship exemption in accordance with paragraph (k)(5) of this section must report to CMS annually the following information, in the form and manner, and at a time, specified by CMS: ( A ) The State's hardship criteria developed in accordance with paragraph (k)(5) of this section;
( B ) The percentage of providers of services set forth at § 440.180(b)(2) through (4) that qualify for a hardship exemption as provided in paragraph (k)(5) of this section; and
( C ) A plan, subject to CMS review and approval, for reducing the number of providers that qualify for a hardship exemption within a reasonable period of time.
( iii ) CMS may waive the reporting requirements in paragraphs (k)(6)(i)(D) or (k)(6)(ii)(C) of this section, as applicable, if the State demonstrates it has applied the small provider minimum performance level at paragraph (k)(4)(ii) of this section or the hardship exemption at paragraph (k)(5) of this section to less than 10 percent of the State's providers.
( 7 ) *Exemption for the Indian Health Service and Tribal health programs subject to 25 U.S.C. 1641 .* The Indian Health Service and Tribal health programs subject to the requirements at 25 U.S.C. 1641 are exempt from the requirements at paragraph (k) of this section.
( 8 ) *Applicability date.* States must comply with the requirements set forth in paragraph (k) of this section beginning 6 years after July 9, 2024; and in the case of the State that implements a managed care delivery system under the authority of section 1915(a), 1915(b), 1932(a), or 1115(a) of the Act and includes homemaker, home health aide, or personal care services, as set forth at § 440.180(b)(2) through (4) in the MCO's, PIHP's, or PAHP's contract, the first rating period for contracts with the MCO, PIHP, or PAHP beginning on or after the date that is 6 years after July 9, 2024.
[50 FR 10026, Mar. 13, 1985, as amended at 59 FR 37717, July 25, 1994; 65 FR 60107, Oct. 10, 2000; 79 FR 3031, Jan. 16, 2014; 89 FR 40865, May 10, 2024]