[Federal Register Volume 72, Number 232 (Tuesday, December 4, 2007)]
[Rules and Regulations]
[Pages 68077-68093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-5903]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 431, 440, and 441

[CMS-2237-IFC]
RIN 0938-AO50


Medicaid Program; Optional State Plan Case Management Services

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

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period revises current 
Medicaid regulations to incorporate changes made by section 6052 of the 
Deficit Reduction Act of 2005. In addition, it incorporates provisions 
of the Consolidated Omnibus Budget Reconciliation Act of 1985, the 
Omnibus Budget Reconciliation Act of 1986, the Tax Reform Act of 1986, 
the Omnibus Budget Reconciliation Act of 1987, and the Technical and 
Miscellaneous Revenue Act of 1988, concerning case management and 
targeted case management services. This interim final rule with comment 
period will provide for optional coverage of case management services 
or targeted case management services furnished according to section 
1905(a)(19) and section 1915(g) of the Social Security Act. This 
interim final rule with comment period clarifies the situations in 
which Medicaid will pay for case management activities and also 
clarifies when payment will not be consistent with proper and efficient 
operation of the Medicaid program, and is not available.

DATES: Effective Date: The effective date of this rule is March 3, 
2008.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on February 4, 2008.

ADDRESSES: In commenting, please refer to file code CMS-2237-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-2237-IFC, 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 (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-2237-IFC, 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 (one original and two copies) before the 
close of the comment period to one of the following addresses. 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. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH 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.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Jean Close, (410) 786-5831.

SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments 
from the public on all issues set forth in this rule to assist us in 
fully considering issues and developing policies. You can assist us by 
referencing the file code CMS-2237-IFC and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.

[[Page 68078]]

    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.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on 
CMS Regulations'' on that Web site to view public comments.
    Comments received timely also will be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    [If you choose to comment on issues in this section, please include 
the caption ``Background'' at the beginning of your comments.]
    Case management is commonly understood to be an activity that 
assists individuals in gaining access to necessary care and services 
appropriate to their needs. Many individuals, because of their age, 
condition, illness, living arrangement, or other factors, may benefit 
from receiving direct assistance in gaining access to services. In the 
context of this regulation, it is the individual's access to care and 
services that is the subject of this management--not the individual. 
Because case management has been subject to so many different 
interpretations over the years, many Medicaid agencies now refer to 
case management as ``care management,'' ``service coordination,'' 
``care coordination'' or some other term related to planning and 
coordinating access to health care and other services on behalf of an 
individual. Because section 1915 of the Social Security Act (the Act) 
uses the term ``case management,'' we will use this term throughout 
this document.
    In 1981, the Congress amended the Act to authorize Medicaid 
coverage of case management services under two provisions. Under 
section 1915(b) of the Act, States were authorized to develop primary 
care case management systems in order to direct individuals to 
appropriate Medicaid services. Under section 1915(c) of the Act, States 
were authorized to furnish case management as a distinct service under 
home and community-based services waivers. Case management is widely 
used under both authorities because of its value in ensuring that 
individuals receiving Medicaid benefits are assisted in making 
necessary decisions about the care they need and in locating service 
providers.
    The regulations set forth in this interim final regulation 
implement in 42 CFR parts 431, 440, and 441 the case management 
services provisions authorized by sections 1905(a)(19) of the Act and 
1915(g) of the Act. The definition of case management in the Deficit 
Reduction Act was effective on January 1, 2006. The provisions of this 
rule are effective 90 days after the date of publication of this rule.

II. Legislative History

A. Changes Made by the Consolidated Omnibus Budget Reconciliation Act 
of 1985

    Section 9508 of the Consolidated Omnibus Budget Reconciliation Act 
of 1985 (COBRA) (Pub. L. 99-272), enacted on April 7, 1986, amended the 
Act concerning the provision of targeted case management services. 
Specifically, section 9508 of COBRA added a new section 1915(g) to the 
Act that--
    <bullet> Provided that a State may elect to furnish case 
management, targeted to specified groups, as a service covered under 
the State plan;
    <bullet> Defined case management services as services that will 
assist individuals, eligible under the State plan, in gaining access to 
needed medical, social, educational, and other services;
    <bullet> Provided an exception to the statewideness requirement of 
section 1902(a)(1) of the Act by allowing a State to limit its 
provision of case management services to individuals who reside in 
particular geographic areas or political subdivisions within the State;
    <bullet> Provided an exception to the comparability requirement of 
section 1902(a)(10)(B) of the Act by allowing a State to furnish case 
management services to any specific group (targeted case management); 
and
    <bullet> Required that there be no restriction on free choice of 
providers of case management services that would violate section 
1902(a)(23) of the Act.

B. Changes Made by the Omnibus Budget Reconciliation Act of 1986

    Section 9411(b) of the Omnibus Budget Reconciliation Act of 1986 
Pub. L. 99-509, enacted on October 21, 1986, amended section 1915(g) of 
the Act by clarifying that a State may limit the provision of case 
management services to individuals with acquired immune deficiency 
syndrome (AIDS), AIDS-related conditions, or with either. Section 
1915(g) of the Act also was amended to clarify that a State may limit 
case management services to individuals with chronic mental illness.

C. Changes Made by the Tax Reform Act of 1986

    Section 1895(c)(3) of the Tax Reform Act of 1986 (Pub. L. 99-514), 
enacted on October 22, 1986, amended the statute to permit States to 
furnish non-targeted case management services under a State Medicaid 
plan. This law amended section 1905(a) of the Act by adding a new 
paragraph (19) that included case management services, as defined in 
section 1915(g)(2) of the Act, in the list of optional services a State 
may include in its Medicaid plan (the existing paragraph (19) was 
redesignated as paragraph (20)).

D. Changes Made by the Omnibus Budget Reconciliation Act of 1987

    Section 4118(i) of the Omnibus Budget Reconciliation Act of 1987 
(OBRA '87) Pub. L. 100-203, enacted on December 22, 1987, amended 
section 1915(g)(1) of the Act to allow States to limit the providers of 
case management services available for individuals with developmental 
disabilities or chronic mental illness to ensure that the case managers 
for those individuals are capable of ensuring that those individuals 
receive needed services.

E. Changes Made by the Technical and Miscellaneous Revenue Act of 1988

    Section 8435 of the Technical and Miscellaneous Revenue Act of 1988 
(Pub. L. 100-647), enacted on November 10, 1988, prohibited the 
Secretary from denying approval of a State plan amendment to provide 
case management services on the basis that a State is required to 
provide those services under State law or on the basis that the State 
had paid or is paying for those services from other non-Federal revenue 
sources before or after April 7, 1986. This provision also specified 
that the Secretary was not required to make payment under Medicaid for 
case management services that are furnished without charge to the users 
of such services.

F. Changes Made by the Deficit Reduction Act of 2005

    Section 6052 of the Deficit Reduction Act (DRA) of 2005 (Pub. L. 
109-171), enacted on February 8, 2006, addresses Reforms of Case 
Management and Targeted Case Management under Medicaid. This section 
redefined the

[[Page 68079]]

term ``case management services'' to mean services that will ``assist 
individuals eligible under the State plan in gaining access to needed 
medical, social, educational, and other services'' and to include the 
following components:
    <bullet> Assessment of an eligible individual to determine service 
needs, including activities that focus on needs identification, to 
determine the need for any medical, educational, social, or other 
services. These activities are defined to include the following:

--Taking client history.
--Identifying the needs of the individual, and completing related 
documentation.
--Gathering information from other sources, such as family members, 
medical providers, social workers, and educators, if necessary, to form 
a complete assessment of the eligible individual.

    <bullet> Development of a specific care plan based on the 
information collected through the assessment described above. The care 
plan specifies the goals of providing case management to the eligible 
individual and actions to address the medical, social, educational, and 
other services needed by the eligible individual, including activities 
such as ensuring the active participation of the eligible individual 
and working with the individual (or the individual's authorized health 
care decision maker) and others to develop such goals and identify a 
course of action to respond to the assessed needs of the eligible 
individual.
    <bullet> Referral and related activities to help an individual 
obtain needed services, including activities that help link the 
eligible individual with medical, social, educational providers, or 
other programs and services that are capable of providing needed 
services, such as making referrals to providers for needed services and 
scheduling appointments for the individual.
    <bullet> Monitoring and follow-up activities, including activities 
and contacts that are necessary to ensure that the care plan is 
effectively implemented and adequately addresses the needs of the 
eligible individual. Monitoring and follow-up activities may be with 
the individual, family members, providers, or other entities. These 
activities may be conducted as frequently as necessary to help 
determine such matters as:

--Whether services are being furnished in accordance with the 
individual's care plan.
--Whether the services in the care plan are adequate to meet the needs 
of the individual.
--Whether there are changes in the needs or status of the individual.

If there are changes in the needs or status of the individual, 
monitoring and follow-up activities include making necessary 
adjustments in the care plan and service arrangements with providers.
    Section 6052 of the DRA also clarifies that the term ``case 
management'' does not include the ``direct delivery of an underlying 
medical, educational, social, or other service to which an eligible 
individual has been referred'' by adding clause section 
1915(g)(2)(A)(iii) of the Act. In addition, with respect to foster 
care, the statute gives examples of some types of activities that are 
not covered. With respect to the direct delivery of foster care 
services, the following activities are not considered to qualify as 
components of Medicaid case management services:
    <bullet> Research gathering and completion of documentation 
required by the foster care program;
    <bullet> Assessing adoption placements;
    <bullet> Recruiting or interviewing potential foster care parents;
    <bullet> Serving legal papers;
    <bullet> Home investigations;
    <bullet> Providing transportation;
    <bullet> Administering foster care subsidies; or
    <bullet> Making placement arrangements.
    The DRA also added a new section 1915(g)(2)(B) to the Act, defining 
the term ``targeted case management services'' as case management 
services that are furnished without regard to the requirements of 
section 1902(a)(1) of the Act, regarding statewide availability of 
services, and section 1902(a)(10)(B) of the Act, regarding 
comparability of services. Although the ability to provide these 
services without regard to section 1902(a)(1) of the Act and section 
1902(a)(10)(B) of the Act is not new, this paragraph clarifies that the 
State can ``target'' case management services to specific classes of 
individuals, or to individuals who reside in specified areas of the 
State (or both).
    Section 6052 of the DRA also added a new section 1915(g)(3) to the 
Act, to clarify that when a case manager contacts individuals who are 
not eligible for Medicaid, or who are Medicaid eligible but not 
included in the eligible target population in the State, that contact 
may qualify as Medicaid case management services. The contact is 
considered an allowable case management activity when the purpose of 
the contact is directly related to the management of the eligible 
individual's care. It is not considered an allowable case management 
activity if those contacts relate directly to the identification and 
management of the non-eligible or non-targeted individual's needs and 
care.
    Section 6052 of the DRA added a new section 1915(g)(4) to the Act 
to discuss the circumstances under which Federal financial 
participation (FFP) is available for case management or targeted case 
management services. With a few exceptions described in the following 
paragraph, in accordance with section 1902(a)(25) of the Act, FFP only 
is available for the cost of case management or targeted case 
management services if there are no other third parties liable to pay 
for those services, including as reimbursement under a medical, social, 
educational, or other program. When the costs of any part of case 
management or targeted case management services are reimbursable under 
another federally funded program, a State is directed to allocate the 
costs between the other program(s) and Medicaid in accordance with OMB 
Circular (No. A-87) (or any related or successor guidance or 
regulations regarding allocation of costs among Federally funded 
programs) under an approved cost allocation program.
    It should be noted that per section 1903(c) of the Act, nothing in 
this rule would prohibit or restrict payment for medical assistance for 
covered Medicaid services furnished to a child with a disability 
because such services are included in the child's Individualized 
Education Program (IEP) or Individual Family Service Plan (IFSP). 
Likewise, payment for those services that are included in the IEP or 
IFSP would not be available when those services are not covered 
Medicaid services.
    Section 6052 of the DRA also clarified, in a new section 1915(g)(5) 
of the Act, that nothing in section 1915(g) of the Act shall be 
construed as affecting the application of rules with respect to third 
party liability under programs or activities carried out under title 
XXVI of the Public Health Service Act (the HIV Health Care Services 
Program) or the Indian Health Service.
    This rule implements in Federal regulations the statutory 
provisions permitting coverage of case management and targeted case 
management as optional services under a State Medicaid plan, in 
accordance with sections 1905(a)(19) and 1915(g) of the Act, as amended 
by the DRA, and all other relevant statutory provisions.

III. Provisions of the Interim Final Rule

    [If you choose to comment on issues in this section, please 
indicate the caption ``Provisions of the Interim Final

[[Page 68080]]

Rule'' at the beginning of your comments.]
    To incorporate the policies and implement the statutory provisions 
described above, we are making the following revisions to 42 CFR 
chapter IV, subchapter C, Medical Assistance Programs.

A. Freedom of Choice Exception To Permit Limitation of Case Management 
Providers for Certain Target Groups--Sec.  431.51(c)

    While the freedom of choice requirement is beneficial to the 
Medicaid population as a whole, in OBRA '87, the Congress recognized 
that this requirement might not adequately protect the interests of 
persons with a developmental disability or chronic mental illness. In 
several States (or political subdivision), a particular agency may be 
designated under State law or regulation to serve as the exclusive 
source of case management services with respect to these populations. 
Therefore, section 4118(i) of OBRA '87 amended section 1915(g)(1) of 
the Act to provide States with some latitude to restrict the 
availability of case management providers to these targeted groups to 
assure that case management providers are capable of ensuring that 
Medicaid eligible individuals will receive needed services.
    Consistent with section 1915(g) of the Act, as amended by section 
4118(i) of OBRA '87, when a target group consists solely of individuals 
with developmental disabilities or chronic mental illness, including a 
subgroup of those individuals (for example, children with mental 
illness), States may limit provider participation to specific persons 
or entities by setting forth qualifying criteria that assure the 
ability of the case managers to connect individuals with needed 
services. We note, however, that a State's decision to restrict case 
managers for these populations does not impinge on targeted 
individuals' rights to choose freely among those individuals or 
entities that the State has found qualified and eligible to provide 
targeted case management services. Absent a waiver to the contrary, 
those individuals also maintain their right to choose qualified 
providers of all other Medicaid services they receive.
    We are amending Sec.  431.51 by revising paragraphs (c)(2) and 
(c)(3) and adding a new paragraph (c)(4) to afford States the option of 
limiting providers of case management services available to furnish 
services defined in Sec.  440.169 for targeted groups that consist 
solely of individuals with developmental disabilities or chronic mental 
illness. This implements the statutory provisions at section 1915(g)(1) 
of the Act.

B. Statewideness and Comparability Exception to Permitting Targeting--
Sec.  431.54

    While a State can provide case management services under its State 
plan to all Medicaid eligible individuals, it is not required to do so. 
Under section 1915(g)(1) of the Act, a State is not bound by the 
``statewideness'' requirement of section 1902(a)(1) of the Act. (The 
``statewideness'' requirement of section 1902(a)(1) of the Act 
provides, in part, that the provisions of a State plan be in effect in 
all political subdivisions of the State.) Thus, States may limit the 
provision of case management services to any defined location of the 
State (that is, city, county, community, etc.).
    Section 1915(g)(1) of the Act also permits States to target case 
management services to individuals with particular diseases or 
conditions, without regard to the ``comparability'' provision in 
section 1902(a)(10)(B) of the Act. (The ``comparability'' provision 
generally requires States to make Medicaid services available in the 
same amount, duration, and scope to all individuals within the 
categorically needy group or covered medically needy group. The 
comparability provision also requires that the Medicaid services 
available to any individual in a categorically needy group are not less 
in amount, duration, and scope than those Medicaid services available 
to an individual in a medically needy group.) Thus, a State may limit 
case management services to any specific identifiable group, such as 
individuals with human immunodeficiency virus (HIV), acquired immune 
deficiency syndrome (AIDS), AIDS-related conditions, or chronic mental 
illness. A State's flexibility to target case management services to a 
specific group sets these services apart from most other services 
available under the Medicaid program.
    In identifying the groups eligible to receive targeted case 
management services, States are not required to distinguish eligible 
individuals by traditional Medicaid concepts of eligibility groups 
(that is, mandatory categorically needy, optional categorically needy, 
medically needy), although this avenue continues to be available to 
States, should they choose it. Instead, States may target case 
management services by age, type or degree of disability, illness or 
condition, or any other identifiable characteristic or combination of 
characteristics. There is no limit on the number of groups to whom case 
management services may be targeted.
    We note that the exception to the comparability requirement applies 
only to the provision of targeted case management services under 
section 1915(g) of the Act. The comparability requirements of section 
1902(a)(10)(B) of the Act continue to apply to all other Medicaid 
services for which an individual may be eligible, unless these services 
are subject to comparability exceptions in their own right. In other 
words, receipt of case management services does not in any way alter an 
individual's eligibility to receive other services under the State 
plan.
    In Sec.  431.54, we are revising paragraph (a) and adding a new 
paragraph (g) that includes targeted case management services as an 
exception to the comparability requirements in Sec.  440.250 and to the 
statewide operation requirement in Sec.  431.50(b). This implements the 
targeting provisions at section 1915(g)(1) of the Act.

C. Definition of Case Management Services--Sec.  440.169

    Consistent with the provisions of section 1915(g)(2) of the Act, as 
added by the DRA, we will define case management services in Sec.  
440.169(a) generally as services that assist individuals eligible under 
the plan in gaining access to needed medical, social, educational, and 
other services. The intent of case management is to assist the 
individual in gaining access to needed services, consistent with the 
requirements of the law and these regulations. ``Other services'' to 
which an individual eligible under the plan may gain access may include 
services such as housing and transportation.
    In Sec.  440.169(b), we define targeted case management services as 
case management services furnished to particular defined target groups 
or in any defined locations without regard to requirements related to 
statewide provision of services or comparability.
    The integrated medical direction and management of services 
furnished to inpatients in a medical institution already includes case 
management activities. Therefore, including separate coverage for 
institutionalized individuals will in general, result in duplicative 
coverage and payment. Individuals with complex and chronic medical 
needs and individuals transitioning to a community setting after a 
significant period of time in a hospital, nursing facility, or 
intermediate care facility for individuals with mental retardation, 
however,

[[Page 68081]]

require case management that is beyond the scope of work of 
institutional discharge planners. These case management services 
facilitate the process of transitioning individuals from institutional 
care to community services. For example, individuals may require 
assistance locating community services. Thus, services we define as 
case management services for transitioning individuals from medical 
institutions to the community will be included as a separately covered 
case management service.
    In Sec.  440.169(c), we define case management services for the 
transitioning of individuals from institutions to the community. 
Individuals (except individuals ages 22 to 64 who reside in an 
institution for mental diseases (IMD) or individuals who are inmates of 
public institutions) may be considered to be transitioning to the 
community during the last 60 consecutive days (or a shorter period 
specified by the State) of a covered, long-term, institutional stay 
that is 180 consecutive days or longer in duration. For a covered, 
short-term, institutional stay of less than 180 consecutive days, 
individuals may be considered to be transitioning to the community 
during the last 14 days before discharge. We use these time 
requirements to distinguish case management services that are not 
within the scope of discharge planning activities from case management 
required for transitioning individuals with complex, chronic, medical 
needs to the community. As specified in Sec.  441.18(a)(8)(vii)(D) and 
(E), FFP would not be payable until the date that an individual leaves 
the institution, is enrolled with the community case management 
provider, and receiving medically necessary services in a community 
setting.
    In sum, we are defining the case management benefit to include only 
services to individuals who are residing in a community setting or 
transitioning to a community setting following an institutional stay.
    Our proposed exclusion of FFP for case management services or 
targeted case management services provided to individuals under age 65 
who reside in an IMD or to individuals involuntarily living in the 
secure custody of law enforcement, judicial, or penal systems is 
consistent with the statutory requirements in paragraphs (A) and (B) 
following paragraph section 1905(a)(28) of the Act. The statute 
indicates that ``except as otherwise provided in paragraph (16), such 
term [medical assistance] does not include (A) any such payments with 
respect to care or services for any individual who is an inmate of a 
public institution. An individual is considered to be living in secure 
custody if serving time for a criminal offense in, or confined 
involuntarily to, State or Federal prisons, local jails, detention 
facilities, or other penal facilities. A facility is a public 
institution when it is under the responsibility of a governmental unit 
or over which a governmental unit exercises administrative control. 
Case management services could be reimbursed on behalf of Medicaid-
eligible individuals paroled, on probation, on home release, in foster 
care, in a group home, or other community placement, that are not part 
of the public institution system, when the services are identified due 
to a medical condition targeted under the State's Plan, and are not 
used in the administration of other non-medical programs.
    At paragraph (B), following paragraph section 1905(a)(28) of the 
Act, the statute indicates that medical assistance does not include 
``any such payments with respect to care or services for any individual 
who has not attained 65 years of age and who is a patient in an 
institution for mental diseases.'' Paragraph (16) includes in the 
definition of ``medical assistance'' ``* * * inpatient psychiatric 
hospital services for individuals under age 21 * * *''. Section 1905(h) 
of the Act defines ``inpatient psychiatric hospital services'' to 
include inpatient services in inpatient settings other than psychiatric 
hospitals, as specified by the Secretary in regulations. The Secretary 
has specified in regulations at Sec.  440.160 that such settings 
include ``a psychiatric facility which is accredited by the Joint 
Commission on Accreditation of Healthcare Organizations, the Council on 
Accreditation of Services for Families and Children, the Commission on 
Accreditation of Rehabilitation Facilities, or by any other accrediting 
organization with comparable standards, that is recognized by the 
State.'' Thus, the term ``inpatient hospital services for individuals 
under age 21'' includes services furnished in accredited psychiatric 
residential treatment facilities, currently known as ``PRTFs,'' 
providing inpatient psychiatric services for individuals under age 21 
that are not hospitals.
    However, the statutory wording of the exception to the IMD 
exclusion makes it clear that medical assistance includes payment only 
for inpatient hospital services furnished to residents under age 21 in 
an inpatient psychiatric hospital or, by regulation, to residents under 
age 21 in an accredited PRTF. FFP does not extend to other services 
furnished to individuals under age 21 residing in these settings. 
However, we are clarifying in this rule that FFP is available for 
community case management services to transition an individual 
receiving inpatient psychological services for individuals under age 21 
(authorized under section 1905(a)(16) of the Act), after discharge from 
a medical institution to the community. FFP would not be payable until 
the date that an individual leaves the institution, is enrolled with 
the community case management provider, and receiving medically 
necessary services in a community setting.
    At Sec.  440.169(d), we specify that case management includes the 
following elements specified in section 1915(g)(2)(A)(ii) of the Act:
    1. Assessment and periodic reassessment of an eligible individual 
to determine service needs, including activities that focus on needs 
identification, to determine the need for any medical, educational, 
social, or other services. Such assessment activities include:
    <bullet> Taking client history.
    <bullet> Identifying the needs of the individual and completing 
related documentation.
    <bullet> Gathering information from other sources such as family 
members, medical providers, social workers, and educators, if 
necessary, to form a complete assessment of the eligible individual.
    Because the statute defines case management services as those 
services that will assist individuals eligible under the plan in 
gaining access to needed medical, social, educational, and other 
services, we believe that an assessment of an individual's needs should 
be comprehensive and address all needs of the individual. Thus, we are 
requiring in Sec.  440.169(d)(1) that the assessment be comprehensive 
in order to address all areas of need, the individual's strengths and 
preferences, and consider the individual's physical and social 
environment. Performance of a comprehensive assessment can minimize the 
need for an individual to be covered under multiple case management 
plans and have multiple case managers, and can reduce the likelihood of 
service duplication and inefficiencies.
    Assessment includes periodic reassessment to determine whether an 
individual's needs and/or preferences have changed. At this time, we 
will not put forth Federal standards for the frequency of reassessment, 
but recommend that face-to-face reassessments be conducted at least

[[Page 68082]]

annually or more frequently if changes occur in an individual's 
condition.
    2. Development and periodic revision of a specific care plan based 
on the information collected through an assessment or reassessment, 
that specifies the goals and actions to address the medical, social, 
educational, and other services needed by the eligible individual, 
including activities such as ensuring the active participation of the 
eligible individual and working with the individual (or the 
individual's authorized health care decision maker) and others to 
develop those goals and identify a course of action to respond to the 
assessed needs of the eligible individual.
    Because the assessment of an individual's needs must be 
comprehensive, the care plan also must be comprehensive to address 
these needs. However, while the assessment and care plan must be 
comprehensive and address all of the individual's needs, an individual 
may decline to receive services in the care plan to address these 
needs. Section 1902(a)(23) of the Act requires that recipients have 
free choice of qualified providers. This means that the individual 
cannot be required to receive services from a particular provider--or 
from any provider--if the individual chooses. If an individual declines 
services listed in the care plan, this must be documented in the 
individual's case records.
    <bullet> Referral and related activities (such as scheduling 
appointments for the individual) to help an individual obtain needed 
services, including activities that help link eligible individuals with 
medical, social, educational providers, or other programs and services 
that are capable of providing needed services to address identified 
needs and achieve goals specified in the care plan.
    <bullet> Referral and related activities do not include providing 
transportation to the service to which the individual is referred, 
escorting the individual to the service, or providing child care so 
that an individual may access the service. The case management referral 
activity is completed once the referral and linkage has been made. It 
does not include the direct services, program, or activity to which the 
individual is linked.
    <bullet> Monitoring and follow-up activities, including activities 
and contacts that are necessary to ensure that the care plan is 
effectively implemented and adequately addresses the needs of the 
eligible individual. Monitoring and follow-up activities may be with 
the individual, family members, providers, or other entities or 
individuals. These activities may be conducted as frequently as 
necessary to help determine whether:

--The services are being furnished in accordance with the individual's 
care plan.
--The services in the care plan are adequate to meet the needs of the 
individual.
--There are changes in the needs or status of the individual. If there 
are changes in the needs or status of the individual, monitoring and 
follow-up activities include making necessary adjustments in the care 
plan and service arrangements with providers.

    Monitoring may involve either face-to-face or telephone contact. We 
are requiring that monitoring occur at a frequency established by the 
State, but no less frequently than annually.
    In the course of providing case management services, case managers 
can use a person-centered approach. A person-centered approach is a 
process used to develop, implement, and manage a care plan that 
attempts to fulfill the objectives and personal preferences of the 
individual or the legal representative of that individual. The process 
focuses on the person rather than the system; directly involves the 
person (or the legal representative of that individual) in the plan 
development, all aspects of implementation and management; and is 
tailored to meet individualized needs. Varying levels of person-
centered planning, including choice not to participate, may be selected 
by the individual (or by the individual's legal representative). The 
individual or legal representative can participate throughout all 
components of case management and direct who may participate in the 
care plan development process along with the case manager and the 
individual or the individual's legal representative.
    Case management services must be provided by a single Medicaid case 
management provider. This provision is consistent with the requirement 
that the case management includes a comprehensive assessment and care 
plan. Thus, when an individual could be served under more than one 
targeted case management plan amendment because he falls within the 
scope of more than one target group (for example when the individual 
has both mental retardation and a mental illness and the State has 
target groups for both conditions), a decision must be made concerning 
the appropriate target group so that the individual will have one case 
management provider. That provider will be responsible for ensuring 
that the comprehensive assessment and care plan address the 
individual's needs stemming from mental retardation and from the mental 
illness. In doing so, the case management provider must coordinate with 
service providers in both systems of care to ensure that the 
individual's needs are met. We intend to provide for a delayed 
compliance date so that States will have a transition period of the 
lesser of 2 years or 1 year after the close of the first regular 
session of the State Legislature that begins after this regulation 
becomes final before we will take enforcement action on the requirement 
for one case manager to provide comprehensive services to individuals. 
We will be available to States as needed for technical assistance 
during this transition period.
    We note that section 1915(g)(2) of the Act specifically defines 
case management services in terms of services furnished to individuals 
who are eligible under the State plan. This provision reinforces basic 
program requirements found in section 1905(a) of the Act that require 
medical assistance to be furnished only to eligible individuals. An 
``eligible individual'' is a person who is eligible for Medicaid and 
eligible for case management services (including targeted case 
management services) as defined in the Medicaid State plan, at the time 
the services are furnished. Case management as medical assistance under 
the State plan cannot be used to assist an individual, who has not yet 
been determined eligible for Medicaid, to apply for or obtain this 
eligibility. (Those activities may be an administrative expense of the 
State's operation of its Medicaid program, rather than a medical 
assistance service.)
    While the provision of case management services to non-Medicaid 
eligible individuals cannot be covered, we are including a regulatory 
provision at Sec.  440.169(e) to make clear that the effective case 
management of eligible individuals may require some contact with non-
eligible individuals. For instance, in completing the assessment for a 
Medicaid eligible child for whom targeted case management is available, 
it may be appropriate for a case manager to interview the child's 
parents and/or other family members who are not eligible for Medicaid, 
or who are not, themselves, part of a target population specified in 
the State plan. Contacts with family members that are for the purpose 
of helping the Medicaid-eligible individual access services can be 
covered by Medicaid. It also may be appropriate to have non-eligible 
family members involved in all components of case management because 
they may be able to help identify needs and supports to assist the 
eligible individual in

[[Page 68083]]

obtaining services, provide case managers with useful feedback, and 
alert case managers to changes in the individual's needs.
    A case manager's contacts with individuals who are not eligible for 
Medicaid, or who are not included in the group who receives targeted 
case management services, can be considered allowable activities, 
eligible for FFP, when the purpose of the contact is directly related 
to the management of the eligible individual's care. However, these 
activities will not be considered allowable if they relate directly to 
the identification and management of the non-eligible, or non-targeted 
individual's needs and care. Contacts that relate to the case 
management of non-eligible individuals, that is, assessment of their 
needs, referring them to service providers, and monitoring their 
progress, cannot be covered by Medicaid due to the fact they are not 
Medicaid eligible or not covered under the case management target 
population. If these other family members or other individuals also are 
Medicaid eligible and covered under a target group included in the 
State plan, Medicaid could pay for case management services furnished 
to them. In addition, these individuals could receive other medically 
necessary services for which they may qualify.

D. Comparability Exception To Permit Targeting--Sec.  440.250

    We will revise Sec.  440.250 by adding a new paragraph (r) to 
provide for an exception to the comparability requirements under Sec.  
440.240 for targeted case management services.

E. Technical Change to Statement of Statutory Basis--Sec.  441.10

    In part 441, subpart A, we will revise Sec.  441.10 to add a new 
paragraph (m), which provides a statutory basis for the provision of 
case management and targeted case management services.

F. Limitations on Case Management Services--Sec.  441.18

    At Sec.  441.18(a)(1), we are specifying that, with the exception 
discussed above at Sec.  431.51, individuals must have the free choice 
of any qualified provider. Section 9508 of COBRA amended section 
1915(g) of the Act to require that there be no restriction on a 
recipient's free choice of providers, in violation of section 
1902(a)(23) of the Act. Based on COBRA's legislative history, we 
believe the Congress intended that individuals receiving case 
management services under section 1915(g) of the Act not be locked into 
designated providers, whether for case management services, or for 
other services. (See H. Rept. No. 453, 99th Cong., 1st Sess. 546 
(1985).) Therefore, except as described in Sec.  441.18(b), individuals 
eligible to receive case management (or targeted case management) 
services must be free to choose their case management provider from 
among those that have qualified to participate in Medicaid and are 
willing to provide the services.
    States must establish qualifications for providers of case 
management services in the State plan. These qualifications relate to 
minimum age requirements, education, work experience, training, and 
other requirements, such as licensure or certification, which the State 
may establish. The Act does not set any minimum educational or 
professional qualifications for the provision of case management 
services. Therefore, States have flexibility to establish 
qualifications that are reasonably related to the demands of the 
Medicaid case management services to be furnished and the population 
being served. For example, it is reasonable to expect that the 
qualifications for case managers serving children who are ventilator-
dependent to be different than those qualifications for case managers 
serving persons with intellectual disabilities. While the case manager 
must possess the knowledge and skills to conduct a comprehensive 
assessment and to assist the individual or the individual's legal 
representative with the development of a comprehensive care plan, this 
does not mean that the case manager must have experience with the 
program requirements of every medical, social, educational, or other 
program to which an individual may be referred; it means that the case 
manager must be familiar with the general needs of the population being 
served and must be able to connect and coordinate with medical, social, 
educational, and other programs that serve the population. If the case 
manager also provides other services under the plan, the State must 
ensure that a conflict of interest does not exist that will result in 
the case manager making self-referrals.
    We are also including at Sec.  441.18(a)(2) and Sec.  441.18(a)(3) 
provisions to ensure that the provision of case management is neither 
coerced nor a method to restrict access to care or free choice of 
qualified providers. The receipt of case management services must be at 
the option of individuals included in a specific target group. This 
requirement is also consistent with section 1902(a)(19) of the Act. A 
recipient cannot be compelled to receive case management services for 
which he or she might be eligible. Requiring an individual to receive 
case management services against his or her will would not be in the 
best interest of the individual and, thus, will violate sections 
1902(a)(19) and 1902(a)(23) of the Act. A State also cannot condition 
receipt of case management services on the receipt of other services 
since this also serves as a restriction on the individual's access to 
case management services.
    Section 1915(g)(1) of the Act prohibits the use of case management 
services in any fashion that will restrict an individual's access to 
other care and services furnished under the State plan, which will 
violate section 1902(a)(23) of the Act. The purpose of case management 
services authorized by section 1915(g) of the Act is to help an 
individual gain access to services, not hinder this access. Permitting 
case managers to function as gatekeepers under this optional State plan 
service will allow case managers to restrict access to services--that 
is, to the extent to which authorization may be denied, access also may 
be denied. Because this concept is contrary to the statutory definition 
of case management services, providers of case management services 
(including targeted case management services) furnished under this 
section are prohibited from serving as gatekeepers under Medicaid. 
(States may use a section 1915(b) waiver or primary care case 
management (PCCM) services under section 1905(a)(25) for this purpose.) 
Similarly, a State cannot require that an individual receive case 
management services as a prerequisite for receiving other Medicaid 
services.
    In Sec.  441.18(a)(4), we require that the State's plan provide 
that case management services will not duplicate payments made to 
public agencies or private entities under the State plan and other 
program authorities. In authorizing States to offer case management 
services, the Congress recognized that there was some potential for 
duplicate payments. This recognition led to an explicit statement in 
the legislative history of COBRA that prohibited the duplication of 
payments. (See H. Rept. No. 453, 99th Cong., 1st Sess. 546 (1985).) The 
Congress clarified its prohibition on the duplication of funding in 
section 8435 of the Technical and Miscellaneous Revenue Act of 1988. 
This provision prohibits the Secretary from denying approval of a case 
management State plan amendment on the basis that the State is required 
to provide those services under State law, or on the basis that the 
State had paid for those services from other non-Federal funds. In 
other words, the duplication of payment prohibition does

[[Page 68084]]

not preclude States from using Medicaid to pay for case management 
services that previously had been funded solely with State and/or local 
dollars. The amendment also specifies, however, that the Secretary is 
not required to make payment under Medicaid for case management 
services that are furnished without charge to users of the services.
    When an individual could be served under more than one targeted 
case management plan amendment because he falls within the scope of 
more than one target group, a decision must be made concerning the 
appropriate target group so that the individual will have one case 
manager responsible for his services and duplicate payment for the same 
purpose will not be made.
    While FFP would not be available for case management services that 
duplicates payments made under other program authorities, section 
1903(c) of the Act provides an exception for medical assistance for 
covered Medicaid services, including case management services, 
furnished to a child with a disability because such services are 
included in an individualized education program or individualized 
family service plan.
    In section 441.18(a)(5), we would require case management services 
to be provided on a one-to-one basis to eligible individuals by one 
case manager. We are including this requirement to implement the 
provisions of section 1915(g)(2)(A)(ii) that sets forth a unified care 
planning process for case management to respond to the needs of 
eligible individuals based on a comprehensive assessment. The statute 
describes a step-by-step process, each component built upon the 
previous one, to ensure that the care plan is effectively implemented 
and adequately addresses all of the assessed needs of the eligible 
individual. Having one case manager is necessary to ensure 
accountability and coordination in assisting individuals in gaining 
access to services to address all components of assessed need. 
Fragmenting the service would reduce the quality of case management; 
the point of case management is to address the complexities of 
coordinated service delivery for individuals with medical needs. The 
case manager should be the focus for coordinating and overseeing the 
effectiveness of all providers and programs in responding to the 
assessed need.
    We are including Sec.  441.18(a)(6) to prohibit providers of case 
management services from exercising the State Medicaid agency's 
authority to authorize or deny the provision of other services under 
the plan. Although a State Medicaid agency may place great weight on 
the informed recommendation of a case manager, it must not rely solely 
on case management recommendations in making decisions about the 
medical necessity of other Medicaid services that the individual may 
receive. The decision to authorize the provision of a service must 
remain with the State Medicaid agency as required by Sec.  431.10(e). 
Costs related to these activities, such as prior authorization or 
determination of medical necessity, which are necessary for the proper 
and efficient administration of the Medicaid State plan, must be 
claimed as a direct administrative expense by the Medicaid agency and 
may not be included in the development of a case management rate.
    If a State plan provides for case management services (including 
targeted case management services), the State must require providers to 
maintain case records that document the information required by Sec.  
441.18(a)(7). These case records must document, for each individual 
receiving case management, the name of the individual; the dates of 
case management services; the name of the provider agency (if relevant) 
and person chosen by the individual to provide the case management 
services; the nature, content, units of case management services 
received and whether the goals specified in the care plan have been 
achieved; whether the individual has declined services in the care 
plan; timelines for providing services and reassessment; and the need 
for, and occurrences of, coordination with case managers of other 
programs.
    States that opt to furnish case management services must do so by 
amending their State plans in accordance with Sec.  441.18(a)(8) and 
Sec.  441.18(a)(9). FFP is not available for case management as a 
medical assistance service under sections 1905(a)(19) and 1915(g) of 
the Act in the absence of an approved amendment to the State's Medicaid 
plan. A State's amendment to its State plan must contain all 
information necessary for CMS to determine whether the plan can be 
approved to serve as a basis for FFP. Each amendment must--

    <bullet> Specify whether case management will be targeted, and if 
so, define the targeted group (and/or subgroup);
    <bullet> Identify the geographic area to be served;
    <bullet> Describe the services to be furnished including types of 
monitoring;
    <bullet> Specify the frequency of assessments and monitoring and 
provide a justification for the frequencies (given that targeted groups 
may vary in their need for case management services);
    <bullet> Specify the qualifications of the service providers;
    <bullet> Specify the methodology under which case management 
providers will be paid and rates are calculated;
    <bullet> Specifies if case management services are being provided 
to Medicaid-eligible individuals who are in institutions to facilitate 
transitioning to the community. In this case, the amendment must 
specify if case management services are being provided to individuals 
with long-term stays of 180 consecutive days or longer or to 
individuals with short-term stays of less than 180 consecutive days. 
Furthermore, when States choose to provide case management services to 
individuals in institutions to facilitate transitioning to the 
community, the State plan must specify the time period or other 
conditions under which case management may be provided in this manner. 
The time period that case management is provided in an institution must 
not exceed an individual's length of stay. In addition, the State plan 
must specify the case management activities and include an assurance 
that these activities are coordinated with and do not duplicate 
institutional discharge planning; include an assurance that the amount, 
duration, and scope of the case management activities would be 
documented in an individual's plan of care which includes case 
management activities prior to and post-discharge, to facilitate a 
successful transition to community living; specify that case management 
is only provided by and reimbursed to community case management 
providers; specify that FFP is only available to community providers 
and will not be claimed on behalf of an individual until the individual 
is discharged from the institution and enrolled in community services; 
and describe the system and process the State will use to monitor 
providers' compliance with these provisions.
    <bullet> In addition, if the State plan provides for targeted case 
management, the State must submit a State plan amendment for each 
target group that will receive case management services. A separate 
amendment also must be submitted for each subgroup within a group if 
any of these elements differ for that subgroup.
    While a State has some flexibility to establish the methodology and 
rates it will use to reimburse providers of case management or targeted 
case

[[Page 68085]]

management services, a State cannot employ a methodology or rate that 
results in payment for a bundle of services. Per diem rates, weekly 
rates, and monthly rates represent a bundled payment methodology that 
is not consistent with section 1902(a)(30)(A) of the Act, which 
requires that States have methods and procedures to assure that 
payments are consistent with efficiency, economy, and quality of care. 
A bundled payment methodology exists when a State pays a single rate 
for more than one service furnished to an eligible individual during a 
fixed period of time. The payment is the same regardless of the number 
of services furnished or the specific costs, or otherwise available 
rates. Since these bundled (daily, weekly, or monthly) rates are not 
reflective of the actual types or numbers of services provided or the 
actual costs of providing the services, they are not accurate or 
reasonable payments and may result in higher payments than would be 
made on a fee-for-service basis for each individual service. A bundled 
rate is inconsistent with economy, since the rate is not designed to 
accurately reflect true costs or reasonable fee-for-service rates, and 
with efficiency, since it requires substantially more Federal oversight 
resources to establish the accuracy and reasonableness of State 
expenditures. We therefore expect that case management and targeted 
case management services reimbursed on a fee-for-service basis, as 
opposed to a capitated basis, will be reimbursed based on units of 
time. Because of the nature of case management, which can include 
contacts of brief duration, we believe that the most efficient and 
economical unit of service is a unit of 15 minutes or less. 
Accordingly, we are requiring in Sec.  441.18(a)(8)(vi) that the unit 
of service for case management and targeted case management services be 
15 minutes or less.
    In Sec.  441.18(b) we require that, if a State limits qualified 
providers of case management services for target groups with 
developmental disability or chronic mental illness, in accordance with 
Sec.  431.51(a)(4), the plan must identify the limitations being 
imposed on the providers and specify how these limitations enable 
providers to ensure that individuals within the target groups receive 
needed services.
    At Sec.  441.18(c)(1), we specify that the case management benefit 
does not include, and FFP is not available for, activities that are an 
integral component of another covered Medicaid service. To include 
those activities as a separate benefit will result in duplicate 
coverage and payment. This activity would not be consistent with proper 
and efficient operation of the program. For example, when an individual 
receives services from a physician and the physician refers the 
individual to a home health agency for services, that referral is 
integral to the physician's service and FFP will not be available for 
that activity as a case management service.
    Individuals participating in a managed care plan receive case 
management services as an integral part of the managed care services. 
This case management is for the purpose of managing the medical 
services provided by or through the plan and does not extend to helping 
an individual gain access to social, educational, and other services 
the individual may need. Thus, an individual receiving services through 
a managed care plan may also receive case management or targeted case 
management services when the individual is eligible for those services. 
For example, an individual with AIDS served by a managed care plan may 
also be served under a case management plan targeted to persons with 
AIDS/HIV. However, FFP is not available for case management of medical 
services that are also managed by the individual's managed care plan. 
In this situation, it is expected that the Medicaid case manager would 
coordinate with the managed care plan as appropriate. At Sec.  
441.18(c)(2) through Sec.  441.18(c)(5), we set forth limitations 
authorized by the DRA on the case management benefit. The regulation 
text at Sec.  441.18(c) includes the statutory principle set forth at 
section 1915(g)(2)(A)(iii) of the Act providing that the case 
management benefit does not include services that involve the direct 
delivery of underlying medical, educational, social, or other services 
to which an eligible individual has been referred.
    The statutory definition of case management established by the DRA 
draws a distinction between services that assist an individual in 
accessing needed services and the actual services to which access is 
gained. Case management services include only those activities that 
help an individual gain access to needed medical, social, educational, 
and other services. Case managers can assist individuals in gaining 
access to needed services, regardless of the funding source of the 
service to which the individual is referred. By including more than 
medical care, States can implement a holistic approach to the delivery 
of services by using case management to identify all of an individual's 
care needs and coordinate access to services that address these needs.
    Case management does not include the actual direct services the 
individual obtains. For this reason, if a case manager provides a 
direct service, such as counseling, during the course of a case 
management visit, the direct service cannot be reimbursed as part of 
the case management service. This service may be covered under another 
Medicaid service category, such as rehabilitation services, if the 
service is covered under the State's Medicaid program, the case 
management provider also is a qualified provider of that service, and 
the individual chooses to receive the service from the case manager. 
The performance of diagnostic tests also is a direct service. While 
diagnostic tests may provide information that inform the assessment and 
care development process, they do not constitute an assessment activity 
under section 1915(g)(2) of the Act that is covered under the case 
management benefit. These services, however, may be covered under 
another medical assistance category if provided in the State plan. 
Similarly, referral and related activities do not include the provision 
of transportation or escort services, nor do they include the provision 
of day care services so that an eligible individual with children can 
access needed services. These are direct services rather than coverable 
case management activities.
    The nature of the case management benefit to ``assist eligible 
individuals to gain access to needed services'' and the similarity of 
its 1985 definition to the purpose of other programs also has led many 
to confuse the Medicaid benefit with the actual administration of non-
Medicaid programs. This is particularly true when a large number or 
percentage of the participants in these non-Medicaid programs also are 
eligible for Medicaid (and thus, potentially included in a target group 
eligible to receive targeted case management services). Concerns in 
this area have been raised through audits, the review of State plan 
amendments and by the Government Accountability Office (Report GAO-05-
748, entitled ``States Use of Contingency Fee Consultants to Maximize 
Federal Reimbursements Highlights Need for Improved Federal 
Oversight,'' June 2005). The following are examples of targeted case 
management State plans that were inconsistent with Federal policy, 
resulting in excessive Federal Medicaid outlays. These examples 
illustrate the need for the specific definitions and guidance contained 
in this rule.
    <bullet> In one State, in fiscal year 2003, the State received an 
estimated $17 million in Federal reimbursement for targeted case 
management claims from juvenile justice and child welfare agencies of

[[Page 68086]]

which about $12 million was for services that were integral to non-
Medicaid programs.
    <bullet> A State agency claimed $86.6 million Federal share in 
fiscal years 2002 and 2003 for unallowable targeted case management 
services furnished by a social services agency. Contrary to Federal 
requirements, the rates charged to Medicaid included social workers' 
salary costs for child protection and welfare services.
    <bullet> In a CMS audit of a State's counties that provided 
targeted case management services, 72 percent of encounters in one 
county were incorrectly claimed during a 1-year period. These 
encounters either did not meet the definition of targeted case 
management at section 1915(g)(2) of the Act or were claimed for clients 
that were ineligible for Medicaid.
    These past abuses and other occurrences of cost shifting from State 
foster care programs led to the reforms in case management and targeted 
case management made by section 6052 of the DRA. In the DRA, the 
Congress specifically precluded the use of the Medicaid case management 
benefit for the direct delivery of an underlying medical, social, 
educational, or other service funded by other programs. In addition, 
the Congress provided examples with respect to foster care of services 
that are excluded from case management services. The inclusion of 
examples for foster care does not limit the general prohibition on 
including the direct services of other programs from case management 
services under Medicaid as well. For example, the exclusion extends 
to--
    <bullet> Child Welfare/Child Protective Services. States provide 
child protective services to children at risk of abuse or neglect. 
These services include investigation of allegations of abuse or 
neglect, identification of risk factors, provision of services to 
children and families in their own homes, monitoring of at-risk 
children, placement of children into foster care or adoptive homes, and 
evaluation of interventions. Child protective services includes 
development and oversight of a service plan for the child and family 
with the goal of moving the child toward permanency either through 
family reunification, adoption, or other permanent living arrangement. 
Because these services have their own goals'protecting vulnerable 
children and moving them toward a safe and stable living situation--we 
believe child protective services are the direct services of State 
child welfare programs and are not Medicaid case management. These 
activities of child welfare/child protective services are separate and 
apart from the Medicaid program. Thus, Medicaid case management 
services must not be used to fund the services of State child welfare/
child protective services workers. Further, Medicaid may not pay for 
case management services furnished by contractors to the State child 
welfare/child protective services agency, even if they would otherwise 
be qualified Medicaid providers, because they are furnishing direct 
services of the programs of that agency. However, children receiving 
child welfare/child protective services may still qualify to receive 
Medicaid targeted case management services, when these services are 
provided according to the Medicaid State plan program by a qualified 
Medicaid provider who is not furnishing direct services of other 
programs. For example, a Medicaid eligible child with a mental disorder 
receiving child protective services may also qualify to receive case 
management services targeted to children with mental disorders.
    <bullet> Parole and Probation. States often use parole and 
probation as methods by which offenders can be eased back into the 
mainstream society. The supervision, counseling, and oversight required 
by these programs assist individuals in learning--or re-learning--how 
to live within the legal bounds that society places on the behavior of 
its members. Both parole and probation are, however, functions of the 
administration of the justice system, and exist independent of the 
Medicaid program. These functions have their own goals (for example, 
conformance to law, adherence to conditions imposed by a court) which 
may coincide with goals of the Medicaid program, but exist separate and 
independent from it. Because probation and parole functions are 
necessary and integral components of the administration of another 
system, we believe that parole and probation functions are the direct 
services of corrections programs and are not Medicaid case management. 
Thus, we are prohibiting the use of parole or probation officers (or 
other employees or contractors of the justice system or court) as case 
management providers under Medicaid. Individuals who are on parole or 
probation may still qualify to receive Medicaid case management or 
targeted case management services for which they otherwise qualify (for 
example, a Medicaid-eligible individual with a traumatic brain injury 
could qualify to receive case management targeted to a group of persons 
with brain injuries). However, claims for Medicaid case management must 
not include the administration of the State's parole or probation 
system.
    <bullet> Public Guardianship. Persons who have been determined to 
need guardians, because they are found incapable of handling their own 
affairs, may qualify for Medicaid case management when they are also 
part of a group to whom this service is provided (for example, persons 
with developmental disabilities). The public guardianship function, 
however, is also a State or locally administered activity that is 
independent of the Medicaid program. There is a fundamental difference 
between guardians (or conservators, or other similarly appointed 
individuals) and case managers. Case managers may assist decision-
makers in reaching conclusions about the needs of an individual and the 
services that may best meet those needs, but they do not make these 
decisions on behalf of that individual. That is the function of a 
guardian (or conservator, or other similarly appointed individual). 
Case managers may, therefore, assist guardians and others, in enabling 
an individual to gain access to needed services, but they may not be 
used to replace or fund the function of this fundamentally non-Medicaid 
activity.
    <bullet> Special Education. The Individuals with Disabilities 
Education Act (IDEA) ensures every child with a disability has 
available a free appropriate public education (FAPE) that includes 
special education and related services. Part B of the IDEA requires the 
development and implementation of an individualized education program 
(IEP) that addresses the unique needs of each child aged 3 through 21 
with a disability. Part C of the IDEA requires the development and 
implementation of an individualized family service plan (IFSP) to 
address the unique developmental needs of an infant or toddler under 3 
years of age with a disability. The IEP identifies the special 
education and related services needed for the child with a disability. 
An IFSP identifies the early intervention services and other services 
needed for an infant or toddler with a disability and his or her 
family.
    While some of the services identified on a child's IEP (e.g., a 
related service such as physical therapy) may be covered under 
Medicaid, the development, review, and implementation of the IEP is 
part of a process that is required by Part B of the IDEA. This process 
should not be confused with Medicaid case management (or targeted case 
management) services, which also may be needed by the child. Similarly, 
under Part C, the IFSP may identify a need for

[[Page 68087]]

case management as well as other services and activities some of which 
may be covered under Medicaid and others that, while a necessary 
component of the Part C program, are not covered under Medicaid. One 
distinction between the IEP and IFSP is that the IFSP process for an 
infant or toddler with a disability under the age of three requires a 
service coordinator from the outset, some of whose activities may be 
Medicaid-funded case management (or targeted case management) services. 
Case management activities in this context could include taking the 
infant or toddler's history, identifying service needs, and gathering 
information from other sources to form a comprehensive assessment. Case 
management would not include administrative functions that are purely 
IDEA functions such as scheduling IFSP team meetings, and providing the 
requisite prior written notice.
    An IEP or IFSP may identify the need for case management to 
coordinate access to a broad range of medical service providers from 
several disciplines, and also may identify needs for case management to 
gain access to non-medical services. As with other Medicaid covered 
services (such as physical, occupational, or speech therapy) identified 
on the IEP or IFSP, such case management services may be covered under 
Medicaid when furnished to a Medicaid-eligible child by a Medicaid 
qualified provider who assists in gaining access to and coordinating 
all needed services. To facilitate coordinated care, case management is 
a covered Medicaid service only when a single case manager 
comprehensively addresses all of the individual's service needs.
    <bullet> While Medicaid funding could be available for the costs of 
a Medicaid-qualified case manager who may be operating in a school or 
early intervention program in assisting IDEA-eligible children in 
gaining access to needed services, including those identified in their 
IEP or IFSP, coordinating the provision of those services, and 
facilitating the timely delivery of services, Medicaid case management 
services must remain separate and apart from the administration of the 
IDEA programs. Medicaid may pay for those case management services 
where IDEA and Medicaid overlap, but not for administrative activities 
that are required by IDEA but not needed to assist individuals in 
gaining access to needed services. These would include activities such 
as writing an IEP or IFSP, providing required notices to parents, 
preparing for or conducting IEP or IFSP meetings, or scheduling or 
attending IEP or IFSP meetings. Section 504 of the Rehabilitation Act 
(RA) of 1973 requires school districts to provide to students with 
disabilities, appropriate educational services designed to meet the 
individual needs of such students to the same extent as the needs of 
students without disabilities are met; that is, to provide an equal 
opportunity for students with disabilities to participate in or benefit 
from educational aids, benefits, or services. We are clarifying in this 
regulation that FFP is not available for any case management activities 
not included in an IEP or IFSP but performed solely based on 
obligations under section 504 of the RA to ensure equal access to the 
educational program or activity.
    In accordance with section 1903(c) of the Act, nothing in this rule 
would prohibit or restrict payment for medical assistance for covered 
Medicaid services furnished to a child with a disability because such 
services are included in the child's Individualized Education Program 
(IEP) or Individual Family Service Plan (IFSP). Likewise, payment for 
those services that are included in the IEP or IFSP would not be 
available when those services are not covered Medicaid services. In 
addition, Medicaid funds must not be used to replace or otherwise 
supplant funds used for activities related to the administration of the 
IDEA for infants and young children such as Child Find.
    Therefore, at Sec.  441.18(c)(2), we state the general prohibition 
established by the DRA in section 1915(g)(2)(A)(iii) of the Act on 
including as Medicaid case management the direct delivery of services, 
as well as include a list of programs to which we are applying this 
prohibition in this regulation (parole and probation, public 
guardianship, special education, child welfare/child protective 
services, and foster care). We also include in Sec.  441.18(c)(3) the 
specific statutory examples with respect to foster care--
    <bullet> Research gathering and completion of documentation 
required by the foster care program;
    <bullet> Assessing adoption placements;
    <bullet> Recruiting or interviewing potential foster care parents;
    <bullet> Serving legal papers;
    <bullet> Home investigations;
    <bullet> Providing transportation;
    <bullet> Administering foster care subsidies; or
    <bullet> Making placement arrangements.
    These examples of direct delivery of foster care activities are all 
administrative activities that are integral to the delivery of services 
through the foster care program. For the reasons discussed above, since 
the statute cites these administrative activities as examples, rather 
than as an all-inclusive list, at Sec.  441.18(c)(3), we are 
interpreting the exclusion of administrative activities to extend to 
all administrative activities integral to the administration of the 
foster care program. Other foster care activities subject to this 
payment exclusion include case management; referral to services; 
overseeing foster care placements; the training, supervision, and 
compensation of foster care parents; and attendance at court 
appearances related to foster care. Since the activities of foster care 
programs are separate and apart from the Medicaid program, Medicaid 
case management services must not be used to fund the services of 
foster care workers. The following is an example of how this payment 
exclusion will be applied: When a title IV-E eligible child in foster 
care is referred by a caseworker to the Medicaid program for medical 
services or mental health services covered by the Medicaid program, 
that administrative activity neither can be allocated and claimed to 
the Medicaid program as an administrative expense of the Medicaid 
program nor can those costs be claimed as a case management medical 
assistance service. The State may, instead, claim these costs under the 
title IV-E program to the extent allowable (see 45 CFR 1356.60(c)(2) 
and ACF Child Welfare Policy Manual Section 8.1B). FFP for the medical 
services to which a Medicaid-eligible child who resides in foster care 
was referred would be available under the Medicaid program.
    Furthermore, case management activities included under therapeutic 
foster care programs will be subject to this payment exclusion since 
these activities are inherent to the foster care program. FFP for 
medical services to a Medicaid eligible child with medical care needs 
who resides in therapeutic foster care would still be available, 
provided all Medicaid requirements were met.
    At Sec.  441.18(c)(4), we also apply this exclusion from the 
definition of case management the administrative activities integral to 
other non-medical programs, based on the general exclusion from case 
management of services delivered under other programs in section 
1915(g)(2)(A)(iii) of the Act.
    At Sec.  441.18(c)(4), we, thus, will exclude from the case 
management benefit the administrative activities of any other non-
medical program, specifically including activities that constitute the 
administration of special education programs under IDEA, the

[[Page 68088]]

parole and probation functions conducted by or under the authority of 
State or local courts or other justice entities, legal services 
provided by any entity, child welfare/child protective services and 
activities concerning guardianship of a person or the person's assets 
performed by or under the auspices of offices of public guardianship, 
or activities by any individual who has been appointed to perform 
guardianship, conservatorship (or other similar duties) on behalf of a 
Medicaid recipient by a court.
    It is important to note that the exclusion of Medicaid funding for 
case management activities that are used in the administration of other 
non-medical programs does not, in any way, compromise Medicaid 
recipients' eligibility for medically necessary services under the 
plan, including medically necessary case management (and targeted case 
management) services that are not used to administer other programs. 
Thus, a Medicaid eligible child with a developmental disability, who 
receives foster care services, will qualify for Medicaid case 
management services targeted towards individuals with intellectual or 
other developmental disabilities that are not furnished through the 
foster care program. Similarly, a Medicaid-eligible child with chronic 
asthma receiving foster care services will receive medically necessary 
treatment services for that condition funded by Medicaid. Both of these 
children, who also receive foster care services, will continue to 
qualify for Medicaid-funded services. Thus, FFP will be available under 
the Medicaid program for medically necessary services. Similarly, an 
adult who tests positive for the human immunodeficiency virus (HIV) and 
is also on parole may continue to be eligible for medically necessary 
case management services targeted to individuals with HIV that are not 
furnished through a non-medical State program or for medically 
necessary treatment services.
    In Sec.  441.18(c)(5)), we clarify that activities that meet the 
definition in Sec.  440.169 for case management services and under the 
approved State plan cannot be claimed as administrative activities, 
under Sec.  433.15(b).
    Certain activities may be properly claimed as administrative costs 
when the activities are directly related to the proper and efficient 
administration of the Medicaid State plan. Sometimes these activities 
are commonly referred to, by States and others, as ``administrative 
case management''; although, statute and regulation do not include such 
terminology. These administrative activities are performed by State 
agency staff and may involve facilitating access to and coordinating 
Medicaid program services. Some examples of these administrative 
activities include Medicaid eligibility determinations and re-
determinations; Medicaid intake processing; Medicaid preadmission 
screening for inpatient care; prior authorization for Medicaid 
services; utilization review; and Medicaid outreach. These examples are 
not meant to be all-inclusive and CMS may make determinations regarding 
whether these or other activities are necessary for the proper and 
efficient administration of the State plan.
    A State may not claim costs for administrative activities for the 
proper and efficient administration of the State plan if the activities 
are an integral part or extension of a direct medical service. In 
addition, unlike case management claimed as a service cost which can 
extend to coordinating with programs outside of Medicaid, 
administrative activities are strictly related to enhancing access to 
Medicaid services.
    States may not claim, as administrative activities, the costs 
related to general public health initiatives, overhead costs, or 
operating costs of an agency whose purpose is other than the 
administration of the Medicaid program. Activities directed toward 
services not included under the Medicaid program, although these 
services may be valuable to Medicaid beneficiaries, are not necessary 
for the administration of the Medicaid program, and therefore are not 
allowable administrative costs. In addition, with regard to any 
allowable administrative claims, payment may only be made for the 
percentage of time spent which is actually attributable to Medicaid 
eligible individuals.
    The allocation methodology for costs claimed for the proper and 
efficient administration of the State plan must be specified in the 
State's approved public assistance cost allocation plan in accordance 
with subpart E of 45 CFR part 95 and ASMB C-10.
    When the costs of any part of case management or targeted case 
management are reimbursable under another federally funded program, a 
State is directed by section 1915(g)(4)(B) of the Act to allocate costs 
which are reimbursable under the other Federal program in accordance 
with OMB Circular No. A-87 (or any related or successor guidance or 
regulations regarding allocation of costs among federally funded 
programs) under an approved cost allocation program. (OMB Circular No. 
A-87, which details the cost principles for State, local, and Indian 
Tribal Governments for the administration of Federal awards, pertains 
to all Federal agencies whose programs, including Medicaid, are 
administered by a State public assistance agency.) This requirement is 
set forth in Sec.  441.18(d). OMB Circular A-87, Attachment A, 
paragraph C.3.a requires allocation of costs among benefiting cost 
objectives (programs).

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. Waiver of Proposed Rulemaking

    Ordinarily, we will publish a notice of proposed rulemaking and 
afford a period for public comments in accordance with the provisions 
of the Administrative Procedure Act, 5 U.S.C. 553. Further, we 
generally provide for final rules to be effective no sooner than 30 
days after the date of publication unless we find good cause to waive 
the delay. Section 6052(b) of the DRA authorizes the Secretary to 
promulgate regulations to carry out the new statutory provisions at 
section 1915(g)(2) of the Act ``which may be effective and final 
immediately on an interim basis as of the date of the interim final 
regulation.'' In light of the importance of clarifying the definition 
of case management and ensuring the fiscal integrity of the Medicaid 
program, we have elected to use this authority to issue this rule as an 
interim final rule with comment period. Section 6052(b) of the DRA 
further provides that there must be a period for receipt of public 
comments after the date of publication of an interim final rule, and 
that the Secretary may revise the regulation after completion of the 
period of public comment. We are complying with this requirement to 
provide for a period of public comment.
    This rule has been determined to be a major rule as defined in the 
Congressional Review Act, 5 U.S.C. Sec.  804(2). These regulations are 
effective March 3, 2008.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment

[[Page 68089]]

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 PRA of 1995 requires that we 
solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> 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 sections of this document that contain information collection 
requirements (ICRs):

Section 440.169 Case Management Services

    Section 440.169(d) states that case managers assist eligible 
individuals by providing services such as taking client history; 
identifying the needs of the individual, and completing related 
documentation; and gathering information from other sources such as 
family members, medical providers, social workers, and educators (if 
necessary) to form a complete assessment of the eligible individual. 
The case manager must then develop a specific care plan based on the 
information collected through the assessment.
    The burden associated with this requirement is the time and effort 
put forth by the case manager to gather the information and develop a 
specific care plan. While this requirement is subject to the PRA, we 
believe this requirement meets the requirements of 5 CFR 1320.3(b)(2), 
and as such, the burden associated with this requirement is exempt from 
the PRA.

Section 441.18 Case Management Services

    Section 441.18(a) requires that if a State plan provides for case 
management services, as defined in Sec.  440.169, the State must 
require providers to maintain case records that document for all 
individuals receiving case management the name of the individual; the 
date of the case management service; the name of the provider agency 
and the person providing the case management service; and the nature, 
content, and units of case management service. Details of what the case 
records must include are located at Sec.  441.18(a)(7).
    The burden associated with this requirement is the time and effort 
required for a provider to maintain case records. While this 
requirement is subject to the PRA, we believe this requirement meets 
the requirements of 5 CFR 1320.3(b)(2), and as such, the burden 
associated with this requirement is exempt from the PRA.
    If you comment on these information collection and record keeping 
requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Division of Regulations Development, 
Attn.: Melissa Musotto, CMS-2237-IFC, Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Attn.: Katherine Astrich, CMS Desk Officer, CMS-2237-IFC, 
<a href="/cdn-cgi/l/email-protection#8ce7edf8e4e9fee5e2e9d3edfff8fee5efe4cce3e1eea2e9e3fca2ebe3fa"><span class="__cf_email__" data-cfemail="670c06130f02150e090238061413150e040f27080a054902081749000811">[email protected]</span></a>. Fax (202) 395-6974.

VII. Regulatory Impact Analysis

    [If you choose to comment on issues in this section, please 
indicate the caption ``Regulatory Impact'' at the beginning of your 
comments.]
    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year).
    Section 804(2) of title 5, United States Code (as added by section 
251 of Pub. L. 104-121), specifies that a ``major rule'' is any rule 
that the Office of Management and Budget finds is likely to result in--
    <bullet> An annual effect on the economy of $100 million or more;
    <bullet> A major increase in costs or prices for consumers, 
individual industries, Federal, State, or local government agencies, or 
geographic regions; or
    <bullet> Significant adverse effects on competition, employment, 
investment productivity, innovation, or on the ability of United States 
based enterprises to compete with foreign based enterprises in domestic 
and export markets.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 million to $29 million in any 1 year. This rule affects only States 
directly. For purposes of the RFA, we do not consider States or 
individuals to be small entities. Therefore, the Secretary certifies 
that this rule will not have a significant economic impact on a 
substantial number of small entities.
    Section 1915(g) of the Act provides for Medicaid coverage of a new 
optional State plan service, case management services, and permits 
those services to be targeted. This regulation incorporates that 
statutory provision in the Federal regulations.
    Under section 1915(g) of the Act, States may, without securing a 
waiver, furnish case management services, or targeted case management 
services to specified Medicaid groups on a statewide basis or in a 
particular geographic area of the State by requesting approval of a 
State plan amendment. If a State elects to furnish case management 
services (or targeted case management services), FFP will be available 
to the State to assist individuals receiving Medicaid in gaining access 
to needed medical, social, educational, and other services. Thus, the 
Medicaid case management service adds value to services that would 
otherwise be received through Medicaid and other programs in the 
absence of Medicaid case management services. For example, case 
management services provided to women with a high risk pregnancy can 
prevent low birth weight infants and case management of chronic 
problems can reduce hospital emergency room visits. Individuals retain 
the right to select among qualified medical providers of case 
management (or targeted case management) services.
    Ambiguity concerning what services are reimbursable as case 
management and targeted case management services has resulted in 
questionable cost shifting of services onto Medicaid, which increases 
costs. Although the Medicaid program will continue to pay

[[Page 68090]]

for case management and targeted case management services, this 
regulation clarifies and conforms to current statutory requirements of 
the regulatory definition. In fiscal year 2006, Federal and State 
expenditures for targeted case management services were $2,842 million. 
Table 1 contains the Federal and State expenditures for targeted case 
management. These amounts do not reflect changes that may have occurred 
in other services during the projection period as a result of the 
provision of case management services.

                              Table 1.--Medicaid Targeted Case Management Spending
----------------------------------------------------------------------------------------------------------------
                                        2001         2002         2003         2004         2005         2006
----------------------------------------------------------------------------------------------------------------
Federal...........................        1,176        1,384        1,641        1,628        1,620        1,643
State.............................          837        1,020        1,118        1,092        1,185        1,199
                                   -----------------------------------------------------------------------------
    Total.........................        2,012        2,405        2,759        2,720        2,805        2,842
----------------------------------------------------------------------------------------------------------------
Source: CMS-64 Data
Data is reported by Federal fiscal year
All amounts in millions of dollars

    Section 6052 of DRA 2005 specifies that FFP is only available for 
case management services or targeted case management services if there 
are no other third parties liable to pay for those services, including 
as reimbursement under a medical, social, educational, or other 
program. Due to this regulation, it is estimated that Federal Medicaid 
spending on case management and targeted case management services will 
be reduced by $1,280 million between FY 2008 and FY 2012. This 
reduction in spending is expected to occur as case management services 
spending that could be paid for by other third parties or other Federal 
programs, but received by the States as FFP, will no longer be 
reimbursable.
    Due to this regulation, the Assistant Secretary for Resources and 
Technology estimates that Federal spending on title IV-E foster care 
services will increase by $369 million between FY 2008 and FY 2012. 
This increase is expected to occur because State foster care program 
expenditures on case management will no longer be reimbursed as 
Medicaid expenditures and would instead need to be paid by other 
Federal programs or payment sources.
    We are unable to estimate additional net costs/savings that might 
result from case management under section 1915(g) of the Act for the 
following reasons. The use of case management services may result in 
increased access to other services, including those covered under 
Medicaid. Conversely, provision of case management services may work to 
lower both Federal and State costs by encouraging the use of cost-
effective medical care through transitioning individuals out of 
institutions, referrals to qualified providers, and by discouraging 
inappropriate utilization of costly services such as emergency room 
care for routine procedures. The use of case management services also 
may eliminate unnecessary care and over-utilization of services. 
Further, by facilitating early treatment, the use of case management 
services can preclude the need for more costly ``last resort'' 
treatment alternatives.
    Because it is estimated that Federal Medicaid spending on case 
management and targeted case management services will be reduced by 
$1,280 million between FY 2008 and FY 2012 (and thus the annual effect 
on the economy is $100 million or more), we have determined that this 
interim final rule with comment period is a major rule under Executive 
Order 12866. The Secretary certifies that this rule will not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 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 Core-Based 
Statistical Area and has fewer than 100 beds. We have determined that 
this interim final rule with comment period will not have a significant 
effect on the operations of a substantial number of small rural 
hospitals because there will be no change in the administration of the 
provisions related to small rural hospitals. Therefore, the Secretary 
certifies that this rule will not have a significant impact on small 
rural hospitals and, accordingly, we are not preparing an analysis for 
section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. This interim final rule 
with comment period has no consequential effect on State, local, or 
tribal governments or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.

Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in table 2, we have 
prepared an accounting statement showing the classification of the 
savings associated with the provisions of this interim final rule with 
comment period. Tables 2 and 3 provide our best estimate of the savings 
to the Federal Government as a result of the changes presented in this 
interim final rule with comment period based on the estimate in the 
President's FY 2008 Budget that Federal Medicaid spending on case 
management and targeted case management services will be reduced by 
approximately $210 million in FY 2008 and will be reduced by $1,280 
million between FY 2008 and FY 2012. All savings are classified as 
transfers from the State Government to Federal Government.

[[Page 68091]]



   Table 2.--Accounting Statement: Classification of Estimated Savings, From FY 2008 to FY 2012 (in Millions)
----------------------------------------------------------------------------------------------------------------
                                                                                           Units
                                                                Primary                   discount      Period
                          Category                             estimates   Year dollar      rate       covered
                                                                                         (percent)
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized (millions/year)................       $252.6         2008            7    2008-2012
                                                                    254.5  ...........  ...........  ...........
                                                              ...........         2008  ...........    2008-2012
                                                                    256.0  ...........  ...........  ...........
                                                              ...........         2008            0    2008-2012
                                                             ---------------------------------------------------
From Whom to Whom?                                            State Government to Federal Government
----------------------------------------------------------------------------------------------------------------


                    Table 3.--Annual Discounted Transfers--Case Management Rule (in Millions)
----------------------------------------------------------------------------------------------------------------
           Discount rate  (percent)                2008       2009       2010       2011       2012      Total
----------------------------------------------------------------------------------------------------------------
0.............................................        210        230        250        280        310      1,280
3.............................................        204        217        229        249        267      1,166
7.............................................        196        201        204        214        221      1,036
----------------------------------------------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 431

    Grant programs-health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 440

    Grant programs-health, Medicaid.

42 CFR Part 441

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


0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV, subchapter C as set forth 
below:

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

0
1. The authority citation for part 431 continues to read as follows:

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


0
2. Section 431.51 is amended by--
0
A. Republishing the introductory text to paragraph (c).
0
B. Removing the colon and the word ``or'' at the end of paragraph 
(c)(2) and adding a semicolon and the word ``or'' in its place.
0
C. Removing the period at the end of paragraph (c)(3) and adding in its 
place a semicolon and the word ``or''.
0
D. Adding a new paragraph (c)(4).
    The revisions read as follows:


Sec.  431.51  Free choice of providers.

* * * * *
    (c) Exceptions. Paragraph (b) of this section does not prohibit the 
agency from--
* * * * *
    (4) Limiting the providers who are available to furnish targeted 
case management services defined in Sec.  440.169 of this chapter to 
target groups that consist solely of individuals with developmental 
disabilities or with chronic mental illness. This limitation may only 
be permitted so that the providers of case management services for 
eligible individuals with developmental disabilities or with chronic 
mental illness are capable of ensuring that those individuals receive 
needed services.
* * * * *

0
3. Section 431.54 is amended by--
0
A. Revising paragraph (a).
0
B. Adding a new paragraph (g).
    The revision and addition read as follows:


Sec.  431.54  Exceptions to certain State plan requirements.

    (a) Statutory basis--(1) Section 1915(a) of the Act provides that a 
State shall not be deemed to be out of compliance with the requirements 
of sections 1902(a)(1), (10), or (23) of the Act solely because it has 
elected any of the exceptions set forth in paragraphs (b) and (d) 
through (f) of this section.
    (2) Section 1915(g) of the Act provides that a State may provide, 
as medical assistance, targeted case management services under the plan 
without regard to the requirements of sections 1902(a)(1) and 
1902(a)(10)(B) of the Act.
* * * * *
    (g) Targeted case management services. The requirements of Sec.  
431.50(b) relating to the statewide operation of a State plan and Sec.  
440.240 of this chapter related to comparability of services do not 
apply with respect to targeted case management services defined in 
Sec.  440.169 of this chapter.

PART 440--SERVICES: GENERAL PROVISIONS

0
6. The authority citation for part 440 continues to read as follows:

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


0
7. A new Sec.  440.169 is added to subpart A to read as follows:


Sec.  440.169  Case management services.

    (a) Case management services means services furnished to assist 
individuals, eligible under the State plan who reside in a community 
setting or are transitioning to a community setting, in gaining access 
to needed medical, social, educational, and other services, in 
accordance with Sec.  441.18 of this chapter.
    (b) Targeted case management services means case management 
services furnished without regard to the requirements of Sec.  
431.50(b) of this chapter (related to statewide provision of services) 
and Sec.  440.240 (related to comparability). Targeted case management 
services may be offered to individuals in any defined location of the 
State or to individuals within targeted groups specified in the State 
plan.
    (c) For purposes of case management services, individuals (except 
individuals between ages 22 and 64 in an IMD or

[[Page 68092]]

individuals who are inmates of public institutions) may be considered 
to be transitioning to a community setting during the last 60 
consecutive days (or a shorter time period as specified by the State) 
of a covered long-term, institutional stay that is 180 consecutive days 
or longer in duration. For a covered, short-term, institutional stay of 
less than 180 consecutive days, individuals may be considered to be 
transitioning to a community setting during the last 14 days prior to 
discharge.
    (d) The assistance that case managers provide in assisting eligible 
individuals obtain services includes--
    (1) Comprehensive assessment and periodic reassessment of 
individual needs, to determine the need for any medical, educational, 
social, or other services. These assessment activities include the 
following:
    (i) Taking client history.
    (ii) Identifying the needs of the individual, and completing 
related documentation.
    (iii) Gathering information from other sources, such as family 
members, medical providers, social workers, and educators (if 
necessary) to form a complete assessment of the eligible individual.
    (2) Development (and periodic revision) of a specific care plan 
based on the information collected through the assessment, that 
includes the following:
    (i) Specifies the goals and actions to address the medical, social, 
educational, and other services needed by the eligible individual.
    (ii) Includes activities such as ensuring the active participation 
of the eligible individual and working with the individual (or the 
individual's authorized health care decision maker) and others to 
develop those goals.
    (iii) Identifies a course of action to respond to the assessed 
needs of the eligible individual.
    (3) Referral and related activities (such as scheduling 
appointments for the individual) to help the eligible individual obtain 
needed services, including activities that help link the individual 
with medical, social, and educational providers or other programs and 
services that are capable of providing needed services to address 
identified needs and achieve goals specified in the care plan.
    (4) Monitoring and follow-up activities, including activities and 
contacts that are necessary to ensure that the care plan is effectively 
implemented and adequately addresses the needs of the eligible 
individual and which may be with the individual, family members, 
service providers, or other entities or individuals and conducted as 
frequently as necessary, and including at least one annual monitoring, 
to help determine whether the following conditions are met:
    (i) Services are being furnished in accordance with the 
individual's care plan.
    (ii) Services in the care plan are adequate.
    (iii) There are changes in the needs or status of the eligible 
individual. Monitoring and follow-up activities include making 
necessary adjustments in the care plan and service arrangements with 
providers.
    (e) Case management may include contacts with non-eligible 
individuals that are directly related to the identification of the 
eligible individual's needs and care, for the purposes of helping the 
eligible individual access services, identifying needs and supports to 
assist the eligible individual in obtaining services, providing case 
managers with useful feedback, and alerting case managers to changes in 
the eligible individual's needs.


Sec.  440.250  [Amended]

0
8. Section 440.250 is amended by--
0
A. Adding and reserving paragraph (q).
0
B. Adding a new paragraph (r).
    The addition reads as follows:


Sec.  440.250  Limits on comparability of services.

* * * * *
    (q) [Reserved]
    (r) If specified in the plan, targeted case management services may 
be limited to the following:
    (1) Certain geographic areas within a State, without regard to the 
statewide requirements in Sec.  431.50 of this chapter.
    (2) Targeted groups specified by the State.

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

0
9. The authority citation for part 441 continues to read as follows:

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


0
2. Section 441.10 is amended by adding a new paragraph (m) to read as 
follows:


Sec.  441.10  Basis.

* * * * *
    (m) Section 1905(a)(19) and 1915(g) of the Act for case management 
services as set forth in Sec.  441.18 and section 8435 of the Technical 
and Miscellaneous Revenue Act of 1988.

0
10. A new Sec.  441.18 is added to subpart A to read as follows:


Sec.  441.18  Case management services.

    (a) If a State plan provides for case management services 
(including targeted case management services), as defined in Sec.  
440.169 of this chapter, the State must meet the following 
requirements:
    (1) Allow individuals the free choice of any qualified Medicaid 
provider within the specified geographic area identified in the plan 
when obtaining case management services, in accordance with Sec.  
431.51 of this chapter, except as specified in paragraph (b) of this 
section.
    (2) Not use case management (including targeted case management) 
services to restrict an individual's access to other services under the 
plan.
    (3) Not compel an individual to receive case management services, 
condition receipt of case management (or targeted case management) 
services on the receipt of other Medicaid services, or condition 
receipt of other Medicaid services on receipt of case management (or 
targeted case management) services.
    (4) Indicate in the plan that case management services provided in 
accordance with section 1915(g) of the Act will not duplicate payments 
made to public agencies or private entities under the State plan and 
other program authorities;
    (5) Provide comprehensive case management services, on a one-to-one 
basis, to an individual through one case manager.
    (6) Prohibit providers of case management services from exercising 
the agency's authority to authorize or deny the provision of other 
services under the plan.
    (7) Require providers to maintain case records that document for 
all individuals receiving case management as follows:
    (i) The name of the individual.
    (ii) The dates of the case management services.
    (iii) The name of the provider agency (if relevant) and the person 
providing the case management service.
    (iv) The nature, content, units of the case management services 
received and whether goals specified in the care plan have been 
achieved.
    (v) Whether the individual has declined services in the care plan.
    (vi) The need for, and occurrences of, coordination with other case 
managers.
    (vii) A timeline for obtaining needed services.
    (viii) A timeline for reevaluation of the plan.

[[Page 68093]]

    (8) Include a separate plan amendment for each group receiving case 
management services that includes the following:
    (i) Defines the group (and any subgroups within the group) eligible 
to receive the case management services.
    (ii) Identifies the geographic area to be served.
    (iii) Describes the case management services furnished, including 
the types of monitoring.
    (iv) Specifies the frequency of assessments and monitoring and 
provides a justification for those frequencies.
    (v) Specifies provider qualifications that are reasonably related 
to the population being served and the case management services 
furnished.
    (vi) Specifies the methodology under which case management 
providers will be paid and rates are calculated that employs a unit of 
service that does not exceed 15 minutes.
    (vii) Specifies if case management services are being provided to 
Medicaid-eligible individuals who are in institutions (except 
individuals between ages 22 and 64 who are served in IMDs or 
individuals who are inmates of public institutions).
    (viii) Specifies if case management services are being provided to 
individuals with long-term stays of 180 consecutive days or longer or 
to individuals with short-term stays of less than 180 consecutive days. 
When States choose to provide case management services to individuals 
in institutions to facilitate transition to the community, the State 
plan must include the following requirements:
    (A) Specify the time period or other conditions under which case 
management may be provided in this manner. The time period that case 
management is provided in an institution must not exceed an 
individual's length of stay;
    (B) Specify the case management activities and include an assurance 
that these activities are coordinated with and do not duplicate 
institutional discharge planning;
    (C) Include an assurance that the amount, duration, and scope of 
the case management activities would be documented in an individual's 
plan of care which includes case management activities prior to and 
post-discharge, to facilitate a successful transition to community 
living; and
    (D) Specify that case management is only provided by and reimbursed 
to community case management providers;
    (E) Specify that Federal Financial Participation is only available 
to community providers and will not be claimed on behalf of an 
individual until discharge from the medical institution and enrollment 
in community services; and
    (F) Describe the system and process the State will use to monitor 
providers' compliance with these provisions.
    (9) Include a separate plan amendment for each subgroup within a 
group if any of the following differs among the subgroups:
    (i) The case management services to be furnished;
    (ii) The qualifications of case management providers; or
    (iii) The methodology under which case management providers will be 
paid.
    (b) If the State limits qualified providers of case management 
services for target groups of individuals with developmental disability 
or chronic mental illness, in accordance with Sec.  431.51(a)(4) of 
this chapter, the plan must identify any limitations to be imposed on 
the providers and specify how these limitations enable providers to 
ensure that individuals within the target groups receive needed 
services.
    (c) Case management does not include, and FFP is not available in 
expenditures for, services defined in Sec.  440.169 of this chapter 
when any of the following conditions exist:
    (1) Case management activities are an integral component of another 
covered Medicaid service.
    (2) The case management activities constitute the direct delivery 
of underlying medical, educational, social, or other services to which 
an eligible individual has been referred, including, but not limited 
to, services under parole and probation programs, public guardianship 
programs, special education programs, child welfare/child protective 
services, and foster care programs.
    (3) The activities are integral to the administration of foster 
care programs, including but not limited to the following:
    (i) Research gathering and completion of documentation required by 
the foster care program.
    (ii) Assessing adoption placements.
    (iii) Recruiting or interviewing potential foster care parents.
    (iv) Serving legal papers.
    (v) Home investigations.
    (vi) Providing transportation.
    (vii) Administering foster care subsidies.
    (viii) Making placement arrangements.
    (4) The activities, for which an individual may be eligible, are 
integral to the administration of another non-medical program, such as 
a guardianship, child welfare/child protective services, parole, 
probation, or special education program except for case management that 
is included in an individualized education program or individualized 
family service plan consistent with section 1903(c) of the Act.
    (5) Activities that meet the definition of case management services 
in Sec.  440.169 and under the approved State plan cannot be claimed as 
administrative activities under Sec.  433.15(b).
    (d) After the State assesses whether the activities are within the 
scope of the case management benefit (applying the limitations 
described above), in determining the allowable costs for case 
management (or targeted case management) services that are also 
furnished by another federally-funded program, the State must use cost 
allocation methodologies, consistent with OMB Circular A-87, CMS 
policies, or any subsequent guidance and reflected in an approved cost 
allocation plan.

(Catalog of Federal Domestic Assistance Program, No. 93.778, Medical 
Assistance Program.)

    Dated: June 23, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 27, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. 07-5903 Filed 11-30-07; 8:45 am]
BILLING CODE 4120-01-P


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