[Federal Register Volume 70, Number 6 (Monday, January 10, 2005)]
[Notices]
[Pages 1719-1721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-445]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services


Notice of Hearing: Reconsideration of Disapproval of Indiana 
State Plan Amendment 02-021

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice of hearing.

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SUMMARY: This notice announces an administrative hearing to be held on 
January 20, 2005, at 10 a.m., 233 North Michigan Avenue, Minnesota 
Room, Chicago, Illinois 60601 to reconsider the decision to disapprove 
Indiana State Plan Amendment (SPA) 02-021.
    Closing Date: Requests to participate in the hearing as a party 
must be received by the presiding officer by January 25, 2005.

FOR FURTHER INFORMATION CONTACT: Kathleen Scully-Hayes, Presiding 
Officer, CMS, LB-23-20, Lord Baltimore Drive, Baltimore, Maryland 
21244, Telephone: (410) 786-2055.

SUPPLEMENTARY INFORMATION: This notice announces an administrative 
hearing to reconsider the decision to disapprove Indiana Medicaid State 
Plan Amendment (SPA) 02-021, which was submitted on December 27, 2002.
    In SPA 02-021, Indiana proposed to expand the State's Medicaid 
mental health rehabilitation benefit to include services furnished by 
five types of child care facilities to inpatients in the facilities. 
The State incorporated into the SPA portions of the Indiana State code 
(470 IAC 3-11, 470 IAC 3-12, 470 IAC 3-13, 470 IAC 3-14, and 470 IAC 3-
15) that govern the operation of these facilities.
    At issue in this reconsideration is whether SPA 02-021 is 
consistent with the requirements contained in sections 1902(a)(10), 
1902(a)(19), 1902(a)(30)(A), and 1902(a)(4) of the Social Security Act 
(the Act) as described in more detail below. In general, the Centers 
for Medicare & Medicaid Services (CMS) found that the SPA had four 
basic problems: (1) The proposed services would be provided to 
individuals under age 65 who are patients in institutions for mental 
diseases (IMDs) (that are not juvenile psychiatric hospitals) and who 
have not been determined eligible for Medicaid; (2) the proposed 
services would be provided on order of individuals who are neither 
physicians nor licensed practitioners; (3) the proposed services would 
be provided in facilities which permit use of mechanical restraints and 
provide for seclusion of children and which, therefore, cannot be 
considered to be ``in the best interests'' of the recipients; and (4) 
the proposed payment methodology includes items not encompassed in the 
definition of Medicaid rehabilitation services and improperly includes 
payment for state administrative costs.
    More specifically, at issue is whether the proposed SPA complies 
with the requirements of section 1902(a)(10) of the Act, which provides 
generally that state plans must make ``medical assistance'' as defined 
in section 1905(a) of the Act, available to eligible individuals. The 
definition of medical assistance at section 1905(a)(27), excludes 
payment for care and services for individuals under age 65 who are 
patients in institutions for mental diseases (IMDs), except payment for 
juvenile psychiatric hospital services pursuant to section 1905(a)(16) 
of the Act. Indiana proposed to furnish services to individuals who are 
under age 65 in institutions that appear to meet the definition of an 
IMD at section 1905(i) of the Act and applicable Federal regulations at 
42 CFR 435.1009. However, these facilities do not provide services that 
meet the definition of inpatient psychiatric hospital services 
contained in section 1905(h) of the Act and do not comply with the 
regulatory requirements for providers of inpatient psychiatric hospital 
services set forth at 42 CFR 483 Subpart G (concerning use of restraint 
or seclusion). Thus, the State has failed to establish that the 
services are within the scope of medical assistance that is authorized 
under the Act.
    In addition, section 1905(a)(13) of the Act defines rehabilitative 
services as those that are recommended by a physician or other licensed 
practitioner of the healing arts. The proposed SPA would include 
services that are recommended by individuals who are neither physicians 
nor licensed practitioners, but who are operating under the supervision 
of these individuals. Nor do the proposed services meet the 
requirements or services in any inpatient setting within the scope of 
medical assistance (hospitals, nursing facilities, psychiatric hospital 
services for juveniles, or intermediate care facilities for the 
mentally retarded).
    Finally, section 1905(a) of the Act defines the term ``medical 
assistance'' as payment of part or all of the cost of care and services 
furnished to eligible individuals. The reimbursement section of this 
amendment, detailed at section 4.2.2 of the Indiana Residential Care 
Reimbursement Rate Establishment document, and included in Attachment 
4.19B of this amendment, would provide payment for services furnished 
to individuals who have not been determined eligible for Medicaid.
    In addition, at issue is whether the proposed SPA is consistent 
with the requirement in section 1902(a)(19) of the Act that services be 
provided ``in the best interests of the recipients.'' Indiana permits 
the use of mechanical restraints and provides for extended periods of 
seclusion of children in the facilities covered by this amendment. CMS 
has determined that these policies, defined in the Indiana 
Administrative Code (470 IAC 3-11, 470 IAC 3-12, and 470 IAC 3-13) and 
incorporated in this amendment by reference, would endanger the health 
and welfare of the victims of these procedures, and cannot be 
considered to be in the best interests of the children affected.
    Finally, at issue is whether the proposed payment methodology 
complies with section 1902(a)(30)(A) of the Act, which requires that 
payments for services under the plan be ``consistent with efficiency, 
economy, and quality of care,'' and with section 1902(a)(4) which 
requires that the State use methods of administration that are found by 
the Secretary to be ``necessary for the proper and efficient operation 
of the plan.'' The payment methodology proposed by the State includes 
payment for numerous cost items, including elements of room and board 
and transportation services, that are not encompassed in the definition 
of Medicaid rehabilitation services. For this reason, CMS found that 
the State has not documented that the proposed payment methodology 
would be efficient or economical, as required by section 1902(a)(30)(A) 
of the Act. Furthermore, CMS determined that the payment methodology 
improperly includes payment for State administrative costs as medical 
assistance. The amendment would include Medicaid administrative costs 
as part of the payment to providers and thus would likely result in 
incorrect payment of FFP. Because the proposed payment methodology 
commingles medical assistance and administrative costs, it is not 
consistent with the requirement for proper and efficient

[[Page 1720]]

plan administration contained in section 1902(a)(4) of the Act. 
Therefore, based on the reasoning set forth above, and after 
consultation with the Secretary as required under 42 CFR 430.15(c)(2), 
CMS disapproved Indiana SPA 02-021.
    Section 1116 of the Act and 42 CFR Part 430 establish Department 
procedures that provide an administrative hearing for reconsideration 
of a disapproval of a state plan or plan amendment. CMS is required to 
publish a copy of the notice to a state Medicaid agency that informs 
the agency of the time and place of the hearing and the issues to be 
considered. If we subsequently notify the agency of additional issues 
that will be considered at the hearing, we will also publish that 
notice.
    Any individual or group that wants to participate in the hearing as 
a party must petition the presiding officer within 15 days after 
publication of this notice, in accordance with the requirements 
contained at 42 CFR 430.76(b)(2). Any interested person or organization 
that wants to participate as amicus curiae must petition the presiding 
officer before the hearing begins in accordance with the requirements 
contained at 42 CFR 430.76(c). If the hearing is later rescheduled, the 
presiding officer will notify all participants.
    The notice to Indiana announcing an administrative hearing to 
reconsider the disapproval of its SPA reads as follows:

Ms. Melanie Bella, Assistant Secretary, Medicaid Policy, 402 West 
Washington Street, Indianapolis, IN 46204.

    Dear Ms. Bella: I am responding to your request for 
reconsideration of the decision to disapprove Indiana Medicaid State 
Plan Amendment (SPA) 02-021 submitted on December 27, 2002.
    In SPA 02-021, Indiana proposed to expand the State's Medicaid 
mental health rehabilitation benefit to include services furnished 
by five types of child care facilities to inpatients in the 
facilities. The State incorporated into the SPA portions of the 
Indiana State code (470 IAC 3-11, 470 IAC 3-12, 470 IAC 3-13, 470 
IAC 3-14, and 470 IAC 3-15) that govern the operation of these 
facilities.
    We do not find the proposed SPA to be consistent with section 
1902(a) of the Social Security Act (the Act), which provides 
generally that state plans must make ``medical assistance,'' as 
defined in section 1905(a) of the Act, available to eligible 
individuals. The proposed SPA would provide a facility-based benefit 
that within the scope of ``medical assistance'' as that term is used 
in section 1902(a) of the Act and defined in section 1905(a) of the 
Act. The definition of medical assistance at section 1905(a) of the 
Act excludes payment for care and services to individuals under age 
65 who are patients in institutions for mental diseases (IMDs), 
except payment for juvenile psychiatric hospital services pursuant 
to section 1905(a)(16) of the Act. The services proposed under this 
SPA would be furnished to individuals who are under age 65 in 
institutions that appear to meet the definition of an IMD at section 
1905(i) of the Act and applicable Federal regulations at 42 CFR 
435.1009. (In responses to Centers for Medicare & Medicaid Services 
(CMS) inquiries, the State itself indicated that the facilities can 
have over 16 beds, and that the patients reside in the facility in 
order to receive treatment for mental illness.) But, the proposed 
services are not within the scope of juvenile psychiatric hospital 
services which, pursuant to section 1905(h) of the Act, includes 
services provided to individuals under age 21 in psychiatric 
residential treatment facilities. It appears that the proposed 
services would be furnished in facilities that do not meet the 
regulatory requirements for providers of inpatient psychiatric 
hospital services set forth at 42 CFR 483 Subpart G (concerning use 
of restraint or seclusion). Thus, CMS does not find that the State 
has established that the services are within the scope of medical 
assistance that is authorized under the Act.
    Even if the State were to demonstrate that the individuals were 
not inpatients in IMDs, CMS does not believe the State has 
demonstrated that the proposed services are within the proper scope 
of medical assistance. The proposed services do not meet the 
requirement under section 1905(a)(13) of the Act that rehabilitation 
services be recommended by a physician or other licensed 
practitioner of the healing arts. The proposed SPA would include 
services that are recommended by individuals who are neither 
physicians nor licensed practitioners, but who are operating under 
the supervision of these individuals. Nor has the State shown that 
the proposed services meet the requirements for any inpatient 
setting within the scope of medical assistance, including hospitals, 
nursing facilities, psychiatric hospital services for juveniles, or 
intermediate care facilities for the mentally retarded.
    In addition, the proposed SPA, does not appear to be consistent 
with the requirement in section 1902(a)(19) of the Act that services 
be provided ``in the best interests of the recipients.'' Indiana 
permits the use of mechanical restraints and provides for extended 
periods of seclusion of children in the facilities covered by this 
amendment. CMS believes that these policies, defined in the Indiana 
Administrative Code (470 IAC 3-11, 470 IAC 3-12, and 470 IAC 3-13) 
and incorporated in this amendment by reference, would endanger the 
health and welfare of the victims of these procedures, and cannot be 
considered to be in the best interests of the children affected.
    CMS found that the State has not demonstrated that the proposed 
payment methodology would comply with section 1902(a)(30)(A) of the 
Act, which requires that payments for services under the plan be 
``consistent with efficiency, economy, and quality of care.'' The 
payment methodology proposed by the State includes payment for 
numerous cost items, including elements of room and board and 
transportation services, that are not encompassed in the definition 
of Medicaid rehabilitation services. For this reason, CMS found that 
the State has not documented that the proposed payment methodology 
would be efficient or economical.
    Furthermore, the proposed payment methodology does not appear to 
comply with the requirement for methods of administration that are 
found by the Secretary to be ``proper and efficient'' for the 
operation of the State plan, because the payment methodology 
improperly includes payment for State administrative costs as 
medical assistance. Section 1903(a) of the Act provides for FFP for 
medical assistance at the Federal medical assistance percentage 
rate, which is currently 62.32 percent in Indiana. Section 1903(a) 
of the Act provides for FFP at the 50 percent match rate for 
activities that have been found to be in support of the proper and 
efficient administration of the state plan. The amendment would 
include Medicaid administrative costs as part of the payment to 
providers and thus would likely result in incorrect payment of FFP. 
Because the proposed payment methodology commingles medical 
assistance and administrative costs, CMS finds that the payment 
methodology is not consistent with the requirement for proper and 
efficient plan administration.
    Equally important, section 1905(a) of the Act defines the term 
``medical assistance'' as payment of part or all of the cost of care 
and services furnished to eligible individuals. The reimbursement 
section of this amendment, detailed at section 4.2.2 of the Indiana 
Residential Care Reimbursement Rate Establishment document, and 
included in Attachment 4.19B of this amendment, would appear to 
provide payment for services furnished to individuals who have not 
been determined eligible for Medicaid.
    Based on the reasoning set forth above, and after consulting 
with the Secretary as required by 42 CFR 430.15(c)(2), CMS 
disapproved Indiana Medicaid SPA 02-021.
    I am scheduling a hearing on your request for reconsideration to 
be held January 20, 2005, at 10:00 a.m., 233 North Michigan Avenue, 
Minnesota Room, Chicago, Illinois 60601 to reconsider the decision 
to disapprove Indiana SPA 02-021.
    If this date is not acceptable, we would be glad to set another 
date that is mutually agreeable to the parties. The hearing will be 
governed by the procedures prescribed at 42 CFR, part 430.
    I am designating Ms. Kathleen Scully-Hayes as the presiding 
officer. If these arrangements present any problems, please contact 
the presiding officer. In order to facilitate any communication 
which may be necessary between the parties to the hearing, please 
notify the presiding officer to indicate acceptability of the 
hearing date that has been scheduled and provide names of the 
individuals who will represent the State at the hearing. The 
presiding officer may be reached at (410) 786-2055.

Sincerely,

Mark B. McClellan, M.D., Ph.D.


[[Page 1721]]


    Section 1116 of the Social Security Act (42 U.S.C. 1316); 42 CFR 
430.18.

(Catalog of Federal Domestic Assistance Program No. 13.714, Medicaid 
Assistance Program)


    Dated: January 5, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 05-445 Filed 1-7-05; 8:45 am]
BILLING CODE 4120-03-P