3546 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 441 

[CMS–2229–P] 

RIN 0938–AO52 

Medicaid Program; Self-Directed 

Personal Assistance Services Program 

State Plan Option (Cash and 

Counseling) 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule provides 

guidance to States that want to 

administer self-directed personal 

assistance services through their State 

plans. 

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 

February 19, 2008. 

ADDRESSES: In commenting, please refer 

to file code CMS–2229–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may submit 

electronic comments on specific issues 

in this regulation to http:// 

www.cms.hhs.gov/eRulemaking. Click 

on the link ‘‘Submit electronic 

comments on CMS regulations with an 

open comment period.’’ (Attachments 

should be in Microsoft Word, 

WordPerfect, or Excel; however, we 

prefer Microsoft Word.) 

2. By regular mail. You may mail 

written comments (one original and two 

copies) to the following address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–2229– 

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–2229– 

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 one of the following 

addresses. If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410)– 

786–7195 in advance to schedule your 

arrival with one of our staff members. 

Room 445–G, Hubert H. Humphrey 

Building, 200 Independence Avenue, 

SW., Washington, DC 20201; or 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

(Because access to the interior of the 

HHH Building is not readily available to 

persons without Federal Government 

identification, commenters are 

encouraged to leave their comments in 

the CMS drop slots located in the main 

lobby of the building. A stamp-in clock 

is available for persons wishing to retain 

a proof of filing by stamping in and 

retaining an extra copy of the comments 

being filed.) 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by mailing 

your comments to the addresses 

provided 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: 

Marguerite Schervish, (410) 786–7200. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments: We welcome 

comments from the public on all issues 

set forth in this rule to assist us in fully 

considering issues and developing 

policies. You can assist us by 

referencing the file code CMS–2229–IFC 

and the specific ‘‘issue identifier’’ that 

precedes the section on which you 

choose to comment. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://www.cms.hhs.gov/ 

eRulemaking. Click on the link 

‘‘Electronic Comments on CMS 

Regulations’’ on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Background 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘BACKGROUND’’ at the 

beginning of your comments.] 

A. Section 6087 of the Deficit Reduction 

Act of 2005 

The Deficit Reduction Act (DRA) of 

2005 was enacted into law on February 

8, 2006 (Pub. L. 109–171). Section 6087 

of the DRA provided for a new State 

Plan option that is built on the 

experiences and lessons learned from 

the disability rights movement and 

States that pioneered self-direction 

programs. Self-direction is an important 

component of independence as it 

promotes quality, access, and choice. 

Specifically, section 6087 of the DRA 

amended section 1915 of the Social 

Security Act (the Act) to add new 

paragraph (j). Section 1915(j)(1) of the 

Act would allow a State the option to 

provide, as ‘‘medical assistance,’’ 

payment for part or all of the cost of 

self-directed personal assistance 

services (PAS) provided pursuant to a 

written plan of care to individuals for 

whom there has been a determination 

that, but for the provision of such 

services, the individuals would require 

and receive State Plan personal care 

services, or section 1915(c) home and 

community-based waiver services. 

Section 1915(j)(1) of the Act also 

expressly excludes Medicaid payment 

for room and board. Finally, section 

1915(j)(1) of the Act requires that selfdirected PAS may not be provided to 

individuals who reside in a home or 

property that is owned, operated, or 

controlled by a provider of services, not 

related by blood or marriage. 

Section 1915(j)(2) of the Act sets forth 

five assurances that States must provide 

in order for the Secretary to approve 

self-directed PAS under this State Plan 

option. First, States must assure that 

necessary safeguards are in place to 

protect the health and welfare of 

individuals provided services under this 

State Plan option, and to assure the 

financial accountability for funds 

expended with respect to such services. 

Second, States must assure the 

provision of an evaluation of the need 

for State Plan personal care services, or 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3547 

personal services under a section 

1915(c) waiver. Third, States must 

assure that individuals who are likely to 

require State Plan personal care 

services, or section 1915(c) waiver 

services, are informed of the feasible 

alternatives to the self-directed PAS 

State Plan option (if available) such as 

personal care under the regular State 

plan option or personal assistance 

services under a section 1915(c) waiver 

program. Fourth, States must assure that 

they provide a support system that 

ensures that participants in the selfdirected PAS program are appropriately 

assessed and counseled prior to 

enrollment and are able to manage their 

budgets. 

Fifth, States must assure that they will 

provide to the Secretary an annual 

report on the number of individuals 

served under the State Plan option and 

the total expenditures on their behalf in 

the aggregate. States must also provide 

an evaluation of the overall impact of 

this new option on the health and 

welfare of participating individuals 

compared to non-participants every 3 

years. 

Section 1915(j)(3) of the Act indicates 

that States that offer self-directed PAS 

under this State Plan option are not 

subject to the statewideness and 

comparability requirements of the Act. 

Section 1915(j)(4)(A) of the Act 

defines self-directed PAS to mean 

personal care and related services under 

the State Plan, or home and communitybased waiver services under a section 

1915(c) waiver, provided to a 

participant eligible under this selfdirected PAS State Plan option. 

Furthermore, the statute states that 

within an approved self-directed 

services plan and budget, individuals 

can purchase personal assistance and 

related services and hire, fire, supervise, 

and manage the individuals providing 

such services. 

Section 1915(j)(4)(B) of the Act gives 

States the option to permit participants 

to hire any individual capable of 

providing the assigned tasks, including 

legally liable relatives, as paid providers 

of the services. The statute also gives 

States the option to permit participants 

to purchase items that increase 

independence or substitute for human 

assistance to the extent that 

expenditures would otherwise be made 

for the human assistance. 

Section 1915(j)(5) of the Act sets forth 

the requirements for an ‘‘approved selfdirected services plan and budget’’. 

Section 1915(j)(5)(A) of the Act 

authorizes the individual or a defined 

representative to exercise choice and 

control over the budget, planning, and 

purchase of self-directed PAS, including 

the amount, duration, scope, provider, 

and location of service provision. 

Section 1915(j)(5)(B) of the Act requires 

an assessment of participants’ needs, 

strengths, and preferences for PAS. 

Section 1915(j)(5)(C) of the Act requires 

States to develop a service plan based 

on the assessment of need using a 

person-centered planning process. 

Section 1915(j)(5)(D) of the Act requires 

States to develop and approve a budget 

for participants’ services and supports 

based on the assessment of need and 

service plan and on a methodology that 

uses valid, reliable cost data, is open to 

public inspection, and includes a 

calculation of the expected cost of such 

services if those services were not selfdirected. The budget may not restrict 

access to other medically necessary care 

and services furnished under the State 

Plan and approved by the State but not 

included in the budget. 

Section 1915(j)(5)(E) of the Act 

requires that there are appropriate 

quality assurance and risk management 

techniques used in establishing and 

implementing the service plan and 

budget that recognize the roles and 

responsibilities in obtaining services in 

a self-directed manner and assure the 

appropriateness of such plan and budget 

based upon the participant’s resources 

and capabilities. 

Section 1915(j)(6) of the Act indicates 

that States may employ a financial 

management entity to make payments to 

providers, track costs, and make reports. 

Payment for the activities of the 

financial management entity shall be at 

the administrative rate established in 

section 1903(a) of the Act. 

B. History of Self-Direction 

The Independent Living movement in 

the 1960s was premised on the concept 

that people with disabilities should 

have the same civil rights, options, and 

control over choices in their own lives 

as do people without disabilities, and 

that individuals with cognitive 

impairments should not be prohibited 

from exercising control over their lives. 

One mechanism that allows individuals 

to exercise more involvement, control, 

and choice over their lives is selfdirected care. Self-directed care is a 

service delivery mechanism that 

empowers individuals with the 

opportunity to select, direct, and 

manage their needed services and 

supports identified in an individualized 

service plan and budget. Self-direction 

is not a service, but rather an alternative 

to the traditional service delivery model 

whereby a worker hired by the Medicaid 

recipient will furnish the Medicaid 

service to the Medicaid recipient and 

the Medicaid recipient retains the 

control and authority over who provides 

the services, how the services are 

provided, the hours they work, and their 

rate of pay. 

Two national pilot projects 

demonstrated the success of selfdirected care. During the mid-1990s, the 

Robert Wood Johnson Foundation 

awarded grants to develop selfdetermination in 19 States. These 

projects primarily evolved into 

Medicaid-funded programs under the 

section 1915(c) home and communitybased services waiver authority. In the 

late 1990s, the Robert Wood Johnson 

Foundation again awarded grants to 

develop the ‘‘Cash and Counseling’’

national demonstration and evaluation 

project in three States. These projects 

evolved into demonstration programs 

under the section 1115 authority of the 

Act. 

Evaluations were conducted in both 

of these national projects. Results in 

both projects were similar—persons 

directing their personal care 

experienced fewer unnecessary 

institutional placements, experienced 

higher levels of satisfaction, had fewer 

unmet needs, experienced higher 

continuity of care because of less worker 

turnover, and maximized the efficient 

use of community services and 

supports. 

On February 1, 2001, the President 

announced the New Freedom Initiative, 

which included the following three 

elements: Promoting full access to 

community life through efforts to 

implement the Supreme Court’s 

decision in Olmstead vs. L.C., 527 U.S. 

581 (1999) (‘‘Olmstead’’), integrating 

Americans with disabilities into the 

workforce with programs under the 

Ticket to Work and Work Incentives 

Improvement Act of 1999 (TWWIIA) 

(Pub. L. 106–170, enacted on December 

19, 1999), and creating the National 

Commission on Mental Health. The 

President subsequently expanded this 

initiative through Executive Order 

13217 (June 18, 2001) by directing 

Federal agencies to work together to 

‘‘tear down the barriers’’ to community 

living by developing a government-wide 

framework for providing elders and 

people with disabilities the supports 

necessary to learn and develop skills, 

engage in productive work, choose 

where to live, and fully participate in 

community life. 

On May 9, 2002, as part of its 

response to the New Freedom Initiative, 

the Department of Health and Human 

Services unveiled the Independence 

Plus templates and the initiative to help 

States broaden their ability to offer 

individuals the opportunity to 

maximize choice and control over 


rfrederick on PROD1PC67 with PROPOSALS2
3548 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

services in their own homes and 

communities. The Department 

developed two templates that allowed 

States to choose different self-directed 

design features to satisfy their unique 

programs. The section 1115 

demonstration template was developed 

for States that wanted to permit 

individuals to receive a prospective 

cash allowance equivalent to the 

amount of their Medicaid personal care 

benefit. Under the section 1115 

authority, individuals could directly 

manage their cash allowance and direct 

the purchases of their personal care and 

related services and goods. For those 

States not wanting to offer the cash 

allowance, a section 1915(c) home and 

community-based services waiver 

template was developed. The section 

1915(c) waiver template allowed 

Medicaid recipients to self-direct a wide 

array of services, so long as these 

services are required to keep a person 

from being institutionalized in a 

hospital, nursing facility or intermediate 

care facility for the mentally retarded 

(ICFMR). 

However, a program was only given 

the Independence Plus designation 

when a State demonstrated a strong 

commitment to self-direction by 

developing a comprehensive program 

that offered a person-centered planning 

process, individualized budgeting, selfdirected supports including financial 

management services, and a quality 

assurance and improvement plan. The 

intended purposes of the Independence 

Plus Initiative were to: 

• Delay or avoid institutional or other 

high cost out-of-home placement by 

strengthening supports to individuals or 

families. 

• Recognize the essential role of the 

individual or family in the planning and 

purchasing of health care supports and 

services by providing individual or 

family control over an agreed upon 

resource amount. 

• Encourage cost effective decisionmaking in the purchase of supports and 

services. 

• Increase individual or family 

satisfaction through the promotion of 

self-direction, control, and choice—a 

major theme expressed during the New 

Freedom Initiative-National Listening 

Session. 

• Promote solutions to the problem of 

worker availability. 

• Provide supports including 

financial management services to 

support and sustain individuals or 

families as they direct their own 

services. 

• Assist States with meeting their 

legal obligations under the Americans 

with Disabilities Act (ADA) and the U.S. 

Supreme Court’s Olmstead decision. 

• Provide flexibility for States seeking 

to increase the opportunities afforded 

individuals and families in deciding 

how best to enlist or sustain home and 

community services. 

A new section 1915(c) waiver 

application was also developed effective 

spring 2005 that incorporates our 

requirements for an Independence Plus 

program. 

In 2003 we awarded 12 systems 

change grants to States for the 

development of Independence Plus 

programs. On October 7, 2004, the 

Robert Wood Johnson Foundation 

awarded a second round of ‘‘Cash and 

Counseling’’ grants to 11 States to 

develop Independence Plus programs 

using either the Section 1915(c) waiver 

or section 1115 demonstration 

application. As of March 20, 2006, 15 

States had 17 approved Independence 

Plus programs. In addition, there were 2 

other States that included self-direction 

options in their section 1115 

demonstrations and a multitude of 

States that offered self-directed program 

options in their section 1915(c) home 

and community-based services waiver 

programs. 

II. Provisions of the Proposed Rule 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘PROVISIONS OF THE 

PROPOSED RULE’’ at the beginning of 

your comments.] 

Section CFR 441.450 Basis, Scope and 

Definitions 

This proposed rule would implement 

section 1915(j) of the Act, allowing 

States to provide a self-directed PAS 

through a State Plan option. We propose 

to implement this provision in 42 CFR 

part 441 subpart J. This part would set 

forth the requirements of the selfdirected PAS delivery model 

administered through the Medicaid 

State plan and indicates how 

individuals may qualify to participate in 

a self-directed PAS State plan option. 

The overall purpose of section 1915(j) of 

the Act is to allow States the option to 

amend their State Plans to offer 

individuals the opportunity to selfdirect their PAS. This self-directed PAS 

State plan option is a service delivery 

model and is premised in the 

experience and lessons learned from the 

self-direction and Independence Plus 

section 1115 demonstrations and 

section 1915(c) waiver programs. Based 

on the demonstrated success of selfdirected services in these programs, we 

learned that individuals can 

successfully exercise decision-making 

authority over their PAS and supports 

identified in an individualized service 

plan and budget. Consequently, in 42 

CFR 441.450(b), we propose that 

individuals be allowed to exercise 

decision-making authority in 

identifying, accessing, managing and 

purchasing their PAS. We propose a list 

of the minimum activities over which 

individuals may exercise authority, in 

order to implement the basic elements 

of self-direction, which convey control 

over both employer-related and budgetrelated activities. Individuals’ decisionmaking authority includes, at a 

minimum, the purchase of PAS and 

supports for PAS, recruiting workers, 

hiring and discharging workers, 

specifying worker qualifications, 

determining worker duties, scheduling 

workers, supervising workers, 

evaluating worker performance, 

determining the amount paid for a 

service, support, or item, scheduling 

when services are provided, identifying 

service workers, and reviewing and 

approving invoices. This proposed list 

was determined through our review of 

States’ experiences with existing selfdirected programs and we believe it 

represents the minimum authority 

required by an individual to self-direct 

care. A State can include additional 

activities in its submitted State plan 

option request. 

Since we view self-directed care as a 

method of service delivery rather than 

cash assistance, we do not view the 

following Medicaid provisions as a 

barrier to use of the self-directed PAS 

option: 

• When States elect to offer a cash 

option to participants, funds made 

available to the individual solely for the 

purchase of medically necessary items 

and services (as outlined in the 

approved service plan) are not income 

or resources to the individual. Thus, 

they would not be counted for purposes 

of determining or redetermining 

eligibility (under 1902(a)(10)(A) or 

1902(a)(10)(C) of the Act, or any 

demonstration project). 

• Medicaid requirements for direct 

payment to providers found at section 

1902(a)(32) of the Act and prepayment 

review found at section 1902(a)(37)(B) 

of the Act may be satisfied by specific 

responsibilities individuals undertake 

as part of self-direction, such as 

activities to effectively manage their 

funds, review all payment requests, and 

make payments to providers, either 

directly or through a financial 

management entity. These 

responsibilities are further described in 

§ 441.470. 

• In the service delivery model of 

self-direction, the mechanisms that an 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3549 

individual undertakes to document 

delivery of services, such as having 

timesheets signed by the provider of 

services, should include the basic 

elements needed to satisfy the objective 

of the Medicaid requirements on 

provider agreements found at section 

1902(a)(27) of the Act. 

There are many terms specific to the 

self-directed PAS State plan option. 

Because of the need to be consistent 

with their usage within the context of 

section 1915(j), we are proposing to 

define the following terms for purposes 

of this section in § 441.450(c): 

Assessment of Need 

Section 1915(j)(5)(B) of the Act 

requires an assessment of a participant’s 

needs, strengths, and preferences for 

PAS. Our proposed definition at 

§ 441.450(c) reflects this statutory 

language. An assessment of an 

individual’s needs, strengths and 

preferences is crucial because it forms 

the basis for the identification of the 

needed services and supports that will 

be authorized in the individual’s service 

plan and the subsequent service budget. 

It is also important to identify an 

individual’s strengths and preferences 

that will enable self-direction of PAS. 

Therefore, we also propose in 

§ 441.450(c) that the assessment 

includes one or more processes to 

obtain information about an individual’s 

health condition, personal goals and 

preferences for the provision of services, 

functional limitations, age, school, 

employment, household, and other 

factors that are relevant to the 

authorization and provision of services. 

We believe our proposed definition 

reflects the need for such an assessment 

to be a comprehensive assessment of all 

an individual’s needs. 

Individualized Backup Plan 

We propose to add a definition for an 

individualized backup plan because we 

think it is an important beneficiary 

protection and a necessary 

communication device to convey 

important information should a 

situation occur that would pose a risk of 

harm to an individual that would 

necessitate a plan to ensure alternative 

arrangements for service delivery. 

Accordingly, in § 441.450(c), we would 

define an individualized backup plan to 

mean a written plan that addresses 

critical contingencies or incidents that 

would pose a risk of harm to the 

participant’s health or welfare. We 

propose to require that the 

individualized backup plan be 

incorporated into the participant’s 

service plan. For example, a typical 

critical contingency or incident could 

include the failure of a worker to appear 

when scheduled to provide necessary 

services and the individualized backup 

plan would include the steps necessary 

to continue to provide the necessary 

services in such a case. The 

individualized backup plan could 

include arranging for designated 

provider agencies to furnish staff 

support on an on-call basis, or use of 

other services and agencies in existence 

in the participant’s community. We note 

each backup plan must necessarily be 

crafted to meet the unique needs and 

circumstances of each participant. 

Legally Liable Relatives 

Section 1915(j)(4)(B)(i) of the Act 

permits, at the State’s option, 

participants in the self-directed PAS 

option to hire legally liable relatives as 

paid providers of services. In 42 CFR 

441.450(c), we propose to define legally 

liable relatives to mean persons who 

have a duty under the provisions of 

State law to care for another person. 

Legally liable relatives may include: (1) 

The parent (biological or adoptive) of a 

minor child or the guardian of a minor 

child who must provide care to the 

child, (2) legally-assigned caretaker 

relatives, or (3) a spouse. It has been our 

experience that these are the most 

commonly used relationships in 

providing care, but we solicit comments 

on other possible relationships that 

could be used. 

Self-Directed Personal Assistance 

Services 

Section 1915(j)(4)(A) of the Act 

defines self-directed PAS to mean 

personal care and related services, or 

home and community-based services 

otherwise available under the State Plan 

or a 1915(c) waiver, that are provided to 

an individual determined to be eligible 

for the self-directed PAS program. We 

propose at § 441.450(c) to adopt the 

statutory language in our definition. We 

further note that we believe it is clear 

that ‘‘personal care and related services’’

refers to those services that an 

individual receives that are within the 

State’s defined personal care State Plan 

optional service (for example, activities 

of daily living, instrumental activities of 

daily living, supervision, and cueing). 

Notwithstanding an individual’s 

eligibility to participate in the selfdirected PAS option because of their 

eligibility for and receipt of services 

under a State Plan personal care 

services option or a section 1915(c) 

waiver program, we also propose that 

self-directed PAS include, at the State’s 

option, items that increase an 

individual’s independence or substitute 

for human assistance, according to 

section 1915(j)(4)(B)(ii) of the Act. We 

believe it is clear that the State has the 

option to allow the individual to acquire 

these items, and that these items can be 

considered as self-directed PAS. 

Self-Direction 

Section 1915(j)(5)(A) of the Act 

defines self-direction to mean the 

opportunity for participants or their 

representatives to exercise choice and 

control over the budget, planning, and 

purchase of self-directed PAS, including 

the amount, duration, scope, provider, 

and location of service provision. We 

propose to reflect this statutory 

definition in the rule at § 441.450(c). 

Service Budget 

Section 1915(j)(5)(D) of the Act sets 

out the requirement for a service budget 

as part of an ‘‘approved self-directed 

services plan and budget.’’ We propose, 

at § 441.450(c), to define a service 

budget to mean an amount of funds that 

is under the control and direction of a 

participant when the State has selected 

the State Plan option for provision of 

self-directed PAS. We further propose 

that the budget be developed using a 

person-centered and directed process, 

and be individually tailored in 

accordance with the participant’s needs 

and personal preferences as established 

in the service plan. We further note that 

the statutory requirements that the 

budget be based upon an assessment of 

need, approved by the State, developed 

using a valid methodology, is open to 

public inspection, and includes a 

calculation of the expected cost of the 

PAS if not self-directed are inherent in 

the process for approval of a selfdirected PAS State plan option and we 

are not proposing these requirements as 

part of the proposed definition. 

Service Plan 

The statute at section 1915(j)(5)(C) of 

the Act references the requirement for a 

service plan to be developed and 

approved by the State based on an 

assessment of need through a personcentered process. At § 441.450(c), we 

propose to define a service plan to mean 

the written document that specifies the 

services and supports (regardless of 

funding source) that are to be furnished 

to meet the needs of a participant in the 

self-directed PAS option so the 

participant can successfully direct the 

PAS and live in the community. We 

believe that an assessment of an 

individual’s needs, strengths and 

preferences is crucial because it forms 

the basis for the identification of the 

needed services and supports that will 


rfrederick on PROD1PC67 with PROPOSALS2
3550 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

be authorized in the individual’s service 

plan and the subsequent service budget. 

We also propose to reflect the 

statutory requirement that the service 

plan be based on the assessment of need 

using a person-centered and directed 

planning process. We also propose to 

incorporate the principles of a personcentered planning process since we 

believe that the service plan must build 

upon the participant’s capacity to 

actively engage in and lead the 

development of the plan, including 

identifying persons who will be 

involved in the process. We anticipate 

that States will provide individuals with 

information, assistance and training, as 

needed or desired, in advance of and 

during the service planning process in 

order to help them develop their service 

plans, thereby ensuring that the plan 

reflects their needs, strengths and 

preferences. Specifically, we propose to 

require that the process build upon the 

participant’s capacity to engage in 

activities that promote community life 

and that respects the participant’s 

preferences, choices, and abilities. We 

also propose to allow families, friends 

and professionals, as desired or required 

by the participant, to be involved in the 

service-planning process. 

Support System 

Section 1915(j)(2)(D) of the Act 

requires that States provide a support 

system that ensures that participants are 

appropriately assessed and counseled 

prior to their decision to participate in 

the self-directed PAS State Plan option 

and are able to manage their budgets. 

The statute further requires that 

additional counseling and management 

support may be provided at the request 

of the individual. In § 441.450(c), we 

propose to define support system to 

mean information, counseling, training, 

and assistance that support the 

participant (or the participant’s family 

or representative, as appropriate) in 

identifying, accessing, managing, and 

directing their PAS and supports and in 

purchasing their PAS identified in the 

service plan and budget. 

The following proposed provisions of 

subpart J deal with General 

Administration. 

Section 441.452 Self-Direction: 

General 

We note that the statute is written 

such that States must have in place, 

before electing the self-directed PAS 

option, personal care services through 

their State plan, or home and 

community-based services in a section 

1915(c) waiver program. In this way, 

States that choose to amend their State 

plans to add self-directed PAS, will 

have both the traditional delivery 

system (that is, non-self-directed) and 

the self-directed PAS service delivery 

option available in the event that 

individuals voluntary disenroll from or 

are involuntarily disenrolled from the 

self-directed PAS service delivery 

option. This also reflects the choice 

requirement for such individuals as set 

forth in section 1915(j)(2)(C) of the Act. 

In the traditional delivery system, the 

provider of the PAS is an entity such as 

a home health agency. The entity, and 

not the Medicaid recipient, exercises 

authority over who will furnish the PAS 

and retains the control and authority 

over how the services are provided, the 

worker’s hours, and the worker’s rate of 

pay. 

We are also proposing to require that 

the State’s assessment of an individual’s 

needs should form the basis for the level 

of services for which the individual is 

eligible. This requirement will ensure 

that, regardless of service delivery 

system, individuals will receive the 

services identified in the assessment of 

need. The proposed regulation should 

not be construed as affecting an 

individual’s Medicaid eligibility, 

including that of an individual whose 

Medicaid eligibility is attained through 

receipt of section 1915(c) waiver 

services. We are proposing in § 441.452 

to reflect the general concepts of section 

1915(j)(1) statutory requirements as 

noted above. We are available to all 

States to provide technical assistance in 

structuring this new self-directed PAS 

State Plan option. 

Section 441.454 Use of Cash 

In the section 1115 self-direction 

demonstration programs, participants 

could receive a prospective cash 

allowance equivalent to the amount of 

Medicaid expenditures for the services 

included in the demonstration and 

could, if they chose this option, directly 

manage their cash allowance. We 

learned that participants who chose to 

directly manage their cash allowance 

were able to do so successfully and that 

they became more prudent purchasers 

of their needed supports and services. 

Some individuals also chose to perform 

all the employer tax-related 

responsibilities that are associated with 

being an employer of record, while 

others desired to use a fiscal/employer 

agent or financial management entity to 

help them with some or all of these 

responsibilities. 

We are aware that individuals who 

have been directly receiving and 

managing their cash allowance wish to 

continue to have this option. We are 

also aware that individuals in States 

where this option has not heretofore 

been available wish to be able to access 

this option. Accordingly, we are 

proposing in § 441.454, that States can 

elect to disburse cash prospectively to 

participants who are self-directing their 

PAS and must ensure compliance with 

the IRS requirements if they adopt this 

option. Further, if the cash option is 

made available by the State, we would 

require States to permit individuals who 

select the cash option the choice of 

whether to use a financial management 

entity. Individuals must be given 

flexibility to determine whether to use 

a financial management entity, and the 

functions, if any, to be performed on 

their behalf by the financial 

management entity. For example, some 

individuals may want the financial 

management entity to perform all 

employer-related tax functions, while 

they retain responsibility for paying 

their providers of PAS. Individuals 

choosing not to use a financial 

management entity must comply with 

all employer-related tax functions of the 

IRS requirements. However, we are also 

proposing that if States choose to allow 

the cash option, that they make 

available a financial management entity 

to participants who have demonstrated, 

after additional counseling, information, 

training, or assistance, that they cannot 

effectively manage the cash option. 

Section 441.456 Voluntary 

Disenrollment 

We understand that a self-directed 

service delivery model may not 

necessarily work for everyone. 

Individuals who initially elect to selfdirect their PAS may subsequently 

decide to move to a traditional service 

delivery system. At § 441.456, we 

propose to specify that individuals may 

voluntarily disenroll from the selfdirected PAS State plan option at any 

time and elect to receive their services 

through the traditional service delivery 

system. As required by statute, PAS will 

be offered to the individual so long as 

the individual still qualifies for State 

Plan personal care services or home and 

community based services provided 

through a 1915(c) waiver program. 

If individuals decide to leave the selfdirected care option, we want to be 

assured that individuals continue to 

receive the services for which they are 

eligible and that their health and 

welfare are maintained. Accordingly, we 

propose to require that States specify in 

the State plan the safeguards that will be 

in place to ensure continuity of services 

during the transition from self-directed 

services. In order to effectuate a prompt 

and efficient transition, we would 

expect that any revisions to the service 

plan be made promptly and that 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3551 

participants are quickly linked with 

alternate service providers to prevent a 

break in the delivery of services. 

Section 441.458 Involuntary 

Disenrollment 

We understand there may be 

circumstances, where in the interest of 

the participant’s health and welfare, the 

State may wish to involuntarily 

disenroll the participant from the selfdirected PAS option. For example, 

involuntary disenrollment may be 

necessary when the individual does not 

carry out the necessary responsibilities, 

thereby jeopardizing their health and 

welfare, or in other circumstances 

where action must be taken to ensure an 

individual’s health and welfare. 

Accordingly, in § 441.458, we propose 

to permit States to determine the 

conditions under which an individual 

may be involuntarily disenrolled from 

the self-directed PAS State plan option. 

We also note that we propose that we 

approve these conditions, and plan to 

do so as part of the review of the State 

plan amendment to provide selfdirected PAS. 

Again, we want to be assured that 

individuals continue to receive the 

services for which they are eligible and 

that their health and welfare are 

maintained. Accordingly, we would also 

propose to require that States specify in 

the State plan the safeguards that will be 

in place to ensure continuity of services 

during the transition from self-directed 

services. In order to effectuate a prompt 

and efficient transition, we would 

expect that any needed revisions to the 

service plan would be made promptly 

and that participants are quickly linked 

with alternate service providers for a 

seamless delivery of services. 

Section 441.460 Participant Living 

Arrangements 

Section 1915(j)(1) of the Act states 

that self-directed PAS cannot be made 

available to individuals who reside in a 

home or property that is owned, 

operated, or controlled by a provider of 

services, who is not related to the 

individual by blood or marriage. We are 

proposing to reflect the statutory 

requirement in § 441.460(a). We note 

programs that have successfully 

provided the self-directed care option 

have typically provided it to individuals 

who live in homes of their own or in the 

homes of their families. We believe 

successfully directing one’s own care 

may become less feasible when 

individuals receive services and reside 

in large, provider-owned, operated or 

controlled residential living 

arrangements. For example, if the 

residential facility also provides and 

receives payment for the provision of 

personal care and related services, it 

may prohibit the self-directed service 

delivery option for fear of duplication of 

services. We are also proposing in 

§ 441.460(b) to allow States to specify 

additional restrictions on participant 

living arrangements, if they have been 

approved by CMS. We further note that 

we believe this limitation should be 

applied to individuals residing in 

assisted living facilities, as we 

anticipate that the provider would both 

control the housing and be expected to 

provide the PAS. However, we do not 

believe this limitation would apply to 

situations in which the individual 

resides in the home of someone whom 

they wish to employ under the selfdirected PAS option. We invite 

comment on our proposal as well as on 

other situations to which this limitation 

should apply. 

Section 441.462 Statewideness, 

Comparability, and Limitations on 

Number Served 

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

a State to provide self-directed PAS 

without regard to the requirements for 

statewideness (section 1902(a)(1) of the 

Act), comparability of services or the 

number of individuals served (section 

1902(a)(10)(B) of the Act). In § 441.462, 

we propose to reflect section 1915(j)(3) 

of the Act. However, we also wish to 

note below our understanding of the 

extent to which these provisions 

provide flexibilities in the State plan 

PAS option. 

1. Geographic Limitations 

Under this new State plan option, 

States are not bound by the 

‘‘statewideness’’ requirement of section 

1902(a)(1) of the Act. (The 

statewideness requirement of section 

1902(a)(1) of the Act provides, in part, 

that the provisions of a State plan be in 

effect in all political subdivisions of the 

State.) Therefore, consistent with the 

statute, we propose in § 441.462 to 

permit States to limit the provision of 

self-directed PAS to any defined 

location of the State (that is, city, 

county, community, etc.). 

We note that the exception to the 

statewideness requirement applies only 

to the provision of self-directed PAS 

under section 1915(j) of the Act. The 

statewideness requirement of section 

1902(a)(1) of the Act continues to apply 

to all other Medicaid services for which 

an individual may be eligible, unless 

those services are subject to their own 

statewideness exception. In other 

words, the State cannot geographically 

limit other services. Receipt of State 

plan PAS does not in any way alter an 

individual’s eligibility to receive any 

other service under the State plan. 

2. Comparability 

Under this State plan option, the 

statute permits a State to provide selfdirected PAS to individuals without 

regard to the ‘‘comparability’’ provision 

in section 1902(a)(10)(B) of the Act. 

Thus, a State can limit the populations 

eligible to receive these services. (The 

‘‘comparability’’ provision of section 

1902(a)(10)(B) of the Act generally 

requires States to make Medicaid 

services available in the same amount, 

duration, and scope to one group of 

categorically needy individuals as it 

offers to another group of categorically 

needy individuals. The comparability 

provision also requires that the 

Medicaid services available to any 

individual in a categorically needy 

group are not less in amount, duration, 

and scope than those Medicaid services 

available to an individual in a medically 

needy group). Section 1915(j)(3) of the 

Act thus permits States to offer selfdirected PAS to certain populations, 

such as those with developmental 

disabilities, physical disabilities or 

aged. 

As with the statewideness exception, 

we note that the exception to the 

comparability requirement applies only 

to the provision of self-directed PAS 

under section 1915(j) of the Act. For all 

other Medicaid services for which an 

individual may be eligible, the 

comparability requirements of section 

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

apply, unless those services are subject 

to their own comparability exception. In 

other words, receipt of self-directed PAS 

State plan does not in any way alter an 

individual’s eligibility to receive any 

other service under the State plan. 

3. Limitations on Number of People 

Served 

The statute also permits a State to 

limit the number of persons served 

under this State plan option. This 

means that the State may limit the 

number of individuals receiving selfdirected PAS. For example, States could 

offer self-directed PAS to only 150 

individuals. 

Section 441.464 State Assurances 

Section 1915(j)(2) of the Act requires 

States that elect this option to assure the 

appropriate protection of Medicaid 

recipients. The statute does not permit 

us to approve a program that does not 

provide certain specified assurances. 

Specifically, section 1915(j)(2) of the 

Act requires States to assure the 

Secretary of the following: 


rfrederick on PROD1PC67 with PROPOSALS2
3552 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

1. Necessary Safeguards 

States must assure that necessary 

safeguards have been taken to protect 

the health and welfare of individuals 

furnished services under this program 

and to assure the financial 

accountability for funds expended for 

self-directed services. In proposed 

§ 441.464(a), we reflect this general 

requirement. More specifically, in 

proposed § 441.464(a)(1), we would 

require that safeguards must prevent the 

premature depletion of the participant 

directed budget as well as identify 

potential service delivery problems that 

might be associated with budget 

underutilization. We believe it is 

important that States have a system to 

oversee the expenditures being made by 

participants. Premature depletion of the 

funds in a budget could signal a health 

crisis which would require the State to 

immediately determine the health status 

of a participant and conduct a new 

assessment of the participant’s needs. It 

could also signal misuse of the funds, 

for which the State would need to take 

corrective action. The corrective action 

could be the provision of additional 

counseling and training on how to 

manage the budget, or recoupment of 

the misspent funds. In contrast, underutilization of the funds could signal a 

problem with the provision of services, 

or the lack of understanding of how the 

funds may be used to purchase PAS and 

supports. 

We propose, in § 441.464(a)(2), a 

minimum list of safeguards that must be 

provided, but States would have the 

ability to implement additional 

safeguards to protect health and welfare 

and to prevent premature depletion of 

the participant-directed budget. Our 

experience with self-direction indicated 

that, at a minimum, a certain level of 

oversight by the State is necessary to 

help flag potential issues, particularly as 

to budget issues. The proposed list is 

based, in part, on this experience. We 

believe that the proposed list represents 

reasonable activities that a State should 

have in place so that any health or other 

problems associated with use of the 

budgeted funds will be brought to the 

attention of a case manager, support 

broker, financial management entity, or 

other person with oversight 

responsibilities. In proposed 

§ 441.464(a)(3) we would require that 

safeguards must be designed so that 

budget problems are identified on a 

timely basis so that corrective action 

may be taken, if necessary, in order to 

protect health and welfare and ensure 

financial accountability. 

2. Evaluation of Need 

States must assure the performance of 

an evaluation of the need for personal 

care under the State plan or personal 

services under a section 1915(c) home 

and community-based services waiver 

program. In addition, section 

1915(j)(2)(B) of the Act states that those 

subject to the evaluation of need are 

individuals who: (1) Are entitled to 

medical assistance for personal care 

services under the State plan, or receive 

home and community-based services 

under a section 1915(c) waiver; (2) may 

require self-directed PAS; and (3) may 

be eligible for self-directed PAS. We 

would reflect these statutory 

requirements in proposed § 441.464(b). 

3. Notification of Feasible Alternatives 

Individuals likely to require personal 

care under the State plan, or home and 

community-based services under a 

section 1915(c) waiver program, are 

informed of feasible alternatives, if 

available under the State’s self-directed 

PAS State plan option, at the choice of 

such individuals, to the provision of 

personal care services under the State 

plan, or personal assistance services 

under a section 1915(c) home and 

community-based services waiver 

program. 

With the implementation of this new 

State plan option, there could be 

multiple programs offering individuals 

opportunities to receive their services 

through different service delivery 

mechanisms. We believe it is important 

that individuals be made aware, before 

enrolling in a program, of feasible 

alternatives for which they may be 

eligible and the requirements of all selfdirected and non-self-directed programs 

operating within a State. We have 

historically required that participation 

in a self-directed program be voluntary 

and informed in order to ensure that 

participants’’ choice of the self-directed 

model of service delivery is meaningful. 

To reflect both the statutory requirement 

and our longstanding policy, we 

propose in § 441.464(c)(1), that 

individuals receive information about 

self-direction opportunities that is 

sufficient to inform decision-making 

about the election of self-direction and 

provided on a timely basis to 

individuals or their representatives. The 

information given to individuals must 

minimally include the elements of selfdirection compared to non-self-directed 

PAS, self-direction responsibilities and 

potential liabilities, their choice to 

receive PAS under a section 1915(c) 

waiver program, if applicable, and the 

option, if available, to receive and 

manage the cash amount of their 

individual budget allocation. We also 

propose to require a State, at 

§ 441.464(c)(2), to inform individuals 

about when and how the information is 

provided. 

4. Support System 

Section 1915(j)(2)(D) of the Act 

requires States to provide a support 

system to ensure that participants in the 

self-directed PAS State plan option are 

appropriately assessed and counseled 

before enrollment and are able to 

manage their budgets. Participants may 

also request additional counseling and 

management support during 

participation in the self-directed PAS 

option in an effort to address any 

difficulties they may experience. 

Based on our experience with selfdirection programs, we are aware that 

individuals of different ages and with 

different abilities and disabilities, will 

desire to self-direct their PAS. In 

consideration of the potential 

differences in abilities to self-direct 

services, we have long required that 

States offer participants a support 

system that includes information about 

self-direction, as well as any counseling, 

training and assistance that may be 

needed or desired to effectively manage 

their services and budgets. We propose 

to reflect both the statutory requirement 

and our long-standing policy at 

§ 441.464(d). While we do not prescribe 

the way States are to design their 

support system in order to allow 

flexibility, based on our experience, we 

include in the proposed regulation a 

minimum list of activities for which 

individuals may need information, 

counseling, training and/or assistance, 

but States may offer supports for 

additional activities. Generally, the 

activities requiring support include 

participant rights information and how 

the self-directed model of service 

delivery operates. For example, the list 

includes providing important 

beneficiary rights and protections such 

as freedom of choice of providers, 

information about the grievance process 

and how participants would recognize 

and report critical incidents. In order to 

convey all the necessary information to 

individuals, we understand some States 

have developed a ‘‘consumer training 

manual’’ and/or an orientation and 

training program that includes 

necessary information about selfdirection, person-centered planning, the 

services that may be self-directed, the 

roles and responsibilities of 

participants, providers, supports 

brokers/counselors and financial 

management service entities, as well as 

a host of other information about 

managing and directing the services and 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3553 

supports identified in the service plan 

and budget. We encourage States to 

have such a manual or an orientation 

and training program in place because it 

will give clear guidance to the involved 

and interested parties in the selfdirected PAS State plan option. 

We also realize that as self-direction 

assumes a level of independence and 

the ability of individuals to make 

decisions and choices, the extent to 

which individuals use the information 

and assistance may vary with their 

abilities and preferences. Individuals 

may elect whether and to what extent 

they will avail themselves of the 

support system, although States must 

require individuals not participating in 

the cash option to utilize financial 

management services. However, we do 

recognize that situations could arise in 

which individuals experience episodic 

difficulty in effectively managing and 

directing their PAS services and 

budgets. It has been our experience with 

self-direction waiver and demonstration 

programs that States have chosen to 

increase the level of support an 

individual may temporarily need and to 

offer additional information, counseling, 

training or assistance that may be 

needed and desired by individuals to 

overcome the difficulty. States have 

found that by flexibly providing ongoing 

support, success in self-directing 

services can usually be attained. 

Based on these States’’ experiences, 

we would require at proposed 

§ 441.464(d)(3), that States would have 

information, counseling, training or 

assistance available, including financial 

management services, on an ongoing 

basis to participants at their request or 

when the State has determined that the 

participant is not effectively managing 

the services identified in the service 

plan or budget. However, to ensure that 

participants continue to receive needed 

services, we are also proposing in 

§ 441.464(d)(4), that if, after additional 

information, counseling, training or 

assistance is provided, the situation has 

not improved, States may mandate 

additional assistance or may initiate an 

involuntary disenrollment in 

accordance with § 441.458. 

5. Annual Report and Evaluation of 

Impact 

Section 1915(j)(2)(E) of the Act 

requires that the State provide to the 

Secretary an annual report reflecting the 

number of individuals served under the 

State plan option and total expenditures 

on their behalf. This section also 

requires that the State provide an 

evaluation of the overall impact of the 

self-directed PAS option on 

participants’’ health and welfare, in 

comparison to that of non-participants, 

every 3 years. 

We propose to include these 

requirements in the regulations at 

§ 441.464(e) and (f). We plan to issue 

further guidance on the requirements 

and structure of the annual report, and 

we invite comments on other 

information that we should consider in 

the development of this guidance. We 

also plan to issue further guidance 

regarding expected requirements and 

implementation of the evaluation 

component. We also invite comment on 

the structure of this evaluation. For 

purposes of this evaluation requirement, 

the comparison group of ‘‘nonparticipants’’ should be individuals 

receiving PAS that are not self-directed. 

Section 441.466 Assessment of Need 

Section 1915(j)(5)(B) of the Act 

requires that States conduct an 

assessment of participants’ needs, 

strengths, and preferences for selfdirected PAS. We propose to implement 

this requirement at § 441.466. An 

assessment of an individual’s needs, 

strengths and preferences is crucial 

because it forms the basis for the 

identification of the needed services and 

supports that will be authorized in the 

individual’s subsequent service plan 

and budget. It is also important to 

identify an individual’s strengths and 

preferences that will enable selfdirection of PAS. The assessment 

should include a determination of 

whether there are any persons available 

to support the individual, including 

family members. These persons may be 

able to provide unpaid personal 

assistance, or fulfill more formal roles 

such as acting in the capacity of a paid 

provider of PAS or as an individual’s 

representative. We do not prescribe the 

assessment tool to be used by States, but 

we expect that the assessment will be 

sufficiently comprehensive to support 

the determination that an individual 

would require personal care services 

under the State plan or personal 

assistance services under a section 

1915(c) waiver program and the 

development of the individual’s 

subsequent service plan and budget. 

Accordingly, we reflect this 

understanding that while the format of 

the assessment is within the State’s 

discretion, we expect the assessment to 

be comprehensive and minimally meet 

the statutory requirement. We propose 

that it include information about an 

individual’s health condition, personal 

goals and preferences for the provision 

of services, functional limitations, age, 

school, employment, household, and 

other factors that are relevant to the 

authorization and provision of services, 

and support the finding for need of PAS 

and development of the service plan 

and budget. 

Section 441.468 Service Plan Elements 

Section 1915(j)(5)(C) of the Act 

requires States to develop and approve 

a service plan for each participant that 

includes the services and supports for 

such services, based on the assessment 

of need through a person-centered 

process. Section 1915(j)(5)(C) of the Act 

also requires that the service-planning 

process build on the participant’s 

capacity to engage in activities that 

promote community life and that 

respects the participant’s preferences, 

choices, and abilities, and must involve 

families, friends, and professionals in 

the planning or delivery of services or 

supports as desired or required by the 

participant. We propose to reflect these 

requirements at § 441.468. Specifically, 

at proposed § 441.468(a), we list those 

service plan elements we have found to 

be minimally necessary in developing a 

service plan that adequately describes 

the services to be furnished. We also 

propose, as explained previously in our 

Definitions section, that we believe the 

service plan includes the individualized 

backup plan. 

Furthermore, based on our experience 

with States’ self-direction waivers and 

demonstrations, we are aware that 

States implement the person-centered 

planning process differently. Some 

States interpret the process to be simply 

focused on the participant’s needs, and 

do not allow participants to also direct 

the process. Others allow the process to 

be person-directed as well as personcentered. We propose to require, at 

§ 441.468(b), that the process must be 

both person-centered and directed 

because we believe that a personcentered and directed service planning 

process will ensure that the resultant 

service plan actively engages a 

participant, accurately reflects a 

participant’s abilities, preferences, and 

choices, and better meets the underlying 

purpose of the self-directed PAS option. 

Therefore, we would propose at 

§ 441.468(b)(1) that each participant’s 

preferences, choices and abilities are 

identified and strategies to address 

those preferences, choices and abilities 

are included in the service plan. We 

would also propose at § 441.468(b)(2) 

that the participant is permitted to 

exercise choice and control over 

services and supports discussed in the 

plan. Finally, we would propose at 

§ 441.468(b)(3) that risks that may pose 

harm to the participant are assessed and 

planned for. For example, we would 

expect that the assessment would 

identify potential risks to the 


rfrederick on PROD1PC67 with PROPOSALS2
3554 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

participant. The participant, or the 

participant’s representative, if any, 

together with the persons designated by 

the State to develop the service plan, 

and others from whom the participant 

may seek guidance, would discuss a 

plan for how any potential risks may be 

mitigated or eliminated. The resultant 

plan is the individualized backup plan 

and would be included in the service 

plan. 

We would also propose at § 441.468(c) 

that States have in place policies and 

procedures associated with service plan 

development. In § 441.468(c)(1) through 

(c)(7), we propose a minimum list of 

policies and procedures that we believe 

are necessary to ensure the proper 

administration and development of the 

service plan. These include that the 

participant has the opportunity to 

engage in and direct the process to the 

extent desired, the participant has the 

opportunity to involve family, friends, 

and professionals as desired or required, 

the planning process is timely, the 

participant’s needs are assessed and 

services meet the needs, the 

responsibilities for service plan 

development are identified, the 

qualifications of the individuals who are 

responsible for service plan 

development are reflective of the nature 

of the program’s target population(s) 

and that service plans be reviewed 

annually, or whenever necessary due to 

a change in the participant’s needs or 

health status. 

In this way, the service plan would 

continuously address all of the 

participant’s assessed needs and goals, 

including health and safety factors, and 

would be updated to add or delete 

services or modify the amount and 

frequency of services. 

We also propose to require, at 

§ 441.468(d), that safeguards be 

established when an entity that provides 

other State Plan services is responsible 

for service plan development to ensure 

that the service provider’s role in the 

planning process is fully disclosed to 

the participant and controls are in place 

to avoid any possible conflict of interest. 

Based on our review of the 

demonstrations and 1915(c) waiver 

programs, we are aware that States 

sometimes choose to delegate the 

service planning function to an entity 

that provides other State Plan services. 

In order to ensure free choice of 

providers, we propose to add this 

beneficiary protection to the regulation. 

We also propose to require that 

approval of the service plan conveys 

authority to the participant to perform, 

at a minimum, the tasks listed in 

§ 441.468(e), such as recruiting, hiring, 

firing, supervising and managing 

workers. It is the approval of the service 

plan by the State that authorizes the 

individual to undertake these activities 

as part of self-directed service delivery. 

The service plan must encompass both 

the general decision-making authority 

that a participant has and outline the 

individualized services and supports to 

address the participant’s needs, 

abilities, preferences and choices. 

Section 441.470 Service Budget 

Elements 

Section 1915(j)(5)(D) of the Act 

requires the establishment of a budget 

for the provision of PAS and sets forth 

certain requirements for the service 

budget. Specifically, this includes that 

the budget is developed and approved 

by the State based on the assessment of 

need and service plan. We propose to 

reflect this requirement in § 441.470 and 

also propose to require that States 

inform participants of the specific dollar 

amount that may be used for their 

services and supports so they can 

properly develop a budget for how they 

will purchase their services and 

supports. Similarly, we propose to 

require that the specific dollar amount 

that may be used is indicated in the 

budget so there is no question about the 

amount available to the participant. We 

believe these requirements are necessary 

because it is important for participants 

to have sufficient and clear information 

to allow them to adequately plan for 

how they will use the funds to secure 

their needed services and supports. 

Section 1915(j)(5)(D) of the Act also 

requires that the budget not restrict 

access to other medically necessary care 

and services furnished under the State 

plan and approved by the State but not 

included in the budget and sets forth the 

requirements for determining the 

budget. We address these statutory 

requirements at proposed § 441.472. 

Based on our experience with the selfdirection waivers and demonstrations, 

we learned that participants benefited 

from the flexibility to be able to shift 

funds among authorized services within 

the total amount of the budget without 

prior review and approval. To require 

the State’s review and approval of each 

budget modification would be 

administratively untenable and would 

run counter to the philosophy of selfdirection. Therefore, we propose to 

require at § 441.470(c) that the State 

have procedures in place that govern 

how participants may flexibly adjust 

their budgets. The procedures must 

minimally include how the participant 

may freely make changes to the budget; 

the circumstances that may require prior 

approval before a budget adjustment is 

made, for example, purchases above a 

certain dollar amount; and the 

circumstances that may also require a 

modification to the participant’s service 

plan. 

Section 1915(j)(4)(B)(ii) of the Act 

allows States, at their option, to permit 

individuals to use their budget to 

acquire items that increase 

independence or substitute for human 

assistance, to the extent that 

expenditures would otherwise be made 

for the human assistance. Based on our 

experience, we learned that participants 

benefited from this option and were able 

to purchase items that allowed them 

greater independence, such as an 

accessibility ramp, or that substituted 

for human assistance, such as a 

microwave oven. The States that offered 

this option required that the items to be 

purchased related to a need identified in 

the service plan. 

Some of these states also limited 

participants’ purchases to a list of 

allowable items for which no prior 

approval was necessary. Still other 

States required prior approval for all 

items, while some others provided a list 

of allowable items and required prior 

approval for other items not on the list. 

In addition, each State developed 

procedures that governed how 

participants could save an amount of 

their monthly budget to purchase these 

items and how and at what intervals the 

State would recoup funds that were not 

spent according to the purchase plan. 

Accordingly, if a State has elected this 

option, we propose to require at 

§ 441.470(d), that the State have 

procedures that govern how a person 

may put aside or reserve funds to 

purchase items that increase 

independence or substitute for human 

assistance. These items could include 

additional supports, goods, equipment, 

or supplies, and the State should 

indicate if prior approval is required. As 

stated above, participants benefited 

from this option and the ability to 

reserve funds to purchase these items 

likewise proved beneficial to the 

participants. Accordingly, we believe it 

is worthwhile to continue this option 

under this State plan option. 

We also recognize that some of the 

‘‘Cash and Counseling’’ programs 

allowed participants to use a small 

amount of their budget to purchase 

items not otherwise delineated in the 

budget or earmarked for savings. For 

example, participants used this 

discretionary amount to purchase or 

supplement needed items or services 

not otherwise covered by Medicaid, 

such as non-Medicaid covered 

prescription drugs or transportation to a 

doctor’s appointment. States typically 

set a dollar limit on the amount of the 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3555 

discretionary funds and participants 

were required to account for the 

expenditures, but not necessarily retain 

receipts for the discretionary purchases. 

Based on the success of this practice, we 

propose, at § 441.470(e), to permit 

participants to use a small amount of 

their budget to purchase items not 

otherwise delineated in the budget or 

earmarked for savings. We anticipate 

that any budget methodology employed 

by the State and the participant would 

take this option into consideration. 

Lastly, just as persons who receive 

traditional services have the ability to 

grieve a denial or reduction of benefits, 

we think it is important to ensure that 

participants in the self-directed PAS 

State plan option have an opportunity to 

request a fair hearing if their request for 

a budget adjustment is denied or the 

amount of the budget is reduced. 

Accordingly, we propose to add the 

opportunity for a fair hearing, as 

provided in § 441.300, in the regulation 

at § 441.470(f). 

Section 441.472 Budget Methodology 

Section 1915(j)(5)(D) of the Act also 

sets forth certain requirements 

concerning the budget methodology. 

Underlying the requirements are the 

concepts that the methodology used to 

develop the service budget must be 

reasonable and fairly applied to all 

participants. Specifically, the statute 

requires that the methodology use valid, 

reliable cost data, is open to public 

inspection, and includes a calculation of 

the expected cost of such services if 

those services were not self-directed. 

We are not proposing to prescribe the 

methodology States should use to 

develop a service budget. We recognize 

that some States may wish to use a 

prospective method, a retrospective 

method, or a combination of methods. 

However, we propose to require in the 

regulation at § 441.472, that whatever 

methodology is used, it is objective and 

evidence-based, using valid, reliable 

cost data, that is, the method is based on 

an analysis of historical costs and 

utilization and other factors that are 

likely to affect costs. We would also 

propose to require that it is applied 

consistently to participants and that the 

methodology is open to public 

inspection. We also propose to require 

that the State’s method includes a 

calculation of the expected cost of the 

self-directed PAS and supports, if these 

services and supports were not selfdirected. This service budget amount is 

the cap on the amount of funds 

available to an individual with which to 

purchase self-directed PAS and 

supports. 

We recognize in § 441.472(a)(5) that 

States may place monetary or budgetary 

limits on self-directed services and 

supports. Therefore, if a State does so, 

we would require that the State have a 

process in place that describes the limits 

and the basis for the limits, and any 

adjustments that will be allowed and 

the basis for the adjustments, such as 

participant health and welfare. 

Additionally, we propose to require 

certain beneficiary safeguards in light of 

these possible limitations. First, we 

propose that States have procedures to 

safeguard participants when the 

budgeted service amount is insufficient 

to meet a participant’s needs. Second, 

we propose that States have a method of 

notifying participants of the amount of 

any limit that applies to a participant’s 

self-directed PAS and supports. Third, 

we propose that the budget not restrict 

access to other medically necessary care 

and services furnished under the plan 

and approved by the State but not 

included in the budget. We note this 

proposal not only reflects the statutory 

requirement at section 1915(j)(5)(D) of 

the Act, but makes clear that the only 

limitation would be for self-directed 

PAS. 

Section 441.474 Quality Assurance 

and Improvement Plan 

Section 1915(j)(5)(E) of the Act 

requires States to provide appropriate 

quality assurance techniques to 

establish and implement the PAS 

service plan and budget. Such 

techniques must recognize the roles and 

responsibilities in obtaining services in 

a self-directed manner and assure the 

appropriateness of such plan and budget 

based upon the participant’s resources 

and capabilities. For approximately 30 

years, we have witnessed an increasing 

number of Medicaid recipients who 

want to move into or remain in the 

community in order to receive 

community-based care and services. 

Simultaneously, we have seen the 

growth in the number of individuals 

who want to self-direct their 

community-based care and services. 

States face the challenge of how to 

ensure each participant’s health and 

welfare while also respecting individual 

autonomy and choice. We believe that 

this challenge can be met with an 

effective quality assurance and 

improvement plan that incorporates 

performance of discovery, remediation, 

and quality improvement activities and 

includes system performance measures, 

outcome measures, and satisfaction 

measures. We propose to reflect such 

measures and quality assurance and 

improvement plan components in the 

regulation at § 441.474(a) and (b) and 

expect the State to monitor and evaluate 

these measures. 

We will be reviewing the State’s 

description of the quality assurance and 

improvement plan when we review the 

State’s request to use the self-directed 

PAS option. The State Medicaid agency 

must be involved in planning the 

quality assurance activities and 

measures, and the discovery, 

remediation, and improvement 

activities, but does not have to execute 

every activity. However, the State 

Medicaid Agency must retain the 

overall oversight and responsibility for 

the quality assurance plan. 

Section 441.476 Risk Management 

Section 1915(j)(5)(E) of the Act also 

requires States to provide appropriate 

risk management techniques to establish 

and implement the PAS service plans 

and budgets. As with quality assurance, 

these techniques must recognize the 

roles and responsibilities in obtaining 

services in a self-directed manner and 

assure the appropriateness of such plan 

and budget based upon the participant’s 

resources and capabilities. We have 

learned that self-directed care has 

empowered individuals to assert their 

choices and to want to exercise more 

control over their care and services. As 

individuals experience greater choice 

and control, they may also desire to 

assume more of the responsibilities and 

risks associated with the provision of 

their PAS. How much risk an individual 

is willing and able to assume is a matter 

of discussion and negotiation among the 

persons designated by the State to 

develop the service plan, the 

participant, the participant’s 

representative, if any, and others from 

whom the participant may seek 

guidance. In order to facilitate 

appropriate risk management, we 

propose to include certain requirements 

at § 441.476. 

First, at § 441.476(a), we propose to 

require that the State specify the risk 

assessment methods it uses to identify 

potential risks to the participant. We do 

not prescribe an assessment method 

States must use but note that a proper 

assessment of the potential risks should 

include several perspectives, including 

any relevant clinical perspective, and 

involve those responsible for 

development of the service plan, the 

participant, the participant’s 

representative, if any, and others from 

whom the participant may seek 

guidance. 

Second, we also propose, at 

§ 441.476(b), that the State specify any 

tools or instruments it uses to mitigate 

identified risks. Again, we do not 

propose to prescribe the tools or 


rfrederick on PROD1PC67 with PROPOSALS2
3556 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

instruments that States must use 

because States should have the 

flexibility necessary to use the 

instruments or tools they have found 

best meet the needs of the participants. 

Examples of risk management tools or 

instruments might include criminal and 

worker background checks; job 

descriptions that clearly set forth the 

roles and responsibilities of 

participants, workers, representatives, 

and all others involved with supporting 

the participant; and the use of 

individual risk agreements that permit 

the participant to acknowledge and 

accept the responsibility for addressing 

certain types of risks. Currently, States 

have the option, at their own expense, 

to provide criminal background checks 

for individuals who are self-directing 

their services. We invite comment on 

whether the provision of criminal 

background checks should be 

mandatory under this self-directed PAS 

State plan option. 

Third, at § 441.476(c), we propose to 

require that the State ensure that each 

participant’s service plan includes the 

risks that the participant is willing and 

able to assume, and the plan for how the 

identified risks will be mitigated. In this 

manner, the service plan adequately 

includes and documents how these 

identified risks are to be handled. 

Finally, at § 441.476(d), we would 

require that the State ensure that the 

risk management plan is the result of 

discussion and negotiation among the 

persons designated by the State to 

develop the service plan, the 

participant, the participant’s 

representative, if any, and others from 

whom the participant may seek 

guidance. The input of all the parties 

interested in the participant’s PAS 

service plan would thus be included 

and ensure that the service plan and 

budget reflect the participant’s resources 

and capabilities. 

Section 441.478 Qualifications of 

Providers of Personal Assistance 

Section 1915(j)(4)(B) of the Act 

permits States to elect to allow 

participants to choose any individual 

capable of providing the assigned tasks, 

including legally liable relatives, as paid 

providers of services. We reflect these 

requirements in the proposed regulation 

at § 441.478(a). We are not proposing to 

set a minimum age requirement in the 

regulation and invite comment on 

whether an age requirement should be 

added, and if so, under what 

circumstances. At this point, we believe 

that an age requirement would not allow 

States the flexibility in setting their own 

standards should they choose this 

option. For example, hiring a 16-yearold to perform some homemaker tasks 

may be appropriate, whereas an adult 

may be better suited to provide more 

technically difficult or intimate personal 

care services. We expect the State to 

consider these issues prior to making a 

decision to elect this option. 

However, we propose, at § 441.478(b), 

that participants retain the right to train 

their workers in the specific areas of 

personal assistance needed by the 

participant and to perform the needed 

assistance in a manner that comports 

with the participant’s personal, cultural, 

and/or religious preferences. We have 

learned, through our experience with 

the self-direction waiver and 

demonstration programs, that the 

training for workers furnishing selfdirected PAS must be tailored to each 

individual’s preferences, as well as their 

needs. In this way, workers benefit from 

clear instructions about how to 

effectively and appropriately deliver the 

self-directed PAS, and any potential 

dissatisfaction with the way services are 

being delivered can be averted. We 

further propose, at § 441.478(c), that 

participants retain the right to establish 

additional staff qualifications based on 

their needs and preferences. Again, we 

believe that the participant is in the best 

position to set forth the particular staff 

qualifications needed to meet the 

particular preferences of the participant. 

For example, if the participant 

communicates best using American Sign 

Language (ASL), the participant may 

require the worker to be able to 

communicate using ASL. 

Section 441.480 Use of a 

Representative 

Section 1915(j)(5)(A) of the Act 

indicates the types of participant 

representatives in the self-directed PAS 

option. Specifically, the statute includes 

as representatives a parent or guardian 

if the participant is a minor child, or an 

individual recognized by State law to 

act on behalf of a participant who is an 

incapacitated adult. We propose to 

include these requirements at 

§ 441.480(a)(1) and (a)(2). 

In addition to the statutory listings, 

we believe that other representatives 

should be permitted by the State. The 

role of the representative is to assist 

individuals in making decisions with 

respect to the planning, development, 

management and direction of their 

service plans and budgets. We 

encourage States to recognize and 

permit other representative 

relationships, so that participants can 

exercise greater flexibility in their 

choice of who will assist them with 

their decisions. 

Furthermore, based on the experience 

of States with self-direction programs, 

we believe it is appropriate for States to 

have the option to mandate the use of 

a representative if the participant has 

demonstrated, after additional 

counseling, information, training, or 

assistance, the inability to self-direct 

PAS. We specify this requirement in the 

proposed regulation at § 441.480(a)(5), 

and also propose to require that CMS 

approve in the State plan amendment a 

State’s criteria for situations that would 

result in the State mandating the use of 

a representative. Examples of these 

criteria could include a participant not 

being able to carry out the 

responsibilities for self-direction after 

the provision of additional counseling, 

information, training, or assistance, or 

because an individual’s health or 

welfare requires the assistance of a 

representative. 

Finally, to protect against conflict of 

interest, we propose, at § 441.480(b), to 

prohibit a participant’s representative 

from also serving as a paid provider of 

services to the participant. Based upon 

the experiences of the States 

participating in the original ‘‘Cash and 

Counseling’’ demonstration, we learned 

that it is important to include this 

limitation in the self-directed PAS 

option in order to avoid the situation of 

a representative overseeing or making 

decisions that directly impact them, for 

example, ‘‘approving’’ their own rate of 

pay, their own timesheets, and the like. 

Accordingly, in order to promote 

participant health and welfare and 

program integrity, and to ensure that 

participants actually receive their 

authorized PAS, we propose to include 

this necessary protection in the 

proposed regulation. 

Section 441.482 Permissible Purchases 

Section 1915(j)(4)(B)(ii) of the Act 

permits individuals, at the State’s 

option, to use the funds allocated in 

their budgets to acquire items that 

increase their independence or 

substitute for human assistance, to the 

extent that expenditures would 

otherwise be made for that human 

assistance. We propose to implement 

this provision in the proposed 

regulation at § 441.482(a). The statute 

specifically gives the examples of a 

microwave oven and accessibility ramp 

because these two items could 

conceivably increase independence or 

substitute for human assistance. 

Moreover, experience under the 

section 1115 and section 1915 (c) of the 

Act self-direction and Independence 

Plus programs indicated that when 

recipients are given the ability to 

purchase items that increased their 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3557 

independence or substituted for human 

assistance, they do so prudently and 

effectively. However, we propose, at 

§ 441.482(b), that these purchases must 

address an assessed participant need 

included in the service plan, in order to 

ensure that the item, and insofar as that 

expenditure would have otherwise been 

made using human assistance, is 

medically necessary and to promote 

program integrity. We also note that we 

have previously proposed in 

§ 441.470(d) that the State set forth a 

procedure that governs how such items 

are to be included in the service budget. 

Section 441.484 Financial 

Management Services 

Under section 1915(j)(6) of the Act, 

States may employ a financial 

management entity to make payments to 

providers, track costs, and make reports 

under the self-directed PAS State plan 

option. The financial management 

provisions are noted in the proposed 

regulation at § 441.484. The statute lists 

very broad responsibilities for a 

financial management entity to perform. 

In the context of the self-directed PAS 

option, these broad statutory categories 

must be considered and linked to 

specific duties. For example, financial 

management services are used for two 

purposes: (a) To address Federal, State, 

and local employment tax, labor and 

workers’’ compensation insurance rules, 

and other requirements that apply when 

the participant functions as the 

employer of workers, and (b) to make 

financial transactions on behalf of the 

participant, such as preparing 

paychecks for workers and paying 

invoices for goods and services 

identified in the participant’s service 

plan. These responsibilities can be 

generally noted as making payments 

and tracking costs. 

We first note there are different 

Internal Revenue Service (IRS) 

requirements that must be adhered to, 

depending on how financial 

management services are provided. For 

instance, financial management services 

provided directly by the State, or by a 

State’s reporting or subagent through its 

fiscal intermediary, must follow section 

3504 of the IRS Code and Revenue 

Procedure 80–4 and Notice 2003–70. 

Financial management services 

provided through vendor organizations 

must follow Section 3504 of the IRS 

Code and Revenue Procedure 70–6. 

When private entities furnish financial 

management services, the procurement 

method must meet requirements set 

forth in 45 CFR 74.40 through section 

74.48. Accordingly, we propose, at 

§ 441.484(a)(1) and (a)(2), the 

arrangement options available to States 

for offering financial management 

services, and specify proposed 

requirements that must be followed for 

each option (barring participants who 

perform these functions themselves). 

Furthermore, to ensure appropriate 

safeguards and recipient protections, we 

propose to require States to provide 

oversight of financial management 

services. Without this oversight there is 

a risk of inadequate delivery of financial 

management such as system 

deficiencies, failure to pay workers 

timely, and errors in complying with 

IRS requirements. When utilized, the 

financial management service is critical 

to the success of the self-directed PAS 

State plan option. Specifically, at 

§ 441.484(b), we are proposing that 

States must perform the following 

oversight activities, regardless of how 

financial management services are 

provided: Monitoring and assessing the 

performance of the financial 

management entity, including assuring 

the integrity of financial transactions 

they perform; designating a State entity 

or entities responsible for this 

monitoring; and determining how 

frequently financial management entity 

performance will be assessed. While we 

are not requiring specific oversight 

activities, examples of State 

performance monitoring and assessment 

may include conducting periodic audits 

of financial management entities, 

conducting participant satisfaction 

surveys or other methods or procedures. 

Also, as a further beneficiary 

safeguard, we propose, at § 441.484(c), a 

list of the specific minimum functions 

that must be provided by financial 

management entities as noted under the 

broad statutory requirement (or by 

States directly, if no financial 

management entities are utilized). 

This list includes, but is not limited 

to, collecting and processing timesheets 

of the participant’s workers; processing 

payroll, withholding, filing and 

payment of applicable Federal, State 

and local employment-related taxes and 

insurance; maintaining a separate 

account for each participant’s budget; 

tracking and reporting disbursements 

and balances of participant funds; 

processing and paying invoices for 

goods and services approved in the 

service plan; and providing to 

participants periodic reports of 

expenditures and the status of the 

approved service budget. We believe 

these proposed functions represent, at a 

minimum, the standard duties and 

responsibilities that a financial 

management entity (or a State) would 

need to assume in assisting a beneficiary 

in the self-directed State plan option. 

Inherent in the statute is the ability of 

the State to retain the responsibility of 

providing financial management entity 

functions. We are aware that many 

States with self-direction programs do 

in fact retain this responsibility. We 

expect a State to perform the same 

functions as a financial management 

entity. We are proposing to explicitly 

require the State to do such in the 

absence of utilizing a financial 

management entity. The purpose of 

noting this expectation of the States is 

to clarify to a participant that these 

services are provided by the State. 

Accordingly, we propose at § 441.482(d) 

that States not employing a financial 

management entity must perform all 

functions that would have been 

provided by the financial management 

entity on behalf of all participants selfdirecting their PAS under this new State 

plan option, except for participants 

taking advantage of the cash option, as 

they directly perform those functions for 

themselves. 

Based on our review of self-directed 

programs, we are aware that States may 

choose to allow participants to selfdirect services under the ‘‘agency with 

choice’’ model, which utilizes a coemployment relationship between the 

participant and an agency. This agency 

could be a traditional service provider 

or a financial management entity, and 

acts as the employer of record of the 

PAS worker. If a State allows this 

option, the financial management 

services must be separately delineated 

from other services that the agency may 

provide in order that the financial 

management services (FMS) are claimed 

appropriately. 

Section 1915(j)(6) of the Act further 

states activities of the financial 

management entity be matched by CMS 

at ‘‘the administrative rate established 

in Section 1903(a)’’ of the Act. We are 

interpreting this reference to apply 

specifically to section 1903(a)(7) of the 

Act, which provides for a Federal 

Medical Assistance Percentage (FMAP) 

rate of 50 percent for the ‘‘amounts 

expended * * * found necessary by the 

Secretary for the proper and efficient 

administration of the State plan.’’ We 

believe the DRA Conference Report 

language supports this reading as it 

notes that payment for the activities of 

the financial management entity will be 

reimbursed at the ‘‘same rate as other 

Medicaid administrative activities 

generally * * * percent.’’ H.R. Conf. 

Rep. No.362, (109th Cong. 301). We will 

also consider the State’s financial 

management activities to be general 

administrative activities and likewise 

matched at 50 percent. Therefore, 

financial management services, whether 


rfrederick on PROD1PC67 with PROPOSALS2
3558 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

provided by a financial management 

entity, the State, or by another entity 

under ‘‘agency with choice’’ will be 

reimbursed under the 50 percent 

administrative rate under this new State 

plan option. 

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 final document, we will respond 

to the comments in that document. 

IV. Collection of Information 

Requirements 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘COLLECTION OF 

INFORMATION REQUIREMENTS’’ at 

the beginning of your comments.] 

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 

(ICRs): 

Section 441.454 Use of Cash 

Section 441.454(d) requires States to 

make available a financial management 

entity to a participant who has 

demonstrated, after additional 

counseling, information, training, or 

assistance, that the participant cannot 

effectively manage the cash option 

described in paragraph (a) of this 

section. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to counsel and to 

provide information, training, and or 

assistance to participants. We believe 

that it would take a State 1 hour per 

participant to provide this guidance. 

The total annual burden of this 

requirement would vary according to 

the number of participants in each State 

who are self-directing their PAS under 

this State Plan option. 

Section 441.456 Voluntary 

Disenrollment 

Section 441.456(b) requires States to 

specify in the State plan the safeguards 

that are in place to ensure continuity of 

services during the transition from selfdirected PAS. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to revise its State plan 

to include the safeguards. While the 

burden associated with this requirement 

is subject to the PRA, the burden 

associated with the State plan 

amendment is currently approved under 

OMB #0938–0933. 

Section 441.458 Involuntary 

Disenrollment 

Section 441.458(c) requires States to 

specify in the State plan the safeguards 

that are in place to ensure continuity of 

services during the transition from selfdirected PAS. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to revise its State plan 

to include the safeguards. While the 

burden associated with this requirement 

is subject to the PRA, the burden 

associated with the State plan 

amendment is currently approved under 

OMB #0938–0933. 

Section 441.464 State Assurances 

Section 441.464(a) requires States to 

provide an assurance that necessary 

safeguards have been taken to protect 

the health and welfare of individuals 

furnished services under the program 

and to assure the financial 

accountability for funds expended for 

self-directed services. 

The burden associated with this 

requirement is the time and effort it 

would take for each State to meet these 

conditions. To meet the requirements in 

§ 441.464(a), we estimate it would take 

each State 80 hours to develop a system 

of safeguards that protects participants’

health and welfare and ensures financial 

accountability for funds expended, and 

no further burden would be associated 

with this requirement. We estimate the 

total maximum one-time burden for this 

requirement to be 4,480 hours. (56 

States × 80 hours = 4,480 hours) 

Section 441.464(b) requires States to 

provide an assurance that they will 

perform an evaluation of the need for 

personal care under the State plan or 

personal services under a section 

1915(c) home and community-based 

services waiver program. The burden 

associated with this requirement is the 

time and effort it would take for each 

State to meet this condition. To meet the 

requirement in § 441.464(b), we estimate 

it would take a State 2 hours per 

participant to perform this evaluation of 

need. The total annual burden of this 

requirement would vary according to 

the number of participants in each State 

who are (1) entitled to medical 

assistance for personal care services 

under the State plan, or receive home 

and community-based services under a 

section 1915(c) waiver program; (2) may 

require self-directed PAS; and (3) may 

be eligible for self-directed PAS. 

Section 441.464(c) requires States to 

provide an assurance that individuals 

likely to require personal care under the 

State plan, or home and communitybased services under a section 1915(c) 

waiver program, are informed of the 

feasible alternatives, if available, under 

the State’s self-directed PAS State plan 

option, at the choice of these 

individuals, to the provision of personal 

care services under the State plan or 

PAS under a section 1915(c) home and 

community-based services waiver 

program. The burden associated with 

this requirement is the time and effort 

it would take for each State to meet this 

condition. To meet the requirement in 

§ 441.464(c), we estimate it would take 

a State 15 minutes per participant to 

inform individuals of feasible 

alternatives. The total annual burden of 

this requirement would vary according 

to the number of participants in each 

State who are likely to require personal 

care under the State plan, or home and 

community-based services under a 

section 1915(c) waiver program. 

Section 441.464(d) requires States to 

provide a support system that meets the 

following conditions: 

(1) Appropriately assesses and 

counsels an individual before 

enrollment. 

(2) Provides appropriate information, 

counseling, training, and assistance to 

ensure that a participant is able to 

manage the services and budgets. The 

support activities must include at least 

the following: 

(i) Person-centered planning and how 

it is applied. 

(ii) Information about the services 

available for self-direction. 

(iii) Range and scope of individual 

choices and options. 

(iv) Process for changing the service 

plan and service budget. 

(v) Grievance process. 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3559 

(vi) Risks and responsibilities of selfdirection. 

(vii) Freedom of choice of providers. 

(viii) Individual rights. 

(ix) Reassessment and review 

schedules. 

(x) Defining goals, needs, and 

preferences. 

(xi) Identifying and accessing 

services, supports, and resources. 

(xii) Development of risk management 

agreements. 

(xiii) Development of an 

individualized backup plan. 

(xiv) Recognizing and reporting 

critical events. 

(3) Offers additional information, 

counseling, training, or assistance, 

including financial management 

services under either of the following 

conditions: 

(i) At the request of the participant for 

any reason. 

(ii) When the State has determined 

the participant is not effectively 

managing the services identified in the 

service plan or budget. 

The burden associated with this 

requirement is the time and effort it 

would take for each State to meet these 

conditions. To meet the requirements in 

§ 441.464(d)(1), we estimate it would 

take each State 2 hours per participant. 

To meet the requirements in 

§ 441.464(d)(2), we estimate it would 

take each State 1 hour per participant. 

To meet the requirements in 

§ 441.464(d)(3), we estimate it would 

take each State 1 hour per participant. 

The total annual burden of these 

requirements would vary according to 

the number of participants in each State 

who are self-directing their PAS under 

this State Plan option. 

Section 441.464(e) requires the State 

to provide to CMS an annual report on 

the number of individuals served and 

the total expenditures on their behalf in 

the aggregate. 

The annual burden associated with 

this requirement is the time and effort 

it would take for each State to gather the 

necessary data and provide an annual 

report to CMS. We estimate that it 

would take one State no more than 25 

hours to meet this requirement; 

therefore, the total maximum annual 

burden is 1,400 hours. (56 States × 25 

hours = 1,400 hours) 

Section 441.464(f) requires the State 

to provide to CMS an evaluation of the 

overall impact on the health and welfare 

of participating individuals compared to 

non-participants every 3 years, as 

determined by CMS. 

The burden associated with this 

requirement is the time and effort it 

would take for each State to provide 

such an evaluation to CMS. We estimate 

that it would take one State 200 hours 

to prepare and submit the evaluation to 

CMS every 3rd year; therefore, the total 

maximum burden on that 3rd year 

would be 11,200 hours. (56 States × 200 

hours = 11,200) 

Section 441.468 Service Plan Elements 

Section 441.468(b) requires a State to 

develop a service plan for each program 

participant using a person-centered and 

directed planning process to ensure the 

following: 

(1) The identification of each program 

participant’s preferences, choices, and 

abilities, and strategies to address those 

preferences, choices, and abilities. 

(2) The option for the program 

participant to exercise choice and 

control over services and supports 

discussed in the plan. 

(3) Assessment of, and planning for 

avoiding, risks that may pose harm to a 

participant. 

The burden associated with this 

requirement is the time and effort it 

would take for each State to meet these 

conditions. We estimate it would take 

each State 3 hours per participant to 

meet this requirement. The total annual 

burden of this requirement would vary 

according to the number of participants 

in each State who are self-directing their 

PAS under this State Plan option. 

Section 441.468(d) states that when 

an entity that is permitted to provide 

other State plan services is responsible 

for service plan development, the State 

must describe the safeguards that are in 

place to ensure that the service 

provider’s role in the planning process 

is fully disclosed to the participant and 

controls are in place to avoid any 

possible conflict of interest. 

The burden associated with this 

requirement is the time and effort it 

would take for the State to fully disclose 

the required information. We estimate 

that it would take one State 15 minutes 

per participant to meet this requirement. 

The total annual burden of this 

requirement would vary according to 

the number of participants in each State 

who are self-directing their PAS under 

this State Plan option. 

Section 441.468(e) requires that an 

approved self-directed service plan 

conveys authority to the participant to 

perform, at a minimum, the following 

tasks: Recruit and hire workers to 

provide self-directed services, including 

specifying worker qualifications; fire 

workers; supervise workers in the 

provision of self-directed services; 

manage workers in the provision of selfdirected services (determining worker 

duties, scheduling workers, training 

workers in assigned tasks, and 

evaluating workers’ performance); 

determine the amount paid for a service, 

support, or item; and review and 

approve provider invoices. 

While this information collection is 

subject to the PRA, we believe this 

requirement meets the requirements of 5 

CFR 1320.3(b)(2), and as such, the 

burden associated with this requirement 

is exempt from the PRA. 

Section 441.470 Service Budget 

Elements 

Section 441.470 states that a service 

budget must be developed and approved 

by the State based on the assessment of 

need and service plan and must include 

the following: 

(a) The specific dollar amount a 

participant may utilize for services and 

supports. 

(b) How the participant is informed of 

the amount of the service budget before 

the service plan is finalized; 

(c) The procedures for how the 

participant may adjust the budget, 

including the following: 

(1) How the participant may freely 

make changes to the budget. 

(2) The circumstances, if any, that 

may require prior approval before a 

budget adjustment is made. 

(3) The circumstances, if any, that 

may require a change in the service 

plan. 

(d) The procedure(s) that governs how 

a person, at the election of the State, 

may reserve funds to purchase items 

that increase independence or substitute 

for human assistance including 

additional goods, supports, services or 

supplies. 

(e) The procedure(s) that governs how 

a person may use a discretionary 

amount, if applicable, to purchase items 

not otherwise delineated in the budget. 

(f) How participants are afforded the 

opportunity to request a fair hearing 

under § 441.300 if a participant’s 

request for a budget adjustment is 

denied or the amount of the budget is 

reduced. 

The burden associated with this 

requirement is the time and effort put 

forth by the State to develop a service 

budget. We estimate it would take a 

State 3 hours per participant to meet 

this requirement. The total annual 

burden of this requirement would vary 

according to the number of participants 

in each State who are self-directing their 

PAS under this State Plan option. 

Section 441.472 Budget Methodology 

Section 441.472(b) requires a State to 

have procedures in place to safeguard 

participants when the budgeted service 

amount is insufficient to meet a 

participant’s needs. 

The burden associated with this 

requirement is the time and effort it 


rfrederick on PROD1PC67 with PROPOSALS2
3560 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

would take for a State to develop its 

procedures on how to handle this. We 

estimate that it would take one State 16 

hours to develop these procedures and 

no further burden would be associated 

with this requirement. The one-time 

maximum burden associated with this 

requirement is 896 hours. (56 States × 

16 hours = 896 hours) 

Section 441.472(c) requires a State to 

have a method of notifying participants 

of the amount of any limit that applies 

to a participant’s self-directed PAS and 

supports. 

The burden associated with this 

requirement is the time and effort it 

would take for the State to provide this 

notification. We estimate it would take 

one State 15 minutes per participant to 

meet this requirement. The total annual 

burden of this requirement would vary 

according to the number of participants 

in each State who are self-directing their 

PAS under this State Plan option. 

Section 441.474 Quality Assurance 

and Improvement Plan 

Section 441.474(a) requires States to 

provide a quality assurance and 

improvement plan that describes the 

State’s system of how it would conduct 

activities of discovery, remediation, and 

quality improvement in order to learn of 

critical incidents or events that affect 

participants, correct shortcomings, and 

pursue opportunities for improvement; 

and 

(b) The quality assurance and 

improvement plan shall also describe 

the system performance measures, 

outcome measures, and satisfaction 

measures that the State would use to 

monitor and evaluate the self-directed 

State plan option. 

The burden associated with this 

requirement is the time and effort it 

would take for the State to customize its 

quality assurance and improvement 

plan to the self-directed service delivery 

model. We estimate that it would take 

one State 100 hours to customize its 

quality assurance and improvement 

plan and no further burden would be 

associated with this requirement. The 

one-time maximum burden associated 

with this requirement is 5,600 hours. 

(56 States × 100 hours = 5,600 hours) 

Section 441.484 Financial 

Management Services 

Section 441.484(a) proposes that 

States may choose to provide financial 

management services to participants 

self-directing PAS, with the exception of 

those participants utilizing the cash 

option who directly perform those 

functions. Section 441.484(c) proposes 

to require that the financial management 

entity provide functions including, but 

not limited to, the following: 

(1) Collect and process timesheets of 

the participant’s workers. 

(2) Process payroll, withholding, 

filing and payment of applicable 

Federal, State and local employmentrelated taxes and insurance. 

(3) Maintain a separate account for 

each participant’s budget. 

(4) Track and report disbursements 

and balances of participant funds. 

(5) Process and pay invoices for goods 

and services approved in the service 

plan. 

(6) Provide to participants periodic 

reports of expenditures and the status of 

the approved service budget. Section 

441.484(d) requires States not utilizing 

a financial management entity must 

perform the functions listed in 

paragraph (c) of this section on behalf of 

participants self-directing PAS, with the 

exception of those participants utilizing 

the cash option who directly perform 

those functions. 

The burden associated with this 

requirement is the time and effort it 

would take for the financial 

management entity or State to develop 

and perform the listed functions. We 

estimate it would take a financial 

management entity or the State 320 

hours to develop the financial 

management system. Once the system 

was in place, the annual burden 

associated with these functions would 

vary according to the number of 

participants in each State who are selfdirecting their PAS under this State 

Plan option. We estimate the maximum 

one-time burden on the States to 

develop the financial management 

system to be 17,920 hours during the 

first year. (56 States × 320 hours = 

17,920) 

Note: Annual burden in the following years 

will vary. We have no data on how many 

financial management entities would be 

affected by this requirement; therefore, we 

are unable to provide total annual burden 

associated with financial management 

entities. 

The total aggregate burden for the 

requirements in this proposed rule that 

affect States annually is estimated to be 

1,400 hours. The total aggregate burden 

associated with one-time requirements 

on States is estimated to be 28,896. The 

total aggregate burden associated with 

the burden placed on States every 3rd 

year is estimated to be 11,200 hours. 

Note: We are unable to provide aggregate 

burden totals for those requirements affecting 

participants because burden will vary 

according to the number of participants in 

each State who are self-directing their PAS 

under this State Plan option. We are also 

unable to provide aggregate burden for 

financial management entities affected by 

§ 441.484(a). 

If you comment on these information 

collection and record keeping 

requirements, please mail copies 

directly to the following: 

Centers for Medicare & Medicaid 

Services, Office of Strategic Operations 

and Regulatory Affairs, Division of 

Regulations Development, Attn.: 

Melissa Musotto, CMS–2229–P, Room 

C5–14–03, 7500 Security Boulevard, 

Baltimore, MD 21244–1850. 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503, 

Attn: Katherine Astrich, CMS Desk 

Officer, CMS–2229–P, 

katherine_astrich@omb.eop.gov. Fax 

(202) 395–6974. 

V. Regulatory Impact Statement 

[If you choose to comment on issues 

in this section, please include the 

caption ‘‘REGULATORY IMPACT 

STATEMENT’’ at the beginning of your 

comments.] 

A. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), and Executive Order 13132. 

Executive Order 12866 directs agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule does not reach 

the economic threshold and thus is not 

considered a major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $6.5 million to $31.5 million in any 

1 year. Individuals and States are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined, and the Secretary certifies, 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3561 

that this 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 are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this 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 $120 million. This rule 

would have no consequential effect on 

State, local, or tribal governments or on 

the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation would not impose 

any costs on State or local governments, 

the requirements of E.O. 13132 are not 

applicable. 

B. Anticipated Effects 

FFP will be available for self-directed 

PAS if the State elects to offer this 

opportunity through the approved State 

plan. Since self-direction is an 

alternative service delivery model, it is 

expected that the impact on Medicaid 

spending would not be very large. The 

use of self-directed PAS is estimated to 

cost a total of $225 million in FY 2008 

to FY 2012, of which $127 million is 

Federal share. 

In making this estimate, we 

considered that costs might increase due 

to new covered expenses (such as 

microwave ovens or accessibility ramps) 

as well as new applicants being 

attracted to the Medicaid program, 

because of the permissibility of 

payments to relatives. Costs could 

decrease because beneficiaries might 

require less help and less expensive 

help. We also noted that some States 

have already implemented self-directed 

programs under other Medicaid 

authorities and thus, in those States, 

there would be little cost effect to the 

statute or this new regulation. We first 

estimated that the projected impact of 

all our proposals would amount to an 

overall 0.5 percent increase in personal 

care service expenditures, if all States 

and Territories implemented this selfdirection PAS State plan option. We 

then accounted for a partial starting 

year, a phase-in period and the fact that 

this is a State plan option. Our final 

estimate is as noted in the table below. 

SECTION 1915(J) SELF-DIRECTED PERSONAL ASSISTANCE SERVICES PROGRAM (CASH & COUNSELING) 

[Dollars in millions] 

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 

Federal Cost ...................................................................................................... 12 20 29 32 34 

State Cost .......................................................................................................... 9 15 22 24 26 

Total* ........................................................................................................... 22 35 51 56 61

* Amounts may not equal total due to rounding. 

C. Alternatives Considered 

In considering alternatives to the 

proposals presented in this proposed 

rule, we considered the current 

practices under section 1115 

demonstrations and section 1915(c) 

waiver programs that implemented selfdirection. In particular, we considered 

whether to allow States the flexibility to 

offer the option of disbursing cash 

prospectively to participants. We 

learned from the experience of the 

section 1115 demonstrations that 

participants were able to successfully 

manage the funds in their budget and 

maintain financial accountability, with 

some general guidance and oversight. In 

light of our desire to provide flexibility 

to the beneficiaries and to better reflect 

the intent of the PAS State plan option, 

we proposed this option. 

We also considered the extent to 

which to include prescriptive support 

activities that States must include in 

their support system. We propose a 

minimum list of support activities to 

ensure that participants have the 

necessary tools to successfully manage 

their services and budgets. We were 

concerned that if States were not 

required to include such activities as 

part of the support system within the 

PAS State plan option, the likelihood of 

successfully self-directing PAS would 

diminish. As we learned from our 

experience with the section 1115 

demonstrations and section 1915(c) 

waiver programs, support activities have 

a crucial role in leading to the success 

of any self-directed PAS program. 

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 

increase in Medicaid payment as a 

result of the changes presented in this 

proposed rule. 


rfrederick on PROD1PC67 with PROPOSALS2
3562 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

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

[In millions] 

Category Transfers 

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

$25.2 ................................................................

7% Units Discount Rate. 

$24.8. 

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

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

$19.0 ................................................................

7% Units Discount Rate. 

$18.7. 

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

E. Conclusion 

As indicated in the estimated 

expenditures table above, we project the 

Federal Medicaid program cost of this 

proposed rule to be $127 million over 

the period from FY 2008 to FY 2012. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects in CFR Part 441 

Aged, Family planning, Grant 

programs-health, Infants and children, 

Medicaid, Penalties, and 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 441—SERVICES: 

REQUIREMENTS AND LIMITS 

APPLICABLE TO SEPCIFIC SERVICES 

1. The authority citation for part 441 

continues to read as follows: 

Authority: Sec 1102 of the Social Security 

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

2. Amend part 441 by adding new 

subpart J, consisting of § 441.450 

through § 441.486, to read as follows: 

Subpart J—Optional Self-Directed Personal 

Assistance Services Program 

Sec. 

441.450 Basis, scope, and definitions. 

441.452 Self-direction: General. 

441.454 Use of cash. 

441.456 Voluntary disenrollment. 

441.458 Involuntary disenrollment. 

441.460 Participant living arrangement. 

441.462 Statewideness, comparability, and 

limitations on number served. 

441.464 State assurances. 

441.466 Assessment of need. 

441.468 Service plan elements. 

441.470 Service budget elements. 

441.472 Budget methodology. 

441.474 Quality assurance and 

improvement plan. 

441.476 Risk management. 

441.478 Qualifications of providers of 

personal assistance. 

441.480 Use of a representative. 

441.482 Permissible purchases. 

441.484 Financial management services. 

Subpart—J Optional Self-Directed 

Personal Assistance Services Program 

§ 441.450 Basis, scope, and definitions. 

(a) Basis. This subpart implements 

section 1915(j) of the Act concerning the 

self-directed personal assistance 

services (PAS) option through a State 

Plan. 

(b) Scope. A self-directed PAS option 

is designed to allow individuals to 

exercise decision-making authority in 

identifying, accessing, managing and 

purchasing their PAS. This authority 

includes, at a minimum, all of the 

following: 

(1) The purchase of PAS and supports 

for PAS. 

(2) Recruiting workers. 

(3) Hiring and discharging workers. 

(4) Specifying worker qualifications. 

(5) Determining worker duties. 

(6) Scheduling workers. 

(7) Supervising workers. 

(8) Evaluating worker performance. 

(9) Determining the amount paid for 

a service, support or item. 

(10) Scheduling when services are 

provided. 

(11) Identifying service workers. 

(12) Reviewing and approving 

invoices. 

(c) Definitions. 

Assessment of need means an 

evaluation of the needs, strengths, and 

preferences of participants for services. 

This includes one or more processes 

to obtain information about an 

individual, including health condition, 

personal goals and preferences, 

functional limitation, age, school, 

employment, household, and other 

factors that are relevant to the 

authorization and provision of services. 

Assessment information supports the 

development of the service plan and the 

subsequent service budget. 

Individualized backup plan means a 

written plan that addresses critical 

contingencies or incidents that would 

pose a risk of harm to the participant’s 

health or welfare and is incorporated 

into the participant’s service plan. 

Legally liable relatives means persons 

who have a duty under the provisions 

of State law to care for another person. 

Legally liable relatives may include any 

of the following: 

(1) The parent (biological or adoptive) 

of a minor child or the guardian of a 

minor child who must provide care to 

the child. 

(2) Legally-assigned caretaker 

relatives. 

(3) A spouse. 

Self-directed personal assistance 

services (PAS) means personal care and 

related services, or home and 

community-based services otherwise 

available under the State plan or a 

1915(c) waiver program that are 

provided to an individual who has been 

determined eligible for the PAS option. 

Self-directed PAS also includes, at the 

State’s option, items that increase the 

individual’s independence or 

substitutes (such as a microwave oven 

or an accessibility ramp) for human 

assistance, to the extent the 

expenditures would otherwise be made 

for the human assistance. 

Self-direction means the opportunity 

for participants or their representatives 

to exercise choice and control over the 

budget, planning, and purchase of selfdirected PAS, including the amount, 

duration, scope, provider, and location 

of service provision. 

Service budget means an amount of 

funds that is under the control and 

direction of a participant when the State 

has selected the State plan option for 

provision of self-directed PAS. It is 

developed using a person-centered and 

directed process and is individually 

tailored in accordance with the 

participant’s needs and personal 

preferences as established in the service 

plan. 

Service plan means the written 

document that specifies the services and 

supports (regardless of funding source) 

that are to be furnished to meet the 

needs of a participant in the selfVerDate Aug<31>2005 14:27 Jan 17, 2008 Jkt 214001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 E:\FR\FM\18JAP2.SGM 18JAP2

rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3563 

directed PAS option and to assist the 

participant to direct the PAS and to 

remain in the community. The service 

plan is developed based on the 

assessment of need using a personcentered and directed process. The 

service plan builds upon the 

participant’s capacity to engage in 

activities that promote community life 

and respects the participant’s 

preferences, choices, and abilities. 

Families, friends and professionals, as 

desired or required by the participant, 

will be involved in the service-planning 

process. 

Support system means information, 

counseling, training, and assistance that 

support the participant (or the 

participant’s family or representative, as 

appropriate) in identifying, accessing, 

managing, and directing their PAS and 

supports and in purchasing their PAS 

identified in the service plan and 

budget. 

§ 441.452 Self-direction: General. 

(a) States must have in place, before 

electing the self-directed PAS option, 

personal care services through the State 

plan, or home and community-based 

services under a section 1915(c) waiver. 

(b) The State must have both 

traditional service delivery and the selfdirected PAS service delivery option 

available in the event that an individual 

voluntarily disenrolls or is involuntarily 

disenrolled, from the self-directed PAS 

service delivery option. 

(c) The State’s assessment of an 

individual’s needs must form the basis 

of the level of services for which the 

individual is eligible. 

(d) Nothing in this subpart will be 

construed as affecting an individual’s 

Medicaid eligibility, including that of an 

individual whose Medicaid eligibility is 

attained through receipt of section 

1915(c) waiver services. 

§ 441.454 Use of cash. 

(a) States have the option of 

disbursing cash prospectively to 

participants self-directing their PAS. 

(b) States that choose to offer the cash 

option must ensure compliance with all 

applicable requirements of the Internal 

Revenue Service. 

(c) States must permit participants 

using the cash option to choose to use 

the financial management entity for 

some or all of the functions described in 

§ 441.484(c). 

(d) States must make available a 

financial management entity to a 

participant who has demonstrated, after 

additional counseling, information, 

training, or assistance, that the 

participant cannot effectively manage 

the cash option described in paragraph 

(a) of this section. 

§ 441.456 Voluntary disenrollment. 

(a) States must permit a participant to 

voluntarily disenroll from the selfdirected PAS option at any time and 

return to a traditional service delivery 

system. 

(b) The State must specify in the State 

plan the safeguards that are in place to 

ensure continuity of services during the 

transition from self-directed PAS. 

§ 441.458 Involuntary disenrollment. 

(a) States must specify the conditions 

under which a participant may be 

involuntarily disenrolled from the selfdirected PAS option. 

(b) CMS must approve the State’s 

conditions under which a participant 

may be involuntarily disenrolled. 

(c) The State must specify in the State 

plan the safeguards that are in place to 

ensure continuity of services during the 

transition from self-directed PAS. 

§ 441.460 Participant living arrangements. 

(a) Self-directed PAS are not available 

to an individual who resides in a home 

or property that is owned, operated, or 

controlled by a provider of services who 

is not related to the individual by blood 

or marriage. 

(b) States may specify additional 

restrictions on a participant’s living 

arrangements if they have been 

approved by CMS. 

§ 441.462 Statewideness, comparability 

and limitations on number served. 

A State may do the following: 

(a) Provide self-directed PAS without 

regard to the requirements of 

statewideness. 

(b) Limit the population eligible to 

receive these services without regard to 

comparability of amount, duration, and 

scope of services. 

(c) Limit the number of persons 

served without regard to comparability 

of amount, duration, and scope of 

services. 

§ 441.464 State assurances. 

A State must assure that the following 

requirements are met: 

(a) Necessary safeguards. Necessary 

safeguards have been taken to protect 

the health and welfare of individuals 

furnished services under the program 

and to assure the financial 

accountability for funds expended for 

self-directed services. 

(1) Safeguards must prevent the 

premature depletion of the participant 

directed budget as well as identify 

potential service delivery problems that 

might be associated with budget 

underutilization. 

(2) These safeguards may include the 

following: 

(i) Requiring a case manager, support 

broker or other person to monitor the 

participant’s expenditures. 

(ii) Requiring the financial 

management entity to flag significant 

budget variances (over and under 

expenditures) and bring them to the 

attention of the participant, case 

manager, or support broker. 

(iii) Allocating the budget on a 

monthly or quarterly basis. 

(iv) Other appropriate safeguards as 

determined by the State. 

(3) Safeguards must be designed so 

that budget problems are identified on 

a timely basis so that corrective action 

may be taken, if necessary. 

(b) Evaluation of need. The State must 

perform an evaluation of the need for 

personal care under the State Plan or 

services under a section 1915(c) waiver 

program for individuals who meet the 

following requirements: 

(1) Are entitled to medical assistance 

for personal care services under the 

State plan or receiving home and 

community based services under a 

section 1915(c) waiver program. 

(2) May require self-directed PAS. 

(3) May be eligible for self-directed 

PAS. 

(c) Notification of feasible 

alternatives. Individuals who are likely 

to require personal care under the State 

plan, or home and community-based 

services under a section 1915(c) waiver 

program are informed of the feasible 

alternatives, if available, under the 

State’s self-directed PAS State plan 

option, at the choice of these 

individuals, to the provision of personal 

care services under the State plan, or 

PAS under a section 1915(c) home and 

community-based services waiver 

program, including, but not limited to 

the following: 

(1) Information about self-direction 

opportunities that is sufficient to inform 

decision-making about the election of 

self-direction and provided on a timely 

basis to an individual or the 

representative which minimally 

includes the following: 

(i) Elements of self-direction 

compared to non-self-directed PAS. 

(ii) Individual responsibilities and 

potential liabilities under the selfdirection service delivery model. 

(iii) The choice to receive PAS 

through a waiver program administered 

under section 1915(c) of the Act, 

regardless of delivery system, if 

applicable. 

(iv) The option, if available, to receive 

and manage the cash amount of their 

individual budget allocation. 

(2) When and how this information is 

provided. 


rfrederick on PROD1PC67 with PROPOSALS2
3564 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

(d) Support system. States must 

provide a support system that meets the 

following conditions: 

(1) Appropriately assesses and 

counsels an individual before 

enrollment. 

(2) Provides appropriate information, 

counseling, training, and assistance to 

ensure that a participant is able to 

manage the services and budgets. The 

support activities must include at least 

the following: 

(i) Person-centered planning and how 

it is applied. 

(ii) Information about the services 

available for self-direction. 

(iii) Range and scope of individual 

choices and options. 

(iv) Process for changing the service 

plan and service budget. 

(v) Grievance process. 

(vi) Risks and responsibilities of selfdirection. 

(vii) Freedom of choice of providers. 

(viii) Individual rights. 

(ix) Reassessment and review 

schedules. 

(x) Defining goals, needs, and 

preferences. 

(xi) Identifying and accessing 

services, supports, and resources. 

(xii) Development of risk management 

agreements. 

(xiii) Development of an 

individualized backup plan. 

(xiv) Recognizing and reporting 

critical events. 

(3) Offers additional information, 

counseling, training, or assistance, 

including financial management 

services under either of the following 

conditions: 

(i) At the request of the participant for 

any reason. 

(ii) When the State has determined 

the participant is not effectively 

managing the services identified in the 

service plan or budget. 

(4) The State may mandate the use of 

additional assistance, including the use 

of a financial management entity, or 

may initiate an involuntary 

disenrollment in accordance with 

§ 441.458, if, after additional 

information, counseling, training or 

assistance is provided to a participant, 

the participant has continued to 

demonstrate an inability to effectively 

manage the services and budget. 

(e) Annual report. The State must 

provide to CMS an annual report on the 

number of individuals served and the 

total expenditures on their behalf in the 

aggregate. 

(f) Three-year evaluation. The State 

must provide to CMS an evaluation of 

the overall impact of the self-directed 

PAS option on the health and welfare of 

participating individuals compared to 

non-participants every 3 years. 

§ 441.466 Assessment of need. 

States must conduct an assessment of 

the participant’s needs, strengths, and 

preferences in accordance with the 

following: 

(a) States may use one or more 

processes and techniques to obtain 

information about an individual, 

including health condition, personal 

goals and preferences for the provision 

of services, functional limitations, age, 

school, employment, household, and 

other factors that are relevant to the 

need for and authorization and 

provision of services. 

(b) Assessment information supports 

the determination that an individual 

requires PAS and also supports the 

development of the service plan and 

budget. 

§ 441.468 Service plan elements. 

(a) The service plan must include at 

least the following: 

(1) The scope, amount, frequency, and 

duration of each service. 

(2) The type of provider to furnish 

each service. 

(3) Location of the service provision. 

(4) The identification of risks that may 

pose harm to the participant along with 

a written individualized backup plan for 

mitigating those risks. 

(b) A State must develop a service 

plan for each program participant using 

a person-centered and directed planning 

process to ensure the following: 

(1) The identification of each program 

participant’s preferences, choices, and 

abilities, and strategies to address those 

preferences, choices, and abilities. 

(2) The option for the program 

participant to exercise choice and 

control over services and supports 

discussed in the plan. 

(3) Assessment of, and planning for 

avoiding, risks that may pose harm to a 

participant. 

(c) All of the State’s applicable 

policies and procedures associated with 

service plan development must be 

carried out and include, but are not 

limited to, the following: 

(1) Allow the participant the 

opportunity to engage in, and direct, the 

process to the extent desired. 

(2) The participant the opportunity to 

involve family, friends, and 

professionals (as desired or required) in 

the development and implementation of 

the service plan. 

(3) Ensure the planning process is 

timely. 

(4) Ensure the participant’s needs are 

assessed and that the services meet the 

participant’s needs. 

(5) Ensure the responsibilities for 

service plan development are identified. 

(6) Ensure the qualifications of the 

individuals who are responsible for 

service plan development reflect the 

nature of the program’s target 

population(s). 

(7) Ensure the State reviews the 

service plan annually or whenever 

necessary due to a change in the 

participant’s needs or health status. 

(d) When an entity that is permitted 

to provide other State plan services is 

responsible for service plan 

development, the State must describe 

the safeguards that are in place to 

ensure that the service provider’s role in 

the planning process is fully disclosed 

to the participant and controls are in 

place to avoid any possible conflict of 

interest. 

(e) An approved self-directed service 

plan conveys authority to the 

participant to perform, at a minimum, 

the following tasks: 

(1) Recruit and hire workers to 

provide self-directed services, including 

specifying worker qualifications. 

(2) Fire workers. 

(3) Supervise workers in the provision 

of self-directed services. 

(4) Manage workers in the provision 

of self-directed services, which includes 

the following functions: 

(i) Determining worker duties. 

(ii) Scheduling workers. 

(iii) Training workers in assigned 

tasks. 

(iv) Evaluating workers performance. 

(5) Determine the amount paid for a 

service, support, or item. 

(6) Review and approve provider 

invoices. 

§ 441.470 Service budget elements. 

A service budget must be developed 

and approved by the State based on the 

assessment of need and service plan and 

must include the following: 

(a) The specific dollar amount a 

participant may utilize for services and 

supports. 

(b) How the participant is informed of 

the amount of the service budget before 

the service plan is finalized. 

(c) The procedures for how the 

participant may adjust the budget, 

including the following: 

(1) How the participant may freely 

make changes to the budget. 

(2) The circumstances, if any, that 

may require prior approval before a 

budget adjustment is made. 

(3) The circumstances, if any, that 

may require a change in the service 

plan. 

(d) The procedure(s) that governs how 

a person, at the election of the State, 

may reserve funds to purchase items 

that increase independence or substitute 

for human assistance including 

additional goods, supports, services or 

supplies. 


rfrederick on PROD1PC67 with PROPOSALS2
Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 3565 

(e) The procedure(s) that governs how 

a person may use a discretionary 

amount, if applicable, to purchase items 

not otherwise delineated in the budget. 

(f) How participants are afforded the 

opportunity to request a fair hearing 

under § 441.300 if a participant’s 

request for a budget adjustment is 

denied or the amount of the budget is 

reduced. 

§ 441.472 Budget methodology. 

(a) The budget methodology set forth 

by the State to determine a participant’s 

service budget amount, must meet the 

following criteria: 

(1) The State’s method of determining 

the budget allocation is objective and 

evidence based utilizing valid, reliable 

cost data. 

(2) The State’s method is applied 

consistently to participants. 

(3) The State’s method is open for 

public inspection. 

(4) The State’s method includes a 

calculation of the expected cost of the 

self-directed PAS and supports, if those 

services and supports were not selfdirected. 

(5) The State has a process in place 

that describes the following: 

(i) Any limits it places on selfdirected services and supports, and the 

basis for the limits. 

(ii) Any adjustments that will be 

allowed and the basis for the 

adjustments. 

(b) The State must have procedures to 

safeguard participants when the 

budgeted service amount is insufficient 

to meet a participant’s needs. 

(c) The State must have a method of 

notifying participants of the amount of 

any limit that applies to a participant’s 

self-directed PAS and supports. 

(d) The budget may not restrict access 

to other medically necessary care and 

services furnished under the plan and 

approved by the State but not included 

in the budget. 

§ 441.474 Quality assurance and 

improvement plan. 

(a) The State must provide a quality 

assurance and improvement plan that 

describes the State’s system of how it 

will perform activities of discovery, 

remediation and quality improvement 

in order to learn of critical incidents or 

events that affect participants, correct 

shortcomings, and pursue opportunities 

for system improvement. 

(b) The quality assurance and 

improvement plan shall also describe 

the system performance measures, 

outcome measures, and satisfaction 

measures that the State must use to 

monitor and evaluate the self-directed 

State plan option. 

§ 441.476 Risk management. 

(a) The State must specify the risk 

assessment methods it uses to identify 

potential risks to the participant. 

(b) The State must specify any tools 

or instruments it uses to mitigate 

identified risks. 

(c) The State must ensure that each 

service plan includes the risks that an 

individual is willing and able to 

assume, and the plan for how identified 

risks will be mitigated. 

(d) The State must ensure that the risk 

management plan is the result of 

discussion and negotiation among the 

persons designated by the State to 

develop the service plan, the 

participant, the participant’s 

representative, if any, and others from 

whom the participant may seek 

guidance. 

§ 441.478 Qualifications of providers of 

personal assistance. 

(a) States have the option to permit 

participants to hire any individual 

capable of providing the assigned tasks, 

including legally liable relatives, as paid 

providers of the PAS identified in the 

service plan and budget. 

(b) Participants retain the right to 

train their workers in the specific areas 

of personal assistance needed by the 

participant and to perform the needed 

assistance in a manner that comports 

with the participant’s personal, cultural, 

and/or religious preferences. 

(c) Participants retain the right to 

establish additional staff qualifications 

based on participants’ needs and 

preferences. 

§ 441.480 Use of a representative. 

(a) States may permit participants to 

appoint a representative to direct the 

provision of self-directed PAS on their 

behalf. The following types of 

representatives are permissible: 

(1) A minor child’s parent or 

guardian. 

(2) An individual recognized under 

State law to act on behalf of an 

incapacitated adult. 

(3) A State-mandated representative, 

after approval by CMS of the State 

criteria, if the participant has 

demonstrated, after additional 

counseling, information, training or 

assistance, the inability to self-direct 

PAS. 

(b) A person acting as a representative 

for a participant receiving self-directed 

PAS is prohibited from acting as a 

provider of self-directed PAS to the 

participant. 

§ 441.482 Permissible purchases. 

(a) Participants may, at the State’s 

option, use their service budgets to pay 

for items that increase a participant’s 

independence or substitute (such as a 

microwave oven or an accessibility 

ramp) for human assistance, to the 

extent that expenditures would 

otherwise be made for the human 

assistance. 

(b) The services, supports and items 

that are purchased with a service budget 

must be linked to an assessed 

participant need established in the 

service plan. 

§ 441.484 Financial management services. 

(a) States may choose to provide 

financial management services to 

participants self-directing PAS, with the 

exception of those participants utilizing 

the cash option who directly perform 

those functions, utilizing a financial 

management entity, through the 

following arrangements: 

(1) States may use a reporting or 

subagent through its fiscal intermediary 

in accordance with section 3504 of the 

IRS Code and Revenue Procedure 80–4 

and Notice 2003–70; or 

(2) States may use a vendor 

organization that has the capabilities to 

perform the required tasks in 

accordance with Section 3504 of the IRS 

Code and Revenue Procedure 70–6. 

When private entities furnish financial 

management services, the procurement 

method must meet the requirements set 

forth in 45 CFR 74.40 through 74.48. 

(b) States must provide oversight of 

financial management services by 

performing the following functions: 

(1) Monitoring and assessing the 

performance of financial management 

entity, including assuring the integrity 

of financial transactions they perform. 

(2) Designating a State entity or 

entities responsible for this monitoring. 

(3) Determining how frequently 

financial management entity 

performance will be assessed. 

(c) A financial management entity 

must provide functions including, but 

not limited to, the following: 

(1) Collect and process timesheets of 

the participant’s workers. 

(2) Process payroll, withholding, 

filing and payment of applicable 

Federal, State and local employmentrelated taxes and insurance. 

(3) Maintain a separate account for 

each participant’s budget. 

(4) Track and report disbursements 

and balances of participant funds. 

(5) Process and pay invoices for goods 

and services approved in the service 

plan. 

(6) Provide to participants periodic 

reports of expenditures and the status of 

the approved service budget. 

(d) States not utilizing a financial 

management entity must perform the 


rfrederick on PROD1PC67 with PROPOSALS2
3566 Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / Proposed Rules 

functions listed in paragraph (c) of this 

section on behalf of participants selfdirecting PAS, with the exception of 

those participants utilizing the cash 

option who directly perform those 

functions. 

(e) States will be reimbursed for the 

cost of financial management services, 

either provided directly or through a 

financial management entity, at the 

administrative rate of 50 percent. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: May 24, 2007. 

Leslie V. Norwalk, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: October 4, 2007. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. 08–115 Filed 1–14–08; 10:00 am] 

BILLING CODE 4120–01–P 


rfrederick on PROD1PC67 with PROPOSALS2