[Federal Register Volume 62, Number 176 (Thursday, September 11, 1997)]
[Rules and Regulations]
[Pages 47896-47903]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24266]


      

[[Page 47895]]

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Part IV





Department of Health and Human Services





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Health Care Financing Administration



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42 CFR Part 440



Personal Care Services Medicaid Program Coverage; Final Rule

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

[[Page 47896]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 440

[MB-071-F]
RIN 0938-AH00


Medicaid Program; Coverage of Personal Care Services

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule specifies the revised requirements for 
Medicaid coverage of personal care services furnished in a home or 
other location as an optional benefit, effective for services furnished 
on or after October 1, 1994. In particular, this final rule specifies 
that personal care services may be furnished in a home or other 
location by any individual who is qualified to do so. This rule 
conforms the Medicaid regulations to the provisions of section 
13601(a)(5) of the Omnibus Budget Reconciliation Act of 1993, which 
added section 1905(a)(24) to the Social Security Act. Additionally, we 
are making two minor changes to the Medicaid regulations concerning 
home health services.

EFFECTIVE DATE: November 10, 1977.

FOR FURTHER INFORMATION CONTACT: Terese Klitenic, (410) 786-5942.

SUPPLEMENTARY INFORMATION:

I. Background

    Under section 1902(a)(10) of the Social Security Act (the Act), 
States with Medicaid programs must provide certain basic services to 
Medicaid recipients. Section 1905(a) of the Act defines the required 
and optional services that are provided as medical assistance. Before 
the enactment of the Omnibus Budget Reconciliation Act of 1990 (OBRA 
'90, Public Law 101-508), a State had the option to elect to cover 
personal care services under its Medicaid State plan. Although not 
specifically mentioned in section 1905(a) of the Act, personal care 
services could be covered under section 1905(a)(22) of the Act 
(redesignated as section 1905(a)(25) of the Act on November 5, 1990), 
under which a State may furnish any additional services specified by 
the Secretary and recognized under State law. In regulations at 42 CFR 
440.170(f), the Secretary specified that personal care services may be 
covered.
    Section 4721 of OBRA '90 amended section 1905(a)(7) of the Act to 
include personal care services as part of the home health services 
benefit and to impose certain conditions on the provision of personal 
care services, effective for services furnished on or after October 1, 
1994. This amendment would have had a significant effect since, under 
section 1902(a)(10)(D) of the Act, home health services are a mandatory 
benefit for all Medicaid recipients eligible for nursing facility 
services under the State plan. Thus, had section 1905(a)(7) of the Act 
not been further amended (as discussed below) before the effective date 
of section 4721 of OBRA '90, personal care services would have become a 
mandatory benefit for all recipients eligible for nursing facility 
services, effective October 1, 1994.
    Before the provisions of OBRA '90 became effective, the Omnibus 
Budget Reconciliation Act of 1993 (OBRA '93, Public Law 103-66) was 
enacted on August 10, 1993. Section 13601(a)(1) of OBRA '93 amended 
section 1905(a)(7) of the Act to remove personal care services from the 
definition of home health services. Additionally, section 13601(a)(5) 
of OBRA '93 added a new paragraph (24) to section 1905(a) of the Act, 
to include payment for personal care services under the definition of 
medical assistance. Under section 1905(a)(24) of the Act, personal care 
services furnished to an individual who is not an inpatient or resident 
of a hospital, nursing facility, intermediate care facility for persons 
with mental retardation (ICF/MR), or institution for mental disease is 
an optional benefit for which States may provide medical assistance 
payments. The statute specifies that personal care services must be: 
(1) Authorized for an individual by a physician in accordance with a 
plan of treatment or (at the option of the State) otherwise authorized 
for the individual in accordance with a service plan approved by the 
State; (2) provided by an individual who is qualified to provide such 
services and who is not a member of the individual's family; and (3) 
furnished in a home or other location. This amendment was effective 
October 1, 1994. Therefore, as a result of the legislative changes made 
by OBRA '93, personal care services continue to be an optional State 
plan benefit, and are now authorized under section 1905(a)(24) of the 
Act, effective for services furnished on or after October 1, 1994.

II. Issuance of the Proposed Rule

A. Personal Care Services in a Home or Other Location (Sec. 440.167)

    On March 8, 1996, we published in the Federal Register a proposed 
rule that specified that personal care services may be furnished in a 
home or other location by any individual who is qualified to do so (61 
FR 9405). Throughout the preamble to the proposed rule, we emphasized 
our main goal in implementing the statutory provisions regarding 
personal care services. Specifically, our objective was to provide 
States maximum flexibility in tailoring their Medicaid programs to meet 
the needs of recipients while also setting guidelines so that States 
that choose to offer the personal care services benefit furnish quality 
services in an effective manner.
    In the preamble to the proposed rule, we stated that as 
historically used in the Medicaid program, personal care services means 
services related to a patient's physical requirements, such as 
assistance with eating, bathing, dressing, personal hygiene, activities 
of daily living, bladder and bowel requirements, and taking medications 
(61 FR 9406). These services primarily involve ``hands on'' assistance 
by a personal care attendant with a recipient's physical dependency 
needs (as opposed to purely housekeeping services). We noted that 
although personal care services may be similar to or overlap some 
services furnished by home health aides, skilled services that may be 
performed only by a health professional are not considered personal 
care services. Alternatively, services that require a lower level of 
skill such as personal care services may also be provided by home 
health aides under the home health benefit. We did not propose to 
include the above description of personal care services in the 
regulations. The specific changes we proposed to the regulations are 
set forth below:
    The existing regulations at Sec. 440.170 specify that personal care 
services in a recipient's home means services prescribed by a physician 
in accordance with the recipient's plan of treatment, and furnished by 
an individual who is (1) qualified to provide the services, (2) 
supervised by a registered nurse, and (3) not a member of the 
recipient's family. The existing regulations do not provide for 
personal care services furnished in settings other than the recipient's 
home. To conform the regulations to the provisions of section 
1905(a)(24) of the Act, we proposed to add a new Sec. 440.167, 
``Personal care services in a home or other location.'' We proposed

[[Page 47897]]

that personal care services are services furnished to an individual who 
is not an inpatient or resident of a hospital, nursing facility, 
intermediate care facility for persons with mental retardation, or 
institution for mental disease, that are: (1) Authorized for the 
individual by a physician in accordance with a plan of treatment or (at 
the option of the State) otherwise authorized for the individual in 
accordance with a service plan approved by the State; (2) provided by 
an individual who is qualified to provide such services and who is not 
a member of the individual's family; and (3) furnished in a home, and 
if the State chooses, in another location.
    Since section 1905(a)(24) of the Act does not require that the 
services be supervised by a registered nurse, we proposed that we would 
not require such supervision in new Sec. 440.167. In addition, we 
proposed that States that elect to offer the personal care services 
benefit must, at a minimum, cover personal care services provided in 
the home, but also have the option to cover personal care services 
provided in other locations. We set forth a detailed discussion of 
alternatives that we considered in implementing the provision of OBRA 
'93 that allows States to cover personal care services provided outside 
the home (61 FR 9406).
    We proposed to leave to the State's option the decision of whether 
personal care services are to be authorized by a physician in 
accordance with a plan of treatment, or otherwise authorized in 
accordance with a service plan approved by the State. Similarly, we 
proposed to permit States to determine, through development of provider 
qualifications, which individuals are qualified to provide personal 
care services (other than family members).
    Section 1905(a)(24)(B) of the Act specifies that, for Medicaid 
purposes, personal care services may not be furnished by a member of 
the individual's family. To provide for more clarity and consistency in 
this regard, we proposed to define family members under new 
Sec. 440.167(b) as spouses of recipients and parents (or stepparents) 
of minor recipients. Finally, since personal care services are now an 
optional benefit under section 1905(a)(24) of the Act, we proposed to 
remove existing Sec. 440.170(f), which provides for coverage of 
personal care services in a recipient's home as part of any other 
medical care or remedial care recognized under State law and specified 
by the Secretary.

B. Proposed Changes Concerning Home Health Services (Sec. 440.70)

    We proposed several changes to the regulations concerning home 
health services. Specifically, we proposed to revise Sec. 440.70(b)(3) 
to provide that the frequency of physician review of a recipient's need 
for medical supplies, equipment, and appliances suitable for use in the 
home under the home health benefit would be determined on a case-by-
case basis depending on the nature of the item prescribed (rather than 
every 60 days, as provided for in the existing regulations). Absent 
changes in a recipient's condition, we do not believe that a 
recipient's need for medical equipment necessitates routine inclusion 
in a plan of care reviewed every 60 days by a physician.
    Additionally, existing Sec. 440.70(d) defines a home health agency 
for purposes of Medicaid reimbursement as a public or private agency or 
organization, or part of an agency or organization, that meets 
requirements for participation in Medicare. We proposed to revise this 
definition to indicate that in order to participate in Medicaid, the 
agency must meet Medicare requirements for participation as well as any 
additional standards the State may wish to apply that are not in 
conflict with Federal requirements. Finally, we proposed a technical 
change to Sec. 440.70(c) to remove an obsolete reference to subparts F 
and G of part 442.

III. Discussion of Public Comments and Departmental Responses

    We received 73 timely comments in response to the proposed rule. A 
summary of these comments and our responses follow.
    Comment: Many commenters disagreed with our proposal to eliminate 
the requirement that personal care services be supervised by a 
registered nurse. The commenters indicated that the registered nurse is 
the only medical contact many (mostly elderly) beneficiaries have and 
that the nurse is instrumental in identifying health needs that require 
immediate attention by a health care professional.
    Response: Section 1905(a)(24) of the Act, as added by OBRA ``93, 
does not specify that personal care services must be supervised by a 
registered nurse. Therefore, we proposed to remove the requirement from 
the existing regulations. While we believe that it was clearly the 
intent of Congress to eliminate this requirement from the statute, we 
agree with the commenters that there may be situations in which 
individuals providing personal care services need supervision. However, 
while some individuals' conditions may dictate a need for nurse 
supervision, many individuals receiving personal care services are 
either capable of directing their own care or have needs that are not 
based on a ``medical'' condition (for example, individuals with mental 
retardation). Additionally, a stable, physically disabled beneficiary 
without cognitive impairments may not need supervision of his or her 
personal care attendant. In some cases, supervision of personal care 
services by a registered nurse may be unnecessary, but the services of 
a case manager may be appropriate to oversee the individual's needs. We 
note that case management services could be reimbursed as either 
administrative costs or, as applicable, targeted case management 
services under Medicaid. Our revision to the regulations does not 
prohibit the supervision of a registered nurse; rather, it allows 
States to make the determination of when supervision of personal care 
services is necessary and what type of professional is qualified to 
supervise the personal care attendant. Therefore, we believe that the 
need for supervision, whether by a registered nurse or another 
individual, should be made on a case-by-case basis by the State.
    Comment: A few commenters were concerned that we did not define 
``qualified'' personal care providers. Others suggested that we require 
States to establish criteria for determining provider qualifications. 
In addition, several commenters recommended that, without the nursing 
supervision requirement, we establish Federal quality assurance 
standards or minimal standards of training or testing for personal care 
providers.
    Response: We are not establishing provider qualifications for 
personal care services. Rather, in the interest of maintaining a high 
level of flexibility in providing personal care services, we suggest 
that States develop their own provider qualifications and establish 
mechanisms for quality assurance. While we recognize the importance of 
provider qualifications and quality assurance, we also firmly believe 
in allowing States the greatest flexibility in designing their Medicaid 
programs. There are several methods States may use to ensure that 
recipients are receiving high quality personal care services. For 
example, States may opt to screen personal care attendants before they 
are employed and/or train them afterward or allow the recipient to be 
the judge of quality through an initial screening. Alternatively, 
States may require agency providers to train their

[[Page 47898]]

employees on the job. State level oversight of overall program 
compliance standards, case level oversight, attendant training and 
screening, and recipient complaint and grievance mechanisms are ways in 
which States can influence the quality of their personal care programs. 
In this way, States can best address the needs of their target 
populations (for example, individuals with AIDS or with physical 
disabilities) and set unique provider qualifications and quality 
assurance mechanisms. We note that home health aides employed by home 
health agencies may sometimes provide personal care services. Home 
health aides that provide only personal care services under Medicaid 
need only meet the qualifications set forth at Sec. 484.36(e) (and not 
other qualifications for home health aide services).
    Comment: Some commenters disagreed with our proposal that States 
electing to offer personal care services must cover these services when 
provided in the home and may also choose to cover personal care 
services provided in other locations. The commenters believed that we 
should require States to provide the services in locations outside the 
home. One commenter stated that we should indicate that assisted living 
facilities may be considered an individual's home. Other commenters 
asked that we clarify the meaning of ``other locations.''
    Response: In the proposed rule, we set forth a detailed discussion 
of options we considered for implementing the provision of OBRA '93 
that allows States to cover personal care services outside the home (61 
FR 9406). We proposed that States electing the personal care services 
benefit must provide the services in the home but may also choose to 
provide personal care in locations outside the home. We stated that our 
main goal in implementing the provision was to afford States maximum 
flexibility in tailoring their Medicaid programs to meet the needs of 
their recipients while also expanding the settings in which personal 
care services may be provided.
    We do not believe that adopting the commenters' suggestion that we 
require States to provide the services in the home and in other 
locations would be appropriate since section 1905(a)(24)(C) of the Act 
refers to services ``furnished in a home or other location.'' We 
believe that Congress clearly did not intend to impose such a mandate 
on State Medicaid programs. Moreover, a policy such as the one 
suggested by the commenters could work against the best interests of 
recipients if States choose not to offer the personal care services 
benefit at all because of the expense involved in covering the services 
both inside and outside the home. In addition, the Medicaid program has 
always given States latitude in establishing the criteria or conditions 
under which optional services (such as personal care) may be covered, 
as long as the services available are sufficient to achieve their 
purpose. States have the flexibility to define optional services to 
include less than the full array of services that could be covered 
under the regulatory definitions, if they so choose. (In accordance 
with section 1905(r)(5) of the Act, coverage of personal care services 
outside the home is not optional with respect to those individuals who 
are eligible for the Early and Periodic Screening, Diagnostic, and 
Treatment (EPSDT) program. Personal care services outside the home are 
mandatory for these individuals when medically necessary under the 
EPSDT program.)
    We note that an individual need not receive personal care services 
inside the home to be eligible to receive them in another location. 
Rather, as stated above, a State that opts to furnish personal care 
services must provide them inside the home to recipients that need them 
in that setting, but also has the option to provide them in other 
locations. Thus, depending on whether the State also chooses to provide 
personal care services outside the home, an individual recipient could 
receive personal care services inside the home, outside the home or in 
both locations. We believe that our policy is the most appropriate 
interpretation of the statute, is in the best interest of recipients, 
and gives States the discretion necessary to operate their programs in 
an efficient manner.
    With regard to the other issues raised by commenters, States may 
consider an assisted living facility as an individual's home but we do 
not believe we need to add this requirement to the regulations. 
Additionally, ``other locations'' may be any location, as specified by 
the State, except for the statutorily excluded locations set forth in 
section 1905(a)(24) of the Act (hospital, nursing facility, or ICF/MR).
    Comment: One commenter disagreed with our position that the EPSDT 
provisions mandate coverage of personal care services outside the home 
when medically necessary.
    Response: As stated above, under section 1905(r)(5) of the Act, the 
provision of medically necessary personal care services outside the 
home is not an option but a mandate for individuals eligible under the 
EPSDT program. The EPSDT benefit includes all medically necessary 
services described in section 1905(a) of the Act, whether or not such 
services are covered under the State's Medicaid plan. Therefore, 
personal care services must be provided outside the home when medically 
necessary to individuals under the EPSDT program.
    Comment: Some commenters disagreed with our proposed definition of 
personal care services and others believed that we should define the 
services in regulation. The commenters recommended that we provide a 
detailed description of the services that can be provided under the 
personal care services benefit in the regulatory language. One 
commenter indicated that personal care services should include those 
that are delegated by a nurse or physician to an unlicensed personal 
care provider. They also suggested that the definition be revised to 
delete reference to physical tasks while referring to assistance with 
both activities of daily living (ADLs) and instrumental activities of 
daily living (IADLs), including assistance with cognitive tasks and 
services to prevent an individual from harming himself. One commenter 
suggested changing the name of the service from personal care services 
to ``personal assistant services.'' One commenter asserted that 
assistance with taking medications should not be included as a personal 
care service.
    Response: As stated in the proposed rule, in order to more easily 
address changes that may occur in the definition and delivery of 
personal care services and to allow greatest State flexibility, in the 
near future we plan to publish in a State Medicaid Manual instruction a 
definition that States may use. As suggested by the commenter, we plan 
to define the services in terms of assistance with ADLs and IADLs. 
Services such as those delegated by nurses or physicians to personal 
care attendants may be provided so long as the delegation is in keeping 
with State law or regulation and the services fit within the personal 
care services benefit covered under a State's plan. Services such as 
assistance with taking medications would be allowed if they are 
permissible in States' Nurse Practice Acts, although States may need to 
ensure proper training is provided when necessary. We will not change 
the name of the service as suggested, as the regulations now are 
consistent with the statutory language.
    Comment: Some commenters were concerned about our proposed 
definition of ``family member'' for purposes of individuals providing 
personal care services. A few commenters suggested that we expand the 
definition to preclude Medicaid

[[Page 47899]]

coverage of personal care services provided by children, grandchildren, 
and legal guardians of recipients. Other commenters believed that 
parents and spouses should be allowed to provide personal care 
services. Another commenter recommended that stepparents be allowed to 
provide personal care services in States where stepparents are not 
legally responsible for the recipient. Finally, several commenters 
disagreed with our proposal to allow States to further restrict family 
members from providing services and indicated that States should be 
required to limit excluded family members to spouses and parents.
    Response: Section 1905(a)(24)(B) of the Act specifies that personal 
care services may not be furnished by a member of the individual's 
family. We proposed to define family members as spouses of recipients 
and parents (or stepparents) of minor recipients. Additionally, we 
proposed that States could further restrict which family members could 
qualify as providers by extending the definition to apply to family 
members other than spouses and parents.
    To provide for more clarity and consistency, we have revised the 
definition of family member at new Sec. 440.167(b) to provide that a 
family member is a legally responsible relative. Thus, spouses of 
recipients and parents of minor recipients (including stepparents who 
are legally responsible for minor children) are included in the 
definition of family member. This definition is identical to the 
revised definition that applies to personal care services provided 
under a home and community-based services waiver.
    Congress clearly intended to preclude family members from providing 
personal care services and we believe our revised definition is the 
most reasonable interpretation of the term. Furthermore, we have always 
maintained that spouses and parents are inherently responsible for 
meeting the personal care needs of their family members, and, 
therefore, it would not be appropriate to allow Medicaid reimbursement 
for such services. If stepparents are not legally responsible for the 
recipient in some States, they could provide personal care services 
under our revised definition. However, because States can further 
restrict which family members can qualify as providers by extending the 
definition to apply to individuals other than those legally responsible 
for the recipient, States could choose to exclude stepparents 
regardless of their legal responsibility. In addition, by allowing 
States to further define ``family members'' for purposes of personal 
care services, States can tailor their programs to meet their 
individual needs.
    Comment: A few commenters indicated that the personal care services 
benefit should be a mandatory service that States must provide under 
their Medicaid programs. One commenter believed that the regulation 
should specifically allow various methods of delivering personal care 
services (for example, vouchers, individual providers, consumer-
directed agency models, or traditional agency models).
    Response: The Medicaid program is a Federal-State program that 
provides for mandatory services that States must provide and optional 
services that States may choose to provide. Sections 1902(a)(10)(A) and 
1905(a) of the Act define those services that are optional and those 
that are mandatory. Under section 1905(a)(24) of the Act, personal care 
services are an optional benefit that States may choose to provide to 
their Medicaid populations. To mandate that States provide personal 
care services would require legislative action by Congress. With regard 
to methods for delivering personal care services, we believe in 
allowing States the flexibility to determine the best method of 
providing services and will not specify such methods in a regulation.
    Comment: One commenter suggested that we retain the requirement for 
physician plan of care authorization for personal care services. The 
commenter believed that eliminating this requirement will lead to fraud 
and excess spending.
    Response: Section 1905(a)(24) of the Act provides that personal 
care services must be authorized ``by a physician in accordance with a 
plan of treatment or (at the option of the State) otherwise authorized 
for the individual in accordance with a service plan approved by the 
State.'' In accordance with this section of the Act, we proposed to 
include this provision in new Sec. 440.167. We believe that the statute 
clearly indicates Congress' intent to allow States the flexibility to 
utilize alternative means of plan of care authorization. Further, 
regarding the commenter's concern that the elimination of the 
requirement for physician authorization will encourage fraud, we 
believe that it is in the best interest of States to control spending 
and to establish methods to prevent providers from engaging in 
fraudulent activities. Our revisions do not preclude physician 
authorization of personal care services. Rather, in accordance with the 
statute, we are allowing States to determine the appropriate method for 
plan of care authorization. Therefore, we will not continue to require 
that the plan of care be authorized by a physician.
    Comment: One commenter disagreed with our revision to the frequency 
of review of an individual's plan of care for medical supplies, 
equipment, and appliances suitable for use in the home under the home 
health services benefit. The commenter was concerned that our proposal 
might compromise quality of care and utilization control concerns.
    Response: We proposed that Sec. 440.70(b)(3) be revised to provide 
that physician review of a recipient's need for medical supplies, 
equipment, and appliances suitable for use in the home under the home 
health benefit would be required annually instead of every 60 days. The 
frequency of review on other than an annual basis would be determined 
by the State on a case-by-case basis depending on the nature of the 
item prescribed. We have found that, in many cases, once a recipient's 
need for medical supplies, equipment, and appliances is indicated by a 
physician, that need is unlikely to change within 60 days. A 
recipient's need for supplies or pieces of equipment that generally 
tend to be used on a long-term basis would not be reviewed as 
frequently as equipment that is usually used only temporarily. For 
example, review of the need for a wheelchair need not be as frequent as 
review of the need for an oxygen concentrator. In all cases, a 
physician's order for the equipment would be required initially, and 
frequency of further review of a recipient's continuing needs would 
depend on the type of equipment prescribed. We believe that the 
requirement for annual review of medical supplies and equipment 
balances States flexibility in furnishing home health services with 
providing an appropriate level of oversight. In addition, this may 
allow a decrease in physicians' paperwork burden, time, and costs.
    Comment: Two commenters disagreed with our proposal to revise the 
definition of a home health agency for purposes of Medicaid 
reimbursement to indicate that in order to participate in Medicaid, the 
agency must meet Medicare requirements for participation as well as any 
additional standards the State may wish to apply that are not in 
conflict with Federal requirements.
    Response: Under this provision a State would have the option of 
imposing additional standards on home health agencies for participation 
in Medicaid beyond the Medicare conditions of participation. Our 
intention in revising the home health agency definition is to afford 
States greater flexibility in

[[Page 47900]]

establishing Medicaid program requirements tailored to their own 
specific needs. This will enable States to conform existing State and 
Federal requirements but by no means mandates that additional 
requirements be established.
    Comment: One commenter indicated that our proposed revision to 
Sec. 440.70(c) would erroneously preclude home health services from 
being provided to ICF/MR residents regardless of whether those services 
are not otherwise available.
    Response: We proposed to make a technical revision to 
Sec. 440.70(c) to remove an obsolete reference to subparts F and G of 
part 442. We agree with the commenter that our proposed revision would 
have the effect of precluding home health services from being made 
available to ICF/MR residents even when the services are not otherwise 
available. We have revised the language in Sec. 440.70(c) to correct 
this error.

IV. Provisions of the Final Rule

    We are adopting the proposed rule as final with some revisions. 
Specifically:
     We have revised Sec. 440.70(c) to provide that a 
recipient's place of residence, for home health services, does not 
include a hospital, nursing facility, or ICF/MR, except for home health 
services in an ICF/MR that are not required to be provided by the 
facility under subpart I of part 483. We also have reinstated the 
example given.
     We have revised the definition of family member at 
proposed Sec. 440.167(b) to provide that a family member is a legally 
responsible relative.
     In the proposed rule, we failed to include language 
currently located in existing Sec. 440.170(f) in new Sec. 440.167. 
Specifically, the introductory text of existing Sec. 440.170(f) permits 
States to define personal care services differently for purposes of a 
section 1915(c) waiver. We have revised new Sec. 440.167 to include 
this provision.

V. Impact Statement

A. Background

    For proposed rules such as this, we generally prepare a regulatory 
flexibility analysis that is consistent with the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601 through 612), unless we certify that a final 
rule will not have a significant economic impact on a substantial 
number of small entities. For purposes of a RFA, States and individuals 
are not considered small entities. However, providers are considered 
small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for any final rule that may have a 
significant impact on the operation of a substantial number of small 
rural hospitals. Such an analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a Metropolitan Statistical Area and has fewer than 50 beds.
    We are not preparing a rural impact statement since we have 
determined, and we certify, that this final rule will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    This final rule revises the Medicaid regulations to incorporate the 
statutory requirements of section 1905(a)(24) of the Act concerning 
personal care services. In accordance with the statute, we are 
providing that the services must be: (1) Authorized for the individual 
by a physician in accordance with a plan of treatment or (at the option 
of the State) otherwise authorized for the individual in accordance 
with a service plan approved by the State; (2) provided by an 
individual who is qualified to provide the services and who is not a 
member of the individual's family; and (3) furnished in a home or other 
location.
    In general, the provisions of this final rule are prescribed by 
section 1905(a)(24) of the Act, as added by section 13601(a)(5) of 
OBRA'93. The most significant change required under the statute is 
that, as of October 1, 1994, the settings in which States may elect to 
cover personal care services have been expanded to include locations 
outside the home. We believe that this statutory provision will 
increase Medicaid program expenditures regardless of whether or not we 
promulgate this rule. The primary discretionary aspect of this rule is 
the requirement that States electing to offer the personal care 
services benefit must cover the services in the home and may choose to 
cover them in any other location. As discussed in the proposed rule (61 
FR 9406), we considered requiring States that elect to offer the 
personal care services benefit to cover the services in both the home 
and other locations. We also considered allowing States to cover the 
services either in the home or in other locations. However, we believe 
that the policy in this final rule is the most appropriate 
interpretation of the statute and gives States the discretion necessary 
to operate their programs in an efficient manner and in the best 
interest of their recipients.
    As noted above, the major provisions of this final rule are 
required by the statute. Thus, costs associated with these regulations 
are the result of legislation, and this rule, in and of itself, has 
little or no independent effect or burden. However, to the extent that 
a legislative provision being implemented through rulemaking may have a 
significant effect on recipients or providers or may be viewed as 
controversial, we believe that we should address any potential 
concerns. In this instance, we believe it is desirable to inform the 
public of our estimate of the substantial budgetary effect of these 
statutory changes. The statutorily driven costs have been included in 
the Medicaid budget baseline. In addition, we anticipate that a large 
number of Medicaid recipients and providers, particularly home health 
agencies, will be affected. The expansion of settings where personal 
care services may be furnished represents an expansion of Medicaid 
benefits that, if exercised by States, will likely have significant 
effects, particularly on Medicaid recipients. Therefore, the following 
discussion constitutes a voluntary regulatory flexibility analysis.

B. Impact of New Personal Care Services Provision

1. Overview
    This analysis addresses a wide range of costs and benefits of this 
rule. Whenever possible, we express impact quantitatively. In cases 
where quantitative approaches are not feasible, we present our best 
examination of determinable costs, benefits, and associated issues.
    It is difficult to predict the economic impact of expanding the 
settings where personal care services may be covered under Medicaid to 
locations outside the home. We do not know the exact number and type of 
personal care services furnished by individual States or how much these 
services currently cost. Currently, approximately 32 States offer 
coverage for personal care services, and we do not have cost data from 
all of those States. States also differ in their definitions of 
personal care services and rules concerning who may furnish them. Since 
we do not have a full picture of the scope or cost of the different 
services, it is difficult for us to quantify the impact these changes 
will have. Other unknown factors regarding the future provision of 
personal care services include which States now offering the personal 
care services benefit will choose to cover services furnished outside 
the home, how many additional States will opt to offer coverage, how 
many Medicaid recipients will elect to use these

[[Page 47901]]

services in States in which the services have not been covered, and the 
type and costs of these specific services. We believe that the majority 
of those individuals who qualify for these services will elect to use 
this benefit. Thus, although costs to States will rise as they begin to 
pay for the additional services, there will be substantial benefits to 
some providers and to Medicaid recipients as described in detail below.
2. Effects Upon Medicaid Recipients
    Permitting States that elect to offer the personal care services 
benefit the option of covering these services in locations outside the 
home will have a positive effect on recipients. In States where 
coverage has been provided only for personal care services in the home, 
this final rule may expand the types of personal care services 
available and/or the settings where recipients may receive these 
services. Expansion of personal care services or settings could help 
improve the quality of life for these recipients as well as for 
recipients who have not been receiving personal care services. It also 
could save money for some Medicaid recipients or their families since 
they would no longer have to pay for these services. No data are 
available on the number of recipients or family members who are 
currently paying for these services. However, since only 32 States 
currently pay for personal care services, we believe that a substantial 
number of recipients who receive these services are paying for them out 
of pocket.
3. Effects on Providers
    By expanding the range of settings in which Medicaid will cover 
personal care services, we anticipate that this final rule will 
increase the demand for such services. We believe this effect will be 
viewed as beneficial to providers of personal care services. If the 
increase in demand for such services is sufficient, the number of 
providers of personal care services may increase.
4. Effects on Medicaid Program Expenditures
    This final rule implements the provisions of section 1905(a)(24) of 
the Act by specifying that personal care services are an optional State 
plan benefit under the Medicaid program. The rule allows States the 
option to cover personal care services furnished in a home or other 
location, effective for services furnished on or after October 1, 1994. 
Table 1 below provides an estimate of the anticipated additional 
Medicaid program expenditures associated with furnishing these services 
outside the home, beginning on October 1, 1997. This estimate was made 
using various assumptions about increases in utilization by current 
recipients, adjusted for age, as well as assumptions about the induced 
utilization that may result from the availability of these services. We 
have assumed a utilization increase of 5 percent for the aged and 10 
percent for the non-aged, and an overall induction factor of 10 
percent. Given these assumptions, our estimate based on Federal budget 
projections is shown in Table 1, which also provides a breakdown of 
these costs. The first row of figures shows the Federal costs of 
providing this optional State plan benefit. The second row shows the 
Federal administrative costs associated with furnishing these services. 
We estimate the following costs to the Medicaid program:

                                Table 1.--Personal Care Services Outside the Home                               
----------------------------------------------------------------------------------------------------------------
                                                         Federal medicaid cost estimate (in millions) \1\       
                                                ----------------------------------------------------------------
                                                   FY 1998      FY 1999      FY 2000      FY 2001      FY 2002  
----------------------------------------------------------------------------------------------------------------
Services.......................................         $185         $440         $545         $685         $855
Admin. Costs...................................           10           15           15           15           20
                                                ----------------------------------------------------------------
      Total....................................          195          455          560          700         875 
----------------------------------------------------------------------------------------------------------------
\1\ Figures are rounded to the nearest $5 million.                                                              

5. Effects on States
    As stated above, the coverage of personal care services is optional 
except when such services are medically necessary to correct or 
ameliorate medical problems found as a result of a screen under the 
EPSDT program. Many States (approximately 18) currently do not cover 
optional personal care services. In those States that do offer the 
personal care services benefit, services furnished outside the home 
previously could not be covered. Therefore, there may be a substantial 
economic impact on States that decide to provide coverage for personal 
care services furnished outside the home. The varying State definitions 
of personal care services and rules concerning who may furnish them 
make it difficult to estimate accurately the potential increases in 
expenditures for those States that choose to expand coverage of 
personal care services to include services furnished outside the home. 
However, Table 2 includes estimated costs to States, which are based 
upon the same data and assumptions used to formulate the Federal 
expenditures shown in Table 1.

                                Table 2.--Personal Care Services Outside the Home                               
----------------------------------------------------------------------------------------------------------------
                                                         Federal medicaid cost estimate (in millions) \1\       
                                                ----------------------------------------------------------------
                                                   FY 1998      FY 1999      FY 2000      FY 2001      FY 2002  
----------------------------------------------------------------------------------------------------------------
Services.......................................         $140         $330         $415         $515         $645
Admin. Costs...................................            5           10           10           20           20
                                                ----------------------------------------------------------------
      Total....................................          145          340          425          535         665 
----------------------------------------------------------------------------------------------------------------
\1\ Figures are rounded to the nearest $5 million.                                                              


[[Page 47902]]

 C. Conclusion

    The provisions of this final rule are required by section 
1905(a)(24) of the Act. We believe that the provisions of this rule 
adding personal care services as an optional State plan benefit and 
expanding the possible settings for covering personal care services to 
locations outside the home will benefit providers, recipients, and 
their families.
    As shown above in Tables 1 and 2, the costs to the Federal 
Government and States associated with paying for personal care services 
furnished outside the home are substantial. There may be some minor 
offsetting of costs if the number of admissions to nursing facilities 
decreases as a result of these provisions, but we have no data to 
determine the potential savings, if any. Regardless of any possible 
savings, the economic impact of these provisions is attributable to the 
statutory changes mandated by OBRA '93.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.
    This final rule has been classified as a major rule subject to 
congressional review. The effective date is November 10, 1997. If, 
however, at the conclusion of the congressional review process the 
effective date has been changed, HCFA will publish a document in the 
Federal Register to establish the actual effective date or to issue a 
notice of termination of the final rule action.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, agencies are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
     The accuracy of the agency's estimate of the information 
collection burden;
     The quality, utility, and clarity of the information to be 
collected; and
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Section Sec. 440.167 of this final rule contains requirements that 
are subject to review by the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995. The rule requires States to 
amend their State plans to specify whether they will cover personal 
care services and in what locations they will provide the services. 
Public reporting burden for this collection of information is estimated 
to be 1 hour per State. A notice will be published in the Federal 
Register when approval is obtained. Organizations and individuals 
desiring to submit comments on the information collection and 
recordkeeping requirements should mail them directly to the following:
    Health Care Financing Administration, Office of Financial and Human 
Resources, Management Planning and Analysis Staff, Room C2-26-17, 7500 
Security Boulevard, Baltimore, Maryland 21255-1850.
    Any comments submitted on the information collection requirements 
must be received by these two offices on or before November 10, 1997, 
to enable OMB to act promptly on HCFA's information collection approval 
request.

List of Subjects in 42 CFR Part 440

    Grant programs-health, Medicaid.

    42 CFR part 440 is amended as set forth below:

PART 440--SERVICES: GENERAL PROVISIONS

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

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

Subpart A--Definitions

    2. In Sec. 440.70, the introductory text of paragraphs (a) and (b) 
are republished and paragraphs (a)(2), (b)(3), (c), and (d) are revised 
to read as follows:


Sec. 440.70  Home health services.

    (a) ``Home health services'' means the services in paragraph (b) of 
this section that are provided to a recipient--
    (1) * * *
    (2) On his or her physician's orders as part of a written plan of 
care that the physician reviews every 60 days, except as specified in 
paragraph (b)(3) of this section.
    (b) Home health services include the following services and items. 
* * *
    (3) Medical supplies, equipment, and appliances suitable for use in 
the home.
    (i) A recipient's need for medical supplies, equipment, and 
appliances must be reviewed by a physician annually.
    (ii) Frequency of further physician review of a recipient's 
continuing need for the items is determined on a case-by-case basis, 
based on the nature of the item prescribed;
* * * * *
    (c) A recipient's place of residence, for home health services, 
does not include a hospital, nursing facility, or intermediate care 
facility for the mentally retarded, except for home health services in 
an intermediate care facility for the mentally retarded that are not 
required to be provided by the facility under subpart I of part 483. 
For example, a registered nurse may provide short-term care for a 
recipient in an intermediate care facility for the mentally retarded 
during an acute illness to avoid the recipient's transfer to a nursing 
facility.
    (d) ``Home health agency'' means a public or private agency or 
organization, or part of an agency or organization that meets 
requirements for participation in Medicare and any additional standards 
legally promulgated by the State that are not in conflict with Federal 
requirements.
* * * * *
    3. A new Sec. 440.167 is added to read as follows:


Sec. 440.167  Personal care services.

    Unless defined differently by a State agency for purposes of a 
waiver granted under part 441, subpart G of this chapter--
    (a) ``Personal care services'' means services furnished to an 
individual who is not an inpatient or resident of a hospital, nursing 
facility, intermediate care facility for the mentally retarded, or 
institution for mental disease that are--
    (1) Authorized for the individual by a physician in accordance with 
a plan of treatment or (at the option of the State) otherwise 
authorized for the individual in accordance with a service plan 
approved by the State;
    (2) Provided by an individual who is qualified to provide such 
services and who is not a member of the individual's family; and
    (3) Furnished in a home, and at the State's option, in another 
location.
    (b) For purposes of this section, ``family member'' means a legally 
responsible relative.


Sec. 440.170,  [Amended]

    4. Sec. 440.170, paragraph (f) is removed and reserved.

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



[[Page 47903]]


    Dated: June 26, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 97-24266 Filed 9-10-97; 8:45 am]
BILLING CODE 4120-01-P