47896 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 440

[MB–071–F]

RIN 0938–AH00

Medicaid Program; Coverage of

Personal Care Services

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Final rule.

SUMMARY: This final rule specifies the

revised requirements for Medicaid

coverage of personal care services

furnished in a home or other location as

an optional benefit, effective for services

furnished on or after October 1, 1994. In

particular, this final rule specifies that

personal care services may be furnished

in a home or other location by any

individual who is qualified to do so.

This rule conforms the Medicaid

regulations to the provisions of section

13601(a)(5) of the Omnibus Budget

Reconciliation Act of 1993, which

added section 1905(a)(24) to the Social

Security Act. Additionally, we are

making two minor changes to the

Medicaid regulations concerning home

health services.

EFFECTIVE DATE: November 10, 1977.

FOR FURTHER INFORMATION CONTACT:

Terese Klitenic, (410) 786–5942.

SUPPLEMENTARY INFORMATION:

I. Background

Under section 1902(a)(10) of the

Social Security Act (the Act), States

with Medicaid programs must provide

certain basic services to Medicaid

recipients. Section 1905(a) of the Act

defines the required and optional

services that are provided as medical

assistance. Before the enactment of the

Omnibus Budget Reconciliation Act of

1990 (OBRA ’90, Public Law 101–508),

a State had the option to elect to cover

personal care services under its

Medicaid State plan. Although not

specifically mentioned in section

1905(a) of the Act, personal care

services could be covered under section

1905(a)(22) of the Act (redesignated as

section 1905(a)(25) of the Act on

November 5, 1990), under which a State

may furnish any additional services

specified by the Secretary and

recognized under State law. In

regulations at 42 CFR 440.170(f), the

Secretary specified that personal care

services may be covered.

Section 4721 of OBRA ’90 amended

section 1905(a)(7) of the Act to include

personal care services as part of the

home health services benefit and to

impose certain conditions on the

provision of personal care services,

effective for services furnished on or

after October 1, 1994. This amendment

would have had a significant effect

since, under section 1902(a)(10)(D) of

the Act, home health services are a

mandatory benefit for all Medicaid

recipients eligible for nursing facility

services under the State plan. Thus, had

section 1905(a)(7) of the Act not been

further amended (as discussed below)

before the effective date of section 4721

of OBRA ’90, personal care services

would have become a mandatory benefit

for all recipients eligible for nursing

facility services, effective October 1,

1994.

Before the provisions of OBRA ’90

became effective, the Omnibus Budget

Reconciliation Act of 1993 (OBRA ’93,

Public Law 103–66) was enacted on

August 10, 1993. Section 13601(a)(1) of

OBRA ’93 amended section 1905(a)(7) of

the Act to remove personal care services

from the definition of home health

services. Additionally, section

13601(a)(5) of OBRA ’93 added a new

paragraph (24) to section 1905(a) of the

Act, to include payment for personal

care services under the definition of

medical assistance. Under section

1905(a)(24) of the Act, personal care

services furnished to an individual who

is not an inpatient or resident of a

hospital, nursing facility, intermediate

care facility for persons with mental

retardation (ICF/MR), or institution for

mental disease is an optional benefit for

which States may provide medical

assistance payments. The statute

specifies that personal care services

must be: (1) Authorized for an

individual by a physician in accordance

with a plan of treatment or (at the

option of the State) otherwise

authorized for the individual in

accordance with a service plan

approved by the State; (2) provided by

an individual who is qualified to

provide such services and who is not a

member of the individual’s family; and

(3) furnished in a home or other

location. This amendment was effective

October 1, 1994. Therefore, as a result

of the legislative changes made by

OBRA ’93, personal care services

continue to be an optional State plan

benefit, and are now authorized under

section 1905(a)(24) of the Act, effective

for services furnished on or after

October 1, 1994.

II. Issuance of the Proposed Rule

A. Personal Care Services in a Home or

Other Location (§ 440.167)

On March 8, 1996, we published in

the Federal Register a proposed rule

that specified that personal care services

may be furnished in a home or other

location by any individual who is

qualified to do so (61 FR 9405).

Throughout the preamble to the

proposed rule, we emphasized our main

goal in implementing the statutory

provisions regarding personal care

services. Specifically, our objective was

to provide States maximum flexibility in

tailoring their Medicaid programs to

meet the needs of recipients while also

setting guidelines so that States that

choose to offer the personal care

services benefit furnish quality services

in an effective manner.

In the preamble to the proposed rule,

we stated that as historically used in the

Medicaid program, personal care

services means services related to a

patient’s physical requirements, such as

assistance with eating, bathing,

dressing, personal hygiene, activities of

daily living, bladder and bowel

requirements, and taking medications

(61 FR 9406). These services primarily

involve ‘‘hands on’’ assistance by a

personal care attendant with a

recipient’s physical dependency needs

(as opposed to purely housekeeping

services). We noted that although

personal care services may be similar to

or overlap some services furnished by

home health aides, skilled services that

may be performed only by a health

professional are not considered personal

care services. Alternatively, services

that require a lower level of skill such

as personal care services may also be

provided by home health aides under

the home health benefit. We did not

propose to include the above

description of personal care services in

the regulations. The specific changes we

proposed to the regulations are set forth

below:

The existing regulations at § 440.170

specify that personal care services in a

recipient’s home means services

prescribed by a physician in accordance

with the recipient’s plan of treatment,

and furnished by an individual who is

(1) qualified to provide the services, (2)

supervised by a registered nurse, and (3)

not a member of the recipient’s family.

The existing regulations do not provide

for personal care services furnished in

settings other than the recipient’s home.

To conform the regulations to the

provisions of section 1905(a)(24) of the

Act, we proposed to add a new

§ 440.167, ‘‘Personal care services in a

home or other location.’’ We proposed
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations 47897

that personal care services are services

furnished to an individual who is not an

inpatient or resident of a hospital,

nursing facility, intermediate care

facility for persons with mental

retardation, or institution for mental

disease, that are: (1) Authorized for the

individual by a physician in accordance

with a plan of treatment or (at the

option of the State) otherwise

authorized for the individual in

accordance with a service plan

approved by the State; (2) provided by

an individual who is qualified to

provide such services and who is not a

member of the individual’s family; and

(3) furnished in a home, and if the State

chooses, in another location.

Since section 1905(a)(24) of the Act

does not require that the services be

supervised by a registered nurse, we

proposed that we would not require

such supervision in new § 440.167. In

addition, we proposed that States that

elect to offer the personal care services

benefit must, at a minimum, cover

personal care services provided in the

home, but also have the option to cover

personal care services provided in other

locations. We set forth a detailed

discussion of alternatives that we

considered in implementing the

provision of OBRA ’93 that allows

States to cover personal care services

provided outside the home (61 FR

9406).

We proposed to leave to the State’s

option the decision of whether personal

care services are to be authorized by a

physician in accordance with a plan of

treatment, or otherwise authorized in

accordance with a service plan

approved by the State. Similarly, we

proposed to permit States to determine,

through development of provider

qualifications, which individuals are

qualified to provide personal care

services (other than family members).

Section 1905(a)(24)(B) of the Act

specifies that, for Medicaid purposes,

personal care services may not be

furnished by a member of the

individual’s family. To provide for more

clarity and consistency in this regard,

we proposed to define family members

under new § 440.167(b) as spouses of

recipients and parents (or stepparents)

of minor recipients. Finally, since

personal care services are now an

optional benefit under section

1905(a)(24) of the Act, we proposed to

remove existing § 440.170(f), which

provides for coverage of personal care

services in a recipient’s home as part of

any other medical care or remedial care

recognized under State law and

specified by the Secretary.

B. Proposed Changes Concerning Home

Health Services (§ 440.70)

We proposed several changes to the

regulations concerning home health

services. Specifically, we proposed to

revise § 440.70(b)(3) to provide that the

frequency of physician review of a

recipient’s need for medical supplies,

equipment, and appliances suitable for

use in the home under the home health

benefit would be determined on a caseby-case basis depending on the nature of

the item prescribed (rather than every

60 days, as provided for in the existing

regulations). Absent changes in a

recipient’s condition, we do not believe

that a recipient’s need for medical

equipment necessitates routine

inclusion in a plan of care reviewed

every 60 days by a physician.

Additionally, existing § 440.70(d)

defines a home health agency for

purposes of Medicaid reimbursement as

a public or private agency or

organization, or part of an agency or

organization, that meets requirements

for participation in Medicare. We

proposed to revise this definition to

indicate that in order to participate in

Medicaid, the agency must meet

Medicare requirements for participation

as well as any additional standards the

State may wish to apply that are not in

conflict with Federal requirements.

Finally, we proposed a technical change

to § 440.70(c) to remove an obsolete

reference to subparts F and G of part

442.

III. Discussion of Public Comments and

Departmental Responses

We received 73 timely comments in

response to the proposed rule. A

summary of these comments and our

responses follow.

Comment: Many commenters

disagreed with our proposal to eliminate

the requirement that personal care

services be supervised by a registered

nurse. The commenters indicated that

the registered nurse is the only medical

contact many (mostly elderly)

beneficiaries have and that the nurse is

instrumental in identifying health needs

that require immediate attention by a

health care professional.

Response: Section 1905(a)(24) of the

Act, as added by OBRA ‘‘93, does not

specify that personal care services must

be supervised by a registered nurse.

Therefore, we proposed to remove the

requirement from the existing

regulations. While we believe that it was

clearly the intent of Congress to

eliminate this requirement from the

statute, we agree with the commenters

that there may be situations in which

individuals providing personal care

services need supervision. However,

while some individuals’ conditions may

dictate a need for nurse supervision,

many individuals receiving personal

care services are either capable of

directing their own care or have needs

that are not based on a ‘‘medical’’

condition (for example, individuals

with mental retardation). Additionally,

a stable, physically disabled beneficiary

without cognitive impairments may not

need supervision of his or her personal

care attendant. In some cases,

supervision of personal care services by

a registered nurse may be unnecessary,

but the services of a case manager may

be appropriate to oversee the

individual’s needs. We note that case

management services could be

reimbursed as either administrative

costs or, as applicable, targeted case

management services under Medicaid.

Our revision to the regulations does not

prohibit the supervision of a registered

nurse; rather, it allows States to make

the determination of when supervision

of personal care services is necessary

and what type of professional is

qualified to supervise the personal care

attendant. Therefore, we believe that the

need for supervision, whether by a

registered nurse or another individual,

should be made on a case-by-case basis

by the State.

Comment: A few commenters were

concerned that we did not define

‘‘qualified’’ personal care providers.

Others suggested that we require States

to establish criteria for determining

provider qualifications. In addition,

several commenters recommended that,

without the nursing supervision

requirement, we establish Federal

quality assurance standards or minimal

standards of training or testing for

personal care providers.

Response: We are not establishing

provider qualifications for personal care

services. Rather, in the interest of

maintaining a high level of flexibility in

providing personal care services, we

suggest that States develop their own

provider qualifications and establish

mechanisms for quality assurance.

While we recognize the importance of

provider qualifications and quality

assurance, we also firmly believe in

allowing States the greatest flexibility in

designing their Medicaid programs.

There are several methods States may

use to ensure that recipients are

receiving high quality personal care

services. For example, States may opt to

screen personal care attendants before

they are employed and/or train them

afterward or allow the recipient to be

the judge of quality through an initial

screening. Alternatively, States may

require agency providers to train their
47898 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations

employees on the job. State level

oversight of overall program compliance

standards, case level oversight,

attendant training and screening, and

recipient complaint and grievance

mechanisms are ways in which States

can influence the quality of their

personal care programs. In this way,

States can best address the needs of

their target populations (for example,

individuals with AIDS or with physical

disabilities) and set unique provider

qualifications and quality assurance

mechanisms. We note that home health

aides employed by home health

agencies may sometimes provide

personal care services. Home health

aides that provide only personal care

services under Medicaid need only meet

the qualifications set forth at § 484.36(e)

(and not other qualifications for home

health aide services).

Comment: Some commenters

disagreed with our proposal that States

electing to offer personal care services

must cover these services when

provided in the home and may also

choose to cover personal care services

provided in other locations. The

commenters believed that we should

require States to provide the services in

locations outside the home. One

commenter stated that we should

indicate that assisted living facilities

may be considered an individual’s

home. Other commenters asked that we

clarify the meaning of ‘‘other locations.’’

Response: In the proposed rule, we set

forth a detailed discussion of options we

considered for implementing the

provision of OBRA ’93 that allows

States to cover personal care services

outside the home (61 FR 9406). We

proposed that States electing the

personal care services benefit must

provide the services in the home but

may also choose to provide personal

care in locations outside the home. We

stated that our main goal in

implementing the provision was to

afford States maximum flexibility in

tailoring their Medicaid programs to

meet the needs of their recipients while

also expanding the settings in which

personal care services may be provided.

We do not believe that adopting the

commenters’ suggestion that we require

States to provide the services in the

home and in other locations would be

appropriate since section 1905(a)(24)(C)

of the Act refers to services ‘‘furnished

in a home or other location.’’ We believe

that Congress clearly did not intend to

impose such a mandate on State

Medicaid programs. Moreover, a policy

such as the one suggested by the

commenters could work against the best

interests of recipients if States choose

not to offer the personal care services

benefit at all because of the expense

involved in covering the services both

inside and outside the home. In

addition, the Medicaid program has

always given States latitude in

establishing the criteria or conditions

under which optional services (such as

personal care) may be covered, as long

as the services available are sufficient to

achieve their purpose. States have the

flexibility to define optional services to

include less than the full array of

services that could be covered under the

regulatory definitions, if they so choose.

(In accordance with section 1905(r)(5) of

the Act, coverage of personal care

services outside the home is not

optional with respect to those

individuals who are eligible for the

Early and Periodic Screening,

Diagnostic, and Treatment (EPSDT)

program. Personal care services outside

the home are mandatory for these

individuals when medically necessary

under the EPSDT program.)

We note that an individual need not

receive personal care services inside the

home to be eligible to receive them in

another location. Rather, as stated

above, a State that opts to furnish

personal care services must provide

them inside the home to recipients that

need them in that setting, but also has

the option to provide them in other

locations. Thus, depending on whether

the State also chooses to provide

personal care services outside the home,

an individual recipient could receive

personal care services inside the home,

outside the home or in both locations.

We believe that our policy is the most

appropriate interpretation of the statute,

is in the best interest of recipients, and

gives States the discretion necessary to

operate their programs in an efficient

manner.

With regard to the other issues raised

by commenters, States may consider an

assisted living facility as an individual’s

home but we do not believe we need to

add this requirement to the regulations.

Additionally, ‘‘other locations’’ may be

any location, as specified by the State,

except for the statutorily excluded

locations set forth in section 1905(a)(24)

of the Act (hospital, nursing facility, or

ICF/MR).

Comment: One commenter disagreed

with our position that the EPSDT

provisions mandate coverage of

personal care services outside the home

when medically necessary.

Response: As stated above, under

section 1905(r)(5) of the Act, the

provision of medically necessary

personal care services outside the home

is not an option but a mandate for

individuals eligible under the EPSDT

program. The EPSDT benefit includes

all medically necessary services

described in section 1905(a) of the Act,

whether or not such services are

covered under the State’s Medicaid

plan. Therefore, personal care services

must be provided outside the home

when medically necessary to

individuals under the EPSDT program.

Comment: Some commenters

disagreed with our proposed definition

of personal care services and others

believed that we should define the

services in regulation. The commenters

recommended that we provide a

detailed description of the services that

can be provided under the personal care

services benefit in the regulatory

language. One commenter indicated that

personal care services should include

those that are delegated by a nurse or

physician to an unlicensed personal

care provider. They also suggested that

the definition be revised to delete

reference to physical tasks while

referring to assistance with both

activities of daily living (ADLs) and

instrumental activities of daily living

(IADLs), including assistance with

cognitive tasks and services to prevent

an individual from harming himself.

One commenter suggested changing the

name of the service from personal care

services to ‘‘personal assistant services.’’

One commenter asserted that assistance

with taking medications should not be

included as a personal care service.

Response: As stated in the proposed

rule, in order to more easily address

changes that may occur in the definition

and delivery of personal care services

and to allow greatest State flexibility, in

the near future we plan to publish in a

State Medicaid Manual instruction a

definition that States may use. As

suggested by the commenter, we plan to

define the services in terms of assistance

with ADLs and IADLs. Services such as

those delegated by nurses or physicians

to personal care attendants may be

provided so long as the delegation is in

keeping with State law or regulation and

the services fit within the personal care

services benefit covered under a State’s

plan. Services such as assistance with

taking medications would be allowed if

they are permissible in States’ Nurse

Practice Acts, although States may need

to ensure proper training is provided

when necessary. We will not change the

name of the service as suggested, as the

regulations now are consistent with the

statutory language.

Comment: Some commenters were

concerned about our proposed

definition of ‘‘family member’’ for

purposes of individuals providing

personal care services. A few

commenters suggested that we expand

the definition to preclude Medicaid
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations 47899

coverage of personal care services

provided by children, grandchildren,

and legal guardians of recipients. Other

commenters believed that parents and

spouses should be allowed to provide

personal care services. Another

commenter recommended that

stepparents be allowed to provide

personal care services in States where

stepparents are not legally responsible

for the recipient. Finally, several

commenters disagreed with our

proposal to allow States to further

restrict family members from providing

services and indicated that States

should be required to limit excluded

family members to spouses and parents.

Response: Section 1905(a)(24)(B) of

the Act specifies that personal care

services may not be furnished by a

member of the individual’s family. We

proposed to define family members as

spouses of recipients and parents (or

stepparents) of minor recipients.

Additionally, we proposed that States

could further restrict which family

members could qualify as providers by

extending the definition to apply to

family members other than spouses and

parents.

To provide for more clarity and

consistency, we have revised the

definition of family member at new

§ 440.167(b) to provide that a family

member is a legally responsible relative.

Thus, spouses of recipients and parents

of minor recipients (including

stepparents who are legally responsible

for minor children) are included in the

definition of family member. This

definition is identical to the revised

definition that applies to personal care

services provided under a home and

community-based services waiver.

Congress clearly intended to preclude

family members from providing

personal care services and we believe

our revised definition is the most

reasonable interpretation of the term.

Furthermore, we have always

maintained that spouses and parents are

inherently responsible for meeting the

personal care needs of their family

members, and, therefore, it would not be

appropriate to allow Medicaid

reimbursement for such services. If

stepparents are not legally responsible

for the recipient in some States, they

could provide personal care services

under our revised definition. However,

because States can further restrict which

family members can qualify as providers

by extending the definition to apply to

individuals other than those legally

responsible for the recipient, States

could choose to exclude stepparents

regardless of their legal responsibility.

In addition, by allowing States to further

define ‘‘family members’’ for purposes

of personal care services, States can

tailor their programs to meet their

individual needs.

Comment: A few commenters

indicated that the personal care services

benefit should be a mandatory service

that States must provide under their

Medicaid programs. One commenter

believed that the regulation should

specifically allow various methods of

delivering personal care services (for

example, vouchers, individual

providers, consumer-directed agency

models, or traditional agency models).

Response: The Medicaid program is a

Federal-State program that provides for

mandatory services that States must

provide and optional services that States

may choose to provide. Sections

1902(a)(10)(A) and 1905(a) of the Act

define those services that are optional

and those that are mandatory. Under

section 1905(a)(24) of the Act, personal

care services are an optional benefit that

States may choose to provide to their

Medicaid populations. To mandate that

States provide personal care services

would require legislative action by

Congress. With regard to methods for

delivering personal care services, we

believe in allowing States the flexibility

to determine the best method of

providing services and will not specify

such methods in a regulation.

Comment: One commenter suggested

that we retain the requirement for

physician plan of care authorization for

personal care services. The commenter

believed that eliminating this

requirement will lead to fraud and

excess spending.

Response: Section 1905(a)(24) of the

Act provides that personal care services

must be authorized ‘‘by a physician in

accordance with a plan of treatment or

(at the option of the State) otherwise

authorized for the individual in

accordance with a service plan

approved by the State.’’ In accordance

with this section of the Act, we

proposed to include this provision in

new § 440.167. We believe that the

statute clearly indicates Congress’ intent

to allow States the flexibility to utilize

alternative means of plan of care

authorization. Further, regarding the

commenter’s concern that the

elimination of the requirement for

physician authorization will encourage

fraud, we believe that it is in the best

interest of States to control spending

and to establish methods to prevent

providers from engaging in fraudulent

activities. Our revisions do not preclude

physician authorization of personal care

services. Rather, in accordance with the

statute, we are allowing States to

determine the appropriate method for

plan of care authorization. Therefore,

we will not continue to require that the

plan of care be authorized by a

physician.

Comment: One commenter disagreed

with our revision to the frequency of

review of an individual’s plan of care

for medical supplies, equipment, and

appliances suitable for use in the home

under the home health services benefit.

The commenter was concerned that our

proposal might compromise quality of

care and utilization control concerns.

Response: We proposed that

§ 440.70(b)(3) be revised to provide that

physician review of a recipient’s need

for medical supplies, equipment, and

appliances suitable for use in the home

under the home health benefit would be

required annually instead of every 60

days. The frequency of review on other

than an annual basis would be

determined by the State on a case-bycase basis depending on the nature of

the item prescribed. We have found

that, in many cases, once a recipient’s

need for medical supplies, equipment,

and appliances is indicated by a

physician, that need is unlikely to

change within 60 days. A recipient’s

need for supplies or pieces of

equipment that generally tend to be

used on a long-term basis would not be

reviewed as frequently as equipment

that is usually used only temporarily.

For example, review of the need for a

wheelchair need not be as frequent as

review of the need for an oxygen

concentrator. In all cases, a physician’s

order for the equipment would be

required initially, and frequency of

further review of a recipient’s

continuing needs would depend on the

type of equipment prescribed. We

believe that the requirement for annual

review of medical supplies and

equipment balances States flexibility in

furnishing home health services with

providing an appropriate level of

oversight. In addition, this may allow a

decrease in physicians’ paperwork

burden, time, and costs.

Comment: Two commenters disagreed

with our proposal to revise the

definition of a home health agency for

purposes of Medicaid reimbursement to

indicate that in order to participate in

Medicaid, the agency must meet

Medicare requirements for participation

as well as any additional standards the

State may wish to apply that are not in

conflict with Federal requirements.

Response: Under this provision a

State would have the option of imposing

additional standards on home health

agencies for participation in Medicaid

beyond the Medicare conditions of

participation. Our intention in revising

the home health agency definition is to

afford States greater flexibility in
47900 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations

establishing Medicaid program

requirements tailored to their own

specific needs. This will enable States to

conform existing State and Federal

requirements but by no means mandates

that additional requirements be

established.

Comment: One commenter indicated

that our proposed revision to § 440.70(c)

would erroneously preclude home

health services from being provided to

ICF/MR residents regardless of whether

those services are not otherwise

available.

Response: We proposed to make a

technical revision to § 440.70(c) to

remove an obsolete reference to subparts

F and G of part 442. We agree with the

commenter that our proposed revision

would have the effect of precluding

home health services from being made

available to ICF/MR residents even

when the services are not otherwise

available. We have revised the language

in § 440.70(c) to correct this error.

IV. Provisions of the Final Rule

We are adopting the proposed rule as

final with some revisions. Specifically:

• We have revised § 440.70(c) to

provide that a recipient’s place of

residence, for home health services,

does not include a hospital, nursing

facility, or ICF/MR, except for home

health services in an ICF/MR that are

not required to be provided by the

facility under subpart I of part 483. We

also have reinstated the example given.

• We have revised the definition of

family member at proposed § 440.167(b)

to provide that a family member is a

legally responsible relative.

• In the proposed rule, we failed to

include language currently located in

existing § 440.170(f) in new § 440.167.

Specifically, the introductory text of

existing § 440.170(f) permits States to

define personal care services differently

for purposes of a section 1915(c) waiver.

We have revised new § 440.167 to

include this provision.

V. Impact Statement

A. Background

For proposed rules such as this, we

generally prepare a regulatory flexibility

analysis that is consistent with the

Regulatory Flexibility Act (RFA) (5

U.S.C. 601 through 612), unless we

certify that a final rule will not have a

significant economic impact on a

substantial number of small entities. For

purposes of a RFA, States and

individuals are not considered small

entities. However, providers are

considered small entities.

In addition, section 1102(b) of the Act

requires us to prepare a regulatory

impact analysis for any final rule that

may have a significant impact on the

operation of a substantial number of

small rural hospitals. Such an analysis

must conform to the provisions of

section 604 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 50

beds.

We are not preparing a rural impact

statement since we have determined,

and we certify, that this final rule will

not have a significant impact on the

operations of a substantial number of

small rural hospitals.

This final rule revises the Medicaid

regulations to incorporate the statutory

requirements of section 1905(a)(24) of

the Act concerning personal care

services. In accordance with the statute,

we are providing that the services must

be: (1) Authorized for the individual by

a physician in accordance with a plan

of treatment or (at the option of the

State) otherwise authorized for the

individual in accordance with a service

plan approved by the State; (2) provided

by an individual who is qualified to

provide the services and who is not a

member of the individual’s family; and

(3) furnished in a home or other

location.

In general, the provisions of this final

rule are prescribed by section

1905(a)(24) of the Act, as added by

section 13601(a)(5) of OBRA’93. The

most significant change required under

the statute is that, as of October 1, 1994,

the settings in which States may elect to

cover personal care services have been

expanded to include locations outside

the home. We believe that this statutory

provision will increase Medicaid

program expenditures regardless of

whether or not we promulgate this rule.

The primary discretionary aspect of this

rule is the requirement that States

electing to offer the personal care

services benefit must cover the services

in the home and may choose to cover

them in any other location. As

discussed in the proposed rule (61 FR

9406), we considered requiring States

that elect to offer the personal care

services benefit to cover the services in

both the home and other locations. We

also considered allowing States to cover

the services either in the home or in

other locations. However, we believe

that the policy in this final rule is the

most appropriate interpretation of the

statute and gives States the discretion

necessary to operate their programs in

an efficient manner and in the best

interest of their recipients.

As noted above, the major provisions

of this final rule are required by the

statute. Thus, costs associated with

these regulations are the result of

legislation, and this rule, in and of itself,

has little or no independent effect or

burden. However, to the extent that a

legislative provision being implemented

through rulemaking may have a

significant effect on recipients or

providers or may be viewed as

controversial, we believe that we should

address any potential concerns. In this

instance, we believe it is desirable to

inform the public of our estimate of the

substantial budgetary effect of these

statutory changes. The statutorily driven

costs have been included in the

Medicaid budget baseline. In addition,

we anticipate that a large number of

Medicaid recipients and providers,

particularly home health agencies, will

be affected. The expansion of settings

where personal care services may be

furnished represents an expansion of

Medicaid benefits that, if exercised by

States, will likely have significant

effects, particularly on Medicaid

recipients. Therefore, the following

discussion constitutes a voluntary

regulatory flexibility analysis.

B. Impact of New Personal Care Services

Provision

1. Overview

This analysis addresses a wide range

of costs and benefits of this rule.

Whenever possible, we express impact

quantitatively. In cases where

quantitative approaches are not feasible,

we present our best examination of

determinable costs, benefits, and

associated issues.

It is difficult to predict the economic

impact of expanding the settings where

personal care services may be covered

under Medicaid to locations outside the

home. We do not know the exact

number and type of personal care

services furnished by individual States

or how much these services currently

cost. Currently, approximately 32 States

offer coverage for personal care services,

and we do not have cost data from all

of those States. States also differ in their

definitions of personal care services and

rules concerning who may furnish them.

Since we do not have a full picture of

the scope or cost of the different

services, it is difficult for us to quantify

the impact these changes will have.

Other unknown factors regarding the

future provision of personal care

services include which States now

offering the personal care services

benefit will choose to cover services

furnished outside the home, how many

additional States will opt to offer

coverage, how many Medicaid

recipients will elect to use these
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations 47901

services in States in which the services

have not been covered, and the type and

costs of these specific services. We

believe that the majority of those

individuals who qualify for these

services will elect to use this benefit.

Thus, although costs to States will rise

as they begin to pay for the additional

services, there will be substantial

benefits to some providers and to

Medicaid recipients as described in

detail below.

2. Effects Upon Medicaid Recipients

Permitting States that elect to offer the

personal care services benefit the option

of covering these services in locations

outside the home will have a positive

effect on recipients. In States where

coverage has been provided only for

personal care services in the home, this

final rule may expand the types of

personal care services available and/or

the settings where recipients may

receive these services. Expansion of

personal care services or settings could

help improve the quality of life for these

recipients as well as for recipients who

have not been receiving personal care

services. It also could save money for

some Medicaid recipients or their

families since they would no longer

have to pay for these services. No data

are available on the number of

recipients or family members who are

currently paying for these services.

However, since only 32 States currently

pay for personal care services, we

believe that a substantial number of

recipients who receive these services are

paying for them out of pocket.

3. Effects on Providers

By expanding the range of settings in

which Medicaid will cover personal

care services, we anticipate that this

final rule will increase the demand for

such services. We believe this effect will

be viewed as beneficial to providers of

personal care services. If the increase in

demand for such services is sufficient,

the number of providers of personal care

services may increase.

4. Effects on Medicaid Program

Expenditures

This final rule implements the

provisions of section 1905(a)(24) of the

Act by specifying that personal care

services are an optional State plan

benefit under the Medicaid program.

The rule allows States the option to

cover personal care services furnished

in a home or other location, effective for

services furnished on or after October 1,

1994. Table 1 below provides an

estimate of the anticipated additional

Medicaid program expenditures

associated with furnishing these

services outside the home, beginning on

October 1, 1997. This estimate was

made using various assumptions about

increases in utilization by current

recipients, adjusted for age, as well as

assumptions about the induced

utilization that may result from the

availability of these services. We have

assumed a utilization increase of 5

percent for the aged and 10 percent for

the non-aged, and an overall induction

factor of 10 percent. Given these

assumptions, our estimate based on

Federal budget projections is shown in

Table 1, which also provides a

breakdown of these costs. The first row

of figures shows the Federal costs of

providing this optional State plan

benefit. The second row shows the

Federal administrative costs associated

with furnishing these services. We

estimate the following costs to the

Medicaid program:

TABLE 1.—PERSONAL CARE SERVICES OUTSIDE THE HOME

Federal medicaid cost estimate (in millions) 1

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002

Services .................................................................................................... $185 $440 $545 $685 $855

Admin. Costs ............................................................................................ 10 15 15 15 20

Total ............................................................................................... 195 455 560 700 875

1Figures are rounded to the nearest $5 million.

5. Effects on States

As stated above, the coverage of

personal care services is optional except

when such services are medically

necessary to correct or ameliorate

medical problems found as a result of a

screen under the EPSDT program. Many

States (approximately 18) currently do

not cover optional personal care

services. In those States that do offer the

personal care services benefit, services

furnished outside the home previously

could not be covered. Therefore, there

may be a substantial economic impact

on States that decide to provide

coverage for personal care services

furnished outside the home. The

varying State definitions of personal

care services and rules concerning who

may furnish them make it difficult to

estimate accurately the potential

increases in expenditures for those

States that choose to expand coverage of

personal care services to include

services furnished outside the home.

However, Table 2 includes estimated

costs to States, which are based upon

the same data and assumptions used to

formulate the Federal expenditures

shown in Table 1.

TABLE 2.—PERSONAL CARE SERVICES OUTSIDE THE HOME

Federal medicaid cost estimate (in millions) 1

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002

Services .................................................................................................... $140 $330 $415 $515 $645

Admin. Costs ............................................................................................ 5 10 10 20 20

Total ............................................................................................... 145 340 425 535 665

1Figures are rounded to the nearest $5 million.
47902 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations

C. Conclusion

The provisions of this final rule are

required by section 1905(a)(24) of the

Act. We believe that the provisions of

this rule adding personal care services

as an optional State plan benefit and

expanding the possible settings for

covering personal care services to

locations outside the home will benefit

providers, recipients, and their families.

As shown above in Tables 1 and 2, the

costs to the Federal Government and

States associated with paying for

personal care services furnished outside

the home are substantial. There may be

some minor offsetting of costs if the

number of admissions to nursing

facilities decreases as a result of these

provisions, but we have no data to

determine the potential savings, if any.

Regardless of any possible savings, the

economic impact of these provisions is

attributable to the statutory changes

mandated by OBRA ’93.

In accordance with the provisions of

Executive Order 12866, this final rule

was reviewed by the Office of

Management and Budget.

This final rule has been classified as

a major rule subject to congressional

review. The effective date is November

10, 1997. If, however, at the conclusion

of the congressional review process the

effective date has been changed, HCFA

will publish a document in the Federal

Register to establish the actual effective

date or to issue a notice of termination

of the final rule action.

VI. Collection of Information

Requirements

Under the Paperwork Reduction Act

of 1995, agencies 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, section

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

Reduction Act of 1995 requires that we

solicit comment on the following issues:

• Whether the information collection

is necessary and useful to carry out the

proper functions of the agency;

• The accuracy of the agency’s

estimate of the information collection

burden;

• The quality, utility, and clarity of

the information to be collected; and

• Recommendations to minimize the

information collection burden on the

affected public, including automated

collection techniques.

Section § 440.167 of this final rule

contains requirements that are subject to

review by the Office of Management and

Budget (OMB) under the Paperwork

Reduction Act of 1995. The rule

requires States to amend their State

plans to specify whether they will cover

personal care services and in what

locations they will provide the services.

Public reporting burden for this

collection of information is estimated to

be 1 hour per State. A notice will be

published in the Federal Register when

approval is obtained. Organizations and

individuals desiring to submit

comments on the information collection

and recordkeeping requirements should

mail them directly to the following:

Health Care Financing

Administration, Office of Financial and

Human Resources, Management

Planning and Analysis Staff, Room C2–

26–17, 7500 Security Boulevard,

Baltimore, Maryland 21255–1850.

Any comments submitted on the

information collection requirements

must be received by these two offices on

or before November 10, 1997, to enable

OMB to act promptly on HCFA’s

information collection approval request.

List of Subjects in 42 CFR Part 440

Grant programs-health, Medicaid.

42 CFR part 440 is amended as set

forth below:

PART 440—SERVICES: GENERAL

PROVISIONS

1. 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

2. In § 440.70, the introductory text of

paragraphs (a) and (b) are republished

and paragraphs (a)(2), (b)(3), (c), and (d)

are revised to read as follows:

§ 440.70 Home health services.

(a) ‘‘Home health services’’ means the

services in paragraph (b) of this section

that are provided to a recipient—

(1) * * *

(2) On his or her physician’s orders as

part of a written plan of care that the

physician reviews every 60 days, except

as specified in paragraph (b)(3) of this

section.

(b) Home health services include the

following services and items. * * *

(3) Medical supplies, equipment, and

appliances suitable for use in the home.

(i) A recipient’s need for medical

supplies, equipment, and appliances

must be reviewed by a physician

annually.

(ii) Frequency of further physician

review of a recipient’s continuing need

for the items is determined on a case-bycase basis, based on the nature of the

item prescribed;

* * * * *

(c) A recipient’s place of residence,

for home health services, does not

include a hospital, nursing facility, or

intermediate care facility for the

mentally retarded, except for home

health services in an intermediate care

facility for the mentally retarded that are

not required to be provided by the

facility under subpart I of part 483. For

example, a registered nurse may provide

short-term care for a recipient in an

intermediate care facility for the

mentally retarded during an acute

illness to avoid the recipient’s transfer

to a nursing facility.

(d) ‘‘Home health agency’’ means a

public or private agency or organization,

or part of an agency or organization that

meets requirements for participation in

Medicare and any additional standards

legally promulgated by the State that are

not in conflict with Federal

requirements.

* * * * *

3. A new § 440.167 is added to read

as follows:

§ 440.167 Personal care services.

Unless defined differently by a State

agency for purposes of a waiver granted

under part 441, subpart G of this

chapter—

(a) ‘‘Personal care services’’ means

services furnished to an individual who

is not an inpatient or resident of a

hospital, nursing facility, intermediate

care facility for the mentally retarded, or

institution for mental disease that are—

(1) Authorized for the individual by a

physician in accordance with a plan of

treatment or (at the option of the State)

otherwise authorized for the individual

in accordance with a service plan

approved by the State;

(2) Provided by an individual who is

qualified to provide such services and

who is not a member of the individual’s

family; and

(3) Furnished in a home, and at the

State’s option, in another location.

(b) For purposes of this section,

‘‘family member’’ means a legally

responsible relative.

§ 440.170, [Amended]

4. § 440.170, paragraph (f) is removed

and reserved.

(Catalog of Federal Domestic Assistance

Program No. 93.778, Medical Assistance

Program.)
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Rules and Regulations 47903

Dated: June 26, 1997.

Bruce C. Vladeck,

Administrator, Health Care Financing

Administration.

[FR Doc. 97–24266 Filed 9–10–97; 8:45 am]

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