[Federal Register Volume 59, Number 50 (Tuesday, March 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5849]


[[Page Unknown]]

[Federal Register: March 15, 1994]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Parts 404 and 416

RIN 0960-AD50

 

Payments for Vocational Rehabilitation Services

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

-----------------------------------------------------------------------

SUMMARY: We are amending our regulations on the vocational 
rehabilitation (VR) payment programs under titles II and XVI of the 
Social Security Act (the Act). These changes: (1) Expand access to the 
use of private and public non-State VR providers when a State VR agency 
declines to provide VR services to an individual whom we refer for 
services; (2) explain that, in appropriate cases, we will pay for only 
those VR services which have a causal relationship to an individual's 
performance of substantial gainful activity (SGA) for a continuous 
period of 9 months; and (3) prescribe the specific kinds of VR services 
for which we will pay. The changes are intended to make VR services 
more readily available to individuals under our VR payment programs and 
to improve the administration and cost effectiveness of these programs.

EFFECTIVE DATES: These rules are effective March 15, 1994, except that 
paragraphs (c)(2), (f)(1) and (f)(2) of Secs. 404.2104 and 416.2204 
shall become effective on October 1, 1994 with respect to Social 
Security beneficiaries or Supplemental Security Income (SSI) recipients 
whom the Social Security Administration (SSA) refers to a State VR 
agency on or after October 1, 1994, and Secs. 404.2121 and 416.2221 
shall become effective on October 1, 1994.

FOR FURTHER INFORMATION CONTACT: Jack Schanberger, Legal Assistant, 3-
B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD 21235, 
(410) 965-8471.

SUPPLEMENTARY INFORMATION: These final rules amend our regulations at 
Secs. 404.2101 et seq. and Secs. 416.2201 et seq., which prescribe the 
rules for the title II and title XVI VR payment programs under sections 
222(d) and 1615(d) of the Act. The final rules take into consideration 
the comments we received from interested individuals and public and 
private organizations and groups on the proposed rules we published on 
July 24, 1992 (57 FR 32926). These comments and the changes we have 
made in the proposed rules are discussed below.
    In general, sections 222(d) and 1615(d) of the Act authorize the 
Secretary of Health and Human Services (the Secretary) to use the title 
II trust funds and the title XVI general fund to pay a State for the 
reasonable and necessary costs of VR services provided to a title II 
social security beneficiary who is disabled or blind or to a title XVI 
recipient who is disabled or blind, in three categories of cases. 
Specifically, these sections permit payment for VR services furnished 
to such beneficiaries or recipients in cases where: (1) The furnishing 
of such services results in the individual's performance of SGA for a 
continuous period of 9 months; (2) the individual is continuing to 
receive benefits, despite his or her medical recovery, under section 
225(b) or 1631(a)(6) of the Act because of his or her participation in 
a VR program; or (3) the individual, without good cause, refused to 
continue to accept VR services or failed to cooperate in such a manner 
as to preclude his or her successful rehabilitation. Payment may be 
made for the reasonable and necessary costs of VR services provided in 
these cases as determined in accordance with criteria established by 
the Commissioner of Social Security (the Commissioner).
    Sections 222(d) and 1615(d) of the Act permit payment to a State 
for VR services if the services are provided by a State VR agency, 
i.e., an agency administering a State plan for VR services approved 
under title I of the Rehabilitation Act of 1973, as amended. However, 
in the case of a State which is unwilling to participate or does not 
have such a plan for VR services, section 222(d)(2) of the Act 
authorizes the Commissioner to enter into agreements or contracts with 
alternative VR service providers (alternate participants) for the 
purpose of providing VR services to disability beneficiaries under the 
title II VR payment program under the same conditions that would apply 
to a State VR agency. While section 1615(d) of the Act is silent with 
regard to alternate participants, section 1633(a) of the Act provides 
authority for using alternate participants under the title XVI VR 
payment program inasmuch as the latter section gives the Secretary the 
authority to make administrative and other arrangements under title XVI 
in the same manner as they are made under title II. Moreover, the 
legislative history of section 1615(d) indicates that Congress intended 
the title XVI VR payment program to parallel the title II program. Our 
title II and title XVI regulations, therefore, contain virtually 
identical provisions for the title II and title XVI VR payment 
programs.
    When we first published final regulations to implement sections 
222(d) and 1615(d) of the Act on February 10, 1983, at 48 FR 6286, we 
indicated that we would reexamine the provisions of the regulations and 
consider possible changes after we had gained experience administering 
the title II and title XVI VR payment programs. Certain recommendations 
contained in the March 1988 Report of the Disability Advisory Council 
also suggested a need to consider new approaches to these programs to 
increase the availability of VR services for disabled or blind 
beneficiaries and recipients and to ensure that such beneficiaries and 
recipients are provided with those services that are necessary to 
achieve and maintain employment.
    The basic purpose of the title II and title XVI VR payment programs 
is twofold: (1) To make VR services more readily available to disabled 
or blind Social Security beneficiaries and SSI recipients; and (2) to 
achieve savings for the title II trust funds and the title XVI general 
fund. To promote these objectives more effectively, we are amending our 
existing regulations to provide for greater use of alternate 
participants under the VR payment programs and to improve the 
administration and cost effectiveness of the programs so as to ensure 
that savings will accrue to the trust funds and the general fund.
    None of the changes to the VR regulations is a major departure from 
the current program. The changes are meant to address the most 
significant criticisms of the SSA VR program. By expanding the 
opportunity for private VR providers to participate in the program, we 
are responding to the recommendations of the 1988 Disability Advisory 
Council, and the dictates of Congress. By permitting payment to 
providers for only services which have a causal connection to the 
individual's completion of nine months of SGA, we are responding to 
criticisms by the General Accounting Office and the Inspector General 
of the Department of Health and Human Services. The Inspector General 
stated in his most recent and thorough report on SSA's VR program, in 
April 1990, ``SSA should strengthen the linkage between the SSA 
vocational rehabilitation payment program and actions to * * * 
rehabilitate SSA clients.''

Use of Alternate Participants

    These final regulations revise Secs. 404.2104 and 416.2204 to 
provide for the use of alternate participants in cases where a State VR 
agency declines to provide VR services to a disabled or blind Social 
Security beneficiary or SSI recipient whom we referred to the State VR 
agency. These regulations provide that in such cases, the State will be 
considered unwilling to participate through its VR agency with respect 
to such individual.
    When we first published regulations for the VR payment programs, we 
provided in Secs. 404.2104 and 416.2204 that the option of 
participating through their VR agencies would be offered first to the 
States and that a State had to notify us within 60 days after 
publication of the regulations whether it intended to participate 
through its VR agency(ies). All States chose to participate.
    Existing Secs. 404.2104 and 416.2204 also give a State the option 
of not participating, including terminating participation, or limiting 
the scope of its participation. If a State decides not to participate 
or to limit participation, the existing regulations provide that we may 
arrange for VR services through an alternate participant for disabled 
or blind beneficiaries or recipients in the State or, where the State 
has limited its participation, for those beneficiaries and recipients 
not included within the scope of the State's participation. While we 
are making certain technical changes to the rules concerning a State's 
option not to participate or to limit participation, the existing 
provisions relating to these options remain substantially the same 
under the revised regulations. However, while existing Secs. 404.2104 
and 416.2204 provide each State the option of declaring its intent to 
participate with respect to the title II or title XVI VR payment 
program as a whole, the revised Secs. 404.2104 and 416.2204 afford each 
State the opportunity to participate through its VR agency(ies) with 
respect to disabled title II beneficiaries in that State, or disabled 
or blind title XVI recipients in that State, on a case-by-case basis, 
unless the State has notified us in advance of its decision not to 
participate or to limit participation.
    Under the revised Secs. 404.2104 and 416.2204, unless the State has 
exercised its option not to participate or to limit participation 
through its VR agency(ies), we will provide the State the opportunity 
to participate with respect to disabled or blind Social Security 
beneficiaries or SSI recipients in the State by referring such 
individuals first to the State VR agency(ies) for necessary VR 
services. The revised regulations require the State to declare, through 
the State VR agency, whether it is willing to participate with respect 
to a beneficiary or recipient whom we referred to that VR agency. Under 
the revised regulations, the State may participate with respect to such 
an individual only if the State VR agency decides to accept the 
individual as a client for VR services or to place the individual into 
an extended evaluation process and notifies us of such decision in 
writing within a prescribed time period.
    In response to comments we received concerning the proposed rules, 
we are defining the phrases ``accept the beneficiary as a client for VR 
services'' and ``accept the recipient as a client for VR services,'' 
which are used in Secs. 404.2104 and 416.2204, respectively, to mean 
that the State VR agency determines that the individual is eligible for 
VR services and places the individual into an active caseload status 
for development of an individualized written rehabilitation program. We 
are defining these phrases in Secs. 404.2103 and 416.2203, 
respectively, since these sections provide the definitions of terms 
used in the VR payment regulations.
    In addition, we recognize that there are occasions when a State VR 
agency places an individual whom we referred to that agency into an 
extended evaluation process prior to deciding whether the individual is 
eligible for State VR services. Therefore, the revised Secs. 404.2104 
and 416.2204 provide that the State VR agency must notify the 
appropriate SSA Regional Commissioner of its decision either to accept 
the individual as a client for VR services or to place the individual 
into an extended evaluation process no later than the close of the 
fourth month following the month in which we referred the individual to 
the State VR agency. As we explain later in this preamble, we have 
changed ``third month'' in the proposed rules to ``fourth month'' in 
the final rules in response to comments we received concerning the 
proposed regulations. If we do not receive a notice with respect to an 
individual within the prescribed time period, we will consider the 
State unwilling to participate with respect to the individual and may 
arrange for VR services for the individual through an alternate 
participant.
    We are adding provisions to Secs. 404.2103 and 416.2203 to define 
the phrases ``place the beneficiary into an extended evaluation 
process'' and ``place the recipient into an extended evaluation 
process'' to mean that the State VR agency determines that an extended 
evaluation of the individual's VR potential is necessary to determine 
whether the individual is eligible for VR services and places the 
individual into an extended evaluation status.
    In those cases where the State VR agency notifies the appropriate 
SSA Regional Commissioner within the prescribed time period of a 
decision to place the Social Security beneficiary or SSI recipient into 
an extended evaluation process, the State VR agency also must notify 
the appropriate SSA Regional Commissioner, at the conclusion of the 
extended evaluation, of the State VR Agency's final decision whether or 
not to accept the individual for further VR services. If following the 
completion of the extended evaluation we receive a notice of a decision 
by the State VR agency to accept the individual as a client for VR 
services, the State may continue to participate with respect to such 
individual. If we receive a notice of a decision by the State VR agency 
not to accept the individual as a client for VR services, we may 
arrange for VR services for such individual through an alternate 
participant.
    These provisions also apply with respect to the class(es) of 
disabled or blind beneficiaries or recipients whom we refer to a State 
VR agency in a case in which a State has decided to limit participation 
of its VR agency(ies) to such class(es) of beneficiaries or recipients.

Minimum Qualifications for Alternate Participants

    Because the revisions of Secs. 404.2104 and 416.2204 provide for 
greater use of alternate participants under the title II and title XVI 
VR payment programs, we are adding new Secs. 404.2106 and 416.2206 to 
our regulations to specify certain minimum qualifications for alternate 
participants, that is, any for-profit or not-for-profit agency, 
organization, institution, or individual, other than a State VR agency. 
Existing Secs. 404.2104(a) and 416.2204(a) provide that an alternate 
participant must have a plan for VR services that is similar to a State 
plan approved under title I of the Rehabilitation Act of 1973, as 
amended. The final regulations do not change this basic requirement. 
However, we clarify in Secs. 404.2106 and 416.2206 of these final rules 
that the plans of alternate participants must provide, among other 
things, that the provision of VR services to disabled or blind 
beneficiaries or recipients will meet certain minimum standards. We 
also explain in Secs. 404.2106 and 416.2206 that we will use as 
alternate participants only those VR service providers that are 
licensed, certified, accredited or registered, as appropriate, in the 
State in which they provide VR services, and are not precluded from 
Federal procurement or nonprocurement programs.

Payments to Alternate Participants

    The existing regulations provide that we will pay alternate 
participants for VR services furnished to beneficiaries or recipients 
under the same terms and conditions that apply to State VR agencies. 
These final rules do not change this requirement.

Requirements for Payment

    The final rules amend Secs. 404.2108 and 416.2208 to specify the 
information that the State VR agency or alternate participant must 
provide in order to claim and receive payment under our VR payment 
programs. The final rules provide that each claim for payment must be 
submitted on a form prescribed by us and contain the following 
information: A description of each service provided; a statement of 
when the service was provided; and the cost of the service. In response 
to comments we received on the proposed rules, we deleted the 
requirement in the proposed rules that the claim also contain, as 
appropriate, an explanation of how the service contributed to the 
individual's performance of a continuous 9-month period of SGA, or an 
explanation of how the service was reasonably expected to motivate or 
assist the individual to perform such a continuous period of SGA. 
Instead, we are including provisions in Secs. 404.2121 and 416.2221 of 
the final rules to require the State VR agency or alternate participant 
to provide this information as part of the validation review process.
    The final rules also amend Secs. 404.2108 and 416.2208 to provide 
that the State VR agency or alternate participant must maintain, and 
provide as we may require, adequate documentation of all services and 
costs for all disabled or blind beneficiaries or recipients with 
respect to whom a State VR agency or alternate participant could 
potentially request payment for services and costs under our VR payment 
programs.

VR Services Contributing to a Continuous Period of SGA

    The final regulations amend Secs. 404.2111 and 416.2211 which 
provide the criteria for determining when VR services will be 
considered to have contributed to a continuous period of 9 months of 
SGA. We are amending Secs. 404.2111(a)(1) and 416.2211(a)(1) to provide 
that any VR services which significantly motivated or assisted the 
individual in returning to, or continuing in, SGA will be considered to 
have contributed to the continuous 9-month period of SGA in the 
situation where the individual does not recover medically and the 
continuous 9-month period of SGA begins 1 year or less after VR 
services end. We are deleting the words ``might have'' before the 
phrase ``significantly motivated or assisted'' in the existing 
regulations to strengthen the casual relationship between the VR 
services and the continuous period of SGA.

Refusal of VR Services

    We are amending Secs. 404.2113 and 416.2213 to include a timeframe 
within which State VR agencies and alternate participants are to report 
cases of VR refusal. These are cases in which an individual refuses to 
continue to accept VR services or fails to cooperate in such a manner 
as to preclude his or her successful rehabilitation.

Services for Which Payment May Be Made

    Under section 222(d)(5) of the Act, the Secretary may limit the 
type, scope, or amount of VR services that are subject to payment in 
accordance with regulations designed to achieve the purpose of section 
222(d). In general, Secs. 404.2114 and 416.2214 of the existing 
regulations permit payment for evaluation services and all services 
provided by a State VR agency under an Individualized Written 
Rehabilitation Program (IWRP) or by an alternate participant under a 
similar document.
    Consistent with section 222(d)(5) of the Act, we are revising 
Secs. 404.2114 and 416.2214 to describe the specific kinds of VR 
services for which payment may be made in all three categories of cases 
under the VR payment programs. Under the final rules, VR services for 
which payment may be made include only those services described in 
Secs. 404.2114(b) and 416.2214(b). In addition, these services are 
subject to payment only if: (1) The services are necessary to determine 
an individual's eligibility for VR services or the nature and scope of 
the services to be provided; or (2) the services are provided under an 
IWRP, or under a similar document in the case of an alternate 
participant, and could reasonably be expected to motivate or assist the 
individual in returning to, or continuing in, SGA.
    In response to comments we received on the proposed rules, we are 
clarifying Secs. 404.2114(a)(1) and 416.2214(a)(1) to indicate that VR 
services for which payment may be made include diagnostic or other 
evaluation services which are provided after an individual has been 
determined to be eligible for VR services and prior to the 
implementation of an IWRP (or similar document in the case of an 
alternate participant) and which are necessary to determine the nature 
and scope of the VR services to be provided to the individual.
    Additionally, we are clarifying Secs. 404.2114 (b)(3) and (b)(12) 
and 416.2214 (b)(3) and (b)(12) to indicate that the employment 
referred to in these sections may be at or above the SGA level. The 
individual's employment is not restricted to the minimum SGA threshold. 
Also, in these final rules, we have modified some of the descriptions 
of the VR services in Secs. 404.2114(b) and 416.2214(b) to reflect 
changes which the Rehabilitation Act Amendments of 1992 made to the 
list of VR services covered under the Rehabilitation Act of 1973.

Cost Containment

    We are amending Secs. 404.2117 and 416.2217 to require, rather than 
to expect, State VR agencies and alternate participants to seek payment 
or services from other sources in accordance with the ``similar 
benefit'' provisions under 34 CFR part 361. The final rules also 
provide that the cost incurred for VR services must comply with the 
cost-containment policies of the State VR agency or, in the case of an 
alternate participant, with similar written policies established under 
a negotiated plan in accordance with a written agreement or contract 
between us and the alternate participant. These cost-containment 
policies must provide guidelines to ensure the lowest reasonable cost 
for VR services while allowing flexibility to provide for an 
individual's needs. With reference to the cost-containment policies of 
the State VR agencies, the phrase ``established under 34 CFR part 361'' 
which appeared in proposed Secs. 404.2117(c)(1) and 416.2217(c)(1) has 
been deleted in the final rules since the regulations in 34 CFR part 
361 do not themselves explicitly mandate the establishment of specific 
``cost-containment'' policies.
    Under these final rules, a State VR agency or alternate participant 
is required to maintain and use these cost-containment policies to 
govern the costs incurred for all VR services for which payment will be 
requested under the VR payment programs. In response to comments, the 
requirement in the proposed rules that the State VR agency or alternate 
participant send to us on a yearly basis a written summary of the 
written cost-containment policies has been deleted. Instead, these 
final rules require that, before the end of the first calendar quarter 
of each year, the State VR agency must send to us a written 
certification that approved cost-containment policies are in effect and 
are adhered to in procuring and providing goods and services for which 
the State VR agency requests payment under our VR payment programs. The 
rules further specify who may sign such certification. In addition, the 
final rules require that State VR agencies must specify the basis upon 
which such certification is made, e.g., a recent audit by an authorized 
State, Federal or private auditor, or other independent compliance 
review, and the date of such audit or compliance review. In the case of 
an alternate participant, these certification requirements shall be 
incorporated into the negotiated agreement or contract. The final rules 
also provide that we may request a copy(ies) of the specific written 
cost-containment policies of a State VR agency or alternate participant 
if we determine that such additional information is necessary to ensure 
compliance with the requirements of our VR payment programs.

Validation Reviews

    We are revising Secs. 404.2121 and 416.2221. The existing rules 
provide for postpayment reviews of claims submitted by State VR 
agencies or alternate participants for payment under our regulations. 
Under the revised rules, we will institute a validation review of a 
sample of claims filed by each State VR agency or alternate 
participant. Some validation reviews will be conducted prior to payment 
and some will be conducted after payment is made.
    For each claim selected for review, the State VR agency or 
alternate participant must submit records of the VR services and costs 
for which payment has been requested or made to show that the services 
and costs meet the requirements for payment. Also, we have modified the 
proposed rules by providing in these final rules that for claims for 
payment in cases described in Secs. 404.2101(a) and 416.2201(a), a 
clear explanation or existing documentation that demonstrates how the 
service contributed to the individual's performance of a continuous 9-
month period of SGA must be provided as part of the validation review 
documentation. Similarly, for claims for payment in cases described in 
Sec. 404.2101 (b) or (c), or Sec. 416.2201 (b) or (c), a clear 
explanation or existing documentation which demonstrates how the 
service was reasonably expected to motivate or assist the individual to 
return to, or continue in, SGA must be provided. We are making these 
changes in the final rules in response to comments we received on the 
proposed rules from commenters who expressed strong objections about 
the reporting burden related to the requirements of proposed 
Secs. 404.2108(b)(4) and 416.2208(b)(4). These sections of the proposed 
rules would have required that each claim for payment that is filed 
with us include a clear explanation of how the service contributed to 
the individual's performance of a continuous 9-month period of SGA, or 
how the service was reasonably expected to motivate or assist the 
individual to perform SGA, as appropriate. Rather than require this 
information for each claim that is filed, we are including in 
Secs. 404.2121 and 416.2221 of the final rules requirements that this 
information or appropriate supporting documentation be provided as part 
of the validation review process. We are including these requirements 
as a substitute for the requirements in proposed Secs. 404.2108(b)(4) 
and 416.2208(b)(4) which we are deleting in these final rules.
    The purposes of these validation reviews are to ensure that the VR 
services and costs meet the requirements for payment under our 
regulations, to assess the validity of our documentation requirements, 
and to assess the need for additional validation reviews or additional 
documentation requirements for any State VR agency or alternate 
participant to ensure compliance with the requirements under our 
regulations.
    In any validation review, we will determine the amount of payment 
and will notify the State VR agency or alternate participant of our 
determination. In any postpayment validation review, if we find that we 
have paid more or less than the correct amount, we will determine that 
there is an overpayment or underpayment and will notify the State VR 
agency or alternate participant that we will make the appropriate 
adjustment. In any case, if a State agency or alternate participant 
disagrees with our determination, it may appeal our determination. 
These regulations do not change the existing rules set out in 
Secs. 404.2127 and 416.2227 for appealing determinations or resolving 
disputes under the VR payment programs.

Other Changes

    We are also making certain changes to Secs. 404.2102 and 416.2202, 
404.2108 and 416.2208, and 404.2109 and 416.2209 to conform to the 
changes to the other sections of the regulations discussed above.

Comments Received Following Publication of the Notice of Proposed 
Rulemaking

    We published proposed rules on payments for VR services as a notice 
of proposed rulemaking in the Federal Register on July 24, 1992 (57 FR 
32926). We also mailed copies of the proposed rules to State VR 
agencies. We invited comments on the proposed rules and gave interested 
parties 60 days within which to submit comments. The comment period 
closed on September 22, 1992.
    We received 45 letters with comments. These included comments from 
State VR agencies, private VR agencies, national organizations and 
other organizations active in the field of VR. Portions of some letters 
dealt with operational or administrative issues outside the scope of 
the proposed rules, or discussed provisions of the regulations that 
were not being altered by the proposed regulations. Because these 
matters are beyond the scope of the proposed rules, they are not 
addressed here.
    For ease of comprehension and perspective, we have grouped the 
comments according to the issues raised. The comments and our responses 
are presented in the sequence of the regulations.

Use of Alternate Participants--Secs. 404.2104 and 416.2204

    Comment: Many commenters indicated that the proposed timeframe for 
a State VR agency to notify us of its decision to accept an SSA-
referred beneficiary or recipient as a client for VR services was too 
short. The proposed rules required a State VR agency to notify us no 
later than the close of the third month following the month of 
referral. Some of these commenters further indicated that the timeframe 
for providing notification was too restrictive, particularly if the 
referred individual required an extended evaluation prior to the State 
VR agency deciding whether or not it could serve the individual's VR 
needs.
    Response: In consideration of the commenters' concerns about the 
length of the proposed timeframe, we are extending the timeframe for 
the State VR agency to notify us about its decision to accept an SSA-
referred beneficiary or recipient as a client for VR services. The 
revised timeframe allows the State VR agency to notify us by the close 
of the fourth month following the month of referral. This revised 
timeframe considers:

--An increase in the time for State VR agencies to notify SSA as 
suggested by many commenters;
--That a longer interval could cause the referred individual's 
rehabilitation potential to deteriorate before re-referral to an 
alternate participant occurs, thereby causing a potential 
rehabilitation opportunity to slip away;
--That possible backlogs in the State VR agencies can delay the time it 
takes for an SSA-referred beneficiary or recipient to be contacted 
about the State's available VR services; and
--The requirement of the Rehabilitation Act Amendments of 1992 that a 
State VR agency generally must make a determination of whether an 
individual is eligible for VR services within 60 days after the 
individual makes application for services.

    We believe that the revised timeframe will permit adequate time, in 
most cases, for a State VR agency to arrive at a decision and to notify 
us of its acceptance of an SSA-referred beneficiary or recipient for 
State VR services.
    We recognize that some disabled or blind beneficiaries or 
recipients whom we refer to the State VR agency may require a period of 
extended evaluation prior to the State VR agency deciding whether the 
individual is eligible for State VR services. Therefore, we are making 
changes in the final rules to provide that if the State VR agency 
decides that an extended evaluation is needed, then the State VR agency 
will notify us no later than the close of the fourth month following 
the month of referral, that the individual has been placed into an 
extended evaluation process. The final rules also require the State VR 
agency to notify us of the individual's ``accepted'' or ``not 
accepted'' status following the conclusion of the extended evaluation. 
This second notification, in extended evaluation situations, will 
permit us to make an informed decision concerning possible re-referral 
of the individual to an alternate participant in those cases where the 
State VR agency has decided not to provide VR services beyond the 
extended evaluation to an SSA-referred beneficiary or recipient.
    Comment: Several commenters requested that we define the term 
``accepted.'' Another commenter inquired as to what will constitute a 
notification of acceptance.
    Response: In these final rules, we are defining the phrases 
``accept the beneficiary as a client for VR services'' and ``accept the 
recipient as a client for VR services'' in Secs. 404.2103 and 416.2203, 
respectively, to mean that the State VR agency determines that the 
individual is eligible for VR services and places the individual into 
an active caseload status for development of an IWRP. In addition, the 
final rules provide that the State VR agencies also notify us of those 
SSA referred beneficiaries or recipients whom the State VR agencies 
place into an extended evaluation process prior to determining whether 
such individuals are eligible for VR services.
    In regard to how State notifications to us will be structured, we 
will issue procedural instructions outlining the form and content of 
State notifications. To the extent allowable, flexibility in reporting 
formats will be taken into consideration, e.g., electronic 
notification.
    Comment: Several commenters indicated that the requirement to have 
the State VR agencies notify us concerning which of the beneficiaries 
and recipients whom we referred to the State VR agency are being 
accepted for State VR services will present an administrative burden to 
the States. Another commenter expressed concern that the reporting 
provision will have an adverse impact upon the resources of the State 
Disability Determination Services (DDS).
    Response: The proposed rules recognized that an additional 
reporting burden is associated with this regulatory change. However, in 
order to expand rehabilitation opportunities for disabled or blind 
beneficiaries and recipients, it is necessary for us to know which of 
the individuals whom we referred to the State VR agency are accepted 
for VR services so that we may consider those not accepted for possible 
re-referral to an alternate participant.
    In order to minimize the State's reporting burden, we are asking 
for notification of acceptances (instead of the more voluminous number 
of nonacceptances) of beneficiaries and recipients whom we referred to 
the State VR agency, i.e., individuals who are determined to be 
entitled to Social Security disability benefits or eligible for SSI 
disability or blindness benefits (not those individuals whose claims 
for benefits are denied). We believe that we have limited the referral 
reporting burden on the State VR agencies while still achieving a 
sufficient level of information to permit us to consider those disabled 
or blind beneficiaries who are eligible for a possible re-referral to 
an alternate provider for services.
    We do not anticipate an adverse impact upon the resources of the 
State DDS as this regulation does not prescribe changing the referral 
process between the State's DDS and VR agency, nor does it entail 
changing the existing process the DDS uses to report to SSA on these 
referrals.
    Comment: Some commenters asked whether we planned to limit payments 
to State VR agencies under our VR payment programs to those cases 
involving a beneficiary or recipient whom we referred to the State VR 
agency.
    Response: It is not our intention to limit payments to State VR 
agencies under the VR payment programs to only those cases in which the 
beneficiary or recipient was referred to the State VR agency by SSA. 
Consistent with our past practices, we will continue to pay claims 
filed by State VR agencies for payment of the costs of VR services 
provided to a disabled or blind Social Security beneficiary or SSI 
recipient in accordance with the requirements of our regulations, 
regardless of the means by which the beneficiary or recipient came to 
the attention of the State VR agency.
    Comment: One commenter stated that the use of alternate 
participants should be limited to those instances where a State VR 
agency is not cooperating with us. Another commenter thought that State 
VR agencies have the sole responsibility of providing services to those 
who are disabled. In addition, one commenter stated that the services 
available from an alternate participant should be referred to as ``VR 
like'' services or as ``similar to'' VR services to acknowledge that 
only State designated units are authorized to provide VR services under 
the program carried out under title I of the Rehabilitation Act of 
1973, as amended.
    Response: Under sections 222(a) and 1615(a) of the Act, disabled or 
blind Social Security beneficiaries and SSI recipients are to be 
referred for VR services to the State agency administering a State plan 
for VR services approved under title I of the Rehabilitation Act of 
1973, as amended. Sections 222(d) and 1615(d) of the Act authorize 
payment to the State for the costs of VR services provided to such 
beneficiaries or recipients in certain categories of cases. However, 
with respect to Social Security beneficiaries, section 222(d)(2) of the 
Act provides that if a State is unwilling to participate or does not 
have an approved State plan for VR services, the Commissioner is 
authorized to provide such services by agreement or contract with 
alternative VR service providers under the same conditions that would 
apply to a State VR agency. Section 1633(a) provides authority for 
making similar arrangements for VR services with respect to SSI 
recipients. In order to make VR services more readily available to 
beneficiaries and recipients, these final rules provide that a State 
will be considered unwilling to participate with respect to an 
individual whom we referred to the State VR agency if that agency 
declines to provide VR services to that individual.
    There is nothing in section 222(d)(2) of the Act to suggest a 
distinction between the kind of services that are available from a 
State VR agency and the services that would be provided by an alternate 
participant. Consequently, for the purpose of our regulations regarding 
the use of alternate participants, we do not believe that there is any 
need to create a distinction in the nomenclature used to identify the 
services available from the State VR agency and those provided by an 
alternate participant. Additionally, Secs. 404.2103 and 416.2203 
already define the terms ``alternate participants'' and ``Vocational 
Rehabilitation services.'' In neither instance is a distinction made to 
differentiate the services available from a State VR agency and those 
that would be provided by an alternate participant. These final rules 
do not amend those definitions.
    Comment: Some commenters expressed concern that the practice of 
making the first referral of the beneficiary or recipient to the State 
VR agency will permit such agencies to select those referrals with the 
best rehabilitation potential, thereby leaving the alternate 
participants to serve the most difficult cases having a lesser 
probability of rehabilitation success and provider payment. Another 
commenter indicated that we should provide a mixture of cases in the 
referrals made to VR service providers in order to balance the levels 
of disability severity contained in the caseloads referred to each 
provider.
    Response: Sections 222(a) and 1615(a) of the Act require us to 
refer disabled or blind Social Security beneficiaries and SSI 
recipients for VR services to the State agency administering a State 
plan for VR services approved under title I of the Rehabilitation Act 
of 1973, as amended. Section 222(d)(2) of the Act provides that it is 
only in the event that the State is unwilling to participate or does 
not have an approved State plan that we may arrange for such services 
through an agreement or contract with an alternative VR service 
provider. Therefore, the law directs SSA to follow a prescribed order 
in determining where to refer individuals for VR services.
    In addition, the Federal regulations governing the State plan for 
VR services (34 CFR 361.36) provide that the ``* * * plan must assure 
that those individuals with the most severe handicaps are selected for 
service before other individuals with handicaps.'' Thus, the State VR 
agencies are required to select those individuals with the most severe 
impairments for VR services before selecting other individuals.
    We also believe that a sufficiently large pool of disabled or blind 
beneficiaries and recipients exists so that both the State VR agencies 
and the alternate participants will have the opportunity to offer VR 
services to a diverse cross section of these beneficiaries and 
recipients.
    Comment: One commenter asked whether a State VR agency could be 
reimbursed for services provided to a beneficiary or recipient whom SSA 
had referred previously to an alternate participant.
    Response: A State VR agency which provides VR services to a 
beneficiary or recipient who becomes its client after having been 
referred to an alternate participant may be paid for such services if 
the services and costs meet the requirements for payment under our 
regulations, including the requirements in Secs. 404.2108-404.2117 for 
cases involving Social Security beneficiaries or Secs. 416.2208-
416.2217 for cases involving SSI recipients. Among other things, the 
services must have been provided during the period specified in 
Secs. 404.2115 or 416.2215, as appropriate. Also, Secs. 404.2117(d) and 
416.2217(d) provide that the total payment for the costs of services 
provided to an individual in each case, including any prior payments 
made under our VR payment programs, must not be so high as to preclude 
a ``net savings'' to the title II trust funds or the title XVI general 
fund, as the case may be. In addition, Secs. 404.2117(f) and 
416.2217(f) provide that payment will not be made more than once for 
the same VR service or cost.
    While a State VR agency or alternate participant which provided 
only evaluation services to a beneficiary or recipient may be paid for 
such services in certain, limited circumstances described in 
Secs. 404.2111, 404.2113, 416.2211 and 416.2213, the regulations 
generally permit payment only to a State VR agency which provided 
services under an IWRP, or to an alternate participant which provided 
services under a similar document, as provided under 
Secs. 404.2114(a)(2) and 416.2214(a)(2). Thus, with few exceptions, we 
would pay only a State VR agency or alternate participant which 
developed an IWRP, or similar document in the case of an alternate 
participant, with the individual and coordinated the services. At any 
given time, only one VR service provider would be providing services to 
the individual under an IWRP or similar document. We will not pay more 
than one provider for the costs of the same services provided during 
the period specified in Secs. 404.2115 or 416.2215.
    Comment: One commenter stated that regional staff of the 
Rehabilitation Services Administration (RSA) should approve the plan 
for VR services developed by an alternate participant to assure that 
the requirements for a State plan under title I of the Rehabilitation 
Act of 1973, as amended, have been included in the alternate 
participant's plan.
    Response: While Secs. 404.2104(a) and 416.2204(a) provide that an 
alternate participant must have a plan for VR services similar to an 
approved State plan, the details of the plan of an alternate 
participant will be developed under the terms of the negotiated 
agreement or contract between us and the alternate participant. The 
agreement or contract will include procedures for the review and 
approval of such plan. However, we do not believe that it is necessary 
to include such procedures in the regulations.
    Comment: A commenter stated that our plan to expand the use of 
alternate participants suggested that there are problems with State VR 
agencies in providing VR services to individuals with disabilities.
    Response: Our desire to increase the availability of sources of VR 
services for disabled or blind beneficiaries and recipients is not 
intended to question the quality of work performed by the State VR 
agencies, but rather to address a mutual goal shared with the States, 
i.e., that all those desiring VR services shall have the opportunity to 
receive them.
    SSA's interest is in arranging for the maximum number of disabled 
or blind beneficiaries and recipients to have access to the 
availability of rehabilitation and employment opportunities which can 
assist them in achieving and sustaining employment at or above the SGA 
threshold. We believe a sufficiently large pool of disabled or blind 
beneficiaries and recipients exists so that both the State VR agencies 
and alternate participants have ample opportunity to serve such 
beneficiaries and recipients. For this reason, we believe that an 
increased number of disabled or blind beneficiaries and recipients 
could achieve and sustain rehabilitation and employment opportunities 
if an increased number of VR provider sources are available to serve 
the needs of such beneficiaries and recipients.

Basic Qualifications for Alternate Participants--Secs. 404.2106 and 
416.2206

    Comment: Three commenters questioned the adequacy of the 
qualifications for alternate participants in Secs. 404.2106 and 
416.2206 and recommended that we include a specific provision in the 
regulations providing for ongoing monitoring of alternate participants. 
The commenters believed that the provisions requiring that alternate 
participants be licensed, certified, accredited, or registered would be 
inadequate without providing for ongoing monitoring of the services 
provided. They also believed that periodic accreditation or 
certification, e.g., every three years, would not be an adequate 
substitute for ongoing monitoring of such participants. One commenter 
asked for a definition of the term ``qualified personnel'' as used in 
proposed Secs. 404.2106(b)(2) and 416.2206(b)(2), which provide that 
the plans of alternate participants must provide that only qualified 
personnel will be used to furnish VR services. One commenter asked how 
and on what basis alternate participants would provide services. 
Another commenter suggested that we require IWRPs from alternate 
participants to document the relationship of the services provided to 
the performance by an individual of a continuous 9-month period of SGA 
in appropriate cases.
    Response: We did not adopt the recommendation to include a specific 
provision in the regulations to provide for ongoing monitoring of the 
services of alternate participants. Rather, the negotiated agreement or 
contract which we enter into with an alternate participant will include 
procedures for monitoring such services. In addition, we will monitor 
the services provided by alternate participants by conducting 
validation reviews under Secs. 404.2121 and 416.2221 of the claims for 
payment that are filed by such participants.
    We do not believe it is necessary to expand the requirements of 
Secs. 404.2106 and 416.2206 since these sections are intended to state 
only the basic qualifications for alternate participants. Under 
Secs. 404.2106 and 416.2206, we will select as alternate participants 
only those VR service providers that are licensed, certified, 
accredited, or registered, as appropriate, to provide VR services in 
the State in which they operate. In addition, Secs. 404.2104(a), 
404.2106(a)(1)(ii), 416.2204(a), and 416.2206(a)(1)(ii) provide that to 
be an alternate participant, a VR service provider must have a plan for 
VR services that is similar to a State plan for VR services approved 
under title I of the Rehabilitation Act of 1973, as amended. Sections 
404.2106(a)(1)(ii) and 416.2206(a)(1)(ii) also state that this plan 
shall govern the provision of VR services to individuals. While the 
plan of an alternate participant for providing VR services to 
individuals will include provisions similar to those of an approved 
State plan, the details of the plan will be developed under the 
negotiated agreement between us and the alternate participant. We state 
in Secs. 404.2106(b) and 416.2206(b), however, that the plan of an 
alternate participant must provide that the provision of VR services to 
individuals will meet certain minimum standards, including the 
requirement that only qualified personnel and facilities will be used 
to furnish such services. Specific criteria relating to this and other 
requirements for providing services will be prescribed in the plan for 
VR services in accordance with the terms of the negotiated agreement or 
contract.
    The VR services furnished to an individual by an alternate 
participant will be provided under a document similar to the IWRP used 
by State VR agencies. With respect to validation reviews under 
Secs. 404.2121 and 416.2221, the documentation requirements for claims 
for payment in cases in which the individual completes a continuous 9-
month period of SGA are the same for both State VR agencies and 
alternate participants.
    Comment: Four commenters stated that proposed Secs. 404.2106 and 
416.2206 concerning the basic qualifications for alternate participants 
would not ensure the protection of client rights to the same extent 
provided in the Rehabilitation Act of 1973, as amended, and required in 
State plans. They recommended that the plans of alternate participants 
include specific provisions to protect consumer rights, including 
procedural safeguards and the right to a review of decisions by the 
provider affecting the individual. One commenter indicated that clients 
of State VR agencies are protected because State plans are required to 
undergo public hearings and States are required to provide procedural 
safeguards and advise clients of their rights. Another commenter 
expressed the view that the rights of client participation provided by 
an alternate participant should be equal to the rights that are 
required to be provided by State VR agencies, including providing for 
participation by the client in the development of an IWRP and providing 
procedural safeguards and the right to appeal decisions affecting the 
individual.
    Response: We agree with the comments regarding the need to protect 
client rights when we make arrangements for VR services for 
beneficiaries or recipients through alternate participants. The 
regulations provide that an alternate participant must have a plan for 
VR services that is similar to a State plan approved under title I of 
the Rehabilitation Act of 1973, as amended. We will include provisions 
in the negotiated agreement or contract with each alternate participant 
to ensure that the plan of the alternate participant includes 
provisions to protect client rights.
    Comment: Two commenters questioned whether there were sufficient 
incentives for private or public non-State VR service providers to meet 
the requirements that an alternate participant have a plan similar to 
the State plan governing the provision of VR services to individuals 
and that such plan include certain minimum standards for the provision 
of services. They also questioned whether there are interested private 
or public non-State VR service providers that would be able to meet 
these requirements of the regulations.
    Response: The regulations require that an alternate participant 
have a plan for providing services to individuals that is similar to a 
State plan approved under title I of the Rehabilitation Act of 1973, as 
amended. We will solicit expressions of interest in serving as 
alternate participants from qualified private or public non-State VR 
service providers, and will negotiate agreements or contracts with 
those VR service providers that are interested in providing services to 
disabled or blind beneficiaries or recipients under the conditions 
prescribed in the regulations.
    Comment: One non-State VR provider indicated that most providers 
are subject to national accreditation for services rendered and asked 
what outside quality control indicators exist for State VR agencies.
    Response: A State plan for providing VR services must comply with 
the requirements of the Rehabilitation Act of 1973, as amended, and RSA 
regulations. In addition, the 1992 amendments to the Rehabilitation Act 
of 1973 require RSA to develop and publish performance standards and 
indicators for State VR programs. These regulations are in the process 
of development at this writing.

Requirements for Payment--Secs. 404.2108 and 416.2208

    Comment: One commenter believed it was unnecessary to require in 
each claim for payment the information specified in Secs. 404.2108(b) 
(1), (2) and (3) and 416.2208(b) (1), (2) and (3), i.e., a description 
of each service, when the service was provided, and the cost of the 
service. Two commenters objected to providing this information on a 
form prescribed by us.
    Response: We believe that SSA should know what it pays for and, 
therefore, that it is not unreasonable to require that every claim for 
payment must include such basic information as a description of each 
service provided, when the service was provided, and the cost of the 
service. By specifying that the claim for payment containing this 
information be in a form prescribed by us, we did not intend to 
preclude a provider from requesting our approval to use reasonable 
facsimiles of our claim form, such as those generated by a provider's 
automated system.
    Comment: Many commenters objected to the documentation requirements 
set forth in Secs. 404.2108(b)(4) (i) and (ii) and 416.2208(b)(4) (i) 
and (ii), i.e., an explanation of how the service contributed to the 
individual's performance of a continuous 9-month period of SGA, or how 
the service was reasonably expected to motivate or assist the 
individual to perform such a continuous period of SGA, as appropriate. 
The commenters believed that providing this documentation for all 
claims would be burdensome and time-consuming, and would emphasize 
reporting rather than program improvements. These requirements were 
also viewed by a few commenters as a disincentive to serving 
beneficiaries or seeking payment from SSA. Several other commenters 
thought that these requirements questioned the integrity of 
rehabilitation counselors and could lead to second guessing of their 
decisions. Most of these commenters suggested that we delete paragraphs 
(b)(4) (i) and (ii) from these sections. A few suggested that if these 
requirements are retained in the final rules, we should require this 
documentation for some but not all claims for VR payment. For example, 
one commenter suggested that documentation be required for claims for 
payment in cases involving the completion of a continuous 9-month 
period of SGA only where the link between the services provided and the 
accomplishment of 9 continuous months of SGA was not routine or 
apparent. Some commenters did not request that we delete paragraphs 
(b)(4)(i) and (ii), but did recommend that we accept existing 
documentation in lieu of requiring providers to record information on a 
prescribed form.
    Response: Under the Act and our existing regulations, payment may 
be made for services furnished to disabled or blind Social Security 
beneficiaries or SSI recipients in three categories of cases. In cases 
described in Secs. 404.2101(a) and 416.2201(a), payment may be made 
only for services which contributed to the individual's performance of 
a continuous 9-month period of SGA. We continue to believe that there 
are sound reasons for requiring that documentation establishing this 
causal relationship be available for all claims for payment in these 
cases. We also believe that documentation showing how the VR services 
could reasonably be expected to motivate or assist the individual to 
perform SGA must be available for all claims for payment in cases 
described in Secs. 404.2101 (b) and (c) and 416.2201 (b) and (c). 
However, we agree that these requirements could be accomplished in a 
less burdensome manner. Therefore, we will not require that such 
documentation be included for each claim submitted for payment and have 
deleted Secs. 404.2108(b)(4)(i) and (ii) and 416.2208(b)(4)(i) and (ii) 
in the final rules. Instead, such documentation must now be submitted 
only for those claims selected for validation review. This option was 
recommended by a number of commenters and is reflected in 
Secs. 404.2121 and 416.2221 of these final rules. Additionally, in 
revising these sections to require this information in the validation 
review process, we have adopted the recommendation to accept existing 
documentation, such as pertinent parts of the IWRP, as sufficient for 
compliance with these requirements.
    Comment: A few commenters, in commenting on proposed Secs. 404.2108 
and 416.2208, raised questions concerning how we will make VR payments 
to alternate providers. Specifically, questions were raised concerning 
whether private providers would be able to wait until 9 months of SGA 
had been achieved before receiving payment, and whether we will advance 
funds to private providers.
    Response: Alternate providers are subject to the same payment 
provisions as the State VR agencies.

VR Services Contributing to a Continuous Period of SGA-- Secs. 404.2111 
and 416.2211

    Comment: We received comments relating to Secs. 404.2111 and 
416.2211 from nine commenters. Only two commenters acknowledged the 
changes we had proposed to make in these sections of the existing 
rules, and no commenter objected to the proposed changes. Instead, most 
commenters raised questions or sought clarification relating to 
provisions that were unchanged by the proposed rules. Although 
unrelated to the changes in the proposed rules, suggestions were made 
by two commenters that we should specifically state in the final rules 
that supported employment should be considered transitional work 
activity.
    Response: Since no commenters objected to our proposed deletion of 
the words ``might have'' before the phrase ``significantly motivated or 
assisted,'' or to the other changes we proposed to Secs. 404.2111 and 
416.2211, these sections are unchanged from the proposed rules.
    We did not adopt the recommendation to amend Secs. 404.2111 and 
416.2211 to provide that supported employment will be considered 
transitional work activity under these sections. Supported employment 
will qualify as transitional work activity only if it meets the 
definition of transitional work activity already included in 
Secs. 404.2111(a)(2)(i) and 416.2211(a)(2)(i), i.e., employment or 
self-employment which gradually evolved, with or without periodic 
interruption, into SGA. To unequivocally include supported employment 
in these sections might lead to the erroneous conclusion that supported 
employment should always be viewed as transitional employment, whether 
it does or does not meet this definition.

Refusal of VR Services--Secs. 404.2113 and 416.2213

    Comment: Six commenters questioned the requirement in proposed 
Secs. 404.2113 and 416.2213 for reporting VR refusals within 60 days 
after the State VR agency or alternate participant makes a preliminary 
finding that an individual refuses to continue to accept VR services or 
fails to cooperate in a VR program. One commenter indicated that 
reporting refusals within a timeframe would create an additional 
administrative burden for State VR agencies. Three commenters 
recommended that this deadline for reporting refusals be deleted to 
allow the State VR agencies the latitude they currently have in 
reporting VR refusals to SSA. Another commenter indicated that many 
times individuals who initially refuse services will change their 
minds. The commenter believed that in such cases, reporting their 
refusal too early might undermine the rehabilitation process instead of 
helping. One commenter suggested that the 60-day reporting requirement 
be waived in cases where the State VR agency can provide good cause 
justification for not reporting a refusal within the timeframe.
    Response: We did not adopt the recommendation to delete this 
provision. The purpose of the 60-day reporting requirement is to 
encourage disabled or blind beneficiaries and recipients to participate 
in VR services by providing for stricter enforcement of the VR refusal 
provisions of the law. We believe that providing procedures in the 
regulations to strengthen such enforcement will encourage participation 
of beneficiaries and recipients in VR programs. The requirement for 
reporting refusals within 60 days does not change the latitude State VR 
agencies currently have in determining whether a person can benefit 
from VR services and in working with a person to encourage him or her 
to participate or continue participation in a VR program; it only 
requires that they report within 60 days after making a finding of VR 
refusal. It also should not create an additional administrative burden 
on State or other VR service providers because it does not change how 
refusals are currently reported or the procedures for processing 
refusal cases.
    We do not believe that the reporting of a refusal will undermine 
the rehabilitation process in cases of individuals who have initially 
refused VR services. Instead, it should provide an incentive for such a 
person to decide to participate in services rather than to delay such 
participation and risk losing benefits. We did not provide a waiver of 
this reporting requirement in cases where a provider can establish good 
cause justification for not reporting a refusal within the timeframe. 
Once a provider has completed its evaluation and determined that a 
refusal situation exists, it should not be necessary to delay the 
reporting of the refusal beyond 60 days.
    Comment: One advocacy group wanted to know how a reported refusal 
situation affects payment to a provider. It wanted to know whether a 
provider would be paid in situations where a client drops out of a 
program after several months but is provided assistance that is 
designed to improve the client's quality of life.
    Response: Under the Act and our existing regulations, State VR 
agencies and alternate participants may be paid for the costs of VR 
services furnished to disabled or blind beneficiaries or recipients in 
three categories of cases. One of the categories of cases is where the 
individual, without good cause, refuses to continue to accept VR 
services or fails to cooperate in such a manner as to preclude the 
individual's successful rehabilitation. Our existing regulations 
provide for payments to providers for the costs of VR services provided 
to beneficiaries/recipients in refusal situations only when the 
individual has at least applied for services and his or her benefits 
have been suspended because SSA has determined that the refusal to 
participate or continue in the VR program is without good cause.
    Comment: Two commenters suggested that we should place more of an 
emphasis on encouraging beneficiaries to participate in VR services 
rather than on the reporting of refusals. One commenter recommended 
that the final regulations should require State VR agencies and 
alternate participants to make substantial efforts to encourage 
individuals to participate in VR services prior to their reporting a 
refusal. Another commenter indicated that stricter enforcement of the 
VR refusal provisions would not motivate more people to continue in a 
VR program unless SSA becomes more involved earlier in the VR process 
and directly informs beneficiaries of the importance of working with VR 
agencies.
    Response: Our current operating instructions on processing VR 
refusal cases include procedures which emphasize the importance of 
encouraging participation of beneficiaries and recipients in VR 
programs. These procedures require State VR agencies and alternate 
participants to report refusals only after they have made substantial 
efforts to encourage disabled or blind individuals to participate in VR 
services and to resolve problems preventing participation prior to 
reporting a refusal. We are currently working to improve the procedures 
we follow when referring beneficiaries and recipients for VR services 
and to provide more information to beneficiaries and recipients 
regarding rehabilitation and employment opportunities and the 
importance of working with VR service providers.
    Comment: Two commenters suggested that SSA should place more 
emphasis on enforcing the VR refusal sanctions rather than on the 
reporting of VR refusal cases. One State VR agency stated that it 
reports few refusal cases because few beneficiaries or recipients have 
sanctions imposed against their benefits because of VR refusal. The 
agency recommended that the process of enforcing VR cooperation be 
improved to make the reporting provision viable.
    Response: We do not believe that a change to the regulation is 
necessary to enhance our enforcement of the VR refusal sanctions. Our 
current operating instructions for processing refusal cases, which were 
issued in December 1991, emphasize enforcement of the refusal sanctions 
and provide specific instructions for suspending benefits in cases 
where we have determined that good cause does not exist for refusing to 
participate in VR services.
    Comment: Several commenters expressed concern about whether a VR 
provider would be able to distinguish between the effects of a 
psychiatric impairment in refusing VR services and an actual refusal. 
The commenters recommended that SSA obtain a thorough psychiatric 
evaluation or new report from the treating psychiatrist prior to any 
actions based on the person's motivation to participate in VR services. 
Two commenters noted that people with psychiatric disabilities who 
refuse VR services or fail to cooperate may too easily be considered 
unwilling to cooperate, even though such unwillingness may be due to 
their illness rather than to a non-valid reason. They were concerned 
that our proposed regulations would permit such people to be removed 
from the rolls because of refusal to cooperate when the refusal is due 
to the person's illness. Another commenter recommended that the 
definition of VR refusal be more specific regarding mental retardation, 
mental illness, and other psychological disorders.
    Response: We did not make any changes to Secs. 404.2113 and 
416.2213 in response to these comments. Sections 404.422 and 416.1715 
of our existing regulations provide that deductions will not be imposed 
against an individual's Social Security benefits, and an individual's 
SSI benefits will not be suspended, on account of a refusal of VR 
services if we find that the individual has good cause for refusing 
such services. Section 416.1715(b) of our SSI regulations lists 
examples of good cause, including being physically or mentally unable 
to participate in the services that are offered. We use the same 
criteria for Social Security cases. Consequently, a person's 
psychiatric and/or medical condition must be evaluated and taken into 
account in determining whether good cause for refusing VR services 
exists and prior to any determination that deductions will be imposed 
against Social Security benefits or that SSI benefits will be 
suspended. In addition, we published final rules in the Federal 
Register on January 12, 1994 (59 FR 1629) to amend Secs. 404.422 and 
416.1715 to provide that we will take into account any physical, 
mental, educational, or linguistic limitations of an individual in 
determining whether the individual has good cause for refusing VR 
services.

Services for Which Payment May Be Made--Secs. 404.2114 and 416.2214

    Comment: In commenting on proposed Secs. 404.2114 and 416.2214, 
many commenters expressed the belief that there is no need to list the 
specific services for which payment may be made since such services are 
already identified in the Rehabilitation Act of 1973, as amended, and 
in the RSA regulations. Commenters were concerned that SSA's listing of 
such services would create confusion with those already identified in 
the Rehabilitation Act of 1973, as amended, and in the implementing 
regulations promulgated by RSA, and could create a double standard 
between Social Security beneficiaries or SSI recipients and other 
vocational rehabilitation clients. A few commenters expressed concern 
that the list was intended to permit more VR payment denials.
    Response: Our intent in listing specific services in these sections 
was to further clarify the services for which payment may be made under 
our programs and to provide a reference under SSA's regulations for use 
with potential alternate providers. With some modifications to take 
account of the Rehabilitation Act Amendments of 1992, discussed below, 
the services listed in these final rules are essentially the same as 
those currently described in the RSA regulations. There are minor 
differences in our final regulations, relating primarily to the issue 
of the individual's attainment of employment at or above the SGA level, 
which is the basic objective of our VR payment programs. Our final 
regulations, therefore, do not precisely mirror the descriptions of VR 
services contained in the RSA regulations or in the Rehabilitation Act 
Amendments of 1992.
    It is not our intent, in making this change in our rules, to 
introduce conflicts between the handling of cases of Social Security 
beneficiaries or SSI recipients and the cases of other vocational 
rehabilitation clients, nor do we intend, by including this list in our 
rules, to permit more denials of payments to providers of such 
services. We believe that the list of services is as extensive as that 
provided in the RSA regulations or in the Rehabilitation Act Amendments 
of 1992. Moreover, it provides a general category of VR services in 
Secs. 404.2114(b)(15) and 416.2214(b)(15), for ``Other goods and 
services that can reasonably be expected to motivate or assist the 
individual in returning to, or continuing in, SGA.'' In these final 
regulations, we have modified some of the descriptions of the VR 
services in Secs. 404.2114(b) and 416.2214(b) to reflect changes which 
the Rehabilitation Act Amendments of 1992 made to the list of VR 
services covered under the Rehabilitation Act of 1973. As the need 
arises, we will consider making further changes to Secs. 404.2114(b) 
and 416.2214(b), as may be necessary and appropriate, to reflect other 
relevant changes that may be made in the law or in RSA regulations to 
ensure that the list of VR services in these sections of our 
regulations is up-to-date.
    Comment: A few commenters expressed concern that the references to 
``SGA'' and ``the SGA level'' contained in proposed Secs. 404.2114 and 
416.2214 could be read to permit the exclusion of payment of those 
expenses aimed at achieving employment at a level higher than the SGA 
threshold. One commenter specifically recommended that the reference to 
SGA be revised to state, ``at or above SGA level.''
    Response: It was not our intent to exclude payment for services 
aimed at employment above the SGA threshold. However, we recognize that 
the phrase ``at the SGA level'' in paragraphs (b)(3) and (b)(12) of 
proposed Secs. 404.2114 and 416.2214 could be misleading. Therefore, we 
have revised these paragraphs in the final rules to state ``at or above 
the SGA level,'' to prevent any misunderstandings in this regard.
    Comment: One commenter requested further clarification as to what 
costs for diagnostic services would be paid, believing that the 
proposed rules appeared to limit these costs to determining eligibility 
for vocational rehabilitation services. This commenter believed that 
the proposed rules would exclude payment for certain diagnostic 
services provided later in the rehabilitation process, such as 
preparing the rehabilitation plan and determining appropriate 
rehabilitation goals. Another commenter thought that the proposed rules 
would preclude payment for the cost of vocational evaluation and 
disagreed with the rules for this reason. This commenter stated that 
vocational evaluation is often necessary to determine an individual's 
eligibility to receive services, and provides a template for developing 
the IWRP.
    Response: It was not our intent to preclude payment for diagnostic 
or other evaluation services, including vocational evaluations, which 
are necessary to assist an individual and a VR counselor in preparing 
an IWRP or in determining an appropriate vocational goal. Such services 
are covered under Secs. 404.2114(b)(1) and 416.2214(b)(1). We 
recognize, however, that Secs. 404.2114(a) and 416.2214(a) of the 
proposed rules could be read to preclude payment for the costs of 
diagnostic or other evaluation services which are provided after an 
individual has been determined to be eligible for VR services and prior 
to the implementation of an IWRP (or similar document in the case of an 
alternate participant). Therefore, to address the concerns raised by 
the commenters and avoid any misunderstanding regarding our intent, we 
are adding the phrase ``or the nature and scope of the services to be 
provided'' to Secs. 404.2114(a)(1) and 416.2214(a)(1) to clarify that 
payment may be made for diagnostic or other evaluation services which 
are provided between these two stages of the rehabilitation process and 
which are necessary to determine the nature and scope of the services 
to be provided to the individual.
    Comment: Three commenters believed that there was no need to 
include provisions for seeking grant assistance for educational 
services under Secs. 404.2114(b)(4) and 416.2214(b)(4) since similar 
provisions are already mandated by the Rehabilitation Act of 1973, as 
amended.
    Response: While we acknowledge that such ``similar benefit'' 
provisions are already mandated under the Rehabilitation Act of 1973, 
as amended, and the RSA regulations, we are including the requirement 
for seeking grant assistance from other sources for the costs of 
training or training services in institutions of higher education in 
our final regulations to ensure compliance with this requirement by 
alternate participants. The requirements of the Federal/State 
rehabilitation program administered by RSA under title I of the 
Rehabilitation Act of 1973, as amended, apply to State VR agencies. 
With the expanded use of private or public non-State VR service 
providers as alternate participants under our VR payment programs, we 
believe it is necessary to include in our regulations certain 
requirements for payment of services and cost under our programs, even 
if such requirements when applied to State VR agencies are duplicative 
of the requirements under the Rehabilitation Act of 1973, as amended, 
and RSA regulations.
    Comment: One State VR agency raised a question about the 
qualifications of the SSA personnel who will determine whether the 
services provided could reasonably be expected to motivate or assist 
the individual in returning to, or continuing in, SGA as expressed in 
Secs. 404.2114(a)(2) and 416.2214(a)(2). The commenter believed that 
since a counselor has specialized training and experience, and has 
extensive client information, SSA personnel who will determine this 
issue should have equal qualifications in order to make appropriate 
decisions and ensure that the review process does not unnecessarily 
delay the VR payment process.
    Response: We appreciate the need for SSA to ensure that qualified 
personnel are involved in the review process. It is not our intent 
under these regulations to attempt to ``second guess'' the decisions 
made by the VR counselor so long as the VR services involved could 
reasonably have been expected to motivate or assist the individual in 
progressing toward the goal of performing SGA. We will ensure that the 
reviewers are trained and qualified to perform such a review.

Cost Containment--Secs. 404.2117 and 416.2217

    Comment: A few commenters stated that our ``requirement'' (rather 
than our expectation) that they seek similar benefits when providing 
services to beneficiaries or recipients is duplicative of an RSA 
requirement. They viewed this duplication as unnecessary or as imposing 
an additional reporting burden.
    Response: It was our intent to establish consistency with the RSA 
regulations in 34 CFR part 361. We see no additional reporting 
requirement and regard this as a change for reasons of consistency 
only.
    Comment: The requirement in proposed Secs. 404.2117(c)(2) and 
416.2217(c)(2) that State VR agencies and alternate participants submit 
to SSA on a yearly basis a summary of their cost-containment policies 
drew strong criticism from a number of State VR agencies. It was 
described as duplicative of RSA reporting requirements and 
administratively burdensome. One commenter believed that the 
requirement in these sections represented gross over-regulation; 
another believed that it would result in nonessential documentation.
    Commenters who did not recommend deleting this requirement 
suggested that the timeframe for submitting cost-containment policies 
be changed from annually to every 3 years. This would make SSA's 
reporting requirements consistent with the timeframe States must use 
when submitting plans to RSA.
    Response: In proposing the requirement in paragraph (c)(2) of 
Secs. 404.2117 and 416.2217, it was our intent to have some written 
assurance that providers of rehabilitation services would have cost-
containment policies in effect and to ensure that these policies were 
adhered to when providing or procuring goods and services for which 
payment would be requested from SSA. In consideration of the comments 
we received and our own reevaluation of the requirement set forth in 
the proposed rules, we have made substantial changes to paragraph 
(c)(2) in the final rules.
    The final rules require that State VR agencies submit to SSA, by 
the end of the first quarter of each calendar year, a certification 
that approved cost-containment policies are in effect and are adhered 
to in procuring and providing goods and services for which the State VR 
agency requests payment under our regulations. Such certification must 
be signed by the State's chief financial official or the head of the VR 
agency. Additionally, such certification must specify the basis upon 
which it is made, e.g., a recent audit by an authorized State, Federal 
or private auditor, or other independent compliance review, and the 
date of such audit or compliance review. In the case of an alternate 
participant, these certification requirements will be incorporated into 
the negotiated agreement or contract. We also provide in the final 
rules that we may request copies of a provider's specific written cost-
containment policies if we determine that such additional information 
is necessary to ensure compliance with the requirements of our 
regulations, and that the provider shall submit copies of these 
policies when requested. We believe that these certification 
requirements set forth in the final rules will minimize any 
administrative burden that might have resulted from annual submissions 
of summaries of cost-containment policies to SSA, while still assuring 
that such policies are in effect and in use.
    Comment: Several private providers commented that alternate 
participants would need additional guidance on what constitutes a cost-
containment plan for SSA purposes.
    Response: We agree that alternate participants will need such 
guidance but believe that it would be inappropriate to include such 
guidance in these regulations. Instead, we will provide specific 
guidance when we develop contractual agreements with potential 
alternate participants who express an interest in serving disabled or 
blind beneficiaries and recipients.

Validation Reviews--Secs. 404.2121 and 416.2221

    Comment: Thirteen State VR agencies, as well as the Council of 
State Administrators of Vocational Rehabilitation and RSA, commented on 
proposed Secs. 404.2121 and 416.2221. Most commenters identified two 
major areas of concern about the proposal permitting prepayment or 
postpayment validation review of claims for payment for VR services. 
First, many commenters questioned the need for prepayment reviews since 
a process for postpayment review of State VR agency claims has been in 
place for a substantial period of time and, in their experience, has 
proven to be an effective and viable approach. These commenters 
expressed the view that prepayment reviews would unnecessarily delay 
payments and would constitute increased paperwork and administrative 
costs for the State VR agencies.
    Second, many commenters were concerned that the proposed rules 
would give SSA extremely broad discretionary authority to conduct an 
unspecified number of reviews on a prepayment or postpayment basis, 
without providing any guidelines regarding the frequency of such 
reviews or permitting any negotiation or appeal procedures for the 
State VR agencies with respect to the initiation of such reviews. Some 
commenters suggested revising these proposed sections to specify the 
frequency and timing of the validation reviews and to allow an appeal 
by the State VR agency prior to our initiating an increase in 
validation reviews. Also, some commenters suggested that the expanded 
use of validation reviews be limited to situations where evidence 
already pointed to inaccurate or noncompliant claims.
    Response: In proposing the revisions to Secs. 404.2121 and 
416.2221, it was not our intention to set review standards which would 
be arbitrarily burdensome or time-consuming, or which would needlessly 
delay the VR payment process. We envisioned the proposed validation 
reviews as a mechanism to ensure a cost-effective payment program which 
would be supported by sufficient documentation to provide for 
reasonable accountability and sound business practices.
    To maintain appropriate accountability and oversight of this 
growing program, we intend to conduct some validation reviews on a 
prepayment basis and some on a postpayment basis for all VR providers, 
i.e., State VR agencies and alternate participants. We intentionally 
did not specify in the proposed rules particular guidelines for the 
implementation of these prepayment and postpayment reviews. We intended 
to allow some discretion under these sections in order to permit 
flexibility for implementing reviews for both State VR agencies and 
alternate participants; ensure compliance with the provisions for 
payment; and reinforce our goal of conducting quality, comprehensive 
validation reviews. We are aware that sample sizes will have to be 
determined based upon the availability of resources, workload levels, 
and the volume and accuracy of claims being presented by individual 
States and alternate participants. While it is not our intention to 
unnecessarily impede or delay the process for paying claims, we must 
have the discretion and flexibility to determine the volume of claims 
selected for prepayment and postpayment reviews. For these reasons, we 
have not made changes in response to the above comments.
    Comment: One State VR agency interpreted the documentation 
requirements under the validation review process as meaning that SSA 
would only accept original documents as acceptable proof of costs and 
services provided. The agency stated that this requirement was 
unreasonable and would present unnecessary burdens to the State VR 
agencies to attempt to maintain and provide such original 
documentation, particularly since many rehabilitation cases require 
more time to complete than record retention guidelines call for. It 
recommended that our documentation and retention requirements comply 
with the Federal Grants Management Handbook criteria.
    Response: We believe the commenter may have misinterpreted 
Secs. 404.2121(a) and 416.2221(a) in regard to acceptable proofs of 
costs for services provided. We stated in these proposed sections that 
copies of records of the services and costs would be sufficient 
documentation, and that we reserved the right to examine any records 
relating to services and costs. We did not intend to require that only 
original documents would be acceptable as proofs of costs under these 
sections. Also, under Secs. 404.2108(f) and 416.2208(f), a requirement 
for participation in SSA's VR payment program is that the State VR 
agency or alternate participant must maintain, and provide as we may 
require (i.e., for validation reviews), adequate documentation of all 
services or costs, regardless of other record retention requirements 
governing such VR agencies or alternate participants.
    Comment: One State VR agency recommended that onsite reviews be 
considered for conducting the validation review process in order to 
expedite the process and resolve any payment problems, as well as to 
permit the reviewers to gain a better understanding of the 
rehabilitation program's impact on individual clients.
    Response: We appreciate this recommendation and will consider 
onsite reviews as a possible option for some validation review 
activities to the extent that resources will permit.
    Comment: One commenter recommended that Secs. 404.2121 and 416.2221 
include a time requirement under which SSA must provide the State VR 
agency a report of the validation review findings. The commenter 
recommended that a State VR agency be notified of the validation review 
determination within 45 days after the review was completed. The 
commenter believed that timely feedback to the State VR agencies would 
permit corrective actions to be initiated as quickly as possible.
    Response: We are not including in these regulations a specific 
timeframe for notifying the State VR agency or alternate participant of 
validation review determinations. However, we believe that notifying 
the VR provider of our determination within 45 days of the completion 
of a validation review is reasonable, and we expect to provide such 
notification sooner than 45 days.

Other Comments

    Comment: As we requested in the NPRM, most of the commenters 
provided their views on the feasibility of SSA establishing an 
experience-based fee schedule mechanism as a means for achieving a 
simplified payment process which would also ensure a fair 
representation of actual costs incurred by State VR agencies and 
alternate participants. Almost all of these commenters were opposed to 
this initiative. A number of reasons for this position were presented, 
including the view that such a fee schedule could act as an inhibiting 
factor to the State VR agencies' achievement of their goal of being 
able to provide individualized rehabilitation services which would be 
most likely to benefit a given client. Most commenters expressed the 
belief that an experience-based fee schedule would not be able to 
fairly represent the costs incurred by the various State agencies 
because these costs can vary considerably from State to State and 
region to region. Many commenters also argued that there is no need for 
SSA to establish a fee schedule because individual States are required 
to have fee schedules which are based on local conditions and provider/
consumer negotiations. Many commenters believed that imposing a fee 
schedule would not improve the payment process and recommended instead 
that the current process be continued.
    Response: Given the overwhelmingly negative response we received to 
this question, we will not establish an experience-based fee schedule 
at this time.
    Comment: One commenter recommended that the references to 
individuals with certain disabilities or impairments be made consistent 
with the terms used in the Americans with Disabilities Act and the 
Rehabilitation Reauthorization Act.
    Response: We have not adopted this recommendation. Because of the 
special meanings of terms used in the Social Security and SSI programs, 
we must ensure that the references we make to blind or disabled 
beneficiaries and recipients in these rules remain consistent with the 
applicable provisions of the Social Security Act and the other Social 
Security and SSI regulations we have issued pursuant to this Act.
    Comment: Many commenters expressed general displeasure with the 
proposed regulatory changes in total, believing them to represent undue 
interference and bureaucratic overcontrol in the work of the State VR 
agencies. They stated that the proposed changes would constitute 
serious administrative burdens, and would act as a disincentive to 
State participation. Some of the State VR agencies believed these 
proposed changes were intentionally adversarial to them and represented 
an attempt on the part of SSA to unduly restrict VR payments.
    Response: Our intention was not to restrict VR payments, institute 
interference or overcontrol, or to be adversarial in nature. In reply 
to these comments, we can only reiterate that we proposed and are now 
making regulatory changes to improve the administration and cost-
effectiveness of the SSA VR payment program, to ensure that the 
services we pay for bear a reasonable relationship to our goal of 
returning individuals to substantial gainful work activity, and to make 
VR services more readily available to disabled or blind beneficiaries 
and recipients.
    Our VR payment program has expanded over the last 10 years and is 
rapidly approaching a $100 million program. It is understandable that a 
program of such size would come under closer scrutiny and would require 
assurances of proper administration. A minimal element for ensuring 
proper administration is to know what SSA is paying for; hence, we 
proposed and are now issuing additional requirements for submitting a 
claim. In addition, for us to expand our referral mechanism to include 
alternate participants, we need to know the outcome of the referrals we 
send to the State VR agencies.
    As a result of the comments which discussed additional 
administrative burdens under the proposed rules, we have made certain 
revisions, which are discussed in the individual sections above, to 
lessen the impact of these regulatory changes.

Regulatory Procedures

Executive Order 12291

    The Secretary has determined that these are not major rules under 
Executive Order 12291. We expect that these regulations would be at 
least cost-neutral over time. While it is not yet possible to present 
realistic estimates, the expectation is that the program savings from 
the additional successful rehabilitations and resultant benefit 
terminations would exceed any additional administrative costs, 
including the cost of providing VR evaluations and services.
    Nevertheless, it is clear that the potential exists for VR payment 
costs to increase, even if they are later offset by benefit savings. If 
the current workload of claims for successful rehabilitations were to 
increase, the annual cost in VR program payments would be an additional 
$5.8 million for each 1000 claims submitted. In its 1988 report, the 
Disability Advisory Council estimated that the trust funds save at 
least $4 for each $1 spent. Using that as a basis, savings to the trust 
funds could increase by $23.2 million for each additional 1000 claims.
    Because these regulations do not meet any of the threshold criteria 
for a major rule, a regulatory impact analysis is not required.

Paperwork Reduction Act

    These rules contain information collection requirements. The 
requirements in Sec. 404.2108 (b) and (f) and in Sec. 416.2208 (b) and 
(f), which deal with claims for reimbursement for vocational 
rehabilitation (VR) services, already have partial clearance by the 
Office of Management and Budget (OMB) under OMB No. 0960-0310 (form 
SSA-199; State Vocational Rehabilitation Agency Claim). However, these 
sections expand the requirements of the previous regulations to provide 
for the collection of additional information. Also, the changes to 
Secs. 404.2104, 404.2117, 404.2121, 416.2204, 416.2217 and 416.2221 
contain new reporting requirements.
    As required by section 2(a) of the Paperwork Reduction Act of 1980, 
44 U.S.C. 3504(h), we submitted a copy of the proposed rules to OMB for 
its review of these information collection requirements. Other 
organizations and individuals that wanted to submit comments on these 
information collection requirements were asked to direct them to the 
Social Security Administration, Attn: Reports Clearance Officer, 1-A-21 
Operations Building, 6401 Security Boulevard, Baltimore, MD 21235, and 
to the Office of Information and Regulatory Affairs, OMB, New Executive 
Office Building, Room 3208, Washington, DC 20503, ATTENTION: Desk 
Officer for HHS.
    Public reporting burden for these collections of information is 
estimated as follows according to the section of the rule: 
Secs. 404.2104 and 416.2204--80 minutes per response times 960 
responses yearly = 1,280 hours; Secs. 404.2108 and 416.2208--15 minutes 
per response times 12,000 responses yearly = 3,525 hours. (Note: The 
burden shown here is in addition to that already approved by OMB); 
Secs. 404.2113 and 416.2213--No additional burden; Secs. 404.2117 and 
416.2217--4 hours per response for the first year times 80 responses = 
320 hours; thereafter, responses are estimated to take 1 hour, so the 
burden is estimated to be 80 hours in subsequent years; and 
Secs. 404.2121 and 416.2221--70 minutes per response times 1,500 
responses annually = 1,750 hours. (Note: The burden shown here is in 
addition to that already approved by OMB.)

Regulatory Flexibility Act

    We certify that these regulations will not have a significant 
economic impact on a substantial number of small entities. Therefore, a 
regulatory flexibility analysis as provided in Public Law 96-354, the 
Regulatory Flexibility Act of 1980, is not required.
    These regulations apply to States and certain alternate providers 
of VR services which are willing to provide services to disabled or 
blind beneficiaries or recipients under our VR payment programs under 
the conditions specified in the regulations. While the changes to the 
regulations permit us to make greater use of alternate participants 
under these programs, the regulations do not impose any significant 
economic burdens on these alternate VR service providers which may be 
small entities. Under the Act, we may arrange for VR services for 
beneficiaries or recipients by agreement or contract with alternate VR 
service providers where the State is unwilling to participate or does 
not have an appropriate plan for VR services. The Act requires that the 
provision of VR services by alternate participants, and the payment to 
alternate participants for such services, shall be subject to the same 
conditions that would apply to the States. Our existing regulations 
provide that an alternate participant must have a plan for VR services 
that is similar to an appropriate State plan. These amended regulations 
do not change this requirement but clarify that the plans of alternate 
participants, like a State plan for VR services, must ensure, among 
other things, that the provision of VR services will meet certain 
minimum standards. These regulations also clarify that we will not 
enter into a written agreement or contract with a private or other non-
State VR provider to serve as an alternate participant unless such 
provider meets certain basic qualifications. The regulations do not 
require private or other non-State VR providers to participate in the 
VR payment programs. Rather, the regulations increase the opportunity 
for these providers to participate in these programs if they wish to do 
so.

(Catalog of Federal Domestic Assistance Programs Nos. 93.802, Social 
Security-Disability Insurance; 93.807, Supplemental Security Income)

List of Subjects

20 CFR Part 404

    Administrative Practice and Procedure, Blind, Disability benefits, 
Old-Age, Survivors and Disability Insurance, Reporting and 
recordkeeping requirements, Social Security.

20 CFR Part 416

    Administrative Practice and Procedure, Aged, Blind, and Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental Security Income (SSI).

    Dated: September 8, 1993.
Lawrence H. Thompson,
Principal Deputy Commissioner of Social Security.
    Approved: November 29, 1993.
Donna E. Shalala,
Secretary of Health and Human Services.
    For the reasons set out in the preamble, we are amending part 404, 
subpart V, and part 416, subpart V, of chapter III of title 20, Code of 
Federal Regulations, as set forth below.

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE 
(1950- )

Subpart V--Payments for Vocational Rehabilitation Services

    1. The authority citation for subpart V of part 404 continues to 
read as follows:

    Authority: Secs. 205(a), 222, and 1102 of the Social Security 
Act; 42 U.S.C. 405(a), 422, and 1302.

    2. Section 404.2102 is amended by revising paragraph (b), by 
redesignating paragraphs (c) through (n) as paragraphs (d) through (o), 
by adding a new paragraph (c), and by revising redesignated paragraphs 
(e) and (l) to read as follows:


Sec. 404.2102  Purpose and scope.

* * * * *
    (b) Section 404.2104 explains how State VR agencies or alternate 
participants may participate in the payment program under this subpart.
    (c) Section 404.2106 describes the basic qualifications for 
alternate participants.
* * * * *
    (e) Sections 404.2110 through 404.2111 describe when an individual 
has completed a continuous period of SGA and when VR services will be 
considered to have contributed to that period.
* * * * *
    (l) Sections 404.2120 and 404.2121 describe the audits and the 
prepayment and postpayment validation reviews we will conduct.
* * * * *
    3. Section 404.2103 is amended by adding a new definition of 
``Accept the beneficiary as a client for VR services'' immediately 
before the definition of ``Act'' and adding a new definition of ``Place 
the beneficiary into an extended evaluation process'' immediately 
before the definition of ``Secretary'' to read as follows:


Sec. 404.2103  Definitions.

* * * * *
    Accept the beneficiary as a client for VR services means that the 
State VR agency determines that the individual is eligible for VR 
services and places the individual into an active caseload status for 
development of an individualized written rehabilitation program.
* * * * *
    Place the beneficiary into an extended evaluation process means 
that the State VR agency determines that an extended evaluation of the 
individual's VR potential is necessary to determine whether the 
individual is eligible for VR services and places the individual into 
an extended evaluation status.
* * * * *
    4. Section 404.2104 is revised to read as follows:


Sec. 404.2104  Participation by State VR agencies or alternate 
participants.

    (a) General. In order to participate in the payment program under 
this subpart through its VR agency(ies), a State must have a plan which 
meets the requirements of title I of the Rehabilitation Act of 1973, as 
amended. An alternate participant must have a similar plan and 
otherwise qualify under Sec. 404.2106.
    (b) Participation by States. (1) The opportunity to participate 
through its VR agency(ies) with respect to disability beneficiaries in 
the State will be offered first to the State in accordance with 
paragraph (c) of this section, unless the State has notified us in 
advance under paragraph (e)(1) of this section of its decision not to 
participate or to limit such participation.
    (2) A State with one or more approved VR agencies may choose to 
limit participation of those agencies to a certain class(es) of 
disability beneficiaries. For example, a State with separate VR 
agencies for the blind and disabled may choose to limit participation 
to the VR agency for the blind. In such a case, we would give the 
State, through its VR agency for the blind, the opportunity to 
participate with respect to blind disability beneficiaries in the State 
in accordance with paragraph (d) of this section. We would arrange for 
VR services for non-blind disability beneficiaries in the State through 
an alternate participant(s). A State that chooses to limit 
participation of its VR agency(ies) must notify us in advance under 
paragraph (e)(1) of this section of its decision to limit such 
participation.
    (3) If a State chooses to participate by using a State agency other 
than a VR agency with a plan for VR services approved under title I of 
the Rehabilitation Act of 1973, as amended, that State agency may 
participate only as an alternate participant.
    (c) Opportunity for participation through State VR agencies. (1) 
Unless a State has decided not to participate or to limit 
participation, we will give the State the opportunity to participate 
through its VR agency(ies) with respect to disability beneficiaries in 
the State by referring such beneficiaries first to the State VR 
agency(ies) for necessary VR services. A State, through its VR 
agency(ies), may participate with respect to any beneficiary so 
referred by accepting the beneficiary as a client for VR services or 
placing the beneficiary into an extended evaluation process and 
notifying us under paragraph (c)(2) of this section of such acceptance 
or placement.
    (2)(i) In order for the State to participate with respect to a 
disability beneficiary whom we referred to a State VR agency, the State 
VR agency must notify the appropriate Regional Commissioner (SSA) in 
writing or through electronic notification of its decision either to 
accept the beneficiary as a client for VR services or to place the 
beneficiary into an extended evaluation process. The notice must be 
received by the appropriate Regional Commissioner (SSA) no later than 
the close of the fourth month following the month in which we referred 
the beneficiary to the State VR agency. If we do not receive such 
notice with respect to a beneficiary whom we referred to the State VR 
agency, we may arrange for VR services for that beneficiary through an 
alternate participant.
    (ii) In any case in which a State VR agency notifies the 
appropriate Regional Commissioner (SSA) in writing within the stated 
time period under paragraph (c)(2)(i) of this section of its decision 
to place the beneficiary into an extended evaluation process, the State 
VR agency also must notify that Regional Commissioner in writing upon 
completion of the evaluation of its decision whether or not to accept 
the beneficiary as a client for VR services. If we receive a notice of 
a decision by the State VR agency to accept the beneficiary as a client 
for VR services following the completion of the extended evaluation, 
the State may continue to participate with respect to such beneficiary. 
If we receive a notice of a decision by the State VR agency not to 
accept the beneficiary as a client for VR services following the 
completion of the extended evaluation, we may arrange for VR services 
for that beneficiary through an alternate participant.
    (d) Opportunity for limited participation through State VR 
agencies. If a State has decided under paragraph (e)(1) of this section 
to limit participation of its VR agency(ies) to a certain class(es) of 
disability beneficiaries in the State, we will give the State the 
opportunity to participate with respect to such class(es) of disability 
beneficiaries by referring such beneficiaries first to the State VR 
agency(ies) for necessary VR services. The State, through its VR 
agency(ies), may participate with respect to any beneficiary so 
referred by accepting the beneficiary as a client for VR services or 
placing the beneficiary into an extended evaluation process and 
notifying us under paragraph (c)(2) of this section of such acceptance 
or placement.
    (e) Decision of a State not to participate or to limit 
participation. (1) A State may choose not to participate through its VR 
agency(ies) with respect to any disability beneficiaries in the State, 
or it may choose to limit participation of its VR agency(ies) to a 
certain class(es) of disability beneficiaries in the State. A State 
which decides not to participate or to limit participation must provide 
advance written notice of that decision to the appropriate Regional 
Commissioner (SSA). Unless a State specifies a later month, a decision 
not to participate or to limit participation will be effective 
beginning with the third month following the month in which the notice 
of the decision is received by the appropriate Regional Commissioner 
(SSA). The notice of the State decision must be submitted by an 
official authorized to act for the State for this purpose. A State must 
provide to the appropriate Regional Commissioner (SSA) an opinion from 
the State's Attorney General verifying the authority of the official 
who sent the notice to act for the State. This opinion will not be 
necessary if the notice is signed by the Governor of the State.
    (2)(i) If a State has decided not to participate through its VR 
agency(ies), we may arrange for VR services through an alternate 
participant(s) for disability beneficiaries in the State.
    (ii) If a State has decided to limit participation of its VR 
agency(ies) to a certain class(es) of disability beneficiaries, we may 
arrange for VR services through an alternate participant(s) for the 
class(es) of disability beneficiaries in the State excluded from the 
scope of the State's participation.
    (3) A State which has decided not to participate or to limit 
participation may participate later through its VR agency(ies) in 
accordance with paragraph (c) of this section, provided that such 
participation will not conflict with any previous commitment which we 
may have made to an alternate participant(s) under paragraph (e)(2) of 
this section. A State which decides to resume participation under 
paragraph (c) of this section must provide advance written notice of 
that decision to the appropriate Regional Commissioner (SSA). Unless a 
commitment to an alternate participant(s) requires otherwise, a 
decision of a State to resume participation under paragraph (c) of this 
section will be effective beginning with the third month following the 
month in which the notice of the decision is received by the 
appropriate Regional Commissioner (SSA) or, if later, with a month 
specified by the State. The notice of the State decision must be 
submitted by an official authorized to act for the State as explained 
in paragraph (e)(1) of this section.
    (f) Use of alternate participants. The Commissioner, by written 
agreement or contract, may arrange for VR services through an alternate 
participant(s) for any disability beneficiary in the State with respect 
to whom the State is unwilling to participate through its VR 
agency(ies). In such a case, we may refer the beneficiary to such 
alternate participant for necessary VR services. The Commissioner will 
find that a State is unwilling to participate with respect to any of 
the following disability beneficiaries in that State:
    (1) A disability beneficiary whom we referred to a State VR agency 
under paragraph (c) or (d) of this section if we do not receive a 
notice within the stated time period under paragraph (c)(2)(i) of this 
section of a decision by the VR agency either to accept the beneficiary 
as a client for VR services or to place the beneficiary into an 
extended evaluation process;
    (2) A disability beneficiary with respect to whom we receive a 
notice under paragraph (c)(2)(ii) of this section of a decision by the 
VR agency not to accept the beneficiary as a client for VR services 
following the completion of the extended evaluation;
    (3) The class(es) of disability beneficiaries excluded from the 
scope of the State's participation if the State has decided to limit 
participation of its VR agency(ies); and
    (4) All disability beneficiaries in the State if the State has 
decided not to participate through its VR agency(ies).

    5. A new Sec. 404.2106 is added to read as follows:


Sec. 404.2106  Basic qualifications for alternate participants.

    (a) General. We may arrange for VR services through an alternate 
participant by written agreement or contract as explained in 
Sec. 404.2104(f). An alternate participant may be a public or private 
agency, organization, institution or individual (that is, any entity 
whether for-profit or not-for-profit), other than a State VR agency.
    (1) An alternate participant must--
    (i) Be licensed, certified, accredited, or registered, as 
appropriate, to provide VR services in the State in which it provides 
services; and
    (ii) Under the terms of the written contract or agreement, have a 
plan similar to the State plan described in Sec. 404.2104(a) which 
shall govern the provision of VR services to individuals.
    (2) We will not use as an alternate participant any agency, 
organization, institution, or individual--
    (i) Whose license, accreditation, certification, or registration is 
suspended or revoked for reasons concerning professional competence or 
conduct or financial integrity;
    (ii) Who has surrendered such license, accreditation, 
certification, or registration pending a final determination of a 
formal disciplinary proceeding; or
    (iii) Who is precluded from Federal procurement or nonprocurement 
programs.
    (b) Standards for the provision of VR services. An alternate 
participant's plan must provide, among other things, that the provision 
of VR services to individuals will meet certain minimum standards, 
including, but not limited to, the following:
    (1) All medical and related health services furnished will be 
prescribed by, or provided under the formal supervision of, persons 
licensed to prescribe or supervise the provision of these services in 
the State;
    (2) Only qualified personnel and rehabilitation facilities will be 
used to furnish VR services; and
    (3) No personnel or rehabilitation facility described in paragraph 
(a)(2) (i), (ii), or (iii) of this section will be used to provide VR 
services.

    6. Section 404.2108 is amended by redesignating paragraphs (b) 
through (f) as (c) through (g), by adding a new paragraph (b), and by 
revising redesignated paragraphs (d) and (f) to read as follows:


Sec. 404.2108  Requirements for payment.

* * * * *
    (b) The claim for payment must be in a form prescribed by us and 
contain the following information:
    (1) A description of each service provided;
    (2) When the service was provided; and
    (3) The cost of the service;
* * * * *
    (d) The VR services for which payment is being requested must have 
been provided under a State plan for VR services approved under title I 
of the Rehabilitation Act of 1973, as amended, or, in the case of an 
alternate participant, under a negotiated plan, and must be services 
that are described in Sec. 404.2114;
* * * * *
    (f) The State VR agency or alternate participant must maintain, and 
provide as we may require, adequate documentation of all services and 
costs for all disability beneficiaries with respect to whom a State VR 
agency or alternate participant could potentially request payment for 
services and costs under this subpart; and
* * * * *
    7. Section 404.2109 is amended by revising paragraph (c), by 
removing the word ``and'' at the end of paragraph (f), by redesignating 
paragraph (g) as paragraph (h), and by adding a new paragraph (g) to 
read as follows:


Sec. 404.2109  Responsibility for making payment decisions.

* * * * *
    (c) Whether an individual, without good cause, refused to continue 
to accept VR services or failed to cooperate in a VR program for a 
month(s) after October 1984, and whether deductions should be imposed 
against the individual's disability benefits;
* * * * *
    (g) Whether a VR service is a service described in Sec. 404.2114; 
and
* * * * *
    8. Section 404.2111 is amended by revising the introductory text by 
revising paragraphs (a)(1) and (a)(2), and by revising the introductory 
text of paragraph (b)(1) to read as follows:


Sec. 404.2111  Criteria for determining when VR services will be 
considered to have contributed to a continuous period of 9 months.

    The State VR agency or alternate participant may be paid for VR 
services if such services contribute to the individual's performance of 
a continuous 9-month period of SGA. The following criteria apply to 
individuals who received more than just evaluation services. If a State 
VR agency or alternate participant claims payment for services to an 
individual who received only evaluation services, it must establish 
that the individual's continuous period or medical recovery (if medical 
recovery occurred before completion of a continuous period) would not 
have occurred without the services provided. In applying the criteria 
below, we will consider services described in Sec. 404.2114 that were 
initiated, coordinated or provided, including services before October 
1, 1981.
    (a) * * *
    (1) One year or less. Any VR services which significantly motivated 
or assisted the individual in returning to, or continuing in, SGA will 
be considered to have contributed to the continuous period.
    (2) More than one year. (i) If the continuous period was preceded 
by transitional work activity (employment or self-employment which 
gradually evolved, with or without periodic interruption, into SGA), 
and that work activity began less than a year after VR services ended, 
any VR services which significantly motivated or assisted the 
individual in returning to, or continuing in, SGA will be considered to 
have contributed to the continuous period.
    (ii) If the continuous period was not preceded by transitional work 
activity that began less than a year after VR services ended, VR 
services will be considered to have contributed to the continuous 
period only if it is reasonable to conclude that the work activity 
which constitutes a continuous period could not have occurred without 
the VR services (e.g., training).
    (b) Continuous period with medical recovery occurring before 
completion. (1) If an individual medically recovers before a continuous 
period has been completed, VR services under paragraph (a) of this 
section will not be payable unless some VR services contributed to the 
medical recovery. VR services will be considered to have contributed to 
the medical recovery if--
* * * * *
    9. Section 404.2113 is revised to read as follows:


Sec. 404.2113  Payment for VR services in a case of VR refusal.

    (a) For purposes of this section, VR refusal means an individual's 
refusal to continue to accept VR services or failure to cooperate in 
such a manner as to preclude the individual's successful 
rehabilitation.
    (b) No later than the 60th day after the State VR agency or 
alternate participant makes a preliminary finding that an individual 
refuses to continue to accept VR services or fails to cooperate in a VR 
program, the State VR agency or alternate participant shall report to 
the appropriate Regional Commissioner (SSA) in writing such 
individual's VR refusal so that we may make the determination described 
in Sec. 404.2109(c).
    (c) Payment can be made to a State VR agency or alternate 
participant for the costs of VR services provided to an individual who, 
after filing an application with the State VR agency or alternate 
participant for rehabilitation services, without good cause, refuses to 
continue to accept VR services or fails to cooperate in such a manner 
as to preclude the individual's successful rehabilitation. A State VR 
agency or alternate participant may be paid, subject to the provisions 
of this subpart, for the costs of VR services provided to an individual 
if deductions have been imposed against the individual's monthly 
disability benefits for a month or months after October 1984 because of 
VR refusal.

    10. Section 404.2114 is revised to read as follows:


Sec. 404.2114  Services for which payment may be made.

    (a) General. Payment may be made for VR services provided by a 
State VR agency in accordance with title I of the Rehabilitation Act of 
1973, as amended, or by an alternate participant under a negotiated 
plan, subject to the limitations and conditions in this subpart. VR 
services for which payment may be made under this subpart include only 
those services described in paragraph (b) of this section which are--
    (1) Necessary to determine an individual's eligibility for VR 
services or the nature and scope of the services to be provided; or
    (2) Provided by a State VR agency under an IWRP, or by an alternate 
participant under a similar document, but only if the services could 
reasonably be expected to motivate or assist the individual in 
returning to, or continuing in, SGA.
    (b) Specific services. Payment may be made under this subpart only 
for the following VR services:
    (1) An assessment for determining an individual's eligibility for 
VR services and vocational rehabilitation needs by qualified personnel, 
including, if appropriate, an assessment by personnel skilled in 
rehabilitation technology, and which includes determining--
    (i) The nature and extent of the physical or mental impairment(s) 
and the resultant impact on the individual's employability;
    (ii) The likelihood that an individual will benefit from vocational 
rehabilitation services in terms of employability; and
    (iii) An employment goal consistent with the capacities of the 
individual and employment opportunities;
    (2) Counseling and guidance, including personal adjustment 
counseling, and those referrals and other services necessary to help an 
individual secure needed services from other agencies;
    (3) Physical and mental restoration services necessary to correct 
or substantially modify a physical or mental condition which is stable 
or slowly progressive and which constitutes an impediment to suitable 
employment at or above the SGA level;
    (4) Vocational and other training services, including personal and 
vocational adjustment, books, tools, and other training materials, 
except that training or training services in institutions of higher 
education will be covered under this section only if maximum efforts 
have been made by the State VR agency or alternate participant to 
secure grant assistance in whole or in part from other sources;
    (5) Maintenance expenses that are extra living expenses over and 
above the individual's normal living expenses and that are incurred 
solely because of and while the individual is participating in the VR 
program and that are necessary in order for the individual to benefit 
from other necessary VR services;
    (6) Travel and related expenses necessary to transport an 
individual for purpose of enabling the individual's participation in 
other necessary VR services;
    (7) Services to family members of a disabled individual only if 
necessary to the successful vocational rehabilitation of that 
individual;
    (8) Interpreter services and note-taking services for an individual 
who is deaf and tactile interpreting for an individual who is deaf and 
blind;
    (9) Reader services, rehabilitation teaching services, note-taking 
services, and orientation and mobility services for an individual who 
is blind;
    (10) Telecommunications, sensory, and other technological aids and 
devices;
    (11) Work-related placement services to secure suitable employment;
    (12) Post-employment services necessary to maintain, regain or 
advance into suitable employment at or above the SGA level;
    (13) Occupational licenses, tools, equipment, initial stocks, and 
supplies;
    (14) Rehabilitation technology services; and
    (15) Other goods and services that can reasonably be expected to 
motivate or assist the individual in returning to, or continuing in, 
SGA.

    11. Section 404.2117 is amended by revising the introductory text 
and by revising paragraphs (b) and (c) to read as follows:


Sec. 404.2117  What costs will be paid.

    In accordance with section 222(d) of the Social Security Act, the 
Secretary will pay the State VR agency or alternate participant for the 
VR services described in Sec. 404.2114 which were provided during the 
period described in Sec. 404.2115 and which meet the criteria in 
Sec. 404.2111, Sec. 404.2112, or Sec. 404.2113, but subject to the 
following limitations:
* * * * *
    (b) The cost must not have been paid or be payable from some other 
source. For this purpose, State VR agencies or alternate participants 
will be required to seek payment or services from other sources in 
accordance with the ``similar benefit'' provisions under 34 CFR part 
361, including making maximum efforts to secure grant assistance in 
whole or part from other sources for training or training services in 
institutions of higher education. Alternate participants will not be 
required to consider State VR services a similar benefit.
    (c)(1) The cost must be reasonable and necessary, in that it 
complies with the written cost-containment policies of the State VR 
agency or, in the case of an alternate participant, it complies with 
similar written policies established under a negotiated plan. A cost 
which complies with these policies will be considered necessary only if 
the cost is for a VR service described in Sec. 404.2114. The State VR 
agency or alternate participant must maintain and use these cost-
containment policies, including any reasonable and appropriate fee 
schedules, to govern the costs incurred for all VR services, including 
the rates of payment for all purchased services, for which payment will 
be requested under this subpart. For the purpose of this subpart, the 
written cost-containment policies must provide guidelines designed to 
ensure--
    (i) The lowest reasonable cost for such services; and
    (ii) Sufficient flexibility so as to allow for an individual's 
needs.
    (2) The State VR agency shall submit to us before the end of the 
first calendar quarter of each year a written statement certifying that 
cost-containment policies are in effect and are adhered to in procuring 
and providing goods and services for which the State VR agency requests 
payment under this subpart. Such certification must be signed by the 
State's chief financial official or the head of the VR agency. Each 
certification must specify the basis upon which it is made, e.g., a 
recent audit by an authorized State, Federal or private auditor (or 
other independent compliance review) and the date of such audit (or 
compliance review). In the case of an alternate participant, these 
certification requirements shall be incorporated into the negotiated 
agreement or contract. We may request the State VR agency or alternate 
participant to submit to us a copy(ies) of its specific written cost-
containment policies and procedures (e.g., any guidelines and fee 
schedules for a given year) if we determine that such additional 
information is necessary to ensure compliance with the requirements of 
this subpart. The State VR agency or alternate participant shall 
provide such information when requested by us.
* * * * *
    12. Section 404.2121 is revised to read as follows:


Sec. 404.2121  Validation reviews.

    (a) General. We will conduct a validation review of a sample of the 
claims for payment filed by each State VR agency or alternate 
participant. We will conduct some of these reviews on a prepayment 
basis and some on a postpayment basis. We may review a specific claim, 
a sample of the claims, or all the claims filed by any State VR agency 
or alternate participant, if we determine that such review is necessary 
to ensure compliance with the requirements of this subpart. For each 
claim selected for review, the State VR agency or alternate participant 
must submit such records of the VR services and costs for which payment 
has been requested or made under this subpart, or copies of such 
records, as we may require to ensure that the services and costs meet 
the requirements for payment. For claims for cases described in 
Sec. 404.2101(a), a clear explanation or existing documentation which 
demonstrates how the service contributed to the individual's 
performance of a continuous 9-month period of SGA must be provided. For 
claims for cases described in Sec. 404.2101(b) or (c), a clear 
explanation or existing documentation which demonstrates how the 
service was reasonably expected to motivate or assist the individual to 
return to or continue in SGA must be provided. If we find in any 
prepayment validation review, that the scope or content of the 
information is inadequate, we will request additional information and 
will withhold payment until adequate information has been provided. The 
State VR agency or alternate participant shall permit us (including 
duly authorized representatives) access to, and the right to examine, 
any records relating to such services and costs. Any review performed 
under this section will not be considered an audit for purposes of this 
subpart.
    (b) Purpose. The primary purpose of these reviews is--
    (1) To ensure that the VR services and costs meet the requirements 
for payment under this subpart;
    (2) To assess the validity of our documentation requirements; and
    (3) To assess the need for additional validation reviews or 
additional documentation requirements for any State VR agency or 
alternate participant to ensure compliance with the requirements under 
this subpart.
    (c) Determinations. In any validation review, we will determine 
whether the VR services and costs meet the requirements for payment and 
determine the amount of payment. We will notify in writing the State VR 
agency or alternate participant of our determination. If we find in any 
postpayment validation review that more or less than the correct amount 
of payment was made for a claim, we will determine that an overpayment 
or underpayment has occurred and will notify the State VR agency or 
alternate participant that we will make the appropriate adjustment.
    (d) Appeals. If the State VR agency or alternate participant 
disagrees with our determination under this section, it may appeal that 
determination in accordance with 404.2127. For purposes of this 
section, an appeal must be filed within 60 days after receiving the 
notice of our determination.

PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND 
DISABLED

Subpart V--Payments for Vocational Rehabilitation Services

    1. The authority citation for subpart V of part 416 continues to 
read as follows:

    Authority: Secs. 1102, 1615, and 1631(d)(1) and (e) of the 
Social Security Act; 42 U.S.C. 1302, 1382d, and 1383(d)(1) and (e); 
sec. 2344 of Pub. L. 97-35, 95 Stat. 867.

    2. Section 416.2202 is amended by revising paragraph (b), by 
redesignating paragraphs (c) through (n) as paragraphs (d) through (o), 
by adding a new paragraph (c), and by revising redesignated paragraphs 
(e) and (l) to read as follows:


Sec. 416.2202  Purpose and scope.

* * * * *
    (b) Section 416.2204 explains how State VR agencies or alternate 
participants may participate in the payment program under this subpart.
    (c) Section 416.2206 describes the basic qualifications for 
alternate participants.
* * * * *
    (e) Sections 416.2210 through 416.2211 describe when an individual 
has completed a continuous period of SGA and when VR services will be 
considered to have contributed to that period.
* * * * *
    (l) Sections 416.2220 and 416.2221 describe the audits and the 
prepayment and postpayment validation reviews we will conduct.
* * * * *
    3. Section 416.2203 is amended by adding a new definition of 
``Accept the recipient as a client for VR services'' immediately before 
the definition of ``Act'' and adding a new definition of ``Place the 
recipient into an extended evaluation process'' immediately before the 
definition of ``Secretary'' to read as follows:


Sec. 416.2203  Definitions.

* * * * *
    Accept the recipient as a client for VR services means that the 
State VR agency determines that the individual is eligible for VR 
services and places the individual into an active caseload status for 
development of an individualized written rehabilitation program.
* * * * *
    Place the recipient into an extended evaluation process means that 
the State VR agency determines that an extended evaluation of the 
individual's VR potential is necessary to determine whether the 
individual is eligible for VR services and places the individual into 
an extended evaluation status.
* * * * *
    4. Section 416.2204 is revised to read as follows:


Sec. 416.2204  Participation by State VR agencies or alternate 
participants.

    (a) General. In order to participate in the payment program under 
this subpart through its VR agency(ies), a State must have a plan which 
meets the requirements of title I of the Rehabilitation Act of 1973, as 
amended. An alternate participant must have a similar plan and 
otherwise qualify under Sec. 416.2206.
    (b) Participation by States. (1) The opportunity to participate 
through its VR agency(ies) with respect to disabled or blind recipients 
in the State will be offered first to the State in accordance with 
paragraph (c) of this section, unless the State has notified us in 
advance under paragraph (e)(1) of this section of its decision not to 
participate or to limit such participation.
    (2) A State with one or more approved VR agencies may choose to 
limit participation of those agencies to a certain class(es) of 
disabled or blind recipients. For example, a State with separate VR 
agencies for the blind and disabled may choose to limit participation 
to the VR agency for the blind. In such a case, we would give the 
State, through its VR agency for the blind, the opportunity to 
participate with respect to blind recipients in the State in accordance 
with paragraph (d) of this section. We would arrange for VR services 
for disabled recipients in the State through an alternate 
participant(s). A State that chooses to limit participation of its VR 
agency(ies) must notify us in advance under paragraph (e)(1) of this 
section of its decision to limit such participation.
    (3) If a State chooses to participate by using a State agency other 
than a VR agency with a plan for VR services approved under title I of 
the Rehabilitation Act of 1973, as amended, that State agency may 
participate only as an alternate participant.
    (c) Opportunity for participation through State VR agencies. (1) 
Unless a State has decided not to participate or to limit 
participation, we will give the State the opportunity to participate 
through its VR agency(ies) with respect to disabled or blind recipients 
in the State by referring such recipients first to the State VR 
agency(ies) for necessary VR services. A State, through its VR 
agency(ies), may participate with respect to any recipient so referred 
by accepting the recipient as a client for VR services or placing the 
recipient into an extended evaluation process and notifying us under 
paragraph (c)(2) of this section of such acceptance or placement.
    (2)(i) In order for the State to participate with respect to a 
disabled or blind recipient whom we referred to a State VR agency, the 
State VR agency must notify the appropriate Regional Commissioner (SSA) 
in writing or through electronic notification of its decision either to 
accept the recipient as a client for VR services or to place the 
recipient into an extended evaluation process. The notice must be 
received by the appropriate Regional Commissioner (SSA) no later than 
the close of the fourth month following the month in which we referred 
the recipient to the State VR agency. If we do not receive such notice 
with respect to a recipient whom we referred to the State VR agency, we 
may arrange for VR services for that recipient through an alternate 
participant.
    (ii) In any case in which a State VR agency notifies the 
appropriate Regional Commissioner (SSA) in writing within the stated 
time period under paragraph (c)(2)(i) of this section of its decision 
to place the recipient into an extended evaluation process, the State 
VR agency also must notify that Regional Commissioner in writing upon 
completion of the evaluation of its decision whether or not to accept 
the recipient as a client for VR services. If we receive a notice of a 
decision by the State VR agency to accept the recipient as a client for 
VR services following the completion of the extended evaluation, the 
State may continue to participate with respect to such recipient. If we 
receive a notice of a decision by the State VR agency not to accept the 
recipient as a client for VR services following the completion of the 
extended evaluation, we may arrange for VR services for that recipient 
through an alternate participant.
    (d) Opportunity for limited participation through State VR 
agencies. If a State has decided under paragraph (e)(1) of this section 
to limit participation of its VR agency(ies) to a certain class(es) of 
disabled or blind recipients in the State, we will give the State the 
opportunity to participate with respect to such class(es) of disabled 
or blind recipients by referring such recipients first to the State VR 
agency(ies) for necessary VR services. The State, through its VR 
agency(ies), may participate with respect to any recipient so referred 
by accepting the recipient as a client for VR services or placing the 
recipient into an extended evaluation process and notifying us under 
paragraph (c)(2) of this section of such acceptance or placement.
    (e) Decision of a State not to participate or to limit 
participation. (1) A State may choose not to participate through its VR 
agency(ies) with respect to any disabled or blind recipients in the 
State, or it may choose to limit participation of its VR agency(ies) to 
a certain class(es) of disabled or blind recipients in the State. A 
State which decides not to participate or to limit participation must 
provide advance written notice of that decision to the appropriate 
Regional Commissioner (SSA). Unless a State specifies a later month, a 
decision not to participate or to limit participation will be effective 
beginning with the third month following the month in which the notice 
of the decision is received by the appropriate Regional Commissioner 
(SSA). The notice of the State decision must be submitted by an 
official authorized to act for the State for this purpose. A State must 
provide to the appropriate Regional Commissioner (SSA) an opinion from 
the State's Attorney General, verifying the authority of the official 
who sent the notice to act for the State. This opinion will not be 
necessary if the notice is signed by the Governor of the State.
    (2)(i) If a State has decided not to participate through its VR 
agency(ies), we may arrange for VR services through an alternate 
participant(s) for disabled or blind recipients in the State.
    (ii) If a State has decided to limit participation of its VR 
agency(ies) to a certain class(es) of disabled or blind recipients, we 
may arrange for VR services through an alternate participant(s) for the 
class(es) of disabled or blind recipients in the State excluded from 
the scope of the State's participation.
    (3) A State which has decided not to participate or to limit 
participation may participate later through its VR agency(ies) in 
accordance with paragraph (c) of this section, provided that such 
participation will not conflict with any previous commitment which we 
may have made to an alternate participant(s) under paragraph (e)(2) of 
this section. A State which decides to resume participation under 
paragraph (c) of this section must provide advance written notice of 
that decision to the appropriate Regional Commissioner (SSA). Unless a 
commitment to an alternate participant(s) requires otherwise, a 
decision of a State to resume participation under paragraph (c) of this 
section will be effective beginning with the third month following the 
month in which the notice of the decision is received by the 
appropriate Regional Commissioner (SSA) or, if later, with a month 
specified by the State. The notice of the State decision must be 
submitted by an official authorized to act for the State as explained 
in paragraph (e)(1) of this section.
    (f) Use of alternate participants. The Commissioner, by written 
agreement or contract, may arrange for VR services through an alternate 
participant(s) for any disabled or blind recipient in the State with 
respect to whom the State is unwilling to participate through its VR 
agency(ies). In such a case, we may refer the recipient to such 
alternate participant for necessary VR services. The Commissioner will 
find that a State is unwilling to participate with respect to any of 
the following disabled or blind recipients in that State:
    (1) A disabled or blind recipient whom we referred to a State VR 
agency under paragraph (c) or (d) of this section if we do not receive 
a notice within the stated time period under paragraph (c)(2)(i) of 
this section of a decision by the VR agency either to accept the 
recipient as a client for VR services or to place the recipient into an 
extended evaluation process;
    (2) A disabled or blind recipient with respect to whom we receive a 
notice under paragraph (c)(2)(ii) of this section of a decision by the 
VR agency not to accept the recipient as a client for VR services 
following the completion of the extended evaluation;
    (3) The class(es) of disabled or blind recipients excluded from the 
scope of the State's participation if the State has decided to limit 
participation of its VR agency(ies); and
    (4) All disabled or blind recipients in the State if the State has 
decided not to participate through its VR agency(ies).

    5. A new Sec. 416.2206 is added to read as follows:


Sec. 416.2206  Basic qualifications for alternate participants.

    (a) General. We may arrange for VR services through an alternate 
participant by written agreement or contract as explained in 
Sec. 416.2204(f). An alternate participant may be a public or private 
agency, organization, institution or individual (that is, any entity 
whether for-profit or not-for-profit), other than a State VR agency.
    (1) An alternate participant must--
    (i) Be licensed, certified, accredited, or registered, as 
appropriate, to provide VR services in the State in which it provides 
services; and
    (ii) Under the terms of the written contract or agreement, have a 
plan similar to the State plan described in Sec. 416.2204(a) which 
shall govern the provision of VR services to individuals.
    (2) We will not use as an alternate participant any agency, 
organization, institution, or individual--
    (i) Whose license, accreditation, certification, or registration is 
suspended or revoked for reasons concerning professional competence or 
conduct or financial integrity;
    (ii) Who has surrendered such license, accreditation, 
certification, or registration pending a final determination of a 
formal disciplinary proceeding; or
    (iii) Who is precluded from Federal procurement or nonprocurement 
programs.
    (b) Standards for the provision of VR services. An alternate 
participant's plan must provide, among other things, that the provision 
of VR services to individuals will meet certain minimum standards, 
including, but not limited to, the following:
    (1) All medical and related health services furnished will be 
prescribed by, or provided under the formal supervision of, persons 
licensed to prescribe or supervise the provision of these services in 
the State;
    (2) Only qualified personnel and rehabilitation facilities will be 
used to furnish VR services; and
    (3) No personnel or rehabilitation facility described in paragraph 
(a)(2)(i), (ii), or (iii) of this section will be used to provide VR 
services.

    6. Section 416.2208 is amended by redesignating paragraphs (b) 
through (f) as (c) through (g), by adding a new paragraph (b), and by 
revising redesignated paragraphs (d) and (f) to read as follows:


Sec. 416.2208  Requirements for payment.

* * * * *
    (b) The claim for payment must be in a form prescribed by us and 
contain the following information:
    (1) A description of each service provided;
    (2) When the service was provided; and
    (3) The cost of the service;
* * * * *
    (d) The VR services for which payment is being requested must have 
been provided under a State plan for VR services approved under title I 
of the Rehabilitation Act of 1973, as amended, or, in the case of an 
alternate participant, under a negotiated plan, and must be services 
that are described in Sec. 416.2214;
* * * * *
    (f) The State VR agency or alternate participant must maintain, and 
provide as we may require, adequate documentation of all services and 
costs for all disabled or blind recipients with respect to whom a State 
VR agency or alternate participant could potentially request payment 
for services and costs under this subpart; and
* * * * *
    7. Section 416.2209 is amended by revising paragraph (c), by 
removing the word ``and'' at the end of paragraph (f), by redesignating 
paragraph (g) as paragraph (h), and by adding a new paragraph (g) to 
read as follows:


Sec. 416.2209  Responsibility for making payment decisions.

* * * * *
    (c) Whether an individual, without good cause, refused to continue 
to accept VR services or failed to cooperate in a VR program for a 
month(s) after October 1984, and whether an individual's disability or 
blindness payment should be suspended;
* * * * *
    (g) Whether a VR service is a service described in Sec. 416.2214; 
and
* * * * *
    8. Section 416.2211 is amended by revising the introductory text, 
by revising paragraphs (a)(1) and (a)(2), and by revising the 
introductory text of paragraph (b)(1) to read as follows:


Sec. 416.2211  Criteria for determining when VR services will be 
considered to have contributed to a continuous period of 9 months.

    The State VR agency or alternate participant may be paid for VR 
services if such services contribute to the individual's performance of 
a continuous 9-month period of SGA. The following criteria apply to 
individuals who received more than just evaluation services. If a State 
VR agency or alternate participant claims payment for services to an 
individual who received only evaluation services, it must establish 
that the individual's continuous period or medical recovery (if medical 
recovery occurred before completion of a continuous period) would not 
have occurred without the services provided. In applying the criteria 
below, we will consider services described in Sec. 416.2214 that were 
initiated, coordinated or provided, including services before October 
1, 1981.
    (a) * * *
    (1) One year or less. Any VR services which significantly motivated 
or assisted the individual in returning to, or continuing in, SGA will 
be considered to have contributed to the continuous period.
    (2) More than one year. (i) If the continuous period was preceded 
by transitional work activity (employment or self-employment which 
gradually evolved, with or without periodic interruption, into SGA), 
and that work activity began less than a year after VR services ended, 
any VR services which significantly motivated or assisted the 
individual in returning to, or continuing in, SGA will be considered to 
have contributed to the continuous period.
    (ii) If the continuous period was not preceded by transitional work 
activity that began less than a year after VR services ended, VR 
services will be considered to have contributed to the continuous 
period only if it is reasonable to conclude that the work activity 
which constitutes a continuous period could not have occurred without 
the VR services (e.g., training).
    (b) Continuous period with medical recovery occurring before 
completion. (1) If an individual medically recovers before a continuous 
period has been completed, VR services under paragraph (a) of this 
section will not be payable unless some VR services contributed to the 
medical recovery. VR services will be considered to have contributed to 
the medical recovery if--
* * * * *
    9. Section 416.2213 is revised to read as follows:


Sec. 416.2213  Payment for VR services in a case of VR refusal.

    (a) For purposes of this section, VR refusal means an individual's 
refusal to continue to accept VR services or failure to cooperate in 
such a manner as to preclude the individual's successful 
rehabilitation.
    (b) No later than the 60th day after the State VR agency or 
alternate participant makes a preliminary finding that an individual 
refuses to continue to accept VR services or fails to cooperate in a VR 
program, the State VR agency or alternate participant shall report to 
the appropriate Regional Commissioner (SSA) in writing such 
individual's VR refusal so that we may make the determination described 
in Sec. 416.2209(c).
    (c) Payment can be made to a State VR agency or alternate 
participant for the costs of VR services provided to an individual who, 
after filing an application with the State VR agency or alternate 
participant for rehabilitation services, without good cause, refuses to 
continue to accept VR services or fails to cooperate in such a manner 
as to preclude the individual's successful rehabilitation. A State VR 
agency or alternate participant may be paid, subject to the provisions 
of this subpart, for the costs of VR services provided to an individual 
if the individual's monthly disability or blindness payment has been 
suspended or terminated for a month or months after October 1984 
because of VR refusal.

    10. Section 416.2214 is revised to read as follows:


Sec. 416.2214  Services for which payment may be made.

    (a) General. Payment may be made for VR services provided by a 
State VR agency in accordance with title I of the Rehabilitation Act of 
1973, as amended, or by an alternate participant under a negotiated 
plan, subject to the limitations and conditions in this subpart. VR 
services for which payment may be made under this subpart include only 
those services described in paragraph (b) of this section which are--
    (1) Necessary to determine an individual's eligibility for VR 
services or the nature and scope of the services to be provided; or
    (2) Provided by a State VR agency under an IWRP, or by an alternate 
participant under a similar document, but only if the services could 
reasonably be expected to motivate or assist the individual in 
returning to, or continuing in, SGA.
    (b) Specific services. Payment may be made under this subpart only 
for the following VR services:
    (1) An assessment for determining an individual's eligibility for 
VR services and vocational rehabilitation needs by qualified personnel, 
including, if appropriate, an assessment by personnel skilled in 
rehabilitation technology, and which includes determining--
    (i) The nature and extent of the physical or mental impairment(s) 
and the resultant impact on the individual's employability;
    (ii) The likelihood that an individual will benefit from vocational 
rehabilitation services in terms of employability; and
    (iii) An employment goal consistent with the capacities of the 
individual and employment opportunities;
    (2) Counseling and guidance, including personal adjustment 
counseling, and those referrals and other services necessary to help an 
individual secure needed services from other agencies;
    (3) Physical and mental restoration services necessary to correct 
or substantially modify a physical or mental condition which is stable 
or slowly progressive and which constitutes an impediment to suitable 
employment at or above the SGA level;
    (4) Vocational and other training services, including personal and 
vocational adjustment, books, tools, and other training materials, 
except that training or training services in institutions of higher 
education will be covered under this section only if maximum efforts 
have been made by the State VR agency or alternate participant to 
secure grant assistance in whole or in part from other sources;
    (5) Maintenance expenses that are extra living expenses over and 
above the individual's normal living expenses and that are incurred 
solely because of and while the individual is participating in the VR 
program and that are necessary in order for the individual to benefit 
from other necessary VR services;
    (6) Travel and related expenses necessary to transport an 
individual for purpose of enabling the individual's participation in 
other necessary VR services;
    (7) Services to family members of a disabled or blind individual 
only if necessary to the successful vocational rehabilitation of that 
individual;
    (8) Interpreter services and note-taking services for an individual 
who is deaf and tactile interpreting for an individual who is deaf and 
blind;
    (9) Reader services, rehabilitation teaching services, note-taking 
services, and orientation and mobility services for an individual who 
is blind;
    (10) Telecommunications, sensory, and other technological aids and 
devices;
    (11) Work-related placement services to secure suitable employment;
    (12) Post-employment services necessary to maintain, regain or 
advance into suitable employment at or above the SGA level;
    (13) Occupational licenses, tools, equipment, initial stocks, and 
supplies;
    (14) Rehabilitation technology services; and
    (15) Other goods and services that can reasonably be expected to 
motivate or assist the individual in returning to, or continuing in, 
SGA.

    11. Section 416.2217 is amended by revising the introductory text 
and by revising paragraphs (b) and (c) to read as follows:


Sec. 416.2217  What costs will be paid.

    In accordance with section 1615(d) of the Social Security Act, the 
Secretary will pay the State VR agency or alternate participant for the 
VR services described in Sec. 416.2214 which were provided during the 
period described in Sec. 416.2215 and which meet the criteria in 
Sec. 416.2211, Sec. 416.2212, or Sec. 416.2213, but subject to the 
following limitations:
* * * * *
    (b) The cost must not have been paid or be payable from some other 
source. For this purpose, State VR agencies or alternate participants 
will be required to seek payment or services from other sources in 
accordance with the ``similar benefit'' provisions under 34 CFR part 
361, including making maximum efforts to secure grant assistance in 
whole or part from other sources for training or training services in 
institutions of higher education. Alternate participants will not be 
required to consider State VR services a similar benefit.
    (c)(1) The cost must be reasonable and necessary, in that it 
complies with the written cost-containment policies of the State VR 
agency or, in the case of an alternate participant, it complies with 
similar written policies established under a negotiated plan. A cost 
which complies with these policies will be considered necessary only if 
the cost is for a VR service described in Sec. 416.2214. The State VR 
agency or alternate participant must maintain and use these cost-
containment policies, including any reasonable and appropriate fee 
schedules, to govern the costs incurred for all VR services, including 
the rates of payment for all purchased services, for which payment will 
be requested under this subpart. For the purpose of this subpart, the 
written cost-containment policies must provide guidelines designed to 
ensure--
    (i) The lowest reasonable cost for such services; and
    (ii) Sufficient flexibility so as to allow for an individual's 
needs.
     (2) The State VR agency shall submit to us before the end of the 
first calendar quarter of each year a written statement certifying that 
cost-containment policies are in effect and are adhered to in procuring 
and providing goods and services for which the State VR agency requests 
payment under this subpart. Such certification must be signed by the 
State's chief financial official or the head of the VR agency. Each 
certification must specify the basis upon which it is made, e.g., a 
recent audit by an authorized State, Federal or private auditor (or 
other independent compliance review) and the date of such audit (or 
compliance review). In the case of an alternate participant, these 
certification requirements shall be incorporated into the negotiated 
agreement or contract. We may request the State VR agency or alternate 
participant to submit to us a copy(ies) of its specific written cost-
containment policies and procedures (e.g., any guidelines and fee 
schedules for a given year), if we determine that such additional 
information is necessary to ensure compliance with the requirements of 
this subpart. The State VR agency or alternate participant shall 
provide such information when requested by us.
* * * * *
    12. Section 416.2221 is revised to read as follows:


Sec. 416.2221  Validation reviews.

    (a) General. We will conduct a validation review of a sample of the 
claims for payment filed by each State VR agency or alternate 
participant. We will conduct some of these reviews on a prepayment 
basis and some on a postpayment basis. We may review a specific claim, 
a sample of the claims, or all the claims filed by any State VR agency 
or alternate participant, if we determine that such review is necessary 
to ensure compliance with the requirements of this subpart. For each 
claim selected for review, the State VR agency or alternate participant 
must submit such records of the VR services and costs for which payment 
has been requested or made under this subpart, or copies of such 
records, as we may require to ensure that the services and costs meet 
the requirements for payment. For claims for cases described in 
Sec. 416.2201(a), a clear explanation or existing documentation which 
demonstrates how the service contributed to the individual's 
performance of a continuous 9-month period of SGA must be provided. For 
claims for cases described in Sec. 416.2201(b) or (c), a clear 
explanation or existing documentation which demonstrates how the 
service was reasonably expected to motivate or assist the individual to 
return to or continue in SGA must be provided. If we find in any 
prepayment validation review that the scope or content of the 
information is inadequate, we will request additional information and 
will withhold payment until adequate information has been provided. The 
State VR agency or alternate participant shall permit us (including 
duly authorized representatives) access to, and the right to examine, 
any records relating to such services and costs. Any review performed 
under this section will not be considered an audit for purposes of this 
subpart.
    (b) Purpose. The primary purpose of these reviews is--
    (1) To ensure that the VR services and costs meet the requirements 
for payment under this subpart;
    (2) To assess the validity of our documentation requirements; and
    (3) To assess the need for additional validation reviews or 
additional documentation requirements for any State VR agency or 
alternate participant to ensure compliance with the requirements under 
this subpart.
    (c) Determinations. In any validation review, we will determine 
whether the VR services and costs meet the requirements for payment and 
determine the amount of payment. We will notify in writing the State VR 
agency or alternate participant of our determination. If we find in any 
postpayment validation review that more or less than the correct amount 
of payment was made for a claim, we will determine that an overpayment 
or underpayment has occurred and will notify the State VR agency or 
alternate participant that we will make the appropriate adjustment.
    (d) Appeals. If the State VR agency or alternate participant 
disagrees with our determination under this section, it may appeal that 
determination in accordance with Sec. 416.2227. For purposes of this 
section, an appeal must be filed within 60 days after receiving the 
notice of our determination.

[FR Doc. 94-5849 Filed 3-14-94; 8:45 am]
BILLING CODE 4190-29-P