18676 Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 431, 440, and 441 

[CMS–2249–P] 

RIN 0938–AO53 

Medicaid Program: Home and 

Community-Based State Plan Services 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

amend the Medicaid regulations to 

define and describe home and 

community-based State plan services 

implementing new section 1915(i) of the 

Social Security Act as added by section 

6086 of the Deficit Reduction Act of 

2005. 

DATES: Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

June 3, 2008. 

ADDRESSES: In commenting, please refer 

to file code CMS–2249–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions for ‘‘Comment or 

Submission’’ and enter the filecode to 

find the document accepting comments. 

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–2249– 

P, 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–2249–P, Mail Stop C4–26–05, 

7500 Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments (one original 

and two copies) before the close of the 

comment period to either of the 

following addresses: 

a. Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 

(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.) 

b. 7500 Security Boulevard, 

Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Kathy Poisal, (410) 786–5940. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All comments 

received before the close of the 

comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely 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.] 

On February 8, 2006, the Deficit 

Reduction Act of 2005 (DRA 2005) (Pub. 

L. 109–171) was signed into law. 

Section 6086 of the DRA is entitled 

‘‘Expanded Access to Home and 

Community-Based Services for the 

Elderly and Disabled.’’ Section 6086(a) 

of the DRA adds a new section 1915(i) 

to the Social Security Act (the Act) that 

allows States, at their option, to provide 

home and community-based services 

(HCBS) under their regular State 

Medicaid plans. This option allows 

States to receive Federal financial 

participation (FFP) for services that 

were previously eligible for the funds 

only under waiver or demonstration 

projects, including those under sections 

1915(c) and 1115 of the Act. Section 

1915(i) of the Act sets forth several 

conditions that States must meet, and 

actions they must take, if they choose to 

add State plan HCBS to services 

available through the State plan. Section 

6086(b) of the DRA provides for the 

Secretary to develop, through the 

Agency for Healthcare Research and 

Quality, quality of care measures to 

assess Medicaid HCBS. 

Under section 1915(i) of the Act, 

States can provide HCBS to individuals 

who require less than institutional level 

of care and who would therefore not be 

eligible for HCBS under 1915(c) 

waivers. Section 1915(i) of the Act does 

not link HCBS to institutional level of 

care or require cost savings over 

institutional services, permitting States 

to provide the State Plan HCBS benefit 

to individuals whether or not they meet 

an institutional level of care, and based 

on need for support rather than 

population characteristics. 

Section 1915(i) of the Act does 

impose other limits not required by 

section 1915(c) waivers, including a 

prescribed set of services States may 

choose to offer, and exclusion of 

individuals with income above 150 

percent of the Federal Poverty Level 

(FPL). HCBS under the State plan are 

limited to elderly and disabled 

individuals. 

HCBS are available in some States in 

demonstration programs under section 

1115 of the Act. Each demonstration 

under section 1115 of the Act is unique 

with respect to the Medicaid 

requirements waived, type and scope of 

services offered and population served, 

and cannot be generally characterized. 

Therefore, we are not including HCBS 

provided under section 1115 


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1Note that the abbreviation HCBS does not 

distinguish between singular and plural. Where this 

could be confusing, we spell out home and 

community-based service(s). 

demonstrations in this discussion 

except to note that the section 1115 

authority has been used by States to 

provide services in the home and 

community. States can also provide 

Medicaid long-term care services to 

individuals in the community through 

the mandatory State plan home health 

benefit, and the optional State plan 

personal care services benefit. These 

services are occasionally referred to as 

home and community-based, but are not 

included as HCBS in this discussion. 

The section 1915(i) benefit does not 

diminish the State’s ability to provide 

any of these existing community 

services. States opting to offer State plan 

HCBS under section 1915(i) of the Act 

can continue to provide the full array of 

community services under section 

1915(c) waivers, section 1115 

demonstration programs, mandatory 

State plan home health benefits, and the 

optional State plan personal care 

services benefit. 

Before 1981, the Medicaid program 

provided limited coverage for long-term 

care services in non-institutional, 

community-based settings. Medicaid’s 

complex eligibility criteria and other 

factors made institutional care much 

more accessible than care in the 

community. 

Medicaid HCBS were established in 

1981 as an alternative to care in 

Medicaid institutions, by permitting 

States to waive certain Medicaid 

requirements upon approval by the 

Secretary. Section 1915(c) of the Act 

was added to title XIX by the Omnibus 

Budget Reconciliation Act of 1981 

(OBRA 1981) (Pub. L. 97–35). Programs 

of HCBS under section 1915(c) of the 

Act are known as ‘‘waiver programs’’, or 

simply ‘‘waivers’’ due to the authority to 

waive Medicaid requirements. 

Since 1981, the section 1915(c) HCBS 

waiver program has afforded States 

considerable latitude in designing 

services to meet the needs of people 

who would otherwise require 

institutional care. In 2007, 

approximately 300 HCBS waivers under 

section 1915(c) of the Act serve over 1 

million elderly and disabled individuals 

in their homes or alternative residential 

community settings. States have used 

HCBS waiver programs to provide 

numerous services designed to foster 

independence; assist eligible 

individuals in integrating into their 

communities; and promote selfdirection, personal choice, and control 

over services and providers. The 

addition of section 1915(i) of the Act 

affords some of the same flexibility 

through the State plan. 

Another important aspect to this 

background is the passage of the 

Americans with Disabilities Act of 1990 

(ADA) and the Olmstead v. L.C., 527 

U.S. 581 (1999) U.S. Supreme Court 

decision. In particular, Title II of the 

ADA prohibits discrimination on the 

basis of disability by State and local 

governments and requires these entities 

to administer services, programs, and 

activities in the most integrated setting 

appropriate to the needs of qualified 

individuals with disabilities. In 

applying the most integrated setting 

mandate, the U.S. Supreme Court ruled 

in Olmstead v. L.C. that unnecessary 

institutionalization of individuals with 

disabilities may constitute 

discrimination under the ADA. Under 

Olmstead, States may not deny a 

qualified individual with a disability a 

community placement when: (1) 

Treating professionals determine that 

community placement is appropriate; 

(2) the community placement is not 

opposed by the individual with a 

disability; and (3) the community 

placement can be reasonably 

accommodated. 

In the following discussion and the 

proposed regulation, we refer to 

particular home and community-based 

service(s) offered under section 1915(i) 

of the Act as ‘‘State plan HCBS’’ or 

simply ‘‘HCBS’’.1 We refer to the ‘‘State 

plan home and community-based 

services benefit’’ when describing the 

collective requirements of section 

1915(i) of the Act that apply to States 

electing to provide one, or several, of 

the authorized HCBS. We choose to use 

the term ‘‘benefit’’ rather than 

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

the Act to avoid possible confusion with 

HCBS waiver programs. The State plan 

HCBS benefit shares many features with 

section 1915(c) waiver programs, and in 

other respects is similar to other State 

plan services, but differs from both in 

important respects. 

The Secretary has delegated 

administration of the Medicaid program, 

including the State plan HCBS benefit 

furnished under Medicaid, to the 

Centers for Medicare & Medicaid 

Services (CMS). Effective January 2007, 

States that demonstrate they meet 

certain requirements may choose to 

furnish HCBS under the State plan. 

States may elect to provide HCBS 

through waiver programs, State plan 

services, or both. The availability of the 

State plan HCBS benefit does not 

foreclose, or otherwise restrict, a State’s 

ability to operate its HCBS waiver 

programs, nor does the availability of 

HCBS waiver services within a State 

affect its ability to add the HCBS benefit 

to its State plan. 

A. Overview of the State Plan HCBS 

Benefit 

The following overview describes the 

provisions of the DRA in the order they 

are presented in section 1915(i) of the 

Act. The proposed regulation and the 

explanation of each proposed 

requirement in section II. are arranged 

so that related requirements are grouped 

for clarity. 

1. General Provisions of the State Plan 

Amendment Option To Provide Home 

and Community-Based Services for 

Elderly and Disabled Individuals 

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

States the option to provide, under the 

State plan, the services and supports 

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

governing HCBS waivers, not including 

the ‘‘other services’’ described therein. 

The services specifically listed in 

section 1915(c)(4)(B) of the Act are as 

follows: Case management, homemaker/ 

home health aide, personal care, adult 

day health, habilitation, respite care, 

and for individuals with chronic mental 

illness: Day treatment, other partial 

hospitalization services, psychosocial 

rehabilitation services, and clinic 

services (whether or not furnished in a 

facility). The HCBS may not include 

payment for room and board (see 

additional discussion in section I.D.3.). 

We interpret the statute as authorizing 

the services as titled in section 

1915(c)(4)(B) of the Act. Therefore, we 

would expect States to define State plan 

HCBS with sufficient specificity that the 

nature and scope of the service clearly 

relates to those listed in section 

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

Section 1915(i) of the Act explicitly 

provides that State plan HCBS may be 

provided without determining that, but 

for the provision of such services, 

individuals would require the level of 

care provided in a hospital, a nursing 

facility (NF), or an intermediate care 

facility for the mentally retarded (ICF/ 

MR) as is required in section 1915(c) 

HCBS waivers. While HCBS waivers 

must be ‘‘cost-neutral’’ to Medicaid, no 

cost neutrality requirement applies to 

the section 1915(i) State plan HCBS 

benefit. States are not required to 

produce comparative cost estimates of 

institutional care and the State plan 

HCBS benefit. This significant 

distinction allows States to offer HCBS 

to individuals whose needs are 

substantial, but not severe enough to 

qualify them for institutional or waiver 

services, and to individuals for whom 


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2The statute refers to ‘‘the poverty line as defined 

in section 2110(c)(5)’’. The poverty guidelines are 

formally referenced as ‘‘the poverty guidelines 

updated periodically in the Federal Register by the 

U.S. Department of Health and Human Services 

under the authority of 42 U.S.C. 9902(2).’’

Commonly referred to as the ‘‘Federal Poverty 

Level’’ or ‘‘Federal Poverty Line’’ (FPL), we will 

adopt the term FPL in this regulation. 

there is not an offset cost savings in 

NFs, ICFs/MR, or hospitals. 

While eligibility for State plan HCBS 

does not require that the individual 

would otherwise need an institutional 

level of care, the services are intended 

to prevent progression to 

institutionalization and to enable 

individuals to receive needed services 

in their own homes, or in alternative 

living arrangements in what is 

collectively termed the ‘‘community’’ in 

this context. (See additional discussion 

in section I.D.2. regarding institutions 

not considered to be in the community, 

and in which State plan HCBS will not 

be available.) 

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

that in order to receive State plan HCBS, 

individuals must be eligible for 

Medicaid under an eligibility group 

covered by the State plan. This section 

does not create a new eligibility group. 

Individuals who have not been found 

eligible for Medicaid cannot be enrolled 

in the State plan HCBS benefit, even if 

they otherwise meet the requirements 

for the benefit. In addition, individuals 

may not be enrolled in the State plan 

benefit if their income exceeds 150 

percent of the FPL.2 In determining 

whether the 150 percent of the FPL 

requirement is met, the regular rules for 

determining income eligibility for the 

individual’s eligibility group apply, 

including any more liberal income 

disregards used by the State for that 

group under section 1902(r)(2) of the 

Act. 

2. Needs-Based Criteria 

In contrast to the institutional level of 

care requirement for eligibility in HCBS 

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

requires States to impose needs-based 

criteria for eligibility for the State plan 

HCBS benefit. Additionally, the State 

may establish needs-based criteria for 

each specific State plan home and 

community-based service that an 

individual would receive. 

Section 1915(i) of the Act does not 

authorize States to waive the 

requirement of section 1902(a)(10)(B) of 

the Act relating to comparability, as 

does section 1915(c) of the Act. Waiver 

of comparability is a key feature of 

HCBS waivers, permitting the State to 

target the HCBS benefit to certain 

populations by defining which groups 

will be eligible for waiver services, and 

by having separate waivers for different 

groups. Through use of eligibility 

criteria, States can provide services for 

certain high need target groups that are 

not comparable to the services received 

by other Medicaid beneficiaries in the 

State. Under section 1915(i) of the Act, 

States are not authorized to establish 

eligibility criteria in order to target 

services to certain populations. Since 

comparability may not be waived, States 

must determine eligibility for State plan 

HCBS on the basis of the following 

criteria only: 

• The individual is eligible for 

medical assistance under the State plan. 

• The individual’s income does not 

exceed 150 percent of the FPL. 

• The individual resides in the home 

or community. 

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

Needs-based criteria for an individual 

service are subject to the same 

requirements as needs-based eligibility 

criteria, and may not limit or target any 

service based on age, nature or type of 

disability, disease, or condition. 

The heading of section 1915(i) of the 

Act describes the State plan HCBS 

benefit as ‘‘for Elderly and Disabled 

Individuals.’’ However, section 1915(i) 

of the Act does not include definitions 

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

setting forth eligibility criteria, and 

instead requires eligibility to be based 

on need and on eligibility for medical 

assistance under a State plan group. 

Thus, we believe that the use of these 

terms in the statute is descriptive. 

Individuals who are eligible for medical 

assistance under a group covered in the 

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

HCBS will have needs stemming either 

from a disability or from being elderly. 

We note that section 1902(b)(1) of the 

Act prohibits the Secretary from 

approving any plan for medical 

assistance that imposes an age 

requirement of more than 65 years as a 

condition of eligibility. 

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

nature of needs-based criteria to 

distinguish them from targeting criteria, 

which are not permitted under the 

statute. However, we would propose to 

provide States with the flexibility to 

define the specific needs-based criteria 

they will establish. (See discussion 

below of section 1915(i)(1)(D) of the 

Act.) 

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

additionally requires that the needsbased criteria for determining whether 

an individual requires the level of care 

provided in a hospital, NF, or ICF/MR 

or under a waiver of the State plan be 

more stringent than the needs-based 

eligibility criteria for the State plan 

HCBS benefit. ‘‘Stringency’’ is not 

defined in the statute. States establish 

stringency in defining particular needsbased criteria. There is no expectation 

that States will modify institutional 

levels of care to make them more 

stringent, in order to satisfy this 

requirement. If the State’s existing 

criteria for receipt of institutional and 

HCBS waiver care are needs-based, and 

more stringent than the criteria it will 

use for the State plan HCBS benefit, the 

State need not modify its institutional 

criteria. We anticipate that States will 

adopt the much simpler strategy of 

defining the new State plan HCBS 

needs-based eligibility criteria at a less 

stringent level than existing 

institutional criteria. In order to 

implement the State plan HCBS benefit, 

States may need to add needs-based 

criteria to their institutional level of care 

requirements, if none presently exist. 

Section 1915(i) of the Act does not 

require that such added needs-based 

institutional level of care criteria 

necessarily result in excluding 

individuals who would be served 

without the added criteria. In fact, the 

purpose of section 1915(i) of the Act 

appears to be to expand access to HCBS 

to individuals who are not at an 

institutional level of care, rather than to 

reduce access to institutional and 

waiver services. 

We note that section 1915(i) of the Act 

does not modify the statutory coverage 

provisions of institutional benefits. 

States must be cautious not to establish 

more stringent needs-based criteria for 

hospitals, NFs or ICFs/MR that would 

reduce access to services mandated 

elsewhere in title XIX, since those other 

provisions of the statute were not 

amended. For example, the NF benefit 

is defined in section 1919(a)(1) of the 

Act as an institution that is primarily 

engaged in providing to residents 

skilled nursing care, rehabilitation 

services, and ‘‘[o]n a regular basis, 

health-related care and services to 

individuals who because of their mental 

or physical condition require care and 

services (above the level of room and 

board) which can be made available to 

them only through institutional 

facilities.’’ To the extent that needed 

health-related care and services above 

the level of room and board are not 

available in the community, the NF 

institutional benefit must remain 

available to all Medicaid eligible 

individuals described in section 

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

We interpret the reference to hospitals 

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


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mean facilities certified by Medicaid as 

hospitals that are providing long-term 

care services or services related to the 

HCBS to be provided under the State 

plan HCBS benefit. General acute care 

Medicaid hospital services are not 

subject to level of care determinations 

by the State. 

We interpret the reference in section 

1915(i)(1)(B) of the Act ‘‘under any 

waiver of such plan’’ to apply to section 

1915(c) waivers, as well as those section 

1115 waivers that include HCBS. 

Section 1915(c) waivers by definition 

will have more stringent criteria than 

the State plan HCBS benefit, as the 

waivers are required to use level of care 

assessments equivalent to one or more 

of the institutional levels of care. 

In summary, the needs-based 

eligibility criteria for the State plan 

HCBS benefit must have the effect of 

potentially admitting to the benefit 

some individuals who do not meet the 

needs-based criteria for institutionalized 

care, and may admit to the benefit 

individuals who do meet the 

institutional needs-based eligibility 

criteria. We note that individuals who 

meet eligibility requirements for both an 

institutional benefit and the State plan 

HCBS benefit must be offered a choice 

of either benefit. 

3. Number Served 

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

contains two provisions regarding the 

number of individuals served. The first 

provision requires a State to provide to 

the Secretary a projection of the number 

of individuals expected to receive 

services. If this projection is exceeded, 

section 1915(i)(1)(D)(ii) permits the 

State to constrict its needs-based 

eligibility thresholds for State plan 

HCBS. The second provision allows the 

State to impose a maximum limit to the 

number of individuals to be served 

through the State plan HCBS benefit. 

The latter provision carries with it 

authority for the State to establish 

waiting lists for the State plan HCBS 

benefit. 

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

requires that the State submit 

projections of the number of individuals 

to be provided HCBS, in the form and 

manner, and upon the frequency as the 

Secretary specifies. We would propose 

to follow the practice used in HCBS 

waivers to calculate the number served 

as unduplicated persons receiving 

services during a 12-month period. We 

would specify that States annually 

submit both the projected number of 

individuals to be served and the actual 

number of individuals served in the 

previous year. We refer to individuals 

served under the benefit and included 

in the annual number served as having 

been enrolled in the benefit. The statute 

refers to ‘‘enrollment’’ in section 

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

Adjustment Authority. Because there 

are a number of steps involved in an 

individual initiating service under the 

State plan HCBS benefit, ‘‘enrollment’’

is a useful term to indicate individuals 

for whom those steps have been 

completed, services have been 

authorized or provided, and who will be 

accounted for in the annual number 

served under the benefit. 

If the State exceeds its enrollment 

estimate, the State would report the 

number of individuals actually served 

in the required annual report to the 

Secretary, and revise the estimate for 

succeeding years. 

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

provides an option for the State to limit 

the number of eligible individuals to 

whom it will provide the State plan 

HCBS benefit. The limit does not need 

to be the same as the projected number 

of individuals to be served. As with the 

projected number, we would specify 

that the limit be expressed in terms of 

the number of unduplicated recipients 

eligible to receive the State plan HCBS 

benefit, for a period of 12 months. We 

would propose that States may establish 

limits for individuals to be served 

annually. States may establish a phasein and phase-out schedule for limits. 

The State may also elect to place a limit 

on the number of individuals to be 

served at any given time in the year 

(‘‘slot’’ methodology), so long as the 

State also provides the annual report of 

actual unduplicated recipients. 

We would specify that the State 

submit a State plan amendment to 

initiate or adjust the limit on the 

number of individuals to be served. 

Consistent with 42 CFR 430.20, we 

would permit a service expansion to 

become effective on the first date of the 

calendar quarter in which an approvable 

amendment is received in CMS. 

A State electing to use a waiting list 

must develop policies for establishing 

and maintaining the list, if it elects to 

establish a limit to the number of 

individuals served. We do not believe it 

would be appropriate for us to describe 

waiting list policies that must operate in 

each State. Rather, we would require the 

State to assure that its policies are 

published with opportunity for 

comment, equitable, and meet all 

applicable State and Federal 

requirements. Those requirements 

include but are not limited to Medicaid 

provisions such as timely evaluation 

and right to fair hearing; civil rights 

protections such as the State’s 

compliance with the Americans with 

Disabilities Act (ADA) and the decision 

of the United States Supreme Court in 

Olmstead v. L.C. and, in some cases, 

other judicial decisions or procedures 

for court monitoring. Waiting list 

policies will also be affected by the 

option in section 1915(i)(3) of the Act 

for the State to elect not to comply with 

the requirement for statewideness (see 

discussion in section I.14. of this 

proposed rule). 

4. Independent Evaluation 

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

forth a requirement for an individual 

evaluation of need for each person 

applying for the State plan HCBS 

benefit. The statute here uses the term 

‘‘assessment,’’ while sections 

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

the initial eligibility determination as 

the ‘‘independent evaluation.’’ We 

would use the latter term for 

consistency. ‘‘Independent evaluation,’’

as understood in light of section 

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

conflict of interest on the part of the 

evaluator. 

The independent evaluation applies 

the needs-based HCBS eligibility criteria 

(established by the State according to 

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

applicant for the State plan HCBS 

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

establishes that determining whether an 

individual meets the needs-based 

eligibility criteria specified in sections 

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

an individualized and independent 

evaluation of each person’s support 

needs and capabilities. We interpret 

‘‘needs and capabilities’’ to mean a 

balanced approach that considers both 

needs and strengths. However, the 

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

historically connected with a deficitoriented approach to assessment, which 

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

refer to needs and strengths in this 

discussion and in the regulation. 

We believe that the statute 

distinguishes needs-based criteria from 

other possible descriptors of an 

individual’s medical condition or 

demographic situation, for example a 

diagnosis. We interpret needs-based 

criteria as describing the individual’s 

particular need for support, regardless 

of the conditions and diagnoses that 

may cause the need. Therefore, we 

would propose that a useful test of 

whether a criterion is needs-based will 

be the type of data that would be needed 

to complete that item in an evaluation. 

A needs-based criterion requires the 

evaluator to determine the unique 

requirements of the applicant, through 

interview if necessary. 


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Institutional/waiver level of care 

(LOC) criteria in some States do not 

include needs-based criteria. We believe 

that States must include a needs-based 

evaluation component of the 

institutional/waiver LOC determination 

process so that stringency of those 

criteria can be compared to stringency 

of eligibility criteria for the State plan 

HCBS benefit. 

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

indicates that the independent 

evaluation may ‘‘take into account’’ the 

inability of the individual to perform 

two or more activities of daily living 

(ADLs), (which the statute defines by 

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

the Internal Revenue Code of 1986), or 

the need for significant assistance to 

perform these activities. The State may 

also assess other risk factors it 

determines to be appropriate in 

determining eligibility for, and receipt 

of, HCBS. The statute does not limit the 

factors a State may take into account in 

the evaluation. For example, 

instrumental activities of daily living 

(IADLs) could be considered. 

5. Adjustment Authority 

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

permits the State to adjust the needsbased criteria described in section 

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

enrollment exceeds the annual 

maximum number of individuals that 

the State has projected it would serve. 

The purpose of such an adjustment 

would be to revise its needs-based 

criteria in order to reduce the number of 

individuals in the State who would be 

eligible for the HCBS benefit. To 

preserve the requirement of 

1915(i)(1)(B) that more stringent needsbased criteria be in place for 

institutionalized care, the adjusted 

eligibility criteria must still be less 

stringent than those applicable to 

institutional levels of care. If the State 

chooses to make this adjustment, it must 

provide at least 60 days written notice 

to the Secretary and the public, stating 

the revisions it proposes. 

While the adjustment authority is 

granted to States without having to 

obtain prior approval from the 

Secretary, we believe that the statute 

requires the State to amend the State 

plan to reflect the adjusted criteria. We 

believe that the State’s adjustment 

authority does not prevent the Secretary 

from disapproving a State plan 

amendment that fails to comply with 

the statute and regulations. Therefore, 

the Secretary would evaluate the State’s 

adjusted criteria for compliance with 

the provisions of this subparagraph and 

all requirements of subpart K. A State 

may implement the adjusted criteria as 

early as 60 days after notifying all 

required parties. Section 430.16 

provides the Secretary 90 days to 

approve or disapprove a State plan 

amendment, or request additional 

information. If the State implements the 

modified criteria prior to the Secretary’s 

final determination with respect to the 

State plan amendment, the State would 

be at risk for any actions it takes that are 

later disapproved. 

After needs-based criteria are adjusted 

under this authority, the statute 

provides for a period during which 

individuals previously served under the 

State plan HCBS benefit would continue 

to receive HCBS. Section 

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

that an individual who is receiving 

HCBS before the effective date for 

modified needs-based criteria, (based on 

the most recent version of the criteria in 

effect before the modification), must be 

deemed by the State to continue to be 

eligible for State plan HCBS for a period 

of at least 12 months, beginning on the 

date on which the individual first 

received a covered State plan HCBS. In 

order to ensure that an individual who 

has been receiving HCBS for a year or 

more would not be subject to immediate 

discontinuation of service, we are 

proposing to apply the phrase ‘‘at least’’

in this context to require that regardless 

of the length of time HCBS has been 

provided, the State must continue to 

deem the individual eligible for services 

for no less than 60 days after official 

notification of all required parties. 

The statute does not provide any new 

remedy for individuals who will lose 

services due to the adjustment in 

eligibility criteria for the HCBS benefit. 

However, the requirements of 42 CFR 

subpart E would apply. Loss of 

eligibility for the HCBS benefit does not 

affect eligibility for other services for 

which the individual would be eligible 

under the State plan. 

We interpret section 1915(i)(1)(D)(III) 

of the Act to require that if the State 

chooses to modify the needs-based 

criteria under the adjustment authority 

of section 1915(d)(1)(D)(ii) of the Act, 

the eligibility criteria for institutional 

levels of care (hospital, NF, ICF/MR, 

and HCBS waiver services) applied by 

the State may be no less stringent than 

those that were in effect before the 

inception of the State plan HCBS 

benefit. Criteria for determining whether 

an individual requires an institutional 

level of care must also be more stringent 

than the adjusted needs-based eligibility 

criteria for the State plan HCBS benefit. 

Finally, we conclude that the State 

may choose to modify its needs-based 

criteria at any time through the usual 

process of a State plan amendment, 

whether or not the projected enrollment 

is exceeded. 

6. Independent Assessment 

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

describes the relationship of several 

required functions. Section 

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

independent evaluation of eligibility in 

section 1915(i)(1)(A) and (B), 

emphasizing the independence 

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

the Act introduces the requirement of an 

independent assessment following the 

independent evaluation. Thus, there are 

two steps to the process: the eligibility 

determination, which requires the 

application of the needs-based criteria, 

and the assessment for individuals who 

were determined to be eligible under the 

first step, to determine specific needed 

services and supports. The assessment 

also applies the needs-based criteria for 

each service (if any). Like the eligibility 

evaluation, the independent assessment 

is based on the individual’s needs and 

strengths. More specifically, both 

physical and mental needs and 

strengths are assessed. These 

requirements describe a person-centered 

assessment including mental health, 

which will take into account the 

individual’s total support needs as well 

as need for the HCBS to be offered. The 

State must use the assessment to: 

determine the necessary level of 

services and supports to be provided; 

prevent the provision of unnecessary or 

inappropriate care; and establish a 

written individualized plan of care. 

In order to achieve the three purposes 

of the assessment listed above, the 

assessor must be independent; that is, 

free from conflict of interest with 

providers, with the individual and 

related parties, and with concern for 

budget. HCBS provided under the State 

plan may be limited only by the needsbased criteria and medical necessity, not 

budget controls. Therefore, we would 

propose specific requirements for 

independence of the assessor in accord 

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

and we would apply these also to the 

evaluator and the person involved with 

developing the plan of care, where the 

effects of conflict of interest would be 

equally deleterious. These 

considerations of independence inform 

the discussion below under section 

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

conflict of interest standards. 

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

provides detailed requirements for the 

independent assessment: 

• An objective evaluation of the 

individual’s inability to perform two or 

more ADLs, or the need for significant 

assistance to perform such activities is 


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required. We do not interpret 

‘‘objective’’ to refer to the independence 

required of the assessor as discussed 

above, but to refer to an additional 

requirement for reliance on some level 

of valid measurement appropriate to the 

ADLs. For example, an occupational 

therapy (OT) or physical therapy (PT) 

evaluation could be required, the results 

of which would be utilized by the 

assessor. We note that the trained 

assessor is not necessarily responsible 

for performing the objective evaluation, 

but should make sure that the objective 

evaluation is performed by qualified 

individuals. We do not propose 

methods to achieve this requirement, as 

the nature of the HCBS to be provided 

and the needs-based criteria for the 

State plan HCBS benefit will determine 

the appropriate means of evaluating 

ADLs. 

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

defines ADLs in terms of section 

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

Code of 1986, which includes the 

following: Bathing, dressing, toileting, 

transferring, eating, and continence. 

This section of the Internal Revenue 

Code does not define the terms 

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

While States have some flexibility to 

define these factors, we interpret 

‘‘inability’’ to mean need for total 

support to perform an ADL, and 

‘‘significant assistance’’ to mean 

assistance from another individual or 

from assistive technology necessary for 

the successful performance of the task. 

An objective evaluation of ability to 

perform two or more ADLs is a required 

element of the assessment but only a 

suggested element of the eligibility 

evaluation. We conclude that partial or 

complete inability to perform two or 

more ADLs is not a statutory 

prerequisite to receive State plan HCBS, 

but is a required element of the 

assessment. 

• A face-to-face evaluation of the 

individual by an assessor trained in the 

assessment and evaluation of persons 

whose physical or mental conditions 

trigger a potential need for HCBS. To 

fulfill this statutory requirement, we 

would propose that the State shall 

develop standards and determine the 

qualifications necessary for agencies 

and individuals who will perform 

independent assessments and be 

involved with developing the plans of 

care. 

• Consultation with any responsible 

persons appropriate to the individual 

and the needed supports, including 

family, spouse, guardian, or healthcare 

and support providers. We do not 

believe the examples listed in the 

statute to be prescriptive or limiting. 

The assessor must give the individual 

and, if applicable, the individual’s 

authorized representative, the 

opportunity to identify appropriate 

persons who should be consulted 

during this process. The role of the 

assessor is to facilitate free 

communication from persons relevant to 

the support needs of the individual, 

while protecting privacy, and promoting 

the wishes and best interests of the 

individual. In necessary circumstances, 

such as telephone communication with 

parties not available for the meeting, 

consultations are not required to be 

performed in person or at the same time 

and place as the face-to-face evaluation, 

so long as any ancillary contacts are 

with persons the individual has 

identified, are divulged and discussed 

with the individual/representative, and 

documented. 

• An examination of the individual’s 

relevant history, medical records, and 

care and support needs. 

• Knowledge of best practices, and 

research on effective strategies that 

result in improved health and quality of 

life outcomes. The statute requires that 

the examination of the individual’s 

history, medical records, and care and 

support needs be guided by this 

knowledge, and we would propose that 

this evidence-based approach should 

apply to the entire process for 

assessment and plan of care 

development. 

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

the assessment should include gathering 

the information required to establish 

self-direction of services. We do not 

propose to require States to conduct a 

separate or additional assessment 

process for self-direction. 

As long as States comply with all 

provisions related to conducting the 

eligibility evaluation, independent 

assessment, and developing the plan of 

care, States have flexibility in 

determining whether they will require 

that the functions be performed as one 

activity by a single agency or individual, 

or whether they wish to separate those 

functions and have different entities 

involved. 

7. Plan of Care 

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

requires that the State plan HCBS 

benefit be furnished under an 

individualized plan of care based on the 

assessment. The statute describes a 

person-centered planning process, 

which can only be achieved when States 

affirmatively and creatively support 

individuals in the planning process. We 

would propose certain requirements for 

developing the plan of care, but note 

that the degree to which the process 

achieves the goal of person-centeredness 

can only be known with appropriate 

quality monitoring by the State. 

Unless the State has elected to impose 

a limit on the number of individuals it 

would serve through its State plan 

HCBS benefit, the State must make the 

services available to all eligible 

individuals as they are assessed to need 

them. We conclude that the statute 

permits determining the level of 

services required by an individual only 

according to assessment of the 

individual’s need, not according to 

available funds. Individuals who qualify 

for HCBS may not be compelled to 

receive them. Individuals may exercise 

their freedom to choose among qualified 

providers in the planning process. 

The State Medicaid agency may 

delegate other agents to develop the 

plan of care, but remains responsible for 

ensuring compliance with all 

requirements and must approve each 

plan of care developed. 

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

Act requires that the plan of care is 

developed in consultation with the 

individual. The requirements for who is 

consulted in developing the plan of care 

parallel those describing who may be 

consulted during the assessment 

process. 

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

Act requires that the development of the 

plan of care take into account the extent 

of, and need for family or other supports 

for the individual, and section 

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

that the individualized plan of care 

identify needed services. We interpret 

these provisions to indicate that natural 

supports are explicitly included in the 

plan of care. This means that 

individuals with equivalent need for 

support but differing levels of family or 

other natural supports may be 

authorized for different levels of HCBS. 

In the context of person-centered 

planning and consultation with natural 

supports, we conclude that the statute 

requires that the plan of care should 

neither duplicate, nor compel, natural 

supports. 

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

provides that plans of care will be 

reviewed at least annually and upon 

significant change in the individual’s 

circumstances. We interpret this 

provision to indicate that diagnostic or 

functional changes are not required in 

order to adjust a plan of care. Changes 

in external factors such as gain or loss 

of other supports may trigger a review. 

We would require revision of the plan 

of care if the review indicates that 

revision is appropriate. By ‘‘annually,’’

we mean not less often than every 12 


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months. Finally, we would relate this 

requirement to the independent 

assessment, since developing or revising 

the plan of care is based on the 

assessment. We therefore would 

propose that the independent 

assessment (number 6. above) is 

required at least annually, and when 

needed upon change in circumstances, 

in order to comply with the requirement 

to review plans of care with that 

frequency. 

8. Self-Direction 

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

provides that States may offer enrolled 

individuals the option to self-direct 

some or all of the State Plan HCBS that 

they require. Many States have 

incorporated elements of self-direction 

into section 1915(c) waiver programs as 

well as section 1115 demonstration 

programs. Self-directed State plan HCBS 

allow States another avenue by which 

they may afford individuals maximum 

choice and control over the delivery of 

services, while comporting with all 

other applicable provisions of Medicaid 

law. We have urged all States to afford 

waiver participants the opportunity to 

direct some or all of their waiver 

services. With the release of an updated, 

revised section 1915(c) waiver 

application in 2005, we refined the 

criteria and guidance to States 

surrounding self-direction (also referred 

to as participant-direction), and 

established a process by which States 

are encouraged, to whatever degree 

feasible, to include self-direction as a 

component of their overall HCBS waiver 

programs. While section 1915(i) of the 

Act does not require that States follow 

the guidelines for section 1915(c) 

waivers in implementing self-direction 

in the HCBS State plan benefit, we 

anticipate that States will make use of 

their experience with 1915(c) waivers to 

offer a similar pattern of self-directed 

opportunities with meaningful supports 

and effective protections. Individuals 

who choose to self-direct will be subject 

to the same requirements as other 

enrollees in the State plan HCBS 

benefit. 

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

defines self-direction, and requires that 

there be an assessment and plan of care. 

We do not interpret these requirements 

to indicate assessments and plans in 

addition to those required in sections 

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

Accordingly, we would propose that the 

requirements for a self-directed plan of 

care at section 1915(i)(1)(G)(iii)(III) of 

the Act be components of the 

assessment and plan of care required for 

all enrollees in the State plan HCBS 

benefit. 

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

contains specific requirements for the 

self-directed plan of care, for which we 

describe proposed regulations in 

Section II. of this proposed rule. The 

proposed regulations are consistent with 

our requirements for self-direction 

under section 1915(c) HCBS waivers. 

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

Act requires that the plan of care be 

developed with a person-centered 

process, which we would propose to 

require of all plans of care for the State 

plan HCBS benefit. 

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

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

budget authority. Section 1915(i)(1) 

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

self-directed selecting, managing, or 

dismissing of providers of the State plan 

HCBS, which we term employer 

authority. The proposed rule explains 

both budget authority and employer 

authority in a manner consistent with 

Section 1915(c) HCBS waiver policy. 

Individuals require information and 

assistance to support them in 

successfully directing their services. 

Therefore, we would require States to 

design and provide functions in support 

of self-direction that are individualized 

according to the support needs of each 

enrollee. These functions should 

include information and assistance 

consistent with sound principles and 

practice of self-direction, and financial 

management supports. 

Section 6087 of the DRA also 

amended the Act to add a new section 

1915(j), that permits States to provide 

medical assistance for the ‘‘Optional 

Choice of Self-Directed Personal 

Assistance Services (Cash and 

Counseling).’’ Section 6087 of the DRA 

is similar, but more expansive than, the 

self-direction provisions in section 6086 

of the DRA. States should carefully 

examine the opportunities for providing 

self-directed HCBS under either or both 

sections 1915(i) or 1915(j) of the Act, 

depending on the goals and objectives of 

their Medicaid programs. 

9. Quality Assurance 

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

requires the State to ensure that the 

State plan HCBS benefit meets Federal 

and State guidelines for quality 

assurance, which we interpret as 

assurances of quality improvement. 

Consistent with current trends in health 

care, the language of quality assurance 

has evolved to mean quality 

improvement, a systems approach 

designed to continuously improve care 

and prevent or minimize problems prior 

to occurrences. This approach to quality 

is consistent with guidelines developed 

by CMS in the CMS Quality 

Improvement Roadmap and The 

Medicaid/SCHIP Quality Strategy. 

Guidelines for quality improvement 

have also been made available through 

CMS policies governing section 1915(c) 

HCBS waivers. 

Additionally, section 6086(b) of the 

DRA requires the Secretary to act 

through the Agency for Healthcare 

Research and Quality to develop 

program performance and quality of 

care measures for Medicaid HCBS. The 

Secretary is to use the indicators and 

measures to assess and compare State 

plan HCBS, particularly with respect to 

the health and welfare of the recipients 

of the services. 

We would require States to have a 

quality improvement strategy, and to 

measure and maintain evidence of 

quality improvement, including system 

performance and individual quality of 

care indicators approved or prescribed 

by the Secretary. We would require 

States to make this information 

available to CMS upon request. 

10. Conflict of Interest 

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

provides that the State will establish 

conflict of interest standards for the 

independent evaluation and 

independent assessment. For reasons 

described above under independent 

assessment, we believe that the same 

independence is necessary for those 

involved with developing the plan of 

care. In this discussion, we will refer to 

persons or entities responsible for the 

independent evaluation, independent 

assessment, and the plan of care as 

‘‘agents’’ to distinguish them from 

‘‘providers’’ of home and communitybased services. 

The design of services, rates and 

payment, and method of administration 

by the State Medicaid agency all may 

contribute to potential conflicts of 

interest. These contributing factors can 

include obvious conflicts such as 

incentives for either over-or underutilization of services, subtle problems 

such as interest in retaining the 

individual as a client rather than 

promoting independence, or practices 

that focus on the convenience of the 

agent or service provider rather than 

being person-centered. 

The independent agent must not be 

influenced by variations in available 

funding, either locally or from the State. 

Within the services the State decides to 

offer, the plan of care must offer to each 

enrollee the home and communitybased services for which they 

demonstrate need. The plan of care 

must be based on medical necessity 

only, not funding levels. When local 


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entities directly expend funds or direct 

allocated resources for services, in 

accordance with § 433.53(c)(2), the State 

must have a mechanism to ensure that 

availability of local funds does not affect 

access to services, for example, using 

State resources to compensate for 

variability in local funding. However, 

States may elect not to apply 

statewideness requirements, making the 

benefit available only in selected 

localities, possibly those that can 

provide greater resources. 

We would require States to define 

conflict of interest standards, to include 

criteria that reflect our experience with 

the issue in administering HCBS 

waivers, and that reflect the principles 

of section 1877 of the Act. 

We are aware that in certain areas 

there may be only one provider 

available to serve as both the agent 

performing independent assessments 

and developing plans of care, and the 

provider of one or more of the home and 

community-based services. To address 

this potential problem we would 

propose to permit providers in some 

cases to serve as both agent and 

provider of services, but with guarantees 

of independence of function within the 

provider entity. In certain 

circumstances, we may require that 

States develop ‘‘firewall’’ policies, for 

example, separating staff that perform 

assessments and develop plans of care, 

from those that provide any of the 

services in the plan; and meaningful 

and accessible procedures for 

individuals and representatives to 

appeal to the State. We would not 

permit States to circumvent these 

requirements by adopting State or local 

policies that suppress enrollment of any 

qualified and willing provider. We do 

not believe that under any 

circumstances determination of 

eligibility for the State plan HCBS 

benefit should be performed by parties 

with an interest in providers of HCBS. 

We invite comment on practical 

solutions to this important balance of 

independence and access. 

11. Eligibility Redeterminations; 

Appeals 

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

requires the State to conduct 

redeterminations of eligibility at least 

annually. We interpret ‘‘annually’’ to 

mean not less than every 12 months. 

The State must conduct 

redeterminations and appeals in the 

same manner as required under the 

State plan. States must grant fair 

hearings consistent with the 

requirements of part 431, subpart E. 

12. Option for Presumptive Eligibility 

for Assessment 

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

States the option of providing for a 

period of presumptive eligibility, not to 

exceed 60 days, for individuals the State 

has reason to believe may be eligible for 

the State plan HCBS benefit. 

We interpret this provision as follows: 

• ‘‘Presumptive’’ we interpret to 

indicate that medical assistance will be 

available for evaluation even when an 

individual is subsequently found not to 

be eligible for the State plan HCBS 

benefit. 

• ‘‘Eligibility’’ does not connote 

eligibility for Medicaid generally, as this 

provision ‘‘shall be limited to medical 

assistance for carrying out the 

independent evaluation and 

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

of the Act. For clarity, we would refer 

to this limited option as ‘‘presumptive 

payment’’. Individuals not eligible for 

Medicaid may not receive State plan 

HCBS. 

• ‘‘Evaluation and assessment’’ under 

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

described as evaluation for eligibility for 

the benefit and assessment to determine 

necessary services. We believe the 

statutory phrase ‘‘and if the individual 

is so eligible, the specific home and 

community-based services that the 

individual will receive’’ is further 

describing the assessment under section 

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

presumptive payment is available, and 

that this phrase is not offering 

presumptive payment for the actual 

services. 

• ‘‘Medical assistance’’ we interpret 

to mean FFP for administration of the 

approved State plan, as we believe that 

determination of eligibility for the State 

plan HCBS benefit and assessment of 

need for specific HCBS are 

administrative activities of the Medicaid 

or single State agency rather than a 

medical service to individuals. Even if 

the evaluation and assessment could be 

considered a medical service, none of 

the services permitted under section 

1915(i) of the Act could be construed to 

include these activities. ‘‘Medical 

assistance’’ in this provision would not 

refer to other Medicaid State plan 

services because individuals being 

considered for eligibility for the State 

plan HCBS benefit must be Medicaid 

eligible and so already have access to 

those services. Therefore, we interpret 

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

the State an option for a period of 

presumptive payment, not to exceed 60 

days, for Medicaid eligible individuals 

the State has reason to believe may be 

eligible for the State plan HCBS benefit. 

FFP would be available as 

administration of the approved State 

plan for evaluation of eligibility for the 

State plan HCBS benefit and assessment 

of need for specific HCBS. During the 

period of presumptive payment, the 

individual would not receive State plan 

HCBS, and would not be considered to 

be enrolled in the State plan HCBS 

benefit for purposes of computing the 

number of individuals being served 

under the benefit. We invite comments 

that offer other interpretations of this 

presumptive payment option and 

comport with existing Federal 

requirements. 

13. Individual’s Representative 

When an individual is not capable of 

giving consent, or requires assistance in 

making decisions regarding his or her 

care, the individual may be assisted or 

represented by another person. Section 

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

‘‘individual’s representative’’ by listing 

certain examples, but also provides that 

‘‘* * * any other individual who is 

authorized to represent the individual’’

[m]ay be included. We believe that 

‘‘authorized’’ refers to State rules 

concerning guardians, legal 

representatives, power of attorney, or 

persons of other status recognized under 

State law or under the policies of the 

State Medicaid program. States should 

ensure that such representatives 

conform to good practice concerning 

free choice of the individual, and assess 

for abuse or excessive control. 

14. Nonapplication 

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

States to be exempted from the 

requirements of two sections of the 

Medicaid statute: section 1902(a)(1) of 

the Act, regarding statewideness; and 

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

regarding income and resource rules for 

the medically needy in the community. 

The statute uses the terms 

‘‘nonapplication’’ and ‘‘may chose not 

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

We would use this terminology to 

maintain clarity between HCBS waiver 

programs under section 1915(c) of the 

Act, and State plan HCBS under section 

1915(i) of the Act. However, these nonapplications apply only with regard to 

the provision of State plan HCBS. The 

State is not exempted from these 

requirements as they apply to the 

provision of any other medical 

assistance under the plan, or with 

regard to the provision of institutional 

services. 

Non-application of the requirement of 

statewideness allows States to furnish 

the State plan HCBS benefit in 

particular areas of the State, for 


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example, where the need is greatest, or 

where certain types of providers are 

available. States may choose to be 

exempted from the requirements of 

statewideness in order to begin services 

on a limited basis, perhaps with a view 

towards later expansion. If a State 

intends to offer the HCBS State plan 

benefit throughout the State, but 

anticipates that services would be 

phased in as providers and enrollees are 

identified, it is not necessary to elect 

non-application of statewideness 

requirements. 

Being exempt from the requirements 

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

enables States to provide medical 

assistance to medically needy 

individuals in the community by 

electing to treat such individuals as if 

they are living in an institution for 

purposes of determining income and 

resources. This would result in the State 

not deeming income and resources from 

an ineligible spouse to an applicant or 

from a parent to a child with a 

disability. 

Section 1915(i)(4) of the Act 

emphasizes that State election to 

provide the State plan HCBS benefit 

does not in any way affect the State’s 

ability to offer programs through a 

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

section 1115 of the Act. 

However, we note that section 1915(c) 

HCBS waivers may be affected when a 

State implements a State plan HCBS 

benefit if institutional levels of care are 

modified to make them more stringent 

than needs-based eligibility criteria for 

the State plan HCBS benefit. 

15. Federal Financial Participation for 

Institutional Level of Care Shall 

Continue for Individuals Receiving 

Services as of the HCBS State Plan 

Amendment’s Effective Date 

If the State modifies institutional level 

of care requirements so that they will be 

more stringent than the needs-based 

criteria for the State plan HCBS benefit, 

Section 1915(i)(5) of the Act provides 

protection for individuals who are 

receiving services in NFs, ICFs/MR, 

applicable hospitals or under section 

1915(c) or section 1115 HCBS 

demonstration projects before the 

modification. These individuals need 

not satisfy the more stringent 

institutional eligibility criteria. FFP 

under the unmodified criteria continues 

until such time as the individual is 

discharged from the institution, waiver 

program, or demonstration, or no longer 

requires this level of care. States may 

avoid this requirement and the 

complications of implementing a dual 

institutional level of care process by 

preserving existing level of care 

requirements, and defining the State 

plan HCBS benefit needs-based criteria 

as less stringent than the existing 

institutional criteria. 

B. Effective Date 

The effective date on which States 

may provide HCBS through the State 

plan, as set forth by the DRA of 2005 is 

January 1, 2007. 

C. The State Plan HCBS Benefit in the 

Context of the Medicaid Program as a 

Whole 

The section 1915(i) State plan HCBS 

benefit is subject to provisions of the 

Medicaid program as a whole. 

Therefore, it is useful to note certain 

requirements of the Medicaid program 

that have an impact on the 

administration of the State plan HCBS 

benefit. 

To be eligible for the State plan HCBS 

benefit, an individual must be included 

in an eligibility group that is contained 

in the State plan. Each individual must 

meet all financial and non-financial 

criteria set forth in the plan for the 

applicable eligibility group. 

Section 1902(a)(8) of the Act requires 

States to furnish Medicaid services with 

reasonable promptness to individuals 

found eligible. However, under section 

1915(i) of the Act, States may place 

limits on the number of persons that 

they would serve via the State plan 

HCBS benefit. If a State chooses to set 

a capacity limit for the State plan HCBS 

benefit as permitted in section 

1915(i)(1)(C)(ii) of the Act, when the 

HCBS benefit reaches capacity, the 

requirements of reasonable promptness 

do not apply, since the option to choose 

these services is no longer available to 

additional individuals. When 

individuals apply for the State plan 

HCBS benefit after the State has reached 

capacity, the State would not be 

required to provide the State plan HCBS 

to the individuals, even when they meet 

otherwise applicable eligibility criteria. 

Children included in eligibility 

groups under the State plan may meet 

the needs-based criteria and qualify for 

benefits under the State plan HCBS 

benefit. HCBS benefits that are not 

otherwise available under Medicaid’s 

Early and Periodic Screening, Diagnosis 

and Treatment (EPSDT) benefit may be 

furnished to Medicaid eligible children 

who meet the State plan HCBS needsbased eligibility criteria, and who meet 

the State’s medical necessity criteria for 

the receipt of services. State plan HCBS 

and EPSDT services may be provided 

concurrently. A mandate for EPSDT 

services applies only to services 

authorized by section 1905(a) of the Act. 

Therefore, HCBS under section 1915(i) 

of the Act are not included in the 

EPSDT program. Children who are 

eligible for the State plan HCBS benefit 

are eligible to receive medically 

necessary State plan HCBS, but the State 

is not required to provide HCBS as part 

of its EPSDT program. States may not 

reserve or protect ‘‘slots’’ for either 

adults or children, but must allow all 

individuals who meet eligibility and 

medical necessity criteria equal access 

to the State plan HCBS benefit. 

Clinic services (whether or not 

furnished in a facility) for individuals 

with chronic mental illness are listed in 

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

therefore may be covered in the State 

plan HCBS benefit. If a State chooses to 

offer these services, they will be subject 

to the clinic upper payment limit (UPL) 

at 42 CFR 447.321. We also note that 

these services are defined differently 

than other clinic services offered under 

the State Plan in that they include 

services whether or not they are offered 

in a facility. 

D. Other Background 

1. Comparability and State Control of 

Costs 

Section 1915(i) of the Act contains no 

provisions for waiving Medicaid 

amount, duration, and scope 

(‘‘comparability’’) requirements 

described under section 1902(a)(10)(B) 

of the Act. This provision has two 

important implications. First, States 

may not ‘‘target’’ the State plan HCBS 

benefit as is permitted with HCBS 

provided under section 1915(c) of the 

Act, which does provide the Secretary 

authority to waive comparability. 

Second, without targeting, States may 

not offer multiple versions of the State 

Plan HCBS benefit, each designed to 

serve different groups, as is permitted 

with HCBS waivers. States may design 

one State plan HCBS benefit, in which 

one or any combination of the permitted 

services is offered, and which includes 

needs-based eligibility and (optionally) 

service criteria. However, all 

individuals who meet the needs-based 

and other eligibility criteria for the State 

plan HCBS benefit must be served in the 

benefit (up to any limit the State 

optionally sets to the number of 

individuals the benefit will serve) 

regardless of how individuals may relate 

to target groups or other classifications. 

States may assure appropriate 

utilization of the State plan HCBS 

benefit through application of the 

following provisions of 1915(i). 

• The requirement to set eligibility 

standards built on needs-based criteria. 

States choose the needs-based criteria 

used to establish the thresholds of 


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program eligibility. States must set a 

lower threshold of need, but may also 

optionally define an upper threshold of 

need beyond which individuals may not 

be served on the benefit. 

• Optionally, establishing needsbased criteria to determine eligibility for 

each State plan HCBS. These additional 

criteria may vary from service to service, 

and should assist States in identifying 

the individuals who could benefit from 

receipt of a particular State plan HCBS. 

• The scope of services that the State 

chooses to offer may include any, but 

need not include all, of the services 

permitted under Section 1915(c)(4)(B). 

States can elect to offer a limited 

number of services under the State plan 

HCBS benefit. 

• Limits on the amount or duration of 

each service. 

• Since all State plan HCBS must be 

provided under a written plan of care, 

States have the opportunity to review an 

individual’s plan of care to ensure that 

HCBS continue to be responsive to the 

needs of the individual, without being 

excessive. 

General Medicaid requirements apply 

to the State plan HCBS benefit. All 

Medicaid services are to be provided 

only to those who need them according 

to medical necessity as defined by the 

State. Prior authorization or other 

utilization controls methods are 

available to the State. 

2. HCBS Provided in the Community, 

Not in Institutions 

Home and community-based services 

are not available in Medicaid-certified 

NFs, ICFs/MR, and hospitals, as these 

institutions are defined in statute and 

regulation. HCBS are available in 

private homes, apartments, or other 

non-institutional residential settings. 

While a simple definition of ‘‘home and 

community-based’’ would be any 

residence other than the three Medicaid 

certified institutions referenced above, 

this definition is insufficient to ensure 

that enrollees in this State plan benefit 

receive services in the type of setting 

intended. There are other public and 

private, large and small, residences 

whose character is equally institutional 

in the experience of residents. 

Therefore, we would propose that at the 

outset of this new Medicaid benefit, 

States should distinguish between 

institutional and community living 

arrangements for individuals being 

evaluated for enrollment in the State 

plan HCBS benefit. 

Opportunities for independence and 

community integration in a variety of 

alternative living arrangements have 

been demonstrated for those receiving 

HCBS provided under section 1915(c) 

waivers and section 1115 

demonstrations. The new Medicaid 

State plan HCBS benefit should be 

implemented based on those practices, 

and in the context discussed previously 

of the ADA and the Olmstead decision. 

We recognize that defining home and 

community is complex, and invite 

comments on this aspect of the 

proposed rule. We also believe that 

enough is known about methods to 

provide elderly and disabled 

individuals with housing that 

encourages independence and 

community participation to justify the 

need to establish standards around this 

important issue at the inception of a 

new benefit offering HCBS. 

We interpret the distinction between 

‘‘institutional services’’ and ‘‘home or 

community-based services’’ in terms of 

opportunities for independence and 

community integration as well as the 

size of a residence. Applicable factors 

include the resident’s ability to control 

access to private personal quarters, and 

the option to furnish and decorate that 

area; if the personal quarters are not a 

private room, then unscheduled access 

to private areas for telephone and 

visitors, and the option to choose with 

whom they share their personal living 

space; unscheduled access to food and 

food preparation facilities; assistance 

coordinating and arranging for the 

resident’s choice of community pursuits 

outside the residence; and the right to 

assume risk. Services provided in 

settings lacking these characteristics, 

with scheduled daily routines that 

reduce personal choice and initiative, or 

without personal living spaces, cannot 

be considered services provided in the 

home or community. 

We would propose two mechanisms 

for the State to determine that residents 

are residing in the community rather 

than in an institution. First, we would 

require minimum standards, as 

prescribed by the Secretary, for 

community living facilities that take 

into account the factors discussed 

above. 

Individuals vary widely in both 

support needs and preferences, so that 

a residence that meets the minimum 

standards for community living 

facilities may be homelike and 

community-integrated for one 

individual but may not be for another 

individual. While we do not find there 

to be any objective criteria, such as 

numbers of residents, to reliably 

distinguish facilities with institutional 

character from those with community 

character, we do believe that it is 

reasonable to use number of residents to 

trigger an assessment of the nature of 

the residence for a specific individual. 

We would therefore additionally 

propose that for individuals in larger 

residential settings there be an 

individualized determination that the 

residence is a community setting 

appropriate to the individual’s need for 

independence, choice, and community 

integration. We believe that the personcentered assessment and plan of care 

required by section 1915(i) of the Act 

offers an efficient opportunity for such 

an individualized assessment of 

community residence. Therefore, we 

would propose to require that for 

individuals in residential settings 

meeting the standards for community 

living facilities, that house four or more 

persons unrelated to the proprietor and 

provide one or more services or 

treatments to the residents, the personcentered assessment and plan of care 

must include a determination that the 

residence is a community setting 

appropriate to the individual’s need for 

independence, choice, and community 

integration. 

We believe that these two 

mechanisms will provide States the 

flexibility to approve a variety of 

settings appropriate to the needs of the 

individuals served while also 

maximizing independence and 

opportunities for community 

integration. 

For example, we anticipate that States 

could devise standards indicating that a 

residence with multiple independent 

living units (apartments) would not be 

considered to be housing four or more 

people together, and would therefore 

not trigger the requirement for the 

assessment to include documentation of 

community character. 

The State plan HCBS benefit may be 

defined by States to serve individuals 

with widely varying degrees of 

independence. The person-centered 

assessment and plan of care will 

provide flexibility to approve different 

types of living arrangements according 

to need. For example, if physical or 

cognitive impairment makes 

unsupervised access to some food 

preparation facilities unsafe, and the 

person-centered plan reflects that there 

must be safeguards against this risk, 

then those portions of the kitchen 

would be made inaccessible when staff 

is not present. In this example, barring 

residents from the home’s kitchen 

altogether would be an institutional, 

rather an integrated solution in all but 

the rarest of circumstances. A residence 

in which only the high risk equipment 

would be inaccessible when staff are not 

present, and the resident would have 

access to the kitchen, food, and 

equipment that does not pose a danger, 


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could be approved as a community 

living arrangement. 

While HCBS are not available while 

an individual resides in an institution, 

HCBS should be available to individuals 

once they leave an institution. 

Recognizing that individuals leaving 

institutions require assistance to 

establish themselves in the community, 

we would allow for transition services 

to be claimed after the date of discharge 

from the institution. We propose that of 

the HCBS permitted under section 

1915(i) of the Act, case management is 

the only service that could be 

commenced prior to discharge and 

could be used to assist individuals 

during the transition period of 

institutional residence. 

3. HCBS Do Not Provide Room and 

Board 

Payments for room and board are 

prohibited by section 1915(i)(1) of the 

Act. Except for respite care furnished in 

a facility approved by the State that is 

not a private residence, no service or 

combination of services may be used to 

furnish a full nutritional regimen (3 

meals a day) through the State plan 

HCBS benefit. FFP for State plan HCBS 

is not available in the cost of meals that 

are furnished in alternative residential 

facilities in the community, regardless 

of whether services (other than respite 

care) are provided by or through the 

setting in which the individual resides. 

When an individual must be absent 

from his or her residence in order to 

receive a service authorized by the 

individualized plan of care, it may be 

impractical to obtain a meal outside the 

venue in which the service is provided. 

This may occur during the receipt of 

facility-based respite care, adult day 

care, or site-based habilitation. In these 

instances, the individual may be unable 

to leave the site to obtain food at 

mealtime. Therefore, the State plan 

HCBS provider may elect to furnish the 

meal. When meals are furnished as an 

integral component of the service, the 

State may consider the cost of food in 

setting the rate it would pay for the 

State plan HCBS as the cost is then 

considered part of the service itself. We 

would not consider the meal to be an 

integral part of the State plan HCBS 

when two rates are charged to the 

public, one that includes a meal and one 

that does not include a meal. 

II. Provisions of the Proposed Rule 

[If you choose to comment on issues 

in this section, please indicate the 

caption ‘‘Provisions of the Proposed 

Rule’’ at the beginning of your 

comments.] 

To incorporate the policies and 

implement the statutory provisions 

described above, we are proposing the 

following revisions: 

Part 431 (State Organization and 

General Administration) 

• In § 431.40, we are proposing to 

amend paragraph (a)(7), by adding 

reference to section 1915(i) of the Act to 

the scope of subpart B, as an exception 

to statewide operation, and correcting 

the paragraph to include reference to 

sections 1915(d) and (e) of the Act. 

• In § 431.50, we are proposing to 

amend paragraph (c) to include HCBS 

(under waivers and the State plan) as an 

exception to statewide operation. 

Part 440 (Services: General Provisions) 

• In § 440.1, we are proposing to add 

a reference to a new statutory basis to 

read ‘‘1915(i) Home and communitybased services furnished under a State 

plan to elderly and disabled individuals 

under the provisions of part 441, 

subpart K.’’

• In § 440.180, we are proposing to 

revise the heading ‘‘Home or 

community-based services’’ to read 

‘‘Home and community-based waiver 

services’’ to standardize the term ‘‘home 

and community-based services’’ and 

clarify that this section concerns only 

HCBS provided through 1915(c) 

waivers. 

• In part 440 subpart A, we are 

proposing to add § 440.182, ‘‘State plan 

home and community-based services’’, 

which would define a new optional 

Medicaid service for which FFP is 

available to States, as specified in part 

441, subpart K. 

Section 440.182 (State Plan Home and 

Community-Based Services Benefit) 

In § 440.182(a), we propose that the 

services authorized in section 1915(i) of 

the Act, and meeting the requirements 

outlined in proposed subpart K, be 

known as ‘‘State plan home and 

community-based services.’’ When 

referring to the specific service(s) 

offered under the State plan HCBS 

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

term ‘‘State plan HCBS.’’ When referring 

to overall State activities under section 

1915(i) of the Act as described in 

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

‘‘State plan HCBS benefit’’. 

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

propose that the optional State plan 

HCBS benefit may consist of any or all 

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

for waiver programs, as specified in 

regulation at § 440.180, except for the 

‘‘other’’ services which the Secretary 

has the authority to approve for an 

HCBS waiver. Because section 1915(i) of 

the Act defines services by reference to 

section 1915(c) of the Act, we believe 

that the regulatory requirements should 

be parallel. Therefore, we list the 

permitted services for the State plan 

HCBS benefit in § 440.182 identically to 

the services specified in § 440.180 for 

HCBS waivers. We further specify that 

the conditions set forth in § 440.180(b) 

for services to individuals with chronic 

mental illness, and in § 440.180(c) for 

expanded habilitation services, apply to 

State plan HCBS services. In particular, 

due to concern over duplication of 

habilitation services, we propose to 

require at § 441.562(a)(2)(vix) an 

explanation of the manner in which 

nonduplication of services will be 

documented in the assessment of each 

individual receiving habilitation 

services. Section 1915(i) of the Act 

prohibits reimbursement for room and 

board. At § 440.182(c)(2) we define the 

term ‘‘room’’ to mean shelter type 

expenses, including all property-related 

costs such as rental or purchase of real 

estate and furnishings, maintenance, 

utilities, and related administrative 

services. The term ‘‘board’’ means three 

meals a day or any other full nutritional 

regimen. We propose in § 440.182(c)(2) 

to require an assurance that the State 

has a methodology to prevent claims 

and ensure that no payment is made for 

room and board in State plan HCBS. We 

propose to specify three types of service 

costs involving food and housing that 

are not considered room and board. We 

adopt the existing requirement for HCBS 

waivers in § 441.310(a)(2), to permit the 

cost of food and residence to be claimed 

for respite services furnished in Stateapproved settings that are not private 

residences. We clarify that a State may 

claim FFP for the costs of meals that are 

furnished as part of a program of adult 

day health or a similar activity 

conducted outside the participant’s 

living arrangement on a partial day 

basis. Finally, we propose that a State 

may claim FFP for a portion of the 

housing expense and food that may be 

reasonably attributed as a service cost to 

compensate an unrelated caregiver 

providing State plan HCBS, who is 

residing in the same household with the 

recipient. We propose, as is the policy 

in HCBS waivers that FFP is available 

only for the reasonable additional costs 

of the caregiver residing in the 

recipient’s home, not to support the cost 

of a caregiver’s household in which the 

recipient resides. We would therefore 

provide that FFP not be available for 

caregiver living costs when the 

residence is owned or leased by the 

caregiver. 


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Part 441 (Services: Requirements and 

Limits Applicable to Specific Services) 

In part 441, ‘‘Requirements and Limits 

Applicable to Specific Services,’’ we are 

proposing to add a new subpart K titled 

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

Individuals,’’ consisting of § 441.550 

through § 441.577, which describes 

requirements for providing the State 

plan HCBS benefit. This construction 

parallels that for HCBS waivers, which 

are the subject of subpart G of part 441. 

In this new subpart, it is necessary in 

several paragraphs to indicate that 

certain provisions apply to an 

individual or an individual’s 

representative. To reduce redundancy, 

we indicate in those paragraphs that 

‘‘individual’’ means the eligible 

individual and, if applicable, the 

individual’s representative, to the extent 

of the representative’s authority 

recognized by the State. ‘‘Individual and 

representative’’ more accurately convey 

the person-centered process than 

‘‘individual or representative’’. This 

provision clarifies that there is no 

implication that individuals will or will 

not have representatives. 

Section 441.550 (Basis and Purpose) 

We set forth in § 441.550 language to 

implement the provisions of section 

1915(i) of the Act permitting States to 

offer HCBS to qualified elderly and 

disabled individuals under the State 

plan. Those services are listed in 

§ 440.182, and are described by the 

State, including any limitations of the 

services. This optional benefit is known 

as the State plan HCBS benefit. This 

subpart describes what a State Medicaid 

plan must provide, and defines State 

responsibilities. 

Section 441.553 (State Plan 

Requirements) 

In § 441.553, we propose that a State 

plan that includes home and 

community-based services for elderly 

and disabled individuals must meet the 

requirements of this subpart. We would 

require that the State plan amendment 

in which the State establishes the State 

plan HCBS benefit satisfy the 

requirements set forth in this proposed 

regulation. 

Section 441.556 (Eligibility for Home 

and Community-Based Services Under 

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

We propose in § 441.556(a)(1) to 

require that the individual be eligible 

for Medicaid under an eligibility group 

covered under the State’s Medicaid 

plan. Enrollment in the State plan HCBS 

does not confer Medicaid eligibility. In 

addition to meeting State Medicaid 

eligibility requirements, the statute 

requires that applicants for State plan 

HCBS must have income that does not 

exceed 150 percent of the Federal 

Poverty Level (FPL). (The poverty 

guidelines are updated periodically in 

the Federal Register by the U.S. 

Department of Health and Human 

Services under the authority of 42 

U.S.C. 9902(2).) We propose in 

§ 441.556(a)(2) that determinations that 

the individual’s income does not exceed 

150 percent of FPL must be made using 

the applicable rules for income 

eligibility for the individual’s eligibility 

group, including any more liberal 

income disregards used by the State for 

that group under section 1902(r)(2) of 

the Act. We see no authority in the 

statute for States to choose income 

limits other than 150 percent of FPL. 

To implement the intent of the 

Congress that the benefit be ‘‘home and 

community-based,’’ we would require in 

§ 441.556(a)(3) that the individual reside 

in the home or community, not in an 

institution, according to standards for 

community living facilities prescribed 

by the Secretary. As discussed in 

section I.D.2., there are a variety of 

living arrangements other than a private 

home or apartment that promote 

independence and community 

integration, as well as arrangements that 

do not. We propose that the personcentered assessment and plan of care 

required under the State plan HCBS 

benefit provides an opportunity to make 

individualized determinations of 

community residence. Therefore, we 

propose to require that if the individual 

resides in a setting with four or more 

persons unrelated to the proprietor, and 

which furnishes one or more services or 

treatments, the independent assessment 

must include documentation that the 

individual is living in a community 

setting, and not in an institution. 

We would require in § 441.556(a)(4) 

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

§ 441.559. We propose in § 441.556(a)(5) 

that individuals are not eligible for the 

State plan HCBS benefit until they have 

met all eligibility requirements, 

including the need for at least one 

service provided under the State plan as 

part of the HCBS benefit. 

We propose in § 441.556(b) that States 

may elect to follow institutional income 

and resource eligibility rules for the 

medically needy living in the 

community. Waiving the requirements 

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

allows States to treat medically needy 

individuals as if they are living in an 

institution by not deeming income and 

resources from an ineligible family 

member. We use the term ‘‘nonapplication’’ instead of ‘‘waive’’ as does 

the statute. We further propose that 

States may elect non-application of 

section 1902(a)(1) of the Act, concerning 

statewide application of Medicaid, 

which permits the State plan HCBS 

benefit to be offered only in certain 

defined geographic areas of the State. 

Section 441.559 (Needs-Based Criteria 

and Evaluation) 

The statute uses a number of terms at 

times interchangeably. We adopt the 

wording used most frequently in the 

law, and specify a term for each 

requirement. For example, regarding the 

terms ‘‘assessment’’ and ‘‘evaluation,’’

we would adopt the language in section 

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

to the ‘‘independent evaluation’’ and the 

‘‘independent assessment.’’

• Needs-based eligibility criteria. 

In § 441.559(a), we propose that States 

establish needs-based criteria for 

determining an individual’s eligibility 

under the State plan for HCBS, and may 

establish needs-based criteria for each 

specific service. We do not define 

support needs, as we believe that States 

should have the flexibility to match 

eligibility criteria to the nature of the 

services they would provide under the 

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

specified types of support, such as 

assistance with ADLs, or risk factors 

defined by the State. We propose to 

require that State-defined risk factors 

affecting eligibility must be included as 

needs-based eligibility criteria in the 

State plan amendment. While we do not 

propose requirements for State-defined 

risk factors, we believe that as needsbased criteria, risk factors should be 

related to support needs, such as 

availability of family members or other 

unpaid caregivers and their willingness 

and ability to provide necessary care. 

We distinguish support needs from 

other types of characteristics. We 

propose that a distinguishing 

characteristic of needs-based criteria is 

that they can only be ascertained for a 

given person through an individual 

evaluation. This differentiates a 

targeting criterion such as a diagnosis, 

which many individuals may 

identically share, from a support need, 

which will vary widely among those 

individuals with the same diagnosis. 

Also set forth in § 441.559(a) are the 

examples of needs-based eligibility 

criteria and factors to consider that are 

supplied in the statute. Section 1915(i) 

of the Act defines ADLs by reference to 

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

Revenue Code of 1986. This section of 

the Internal Revenue Code lists eating, 

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and continence. This mobility-oriented 

definition of ADLs is one that States 

may consider, meaning that States are 

free to define criteria in other domains 

such as cognitive or behavioral needs 

for support. 

We note that the regulation requires 

only that the needs-based criteria for the 

State plan HCBS benefit establish the 

lowest threshold of need to enroll in the 

benefit. There is an upper limit of need 

to be eligible for the HCBS benefit only 

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

stringent institutional criteria required 

in § 441.559(b) of this section do not 

constitute an upper limit of need to be 

eligible for the State plan HCBS benefit. 

The institutional criteria are only a 

lowest threshold of need to receive 

institutional services. We also note that 

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

that State plan HCBS are not required to 

be direct alternatives to institutional 

care. The statute specifically provides 

that the State plan HCBS benefit does 

not need to meet the section 1915(c) 

requirement that, but for the services 

provided under the HCBS waiver, the 

individual would require institutional 

care. 

• More stringent institutional and 

waiver needs-based criteria 

In § 441.559(b), we propose that the 

State plan HCBS benefit is available to 

a State only if individuals may 

demonstrate a lower level of need to 

obtain State plan HCBS than is required 

to obtain institutional or waiver 

services. States that have functional 

level of care criteria for institutions (that 

meet the requirements in 

§ 441.559(a)(1)), may have no need to 

modify their existing institutional 

criteria so long as the needs-based 

eligibility criteria established for State 

plan HCBS are less stringent. States 

without need-based institutional level of 

care criteria must add need-based 

requirements to their level of care 

assessments in order to establish the 

State plan HCBS benefit. 

We propose in § 441.559(b) to define 

by reference to statute and regulation 

the institutions for which section 

1915(i) of the Act requires more 

stringent eligibility criteria. Nursing 

facility and intermediate care facilities 

for the mentally retarded are so cited. 

We interpret reference in section 

1915(i)(1)(B) of the Act to hospitals to 

mean facilities certified by Medicaid as 

hospitals that are providing long-term 

care services or services related to the 

HCBS to be provided under the benefit. 

The proposed regulation requires that 

States have or establish for such 

hospitals (if any), needs based criteria 

for admission that are more stringent 

than those for eligibility in the State 

plan HCBS benefit. We further propose, 

when the State covers more than one 

service in the State plan HCBS benefit, 

to require that any needs-based criteria 

for individual HCBS, combined with the 

needs-based eligibility criteria for the 

benefit, must be less stringent than 

needs-based eligibility criteria for any 

related institutional services. Without 

this provision, it would be possible for 

States to define needs-based eligibility 

criteria that are less stringent than those 

for institutions, but then set each needsbased service criteria at a more stringent 

level, effectively requiring all persons 

served by the benefit to be at a higher 

level of need than the statute intends. 

In § 441.559(b), we further propose to 

require that the more stringent needsbased criteria for institutions and 

waivers be part of the State’s level of 

care processes, to ensure that the criteria 

are uniformly utilized. We would 

require that these more-stringent needsbased criteria be submitted for 

comparison with the State plan 

amendment that establishes the State 

plan HCBS benefit. We note that needsbased criteria, as defined in § 441.559(a) 

require an evaluation to determine the 

individual’s support needs. Therefore, 

the assessment process for institutional 

levels of care that include needs-based 

criteria must include an individual 

evaluation of support needs. We also 

propose to require that the State’s more 

stringent institutional and waiver needsbased criteria be in effect on or before 

the effective date of the State plan HCBS 

benefit. 

Finally, in § 441.559(b)(2), we propose 

that if States modify their institutional 

levels of care in order to satisfy the 

requirement that the levels of care be 

more stringent than the needs-based 

eligibility criteria for the State plan 

HCBS benefit, individuals receiving 

institutional and waiver services as of 

the date that more stringent eligibility 

criteria for those services become 

effective, would not be subject to the 

more stringent criteria. Exemption from 

the more stringent criteria is indefinite, 

but ends when the individual is 

discharged from the facility or waiver, 

or the individual no longer meets the 

criteria for the applicable level of care. 

We note that in long-term care facilities 

a transfer is not a discharge and would 

not cause the individual to lose this 

exemption. States would determine the 

effect of any subsequent changes to 

general level of care requirements 

(unrelated to the more stringent criteria) 

upon individuals with this exemption. 

• Adjustment authority 

In § 441.559(c), we propose to permit 

States under certain conditions to 

adjust, without prior approval from the 

Secretary, the needs-based eligibility 

criteria and service criteria (if any) 

established under § 441.559(a), in the 

event that the State experiences 

enrollment in excess of the number 

projected to be served by the HCBS 

benefit. We propose a retroactive 

effective date, as approved by the 

Secretary, for the State plan amendment 

modifying the needs-based criteria 

under § 441.559(c)(1). We set forth the 

following conditions required by the 

statute. 

The State must provide for at least 60 

days notice to the Secretary, the public, 

and we would add, each enrollee. Since 

the effect of adjusted criteria would be 

to reduce the scope of services, 

eligibility for services, or eligibility for 

the entire State plan HCBS benefit, the 

adjusted criteria would not apply to 

individuals already enrolled in the State 

plan HCBS benefit for at least 12 months 

from inception of such services, and we 

would add, for the additional length of 

the required minimum 60 day 

notification period. If the State also 

adjusts institutional levels of care, the 

adjusted institutional levels of care may 

not be less stringent than the 

institutional level of care prior to the 

effective date of the State plan HCBS 

benefit. 

In § 441.559(c), we further propose to 

require explicitly that the adjusted 

needs-based eligibility criteria for the 

State plan HCBS benefit must be less 

stringent than all needs-based 

institutional level of care criteria in 

effect at the time of the adjustment. 

We propose that the notice to the 

Secretary be submitted as a State plan 

amendment. In order to implement the 

adjustment authority without prior 

approval of the Secretary, the Secretary 

would approve a State plan amendment 

adjusting the needs-based HCBS benefit 

eligibility criteria with a retroactive 

effective date, as early as 60 days after 

the State notified each enrollee, the 

Secretary, and the public, (or whichever 

is later). Under the provision of section 

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

will evaluate the State’s adjusted criteria 

for compliance with the provisions of 

this paragraph and subpart K. We also 

note that while the State may under this 

provision implement the adjusted 

criteria as early as 60 days after 

notification and before the State plan 

amendment is retroactively approved, 

the State is at risk for any actions it 

takes that are later disapproved. 

Finally, we would require that the 

State notify affected individuals of their 

right to a fair hearing according to 42 

CFR part 431, subpart E. 


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• Independent evaluation and 

determination of eligibility 

In § 441.559(d), we propose that 

eligibility for the State plan HCBS 

benefit be determined by an 

independent evaluation of each 

individual, applying the general 

eligibility requirements in § 441.556 of 

this subpart, and the needs-based 

criteria that the State has established 

under § 441.559(a). Independence of the 

review requires meeting the conflict of 

interest standards set forth in § 441.568, 

where provider qualifications for 

evaluators are specified. 

The evaluation must assess an 

individual’s support needs and 

strengths. We interpret this provision of 

the statute to indicate that the 

evaluation process draws conclusions 

about supports that the individual 

requires because of age or disability, and 

supports that the individual does not 

require because of abilities to perform 

those functions independently. The 

evaluation compares those conclusions 

with the needs-based eligibility criteria 

for the State plan HCBS benefit to 

determine eligibility for the benefit. 

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

provides that the State may take into 

account the need for significant 

assistance to perform ADLs, indicating 

that the statute does not require that 

eligibility be dependent upon lack of 

natural supports. 

We note that appraisal of whether an 

individual has medical necessity for, 

and meets additional needs-based 

criteria (if any) for specific HCBS 

offered under the benefit, is part of the 

independent assessment and plan of 

care development process. However, 

this assessment affects eligibility for the 

benefit in that we propose at § 441.562 

that individuals are considered enrolled 

in the State plan HCBS benefit only if 

they are assessed to require at least one 

home and community-based service 

offered under the State plan benefit in 

addition to meeting the eligibility and 

needs-based criteria for the benefit. 

The evaluation process designed by 

the State would reflect the nature of the 

State plan HCBS benefit designed by the 

State. However, in order to meet the 

forgoing requirements, all independent 

evaluations require specific information 

about each individual’s support needs, 

sufficient to draw the appropriate 

conclusions. In some cases this 

information may be well documented 

and current in the individual’s existing 

records. In other cases, we would 

require that the evaluator obtain this 

information by whatever means are 

appropriate to secure a valid appraisal 

of the individual’s current needs. This 

requirement could include professional 

assessment of certain functional 

abilities. State evaluation procedures 

that rely solely on review of medical 

records would not meet these 

requirements. 

• Periodic redetermination 

In § 441.559(e), we propose that 

individuals receiving the State plan 

HCBS benefit must be reevaluated at a 

frequency defined by the State, but not 

less than every 12 months, to determine 

whether the individuals continue to 

meet eligibility requirements. The 

independent reevaluations must meet 

the requirements for initial independent 

evaluations specified in § 441.559(d). 

Section 441.562 (Independent 

Assessment) 

In § 441.562, we propose 

requirements for independent 

assessment of need of each individual 

who has been determined by the 

independent evaluation to be eligible for 

the State plan HCBS benefit. The 

purpose of the assessment is to obtain, 

in combination with the findings of the 

independent eligibility evaluation, all 

the information necessary to establish a 

plan of care. The assessment is based on 

the needs of the individual, which we 

believe precludes assessment protocols 

that primarily determine diagnoses, or 

only assess function. Assessment 

protocols must not assign supports 

automatically by functional limitation. 

The independent assessment must 

determine the specific supports needed 

to address the individual’s unique 

circumstances and needs. 

The assessment also applies the 

State’s needs-based criteria for each 

service (if any). We propose that an 

individual be considered enrolled in the 

State plan HCBS benefit only if the 

assessment finds that the individual 

needs and meets the needs-based 

criteria (if any) for, at least one State 

plan HCBS. This proposed requirement 

is to provide States with a mechanism 

to prevent the situation of an individual 

being eligible for the State plan HCBS 

benefit but not able to receive any of the 

services it offers. Such a circumstance 

would, among other problems, be of no 

utility to the individual, may make it 

difficult for the State to meet an 

assessed need, and would count 

towards the maximum number of 

individuals the State could serve, using 

up a ‘‘slot’’ for no purpose. 

We make clear that the assessment 

must include an objective evaluation of 

the individual’s inability to perform two 

or more activities of daily living (ADL) 

as defined in the Internal Revenue Code 

of 1986, or need for significant 

assistance to perform ADLs. We 

interpret the statutory term ‘‘objective’’

to require an accepted method of 

measuring functioning appropriate to 

the ADL. 

We propose to require in 

§ 441.562(a)(2) that the assessment 

include a face-to-face meeting with the 

individual (‘‘individual’’ meaning in 

this context, if applicable, the 

individual and the individual’s 

authorized representative). In 

§ 441.562(a)(2)(i), we propose to require 

that the assessment is performed by an 

agent that is independent and qualified 

as defined in § 441.568. The assessment 

is to be guided by best practice and 

research on effective strategies that 

result in improved health and quality of 

life outcomes. We further propose that 

the assessment includes consultation, as 

appropriate, with other responsible 

parties. The assessment must include an 

examination of the individual’s relevant 

history, medical records, and care and 

support needs, including the findings 

from the independent eligibility 

evaluation. 

If self-direction of services is offered 

by the State and elected by the 

individual, the independent assessment 

must include a self-direction appraisal 

as described in § 441.574. 

We propose documentation 

requirements in the assessment to 

address two specific circumstances. For 

individuals living in a residence with 

four or more persons unrelated to the 

proprietor, that furnishes one or more 

treatments or services and meets the 

criteria listed in paragraph (a)(3) of 

§ 441.556, we propose that the 

assessment must include documentation 

that the individual is living in a 

community setting, and not in an 

institution. 

For individuals receiving habilitation 

services, we propose to require 

documentation that no services are 

provided under Medicaid that would 

otherwise be available to the individual, 

specifically including but not limited to 

services available to the individual 

through a program funded under section 

110 of the Rehabilitation Act of 1973, or 

the Individuals with Disabilities 

Improvement Act of 2004. We believe 

that these documentation requirements 

would provide a clear method for States 

to comply with Federal requirements, 

focus only on the individuals for whom 

these circumstances could apply, and 

would not add significantly to the 

burden of the assessment. 

Finally, in § 441.562(b), we propose to 

require that the independent assessment 

of need is conducted at least every 12 

months and as needed when the 

individual’s needs and circumstances 

change significantly, in order to revise 

the plan of care. 


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Section 441.565 (Plan of Care) 

In § 441.565 we propose to require 

that based on the independent 

assessment specified in § 441.562, the 

State develops (or approves, if the plan 

is developed by others) a plan of care 

through a person-centered planning 

process. Section 

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

requires a person-centered approach to 

establishing a plan of care for an 

individual (‘‘individual’’ meaning in 

this context, if applicable, the 

individual and the individual’s 

authorized representative) electing to 

direct his or her own services. We 

propose to require that person-centered 

principles guide all plans of care for the 

State plan HCBS benefit. 

We propose that the plan of care must 

be developed jointly with the 

individual. While we propose several 

specific requirements for the process of 

developing a plan of care, we note that 

the intent of these requirements is to 

ensure a process with shared authority 

between the individual and the agency 

or agent. To achieve this intent, States 

must affirmatively and creatively work 

to establish such shared authority. 

The assessment must include 

consultation with appropriate persons. 

Definition of appropriate persons would 

be determined in each case, and while 

we include examples, we do not 

propose any required or excluded 

category of persons to consult. When the 

plan of care is finalized between the 

parties, a written copy is provided to the 

individual. 

Also, in § 441.565(a), we propose 

certain content to be required in the 

plan of care. The plan of care must 

identify the specific State plan HCBS to 

be provided to the individual, that take 

into account the individual’s strengths, 

preferences, and desired outcomes, as 

well as support needs arising from the 

individual’s disability. In the planning 

process, the degree of assistance with 

ADLS available to the individual 

outside of the State plan HCBS benefit 

may be taken into account in planning 

the scope and frequency of HCBS to be 

provided. Thus, the plan of care 

provides for all needed services to the 

individual while preventing provision 

of unnecessary services. 

We propose a single plan of care for 

both self-directed and non self-directed 

services. When an individual selfdirects some or all of their HCBS, the 

plan of care includes the information 

required in § 441.574. 

We further propose to require that the 

plan of care be reviewed and revised at 

least every 12 months, and as needed 

when the individual’s circumstances or 

needs change significantly. 

Section 441.568 (Provider 

Qualifications) 

In § 441.568, we propose to require 

that the State provide assurance that 

necessary safeguards have been taken to 

protect the health and welfare of the 

enrollees in State plan HCBS by 

provision of adequate standards for all 

types of providers of HCBS. States must 

define qualifications for providers of 

HCBS services, and for those persons 

who conduct independent evaluation of 

eligibility for State plan HCBS, 

independent assessment of need, and 

are involved with developing the plan 

of care. 

We propose at § 441.568(b) and (c) to 

require minimum qualifications for 

individuals and agencies who conduct 

independent evaluation of eligibility for 

State plan HCBS, independent 

assessment of need, and are involved 

with developing the plan of care. We 

will refer to these individuals and 

entities involved with determining 

access to care as ‘‘agents’’ to distinguish 

this role from providers of services. We 

believe that these qualifications are 

important safeguards for individuals 

enrolled in the State plan HCBS benefit 

and propose that they be required 

whether activities of the agents are 

provided as an administrative activity or 

whether some of the activities are 

provided as a Medicaid service. At a 

minimum, these qualifications include 

conflict of interest standards, and for 

providers of assessment and plan of care 

development, these qualifications must 

include training in assessment of 

individuals whose physical or mental 

condition may trigger a need for home 

and community-based services and 

supports, and an ongoing knowledge of 

current best practices to improve health 

and quality of life outcomes. 

The minimum conflict of interest 

standards we propose to require ensure 

that the provider is not a relative of the 

individual or responsible for the 

individual’s finances or health-related 

decisions. Relatives and decision 

makers are required to be permitted in 

the assessment and planning process, as 

appropriate, but we do not see any 

necessity or value in family members 

being responsible for evaluation, 

assessment, or planning. Our experience 

with HCBS in waivers indicates that 

assessment and plan of care 

development should not be performed 

by providers of the services prescribed. 

However, we recognize, as discussed in 

Section I., that in some circumstances 

there are acceptable reasons for a single 

provider of service that performs all of 

those functions. In this case, the 

Secretary would require the State Plan 

to include provisions assuring 

separation of functions within the 

provider entity. 

Section 441.571 (Definition of 

Individual’s Representative) 

In § 441.571, we propose to define the 

term ‘‘individual’s representative’’ to 

encompass any party that is authorized 

to represent the individual for the 

purpose of making personal or health 

care decisions, either under State law or 

under the policies of the State Medicaid 

agency. We do not propose to regulate 

the relationship between an individual 

enrolled in the State plan HCBS benefit 

and his or her authorized representative, 

but note that States should have policies 

to assess for abuse or excessive control 

and ensure that representatives conform 

to applicable State requirements. 

Section 441.574 (Self-Directed Services) 

We propose in § 441.574 to permit 

States to offer an election for selfdirecting HCBS. In § 441.574(a), we 

would define ‘‘self-direction.’’

Provisions related to self-direction 

apply to an individual or an 

individual’s representative. In 

§ 441.574(b), we propose that when an 

individual chooses self-direction, the 

independent assessment and personcentered planning required under 

§§ 441.562 and 441.565 would include 

examination of the support needs of the 

individual to self-direct the purchase of, 

or control the receipt of, such services. 

The evaluation should not reject 

election to self-direct based solely on 

the individual’s disability or a 

manifestation of his or her disability. 

We therefore propose to require that the 

evaluation for self-direction result in a 

determination of ability to self-direct 

both with and without specified 

supports. 

We propose regulations containing 

the specific requirements for selfdirection found in section 

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

regulations are consistent with our 

policy for self-direction under section 

1915(c) HCBS waivers. We propose to 

require in § 441.574(b) that the plan of 

care indicate the HCBS to be selfdirected and the methods by which the 

individual will plan, direct, or control 

the services; the role of family or others 

who will participate in the HCBS; and 

risk management techniques. Our 

experience with HCBS waivers indicates 

that contingency plans are an important 

protection for the individual, in the 

absence of an agency that would 

otherwise be responsible for absent 

workers or other common problems. 


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Contingency plans are most effective 

when designed for the unique 

circumstances of each self-directing 

individual. We propose that the plan of 

care describe the process for facilitating 

voluntary and involuntary transition 

from self-direction. When the plan of 

care is finalized between the parties, a 

written copy is provided to the 

individual, as required in § 441.565(a). 

In § 441.574(c) and (d), we define selfdirection of services in terms of 

employer authority and budget 

authority, as we have with self-directed 

HCBS in Medicaid section 1915(c) 

waivers. In § 441.574(c), employer 

authority is defined as the ability to 

select, manage, or dismiss providers of 

the State plan HCBS. We propose that 

the plan of care must specify the 

authority to be assumed by the 

individual and the individual’s 

representative, any parties responsible 

for functions outside the assumed 

authority, and the financial management 

supports to be provided as required in 

§ 441.574(e). 

In § 441.574(d), we propose to define 

budget authority as an individualized 

budget which identifies the dollar value 

of the services and supports under the 

control and direction of the individual. 

We propose that the plan of care must 

specify the method for calculating the 

dollar values in the budget, a process for 

adjusting the budget to reflect changes 

in assessment and plan of care, a 

procedure to evaluate expenditures 

under the budget, and the financial 

management supports, as required in 

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

here that while budget authority grants 

control of expenditures to the 

individual, it does not include 

performing the transactions or 

conveying cash to the individual or 

representative. 

In § 441.574(e), we propose to define 

functions in support of self-direction 

that the State must offer, based on our 

experience with self-directed HCBS in 

section 1915(c) waivers and section 

1115 demonstrations. These provisions 

are required in order to equip 

individuals for success in managing 

their services, and to comply with 

Federal, State, and local requirements, 

particularly the many tax, labor, and 

insurance issues that arise when the 

self-directing individual is the employer 

of record. Supports for self-direction 

should provide the technical expertise 

and business functions that will free 

individuals to exercise choice and 

control over their experience of the 

HCBS provided to them. 

Section 441.577 (State Plan HCBS 

Administration: State Responsibilities 

and Quality Improvement) 

• State responsibilities. 

We would require in § 441.577(a)(1)(i) 

that the State annually provide CMS 

with the projected number of 

individuals to be enrolled in the benefit, 

and the actual number of unduplicated 

individuals enrolled in the State plan 

HCBS benefit in the previous year. 

States may choose to limit the number 

to be served at any point in time, as 

provided in § 441.577(a)(1)(ii). If the 

State so chooses, we propose that it 

would also provide annually to CMS the 

maximum number enrolled at one time. 

In § 441.577(a)(1)(ii) we propose that 

a State may elect to set a limit on the 

number of individuals enrolled in the 

State plan HCBS benefit, either as an 

annual limit or as limit at any one point 

in time. The State must establish or 

adjust the limit by amending the State 

plan. The State may, but is not required 

to, establish a waiting list. States must 

consider many legal requirements and 

competing demands in establishing 

waiting list policy, including the 

Americans with Disabilities Act (ADA). 

We do not specify waiting list 

requirements, but propose to require 

that if a State elects to maintain a 

waiting list, it must do so with written 

and publicly published policies to 

ensure fairness and consistency. The 

public should have opportunity for 

notice and comment on this important 

limitation to access. We propose to 

require a formally established schedule 

and procedure for reevaluation and 

revision to waiting list policy. We also 

would require assurance that States will 

adhere to all applicable Federal and 

State requirements. For example, 

individuals who may be denied access 

to services would have all rights 

required under 42 CFR part 431, subpart 

E. 

Because section 1915(i) of the Act 

does not authorize waiver of 

comparability requirements, we clarify 

in § 441.577(a)(1)(iii) that the State may 

not limit enrollee access to services in 

the benefit for any reason other than 

assessed need, including limits based on 

type of disability or other targeting, or 

limiting the number of persons 

receiving particular services. This is an 

important distinction between the limits 

States place on the services to be offered 

when they design the benefit, as 

opposed to limiting access to the 

services that are in the benefit for 

particular enrolled individuals. As 

discussed in Section I.D.1 above, States 

have a number of permitted methods to 

control utilization by placing limits on 

the overall benefit and particular 

services offered. We propose that once 

an individual is found eligible and 

enrolled in the benefit, access to offered 

services can only be limited by medical 

necessity. Medical necessity in the State 

plan HCBS benefit is determined by the 

independent assessment and personcentered plan of care. By not limiting 

access, we mean that an enrollee must 

receive any or all of the HCBS offered 

by the benefit, in scope and frequency 

up to any limits on those services 

defined in the State plan, to the degree 

the enrollee is determined to need them. 

Enrollees should receive no more, and 

no fewer, services than they are 

determined to require. We note that one 

function of the plan of care as proposed 

at § 441.565(a)(3) is to prevent the 

provision of unnecessary or 

inappropriate care. 

• Administration. 

We propose in § 441.577(a)(2)(i) an 

option for presumptive payment. The 

State may provide for a period of 

presumptive payment, not to exceed 60 

days, for evaluation of eligibility for the 

State plan HCBS benefit and assessment 

of need for HCBS. This period of 

presumptive payment would be 

available for individuals who have been 

determined to be Medicaid eligible, and 

whom the State has reason to believe 

may be eligible for the State plan HCBS 

benefit. We propose that FFP would be 

available for evaluation and assessment 

as administration of the approved State 

plan prior to an individual’s 

determination of eligibility for and 

receipt of other 1915(i) services. If the 

individual is found not eligible for the 

State plan HCBS benefit, the State may 

claim the evaluation and assessment as 

administration, even though the 

individual would not be considered to 

have participated in the benefit for 

purposes of determining the annual 

number of individuals served by the 

benefit. FFP would not be available 

during this presumptive period for 

receipt of State plan HCBS. 

In § 441.577(a)(2)(ii), we propose that 

a State plan amendment submitted to 

establish the State plan HCBS benefit 

must include a reimbursement 

methodology for each covered service. 

In some States, reimbursement methods 

for self-directed services may differ from 

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

reimbursement methodology for the 

self-directed services must also be 

described. 

In § 441.577(a)(2)(iii), we propose that 

the State Medicaid agency describe the 

line of authority for operating the State 

plan HCBS benefit. The State plan 

HCBS benefit requires several functions 


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to be performed in addition to the 

service(s) provided, such as eligibility 

evaluation, assessment, and developing 

a plan of care. To the extent that the 

State Medicaid agency delegates these 

functions to other entities, we propose 

that the agency describe the methods by 

which it will retain oversight and 

responsibility for those activities, and 

for the operation and quality 

improvement of the benefit as a whole. 

• Quality improvement strategy. 

We propose in § 441.577(b) the 

guidelines for quality assurance 

required in the statute at section 

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

to require a State to maintain a quality 

improvement strategy for its State plan 

HCBS benefit. The State’s quality 

improvement strategy should reflect the 

nature and scope of the benefit the State 

will provide. 

As discussed in section I of this 

preamble, section 6086(a) of the DRA 

established section 1915(i) of the Act, 

the optional State plan HCBS benefit. 

Section 6086(b), Quality of Care 

Measures, sets forth requirements for 

the Secretary to develop through the 

Agency for Healthcare Research and 

Quality (AHRQ) indicators and 

measures for program performance and 

quality of care to assess HCBS at the 

State and national level, and service 

outcomes, particularly regarding health 

and welfare of recipients. Likewise, we 

propose that measures in the State 

quality improvement strategy consist of 

indicators for program performance and 

quality of care as approved and 

prescribed by the Secretary, and 

applicable to the nature of the benefit. 

In § 441.577(b)(2), we propose to 

require States to have program 

performance measures, appropriate to 

the scope of the benefit, designed to 

assess the State’s overall system for 

providing HCBS. 

In § 441.577(b)(3), we propose to 

require States to have quality of care 

measures as approved or prescribed by 

the Secretary that may be used to assess 

individual outcomes of participants in 

home and community-based services, 

such as client function indicators and 

measures of client satisfaction. Outcome 

measures may be reflective of the design 

and scope of the benefit and the specific 

HCBS provided. 

III. 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. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements: 

Section 441.559 Needs-Based Criteria 

and Evaluation 

Section 441.559(a) requires a State to 

establish needs-based criteria for 

determining an individual’s eligibility 

under the State plan for the HCBS 

benefit, and may establish needs-based 

criteria for each specific service. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to establish such 

criteria. We estimate it would take 1 

State 24 hours to meet this requirement. 

We estimate that on an annual basis, 3 

States will submit a State plan 

amendment to offer the State plan HCBS 

benefit, and be affected by this 

requirement; therefore, the total annual 

burden hours for this requirement is 72 

hours. This would be a one-time 

burden. 

Section 441.559(c) reads that a State 

may modify the needs-based criteria 

established under paragraph (a) of this 

section, without prior approval from the 

Secretary, if the number of individuals 

enrolled in the State plan HCBS benefit 

exceeds the projected number submitted 

annually to CMS. 

Section 441.559(c)(1) requires the 

State to provide at least 60 days’ notice 

of the proposed modification to the 

Secretary, the public, and each 

individual enrolled in the State plan 

HCBS benefit. The State notice to the 

Secretary will be considered an 

amendment to the State plan. 

Section 441.559(c)(2) reads that the 

State may under this provision 

implement the adjusted criteria as early 

as 60 days after submitting the State 

plan amendment and notifying all 

required parties. 

The burden associated with the 

requirements found under 441.559(c) is 

the time and effort put forth by the State 

to modify the needs-based criteria and 

provide notification of the proposed 

modification to the Secretary. We 

estimate it would take 1 State 24 hours 

to make the modifications and provide 

notification. This would be a one-time 

burden. The total annual burden of 

these requirements would vary 

according to the number of States who 

choose to modify their needs-based 

criteria. We do not expect any States to 

make this modification in the next 3 

years. 

Section 441.559(d) states that 

eligibility for the State plan HCBS 

benefit is determined, for individuals 

who meet the requirements of 

441.556(a)(1) through (3), through an 

independent evaluation of each 

individual that meets the specified 

requirements. Section 441.559(d)(5) 

requires the evaluator to obtain 

information from existing records, and 

when documentation is not current and 

accurate, obtain any additional 

information necessary to draw a valid 

conclusion about the individual’s 

support needs. Section 441.559(e) 

requires at least annual reevaluations. 

The burden associated with this 

requirement is the time and effort put 

forth by the evaluator to obtain 

information to support their conclusion. 

We estimate it would take one evaluator 

2 hours per participant to obtain 

information as necessary. The total 

annual burden of this requirement 

would vary according to the number of 

participants in each State who may 

require and be eligible for home and 

community-based services under the 

State plan. 

Section 441.562 requires the State to 

provide for an independent assessment 

of need in order to establish a plan of 

care. At a minimum, the plan must meet 

the requirements as discussed under 

441.565. 

Section 441.568 requires the State to 

define in writing adequate standards for 

providers of HCBS services and for 

providers conducting independent 

evaluation, independent assessment, 

and plan of care development. 

While the burden associated with the 

requirements under §§ 441.562 and 

441.568 is subject to the PRA, we 


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believe the burden is exempt as defined 

in 5 CFR 1320.3(b)(2) because the time, 

effort, and financial resources necessary 

to comply with this requirement would 

be incurred by persons in the normal 

course of their activities. 

Section 441.574 Self-Directed Services 

Section 441.574 reads that a State may 

choose to offer an election for selfdirecting HCBS. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to elect for selfdirecting HCBS. We estimate it would 

take one State 5 hours to meet this 

requirement; therefore, if all of the 

States and territories estimated to apply 

for State plan HCBS on an annual basis 

(3) chose to offer an election for selfdirecting HCBS the total annual burden 

would be 15 hours. This would be a 

one-time burden. 

Section 441.577 State Plan HCBS 

Administration: State Responsibilities 

and Quality Improvement 

Section 441.577(a)(1)(i) reads that a 

State will annually provide CMS with 

the projected number of individuals to 

be enrolled in the benefit, and the actual 

number of unduplicated individuals 

enrolled in State plan HCBS in the 

previous year. If the State chooses to 

limit the number to be served at any 

point in time, as provided in 

§ 441.577(a)(1)(ii), the State will 

annually provide to CMS the maximum 

number enrolled at one time. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to annually project the 

number of individuals who will enroll 

in State plan HCBS. We estimate it will 

take one State 2 hours to meet this 

requirement. The total annual burden of 

these requirements would vary 

according to the number of States 

offering the State plan HCBS benefit. 

The maximum total annual burden is 

112 hours (56 States × 2 hours = 112 

hours). 

Section 441.577(a)(1)(ii)(B) reads that 

if a State elects to maintain a waiting list 

for State plan HCBS, the State 

establishes and adheres to policies and 

procedures for formation and 

maintenance of a waiting list that 

complies with all applicable Federal 

and State requirements. 

While this burden associated with 

this requirement is subject to the PRA, 

we believe the burden is exempt as 

defined in 5 CFR 1320.3(b)(2) because 

the time, effort, and financial resources 

necessary to comply with this 

requirement would be incurred by 

persons in the normal course of their 

activities. 

Section 441.577(a)(2)(ii) reads that the 

State plan amendment to provide State 

plan HCBS must contain a description 

of the reimbursement methodology for 

each covered service. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to describe the 

reimbursement methodology for each 

State plan HCBS. We estimate that it 

will take one State an average of 2 hours 

to determine the reimbursement 

methodology for one covered HCBS. 

This would be a one-time burden. The 

total annual burden for this requirement 

would vary according to the number of 

services that the State chooses to 

include in the State plan HCBS benefit. 

Section 441.577(a)(2)(iii) reads that 

the State plan amendment to provide 

State plan HCBS must contain a 

description of the State Medicaid 

agency line of authority for operating 

the State plan HCBS benefit, including 

distribution of functions to other 

entities. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to describe the State 

Medicaid agency line of authority. We 

estimate it will take one State 2 hours 

to meet this requirement. Since we have 

estimated that 3 States will annually 

request State plan HCBS, the total 

annual burden associated with this 

requirement is estimated to be 6 hours. 

This would be a one-time burden. 

Section 441.577(b)(1) requires States 

to maintain a quality improvement 

strategy that includes methods for 

ongoing measurement of program 

performance and mechanisms of 

intervention to assure quality of care, 

proportionate to the scope of services in 

the State plan HCBS benefit, the needsbased criteria, and the number of 

individuals to be served. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to prepare and 

maintain a quality improvement 

strategy. We estimate it will take one 

State 45 hours for the preparation and 

maintenance of the strategy. The total 

annual burden of these requirements 

would vary according to the number of 

States offering the State plan HCBS 

benefit. The maximum total annual 

burden is estimated to be 2,520 hours 

(56 States × 45 hours = 2,520 hours). 

We have submitted a copy of this 

proposed rule to OMB for its review of 

the information collection requirements 

described above. These requirements are 

not effective until they have been 

approved by OMB. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Mail copies to the address specified 

in the ADDRESSES section of this 

proposed rule and to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Room 10235, New Executive Office 

Building, Washington, DC 20503, Attn: 

Carolyn Lovett, CMS Desk Officer, 

CMS–2249–P, 

carolyn_lovett@omb.eop.gov. Fax (202) 

395–6974. 

V. 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.] 

A. Overall Impact 

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), Executive Order 13132 on 

Federalism, and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Order 12866, as amended, 

directs agencies to identify the specific 

market failure or other problem that 

warrants agency action, 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). We 

estimate that, adjusted for a phase-in 

period during which States gradually 

elect to offer the State plan HCBS 

benefit, in fiscal year 2009 the estimated 

cost would be $114 million. The 

estimated 5-year (FY 2007 through FY 

2011) cost of this proposed rule would 

be $563 million. Therefore, we estimate 

that this rulemaking is ‘‘economically 

significant’’ as measured by the $100 

million standard, and hence also a 

major rule under the Congressional 

Review Act. Accordingly, we have 

prepared a Regulatory Impact Analysis. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses if a rule would have a 


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significant impact on a substantial 

number of small businesses or small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $6.5 million to $31.5 million in any 

1 year. Individuals and States are not 

included in the definition of a small 

entity. This rule imposes no 

requirements or costs on providers or 

suppliers for their existing activities. 

The rule implements a new optional 

State plan benefit established in section 

1915(i) of the Act. Small entities that 

meet provider qualifications and choose 

to provide HCBS under the State plan 

would have a business opportunity 

under this proposed rule. The Secretary 

certifies that this proposed rule would 

not have a significant economic impact 

on a substantial number of small 

entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Core-Based Statistical Area and has 

fewer than 100 beds. We have 

determined that this proposed rule 

would not have a significant effect on 

the operations of a substantial number 

of small rural hospitals because there 

would be no change in the 

administration of the provisions related 

to small rural hospitals. Therefore, the 

Secretary has determined that this 

proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

That threshold level is currently 

approximately $127 million. This 

proposed rule does not mandate any 

spending by State, local, or tribal 

governments or 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. 

B. Anticipated Effects 

1. Effects on Medicaid Beneficiaries 

The Medicaid beneficiaries who 

receive the State plan HCBS benefit will 

be substantial and beneficial. The State 

plan HCBS benefit will afford business 

opportunity for providers of the HCBS. 

2. Effects on Other Providers 

We do not anticipate any effects on 

other providers. Section 1915(i) of the 

Act delinks the HCBS from institutional 

level of care, and requires that eligibility 

criteria for the benefit include a 

threshold of need less than that for 

institutional level of care, so that it is 

unlikely that large numbers of 

participants in the State plan HCBS 

benefit will be discharged from the 

facilities of Medicaid institutional 

providers. There may be some 

redistribution of services among 

providers of existing non-institutional 

Medicaid services into State plan HCBS, 

but providers who meet qualifications 

for the State plan HCBS benefit have the 

option to enroll as providers of HCBS. 

3. Effects on the Medicare and Medicaid 

Programs 

This rule has no effect on the 

Medicare program. State Medicaid 

programs will make use of the optional 

flexibility afforded by the State plan 

HCBS benefit to provide needed longterm care home and community based 

services to eligible elderly or disabled 

individuals the State has not had means 

to serve previously, or to provide 

services to these individuals more 

efficiently and effectively. The State 

plan HCBS benefit will afford States a 

new means to comply with 

requirements of the Olmstead decision, 

to serve individuals in the least 

restrictive setting. 

The cost of these services will be 

dependent upon the number of States 

electing to offer the benefit, the scope of 

the benefits States design, and the 

degree to which the benefits replace 

existing Medicaid services. States have 

more control over expenditures for this 

benefit than over other State plan 

services. For States that choose to offer 

these services, States may specify limits 

to the scope of HCBS, cap the number 

of recipients, and have the option to 

tighten eligibility requirements if costs 

escalate too rapidly. 

Use of the State plan HCBS benefit is 

unlikely to result in increased access to 

other Medicaid services, because 

eligibility for the benefit is limited to 

individuals who are already eligible for 

Medicaid, and whose income is less 

than 150 percent of the FPL. Moreover, 

costs of the State plan HCBS benefit 

may be offset by lowered potential 

Federal and State costs of more 

expensive institutional care. 

Additionally, the requirement for a 

written individualized plan of care may 

discourage inappropriate utilization of 

costly services such as emergency room 

care for routine procedures. 

After taking the above factors into 

account, the Federal and State cost 

estimates are shown in the table below. 

MEDICAID COST ESTIMATE

[In millions] 

FY08 FY09 FY10 FY11 FY12 5-year 

total 

Federal Cost ............................................................................................ $68 $114 $169 $189 $210 $750 

State Cost ................................................................................................ 51 86 127 142 159 565

C. Alternatives Considered 

This proposed rule incorporates 

provisions of new section 1915(i) of the 

Act into Federal regulations, providing 

for Medicaid coverage of a new optional 

State plan benefit to furnish home and 

community-based State plan services. 

The statute provides States with an 

option under which to draw Federal 

matching funds; it does not impose any 

requirements or costs on existing State 

programs, on providers, or upon 

beneficiaries. States retain their existing 

authority to offer HCBS through the 

existing authority granted under section 

1915(c) waivers and under section 1115 

waivers. States can also continue to 


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offer, and individuals can choose to 

receive, some but not all components of 

HCBS allowable under section 1915(i) 

through existing State plan services 

such as personal care or targeted case 

management services. Therefore, this 

rule is entirely optional for States. 

Alternatives to this rule as proposed 

include: 

1. Not Publishing a Rule 

Section 1915(i) of the Act is effective 

January 1, 2007. States may propose 

State plan amendments to establish the 

State plan HCBS benefit with or without 

this proposed rule. We considered 

whether this statute could be selfimplementing and require no regulation. 

Section 1915(i) of the Act is complex; 

many States have contacted us for 

technical assistance in the absence of 

published guidance, and some have 

indicated they are waiting to submit an 

amendment until there is a rule. We 

further considered whether a State 

Medicaid Director letter would provide 

sufficient guidance regarding CMS 

review criteria for approval of a State 

plan amendment. We conclude that 

section 1915(i) of the Act establishes 

significant new features in the Medicaid 

program, and that States and the public 

should be afforded the published 

invitation for comment provided by this 

proposed rule. Finally, State legislation 

and judicial decisions are not 

alternatives to a Federal rule in this case 

since section 1915(i) of the Act provides 

Federal benefits. 

2. Modification of Existing Rules 

We considered modifying existing 

regulations at 42 CFR 440.180, part 441 

subpart G, Home And CommunityBased Services: Waiver Requirements, 

which implement the section 1915(c) 

HCBS waivers, to include the authority 

to offer the State plan HCBS benefit. 

This would have the advantage of not 

duplicating definitions of HCBS and 

certain requirements common to both 

types of HCBS. However, we believe 

that any such efficiency would be 

outweighed by the substantial 

discussion that would be required of the 

differences between the Secretary’s 

discretion to approve waivers under 

section 1915(c) of the Act, and authority 

to offer HCBS under the State plan at 

section 1915(i) of the Act. While 

Congress clearly considered the 

experience to date with HCBS under 

waivers when constructing section 

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

modify section 1915(c) of the Act, but 

chose instead to create a new authority 

at section 1915(i) of the Act. We, 

therefore, chose to propose a separate 

rule. 

3. Alternative Methods for Delivering 

HCBS 

CMS considered using existing 

operational methods for delivering State 

plan HCBS, but the unique and specific 

requirements in section 1915(i) of the 

Act are substantially different from 

currently-existing authorities, and 

ultimately required stand-alone 

implementation tailored to the 

particular characteristics of the State 

plan HCBS option as described in 

statute. CMS considered whether 

section 1915(i) of the Act permits States 

to: (1) Disregard comparability, (2) 

define HCBS other than the services 

specifically listed in statute, as 

allowable under section 1915(c), (3) 

offer HCBS to Medicaid beneficiaries 

without a 150 percent of FPL income 

test unique to this benefit, or (4) provide 

State plan HCBS in place of mandatory 

institutional benefits for some 

individuals. However, CMS determined 

that none of these options is allowable 

under section 1915(i) of the Act. 

D. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http://www.whitehouse.

gov/omb/circulars/a004/a-4.pdf), in the 

table below, we have prepared an 

accounting statement showing the 

classification of the expenditures 

associated with the provisions of this 

proposed rule. This table provides our 

best estimate of the proposed increase in 

Federal Medicaid outlays resulting from 

offering States the option to provide the 

State plan HCBS benefit established in 

section 1915(i) of the Act and 

implemented by CMS–2249–P 

(Medicaid program; Home and 

Community-Based State Plan Services). 

TABLE: ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2008 TO FY 2012 

[In millions] 

Category Transfers 

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

Rate 

$147.9 

7% Units Discount 

Rate 

$145.1 

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

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

Rate 

$111.4 

7% Units Discount 

Rate 

$109.3 

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

E. Conclusion 

We anticipate that States will make 

widely varying use of the section 1915(i) 

State plan HCBS benefit to provide 

needed long-term care services for 

Medicaid beneficiaries. These services 

will be provided in the home or 

alternative living arrangements in the 

community, which is of benefit to the 

beneficiary and is less costly than 

institutional care. Requirements for 

independent evaluation and assessment, 

individualized care planning, and 

requirements for a quality improvement 

program will assure efficient and 

effective use of Medicaid expenditures 

for these services. 

For the reasons stated above, we are 

not preparing analyses for either the 

RFA or section 1102(b) of the Act 

because we have determined, and the 

Secretary certifies, that this proposed 

rule will not have a significant 


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economic impact on a substantial 

number of small entities or a significant 

impact on the operations of a substantial 

number of small rural hospitals. 

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. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

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). 

Subpart B—General Administrative 

Requirements 

2. Section 431.40 is amended by 

revising paragraph (a)(7) to read as 

follows: 

§ 431.40 Basis and scope. 

(a) * * * 

(7) Exceptions to, and waiver of, State 

plan requirements—sections 1915(a) 

through (e), and (i) of the Act, and 

section 1916(a)(3) and (b)(3) of the Act. 

* * * * * 

3. Section 431.50 is amended by—

A. Redesignating paragraph (c)(2) as 

paragraph (c)(3). 

B. Adding a new paragraph (c)(2). 

The revisions read as follows: 

§ 431.50 Statewide operation. 

* * * * * 

(c) * * * 

(2) Home and community-based 

services for the elderly and disabled 

under sections 1915(c), (d), and (i) of the 

Act; and 

* * * * * 

PART 440—SERVICES: GENERAL 

PROVISIONS 

4. The authority citation for part 440 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

5. Amend § 440.1 by adding the new 

statutory basis in numerical order. 

The addition reads as follows: 

§ 440.1 Basis and purpose. 

* * * * * 

1915(i) Home and community-based 

services furnished under a State plan to 

elderly and disabled individuals under 

the provisions of part 441, subpart K. 

6. Section 440.180 is amended by 

revising the heading to read as follows: 

§ 440.180 Home and community-based 

waiver services. 

* * * * * 

7. A new § 440.182 is added to read 

as follows: 

§ 440.182 State plan home and 

community-based services. 

(a) Definition. State plan home and 

community-based services benefit 

means the services listed in paragraph 

(b) of this section when provided under 

an amendment to the State’s Medicaid 

plan under the provisions of part 441, 

subpart K of this chapter. 

(b) Services. The State plan home and 

community-based services (HCBS) 

benefit provided by the State may 

consist of any or all of the following 

services as they are described by the 

State and included in the State’s plan 

for medical assistance approved by the 

Secretary: 

(1) Case management services. 

(2) Homemaker services. 

(3) Home health aide services. 

(4) Personal care services. 

(5) Adult day health services. 

(6) Habilitation services, which 

include expanded habilitation services 

as specified in § 440.180(c). 

(7) Respite care services. 

(8) Subject to the conditions in 

§ 440.180, for individuals with chronic 

mental illness: 

(i) Day treatment or other partial 

hospitalization services; 

(ii) Psychosocial rehabilitation 

services; 

(iii) Clinic services (whether or not 

furnished in a facility. 

(c) Exclusions. State plan HCBS do 

not include either of the following: 

(1) Other services. The other services 

that the Secretary has the authority to 

approve under § 440.180 for a home and 

community-based services (HCBS) 

waiver; 

(2) Room and board. For purposes of 

this provision, ‘‘board’’ means 3 meals 

a day or any other full nutritional 

regimen. ‘‘Room’’ means expenses for 

shelter, including all property-related 

costs, furnishings, maintenance, 

utilities, and related administrative 

services. FFP is not available for the cost 

of room and board in State plan HCBS. 

The following service costs are not 

considered room or board: 

(i) The cost of food and housing in 

respite care services provided in a 

facility approved by the State that is not 

a private residence. 

(ii) Meals provided as part of a 

program of adult day health services as 

long as the meals provided do not 

constitute a ‘‘full’’ nutritional regimen. 

(iii) A portion of the housing expense 

and food that may be reasonably 

attributed to an unrelated caregiver 

providing State plan HCBS who is 

residing in the same household with the 

recipient, but not if the recipient is 

living in the home of the caregiver or in 

a residence that is owned or leased by 

the caregiver. 

PART 441—SERVICES: 

REQUIREMENTS AND LIMITS 

APPLICABLE TO SPECIFIC SERVICES 

8. The authority citation for part 441 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

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

9. A new subpart K, consisting of 

§ 441.550 through § 441.577, is added to 

part 441 to read as follows: 

Subpart—K State Plan Home and 

Community-Based Services for Elderly and 

Disabled Individuals 

Sec. 

441.550 Basis and purpose. 

441.553 State plan requirements. 

441.556 Eligibility for home and 

community-based services under section 

1915(i)(1) of the Act. 

441.559 Needs-based criteria and 

evaluation. 

441.562 Independent assessment. 

441.565 Plan of care. 

441.568 Provider qualifications. 

441.571 Definition of individual’s 

representative. 

441.574 Self-directed services. 

441.577 State plan HCBS administration: 

State responsibilities and quality 

improvement. 

Subpart K—State Plan Home and 

Community-Based Services for Elderly 

and Disabled Individuals 

§ 441.550 Basis and purpose. 

Section 1915(i) of the Act permits 

States to offer one or more home and 

community-based services (HCBS) to 

qualified elderly and disabled 

individuals under their State Medicaid 

plans. Those services are listed in 

§ 440.182 of this chapter, and are 

described by the State, including any 

limitations of the services. This optional 

benefit is known as the State plan HCBS 


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benefit. This subpart describes what a 

State Medicaid plan must provide, and 

defines State responsibilities. 

§ 441.553 State plan requirements. 

A State plan that includes home and 

community-based services for elderly 

and disabled individuals must meet the 

requirements of this subpart. 

§ 441.556 Eligibility for home and 

community-based services under section 

1915(i)(1) of the Act. 

(a) Eligibility. To be eligible for State 

plan HCBS under section 1915(i) of the 

Act, an individual must meet the 

following requirements: 

(1) Be eligible for Medicaid under an 

eligibility group covered under the 

State’s Medicaid plan. 

(2) Have income that does not exceed 

150 percent of the Federal Poverty Level 

(FPL). In determining whether the 150 

percent of FPL requirement is met, the 

rules for determining income eligibility 

for the individual’s eligibility group 

under the State’s Medicaid plan, 

including any more liberal income 

disregards used by the State for that 

group under section 1902(r)(2) of the 

Act, apply. 

(3) Reside in the home or community, 

not in an institution, in accordance with 

the following: 

(i) According to standards for 

community living facilities, as 

prescribed by the Secretary. 

(ii) If the individual living in a 

residence with four or more persons 

unrelated to the proprietor, which 

furnishes one or more treatments or 

services, the independent assessment 

must include documentation that the 

individual is living in a community 

setting, and not in an institution. 

(4) Meet needs-based criteria for 

eligibility for the State plan HCBS 

benefit, as required in § 441.554(d). 

(5) Be assessed to require at least one 

home and community-based service, as 

required in § 441.562(a)(vi). 

(b) State options. The State may elect 

in the State plan amendment approved 

under this subpart not to apply the 

following requirements: 

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

Act, pertaining to income and resource 

eligibility rules for the medically needy 

living in the community, but only for 

the purposes of providing State plan 

HCBS. 

(ii) Section 1902(a)(1) of the Act, 

pertaining to statewide application of 

Medicaid, but only for the purposes of 

providing State plan HCBS. 

§ 441.559 Needs-based criteria and 

evaluation. 

(a) Needs-based criteria. The State 

must establish needs-based criteria for 

determining an individual’s eligibility 

under the State plan for the HCBS 

benefit, and may establish needs-based 

criteria for each specific service. 

(1) Needs-based criteria are factors 

used to determine an individual’s 

requirements for support. The criteria 

are not characteristics that describe the 

individual or the individual’s condition. 

A diagnosis is not a sufficient factor on 

which to base a determination of need. 

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

ascertained for a given person through 

an individualized evaluation of need. 

(2) Needs-based criteria defined by 

the State may include: 

(i) Need for total support to perform 

two or more activities of daily living 

(ADLs) (as defined in section 

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

Code of 1986). 

(ii) Need for significant assistance to 

perform ADLs. 

(iii) Other risk factors as the State 

determines to be appropriate and 

describes in the State Medicaid plan. 

(b) More stringent institutional and 

waiver needs-based criteria. The State 

plan HCBS benefit is available only if 

the State has in effect needs-based 

criteria (as defined in paragraph (a)(1) of 

this section), for receipt of services in 

nursing facilities as defined in section 

1919(a) of the Act, intermediate care 

facilities for the mentally retarded as 

defined in § 440.150 of this chapter, and 

hospitals as defined in § 440.10 of this 

chapter under the State plan and for 

which the State has established longterm level of care criteria, or waivers 

offering HCBS, and these needs-based 

criteria are more stringent than the 

needs-based criteria for the State plan 

HCBS benefit. If the State defines needsbased criteria for individual State plan 

home and community-based services, 

the needs-based institutional eligibility 

criteria must be more stringent than the 

combined effect of needs-based State 

plan HCBS benefit eligibility criteria 

and individual service criteria. 

(1) These more stringent criteria must 

meet the following requirements: 

(i) Be included in the level of care 

determination process for each 

institutional service and waiver. 

(ii) Be submitted for inspection by 

CMS with the State plan amendment 

that establishes the State Plan HCBS 

benefit. 

(iii) Be in effect on or before the 

effective date of the State plan HCBS 

benefit. 

(2) In the event that the State modifies 

institutional level of care criteria to 

meet the requirements under paragraph 

(b) of this section that such criteria be 

more stringent than the State plan HCBS 

needs-based eligibility criteria, 

individuals receiving Medicaid in an 

institution or waiver HCBS, as of the 

effective date of the State plan 

amendment, will continue to be eligible 

for the institutional services or waiver 

HCBS under the level of care criteria 

previously in effect. Such individuals 

will not be subject to the more stringent 

modified institutional criteria, until 

such time as the individual is 

discharged from the institution or 

waiver, or no longer requires that level 

of care. 

(c) Adjustment authority. The State 

may modify the needs-based criteria 

established under paragraph (a) of this 

section, without prior approval from the 

Secretary, if the number of individuals 

enrolled in the State plan HCBS benefit 

exceeds the projected number submitted 

annually to CMS. The Secretary will 

approve a retroactive effective date for 

the State plan amendment modifying 

the criteria, as early as the day following 

the notification period required under 

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

the following conditions are met: 

(1) The State provides at least 60 days 

notice of the proposed modification to 

the Secretary, the public, and each 

individual enrolled in the State plan 

HCBS benefit. 

(2) The State notice to the Secretary 

is submitted as an amendment to the 

State plan. 

(3) The adjusted needs-based 

eligibility criteria (in combination with 

service-specific needs-based criteria, if 

any) for the State plan HCBS benefit are 

less stringent than all needs-based 

institutional and waiver level of care 

criteria in effect after the adjustment. 

(4) Individuals who were found 

eligible for the State plan HCBS benefit 

before modification of the needs-based 

criteria under this adjustment authority 

must remain eligible for the HCBS 

benefit and specific services on the basis 

of the unmodified criteria, for at least 12 

months, beginning on the date the 

individual first received medical 

assistance for such services. 

(5) Individuals continue to receive 

HCBS under the unmodified criteria 

during the not less than 60-day 

notification period, irrespective of the 

date the individual first received 

medical assistance for such services. 

(6) Any changes in service due to the 

modification of needs-based criteria 

under this adjustment authority are 

treated as actions as defined in 

§ 431.201 and are subject to the 

requirements of part 431 subpart E of 

this chapter. 

(7) In the event that the State modifies 

institutional level of care criteria to 

meet the requirements under paragraph 


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(b) of this section that such criteria be 

more stringent than the State plan HCBS 

needs-based eligibility criteria, the State 

may adjust the modified institutional 

level of care criteria under this 

adjustment authority. The adjusted 

institutional level of care criteria must 

be at least as stringent as those in effect 

before they were modified to meet the 

requirements in paragraph (b) of this 

section. 

(d) Independent evaluation and 

determination of eligibility. Eligibility 

for the State plan HCBS benefit must be 

determined through an independent 

evaluation of each individual according 

to the requirements of § 441.556(a)(1) 

through (4). The independent evaluation 

complies with the following 

requirements: 

(1) Is performed by an agent that is 

independent and qualified as defined in 

§ 441.568 of this section. 

(2) Applies the needs-based eligibility 

criteria that the State has established 

under paragraph (a) of this section, and 

the general eligibility requirements 

under § 441.556(a)(1) through (3). 

(3) If applicable, includes the 

individual’s authorized representative. 

(4) Assesses the individual’s strengths 

as well as support needs. 

(5) Uses only current and accurate 

information from existing records, and 

obtains any additional information 

necessary to draw valid conclusions 

about the individual’s support needs. 

(6) Evaluations finding that an 

individual is not eligible for the State 

plan HCBS benefit are treated as actions 

defined in § 431.201 and are subject to 

the requirements of part 431 subpart E 

of this chapter. 

(e) Periodic redetermination. 

Independent reevaluations of each 

individual receiving the State plan 

HCBS benefit must be performed at least 

every 12 months, to determine whether 

the individual continues to meet 

eligibility requirements. 

Redeterminations must meet the 

requirements of paragraph (d) of this 

section. 

§ 441.562 Independent assessment. 

(a) For each individual determined to 

be eligible for the State plan HCBS 

benefit, the State must provide for an 

independent assessment of need in 

order to establish a plan of care. The 

independent assessment must include 

the following: 

(1) An objective evaluation of the 

individual’s inability to perform two or 

more activities of daily living (ADLs) (as 

defined in section 7702(c)(2)(B) of the 

Internal Revenue Code of 1986) or need 

for significant assistance to perform 

ADLs. 

(2) A face-to-face assessment of the 

individual. The face-to-face assessment 

must meet the following requirements: 

(i) The assessment must be performed 

by an agent that is independent and 

qualified as defined in § 441.568 of this 

section. 

(ii) If applicable, the assessment must 

include the individual’s authorized 

representative. 

(iii) The assessment must be 

conducted in consultation with the 

individual, the individual’s spouse, 

family, guardian, appropriate treating 

and consulting health and support 

professionals caring for the individual, 

support staff, and other responsible 

parties. 

(iv) The assessment must include an 

examination of the individual’s relevant 

history, medical records (including the 

independent evaluation of eligibility), 

physical and mental health care and 

support needs and all information 

needed to develop the plan of care as 

required in § 441.565. 

(v) The assessment must be guided by 

best practice and research on effective 

strategies that result in improved health 

and quality of life outcomes. 

(vi) The assessment must apply the 

State’s needs-based criteria for each 

service (if any) that the individual may 

require. Individuals are considered 

enrolled in the State plan HCBS benefit 

only if they meet the eligibility and 

needs-based criteria for the benefit, and 

are also assessed to require at least one 

home and community-based service 

offered under the State plan for medical 

assistance. 

(vii) If the State offers individuals 

(including, if applicable, the 

individual’s authorized representative) 

the option to self-direct the purchase of, 

or control the receipt of, a home and 

community-based State plan service or 

services, the assessment must include 

an evaluation of the support needs of 

the individual and the ability of the 

individual (with and without supports) 

to self-direct the purchase of, or control 

the receipt of, these services if the 

individual so elects. 

(viii) For individuals living in a 

residence with four or more persons 

unrelated to the proprietor, that 

furnishes one or more treatments or 

services, the assessment must include 

documentation of whether the 

individual resides in the community, 

according to § 441.556(a)(3). 

(ix) For individuals receiving 

habilitation services, documentation 

that no Medicaid services are provided 

which would otherwise be available to 

the individual, specifically including 

but not limited to services available to 

the individual through a program 

funded under section 110 of the 

Rehabilitation Act of 1973, or the 

Individuals with Disabilities 

Improvement Act of 2004. 

(b) The independent assessment of 

need must be conducted at least every 

12 months and as needed when the 

individual’s support needs or 

circumstances change significantly, in 

order to revise the plan of care. 

§ 1.565 Plan of care. 

(a) Plan of care. Based on the 

independent assessment required in 

§ 441.562, the State must develop (or 

approve, if the plan is developed by 

others) a written plan of care jointly 

with the individual (including, for 

purposes of this paragraph, the 

individual and the individual’s 

authorized representative if applicable). 

The person-centered planning process 

must identify the individual’s physical 

and mental health support needs, 

strengths and preferences, and desired 

outcomes. The plan must be developed 

in consultation with the individual’s 

health care or support professionals, or 

other appropriate persons, as 

determined by the State, and where 

appropriate, with the individual’s 

family, spouse, caregiver, guardian, or 

representative. When the plan of care is 

finalized between the parties, a written 

copy is provided to the individual. At 

a minimum, the plan must determine 

HCBS to be provided that meet the 

following requirements: 

(1) Take into account the extent of, 

and need for, any family or other 

supports for the individual. 

(2) Be consistent with the individual’s 

strengths and support needs arising 

from the individual’s physical, sensory, 

or intellectual disability. 

(3) Prevent the provision of 

unnecessary or inappropriate care, and 

provide the HCBS that the individual is 

assessed to require. 

(4) Include those services, the 

purchase or control of which the 

individual elects to self-direct, meeting 

the requirements of § 441.574(b) through 

(d). 

(b) Reassessment. The plan of care 

must be reviewed and revised upon 

independent reassessment, as required 

in § 441.562, at least every 12 months 

and when the individual’s 

circumstances or needs change 

significantly. 

(c) Shared authority. The plan of care 

must afford the individual the 

opportunity, with information and 

supports, for active participation and 

shared authority in developing the plan 

of care. 


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§ 441.568 Provider qualifications. 

(a) The State must provide assurances 

that necessary safeguards have been 

taken to protect the health and welfare 

of enrollees in State plan HCBS, and 

must define in writing adequate 

standards for providers (both agencies 

and individuals) of HCBS services and 

for agents conducting independent 

evaluation, independent assessment, 

and plan of care development. 

(b) The State must define conflict of 

interest standards that ensure the 

independence of individual and agency 

agents who conduct (whether as a 

service or an administrative activity) 

independent evaluation of eligibility for 

State plan HCBS, independent 

assessment of need, or are involved in 

developing the plan of care. The conflict 

of interest standards apply to all 

individuals and entities, public or 

private. At a minimum, these agents 

must not be any of the following: 

(1) Related by blood or marriage to the 

individual, or to any paid caregiver of 

the individual. 

(2) Financially responsible for the 

individual. 

(3) Empowered to make financial or 

health-related decisions on behalf of the 

individual. 

(4) Providers of State plan HCBS for 

the individual, or those who have an 

interest in or are employed by a 

provider of State plan HCBS for the 

individual, except when the only 

willing and qualified agent to perform 

independent assessments and develop 

plans of care in a geographic area also 

provides HCBS, and the State devises 

conflict of interest protections including 

separation of agent and provider 

functions within provider entities, 

which are described in the State plan for 

medical assistance and approved by the 

Secretary. 

(c) Qualifications for agents 

performing independent assessments 

and plans of care must include training 

in assessment of individuals whose 

physical or mental conditions trigger a 

potential need for home and 

community-based services and 

supports, and current knowledge of best 

practices to improve health and quality 

of life outcomes. 

§ 441.571 Definition of individual’s 

representative. 

In this subpart, the term individual’s 

representative means, with respect to an 

individual being evaluated for, assessed 

regarding, or receiving State plan HCBS, 

the following: 

(a) The individual’s legal guardian or 

other person who is authorized under 

State law to represent the individual for 

the purpose of making decisions related 

to the person’s care or well-being. 

(b) Any other person who is 

authorized by policy of the State 

Medicaid Agency to represent the 

individual including but not limited to 

a parent, a family member, or an 

advocate for the individual. When the 

State authorizes representatives 

pursuant to this paragraph, the State 

must have policies describing the 

process for appointment; the extent of 

decision-making authorized; and 

safeguards to ensure that the 

representative functions in the best 

interests of the participant. 

§ 441.574 Self-directed services. 

(a) State option. The State may choose 

to offer an election for self-directing 

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

with respect to State plan HCBS listed 

in § 440.182 of this chapter, services 

that are planned and purchased under 

the direction and control of the 

individual, including the amount, 

duration, scope, provider, and location 

of the HCBS. For purposes of this 

paragraph, individual means the 

individual and, if applicable, the 

individual’s representative as defined in 

§ 441.571. 

(b) Plan of care requirement. Based on 

the independent assessment required in 

§ 441.562, the State develops (or 

approves, if the plan is developed by 

others) a plan of care jointly with the 

individual as required in § 441.565. If 

the individual chooses to direct some or 

all HCBS, the plan of care must meet the 

following requirements: 

(1) Be developed through a personcentered process that is directed by the 

individual, builds upon the individual’s 

ability (with and without support) to 

engage in activities that promote 

community life, respects individual 

preferences, choices, strengths, and 

involves families, friends, and 

professionals as desired or required by 

the individual. 

(2) Specify the State plan HCBS that 

the individual will be responsible for 

directing. 

(3) Identify the methods by which the 

individual will plan, direct or control 

services, including whether the 

individual will exercise authority over 

the employment of service providers or 

authority over expenditures from the 

individualized budget. 

(4) Specify the role of family members 

and others whose participation is sought 

by the individual with respect to the 

State plan HCBS. 

(5) Include appropriate risk 

management techniques, including 

contingency plans, that recognize the 

roles and sharing of responsibilities in 

obtaining services in a self-directed 

manner and assure the appropriateness 

of this plan based upon the resources 

and support needs of the individual. 

(6) Describe the process for facilitating 

transition from self-direction and any 

circumstances under which transition 

out of self-direction is involuntary. 

(c) Employer authority. If the plan of 

care includes authority to select, 

manage, or dismiss providers of the 

State plan HCBS, the plan must meet 

the following requirements: 

(1) Specify the authority to be 

assumed by the individual, any limits to 

the authority, and specify parties 

responsible for functions outside the 

authority to be assumed. 

(2) Specify the financial management 

supports, as required in paragraph (e) of 

this section, to be provided. 

(d) Budget authority. If the plan of 

care includes an individualized budget 

(which identifies the dollar value of the 

services and supports under the control 

and direction of the individual), the 

plan must meet the following 

requirements: 

(1) Describe the method for 

calculating the dollar values in the 

budget, based on reliable costs and 

service utilization. 

(2) Define a process for making 

adjustments in dollar values to reflect 

changes in an individual’s assessment 

and plan of care. 

(3) Provide a procedure to evaluate 

expenditures under the budget. 

(4) Specify the financial management 

supports, as required in paragraph (e) of 

this section, to be provided. 

(5) Not result in payment for medical 

assistance to the individual. 

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

self-directed State plan HCBS, it must 

also offer the following supports to 

individuals receiving the services and 

their representatives: 

(1) Information and assistance 

consistent with sound principles and 

practice of self-direction. 

(2) Financial management supports to 

meet the following requirements: 

(i) Manage Federal, State, and local 

employment tax, labor, worker’s 

compensation, insurance, and other 

requirements that apply when the 

individual functions as the employer of 

service providers. 

(ii) Function as employer of record 

when the individual elects to exercise 

supervisory responsibility without 

employment responsibility. 

(iii) Make financial transactions on 

behalf of the individual when the 

individual has personal budget 

authority. 

(iv) Maintain separate accounts for 

each individual’s budget and provide 


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periodic reports of expenditures against 

budget in a manner understandable to 

the individual. 

§ 441.577 State plan HCBS administration: 

State responsibilities and quality 

improvement. 

(a) State plan HCBS administration—

(1) State responsibilities. The State must 

carry out the following responsibilities 

in administration of its State plan 

HCBS: 

(i) Number served. The State will 

annually provide CMS with the 

projected number of individuals to be 

enrolled in the benefit and the actual 

number of unduplicated individuals 

enrolled in State plan HCBS in the 

previous year. If the State chooses to 

limit the number to be served at any 

point in time, as provided in 

§ 441.577(a)(1)(ii), the State will 

annually provide to CMS the maximum 

number enrolled at one time. 

(ii) Optional limit to number served. 

If the State chooses to set a limit for the 

maximum number of individuals to be 

enrolled in the State plan HCBS benefit 

(either annually or at any point in time), 

the following conditions must be met: 

(A) The maximum number of 

individuals to be enrolled in the benefit 

is established and adjusted by a State 

plan amendment. 

(B) If the State elects to maintain a 

waiting list for State plan HCBS, the 

State establishes and adheres to policies 

and procedures for formation and 

maintenance of a waiting list that 

complies with all applicable Federal 

and State requirements. Waiting list 

criteria and a formally established 

schedule and procedure for reevaluation 

and revision must be made public. 

(iii) Access to services. The State must 

grant access to all State plan HCBS 

assessed to be needed, to individuals 

who have been determined to be eligible 

for the State plan HCBS benefit. The 

State may not limit access to one or 

more State plan HCBS according to type 

of disability or other characteristic, or 

limit the number of persons served by 

particular services. The State must not 

restrict the number of State plan HCBS 

that enrolled individuals may receive, 

or the scope and frequency of the HCBS 

(up to the approved service limitations, 

if any,) for reasons other than medical 

necessity as determined by the plan of 

care according to § 441.565. 

(2) Administration—(i) Option for 

presumptive payment. (A) The State 

may provide for a period of presumptive 

payment, not to exceed 60 days, for 

Medicaid eligible individuals the State 

has reason to believe may be eligible for 

the State plan HCBS benefit. FFP is 

available as administration of the 

approved State plan for evaluation of 

eligibility for the State plan HCBS 

benefit under § 441.559(d) and 

assessment of need for specific HCBS 

under § 441.562(a), prior to an 

individual’s receipt of State plan HCBS 

services or determination of ineligibility 

for the benefit. 

(B) If an individual the State has 

reason to believe may be eligible for the 

State plan HCBS benefit is evaluated 

and assessed under the presumptive 

payment option and found not to be 

eligible for the benefit, FFP as 

administration of the approved State 

plan will be available for the evaluation 

and assessment. The individual so 

determined will not be considered to 

have enrolled in the State plan HCBS 

benefit for purposes of determining the 

annual number of participants in the 

benefit. 

(ii) Reimbursement methodology. The 

State plan amendment to provide State 

plan HCBS must contain a description 

of the reimbursement methodology for 

each covered service. To the extent that 

the reimbursement methodologies for 

any self-directed services differ from 

those descriptions, the method for 

setting reimbursement methodology for 

the self-directed services must also be 

described. 

(iii) Operation. The State plan 

amendment to provide State plan HCBS 

must contain a description of the State 

Medicaid agency line of authority for 

operating the State plan HCBS benefit, 

including distribution of functions to 

other entities. 

(b) Quality improvement strategy: 

Program performance and quality of 

care—(1) Quality improvement strategy. 

States will maintain an HCBS quality 

improvement strategy that includes 

methods for ongoing measurement of 

program performance, quality of care, 

and mechanisms for remediation and 

improvement proportionate to the scope 

of services in the State plan HCBS 

benefit and the number of individuals to 

be served. 

(2) Program performance measures. 

The States’ quality improvement 

strategy must be designed to measure 

and provide evidence of program 

performance. Program performance 

measures must be made available to 

CMS upon request and include 

indicators approved or prescribed by the 

Secretary. 

(3) Quality of care measures. The 

State’s quality improvement strategy 

must be designed to measure outcomes 

associated with the receipt of home and 

community-based services, particularly 

with respect to the health and welfare 

of the recipients of these services. 

Quality of care measures must be made 

available to CMS upon request and 

include indicators approved or 

prescribed by the Secretary. 

(Catalog of Federal Domestic Assistance 

Program, No. 93.778, Medical Assistance 

Program.) 

Dated: October 31, 2007. 

Kerry Weems, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: December 20, 2007. 

Michael O. Leavitt, 

Secretary. 

Editorial Note: This document was received 

at the Office of the Federal Register on March 

27, 2008. 

[FR Doc. 08–1084 Filed 3–28–08; 11:11 am] 

BILLING CODE 4121–01–P 


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