[Federal Register Volume 65, Number 196 (Tuesday, October 10, 2000)]
[Rules and Regulations]
[Pages 60105-60108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25496]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 440 and 441

[HCFA-2010-FC]
RIN 0938-AI67


Medicaid Program; Home and Community-Based Services

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period expands State flexibility 
in providing prevocational, educational, and supported employment 
services under the Medicaid home and community-based services waiver 
provisions currently found in section 1915(c) of the Social Security 
Act (the Act); and incorporates the self-implementing provisions of 
section 4743 of the Balanced Budget Act of 1997 that amends section 
1915(c)(5) of the Act to delete the requirement that an individual have 
prior institutionalization in a nursing facility or intermediate care 
facility for the mentally retarded before becoming eligible for the 
expanded habilitation services. In addition, we are making a number of 
technical changes to update or correct the regulations.

DATES: Effective date: October 1, 1997. We will consider written 
comments if we receive them at the appropriate address, as provided 
below, no later than 5 p.m. on or before December 11, 2000.

ADDRESSES: Mail written comments (one original and three copies) to the 
following address: Health Care Financing Administration, U.S. 
Department of Health and Human Services, P.O. Box 9010, Attention: 
HCFA-2010-FC, 7500 Security Boulevard, Baltimore, MD 21244-9010.
    If you prefer, you may deliver your written comments (one original 
and three copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    Because of staffing and resource limitations, we cannot accept 
audio, visual, or facsimile (FAX) copies of comments. In commenting, 
please refer to file code HCFA-2010-FC. Comments received timely will 
be available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, in 
room 443-G of the Department's offices at 200 Independence Avenue, SW., 
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 
5 p.m. (phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Mary Jean Duckett, (410) 786-3294.

SUPPLEMENTARY INFORMATION:

I. Background

    The Medicaid program is a Federally supported, State-administered 
program that provides medical assistance to individuals that meet 
eligibility criteria. It was established in 1965 as title XIX of the 
Social Security Act (the Act).
    Section 1915(c) was added to title XIX of the Act by the Omnibus 
Budget Reconciliation Act of 1981 (OBRA 1981) (Public Law 97-35) to 
encourage the provision of cost-effective services to Medicaid 
recipients in noninstitutional settings. Before the enactment of OBRA 
1981, the Medicaid program provided limited coverage for long-term care 
services in noninstitutional settings.
    Section 1915(c) of the Act authorizes the Secretary to waive 
certain Medicaid statutory requirements to enable a State to cover a 
broad array of home and community-based services that are not otherwise 
available under a State's Medicaid program. These services must be 
furnished in accordance with an individually written plan of care that 
is subject to approval by the State Medicaid agency, and may be 
furnished only to persons who, but for the provision of the services, 
would otherwise require the level of care provided in a hospital, 
nursing facility (NF), or intermediate care facility for the mentally 
retarded (ICF/MR). Coverage of these services enables elderly, 
disabled, and chronically ill persons, who would otherwise be 
institutionalized, to live in the community.
    Under section 1915(c) of the Act, a State could receive Federal 
financial participation (FFP) for the following services as home and 
community-based services: case management services, homemaker and home 
health aide services, personal care services, adult day health 
services, habilitation services, respite care, and ``other'' services 
as requested by the State and approved by HCFA. Section 9502(a) of the 
Consolidated Omnibus Budget Reconciliation Act of 1985 (Public Law 99-
272) revised section 1915(c) of the Act to explicitly include certain 
prevocational, educational, and supported employment services as 
expanded habilitation services under home and community-based services 
for those individuals who receive waiver services after discharge from 
an NF or ICF/MR. Section 1915(c)(4) of the Act authorizes the provision 
of habilitation services, and section 1915(c)(5) of the Act defines 
habilitation services as services to assist individuals in acquiring, 
retaining, and improving the self-help, socialization, and adaptive 
skills necessary to reside successfully in home and community-based 
settings.
    Section 1915(c)(5) of the Act was further amended by section 
4743(a) of the Balanced Budget Act of 1997 (BBA) (Public Law 105-33), 
which deleted the requirement that an individual have prior 
institutionalization in either an NF or ICF/MR before becoming eligible 
for habilitation services. The regulations at Sec. 440.180(c)(1) 
applied this prior institutionalization requirement to expanded 
habilitation services. Thus, effective October 1, 1997, if a State 
chooses to provide these expanded habilitation services under its home 
and community-based waiver, it may provide these services to all 
individuals eligible for these services without regard to whether the 
individuals had a prior institutional stay in an NF or ICF/MR.

II. Provisions of the Final Rule With Comment Period

    Before the enactment of the BBA, section 1915(c)(5) of the Act 
specified that the term ``habilitation services'' applies to 
individuals who receive services after discharge from an NF or ICF/MR. 
Section 4743 of the BBA amended section 1915(c)(5) of the Act, 
effective October 1, 1997, to remove the requirement that an individual 
be institutionalized before receiving habilitation services.
    To implement the provisions of section 4743 of the BBA, we are 
revising parts 440 and 441. We are also making a number of technical 
changes to update or correct the regulations.

[[Page 60106]]

    In Sec. 440.180, ``Home or community-based services,'' we are 
revising the heading for paragraph (c) by changing the effective date 
from April 7, 1986 to October 1, 1997, and in paragraph (c)(1) we are 
deleting the requirement that recipients must have been discharged from 
a Medicaid-certified NF or ICF/MR to receive the services.
    In Sec. 441.301, ``Contents of request for a waiver,'' our current 
rules at paragraph (a)(2) state that requests for waivers of the 
requirements of the Act that concern statewide application of Medicaid, 
comparability of services, and income and resource rules are applicable 
to individuals with spouses living in the community. This requirement 
incorrectly limits the waiver of the requirements of section 
1902(a)(10)(C)(i)(III) of the Act to individuals with spouses. We are 
correcting the requirement by deleting the phrase ``with spouses'' and 
adding ``medically needy'' before the word ``individuals.'' This 
revision clarifies that the request for a waiver is not limited to 
medically needy individuals with spouses.
    In Sec. 441.302, ``State assurances,'' we are making a number of 
changes. Section 441.302(c)(1)(i) incorrectly cites hospital 
regulations at Sec. 440.40, rather than at Sec. 440.10. We are making 
this technical change. Section 441.302(d) requires States to give 
assurance that when a recipient is determined to be likely to require 
the level of care provided in an SNF, ICF, or ICF/MR, the recipient or 
his or her legal representative will be informed of the alternatives 
available under the waiver and given the choice of either institutional 
or home and community-based services. We are updating the terminology 
in Sec. 441.302(d) by removing the terms ``SNF and ICF'' and replacing 
them with ``NF,'' and adding the term ``hospital'' as a conforming 
change to the regulations text. Section 441.302(i)(2) also requires 
State assurances that services are furnished only to individuals who 
have been deinstitutionalized, regardless of discharge date from a 
Medicaid-certified NF or ICF/MR. Therefore, to conform the regulation 
to the BBA changes, we are removing Sec. 441.302(i)(2) and 
redesignating Sec. 441.302(i)(3) as Sec. 441.302(i)(2). In the 
redesignated Sec. 441.302(i)(2), we are also removing the phrase ``on 
or after April 7, 1986.''
    In Sec. 441.307, ``Notification of a waiver termination,'' our 
regulations at paragraph (a) require that if a State chooses to 
terminate its waiver before the 3-year period expires, it must notify 
HCFA in writing 30 days before terminating services to recipients. We 
are making a technical correction in paragraph (a) to state that 
waivers may be terminated during the initial 3-year period or 5-year 
renewal period.
    In Sec. 441.310, ``Limits on Federal financial participation 
(FFP),'' we are making a number of changes. Section 441.310(a)(3)(i) 
states that FFP is not available for prevocational, educational, or 
supported employment services, or any combination of these services, as 
part of habilitation services that are provided before April 7, 1986, 
and Sec. 441.310(a)(3)(iii) requires that habilitation services must be 
provided to recipients who were never institutionalized in a Medicaid-
certified NF or ICF/MR. Section 441.310(b) states that FFP is available 
for expenditures for expanded habilitation services if the services are 
included under a waiver or waiver amendment approved by HCFA on or 
after April 7, 1986. Again, as the BBA eliminated the April 1986 date 
and also makes services available to medically needy recipients who 
have not been institutionalized, we are revising Sec. 441.310(a)(3)(i), 
Sec. 441.310(a)(3)(iii), and Sec. 441.310(b) to conform the regulations 
to the BBA changes.

III. Collection of Information Requirements

    This document does not impose any information collection and 
recordkeeping requirements subject to the Paperwork Reduction Act of 
1995 (PRA). Consequently, it does not need to be reviewed by the Office 
of Management and Budget (OMB) under the authority of the PRA.

IV. Response to Comments

    Because of the large number of comments we receive in response to a 
Federal Register publication, we are not able to respond to them 
individually. We will, however, consider all comments that we receive 
by the date and time specified in the ``DATES'' section of this 
preamble, and, if we publish a subsequent document, we will respond to 
the comments in the preamble to that document.

V. Waiver of Notice of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of the rule take effect. However, pursuant to 5 U.S.C. 
553(b)(B), we may waive a notice of proposed rulemaking if we find good 
cause that notice and comment are impracticable, unnecessary, or 
contrary to the public interest. For good cause we find that it was 
unnecessary to undertake notice and comment procedures because these 
self-implementing changes merely conform the regulations to the 
statutory language or make technical corrections and do not involve any 
exercise of discretion.
    Therefore, we believe it is unnecessary to publish a proposed rule 
and for good cause waive publication of a proposed regulation. We are, 
however, providing a 60-day period for public comment.

VI. Waiver of Effective Date

    Under section 553(d) of the Administrative Procedure Act, we 
ordinarily publish a substantive rule at least 30 days before its 
effective date, unless for good cause we find a delay is impracticable, 
unnecessary, or contrary to the public interest. For good cause we find 
it unnecessary to delay the effective date of this rule because the 
changes are self-implementing or merely reflect technical corrections. 
Therefore, we are waiving the 30-day delay of the effective date.

VII. Regulatory Impact Analysis

    We have examined the impact of this rule as required by Executive 
Order (E.O.) 12866 and the Regulatory Flexibility Act (RFA) (Public Law 
96-354). E.O. 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, when regulation is necessary, 
to select regulatory approaches that maximize net benefits, including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity.
    The RFA (5 U.S.C. 601 through 612) requires agencies to analyze 
options for regulatory relief for small entities. Consistent with the 
RFA, we prepare a regulatory flexibility analysis unless we certify 
that a rule will not have a significant economic impact on a 
substantial number of small entities. For purposes of the RFA, we treat 
most hospitals and most other providers, physicians, health care 
suppliers, carriers, and intermediaries as small entities, either by 
nonprofit status or by having revenues of $5 million or less annually. 
Individuals and States are not included in the definition of a small 
entity.
    Also, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. That 
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

[[Page 60107]]

a Metropolitan Statistical Area and has fewer than 50 beds.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and we certify, that this rule 
will not have a significant economic impact on a substantial number of 
small entities or a significant impact on the operations of a 
substantial number of small rural hospitals. This rule primarily 
affects States and individuals by expanding State flexibility and 
individual eligibility regarding certain services under Medicaid home 
and community-based waivers. It does not impose any new, direct 
economic burdens on providers or other health care entities.
    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare an assessment of anticipated costs and benefits 
for any rule that may result in an expenditure by State, local, or 
tribal governments in the aggregate, or by the private sector, of $100 
million in any one year. This rule has no mandated consequential effect 
on State, local, or tribal governments, or the private sector, and will 
not create an unfunded mandate.
    We do not believe publication of this rule will have a major impact 
on Medicaid waiver costs. According to States that have the expanded 
habilitation services under their waivers, individuals that currently 
are not receiving the expanded habilitation services because of no 
prior institutionalization are in day habilitation programs. This rule 
offers States greater flexibility. As stated above it should not 
significantly change how they do business because more individuals 
would shift from day habilitation to expanded habilitation programs.
    In accordance with Executive Order 12866, this final rule with 
comment period was reviewed by OMB.
    We have reviewed this rule under the threshold criteria of 
Executive Order 13132, Federalism. We have determined that this rule 
does not significantly affect the rights, roles, and responsibilities 
of States.

List of Subjects

42 CFR Part 440

    Grant programs-health, Health facilities, Health maintenance 
organizations (HMO), Medicaid, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 441

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

    42 CFR chapter IV is amended as set forth below:

PART 440--SERVICES: GENERAL PROVISIONS

    A. Part 440 is amended as follows:
    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).

    2. In Sec. 440.180, the heading for paragraph (c) and paragraph 
(c)(1) are revised to read as follows:


Sec. 440.180  Home or community-based services.

* * * * *
    (c) Expanded habilitation services, effective October 1, 1997-- (1) 
General rule. Expanded habilitation services are those services 
specified in paragraph (c)(2) of this section.
* * * * *

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

    B. Part 441 is amended as follows:
    1. The authority citation for part 441 continues to read as 
follows:


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


    2. In Sec. 441.301, the introductory text of paragraph (a) is 
republished and paragraph (a)(2) is revised to read as follows:


Sec. 441.301  Contents of request for a waiver.

    (a) A request for a waiver under this section must consist of the 
following:
* * * * *
    (2) When applicable, requests for waivers of the requirements of 
section 1902(a)(1), section 1902(a)(10)(B), or section 
1902(a)(10)(C)(i)(III) of the Act, which concern respectively, 
statewide application of Medicaid, comparability of services, and 
income and resource rules applicable to medically needy individuals 
living in the community.
* * * * *


Sec. 441.302  [Amended]

    3. In Sec. 441.302, the following changes are made:
    a. Paragraph (c)(1)(i) is amended by removing the citation 
``Sec. 440.40'' and adding ``Sec. 440.10'' in its place.
    b. The introductory text of paragraph (d) is revised, paragraph 
(i)(2) is removed, and paragraph (i)(3) is redesignated as paragraph 
(i)(2) and revised to read as follows:


Sec. 441.302  State assurances.

* * * * *
    (d) Alternatives--Assurance that when a recipient is determined to 
be likely to require the level of care provided in a hospital, NF, or 
ICF/MR, the recipient or his or her legal representative will be--
* * * * *
    (i) * * *
    (2) Furnished as part of expanded habilitation services, if the 
State has requested and received HCFA's approval under a waiver or an 
amendment to a waiver.
* * * * *

    4. In Sec. 441.307, paragraph (a) is revised to read as follows:


Sec. 441.307  Notification of a waiver termination.

    (a) If a State chooses to terminate its waiver before the initial 
3-year period or 5-year renewal period expires, it must notify HCFA in 
writing 30 days before terminating services to recipients.
* * * * *

    5. In Sec. 441.310, the introductory text of paragraph (a) is 
republished, and paragraphs (a)(3) and (b) are revised to read as 
follows:


Sec. 441.310  Limits on Federal financial participation (FFP).

    (a) FFP for home and community-based services listed in 
Sec. 440.180 of this chapter is not available in expenditures for the 
following:
* * * * *
    (3) Prevocational, educational, or supported employment services, 
or any combination of these services, as part of habilitation services 
that are--
    (i) Provided in approved waivers that include a definition of 
``habilitation services'' but which have not included prevocational, 
educational, and supported employment services in that definition; or
    (ii) Otherwise available to the recipient under either special 
education and related services as defined in section 602(16) and (17) 
of the Education of the Handicapped Act (20 U.S.C. 1401(16) and (17)) 
or vocational rehabilitation services available to the individual 
through a program funded under section 110 of the Rehabilitation Act of 
1973 (29 U.S.C. 730).
* * * * *
    (b) FFP is available for expenditures for expanded habilitation 
services, as described in Sec. 440.180 of this chapter, if the services 
are included under a waiver or waiver amendment approved by HCFA.

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


[[Page 60108]]


    Dated: December 28, 1999.
Nancy-Ann DeParle,
Administrator, Health Care Financing Administration.

    Dated: March 28, 2000.
Donna E. Shalala,
Secretary.
    Editorial Note: This document was received at the Office of the 
Federal Register September 29, 2000.
[FR Doc. 00-25496 Filed 10-6-00; 8:45 am]
BILLING CODE 4120-01-P