[Federal Register Volume 73, Number 193 (Friday, October 3, 2008)]
[Rules and Regulations]
[Pages 57853-57886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-23102]



[[Page 57853]]

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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 441



Medicaid Program; Self-Directed Personal Assistance Services Program 
State Plan Option (Cash and Counseling); Final Rule

Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Rules 
and Regulations

[[Page 57854]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 441

[CMS-2229-F]
RIN 0938-AO52


Medicaid Program; Self-Directed Personal Assistance Services 
Program State Plan Option (Cash and Counseling)

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

ACTION: Final rule.

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SUMMARY: This final rule provides guidance to States that want to 
administer self-directed personal assistance services through their 
State Plans, as authorized by the Deficit Reduction Act of 2005. The 
State plan option allows beneficiaries, through an approved self-
directed services plan and budget, to purchase personal assistance 
services. The rule also provides guidance to ensure beneficiary health 
and welfare and financial accountability of the State Plan option.

DATES: Effective date: November 3, 2008.

FOR FURTHER INFORMATION CONTACT: Marguerite Schervish, (410) 786-7200.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Section 6087 of the Deficit Reduction Act of 2005

    The Deficit Reduction Act (DRA) of 2005 was enacted into law on 
February 8, 2006 (Pub. L. 109-171). Section 6087 of the DRA provided 
for a new State Plan option that is built on the experiences and 
lessons learned from the disability rights movement and States that 
pioneered self-direction programs. Self-direction is an important 
component of independence, as it promotes quality, access, and choice.
    Specifically, section 6087 of the DRA amended section 1915 of the 
Social Security Act (the Act) to add new paragraph (j). Section 
1915(j)(1) of the Act would allow a State the option to provide, as 
``medical assistance,'' payment for part or all of the cost of self-
directed personal assistance services (PAS) provided pursuant to a 
written plan of care to individuals for whom there has been a 
determination that, but for the provision of such services, the 
individuals would require and receive State Plan personal care 
services, or section 1915(c) home and community-based waiver services. 
Section 1915(j)(1) of the Act also expressly excludes Medicaid payment 
for room and board. Finally, section 1915(j)(1) of the Act requires 
that self-directed PAS may not be provided to individuals who reside in 
a home or property that is owned, operated, or controlled by a provider 
of services, not related by blood or marriage.
    Section 1915(j)(2) of the Act sets forth five assurances that 
States must provide in order for the Secretary to approve self-directed 
PAS under this State Plan option. First, States must assure that 
necessary safeguards are in place to protect the health and welfare of 
individuals provided services under this State Plan option, and to 
assure the financial accountability for funds expended with respect to 
such services. Second, States must assure the provision of an 
evaluation of the need for State Plan personal care services, or 
personal services under a section 1915(c) waiver. Third, States must 
assure that individuals who are likely to require State Plan personal 
care services, or section 1915(c) waiver services, are informed of the 
feasible alternatives to the self-directed PAS State Plan option (if 
available) such as personal care under the regular State Plan option or 
personal assistance services under a section 1915(c) waiver program. 
Fourth, States must assure that they provide a support system that 
ensures that participants in the self-directed PAS program are 
appropriately assessed and counseled prior to enrollment and are able 
to manage their budgets. Fifth, States must assure that they will 
provide to the Secretary an annual report on the number of individuals 
served under the State Plan option and the total expenditures on their 
behalf in the aggregate. States must also provide an evaluation of the 
overall impact of this new option on the health and welfare of 
participating individuals compared to non-participants every 3 years.
    Section 1915(j)(3) of the Act indicates that States that offer 
self-directed PAS under this State Plan option are not subject to the 
statewideness and comparability requirements of the Act. Section 
1915(j)(4)(A) of the Act defines self-directed PAS to mean personal 
care and related services under the State Plan, or home and community-
based waiver services under a section 1915(c) waiver, provided to a 
participant eligible under this self-directed PAS State Plan option. 
Furthermore, the statute states that within an approved self-directed 
services plan and budget, individuals can purchase personal assistance 
and related services and hire, fire, supervise, and manage the 
individuals providing such services.
    Section 1915(j)(4)(B) of the Act gives States the option to permit 
participants to hire any individual capable of providing the assigned 
tasks, including legally liable relatives, as paid providers of the 
services. The statute also gives States the option to permit 
participants to purchase items that increase independence or substitute 
for human assistance to the extent that expenditures would otherwise be 
made for the human assistance.
    Section 1915(j)(5) of the Act sets forth the requirements for an 
``approved self-directed services plan and budget.'' Section 
1915(j)(5)(A) of the Act authorizes the individual or a defined 
representative to exercise choice and control over the budget, 
planning, and purchase of self-directed PAS, including the amount, 
duration, scope, provider, and location of service provision. Section 
1915(j)(5)(B) of the Act requires an assessment of participants' needs, 
strengths, and preferences for PAS. Section 1915(j)(5)(C) of the Act 
requires States to develop a service plan based on the assessment of 
need using a person-centered planning process. Section 1915(j)(5)(D) of 
the Act requires States to develop and approve a budget for 
participants' services and supports based on the assessment of need and 
service plan and on a methodology that uses valid, reliable cost data, 
is open to public inspection, and includes a calculation of the 
expected cost of such services if those services were not self-
directed. The budget may not restrict access to other medically 
necessary care and services furnished under the State Plan and approved 
by the State but not included in the budget.
    Section 1915(j)(5)(E) of the Act requires that there are 
appropriate quality assurance and risk management techniques used in 
establishing and implementing the service plan and budget that 
recognize the roles and responsibilities in obtaining services in a 
self-directed manner and assure the appropriateness of such plan and 
budget based upon the participant's resources and capabilities.
    Section 1915(j)(6) of the Act indicates that States may employ a 
financial management entity to make payments to providers, track costs, 
and make reports. Payment for the activities of the financial 
management entity shall be at the administrative rate established in 
section 1903(a) of the Act.

    Note: CMS released a pre-print for use by States, at their 
discretion, to submit a State plan section 1915(j) amendment, which 
was approved under OMB 0938-1024.


[[Page 57855]]



B. History of Self-Direction

    The Independent Living movement in the 1960s was premised on the 
concept that people with disabilities should have the same civil 
rights, options, and control over choices in their own lives as do 
people without disabilities, and that individuals with cognitive 
impairments should not be prohibited from exercising control over their 
lives. One mechanism that allows individuals to exercise more 
involvement, control, and choice over their lives is self-directed 
care. Self-directed care is a service delivery mechanism that empowers 
individuals with the opportunity to select, direct, and manage their 
needed services and supports identified in an individualized service 
plan and budget plan. Self-direction is not a service, but rather an 
alternative to the traditional service delivery model whereby a worker 
hired by the Medicaid recipient will furnish the Medicaid service to 
the Medicaid recipient and the Medicaid recipient retains the control 
and authority over who provides the services, how the services are 
provided, the hours they work, and their rate of pay.
    Two national pilot projects demonstrated the success of self-
directed care. During the mid-1990s, the Robert Wood Johnson Foundation 
awarded grants to develop self-determination in 19 States. These 
projects primarily evolved into Medicaid-funded programs under the 
section 1915(c) home and community-based services waiver authority. In 
the late 1990s, the Robert Wood Johnson Foundation again awarded grants 
to develop the ``Cash & Counseling'' national demonstration and 
evaluation project in three States. These projects evolved into 
demonstration programs under the section 1115 authority of the Act.
    Evaluations were conducted in both of these national projects. 
Results in both projects were similar--persons directing their personal 
care experienced fewer unnecessary institutional placements, 
experienced higher levels of satisfaction, had fewer unmet needs, 
experienced higher continuity of care because of less worker turnover, 
and maximized the efficient use of community services and supports.
    On February 1, 2001, the President announced the New Freedom 
Initiative, which included the following three elements: promoting full 
access to community life through efforts to implement the Supreme 
Court's decision in Olmstead v. L.C., 527 U.S. 581 (1999) 
(``Olmstead''), integrating Americans with disabilities into the 
workforce with programs under the Ticket to Work and Work Incentives 
Improvement Act of 1999 (TWWIIA) (Pub. L. 106-170, enacted on December 
19, 1999), and creating the National Commission on Mental Health. The 
President subsequently expanded this initiative through Executive Order 
13217 (June 18, 2001) by directing Federal agencies to work together to 
``tear down the barriers'' to community living by developing a 
government-wide framework for providing elders and people with 
disabilities the supports necessary to learn and develop skills, engage 
in productive work, choose where to live, and fully participate in 
community life.
    On May 9, 2002, as part of its response to the New Freedom 
Initiative, the Department of Health and Human Services unveiled the 
Independence Plus templates and the initiative to help States broaden 
their ability to offer individuals the opportunity to maximize choice 
and control over services in their own homes and communities. The 
Department developed two templates that allowed States to choose 
different self-directed design features to satisfy their unique 
programs. The section 1115 demonstration template was developed for 
States that wanted to permit individuals to receive a prospective cash 
allowance equivalent to the amount of their Medicaid personal care 
benefit. Under the section 1115 authority, individuals could directly 
manage their cash allowance and direct the purchases of their personal 
care and related services and goods. For those States not wanting to 
offer the cash allowance, a section 1915(c) home and community-based 
services waiver template was developed. The section 1915(c) waiver 
template allowed Medicaid recipients to self-direct a wide array of 
services, so long as these services are required to keep a person from 
being institutionalized in a hospital, nursing facility or intermediate 
care facility for the mentally retarded (ICF-MR).
    However, a program was only given the Independence Plus designation 
when a State demonstrated a strong commitment to self-direction by 
developing a comprehensive program that offered a person-centered 
planning process, individualized budgeting, self-directed supports 
including financial management services, and a quality assurance and 
improvement plan. The intended purposes of the Independence Plus 
Initiative were to:
     Delay or avoid institutional or other high cost out-of-
home placement by strengthening supports to individuals or families.
     Recognize the essential role of the individual or family 
in the planning and purchasing of health care supports and services by 
providing individual or family control over an agreed upon resource 
amount.
     Encourage cost effective decision-making in the purchase 
of supports and services.
     Increase individual or family satisfaction through the 
promotion of self-direction, control, and choice--a major theme 
expressed during the New Freedom Initiative--National Listening 
Session.
     Promote solutions to the problem of worker availability.
     Provide supports including financial management services 
to support and sustain individuals or families as they direct their own 
services.
     Assist States with meeting their legal obligations under 
the Americans with Disabilities Act (ADA) and the U.S. Supreme Court's 
Olmstead decision.
     Provide flexibility for States seeking to increase the 
opportunities afforded individuals and families in deciding how best to 
enlist or sustain home and community services.
A new section 1915(c) waiver application was also developed effective 
spring 2005 that incorporates our requirements for an Independence Plus 
program.
    In 2003 we awarded 12 systems change grants to States for the 
development of Independence Plus programs. On October 7, 2004, the 
Robert Wood Johnson Foundation awarded a second round of ``Cash & 
Counseling'' grants to 11 States to develop Independence Plus programs 
using either the section 1915(c) waiver or section 1115 demonstration 
application. As of March 20, 2006, 15 States had 17 approved 
Independence Plus programs. In addition, there were 2 other States that 
included self-direction options in their section 1115 demonstrations 
and a multitude of States that offered self-directed program options in 
their section 1915(c) home and community-based services waiver 
programs.
    This final rule finalizes provisions set forth in the January 18, 
2008 proposed rule.

II. Analysis of and Responses to Public Comments on the Proposed Rule

    We received a total of 55 timely comments from home care agencies 
and provider associations, State Medicaid directors, home care 
providers, unions, beneficiaries, and other individuals and

[[Page 57856]]

professional associations. The comments ranged from general support or 
opposition to the proposed provisions to very specific questions and 
detailed comments regarding the proposed changes. A summary of our 
proposals, the public comments, and our responses are set forth below.

General

    Comment: Several commenters expressed support for the rule and the 
options, rights, support, and safeguards the provisions gave to 
participants. One commenter was appreciative of the possibility to be 
able to hire a caregiver of her own choosing. Another commenter stated 
that her ``hard to serve'' clients were satisfied with hiring persons 
of their choosing and that another client was able to get more hours of 
``flexible'' care to fit her individualized needs and wishes.
    Response: We appreciate the perspectives these commenters had in 
support of the rule.
    Comment: Several commenters indicated opposition to the self-
directed service delivery model. Some commenters stated that the model 
was not appropriate for most Medicaid beneficiaries. Other commenters 
were concerned that under the self-directed delivery model, caregivers 
were inadequately trained, that there was insufficient oversight of the 
care being provided beneficiaries, and that the potential for fraud, 
abuse, neglect, and exploitation increased.
    Response: We disagree that the self-directed service delivery model 
is an inappropriate model. Our experience with programs that offer 
self-direction in section 1915(c), home and community-based services 
waiver programs and section 1115 demonstration programs, has confirmed 
the positive results found in the formal evaluation of the ``Self-
Determination'' and ``Cash & Counseling'' projects. These programs 
successfully offered the self-directed service delivery model to 
children, older persons, and persons with cognitive impairments, 
developmental disabilities, and mental health needs. This final rule 
requires numerous participant safeguards, including the requirement for 
a support system that provides information about self-direction, as 
well as any counseling, training and assistance that may be needed or 
desired by participants to effectively manage their services and 
budgets. Key components of the support system are the support brokers 
and consultants who help participants perform tasks (for example, 
locating and accessing needed services, developing a service budget 
plan, and monitoring the beneficiary's management of the PAS and 
budget). Additionally, the support system includes financial management 
services entities that perform, or assist participant beneficiaries who 
have elected the cash option to perform, the employer-related and tax 
responsibilities. States may also add other activities that they deem 
necessary or appropriate in their support systems.
    Other participant protections include requirements for an 
assessment of the individual's needs, strengths, and preferences for 
self-directed PAS; the use of a representative when needed; a person-
centered planning process that engages the individual and also involves 
the individual's family, friends, and professionals in the planning or 
delivery of services or supports; a quality assurance and improvement 
plan; and individualized backup plans that address critical 
contingencies or incidents that would pose a risk of harm to the 
participant's health and welfare. We also require that States have in 
place a risk management system that identifies potential risks to the 
participant and employs tools or instruments (for example, criminal and 
worker background checks) to mitigate risks. The statute and this final 
rule further require States to assure that necessary safeguards have 
been taken to protect the health and welfare of individuals furnished 
services under this program and to assure financial accountability for 
the funds expended for self-directed services.
    Comment: Some commenters requested clarification about the impact 
of funds paid to legally liable relatives, including a parent-
caregiver, on the individual's or family's resources for other public 
benefit programs. The commenters urged that CMS work with other Federal 
partners to ensure that the receipt of cash would not jeopardize other 
public benefit programs and that we work to enact needed changes 
through legislation.
    Response: The scope of this regulation does not extend to the 
impact of funds paid to legally liable relatives on their receipt of 
public benefits. However, we will take under advisement the suggestion 
of working with other agencies to address the impact of the cash option 
on the receipt of other public benefits.
    Comment: One commenter sought clarification on whether CMS will 
require a State that has already implemented elements of self-direction 
under its State plan and waivers to modify these existing programs or 
submit a State plan amendment in compliance with the new rule. This 
same commenter sought clarification on whether the section 1915(j) 
option would be the exclusive authority for self-directed services or 
whether States may pursue or rely on other Medicaid authorities.
    Response: We have not required and do not intend to require any 
State to submit a section 1915(j) State plan amendment, nor is the 
section 1915(j) opportunity the exclusive opportunity for a State to 
pursue the self-directed service delivery model. States are free to use 
some, all, or none of the appropriate Medicaid authorities that are 
available for use of the self-directed service delivery model.
    Comment: One commenter requested clarification on the impact of the 
rule on a participant's eligibility for self-directed PAS, generally 
focusing on the interaction with a section 1915(c) waiver program. The 
commenter requested clarification on the following:
    (1) Whether a participant may receive a budget for self-directed 
PAS and concurrently receive waiver services, or whether States may 
limit or deny access to waiver services.
    (2) Whether waiver recipients who elect the self-directed PAS 
service option are considered enrolled in the waiver, and whether 
waiver ``slots'' must be set aside for persons who may disenroll from 
the option.
    (3) Whether CMS intends to allow States to cover services beyond 
personal care and items that increase independence or substitute for 
human assistance.
    (4) Whether individuals who are eligible for section 1915(c) waiver 
services under the special income group may be eligible for the self-
directed PAS State plan option.
    (5) Whether the individual would have to maintain enrollment in a 
waiver and what threshold is required to maintain that enrollment (for 
example, meeting the level of care criteria, having a plan of care, or 
receiving a waiver service on a periodic basis).
    Response: Our response follows the order of the commenter's 
questions as noted above.
    (1) It is permissible for an individual to participate in the self-
directed PAS State plan option and concurrently receive services under 
a section 1915(c) waiver program as a State can select which of the 
section 1915(c) waiver services participants will have the opportunity 
to self-direct. It is not permissible to limit or deny a participant 
the other section 1915(c) waiver services for which the participant is 
eligible but not self-directing. Specifically, 42 CFR 441.472(d) 
requires that the ``budget may not restrict access to other

[[Page 57857]]

medically-necessary care and services furnished under the plan and 
approved by the State but not included in the budget.''
    (2) Participants who elect the self-directed PAS State plan option 
may remain ``enrolled'' in their section 1915(c) waiver program and 
their so-called ``slots'' must be kept available in the event the 
participant voluntarily disenrolls or is involuntarily disenrolled from 
the self-directed PAS State plan option.
    (3) When a State offers the opportunity to self-direct State plan 
personal care services (PCS), we do not believe it would be permissible 
for participants to purchase services that are not included within the 
State's definition of its PCS benefit. However, we recognize that both 
the statute and regulation at Sec.  441.470(d) allow a State, at the 
State's election, to offer participants the opportunity to reserve 
funds to purchase items that increase independence or substitute for 
human assistance, to the extent that expenditures would otherwise be 
made for human assistance, including additional goods, supports, 
services, or supplies. We intend to issue further guidance on the 
criteria for permissible purchases to assist States in deciding the 
scope of the permissible purchases in their self-direction programs. We 
believe that, at a minimum, the permissible purchase must relate to a 
need or goal identified in the service plan.
    (4) Individuals who are eligible for section 1915(c) home and 
community-based waiver services under the special income group may be 
eligible for the self-directed PAS State plan option.
    (5) A participant would have to maintain all eligibility, level of 
care, and other requirements for the section 1915(c) waiver program. 
If, upon reassessment, a participant would no longer be eligible for 
the section 1915(c) waiver services through which the participant was 
able to self-direct their PAS, then the participant would no longer be 
able to self-direct their PAS under this State plan option.
    Comment: Some commenters stated that they believe that the self-
directed service delivery model would reduce the viability of agencies 
that deliver traditional agency-delivered services especially in rural 
or difficult to serve areas, would force individuals into a more 
expensive option, such as a skilled nursing facility (SNF) or hospital, 
and would delay hospital discharges and would force more agencies to 
only serve private pay clients.
    Response: The evaluations conducted on the ``Self-Determination'' 
and the ``Cash & Counseling'' national projects have provided evidence 
of consumer satisfaction and quality of care. In addition, our 
experience with the section 1115 demonstration and section 1915(c) 
waiver programs has not shown this impact on traditional agency-
delivered services. Therefore, we do not believe that the consequences 
noted in the comments regarding the self-directed service delivery 
model are necessarily predicted outcomes.
    Comment: One commenter disagreed that the self-directed service 
delivery model costs less than traditional agency-delivered services.
    Response: We have not asserted that the self-directed PAS State 
plan option costs less than the traditional agency-delivered service 
model. Two national pilot projects demonstrated the success of the 
self-directed service delivery model. The ``Self-Determination'' and 
the ``Cash & Counseling'' national projects were evaluated in a 
scientifically designed study. The evaluation results of those projects 
were similar and concluded that persons directing their personal care 
experienced fewer unnecessary institutional placements; experienced 
higher levels of satisfaction; had fewer unmet needs; experienced 
higher continuity of care because of less worker turnover; and 
maximized the efficient use of community services and supports. The 
results did not necessarily confirm that self-directed care costs less. 
For example, the results in the ``Cash & Counseling'' States indicated 
that Medicaid personal care costs were somewhat higher under ``Cash & 
Counseling'', mainly because enrollees received more of the care they 
were authorized to receive, as compared to the services delivered under 
the traditional agency model. Another finding was that increased 
Medicaid personal care costs under ``Cash & Counseling'' were partially 
offset by savings in institutional and other long-term-care costs. 
Furthermore, the findings also suggested that ``Cash & Counseling'' 
need not cost more than traditional programs if states carefully design 
and monitor their programs. For example, States could design their 
``Cash & Counseling'' programs so that the cost per month is budgeted 
to match the cost per month of its traditional system, assuming that 
home care agencies will fully meet their care obligations. If the 
traditional system delivers the services beneficiaries are authorized 
to receive, there should be no difference in planned costs.
    Comment: Two commenters expressed concern that the proposed rule 
added too many additional administrative requirements that would be 
burdensome or costly to States. One commenter thought that the rule 
would eliminate the efficiencies intended by the Congress.
    Response: We acknowledge that States that have not yet developed 
the infrastructure necessary to support the self-directed service 
delivery model, in particular developing a support system, may 
experience higher initial administrative burdens and costs when 
designing their self-directed PAS programs. Regardless of whether a 
State uses its self-directed PAS State plan option, a section 1915(c) 
home and community-based services waiver option, or a section 1915(i) 
home and community-based services State plan option to offer the self-
directed service delivery model, there will be administrative and 
support system requirements, and State Medicaid agencies must exercise 
administrative and oversight functions over their Medicaid programs.

Basis, Scope & Definitions (Sec.  441.450)

    We proposed to implement section 1915(j) of the Social Security Act 
(the Act) concerning the self-directed PAS option through a State plan. 
We proposed that individuals who self-direct their PAS under this 
option have the decision-making authority to identify, access, manage, 
and purchase their PAS including a proposed list of minimum activities 
over which the individuals may exercise decision-making authority. We 
proposed several definitions specific to the self-directed PAS State 
plan option.
    Comment: One commenter recommended that CMS add a reference to ``or 
their representative(s)'' whenever the rule refers to individuals or 
participants.
    Response: We agree with the comment because the use of a 
representative to assist the individual or participant in exercising 
their decision-making authority is consistent with the self-directed 
service delivery model. Accordingly, we have revised the part 441, 
subpart J in relevant places by adding ``or their representatives'' 
when we refer to ``individuals'' or ``participants.''
    Comment: A few commenters suggested that CMS add ``training'' of 
the PAS providers to the list of items subject to the participant's 
authority in Sec.  441.450(b) and that participants have access to 
training provided by or through the State.
    Response: We agree with the comment about adding ``training'' to 
the list of items subject to the participant's authority because the 
ability of a

[[Page 57858]]

participant to train the provider of their PAS in the participant's 
needs and in a manner that comports with the participant's preferences 
is crucial to the self-directed service delivery model. Accordingly, we 
have revised the authority provision at Sec.  441.450(b)(4) to 
expressly include the ability of the participant to train their 
workers. We also believe that there are circumstances in which 
participants may desire that their PAS providers secure additional 
training beyond what the participants can provide. Accordingly, we have 
further revised the authority provision at Sec.  441.450(b)(4) to 
permit participants to have access to other training provided by or 
through the State so that their PAS providers can meet any additional 
qualifications that participants think their providers may need.
    Comment: Some commenters thought that Sec.  441.450(b) should be 
revised to include the ability of the participant to select his or her 
own financial management services (FMS) entity and his or her own 
supports brokers or consultant.
    Response: We believe that the services of the FMS entities are 
administrative functions and that States have the authority to 
determine whether or not to limit the FMS entities that will provide 
the FMS functions. We believe that the functions of a supports broker 
or consultant comprise a service that is unique to this State plan 
option and, as such, recognize that States would want to be able to 
claim Federal medical assistance percentages (FMAP) for this service. 
The supports broker or consultant performs a variety of key functions 
that include the provision of information, counseling, training and 
assistance, or helping participants access needed information, 
counseling, training and assistance to help participants effectively 
manage their PAS. Typically, they may assist participants in locating 
and accessing needed services, developing service budget plans and 
helping participants to fulfill their roles and responsibilities as an 
employer. Based on our experience with self-direction programs under 
section 1115 demonstrations or section 1915(c) waiver programs, we have 
learned that participants desired the opportunity to select a different 
supports broker or consultant if the relationship between an assigned 
supports broker or consultant and the participant was not satisfactory. 
We have revised the rule at Sec.  441.450(c) to add a definition for 
``supports broker'' or ``consultant.'' Further detail on the definition 
is provided in response to another comment.
    Comment: Some commenters expressed disagreement with the 
requirement that participants are allowed to determine the amount paid 
for a service, support, or item stating that a State law or collective 
bargaining agreement could conflict with this authority. One commenter 
thought that this requirement was inconsistent with the statutory 
language and congressional intent and would deprive States of their 
``traditional wage standard-setting role.'' Another commenter asked for 
clarification on how the requirement comports with State plan rate-
setting requirements, including the requirement that there must be 
public notice of any significant proposed change in methods and 
standards for setting payment rates.
    Response: We believe that the statutory authority contemplates 
including participants in the decision-making authority over the amount 
paid for a service, support or item. We believe that only a few States 
have actually set the precise wages for participants of self-direction 
programs. Indeed, we believe that most States reimburse varying amounts 
even for services provided by traditional service models. We further 
note that the requirement for public notice applies to rates paid by 
the Medicaid agency for services. In the case of self-directed 
services, it would be the budget amount upon which Medicaid 
reimbursement would be based. The rate that the participant pays their 
provider of PAS from the available budgeted amount is outside the scope 
of the requirement for public notice of Medicaid rate setting.
    Comment: One commenter was confused about the apparent multiple 
meanings for the word ``support'' or ``supports.'' The commenter 
suggested that we amend the rule to clarify that the State has the 
discretion to limit supports that are beyond the State's obligation, 
such as repeated counseling, training, and assistance sessions.
    Response: To clarify, in the context of self-directed PAS, 
``supports'' generally means a service or item that a participant can 
purchase and ``support'' generally means the information, counseling, 
training, or assistance provided under the support system, including 
that provided by a support broker or consultant. We disagree that the 
regulation needs further amending to allow the State to provide limits 
to the PAS supports. If participants demonstrate that they cannot 
effectively manage their PAS or budgets, the rule provides States with 
options such as offering additional assistance, including FMS; 
mandating the use of a representative; or involuntarily disenrolling a 
participant from the self-directed PAS option.
    Comment: One commenter requested clarification about how the 
requirement that States have a mechanism that satisfies the Medicaid 
requirements on provider agreements would apply when vendors furnish 
items and supplies. It is unclear who the ``enrolled provider'' is when 
services, items, or supplies are purchased with cash.
    Response: As self-directed PAS is not ``cash assistance'' but 
rather is a service delivery model, the requirements on provider 
agreements at section 1902(a)(27) of the Act would not be a barrier if 
a State elected the cash option.
    Comment: One commenter thought the definition of ``assessment of 
need'' was too vague. The commenter recommended use of a standardized 
assessment instrument.
    Response: We believe the definition of ``assessment of need'' is 
adequate. We acknowledge that a standardized assessment instrument 
could lead to more uniformity in determining an individual's PAS needs 
and encourage their use where possible. However, it may not be useful 
in determining the strengths, personal goals, and preferences of the 
individual for PAS which is essential in a self-directed service 
delivery model. Accordingly, we are not amending the definition of 
``assessment of need'' to require States to use a standardized 
assessment instrument, but recognize a State may nonetheless choose to 
do so.
    Comment: Some commenters suggested language to be included in the 
definition of ``individualized backup plans.'' The recommended language 
included additional language for the following areas: respecting the 
individual's choices and preferences, planning for emergency 
preparedness, and a State assessment of worker shortage that could 
possibly impact the ability of an agency to provide back-up care, and 
if a shortage exists, require that the individual cannot enroll unless 
a backup plan can be developed that relies on family, personal, and 
available community services.
    Response: We agree with the comment that an individualized backup 
plan has to respect the individual's choices and preferences and not 
substitute the individual's choices with those of others who may be 
participating in the development of the backup plan. We believe that 
this is consistent with the ``dignity of risk'' concept that recognizes 
as individuals experience greater choice and control, they may also 
desire to assume more of the responsibilities and risks associated with 
the provision of their PAS. The

[[Page 57859]]

individualized backup plan is related to the provisions of the rule at 
Sec.  441.476 on risk management and should occur as part of the 
discussion about the risks an individual is willing and able to assume. 
As it is of utmost importance that the backup plan is individually 
tailored to the individual's needs and preferences, we believe that a 
State or regional approach that treats all participants' contingencies 
the same by imposing a requirement that participants should simply 
contact 911 emergency services in the event of a critical contingency 
or incident, is not a sufficiently individualized backup plan. We have 
revised the definition of ``individualized backup plan'' in Sec.  
441.450(c) to clarify that the individualized backup plan must 
demonstrate an interface with the risk management provision at Sec.  
441.476 which requires States to assess and identify the potential 
risks to the participant (such as any critical health needs), and 
ensure that the risks and how they will be managed are the result of 
discussion and negotiation among persons involved in the service plan 
development. We have also revised the definition to include that the 
backup plan must be individualized as well as not include a 911 
emergency system or other emergency system as the sole backup feature 
of the plan.
    We also agree that emergency preparedness may be a part of the 
individualized backup planning; however, we must stress that these two 
things are not the same. We view ``emergency preparedness'' as 
addressing the contingency of a natural disaster or other similar 
catastrophic disaster and planning for how the participant will be 
secured or evacuated to safety. We view the ``individualized backup 
plan'' as a much broader participant protection than emergency 
preparedness. We view the individualized backup plan as a cornerstone 
to self-directed PAS because it sets forth the participant's wishes in 
a critical contingency or incident that would pose a risk of harm to 
the participant's health or welfare. While ``emergency preparedness'' 
can be part of an individualized backup plan, we do not believe 
additional language is necessary for it to be included.
    We disagree with the comment that individuals should not be 
permitted to enroll in the self-directed PAS State plan option if an 
individualized backup plan cannot be developed which relies on family, 
personal, and available community services. While we are aware that 
some individuals who select the self-directed State plan option will 
not have access to family and personal resources or to community 
resources, in these instances, the supports broker or consultant would 
help the individual locate and access the providers of PAS needed by 
the individual. If, after reasonable effort by the supports broker or 
consultant, it is not possible to locate providers of PAS suitable to 
the individual, then it would be permissible to delay the individual's 
enrollment in the self-directed PAS option until such time as suitable 
providers of their PAS can be found. We do not believe that the 
definition of ``individualized backup plan'' needs to be revised to 
reflect this procedure because the definition of ``supports broker or 
consultant'' indicates that one of the roles of the supports broker or 
consultant is to help an individual locate and access needed PAS, if 
necessary.
    Comment: We invited comments on other possible relationships that 
could be included within the definition of ``legally liable relatives'' 
(LLRs). One commenter thought that ``significant others'' should be 
included in the definition. Some commenters suggested that we amend the 
rule to include provider training requirements and other safeguards. 
Another commenter suggested that we amend the regulation to require 
States to have a mechanism to deal with situations in which 
participants may be pressured to hire a family member or friend or are 
having difficulty discharging a family member or friend.
    Response: We disagree that the definition should be revised to 
include ``significant others.'' We believe it is up to the States to 
determine what relationships they include in their definition of 
``legally liable relatives''. We also disagree that the regulation 
should be revised to specify certain safeguards, such as minimum 
training requirements, competency evaluations, criminal background 
checks, or other modifications to ensure that PAS workers, including 
LLRs, are properly trained and qualified to perform the functions of 
their jobs. One of the most valued aspects of a self-directed program 
is that participants have the authority to train their providers of PAS 
in what they need and how to deliver the PAS in accordance with their 
personal, cultural, and religious preferences. As noted previously, we 
have revised the regulation at Sec.  441.450 to permit participants to 
have access to other training provided by or through the State so that 
their PAS providers can meet any additional qualifications that 
participants think are needed or desired. Accordingly, we do not 
believe that the rule needs to be revised to specify provider training 
requirements as this will vary from participant to participant. We 
further do not believe that the regulations need to be revised to 
require that States have a mechanism to deal with situations in which 
participants may be pressured to hire a family member or friend or 
where they are having difficulty discharging a family member or friend. 
The role of the supports broker or consultant is to assist the 
participant in managing their PAS and budget plans, including how to 
hire the person most suitable to the participant, and how to discharge 
the worker if necessary. Finally, as noted above, we do not believe the 
regulation needs to be revised to add more safeguards to detect whether 
needed services are actually being provided. We believe that the 
regulation provides sufficient participant protections to detect 
whether needed services are actually being provided. It is CMS' 
expectation that participants' services and budget plans will be 
monitored by supports brokers or consultants; that the FMS entities, as 
required in the rule, will report any irregularities detected to 
participants and States; and that the State Medicaid agency will 
exercise ongoing oversight and monitoring of the provision of PAS 
through its Quality Assurance and Improvement Plan and remediate any 
problematic issues for participants.
    Comment: One commenter noted that the definition of ``self-
direction'' did not acknowledge that participants who self-direct their 
PAS must have the ability to perform the required roles and 
responsibilities. Another commenter sought further clarification of the 
definition of ``self-direction.'' The commenter stated that a 
clarification may be needed to ensure that the maximum amount and scope 
of a person's budget will not exceed the level of services determined 
by the assessment or the budget established by the valid budget 
methodology.
    Response: The self-directed service delivery model does not presume 
who can and cannot self-direct their PAS. Instead, the model requires 
that the participant is assessed for their need for PAS, and furnished 
the necessary information, counseling, training, and assistance so that 
the participant can manage his services and budget. In addition to the 
support system, the regulations provide several other mechanisms that 
enable participants to manage their services and budgets such as the 
use of a representative to assist the participant to exercise his 
decision-making authority over the services and budget. If a 
participant is no longer able or willing to self-direct their PAS, the

[[Page 57860]]

State is allowed to require additional assistance for the participant, 
mandate the use of a representative, or, if need be, involuntarily 
disenroll the participant. Therefore, we have not revised the 
regulation as we do not believe any clarification is necessary. 
Moreover, the regulation at Sec.  441.470 clearly sets out the steps 
for determining a participant's budget amount such that we do not 
believe that the budget will exceed the level of needed PAS.
    Comment: A few commenters had concerns about the definition of the 
``service plan.'' One commenter suggested that the definition not 
require unpaid caregivers to attend the planning meeting, but instead, 
provide the service hours that are included in the service plan. One 
commenter cautioned against a reduction in the budget based on an 
erroneous assumption that informal support is available and another 
sought minimum qualifications for those responsible for development of 
the service plan.
    Response: The definition of ``service plan'' permits the 
participant to direct the planning process, including inviting the 
participant's family or others of the participant's choosing to the 
planning meeting. This is not a requirement, however. In addition, we 
believe it would be inappropriate to revise the definition to require 
any minimum qualifications of individuals responsible for development 
of the service plan as States should have the flexibility to craft 
their own requirements. However, we acknowledge that there may be a 
``lead'' person who will assume responsibility for assuring that the 
planning meetings occur and that the resultant plan meets the 
regulatory requirements. We would expect that this individual or 
individuals would minimally be familiar with person-centered and 
directed planning and person-centered services, and preferably possess 
demonstrated skill to facilitate person-centered and directed planning. 
We wish to clarify that our reference to persons who are ``required'' 
to attend the planning meeting was to include those persons who may be 
required by the State to attend the person-centered planning meeting. 
We did not intend to suggest that the participant should require the 
attendance of family, friends, or others who do not wish to participate 
in the meeting. Finally, we agree that the service budget should not be 
reduced based on an erroneous assumption about the level of service 
that an informal caregiver would be providing.
    Comment: Two commenters indicated that the requirements for a 
comprehensive assessment, care planning, health and welfare assurances, 
and monitoring appear to meet the definition of case management as 
defined in section 6052 of the DRA, Optional State Plan Case Management 
Services. They also requested clarification on whether a participant 
who elects this option will be unable to receive any other type of case 
management covered by Medicaid. One commenter asked how States would 
reconcile the requirements of the self-directed PAS State plan option 
final rule with section 6052 of the DRA. For example, as outlined in 
the January 18, 2008 self-directed PAS State plan option proposed rule, 
CMS ``requires case management services under self-directed PAS,'' but 
the case management provision of the DRA prohibits States from 
requiring beneficiaries to receive case management. Furthermore, the 
commenter suggested that the self-directed PAS State plan option 
proposed rule requires ``gate-keeping'' and advocacy functions but the 
case management DRA provision requires these functions to be separated 
by payment source and beneficiaries to be allowed to select from all 
qualified providers. One commenter asked how CMS could require a case 
manager to monitor the participant's service plan under the self-
directed PAS State plan option, if, as stated in the case management 
DRA provision, the State cannot bill for services defined as ``case 
management'' as administrative or other services.
    Response: We believe that the functions that are required of the 
supports broker or consultant are not ``case management'' within the 
definition of case management provided pursuant to section 1915(g)(2) 
of the Act, as revised by section 6052 of the DRA. Section 1915(g)(2) 
of the Act defines case management services for purposes of section 
1915(g) of the Act as services that will ``assist individuals eligible 
under the State plan in gaining access to needed medical, social, 
educational, and other services.'' Case management includes the 
following: Assessment of an eligible individual to determine service 
needs, including activities that focus on needs identification; 
development of a specific care plan based on the information collected 
through the assessment; referral and related activities to help an 
individual obtain needed services, including activities that help link 
the eligible individual with medical, social, educational providers, or 
to other programs and services that are capable of providing needed 
services; and monitoring and follow-up activities, including activities 
and contacts that are necessary to ensure that the care plan is 
effectively implemented and adequately addresses the needs of the 
eligible individual.
    We believe that the relationship between a supports broker or 
consultant and a participant and the assistance provided by the 
supports broker or consultant in the self-directed PAS State plan 
option is fundamentally different than the relationship required 
between a case manager and beneficiary and the assistance provided by a 
case manager. Supports brokers or consultants are agents of the 
participants in that they are primarily responsible for facilitating 
participants' needs in a manner that comports with the participants' 
preferences. As the relationship that develops must be supportive and 
ongoing, participants may request a different supports broker or 
consultant if the relationship is not working out. Furthermore, the 
functions performed by supports brokers or consultants are unique to 
the self-directed service delivery model because supports brokers or 
consultants are primarily responsible for providing information, 
training, and counseling and assistance, as desired by participants, 
that help participants effectively manage their PAS and budgets. These 
functions include helping participants develop their service budget 
plans and fulfill their employer-related responsibilities. This 
assistance can also include helping participants locate and access PAS, 
but supports brokers or consultants do not perform assessments of need 
or develop care plans. Although supports brokers or consultants do 
perform a monitoring function for the purpose of checking whether 
participants' health status has changed, they are also verifying 
whether expenditures of funds are being made in accordance with the 
service budget plans.
    Because of the unique position of a supports broker or consultant 
under the self-directed PAS State plan model, we believe that a 
traditional case manager can perform the functions of supports brokers 
or consultants only if they receive training in the self-directed 
service delivery model that includes a demonstrated capacity to 
understand that they are to assist the participants with fulfilling 
their preferences, and not supplant the participants' preferences with 
their views or preferences. As evidenced by the comment, it is 
important to avoid confusion between the functions of a supports broker 
or consultant and the services furnished by a case manager, and we 
believe a definition of supports broker or

[[Page 57861]]

consultant would clarify the functions. Accordingly, we have revised 
Sec.  441.450(c) to add a definition of supports broker and consultants 
that reflects the unique role and functions of the supports broker or 
consultant; that requires States to develop a protocol to ensure that 
supports brokers or consultants are accessible to participants, have 
regularly scheduled phone and in-person contacts with participants, 
monitor whether participants' health status has changed and whether 
expenditure of funds are being made in accordance with service budget 
plans; and to require that supports brokers or consultants meet the 
training and monitoring requirements and qualifications required by 
their respective State. We have also added to Sec.  441.450(c) the 
requirement that support brokers or consultants be available to each 
participant as part of the support system.
    Comment: One commenter suggested that we include a definition of 
``person-centered services'' or ``person-directed planning'' because it 
is critical that States have a uniform understanding and application of 
these concepts.
    Response: We include in the regulations at Sec.  441.468(b)(1) a 
requirement that the service planning process be ``person-centered and 
directed'' to ensure the identification of each participant's 
preferences, choices, and abilities, and strategies to address those 
preferences, choices, and abilities. We further require at Sec.  
441.468(c)(1) that the State's procedures governing service plan 
development allow the participant to engage in and direct the process 
to the extent desired, and allow the participant the opportunity to 
involve family, friends, and professionals. We do not believe that the 
regulation should be revised to add definitions of ``person-centered 
services'' or ``person-directed planning,'' because the intent of such 
processes is clear and we wish to provide flexibility in implementing 
the concepts. We wish to note there are numerous resources available 
that define ``person-centered planning'' and ``person-centered 
services'' to assist the States. There are also different models (for 
example, MAPS, PATH, ELP, Personal Futures Planning) of person-centered 
planning. According to one resource, (Schwartz, A.A., Jacobson, J.W., & 
Holburn, S. (2000)). Defining ``person-centeredness'': Results of two 
consensus methods. Education & Training in Mental Retardation & 
Developmental Disabilities), each model has a different emphasis and 
should be applied based on the needs of the individual. Furthermore, 
the authors indicate that all models share a common underlying set of 
eight basic characteristics. These characteristics include the 
following:
     The person's activities, services and supports are based 
on his or her dreams, interests, preferences, strengths, and capacities
     The person and people important to him or her are included 
in planning, and have the opportunity to exercise control and make 
informed decisions
     The person has meaningful choices, with decisions based on 
his or her experiences
     The person uses, when possible, natural and community 
supports
     Activities, supports and services foster skills to achieve 
personal relationships, community inclusion, dignity, and respect
     The person's opportunities and experiences are maximized, 
and flexibility is enhanced within existing regulatory and funding 
constraints
     Planning is collaborative, recurring, and involves an 
ongoing commitment to the person
     The person is satisfied with his or her activities, 
supports and services.
    Generally, any model for person-centered planning a State uses 
should be based on the wishes and needs of the individual. With respect 
to the concept of ``person-directed'' planning, we expect that 
participants will actually direct the service planning and budget 
development. We think this is an important aspect of person-centered 
planning in order to ensure that the resultant service and budget plan 
actively engages a participant, accurately reflects a participant's 
abilities, preferences, and choices, and better meets the underlying 
purpose of the self-directed PAS option. We are available to provide 
information and technical assistance to any State that desires it.
    After consideration of public comments received, we are finalizing 
Sec.  441.450 with revision to the definition of individualized backup 
plan and addition of a definition of supports broker or consultant. We 
have also generally added ``representative'' throughout the 
regulations, as applicable.

Self-Direction: General (Sec.  441.452)

    We proposed that States must have in place, before electing the 
self-directed PAS option, personal care services through the State 
plan, or home and community-based services under a section 1915(c) 
waiver. We proposed that the State must have both traditional service 
delivery and the self-directed PAS service delivery option available in 
the event that an individual voluntarily disenrolls or is involuntarily 
disenrolled, from the self-directed PAS service delivery option. We 
also proposed that the State's assessment of an individual's needs must 
form the basis of the level of services for which the individual is 
eligible and that nothing in the self-directed PAS State plan option 
would be construed as affecting an individual's Medicaid eligibility, 
including that of an individual whose Medicaid eligibility is attained 
through receipt of section 1915(c) waiver services.
    Comment: One commenter requested that CMS recognize other delivery 
models as ``traditional'' besides ``agency-delivered'' services. This 
same commenter asked whether a State that offers home health services 
under its State plan could meet the requirement for a ``traditional'' 
service-delivery model under this rule. Finally, this commenter sought 
clarification on whether the requirement that States offer a ``non-
self-directed'' model refers only to the ``agency-delivered'' service 
model. Another commenter indicated that it is imperative that all 
participants retain the option to use the ``traditional'' service-
delivery system.
    Response: In the preamble to the proposed rule, we construed the 
``traditional'' service-delivery model to mean ``traditional agency-
delivered services'', i.e., the personal care and related services and 
section 1915(c) waiver services that are delivered by personnel hired, 
supervised, and managed by a home care or similar agency. We agree with 
the commenters that we should not limit the ``traditional'' delivery 
system to ``agency-delivered services'' and now construe 
``traditional'' delivery system to mean the delivery system that the 
State has in place to provide their State plan optional personal care 
services benefit or their section 1915(c) waiver services for 
individuals who are not self-directing their PAS under a section 
1915(j) State plan option.
    ``Personal care and related services'' as used in section 
1915(j)(4)(A) of the Act are those services that are included in the 
State's definition of its optional personal care services benefit and 
not other State plan services such as home health. We further note 
section 1915(j)(2)(C) of the Act already requires that participation in 
the self-directed PAS State plan option is voluntary. Also, the 
regulation at Sec.  441.456 permits participants to voluntarily 
disenroll from the self-directed PAS option. Finally, the regulation at 
Sec.  441.458 allows States to involuntarily disenroll participants. In 
the event of a voluntary or involuntary disenrollment,

[[Page 57862]]

participants must resume receiving traditional services to which they 
are eligible under the State plan personal care service benefit or a 
section 1915(c) waiver program.
    After consideration of the public comments received, we are 
finalizing Sec.  441.452 without revision.

Use of Cash (Sec.  441.454)

    We proposed that States have the option to disburse cash 
prospectively to participants self-directing their PAS, and further, 
that States must ensure compliance with all applicable Internal Revenue 
Service requirements; that participants, at their option, could use the 
financial management entity for some or all of the functions described 
in Sec.  441.484(c); and that States must make a financial management 
entity available to participants if they demonstrated, after additional 
counseling, information, training, or assistance, that they could not 
effectively manage the cash option.
    Comment: One commenter thought that allowing individuals who choose 
the cash option to perform tax-related reporting functions puts the 
individual at risk with the Internal Revenue Service (IRS). One 
commenter asserted that older persons and persons with disabilities are 
unlikely to be able to properly manage the quarterly IRS tax payments. 
One commenter suggested that the rule be revised to permit the State to 
require a participant to use the financial management services (FMS) 
entity for all or part of the functions described in Sec.  441.484(c). 
One commenter thought that making use of the FMS entity optional would 
add an additional administrative and cost burden to the States. Also, 
the commenter stated that it is unwise for CMS to allow the practice of 
the hours of needed PAS to be determined by the wage/pay needs of the 
provider of care rather than the hours of PAS actually needed by the 
individual.
    Response: On September 13, 2007, we released a State Medicaid 
Director Letter (SMDL07-013), with preprint, for the self-
directed PAS State plan option. In the preprint, we indicate that 
States must assure that all IRS requirements regarding payroll/tax 
filing functions will be followed, including when participants perform 
these functions themselves. In the regulation at Sec.  441.454, we 
require that States can elect to disburse cash prospectively to 
participants who are self-directing their PAS and must ensure 
compliance with the IRS requirements if they adopt this option. We have 
revised the regulation at Sec.  441.454(b) to add a minimum list of the 
tax-related responsibilities that are required by the IRS because we 
believe these examples will help to illustrate some of the tax-related 
responsibilities that must be performed. We recognize that not all 
participants who select the cash option will have the interest or skill 
to bear these responsibilities, so the regulation at Sec.  441.454(c) 
notes that participants may use a FMS entity to perform some or all of 
the employer and tax-related functions. We disagree that the regulation 
should permit the State to require a participant to use an FMS entity 
if that individual has selected the cash option and have not changed 
the rule. The purpose of the self-directed service delivery model is to 
vest participants with the choice and authority over decisions about 
their PAS and budget purchases. Therefore, when participants who have 
selected the cash option also choose to perform some or all of their 
employer and tax-related functions, we intend for that decision to be 
respected. Thereafter, if participants experience difficulty in 
performing some or all of these functions, or no longer choose to 
perform them, the regulation at Sec.  441.454(c) permits participants 
to use the services of the FMS entity. We acknowledge that States who 
have not yet built an infrastructure to support this self-directed 
State plan option will likely experience an initial higher 
administrative and cost burden, but again, the State is best suited to 
make a determination on how best to expend its resources. Lastly, the 
commenter misconstrues the link of needed hours of PAS to the wage/pay 
needs of the provider. The regulation does not permit the wage/pay 
needs of the provider of PAS to determine the wage/pay they will be 
paid; rather, the participant determines the amount to be paid for a 
service, support, or item.
    Comment: One commenter requested guidance on whether the FMS 
functions can be divided between a State and an FMS entity. Another 
commenter asked that we delineate the fiscal responsibilities that a 
participant who chooses the cash option may manage without the 
involvement of an FMS entity, and those that the State or FMS must 
retain, for example, disbursing the cash and monitoring spending.
    Response: We believe these issues are best handled on a case-by-
case basis as we believe it is important that States have the 
flexibility in the oversight of the functions it has delegated to an 
FMS entity versus those it has retained.
    Comment: One commenter requested more detail in the requirements 
pertaining to the cash option.
    Response: We believe the requirements for the cash option have been 
adequately addressed in Sec.  441.454(c) of the regulation. We can work 
to provide further technical guidance and assistance to States on a 
case-by-case basis, as needed.
    Comment: One commenter had concerns about how the IRS would treat 
the cash received by a participant and asked if there is an IRS ruling 
on the income tax consequences for participants who choose the cash 
option.
    Response: We are unaware of any IRS ruling regarding the cash 
option under the self-directed PAS State plan option.
    After consideration of the public comments received, we are 
finalizing Sec.  441.454 with revision to provide examples of tax-
related responsibilities required by the IRS.

Voluntary Disenrollment/Involuntary Disenrollment (Sec.  441.456 and 
Sec.  441.458)

    In these provisions, we proposed that States must permit a 
participant to voluntarily disenroll from the self-directed PAS option 
at any time, and that States must specify the conditions under which a 
participant may be involuntarily disenrolled from the self-directed PAS 
option. We proposed that CMS must approve the State's conditions under 
which a participant may be involuntarily disenrolled. In both 
situations, we proposed that the State must specify in the State plan 
the safeguards that are in place to ensure continuity of services 
during the transition from self-directed PAS to the traditional service 
delivery system.
    Comment: Some commenters stated that States would not have the 
ability to guarantee ``continuity of services during the transition 
from self-directed PAS'' such that the rule needs to clarify that the 
safeguards to ensure continuity of services belong in the section 
1915(j) State plan amendment, and not in other parts of a State's plan; 
and that States be required to have a ``transition period'' in the 
State plan amendment.
    Response: We continue to believe that States must have the 
discretion and flexibility to design their own procedures to guarantee 
the continuity of services when a participant voluntarily or 
involuntarily disenrolls from the self-directed PAS State plan option. 
We further believe States have the ability to guarantee ``continuity of 
services during the transition from self-directed PAS.'' Accordingly, 
we have not revised the regulations to provide a transition period as 
the commenters suggested. However, we agree with the commenters that 
the safeguards are better suited in the section 1915(j) State plan 
amendment. Accordingly, we have revised the regulation at Sec.  
441.456(b) and Sec.  441.458(c) to make the technical change that the 
safeguards be listed in

[[Page 57863]]

the section 1915(j) State plan amendment and not other parts of a State 
plan.
    Comment: Some commenters suggested that participants receive 
information about disenrollment at the time of enrollment and that 
information about feasible alternatives and disenrollment should be 
communicated in a manner that is clearly understandable by the 
individual.
    Response: We agree that individuals should receive information 
about disenrollment at the time of enrollment and we believe that this 
information would be best communicated as part of the initial 
counseling that is provided to the individual. Accordingly, we have 
revised the regulation at Sec.  441.464(d)(1) to require that a State 
inform individuals about disenrollment at the time of counseling prior 
to enrollment. We also agree with the comments that all information be 
communicated to the individual in a manner and language understandable 
by the individual. We have revised the regulations at Sec.  441.464(c) 
and Sec.  441.464(d) to reflect this requirement. We believe that these 
issues are better suited to the regulations at Sec.  441.464 as we 
believe that areas such as information and effective communication are 
more properly within the scope of the support system provisions at 
Sec.  441.464, and thus have revised those regulations accordingly.
    Comment: One commenter recommended that the rule be revised to 
require that if a participant is dissatisfied with their FMS entity or 
their ``agency with choice'' entity, that the State offer the 
participant another entity to furnish these supports before 
disenrolling a participant who seeks to voluntarily disenroll from the 
self-directed PAS option.
    Response: We believe decisions about whether to offer another 
entity to a participant and the circumstances under which participants 
may be disenrolled are best determined by each State when they design 
their self-directed PAS State plan option. Accordingly, we have not 
changed the regulation to require that a State offer a participant 
another FMS or agency with choice entity if the participant becomes 
dissatisfied with their current one. We do, however, encourage States 
to design their self-directed PAS State plan option to optimize the 
choice and authority participants will be able to exercise over their 
needed supports.
    Comment: One commenter suggested that we include protections for 
workers in the rule at Sec.  441.458. Specifically, the commenter 
recommended that the rule be revised to permit the State to 
involuntarily disenroll a participant who is violating anti-
discrimination laws and other applicable federal or state labor laws 
and regulations.
    Response: We believe that issues about potential worker 
discrimination or violations of labor laws and regulations are best 
handled as part of the initial and ongoing information, counseling, 
training, and assistance that are provided by the supports brokers or 
consultants to the participants. We further believe that States could 
make the determination whether potential worker discrimination or 
violations of labor laws and regulations could be a condition of 
disenrollment from the self-directed PAS State plan option. As we 
believe that States are best suited to make this determination, we do 
not believe it requires a revision to the regulations.
    Comment: One commenter stated that States should not involuntarily 
disenroll participants because of discomfort with the participant's 
personal preferences. Also, the commenter suggested that the 
participant be given an opportunity to rebut a decision of involuntary 
disenrollment. Another commenter recommended that CMS revise the 
regulations to clarify that States should not be allowed to 
involuntarily disenroll a participant when that participant is fully 
accessing services pursuant to the service plan and, as applicable, 
complying with his risk management agreement.
    Response: We agree that States should not disenroll a participant 
based on discomfort with a participant's personal preferences, or when 
a participant is fully accessing services pursuant to the service plan 
and complying with any applicable risk management agreement. We will be 
carefully reviewing the State's submission of the conditions for 
involuntary disenrollment. We strongly encourage States to respect 
participants' personal preferences and to afford participants their 
dignity of risk. As stated previously, the concept of ``dignity of 
risk'' recognizes that as individuals experience greater choice and 
control, they may also desire to assume more of the responsibilities 
and risks associated with the provision of their PAS. If a State has 
concerns about participants' personal preferences or other risks 
participants may wish to assume, we encourage States to use risk 
mitigation strategies, such as the use of a risk agreement. A ``risk 
agreement'' is an agreement entered into between the participant and 
relevant and necessary parties. It identifies the risks that the 
participant is willing to assume, the responsibilities that the 
participant and others are willing to undertake to mitigate the 
identified risks, and the circumstances that might cause the agreement 
to be terminated. The risks that participants may assume and how to 
mitigate them are subjects of discussion and negotiation as required in 
the regulations at Sec.  441.476. We do not believe that the rule 
requires further revision as suggested by the commenter since the 
regulations at Sec.  441.476 adequately address risk management 
requirements.
    After consideration of the public comments received, we are 
finalizing Sec.  441.456 and Sec.  441.458 with revision for a 
technical change to specify that the safeguards for ensuring continuity 
of services during the transition from self-directed PAS be listed in 
the 1915(j) State Plan Amendment.

Participant Living Arrangements (Sec.  441.460)

    In order to reflect the requirement at section 1915(j)(1) of the 
Act, we proposed that self-directed PAS are not available to an 
individual who resides in a home or property that is owned, operated, 
or controlled by a provider of services who is not related to the 
individual by blood or marriage. We proposed that States may specify 
additional restrictions on a participant's living arrangements if they 
have been approved by CMS.
    Comment: A few commenters opposed the inclusion of assisted living 
facilities (ALFs) within the requirement that self-directed PAS cannot 
be provided in a home or property owned, operated, or controlled by a 
provider of services who is unrelated by blood or marriage to the 
individual. The commenters offered a variety of reasons that would 
support how ALFs could successfully provide PAS. A few other commenters 
noted that the limitation on living arrangements should not apply to 
individuals who choose to live in the home of a non-related provider of 
services, for example, a domestic partner or a friend, who is the paid 
provider of their PAS. Some commenters stated that the rule should be 
revised to clarify that an individual should not be precluded from the 
self-directed PAS option unless they are living in arrangements where 
the housing and the PAS are provided by the same individual or entity 
and the PAS are part of the paid services. A commenter suggested that 
we clarify that the prohibition would not apply to a landlord-tenant 
relationship that meets local and State tenant laws; a housing provider 
who co-signs a lease to allow an individual to secure affordable 
housing; or a service provider's housing corporation that helps the 
individual

[[Page 57864]]

secure housing, when the housing corporation has separate governance 
from the service provider. A commenter thought that the requirement was 
too restrictive and would preclude persons with severe disabilities who 
need extensive support from the option to self-direct their PAS.
    Response: The statute is very clear as to the type of living 
arrangements that could be entered into under this self-directed PAS 
State plan option. The living arrangements should optimize participant 
independence, choice, and community integration and are intended to 
mitigate the control that some providers of PAS could exert over 
participants if participants lived in a setting owned, operated, or 
controlled by the unrelated providers of PAS. The exception is if the 
provider of PAS is related by blood or marriage to the participant 
because it is presumed that providers of PAS related by blood or 
marriage to the participant will not exert undue influence over the 
participant and will facilitate, and not impede, the participant's 
self-direction of the participant's PAS and budget.
    In the proposed rule published on January 18, 2008, we noted that, 
``programs that have successfully provided the self-directed care 
option have typically provided it to individuals who live in homes of 
their own or in the homes of their families.'' We also noted that we 
believe that ``successfully directing one's own care may become less 
feasible when individuals receive services and reside in large, 
provider-owned, operated, or controlled residential living 
arrangements.'' We provided an example of a residential facility that 
also provides and receives payment for the provision of personal care 
and related services that may prohibit the self-directed service 
delivery option for fear of duplication of services. We further noted 
that we believed this limitation should be applied to individuals 
residing in ALFs, as we anticipated that the provider would both 
control the housing and be expected to provide the PAS. However, we 
noted that we did not believe this limitation would apply to situations 
in which the individual resided in the home of another whom the 
individual wished to employ under the self-directed PAS option. We are 
now clarifying that any living arrangement, irrespective of the home-
like nature of the setting, that is owned, operated, or controlled by a 
provider of the participant's PAS, not related by blood or marriage to 
the participant, is not permitted by statute in the self-directed State 
plan option. We agree with the commenters that stated that the 
regulations should be revised to clarify that an individual should not 
be precluded from the self-directed PAS option unless they are living 
in arrangements where the housing and the PAS are both provided by the 
same individual or entity and the PAS are part of the paid services. We 
have revised the regulation at Sec.  441.460(a) to insert ``PAS'' 
before ``provider'', thereby indicating that the limitation only 
applies where the living arrangement and the PAS are provided by one 
and the same individual or entity. We further wish to clarify that when 
we referenced the ``home of another'' in the proposed rule, we intended 
that the home was controlled, operated, or owned by someone related by 
blood or marriage to the participant and so we allowed this under the 
exception to the statutory limitation.
    Based on the comments we received pertaining to ALFs, we understand 
that there are some ALFs that are not in the business of providing PAS. 
Accordingly, we believe that where the living arrangements, including 
ALFs, do not furnish PAS (as that term is defined under the self-
directed PAS State plan option), then the living arrangements may be 
conducive to the participant's successful and effective self-direction 
of their PAS and budgets. If a supports broker or consultant, the 
State, or other person known to the participant, becomes aware that the 
participant's exercise of choice over their PAS and budgets is hindered 
because the nature of the living arrangement has changed, the living 
arrangement begins to offer PAS, or other conditions arise making self-
direction of the participant's PAS overly difficult or impossible, then 
the State must promptly rectify the situation by assisting the 
participant to find other acceptable and safe housing.
    Comment: A commenter recommended that we delete Sec.  441.460(b), 
which permits States to specify additional restrictions on 
participant's living arrangements if approved by CMS. The commenter 
stated that this provision could possibly be used by States to overly 
restrict self-directed PAS.
    Response: We will be reviewing any State proposal further 
restricting participant living arrangements to ensure all proposals 
further enable the participant to engage in meaningful self-direction 
of PAS and are not a restriction to self-directed PAS.
    Based upon consideration of public comments received, we are 
finalizing Sec.  441.460, with revision, to clarify the living 
arrangement prohibition is for a living arrangement where the living 
arrangement and a PAS provider are one and the same individual or 
entity.

Statewideness, Comparability, and Limitations on Number Served (Sec.  
441.462)

    To reflect the requirements at section 1915(j)(3) of the Act, we 
proposed that States may provide self-directed PAS without regard to 
the requirements of statewideness, comparability of services, or the 
number of individuals served.
    Comment: Some commenters disagreed with CMS that the Medicaid 
requirements for statewideness and comparability should be disregarded. 
One commenter stated that States would not offer the self-direction 
option to certain population groups that the State perceived as unable 
to self-direct their PAS. Another commenter thought that to disregard 
comparability and statewideness would unfairly disadvantage agencies 
that have to meet stricter or more burdensome requirements. In 
contrast, one commenter urged that we ``encourage'' or ``require'' 
States that have never implemented or had oversight for a self-directed 
PAS program to first implement a program in a particular region and to 
a particular population or both. Alternatively, the commenter 
recommended that the number of people served should be limited.
    Response: The regulation at Sec.  441.462 reflects the requirement 
in section 1915(j)(3) of the Act that permits a State to provide self-
directed PAS without regard to statewideness, comparability of 
services, or the number of individuals served. We believe that by 
providing States this flexibility, States could allow for incremental 
growth in offering self-directed PAS under the State plan option. As 
States gain more experience, they can amend their State plans to allow 
self-directed PAS statewide, to different populations and to more 
individuals. We note Sec.  441.462 reflects the provisions of section 
1915(j)(3) of the Act, and is not intended to disadvantage agencies 
that provide traditionally delivered services or to adversely affect 
certain population groups. We believe that all population groups can 
successfully self-direct their PAS if they have the appropriate 
information, counseling, training, and assistance they need.
    Comment: A commenter sought clarification about the ``populations'' 
that could be targeted. Moreover, this commenter suggested we clarify 
that the State may subject each population to its own enrollment cap 
and specific eligibility criteria if the State so chooses.

[[Page 57865]]

    Response: Section 1915(j)(1) of the Act sets forth the initial 
eligibility criteria for participation in a self-directed PAS State 
plan option. Specifically, section 1915(j)(1) requires that the self-
directed PAS State plan opportunity be available to individuals for 
whom there has been a determination that, but for the provision of such 
services, would require and receive State plan personal care services 
or section 1915(c) waiver services. We believe that section 1915(j)(3), 
regarding comparability, permits States to target persons who are 
eligible for and receiving State plan personal care services or section 
1915(c) waiver services. Section 1915(j) of the Act does not broaden or 
narrow a State's definitions of the State's personal care services 
benefit or section 1915(c) waiver services.
    Comment: A commenter asked whether the services described in the 
rule are mandatory under the early and periodic screening, diagnostic 
and treatment (EPSDT) system.
    Response: This rule implements section 1915(j) of the Act allowing 
States the option to amend their State plans to offer individuals the 
opportunity to self-direct their PAS. Therefore, Section 1915(j) of the 
Act offers the self-directed service delivery model as an alternative 
to traditionally delivered services. There are no new services that can 
be self-directed; rather, participants are afforded the opportunity to 
self-direct State plan personal care services and section 1915(c) 
waiver services that they are already receiving. Accordingly, there is 
no ``service'' under section 1905(a) of the Act that must be provided 
under the EPSDT benefit.
    After consideration of the public comments received, we are 
finalizing Sec.  441.462 without revision.

State Assurances (Sec.  441.464)

    We proposed to reflect the requirements at section 1915(j)(2) of 
the Act that States must provide several assurances: (1) That necessary 
safeguards have been taken to protect the health and welfare of 
individuals furnished services under the program and the financial 
accountability for funds expended for self-directed services; (2) that 
States perform an evaluation of the need for personal care under the 
State Plan or services under a section 1915(c) waiver program; (3) that 
individuals who are likely to require personal care under the State 
plan, or home and community-based services under a section 1915(c) 
waiver program are informed of the feasible alternatives, when 
available; (4) that States must provide a support system that meets 
several delineated conditions; (5) that the State must provide to CMS 
an annual report on the number of individuals served and the total 
expenditures on their behalf in the aggregate; and (6) that the State 
must provide to CMS an evaluation of the overall impact of the self-
directed PAS option on the health and welfare of participating 
individuals compared to non-participants every 3 years.

Necessary Safeguards (Sec.  441.464(a))

    Comment: A few commenters stated that the Federal and state level 
of assurances should be the same between the self-directed and agency-
delivered models of service delivery. The commenters offered several 
suggestions of safeguards that govern traditional agency-delivered 
services that CMS should require in the rule governing the self-
directed PAS State plan option.
    Response: We disagree that the regulations should be revised to add 
the safeguards in the traditional agency-delivered service model 
suggested by the commenters because we believe that the requirements 
concerning needed safeguards are sufficient and adequately address the 
concerns and needs in a self-directed service delivery model. 
Furthermore, the self-directed service delivery model has been formally 
evaluated in the ``Self-Determination'' and ``Cash & Counseling'' 
national projects and the regulatory requirements reflect the safeguard 
analyses and conclusions made from those national projects. We believe 
it is also important to note that States retain oversight and 
monitoring functions and must fulfill the obligations in their QA/QI 
plans to discover critical incidents and complaints and to subsequently 
remediate them.
    Comment: A commenter suggested that CMS add safeguards to protect 
workers' rights, health, and safety.
    Response: These issues are outside the scope of these regulations 
as they do not extend to workers' rights, health, and safety. 
Therefore, we are not revising the regulations as the commenter 
suggested. However, as this self-directed PAS opportunity is a service 
delivery model it is not intended to conflict with existing laws 
governing workers' rights, health, or safety issues. We understand the 
States and participants would comply with these laws and we encourage 
States and participants to consider affording workers these kinds of 
worker protections.
    Comment: A commenter recommended that CMS establish a federally-
mandated resolution process that States would implement when problems 
would arise between consumers and providers.
    Response: We do not believe a mandated resolution process is either 
necessary or appropriate because we believe existing safeguards are 
sufficient to assist participants when problems arise between them and 
their PAS providers. We encourage participants to seek out any needed 
or desired training on how to be a better employer, or to consult with 
their supports broker or consultant or a person of their choosing, when 
there are employer-employee problems. There are also resources 
available to assist in resolving these issues, such as voluntary 
dispute resolution programs. If these types of programs exist in the 
participant's community, and they may be of help, then we encourage 
participants and workers to avail themselves of that opportunity if 
they choose to do so. States may wish to consider providing such 
information during the counseling session with participants prior to 
their enrollment in the self-directed PAS State plan option.
    Comment: A commenter stated that at Sec.  441.464(a), CMS should 
add ``quality of life'' in addition to health and welfare for which 
States must have necessary safeguards. The commenter further 
recommended that we add a specific listing of safeguards related to the 
health and welfare and the quality of life of participants to the 
current list of financial safeguards.
    Response: We believe that States may measure ``quality of life'' 
issues in the quality assurance and improvement plan as well as in the 
three-year evaluation that the regulations require, if they choose to 
do so. Therefore, while we do not believe that the regulations should 
require ``quality of life'' safeguards, we do not prohibit States from 
incorporating them into the design of their QA/QI plan or their three-
year evaluation. It should be noted that we will be issuing related 
guidance on the requirement for the three-year evaluation of the impact 
of the self-directed PAS option on the health and welfare of 
participating individuals compared to non-participants. We believe that 
States could measure and analyze ``quality of life'' issues such as 
whether participants experienced greater independence, increased 
community access, or were able to work. Therefore, we are not adopting 
the commenter's suggestion to change the regulations as we think States 
have the flexibility to design their QA/QI plans and their three-year 
evaluations to consider ``quality of life'' issues.

[[Page 57866]]

Financial Accountability (Sec.  441.464(a))

    Comment: One commenter stated that the language describing 
necessary safeguards was too vague and would not assure financial 
accountability. The commenter recommended program controls and controls 
in the timekeeping system.
    Response: We agree that there should be program controls and 
controls in the timekeeping system, but we believe that States should 
have flexibility to set up their own program controls and timekeeping 
controls in order to meet the financial accountability requirements. We 
believe that the oversight functions of the service budgets and 
expenditures, required to be performed by the FMS entity, the supports 
brokers and consultants, and States, should adequately address the 
commenter's concerns by providing adequate financial accountability.
    Comment: One commenter recommended that the amount of the budget 
not be allocated on a monthly or quarterly basis as indicated in Sec.  
441.464(a)(2)(iii) because it would be too rigid. The commenter 
proposed that the regulation be revised to permit participants to plan 
for periods of greater or lesser needed coverage ``during the State's 
budget period.''
    Response: We believe that prior planning for periods of greater or 
lesser utilization and the ability of States to allocate funds 
consistent with a participant's plan, during the State's budget period, 
is already provided for in the regulation. The prefatory language at 
section 441.464(a)(2) indicates that the listed safeguards, including 
allocating the budget on a monthly or quarterly basis, are permissive, 
not mandatory. Furthermore, we believe that the regulation at Sec.  
441.470, concerning the service budget elements, further affords the 
flexibility that the commenter desires. In Sec.  441.470, the service 
budget must include procedures as to how the participants may adjust 
the budget plan, including how the participant may freely make changes 
to their budget plan and the circumstances, if any, that may require 
prior approval before a budget plan adjustment is made.
    Comment: Two commenters stated that abuse of funds could occur when 
participants selected the cash option. The commenters recommended that 
participants using the cash option be required to use a qualified 
financial management entity; that participants and their PAS providers 
are closely monitored to ensure that authorized services were actually 
delivered and properly accounted for in timesheets; and, that CMS 
develop criteria to ensure the financial accountability required, 
including one set of national guidelines.
    Response: At the core of the self-directed service delivery model 
is participant ``choice and control'' over their services and budgets. 
The ability of participants to choose to perform some or all of their 
employer and tax-related responsibilities is in keeping with this 
tenet. If a participant discovers that he is not interested in or able 
to assume these responsibilities, then the participant may use the 
service of the FMS entity. While we understand the commenters' 
concerns, we believe that the requirements for the State assurances at 
Sec.  441.464(a), and for the supports system at Sec.  441.454 and 
Sec.  441.464(d) adequately address the commenters' concerns and 
provide the requested financial accountability and oversight.
    Comment: One commenter stated that although financial 
accountability is important, States should not become overly 
prescriptive about the ways in which individuals spend their budgets.
    Response: We agree with the comment that flexibility in the budget 
planning and spending should be encouraged by the State.

Evaluation of Need (Sec.  441.464(b))

    We proposed that the State must perform an evaluation of the need 
for personal care under the State plan or services under a section 
1915(c) waiver program for certain individuals. We received no comments 
on this proposal.

Notification of Feasible Alternatives (Sec.  441.464(c))

    Comment: One commenter recommended that at the time feasible 
alternatives are discussed, participants be given information about 
agency-delivered or traditionally-delivered care and self-directed 
care, including licensure and certification of agency or other entity 
staff, required training and competency evaluation, criminal background 
checks, and the ability to contact the agency or entity to request a 
substitute caregiver if the initial caregiver does not show up.
    Response: Section 1915(j)(2)(C) of the Act requires States to 
provide an assurance that individuals who are likely to require 
personal care under the State plan, or home and community-based 
services under a section 1915(c) waiver program, are informed of the 
feasible alternatives, where available, to self-directed PAS. The 
information on feasible alternatives would include information about 
agency-delivered or traditionally-delivered services. Furthermore, most 
participants will already be familiar with the agency-delivered or 
traditionally-delivered services because most will have been receiving 
them under their State plan personal care benefit or a section 1915(c) 
waiver program. Section 441.464(d), which implements this statutory 
provision, provides a listing of information that must be provided to 
participants. We believe the kind of information noted by the commenter 
is included in the regulation as it states that individuals must be 
given necessary information about self-direction, their 
responsibilities and potential liabilities, the choice to receive 
section 1915(c) waiver services regardless of delivery system, and the 
option to receive and manage the cash amount of their budget 
allocation.

Support System (Sec.  441.464(d))

    Comment: One commenter suggested that the support system for 
management of funds should include check-writing and accounting as part 
of the training to those who wish to receive the cash option and manage 
their own allocation.
    Response: The extent and type of training needed or desired by a 
participant will vary depending upon the individual. We anticipate that 
participants will request any needed or desired training for management 
of funds, or that their representatives, supports brokers, or 
consultants will request this training including training along the 
lines as that noted by the commenter. We also anticipate that the State 
will offer the additional training that is desired or needed.
    Comment: One commenter noted that the proposed regulations lacked a 
practical plan to operationalize the ``freedom of choice of providers'' 
requirement and asked that this requirement be clarified.
    Response: We believe the requirement to allow participants the 
freedom to choose their PAS providers will be operationalized when 
participants hire the person of their choosing to provide their PAS. 
However, as indicated by the commenter, the intent of the requirement 
is to allow participants freedom to choose their PAS providers and to 
clarify this requirement, we are revising the regulations text at Sec.  
441.464(d)(2)(vii) to now read, ``freely choose from available PAS 
providers.''
    Comment: One commenter recommended that the regulation be revised 
at Sec.  441.464(d) to acknowledge that those participants with 
progressive dementias will need increasing support, as will their 
representatives or caregivers.
    Response: We believe it is not necessary to revise the regulation 
to indicate that persons with dementia will

[[Page 57867]]

require increasing support as their condition worsens. Section 
441.464(d)(3) already requires ongoing support throughout the period 
that a participant is self-directing their PAS under this option. 
Consequently, support for any worsening condition, like dementia, is 
contemplated under the regulations at Sec.  441.464(d)(3).
    Comment: One commenter urged that CMS ``encourage'' States to 
contract with or otherwise delegate certain responsibilities to 
organizations that are privately accredited to perform the supports 
broker or consultant function and financial management services 
functions.
    Response: We believe that States are free to contract with entities 
to perform the required supports broker or consultant and FMS 
functions, provided these entities have demonstrated knowledge and 
skill in implementing the requirements of the self-directed PAS State 
plan option and that the entities meet State requirements for 
furnishing these support functions.
    Comment: One commenter recommended that CMS clarify that States or 
local governments do not have to actually provide the training needed 
by participants, but may instead delegate the needed supports, 
services, and training (through contractual means) to other entities, 
including providers.
    Response: We agree as it provides States with greater flexibility 
to manage this option and conforms to current practice with other 
services. Accordingly, we revised Sec.  441.464(d) to indicate that, 
``States must provide, or arrange for the provision of, a support 
system that meets the following conditions.''
    Comment: Another commenter stated that participants would possibly 
hesitate to complain about their workers for fear of retaliation. 
Accordingly, the commenter recommended that participants have direct 
access to an advocate.
    Response: We agree that participants should have access to an 
advocate or advocacy organization and we have revised the rule at Sec.  
441.464(d)(2) (Support system) to add a new subsection (xv) that 
requires that participants be given information about the advocate or 
advocacy system in the State and how to contact the advocate or 
advocacy system. In the ``Cash & Counseling'' and Independence Plus 
programs, we required that an independent advocate or advocacy system 
be available to participants as part of the State's support system. The 
independent advocate or advocacy system would not have to be newly 
created by the State, but could possibly include the State's Protection 
and Advocacy System, the State and Local Long-Term Care Ombudsman 
Program, or any other existing advocate or advocacy system within the 
State's aging and disability networks. This requirement to inform 
participants of this right would not absolve States of their obligation 
to discover and investigate critical incidents and complaints that 
participants and others report, nor would it supplant the State's 
requirements to investigate complaints of abuse, neglect, or 
exploitation made to their protective services agencies. Moreover, the 
purpose of the support system is to assist participants in effectively 
managing their service plans and budgets. Accordingly, the supports 
broker should be assisting the participant in learning how to be an 
effective employer, including how to discharge a worker, if necessary.

Annual Report and Evaluation of Impact (Sec. Sec.  441.464(e) and 
441.464(f))

    Comment: We invited comments on the requirements and structure of 
the annual report required in the rule at section 441.464(e). 
Commenters suggested that a varying spectrum of information be included 
in the annual report. Commenters suggested that the following 
information be included:
     The number of individuals self-directing.
     The units of service they received.
     The expenditures for persons receiving self-directed 
services, agency-delivered/traditionally-delivered services and those 
receiving a mix of modes.
     The number of participants with representatives helping 
them.
     The number of participants who are directing the State 
plan personal care services benefit.
     The number of participants who are directing section 
1915(c) home and community-based services, and type of waiver.
     The average per-participant spending (by eligibility) 
category for those who direct their services and those who receive 
agency-delivered or traditionally-delivered services.
     The services and items used by those self-directing and 
those who receive agency-delivered or traditionally-delivered services.
     Whether LLRs are permitted to be paid providers.
     Whether the State allows the purchase of items that 
increase independence.
     Whether the State allows the delivery of services in 
alternative living arrangements.
     The number of individuals who expressed interest in the 
option, but were denied, and the reason for the denial.
     The number who voluntarily disenrolled and the reasons for 
the disenrollment.
     The number who were involuntarily disenrolled and the 
reasons for the disenrollment.
     The number of fiscal intermediaries.
     The number of providers.
     A summary of critical events reported by participants.

As to the structure of the report itself, other commenters made the 
following suggestions:
     The Secretary should make the annual reports available to 
the public.
     CMS should closely monitor the costs associated with the 
self-directed service delivery model.
    Response: We appreciate the ideas that commenters submitted for the 
annual report requirements. We will carefully consider these comments 
as we develop guidance on the structure and criteria of the annual 
report.
    Comment: One commenter stated that the reporting requirements for 
the annual report were burdensome and overly broad.
    Response: As we noted that specific guidance about the annual 
report requirements will be forthcoming, it is unclear what 
requirements the commenter was referring to. However, we will take the 
commenter's perspective into consideration as we develop our guidance 
and will try to impose as little burden on the States as possible.
    Comment: We invited comments on the requirements of what should be 
included in the three-year evaluation required in Sec.  441.464(f). Two 
commenters had the following suggestions:
     The evaluation should separately address the experiences 
of those with and without cognitive impairments.
     The evaluation should address issues of quality of life of 
participants, family caregiver burdens and comparisons of the 
individuals with and without cognitive impairments.
     The evaluation should assess the effectiveness of the 
self-directed PAS option, especially for populations with cognitive 
impairments.

Another commenter suggested CMS streamline any evaluation requirements 
in our future guidance, given that the efficacy of consumer-directed 
services has been evaluated through the cash and counseling 
demonstration projects.
    Response: We thank the commenters for their input and we will take 
these

[[Page 57868]]

recommendations under consideration as we develop guidance on the 
structure and implementation of the evaluation.
    Comment: One commenter asked that CMS clarify what was meant by 
``overall impact'' of the self-directed PAS on the health and welfare 
of participating individuals compared to non-participants.
    Response: We do not expect that States will need to conduct a 
``scientific'' research study and evaluation as was done in the 
national projects. We anticipate that our guidance will include minimum 
criteria that will form the basis of what we expect States to evaluate. 
We also anticipate that the guidance will include insight into the 
numbers of participants versus non-participants to be evaluated.
    After consideration of the public comments received, we are 
finalizing Sec.  441.464, with revision, to clarify that participants 
may freely choose from available PAS providers, that the State may 
provide under arrangement, the provision of support services, and that 
the State must provide information about advocates and the advocacy 
system in the State and how to access them. As explained in response to 
a prior comment, we also note changes were made to indicate that 
information provided to individuals and participants be communicated in 
a manner and language understood by the individual and participant and 
that the support system includes counseling about disenrollment, prior 
to when an individual enrolls.

Assessment of Need (Sec.  441.466)

    We proposed that States must conduct an assessment of the 
participant's needs, strengths, and preferences and indicated that the 
assessment information is crucial as it supports the determination that 
an individual requires PAS and also supports the development of the 
service plan and budget.
    Comment: Some commenters offered various suggestions on specifics 
for the assessment of need, including that it be standardized; 
performed by registered nurses or trained medical personnel; based on a 
prescribed scale; use a national standard to assess the amount of 
assistance needed; and that States be given latitude to develop their 
own assessment criteria and to use their existing assessment tools. 
Another commenter stated that the assessment was more burdensome than 
it needed to be. One commenter stated that CMS should amend the 
definition of ``assessment of need'' regulations at Sec.  441.450(c) 
and the assessment requirements at Sec.  441.466 to specifically add 
that an individual's cognitive function and mental health conditions 
must be assessed, where indicated, including the individual's need for 
``cueing'' or supervision.
    Response: Section 441.466 requires the assessment of need but does 
not specify the type of personnel that should perform the assessment. 
We agree that appropriately trained medical personnel should be trained 
and available, if an individual's condition warrants a need for 
assessment. We also believe that assessing personnel should be trained 
in the person-centered planning and directed process and person-
centered services, or be accompanied by someone who is trained in these 
areas. While we have not specified the instruments or techniques that 
should be used to secure the required information in Sec.  441.466(a), 
information about the individual's health condition and functional 
limitations must be included in the assessment. This should include 
information about cognitive function and other health information. 
Moreover, States have been given latitude to develop their own 
assessment criteria and tool, and we expect that States will use that 
latitude to perform the assessment of all of the individual's physical, 
cognitive mental health, and functional needs, as required, in order to 
fulfill the overall purpose of the assessment which is to obtain 
information ``relevant to the need for and authorization and provision 
of services.'' Given the importance of the assessment in light of the 
role it plays in self-directed PAS under this option, we do not believe 
that the listed information is burdensome to either assess or secure.
    Comment: Two commenters recommended that CMS require that the 
assessment determine whether an individual is capable of directing his 
own care and that an individual's ability to manage his own care must 
be established. The commenters suggested that the rule include minimum 
processes to screen out individuals incapable of directing their own 
care or who would require specialized medical treatments.
    Response: As we interpret the commenter's statements, it appears 
they are suggesting individuals should not be given the opportunity to 
self-direct their PAS under this option simply because they may need or 
desire supports to effectively manage their PAS and budgets. We 
disagree with the commenters that exclusionary criteria should be used 
to ``screen out'' participants. Individuals of different ages and 
various impairments and skill levels have successfully directed their 
PAS when given the supports they need or desire. However, the 
assessment of needs, strengths, and preferences can be considered in 
determining the extent to which supports may be needed or desired.
    Comment: Two commenters stated that CMS should revise Sec. Sec.  
441.466 and 441.468 to include in the assessment and the service plan, 
respectively, a requirement to identify potential caregivers and to 
assess their willingness and capacity to provide care to individuals. 
Additionally, the commenters stated that the service plan should not 
include hours of unpaid care.
    Response: We believe that the assessment of need should take into 
consideration an assessment of the individual's environment, including 
the presence or absence of unpaid care and is one of the factors 
relevant to the need for authorization and provision of services. 
However, we do not believe that the regulations should be revised to 
require this, and leave this determination to the States. We do not 
believe that the specifics of any unpaid care need to be included in 
the resultant service plan.
    Comment: One commenter sought clarification on how States can bill 
for an assessment before a participant's entry into the program.
    Response: Individuals who will be permitted the opportunity to 
self-direct their PAS under this new State plan option will already be 
Medicaid-eligible beneficiaries. Therefore, the assessment for self-
directed PAS under this new State plan option can be properly claimed 
by the State.
    Comment: One commenter sought clarification on how the ``assessment 
of need'' differs from or relates to the ``evaluation of need.''
    Response: Section 1915(j)(2)(B) of the Act requires ``an evaluation 
of the need'' for personal care under the State plan or personal 
services under a section 1915(c) home and community-based services 
waiver program. Section 1915(j)(5) of the Act requires that States 
conduct an ``assessment'' of participants' needs, strengths, and 
preferences for self-directed PAS. Section 1915(j)(2)(B) is intended to 
evaluate an individual's need, generally, for personal care services or 
section 1915(c) waiver services. The ``assessment of need'' determines 
the specific needs, strengths and preferences of individuals in order 
to self-direct their PAS under this State plan option.
    After consideration of the public comments received, we are 
finalizing Sec.  441.466 without revision.

[[Page 57869]]

Service Plan Elements (Sec.  441.468)

    We proposed minimum requirements that would be included in a 
service plan. We further proposed that the service plan must be 
developed using a person-centered and directed planning process. We 
also proposed that the State's applicable policies and procedures 
associated with service plan development be carried out and listed a 
minimum set of criteria that must be included in the State's policies 
and procedures. Furthermore, we proposed that if an entity that 
provides other State plan services is responsible for service plan 
development, the State must describe the safeguards that are in place 
to ensure that the service provider's role in the planning process is 
fully disclosed to the participant, and that controls are in place to 
avoid any possible conflict of interest. Finally, we proposed that the 
approved service plan conveys authority to participants to perform 
certain minimum tasks including recruiting and hiring their workers and 
determining the amount paid for a service, support, or item.
    Comment: Two commenters suggested that CMS explicitly require that 
the participant be allowed to determine the wages paid to their 
providers of PAS. However, other commenters disagreed that a 
participant should determine the amount paid for a service, support, or 
item. One commenter noted that such a requirement conflicts with the 
commenter's State law that ``regulates county wages for PAS.'' Another 
commenter noted that such a requirement would limit a State's ability 
to establish a minimum wage standard for personal care workers or to 
mandate a wage increase for personal care workers. A third commenter 
noted that the requirement appears to be in conflict with the 
collective bargaining agreement in the commenter's State between the 
State and unions representing workers. The commenter noted that 
``individual providers are unionized and the rates of pay and benefits 
for PAS are established through a collective bargaining process.'' The 
commenter asked CMS to clarify that a participant could determine the 
portion of the budget that goes to PAS, but that the collective 
bargaining agreement would govern the wage and benefit package for 
individual or agency PAS providers. Another commenter stated that 
applicable State or Federal minimum wage requirements should continue 
to apply.
    Response: We believe that the statute requires participants to 
exercise control over the service plan and budget and that includes 
determining the amount paid for services, supports, or items. Section 
1915(j)(5)of the Act vests participants with decision-making authority 
over their service plans and budgets. The regulations at Sec.  
441.450(b) and Sec.  441.468(e) implementing section 1915(j)(5)of the 
Act specifically grant participants the authority to hire, fire, 
supervise, and manage their workers, and to determine the amount paid 
for a service, support, or item. We do not believe that State laws or 
collective bargaining agreements should hinder the ability of 
participants to determine the amount they pay their workers. As this 
self-directed PAS opportunity is a service delivery model it is not 
intended to conflict with existing laws governing these issues. We 
understand the States and participants would comply with these laws and 
collective bargaining agreements and that support and education, as 
needed, would be furnished to participants to inform them of any 
necessary requirements.
    Comment: One commenter stated that the rule should be revised to 
specifically allow a participant to request revisions to the service 
plan, based on a change in needs.
    Response: We agree with the commenter and have revised the rule at 
Sec.  441.468(c) to add a new subsection (8) to ``[e]nsure that a 
participant may request revisions to a service plan, based on a change 
in needs or health status.''
    Comment: One commenter requested clarification of the language at 
Sec.  441.468(c)(6) that those responsible for service plan development 
``reflect the nature of the program's target population.''
    Response: We were concerned that individuals developing the service 
plan have the necessary background to adequately develop a service plan 
for the person self-directing their PAS. In particular, individuals 
with the ``lead'' responsibility for service plan development should 
have knowledge about the population that will be self-directing their 
PAS under this State plan option. In keeping with the overall focus of 
a service plan, we also believe that those responsible for service plan 
development have demonstrated skill to facilitate person-centered and 
directed planning and to include person-centered services in the 
service plan.
    Comment: One commenter suggested that CMS add ``cognitive status'' 
after ``health status'' in the regulation at Sec.  441.468(c)(7).
    Response: We believe that the term ``health status'' encompasses 
any physical, cognitive, mental health, behavioral, or functional 
change observed or discovered that would necessitate a reassessment 
more often than annually, and therefore have not revised the 
regulation.
    Comment: One commenter requested that we revise the rule at Sec.  
441.468(c) to clarify that States may delegate the reassessment of the 
need for PAS to a sub-unit of government as long as the State sets 
guidelines, exercises oversight, and performs quality assurance and 
improvement activities over these sub-units.
    Response: We agree with the comment but do not believe it requires 
a revision in the regulations. States may delegate the reassessment of 
the need for PAS to an agency or sub-unit of government, provided the 
State retains all necessary administrative and monitoring oversight of 
the entity that performs reassessments for the State. We believe this 
will provide the State with the administrative option currently found 
in the provision of other Medicaid services.
    Comment: One commenter noted that a verb is missing from section 
441.468(c)(2) and should be inserted.
    Response: We have revised the rule to make this technical 
correction.
    Comment: One commenter suggested that the rule ``include that the 
older adult and person with disabilities have a choice of all the 
provider types available.''
    Response: This new State plan option permits States the option to 
amend their State plans to offer individuals the opportunity to self-
direct their PAS. As eligible individuals may include older adults and 
persons with disabilities, we do not believe a regulation change is 
necessary. Moreover, these individuals are free to choose to self-
direct their PAS under the section 1915(j) State plan option or to 
remain with a traditional service delivery model. Individuals who do 
not wish to self-direct their PAS under this State plan option may 
consider other models of care available to them and for which they are 
eligible, such as the Program of All Inclusive Care for the Elderly 
(PACE). As required by both statute and regulations, a State's feasible 
alternatives, if applicable, should be discussed with individuals 
before they enroll in this new State plan option.
    After consideration of public comments received, we are finalizing 
Sec.  441.468, with revision, to correct a technical error and to 
provide that participants may request a change to the service plan, as 
needed.

Service Budget Elements (Sec.  441.470)

    We proposed that a service budget must be developed and approved by 
the State based on the assessment of need and service plan. We also 
proposed

[[Page 57870]]

certain budget elements that govern the service budgets, including that 
the participants have knowledge about the specific dollar amount 
available for their PAS; how they may adjust the budget plan; the 
procedures that govern how a person, at the election of the State, may 
reserve funds to purchase items that increase independence or 
substitute for human assistance; how a person may use a discretionary 
amount, if applicable, to purchase items not otherwise delineated in 
the budget; and how participants are afforded the opportunity to 
request a fair hearing if a participant's request for a budget 
adjustment is denied or the amount of the budget is reduced.
    Comment: One commenter thought that we needed to provide more 
detail on the steps used in developing the service budget. The 
commenter was also concerned that some States may ``discount'' a 
participant's service budget as a cost-cutting tool. The commenter 
stated that it could result in inadequate provision of services.
    Response: We believe that the regulations at Sec. Sec.  441.450 and 
441.470 provide ample detail and give sufficient guidance in the 
development of service budgets and no further detail is necessary. 
There are numerous resources that can provide further guidance to 
States in the development of service budgets and we are available to 
provide technical assistance if necessary. We agree with the comment 
that a person's budget should not be ``discounted'' in order for a 
State to cut costs and do not believe that it would be proper for 
States to do so.
    Comment: One commenter recommended that each State be required to 
develop a methodology for the timely recoupment of unused funds and 
that these funds be used for the self-directed PAS option.
    Response: We believe that it is important for States to have a 
procedure to timely recoup unused funds. We believe that Sec.  
441.464(a), that requires States to assure the financial accountability 
of funds expended under this State plan option, would encompass the 
recoupment of unused funds. Accordingly, we are not adopting the 
commenter's suggestion.
    Comment: Two commenters suggested that CMS add the language, 
``earmarked for savings,'' to the regulations text at Sec.  441.470(e) 
to permit individuals to use a discretionary amount of their budget to 
purchase items not otherwise delineated in the budget plan or 
``earmarked for savings,'' since that is the language we used in the 
preamble.
    Response: We agree and have revised the regulation at Sec.  
441.470(e) to indicate that the discretionary amount could be used to 
purchase items not otherwise delineated in the budget plan or 
``reserved for permissible purchases.'' We believe the phrase 
``reserved for permissible purchases'' better reflects this concept 
rather than ``earmarked for savings'' because permissible purchases, 
under this self-directed PAS State plan option, are those supports, 
goods, equipment, or supplies that increase independence or substitute 
for human assistance, and are purchased with the amount of funds that a 
participant is able to save or ``reserve''.
    Comment: One commenter suggested that we eliminate the requirements 
in the regulation at Sec.  441.470(a) and (b) with regard to informing 
the participant of the amount of the budget and conveying that 
information before the service plan is finalized.
    Response: We disagree with the commenter. The requirement in Sec.  
441.470(a) that participants be informed of the ``specific dollar 
amount a participant may utilize for services and supports'' is crucial 
so that the participant, with assistance as needed or desired, can 
develop a service plan and budget plan that properly reflects the 
participant's needs, and the way in which any reserve or discretionary 
funds, if permitted by the State, will be budgeted. Section 441.470(b) 
is a requirement that describes only that the participant will be told, 
at the time the service plan is developed, how the participant will 
learn of the service budget amount, once it is determined. The 
requirement was not meant to prescribe a particular process.
    Comment: One commenter requested clarification on whether an 
individual could purchase services that are not currently covered 
within the State plan's definition of personal care services such as 
supervision and cueing.
    Response: When a State offers the opportunity to self-direct State 
plan PAS, we do not believe it would be permissible for participants to 
purchase services that are not included within the State's definition 
of their PCS benefit. However, the statute and regulations at Sec.  
441.470(d) allow a State, at the State's election, to offer 
participants the opportunity to reserve funds to purchase items that 
increase independence or substitute for human assistance, to the extent 
that expenditures would otherwise be made for the human assistance, 
including additional goods, supports, services, or supplies. If this 
option is offered by the State, we believe that a participant can 
purchase goods, supports, services, or supplies that are not included 
within the definition of the State's PCS benefit.
    Comment: A commenter requested clarification on how States are 
supposed to review and approve the service budgets of PAS participants 
when the participants are free to determine the amount they will be 
spending for goods and services.
    Response: Under the self-directed service delivery model, 
individuals determine the rate or amount paid for their services, 
supports, and items. Moreover, while individuals direct the decisions 
about the purchases to be made with their service budget, they are 
still responsible for remaining within the budgeted amount noted in 
their budget plan. To clarify, we intended that States review and 
approve the budget plan to ensure that the budget plan is not exceeding 
the budget amount, that the participant's budget plan is in keeping 
with the assessment of need and the identified needs in the service 
plan, and because we believe it is an important step to ensure the 
financial integrity of the self-directed State plan option.
    Upon consideration of the public comments received, we are 
finalizing Sec.  441.470, with revision for a technical change and to 
note that the service budget may include a discretionary amount, if 
applicable, to purchase items not otherwise delineated in the budget or 
reserved for permissible purchases.

Budget Methodology (Sec.  441.472)

    We proposed that the State's budget methodology to determine a 
participant's service budget meet certain criteria and generally 
tracked the statute at section 1915(j)(5)(D). We also proposed that the 
State have procedures in place to safeguard participants when the 
budgeted amount is insufficient to meet a participant's needs. We also 
proposed that the State have a method of notifying participants of the 
amount of any limit that applies to a participant's self-directed PAS 
and supports. We also proposed that the budget may not restrict access 
to other medically necessary care and services furnished under the plan 
and approved by the State but not included in the budget.
    Comment: One commenter requested that CMS clarify what is intended 
by the requirement, ``The State's method includes a calculation of the 
expected cost of the self-directed PAS and supports, if those services 
and supports were not self-directed.''
    Response: As persons eligible for self-directed PAS must already be 
eligible for and receiving the optional State plan personal care 
services benefit or services in a section 1915(c) waiver, the amount of 
the funds available to a participant

[[Page 57871]]

for their self-directed PAS ``budget'' is not to exceed the amount that 
the State would pay for the services and supports if those services and 
supports were provided under the traditional service delivery model.
    Comment: Several commenters requested that CMS clarify what is 
meant when States are required to have a procedure to safeguard 
participants when budgeted service amounts are insufficient to meet 
participants' needs. One commenter asked whether the procedures to 
safeguard participants included the following: Appeal rights to 
challenge benefit levels that participants perceived to be inadequate; 
institutionalization; additional financial resources when a participant 
states that the funds or services are insufficient; or whether CMS 
expects participants to forego needed services. One commenter suggested 
that we revise the regulation at Sec.  441.472 to indicate that service 
budget increases may be appropriate when it can be shown that some 
change in a participant's medical condition, functional status, or 
living arrangement requires it.
    Response: It is important to note that at any time a reassessment 
is performed, ultimate decision-making authority for the amount of 
services authorized rests with the State, according to the State's 
medical necessity criteria applied against an individual's assessed 
needs. Therefore, we have revised Sec.  441.472(a) to indicate that the 
budget methodology is established by the State in such a way as to 
ensure the State's role in service authorization. Section 441.470(f) 
permits participants to request a fair hearing if a participant's 
request for a budget adjustment is denied or the amount of the budget 
is reduced. We believe that this section will encompass a situation 
where a participant perceives that the amount of the service budget is 
inadequate to meet the participant's needs. However, the preferred 
process in such a situation would be for a discussion to initially 
occur between the participant, the participant's representative, if 
any, the supports broker or consultant or other members of the service 
planning team to explore an informal resolution to the participant's 
concern. We believe that a reassessment of the participant's need for 
PAS may be a proper solution to the participant's concern. We do not 
necessarily agree with the other alternatives mentioned by the 
commenters. Institutionalization is not an acceptable option in this 
case, as the intent of the section 1915(j) provision is to avoid 
institutionalization by strengthening supports to individuals. We also 
do not support any process where participants forego needed services; 
rather, we would expect that the PAS provider, the representative, if 
any, the FMS entity or the supports broker or consultant would discover 
whether a reassessment is indicated and report this information to the 
State. As noted by the commenter, because reassessment is an 
appropriate step when the participant or representative, if any, feels 
the budgeted service amount is insufficient to meet a participant's 
needs, we have revised Sec.  441.472 to add a new subsection (e) to 
indicate that a State must have a procedure to adjust a budget when a 
reassessment indicates a change in the participant's medical condition, 
functional status, or living situation.
    Comment: One commenter recommended that we delete the word 
``medically'' from the language in the rule at Sec.  441.472(d). The 
commenter was concerned that the word ``medically'' would restrict a 
participant to the receipt of care or services related solely to a 
participant's medical condition or disease.
    Response: Section 441.472(d) reflects the statutory language which 
states that, ``The budget may not restrict access to other medically 
necessary care and services furnished under the plan and approved by 
the State but not included in the budget.'' Moreover, we believe that 
the term ``medically necessary'' is a commonly recognized term of art 
that encompasses all the services, supplies, or equipment that a State 
includes under its State plan, waiver, or other Medicaid programs, and 
for which an eligible individual has been determined to need.
    Comment: One commenter recommended that the rule include an 
incentive system for payment to the counseling and fiscal agencies. 
Specifically, the commenter recommended that a higher, one-time payment 
be made to the counseling or FMS entity when an individual has selected 
the option, followed by a one-time payment when the spending plan is 
developed, and finally, by a monthly fee after the individual receives 
the budget allowance.
    Response: We believe that States should design the approach for 
payment to FMS entities in a manner that comports best with the State's 
fiscal processes and procedures.
    Comment: One commenter indicated that there are insufficient 
standards in the rule to ensure that budgets will not be arbitrarily 
reduced for participants who self-direct their PAS. The commenter 
further suggests that States should not assume that all participants 
will be able to secure services at a lower cost than through the 
traditional service delivery model.
    Response: We believe that there are sufficient standards in the 
regulations to ensure that budgets will not be arbitrarily reduced. The 
regulations require that the budget methodology be consistently applied 
to participants and that the budgeted amount be based on the assessment 
of the participant's needs, strengths, and preferences and the service 
plan. We believe that all these are safeguards against participants' 
budgets being arbitrarily reduced.
    Comment: One commenter questioned the need for a budget methodology 
if participants are free to purchase what they need outside of any 
State-imposed pricing methodology. The commenter further noted that it 
seemed inappropriate to claim that participants would be free to 
determine the pay rate for their providers of PAS when they have no 
control over the total budget amount.
    Response: We believe the commenter has confused the budget 
methodology with the ability of the participant to determine the amount 
paid for a service, support, or item. To clarify, among other things, 
the budget methodology is for the purpose of ensuring that the budget 
allocation for all participants is objective; evidenced based; utilizes 
valid, reliable cost data; is applied consistently to participants; is 
open to public inspection; and, includes a calculation of the expected 
cost of the self-directed PAS and supports, if those services and 
supports were not self-directed. Under the traditional service delivery 
model, the amount that the State has budgeted for an individual is 
based on these same factors. The only difference is that the 
participant in this self-directed model is directing how that amount 
will be used to purchase the services, supports, or items to meet his 
or her needs.
    Upon consideration of the public comments received, we are 
finalizing Sec.  441.472, with revision, to indicate that the budget 
methodology is established by the State in such a way as to ensure the 
State's role in service authorization, and to require the State to have 
a procedure to adjust a budget when a reassessment occurs and 
necessitates a change.

Quality Assurance and Improvement Plan (Sec.  441.474)

    We proposed that the State must provide a quality assurance and 
improvement plan that describes the State's system of how it will 
perform activities of discovery, remediation, and quality improvement 
for self-directed

[[Page 57872]]

PAS. We proposed that the quality assurance and improvement plan 
describe the system performance measures, outcome measures, and 
satisfaction measures that the State must use to monitor and evaluate 
the self-directed State plan option.
    Comment: One commenter suggested that we require the State to 
create a log of all critical events reported by participants.
    Response: We do not accept the commenter's suggestion because we 
believe that the State would already be required to track the critical 
incidents reported by participants as part of the State's quality 
assurance and improvement (QA/QI) plan under Sec.  441.474. Section 
441.474 requires a State to have a QA/QI plan that includes a system to 
discover critical incidents or events that may pose harm to 
participants. Under such a system, critical incidents or events 
reported by participants must be tracked, and the results analyzed and 
evaluated, so that quality improvements that are needed to ensure 
participant health and welfare are continuously made under the self-
directed PAS option.
    Comment: One commenter indicated that State plans must address how 
the State will monitor quality for those with progressive, degenerative 
diseases (for example, Alzheimer's disease), developmental 
disabilities, or mental health conditions. The commenter stated that 
special attention to the experiences of those with cognitive 
impairments is critically important in a program that relies on 
participants to manage their own services.
    Response: We agree that a State's QA/QI plan should take into 
consideration the changing needs of particular populations that are 
self-directing their PAS under this option. For example, a QA/QI plan 
could include adjustments for more frequent phone or face-to-face 
monitoring if the participants' conditions change. However, we do not 
believe a change to the regulation is necessary as we will evaluate a 
State's QA/QI plan during the review of the section 1915(j) State plan 
application.
    Comment: Some commenters suggested specific performance, outcome 
and satisfaction measures be added as requirements for the QA/QI plan.
    Response: We appreciate the commenters' input. Section 441.474 
already requires that the QA/QI plan describe the system performance 
measures, outcome measures, and satisfaction measures that the State 
must use to monitor and evaluate the self-directed State plan option. 
We believe requiring certain measures and indicators at this time may 
be premature as we currently have an initiative underway to evaluate 
whether certain quality measures and indicators should apply to all 
Medicaid programs. To assist us in determining which quality measures 
and indicators are generally being used in Medicaid, we are revising 
Sec.  441.474(b) to indicate that quality of care measures must be made 
available to CMS upon request. Moreover, if we do identify such quality 
measures, we may wish to apply them to the self-directed PAS State plan 
option. In light of this possibility, we have revised Sec.  441.474(b) 
to clarify that quality of care measures must be made available to CMS 
upon request and note that the QA/QI plan must include indicators 
approved or prescribed by the Secretary.
    Comment: One commenter recommended that CMS revise the regulations 
to reflect the statutory language which requires only ``appropriate 
quality assurance and risk management techniques'' instead of the 
current requirements for a quality assurance and improvement plan and 
the system performance measures, outcome measures, and satisfaction 
measures.
    Response: We do not agree with the commenter. Section 1915(j)(5)(E) 
of the Act requires States to provide appropriate quality assurance 
techniques to establish and implement the PAS service plan and budget. 
As we stated in the proposed regulation, such techniques must recognize 
the roles and responsibilities in obtaining services in a self-directed 
manner and assure the appropriateness of such plan and budget based 
upon the participant's resources and capabilities. For approximately 30 
years, we have witnessed an increasing number of Medicaid recipients 
who want to move into or remain in the community in order to receive 
community-based care and services. Simultaneously, we have seen the 
growth in the number of individuals who want to self-direct their 
community-based care and services. States face the challenge of how to 
ensure each participant's health and welfare while also respecting 
individual autonomy and choice. We believe that this challenge can be 
met with an effective QA/QI plan that incorporates performance of 
discovery, remediation, and quality improvement activities and includes 
system performance measures, outcome measures, and satisfaction 
measures. Accordingly, we believe that the appropriate techniques must 
reflect, at a minimum, the need for discovery, remediation, and quality 
improvement activities and system performance measures, outcome 
measures, and satisfaction measures as noted in the regulations at 
Sec.  441.474(a) and (b).
    Comment: One commenter recommended that we require a broad backup 
plan to account for situations where budgeted funds are prematurely 
depleted. Additionally, the commenter recommended a reassessment of an 
individual's ability to participate in the State plan option if the 
budget plan is not being followed.
    Response: We believe that by ``broad backup plan'', the commenter 
means that we should require States to have a ``template'' prepared in 
advance that would address what to do in situations where budgeted 
funds are prematurely depleted. We disagree with the commenter because 
we believe that a backup plan should be individualized and tailored to 
a participant's identified critical contingencies or incidents that 
would pose a risk of harm to the participant's health or welfare. As 
stated previously, there are several options that a State may employ to 
safeguard participants who have prematurely spent the funds in their 
service budgets, such as the provision of additional information or 
counseling on budgeting. Moreover, a reassessment of an individual's 
ability to self-direct their PAS if the budget plan is not being 
followed, may not be appropriate in all situations. Again, it would 
depend on whether additional information or training has helped the 
participant to stay within the budget restrictions. However, we agree 
with the commenter insofar as a change in the participant's health 
status may be the cause of the participant's inability to stay within 
budget restrictions. As we noted previously in response to a prior 
comment, in such a situation, a reassessment of the participant's 
health status would be appropriate.
    After consideration of public comments received, we are finalizing 
Sec.  441.474, with revision, to require that quality measures be 
available to CMS upon request and include indicators approved or 
prescribed by the Secretary.

Risk Management (Sec.  441.476)

    We proposed that the State must specify the risk assessment methods 
it uses to identify potential risks to the participant and the tools or 
instruments it uses to mitigate identified risks. We further proposed 
that the State must ensure that each service plan includes the risks 
that an individual is willing and able to assume, and the plan for how 
identified risks will be mitigated. Finally, we proposed that the State 
must ensure that the risk management plan is the result of discussion 
and negotiation among the persons designated by the

[[Page 57873]]

State to develop the service plan, the participant, the participant's 
representative, if any, and others from whom the participant may seek 
guidance.
    Comment: One commenter urged that CMS require States to specify how 
they will assess and address potential risks for those with impaired 
cognition.
    Response: The statute and the regulations note that States must 
specify risk assessment methods, tools, or instruments the State uses 
to mitigate identified risks, and a plan for how risks will be 
mitigated. We do not believe that it is necessary to specify how 
persons with impaired cognition will be assessed and how the potential 
risks for these individuals will be addressed. As stated in the 
proposed regulations, how much risk an individual is willing and able 
to assume is a matter of discussion and negotiation among the persons 
designated by the State to develop the service plan, the participant, 
the participant's representative, if any, and others from whom the 
participant may seek guidance. This process provides flexibility to the 
State and to the participants to reflect the participants' needs and 
resources in the service plan and budget plan. We believe this process 
would adequately address situations where participants have impaired 
cognition and have not revised the regulations.
    Comment: In discussing the tools that may be used, we invited 
comment on whether criminal background checks should be mandatory under 
the State plan option or left to the discretion of the States, as is 
the current practice in programs that offer self-direction. Several 
commenters provided comments on whether criminal background checks 
should be mandatory with one commenter stating we should include 
national background checks for any provider of PAS that has one-to-one 
contact with participants. Other commenters offered suggestions on how 
the background checks should be reimbursed. Some commenters indicated 
that an individual's spouse, parent, close relative, or friend who is 
to be hired as a provider of PAS should not have to undergo a criminal 
background check. Some commenters also thought that the individual 
should retain the decision of whether to hire a person whom the 
individual or participant knows to have, or discovers to have, a 
criminal background.
    Response: We recognize the commenters' perspective that recommended 
that criminal background checks be mandatory under this State plan 
option. However, we agree with the commenters who suggested that 
criminal background checks remain at the State's discretion and are not 
revising Sec.  441.476. Section 441.476 requires States to specify any 
tools or instruments it uses to mitigate identified risks. We have not 
prescribed the tools or instruments that States must use because States 
should have the necessary flexibility to use the instruments or tools 
that they have found best meets the needs of the participants. These 
tools may include the use of criminal and worker background checks and 
States have the option to determine who falls within the scope of such 
background checks. In addition, if States make criminal or worker 
background checks available as a tool to mitigate risks to 
participants, then States would bear the expense of the criminal or 
worker background checks it performs on behalf of participants. We 
further believe that the individual, or individual's representative, 
must retain the authority to decide who the participant will hire to 
provide their PAS as this decision as to who to employ is inherent in 
self-direction.
    Comment: One commenter suggested that CMS establish procedures for 
developing negotiated risk agreements. Moreover, the commenter stated 
that CMS should require State Medicaid programs to develop appropriate 
linkages with their State long-term care ombudsman and agencies that 
administer protective service to ensure that there are safeguards 
against abuse.
    Response: Section 441.476(b) requires a State to specify the tools 
or instruments it uses to mitigate identified risks. As noted in the 
proposed regulation, we do not prescribe the tools or instruments that 
States must use because States should have the flexibility necessary to 
use the instruments or tools they have found best meet the needs of the 
participants. We noted that examples of risk management tools or 
instruments might include criminal and worker background checks; job 
descriptions that clearly set forth the roles and responsibilities of 
participant, workers, representatives, and all others involved with 
supporting the participant; and the use of individual risk agreements 
that permit the participant to acknowledge and accept the 
responsibility for addressing certain types of risks. Accordingly, we 
do not believe that CMS should establish procedures for the development 
of negotiated risk agreements. Moreover, while we encourage States to 
develop linkages with their State long-term care ombudsman program, we 
do not believe we should require these relationships. We have 
previously addressed the need for access to an independent advocate or 
advocacy organization in our response to the comments under Sec.  
441.464(d) (Support system) that we think would encompass programs such 
as the State long-term care ombudsman program and protective services 
programs that exist in the State. We assume and believe that States 
already have agencies that administer protective services to ensure 
that there are safeguards against abuse.
    Upon consideration of public comments received, we are finalizing 
Sec.  441.476 without modification.

Qualifications of Providers of Personal Assistance (Sec.  441.478)

    We proposed that States have the option to permit participants to 
hire any individual capable of providing the assigned tasks, including 
legally liable relatives, as paid providers of the PAS identified in 
the service plan and budget. We proposed that participants retain the 
right to train their workers in the specific areas of personal 
assistance needed and to perform the needed assistance in a manner that 
comports with the participant's personal, cultural or religious 
preferences. Finally, we proposed that participants retain the right to 
establish additional staff qualifications based on participants' needs 
and preferences.
    Comment: We invited comment on whether a minimum age requirement 
should be required for the providers of PAS. Three commenters opposed 
the imposition of a minimum age requirement in order to maximize the 
degree of flexibility participants have over their workers who will 
furnish the participant's PAS. However, one commenter cautioned that 
not including a minimum age requirement may run afoul of a State's 
child labor laws. Further, one commenter stated that the focus should 
be on whether the worker is qualified to furnish the service in the 
service plan. Several commenters suggested that CMS demand some minimum 
training, worker qualifications, and competency evaluation 
requirements.
    Response: We agree with the commenters that we should not impose a 
minimum age restriction on providers of PAS; rather, the focus should 
be on whether the worker is qualified to furnish the service in the 
service plan according to the participant's personal, cultural, and 
religious preferences.
    As self-directed PAS may include services beyond personal care, any 
minimum training, worker qualifications, or competency evaluation 
requirements would have to be tailored to each of the different

[[Page 57874]]

provider types that will potentially furnish self-directed PAS under 
this option. We do not believe that recreating a system of minimum 
training, worker qualifications, and competency evaluation requirements 
would be appropriate because it would remove the authority vested in 
participants to train their providers of PAS and to determine their 
qualifications.
    We agree that participants should have access to additional 
training for their workers, as needed or desired, provided by or 
through the State. In this regard, we have revised the regulations at 
Sec.  441.450(b) to permit participants to have access to other 
training provided by or through the State so that their PAS providers 
can meet any additional qualifications that participants think are 
needed or desired. We also believe that Sec.  441.478(b) should include 
this requirement and have revised that section similarly. The 
participant's supports broker or consultant, as needed or desired, 
should assist the participant in locating and accessing additional 
training.
    Comment: One commenter recommended that all individual assessments 
include a determination of the ability of the individual to adequately 
train their PAS provider.
    Response: We believe that the regulations afford sufficient 
supports to the participant, such as, the requirements that ongoing 
information or counseling be provided to participants, or the use of 
representatives, as needed, that would enable participants to 
adequately communicate their needs to a PAS provider and to train their 
PAS provider in how to meet those needs. Therefore, we are not adopting 
the commenter's suggestion.
    Upon consideration of the public comments received, we are 
finalizing Sec.  441.478, with modification to permit access to 
training provided by the State to allow the PAS providers to meet any 
additional qualifications required or desired by the participant.

Use of a Representative (Sec.  441.480)

    We proposed that States may permit participants to appoint a 
representative to direct the provision of self-directed PAS on their 
behalf and listed the types of representatives that are permissible. We 
also proposed that States could mandate a representative, using 
criteria approved by CMS, if the participant has demonstrated, after 
additional counseling, information, training or assistance, the 
inability to self-direct PAS. We further proposed that a person acting 
as a representative for a participant receiving self-directed PAS is 
prohibited from acting as a provider of self-directed PAS to the 
participant.
    Comment: Two commenters recommended that use of a representative 
should be required in the rule. In contrast, other commenters urged 
that CMS amend the rule to permit a representative to be ``an 
individual chosen by the participant'' and to permit a spouse or 
significant other to act as a representative. One commenter noted that 
it is inappropriate for the participant to appoint a parent or guardian 
as the representative, since this is the fundamental responsibility of 
a parent or guardian. Several other commenters stated that the rule 
should permit representatives to be paid providers of PAS to allow for 
situations where workers are in short supply, or where a representative 
is the participant's preferred or only available provider. One 
commenter was concerned about the use of ``legally liable relatives'' 
as paid providers of PAS because the situation would be susceptible to 
abuse and because the potential exists for violations of State Nurse 
Practice Acts that delegate skilled nursing care to unpaid but not paid 
caregivers. Another commenter suggested that we add a definition of 
``representative'' to the rule. One commenter suggested that the 
language at Sec.  441.480, with respect to who may be a representative, 
should be moved to the definitions section to strengthen the 
protections embodied in the regulatory language.
    Response: We disagree that use of a representative should be 
required as this could be overly prescriptive in situations where an 
individual is able to indicate preferences or manage his own services 
and budgets with assistance. We further note that while spouses are not 
expressly included, they are not specifically excluded in the 
regulations, and would likely be an individual recognized by State law 
to act on the participant's behalf. We believe that other 
representatives could be permitted by the State.
    The role of the representative is to assist individuals in making 
decisions with respect to the planning, development, management, and 
direction of their service plans and budget plans. We encourage States 
to recognize and permit other representative relationships, so that 
participants can exercise greater flexibility in their choice of who 
will assist them with their decisions.
    We continue to believe that representatives should not be paid 
providers of PAS. While it potentially limits a participant's choice of 
representative or provider, we think it is important to avoid any 
potential conflict of interest. We also learned from the experiences of 
the States participating in the original ``Cash & Counseling'' 
demonstration, that it is important to include this limitation in order 
to avoid the situation of a representative overseeing or making 
decisions that directly impact them, such as approving their own rate 
of pay, their own timesheets, and the like. Accordingly, in order to 
promote participant health and welfare and program integrity, and to 
ensure that participants actually receive their authorized PAS, we 
included this necessary protection in the regulation at Sec.  
441.480(b). Moreover, we believe that there are sufficient participant 
and programmatic protections in the regulations that would detect 
concerns about violations of Nurse Practice Acts. Finally, we disagree 
that the rule should be amended to add those who may be a 
representative, or that a separate definition is necessary, because we 
believe that representative eligibility will vary under State law and 
agency procedure. Therefore, we have left the regulations unchanged.
    Comment: One commenter suggested that the rule address the ability 
of potential representatives to freely choose or to decline to perform 
the tasks associated with being the representative; to understand their 
responsibilities; and to get support, training, and counseling as 
needed to carry out their responsibilities.
    Response: We do not believe that the details of the 
representative's training and understanding of their responsibilities 
is needed as we believe that the States will perform this function as 
part of the pre-enrollment counseling and as necessary on an ongoing 
basis.
    Comment: One commenter suggested that CMS require a representative 
agreement that lists the tasks the representative agrees to perform on 
behalf of the participant.
    Response: We encourage the voluntary use of an agreement if it 
would be beneficial to the participant and the representative, but do 
not believe a requirement for such an agreement should be dictated. We 
believe that some representatives who are clear about their tasks and 
responsibilities would find such a requirement unnecessary and 
burdensome. We further believe that States should have the discretion 
whether to impose such a requirement on representatives of participants 
self-directing their PAS under this State plan option.

[[Page 57875]]

    Upon consideration of public comments received, we are finalizing 
Sec.  441.480 without modification.

Permissible purchases (Sec.  441.482)

    We proposed that participants may, at the State's option, use their 
service budgets to pay for items that increase a participant's 
independence or substitute for human assistance, to the extent that 
expenditures would otherwise be made for the human assistance. We also 
proposed that the services, supports, and items that are purchased with 
a service budget must be linked to an assessed participant need 
established in the service plan.
    Comment: One commenter stated that purchases must relate back to an 
assessed need and must be restricted to those that relate to the 
individual's medical condition. Furthermore, this commenter stated, 
individuals in traditional models of service delivery should have 
access to the same purchase options as participants in the self-
directed PAS State plan option, that is, to purchase items that 
increase independence or substitute for human assistance.
    Response: Section 441.482 indicates that permissible purchases must 
be linked to an assessed participant need established in the service 
plan. We do not agree that purchases must relate to a participant's 
``medical condition'' because such a limitation may be overly 
prescriptive and preclude the purchase of some items that may 
substitute for human assistance, such as a microwave. However, we have 
revised the regulation further to allow that permissible purchases must 
be related to an assessed participant need or goal established in the 
service plan. As service plans must be person-centered and identify 
participants' preferences, we believe that service plans often include 
participants' goals such as the desire to live in their own home. 
Therefore, if a purchase would assist a participant to live in their 
own home, thereby becoming more independent, then the purchase of an 
item that would increase independence could be consistent with the 
requirements in the regulation. In separate guidance, we will issue 
further direction on permissible purchases. As to the commenter's 
suggestion that individuals who receive their services in a traditional 
service delivery model should have the option to purchase items that 
increase independence or substitute for human assistance, we believe 
that the statute directs this option only to participants of the self-
directed PAS State plan option.
    Comment: One commenter noted that the use of the term ``medically 
necessary'' in the preamble is not correct in the context of 
permissible purchases. These purchases could be consistent with a 
service plan, but not strictly ``medically necessary.''
    Response: We agree with the commenter that in the context of 
permissible purchases, the item need not be medically necessary. We are 
clarifying this point here and will take this comment into 
consideration as we develop the future guidance on permissible 
purchases.
    Comment: One commenter supported the concept of allowing 
participants to use funds for permissible purchases but cautions that 
doing so allows for more opportunities for abuse. The commenter 
recommended more oversight to ensure the fiscal integrity of the State 
plan option and accountability for the funds.
    Response: Section 441.464(a) requires assurances that necessary 
safeguards be taken to protect the health and welfare of individuals 
furnished services under the State plan option and to assure the 
financial accountability for funds expended for self-directed services, 
which includes permissible purchases. We believe this provides adequate 
oversight over the fiscal accountability of the funds and protects the 
overall integrity of this option.
    Upon consideration of public comments received, we are finalizing 
Sec.  441.482 with revision to note that permissible purchases must be 
linked to a participant need or goal established in the service plan.

Financial Management Services (Sec.  441.484)

    We proposed that States may provide FMS themselves to participants 
self-directing their PAS, or employ another FMS entity to provide these 
services. Participants utilizing the cash option who directly perform 
those functions themselves would not require this service. We proposed 
that the FMS entity must comply with all applicable requirements of the 
IRS. We further proposed that States must provide oversight of FMS by 
performing certain prescribed functions. We also proposed the specific 
functions that FMS entities must perform and proposed that States not 
employing an FMS entity must perform those functions. Finally, we 
proposed that States will be reimbursed for the cost of FMS, either 
provided directly or through a financial management entity, at the 
administrative rate of 50 percent to reflect the statutory requirement 
for reimbursement of FMS.
    Comment: One commenter stated that the requirement for FMS would 
add considerable costs to a State's Medicaid budget and also add to the 
oversight responsibilities borne by a State.
    Response: We acknowledge that States may experience an initial 
outlay of funds to provide, or employ an entity to provide, the FMS 
required by this rule. This may be particularly true when a State has 
not previously offered a self-direction opportunity that included a 
participant's authority over their workers and services, as well as a 
service budget. However, we do not believe an FMS option would 
significantly add to States' fiscal and administrative 
responsibilities, as States must already provide programmatic and 
financial oversight of their Medicaid programs, including the functions 
to be performed by the FMS entity.
    Comment: One commenter asserted that agencies who are supposed to 
serve as ``fiscal intermediaries'' are, in reality, functioning as home 
care agencies without any regulatory oversight. One commenter cautioned 
that the FMS entity cannot be allowed to operate independently without 
oversight by the State and without oversight responsibility for the 
expenditures made by a participant.
    Response: We believe the commenter has misunderstood the role of 
the FMS entity. We note that the term ``fiscal intermediary'' may be 
interpreted differently by different people and States. ``Fiscal 
intermediaries'' are not necessarily synonymous with financial 
management services. Section 441.484 sets forth minimum mandatory 
functions that must be performed by the FMS entity and the State's 
responsibilities for oversight of the FMS entity. Accordingly, we 
believe that the rule has sufficient safeguards to ensure that the FMS 
responsibilities are properly carried out and supervised.
    Comment: One commenter thought that reimbursing the FMS entity at 
the 50 percent administrative rate was improper in situations when the 
State offers an ``agency with choice'' model. The commenter explained 
that under this model, the participant may choose to delegate certain 
functions to the agency such as recruitment, initial and on-going 
training, and the identification and management of backup services. 
These functions should be reimbursed at the FMAP rate.
    Response: Financial management services, regardless if performed by 
a stand-alone FMS entity or one that is part of an agency with choice 
model, will be reimbursed at the statutorily-required 50 percent 
administrative rate.

[[Page 57876]]

    Comment: One commenter suggested that we add a requirement to Sec.  
441.484(c) that the FMS entity must maintain a separate account for 
each participant's budget.
    Response: This is already a requirement for the FMS entity as noted 
in Section 441.484(c)(3).
    Upon consideration of the public comments received, we are 
finalizing Sec.  441.484 without modification.

IV. Provisions of the Final Regulation

    Generally, this final regulation incorporates the January 18, 2007 
provisions of the proposed rule. The provisions of this final 
regulation that differ from the proposed rule are as follows:
    (1) We have revised the final regulation in relevant places by 
adding ``or their representatives, if applicable'' when we refer to 
individuals or participants. The provisions that we revised include: 
Sec.  441.450(b); Sec.  441.450(c) (that is, the definitions of 
``Service budget'' and ``Service plan''); Sec.  441.454(a), (c), (d); 
Sec.  441.464(a)(2)(ii); Sec.  441.464(d)(3)(i) and (ii); Sec.  
441.464(d)(4); Sec.  441.468(b)(2); Sec.  441.468(c)(1) and (2); Sec.  
441.468(d); Sec.  441.468(e); Sec.  441.470(c); Sec.  441.470(c)(1); 
Sec.  441.470(e); Sec.  441.470(f); Sec.  441.472(c); Sec.  441.478(a), 
(b) and (c); Sec.  441.482(a); and Sec.  441.484(a).
    (2) We have revised Sec.  441.450(b) by adding a new requirement in 
paragraph (4) to include the authority of participants to train their 
workers and to access training provided by or through the State if 
additional worker training is required or desired by the participant, 
or participant's representative, if applicable.
    (3) We have revised Sec.  441.450(c), the definition of 
individualized backup plan, to clarify that the individualized backup 
plan must demonstrate an interface with the risk management provision 
at Sec.  441.476.
    (4) We have revised Sec.  441.450(c) to add a definition for 
``supports broker or consultant'' and to require that a supports broker 
or consultant be available to each participant, as part of the support 
system. We have defined ``supports broker or consultant'' to mean an 
individual who supports participants in directing their PAS and service 
budgets. The supports broker or consultant is an agent of the 
participants and takes direction from the participants, or their 
representatives, if applicable, about what support is needed or 
desired. The supports broker or consultant is primarily responsible for 
facilitating participants' needs in a manner that comports with the 
participants' preferences. The primary functions of the supports broker 
or consultant are to inform, counsel, train, and assist the 
participant, or the participant's representative, if applicable, with 
whatever is needed to develop a service budget and effectively manage 
the participant's self-directed PAS and budgets. Supports brokers or 
consultants must be accessible to participants, maintain an ongoing 
relationship with participants, monitor whether participants' health 
status has changed, and whether expenditures of funds are being made in 
accordance with the service budgets. States must develop a monitoring 
protocol that includes regularly scheduled telephone and face-to-face 
contact with participants. States must also develop the training 
requirements and qualifications for supports brokers or consultants 
that include, at a minimum, the following:
     An understanding of the philosophy of self-direction and 
person-centered and directed planning.
     The ability to facilitate participants' independence and 
participants' preferences in managing PAS and budgets, including any 
risks assumed by participants;
     The ability to develop service budgets and ensure 
appropriate documentation;
     Knowledge of the PAS and resources available in the 
participant's community and how to access them.

The availability of a supports broker or consultant to each participant 
is a requirement of the support system.
    (5) We have revised Sec.  441.454(b) to add examples of the types 
of tax-related requirements that participants, if they have chosen the 
cash option, or the FMS entity, must perform.
    (6) We have revised Sec.  441.456(b) and Sec.  441.458(c) to 
require that the State specify in the section 1915(j) State plan 
amendment the safeguards that are in place to ensure continuity of 
services during the transition from self-directed PAS.
    (7) We have revised Sec.  441.460(a) to insert ``PAS'' before 
``providers.''
    (8) We have revised Sec.  441.464(c) to require that information on 
feasible alternatives be communicated to the individual in a manner and 
language understandable by the individual.
    (9) We have revised Sec.  441.464(d) to add a requirement that 
States may arrange for the provision of a support system, in addition 
to providing the support system themselves.
    (10) We have revised Sec.  441.464(d)(1) to add a requirement that 
before enrollment, the support system appropriately counsels an 
individual about disenrollment.
    (11) We have revised Sec.  441.464(d)(2) to add a requirement that 
any information provided to the participant as a part of the support 
system must be communicated to the participant in a manner and language 
understandable by the participant.
    (12) We have revised Sec.  441.464(d)(2)(vii) to insert the term 
``PAS'' to the requirement that the support activities include the 
ability to freely choose PAS providers.
    (13) We have revised Sec.  441.464(d)(2) by adding a clause (xv) 
that the list of support activities include information about an 
advocate or advocacy systems available in the State and how a 
participant, or a participant's representative, can access the advocate 
or advocacy systems.
    (14) We have revised Sec.  441.468(c)(2) by adding the word 
``allow'' at the beginning of the paragraph.
    (15) We have revised Sec.  441.468(c) to add a new paragraph (8) to 
include that the State ensures that a participant may request revisions 
to a service plan, based on a change in needs or health status.
    (16) We have revised Sec.  441.470(d) to make a technical change to 
insert the phrase, ``to the extent that expenditures would otherwise be 
made for the human assistance,'' into the requirement concerning 
procedures that govern how a participant, at the election of a State, 
may reserve funds to purchase items that increase independence or 
substitute for human assistance.
    (17) We have revised Sec.  441.470(e) to add the phrase, ``or 
reserved for permissible purchases,'' to the requirement concerning 
procedures that govern how a person may use a discretionary amount, if 
applicable.
    (18) We have revised Sec.  441.472 to revise subsection (a) to 
indicate that the budget methodology is established by the State in 
such a way as to ensure the State's role in service authorization, and 
to add a new subsection (e) to require a State to have a procedure to 
adjust a budget, subject to a State's medical necessity criteria, when 
a reassessment indicates a change in a participant's medical condition, 
functional status, or living situation.
    (19) We have revised Sec.  441.474(b) to add a new requirement that 
quality of care measures must be made available to CMS upon request and 
that the QA/QI plan must include indicators approved or prescribed by 
the Secretary.
    (20) We have revised Sec.  441.478(b) to add a requirement that 
participants, or their representatives, if applicable, also have the 
right to access training

[[Page 57877]]

provided by or through the State so that their PAS providers can meet 
any additional qualifications that participants think are needed.
    (21) We have revised Sec.  441.482(b) to insert the words, ``or 
goal,'' to the requirement that the services, supports, and items that 
are purchased with a service budget must be linked to an assessed 
participant need or goal established in the service plan.

V. Collection of Information Requirements

    We solicited public comment on each of the issues for the following 
sections of this document that contain information collection 
requirements (ICRs). We received one general comment. We also received 
public comments on four specific sections contained in the ICRs. The 
comments and our responses follow:

General

    Comment: Two commenters stated that the estimates in the collection 
of information section do not reflect differences in State Medicaid 
systems and the populations served and that we have severely 
underestimated the time and resources that are necessary to meet the 
requirements.
    Response: Our estimates are based on the average time it may take 
for States to fulfill the requirements of this rule and reflect the 
appropriate differences in the State Medicaid systems and populations.

    Note: The self-directed PAS State plan option pre-print is 
currently approved under OMB number 09398-1024.

Section 441.454--Use of Cash

    Section 441.454(d) requires States to make available a financial 
management entity to a participant who has demonstrated, after 
additional counseling, information, training, or assistance, that the 
participant cannot effectively manage the cash option described in 
paragraph (a) of this section.
    The burden associated with this requirement is the time and effort 
put forth by the State to counsel and to provide information, training, 
and or assistance to participants. We believe that it would take a 
State 1 hour per participant to provide this guidance. The total annual 
burden of this requirement would vary according to the number of 
participants in each State who are self-directing their PAS under this 
State Plan option. We received no public comment on this section. 
Therefore, we have not revised the collection of information estimate.

Section 441.456 Voluntary Disenrollment

    Section 441.456(b) requires States to specify in the State plan the 
safeguards that are in place to ensure continuity of services during 
the transition from self-directed PAS.
    The burden associated with this requirement is the time and effort 
put forth by the State to revise its State plan to include the 
safeguards. While the burden associated with this requirement is 
subject to the PRA, the burden associated with the State plan amendment 
is currently approved under OMB 0938-0933. We received no 
public comment on this section. Therefore, we have not revised the 
collection of information estimate.

Section 441.458 Involuntary Disenrollment

    Section 441.458(c) requires States to specify in the State plan the 
safeguards that are in place to ensure continuity of services during 
the transition from self-directed PAS.
    The burden associated with this requirement is the time and effort 
put forth by the State to revise its State plan to include the 
safeguards. While the burden associated with this requirement is 
subject to the PRA, the burden associated with the State plan amendment 
is currently approved under OMB 0938-0933. We received no 
public comment on this section. Therefore, we have not revised the 
collection of information estimate.

Section 441.464 State Assurances

    Section 441.464(a) requires States to provide an assurance that 
necessary safeguards have been taken to protect the health and welfare 
of individuals furnished services under the program and to assure the 
financial accountability for funds expended for self-directed services.
    The burden associated with this requirement is the time and effort 
it would take for each State to meet these conditions. To meet the 
requirements in Sec.  441.464(a), we estimate it would take each State 
80 hours to develop a system of safeguards that protects participants' 
health and welfare and ensures financial accountability for funds 
expended, and no further burden would be associated with this 
requirement. We estimate the total maximum one-time burden for this 
requirement to be 4,480 hours. (56 States x 80 hours = 4,480 hours)
    Comment: One commenter thought that the estimate of 80 hours to 
develop a system of safeguards was unreasonable given that some States 
would be developing and promulgating state rules to implement the new 
safeguards, in addition to having to adjust contracts, train staff and 
providers in new procedures and make any needed system modifications.
    Response: We do not believe that the estimate of 80 hours to 
develop a system of safeguards is unreasonable. All Medicaid programs 
must assure the health and welfare of beneficiaries and fiscal 
accountability, so these are not new safeguards. Furthermore, we do not 
believe that all States will have to develop and promulgate rules. We 
acknowledge that some States may need to adjust contracts, train staff 
and make system modifications, but do not believe, that making such 
changes would exceed, on average, 80 hours per State. Many States 
already offer the opportunity for self-direction in their section 
1915(c) waiver programs, so it would not be overly difficult for these 
States to transition to the opportunity for self-direction offered 
under the self-directed PAS State plan option. We also note that there 
would be little, if any, burden to the States associated with the 
training of PAS providers, as participants bear the responsibility for 
training their PAS providers. Accordingly, we have not revised the 
collection of information estimate.
    Section 441.464(b) requires States to provide an assurance that 
they will perform an evaluation of the need for personal care under the 
State plan or personal services under a section 1915(c) home and 
community-based services waiver program. The burden associated with 
this requirement is the time and effort it would take for each State to 
meet this condition. To meet the requirement in Sec.  441.464(b), we 
estimate it would take a State 2 hours per participant to perform this 
evaluation of need. The total annual burden of this requirement would 
vary according to the number of participants in each State who are (1) 
entitled to medical assistance for personal care services under the 
State plan, or receive home and community-based services under a 
section 1915(c) waiver program; (2) may require self-directed PAS; and 
(3) may be eligible for self-directed PAS. We received no public 
comment on this section. Therefore, we have not revised the collection 
of information estimate.
    Section 441.464(c) requires States to provide an assurance that 
individuals likely to require personal care under the State plan, or 
home and community-based services under a section 1915(c) waiver 
program, are informed of the feasible alternatives, if available, under 
the State's self-directed PAS State plan option, at the choice of these 
individuals, to the provision of personal

[[Page 57878]]

care services under the State plan or PAS under a section 1915(c) home 
and community-based services waiver program. The burden associated with 
this requirement is the time and effort it would take for each State to 
meet this condition. To meet the requirement in Sec.  441.464(c), we 
estimate it would take a State 15 minutes per participant to inform 
individuals of feasible alternatives. The total annual burden of this 
requirement would vary according to the number of participants in each 
State who are likely to require personal care under the State plan, or 
home and community-based services under a section 1915(c) waiver 
program.
    Comment: Two commenters stated that the proposed 15-minute time 
estimate for explaining feasible alternatives to individuals was too 
brief.
    Response: We do not believe that the estimate of 15 minutes to 
inform individuals of the feasible alternatives is too short. We 
believe that most States will incorporate information about feasible 
alternatives within the context of the assessment of the individual's 
needs, or during some other pre-enrollment contact with the individual. 
We estimated that the time to advise an individual of the feasible 
alternatives would only be a small portion of the time spent during the 
assessment. Accordingly, we have not revised the collection of 
information estimate.
    Section 441.464(d) requires States to provide a support system that 
meets the following conditions:
    (1) Appropriately assesses and counsels an individual before 
enrollment.
    (2) Provides appropriate information, counseling, training, and 
assistance to ensure that a participant is able to manage the services 
and budgets. The support activities must include at least the 
following:
    (i) Person-centered planning and how it is applied.
    (ii) Information about the services available for self-direction.
    (iii) Range and scope of individual choices and options.
    (iv) Process for changing the service plan and service budget.
    (v) Grievance process.
    (vi) Risks and responsibilities of self-direction.
    (vii) Freedom of choice of providers.
    (viii) Individual rights.
    (ix) Reassessment and review schedules.
    (x) Defining goals, needs, and preferences.
    (xi) Identifying and accessing services, supports, and resources.
    (xii) Development of risk management agreements.
    (xiii) Development of an individualized backup plan.
    (xiv) Recognizing and reporting critical events.
    (3) Offers additional information, counseling, training, or 
assistance, including financial management services under either of the 
following conditions:
    (i) At the request of the participant for any reason.
    (ii) When the State has determined the participant is not 
effectively managing the services identified in the service plan or 
budget.
    The burden associated with this requirement is the time and effort 
it would take for each State to meet these conditions. To meet the 
requirements in Sec.  441.464(d)(1), we estimate it would take each 
State 2 hours per participant. To meet the requirements in Sec.  
441.464(d)(2), we estimate it would take each State 1 hour per 
participant. To meet the requirements in Sec.  441.464(d)(3), we 
estimate it would take each State 1 hour per participant. The total 
annual burden of these requirements would vary according to the number 
of participants in each State who are self-directing their PAS under 
this State plan option. We received no public comment on this section. 
Therefore, we have not revised the collection of information estimate.
    Section 441.464(e) requires the State to provide to CMS an annual 
report on the number of individuals served and the total expenditures 
on their behalf in the aggregate.
    The annual burden associated with this requirement is the time and 
effort it would take for each State to gather the necessary data and 
provide an annual report to CMS. We estimate that it would take one 
State no more than 25 hours to meet this requirement; therefore, the 
total maximum annual burden is 1,400 hours. (56 States x 25 hours = 
1,400 hours) We received no public comment on this section. Therefore, 
we have not revised the collection of information estimate.
    Section 441.464(f) requires the State to provide to CMS an 
evaluation of the overall impact on the health and welfare of 
participating individuals compared to non-participants every three 
years, as determined by CMS.
    The burden associated with this requirement is the time and effort 
it would take for each State to provide such an evaluation to CMS. We 
estimate that it would take one State 200 hours to prepare and submit 
the evaluation to CMS every 3rd year; therefore, the total maximum 
burden on that 3rd year would be 11,200 hours. (56 States x 200 hours = 
11,200)
    Comment: One commenter questioned how we arrived at the estimate of 
200 hours to prepare and submit an evaluation every three years as we 
did not include the requirements for the report. The commenter urged 
use of existing data sources.
    Response: We believe that our estimate of the time to prepare and 
submit the three-year evaluation was reasonable. Our estimate was based 
on the time we expected it would take a State, on average, to determine 
the measures it would use to compare the impact of the self-directed 
PAS State plan option on the health and welfare of participants and 
non-participants, collect and analyze data, and summarize the findings 
in a report. Many, if not all, States collect data on performance and 
outcome measures within the context of their quality management systems 
in their current Medicaid programs. We believe that it would be 
appropriate for States to use data they have already collected to 
satisfy the requirement for the evaluation in Sec.  441.464(f). 
Therefore, we have not revised the collection of information estimate.

Section 441.468 Service Plan Elements

    Section 441.468(b) requires a State to develop a service plan for 
each program participant using a person-centered and directed planning 
process to ensure the following:
    (1) The identification of each program participant's preferences, 
choices, and abilities, and strategies to address those preferences, 
choices, and abilities.
    (2) The option for the program participant to exercise choice and 
control over services and supports discussed in the plan.
    (3) Assessment of, and planning for avoiding, risks that may pose 
harm to a participant.
    The burden associated with this requirement is the time and effort 
it would take for each State to meet these conditions. We estimate it 
would take each State 3 hours per participant to meet this requirement. 
The total annual burden of this requirement would vary according to the 
number of participants in each State who are self-directing their PAS 
under this State plan option. We received no public comment on this 
section. Therefore, we have not revised the collection of information 
estimate.
    Section 441.468(d) states that when an entity that is permitted to 
provide other State plan services is responsible for service plan 
development, the State must describe the safeguards that are in place 
to ensure that the service provider's role in the planning process is 
fully disclosed to the participant and

[[Page 57879]]

controls are in place to avoid any possible conflict of interest.
    The burden associated with this requirement is the time and effort 
it would take for the State to fully disclose the required information. 
We estimate that it would take one State 15 minutes per participant to 
meet this requirement. The total annual burden of this requirement 
would vary according to the number of participants in each State who 
are self-directing their PAS under this State Plan option. We received 
no public comment on this section. Therefore, we have not revised the 
collection of information estimate.
    Section 441.468(e) requires that an approved self-directed service 
plan conveys authority to the participant to perform, at a minimum, the 
following tasks: recruit and hire workers to provide self-directed 
services, including specifying worker qualifications; fire workers; 
supervise workers in the provision of self-directed services; manage 
workers in the provision of self-directed services (determining worker 
duties, scheduling workers, training workers in assigned tasks, and 
evaluating workers' performance); determine the amount paid for a 
service, support, or item; and review and approve provider invoices.
    While this information collection is subject to the PRA, we believe 
this requirement meets the requirements of 5 CFR 1320.3(b)(2), and as 
such, the burden associated with this requirement is exempt from the 
PRA. We received no public comment on this section. Therefore, we have 
not revised the collection of information estimate.

Section 441.470 Service Budget Elements

    Section 441.470 states that a service budget must be developed and 
approved by the State based on the assessment of need and service plan 
and must include the following:
    (a) The specific dollar amount a participant may utilize for 
services and supports.
    (b) How the participant is informed of the amount of the service 
budget before the service plan is finalized;
    (c) The procedures for how the participant may adjust the budget, 
including the following:
    (1) How the participant may freely make changes to the budget.
    (2) The circumstances, if any, that may require prior approval 
before a budget adjustment is made.
    (3) The circumstances, if any, that may require a change in the 
service plan.
    (d) The procedure(s) that governs how a person, at the election of 
the State, may reserve funds to purchase items that increase 
independence or substitute for human assistance including additional 
goods, supports, services or supplies.
    (e) The procedure(s) that governs how a person may use a 
discretionary amount, if applicable, to purchase items not otherwise 
delineated in the budget.
    (f) How participants are afforded the opportunity to request a fair 
hearing under Sec.  441.300 if a participant's request for a budget 
adjustment is denied or the amount of the budget is reduced.
    The burden associated with this requirement is the time and effort 
put forth by the State to develop a service budget. We estimate it 
would take a State 3 hours per participant to meet this requirement. 
The total annual burden of this requirement would vary according to the 
number of participants in each State who are self-directing their PAS 
under this State plan option. We received no public comment on this 
section. Therefore, we have not revised the collection of information 
estimate.

Section 441.472 Budget Methodology

    Section 441.472(b) requires a State to have procedures in place to 
safeguard participants when the budgeted service amount is insufficient 
to meet a participant's needs.
    The burden associated with this requirement is the time and effort 
it would take for a State to develop its procedures on how to handle 
this. We estimate that it would take one State 16 hours to develop 
these procedures and no further burden would be associated with this 
requirement. The one-time maximum burden associated with this 
requirement is 896 hours. (56 States x 16 hours = 896 hours) We 
received no public comment on this section. Therefore, we have not 
revised the collection of information estimate.
    Section 441.472(c) requires a State to have a method of notifying 
participants of the amount of any limit that applies to a participant's 
self-directed PAS and supports.
    The burden associated with this requirement is the time and effort 
it would take for the State to provide this notification. We estimate 
it would take one State 15 minutes per participant to meet this 
requirement. The total annual burden of this requirement would vary 
according to the number of participants in each State who are self-
directing their PAS under this State plan option. We received no public 
comment on this section. Therefore, we have not revised the collection 
of information estimate.

Section 441.474 Quality Assurance and Improvement Plan

    Section 441.474(a) requires States to provide a quality assurance 
and improvement plan that describes the State's system of how it would 
conduct activities of discovery, remediation, and quality improvement 
in order to learn of critical incidents or events that affect 
participants, correct shortcomings, and pursue opportunities for 
improvement; and
    (b) The quality assurance and improvement plan shall also describe 
the system performance measures, outcome measures, and satisfaction 
measures that the State would use to monitor and evaluate the self-
directed State plan option.
    The burden associated with this requirement is the time and effort 
it would take for the State to customize its quality assurance and 
improvement plan to the self-directed service delivery model. We 
estimate that it would take one State 100 hours to customize its 
quality assurance and improvement plan and no further burden would be 
associated with this requirement. The one-time maximum burden 
associated with this requirement is 5,600 hours. (56 States x 100 hours 
= 5,600 hours)
    Comment: One commenter urged that CMS clarify that there will be 
ongoing burdens associated with quality assurance and improvement 
activities and not just the one-time burdens indicated in the rule.
    Response: As States always retain the ultimate oversight and 
administrative authority for any Medicaid program, we think that any 
ongoing burden is subsumed within the State's normal course of doing 
business. Accordingly, we have not revised the collection of 
information estimate to account for an ongoing burden as suggested by 
the commenter.

Section 441.484 Financial Management Services

    Section 441.484(a) proposes that States may choose to provide 
financial management services to participants self-directing PAS, with 
the exception of those participants utilizing the cash option who 
directly perform those functions.
    Section 441.484(c) proposes to require that the financial 
management entity provide functions including, but not limited to, the 
following:
    (1) Collect and process timesheets of the participant's workers.
    (2) Process payroll, withholding, filing and payment of applicable 
Federal, State, and local employment-related taxes and insurance.

[[Page 57880]]

    (3) Maintain a separate account for each participant's budget.
    (4) Track and report disbursements and balances of participant 
funds.
    (5) Process and pay invoices for goods and services approved in the 
service plan.
    (6) Provide to participants periodic reports of expenditures and 
the status of the approved service budget.
    Section 441.484(d) requires States not utilizing a financial 
management entity must perform the functions listed in paragraph (c) of 
this section on behalf of participants self-directing PAS, with the 
exception of those participants utilizing the cash option who directly 
perform those functions.
    The burden associated with this requirement is the time and effort 
it would take for the financial management entity or State to develop 
and perform the listed functions. We estimate it would take a financial 
management entity or the State 320 hours to develop the financial 
management system. Once the system is in place, the annual burden 
associated with these functions would vary according to the number of 
participants in each State who are self-directing their PAS under this 
State Plan option. We estimate the maximum one-time burden on the 
States to develop the financial management system to be 17,920 hours 
during the first year. (56 States x 320 hours = 17,920)

    Note: Annual burden in the following years will vary. We have no 
data on how many financial management entities would be affected by 
this requirement; therefore, we are unable to provide total annual 
burden associated with financial management entities. We received no 
public comment on this section. Therefore, we have not revised the 
collection of information estimate.

    The total aggregate burden for the requirements in this final 
regulation that affect States annually is estimated to be 1,400 hours. 
The total aggregate burden associated with one-time requirements on 
States is estimated to be 28,896. The total aggregate burden associated 
with the burden placed on States every 3rd year is estimated to be 
11,200 hours.

    Note: We are unable to provide aggregate burden totals for those 
requirements affecting participants because burden will vary 
according to the number of participants in each State who are self-
directing their PAS under this State Plan option. We are also unable 
to provide aggregate burden for financial management entities 
affected by Sec.  441.484(a).

    This document imposed information collection and recordkeeping 
requirements. Consequently, it was reviewed by the Office of Management 
and Budget under the authority of the Paperwork Reduction Act of 1995 
(44 U.S.C. 35).

VI. Regulatory Impact Statement

A. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866, as amended, directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This final regulation does not reach the economic threshold and thus is 
not considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6.5 million to $31.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. An RFA was not 
prepared because the Secretary has determined that this final 
regulation would not have a significant economic impact on a 
substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 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 100 beds. Analysis for section 
1102(b) of the Act was not prepared because the Secretary has 
determined that this final regulation would not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $130 million. This final regulation 
would have no consequential effect on State, local, or tribal 
governments in the aggregate, or on the private sector near the 
threshold amount of $130 million.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final regulation) that imposes substantial direct requirement costs on 
State and local governments, preempts State law, or otherwise has 
Federalism implications. As this final regulation would not impose any 
costs on State or local governments, the requirements of E.O. 13132 are 
not applicable.

B. Anticipated Effects

    FFP will be available for self-directed PAS if the State elects to 
offer this opportunity through the approved State plan. As self-
direction is an alternative service delivery model, it is expected that 
the impact on Medicaid spending would not be very large. The use of 
self-directed PAS is estimated to cost a total of $225 million in FY 
2008 to FY 2012, of which, $127 million is Federal share.
    In making this estimate, we considered that costs might increase 
due to new covered expenses (such as microwave ovens or accessibility 
ramps) as well as new applicants being attracted to the Medicaid 
program, because of the permissibility of payments to relatives. Costs 
could decrease because beneficiaries might require less help and less 
expensive help. We also noted that some States have already implemented 
self-directed programs under other Medicaid authorities and thus, in 
those States, there would be little cost effect to the statute or this 
new regulation. We first estimated that the projected impact of all our 
proposals would amount to an overall 0.5 percent increase in personal 
care service expenditures, if all States and Territories implemented 
this self-direction PAS State plan option. We then accounted for a 
partial starting year, a phase-in period and the fact that this is a 
State plan option. Our final estimate is as noted in the table below.

[[Page 57881]]



             Section 1915(j) Self-Directed Personal Assistance Services Program (Cash & Counseling)
                                              [Dollars in Millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                  Total FY 2008-
                                   FY 2008      FY 2009      FY 2010      FY 2011      FY 2012         2012
----------------------------------------------------------------------------------------------------------------
Federal Cost...................           12           20           29           32           34             127
State Cost.....................            9           15           22           24           26              96
Total *........................           22           35           51           56           61            225
----------------------------------------------------------------------------------------------------------------
* Amounts may not equal total due to rounding.

 *Amounts may not equal total due to rounding.C. Alternatives 
Considered

    In considering alternatives to the proposals presented in this 
proposed rule, we considered the current practices under section 1115 
demonstrations and section 1915(c) waiver programs that implemented 
self-direction. In particular, we considered whether to allow States 
the flexibility to offer the option of disbursing cash prospectively to 
participants. We learned from the experience of the section 1115 
demonstrations that participants were able to successfully manage the 
funds in their budget and maintain financial accountability, with some 
general guidance and oversight. In light of our desire to provide 
flexibility to the beneficiaries and to better reflect the intent of 
the PAS State plan option, we proposed this option.
    We also considered the extent to which to include prescriptive 
support activities that States must include in their support system. We 
proposed a minimum list of support activities to ensure that 
participants have the necessary tools to successfully manage their 
services and budgets. We were concerned that if States were not 
required to include such activities as part of the support system 
within the PAS State plan option, the likelihood of successfully self-
directing PAS would diminish. As we learned from our experience with 
the section 1115 demonstrations and section 1915(c) waiver programs, 
support activities have a crucial role in leading to the success of any 
self-directed PAS program.

D. Conclusion

    As indicated in the estimated expenditures table above, we project 
the Federal Medicaid program cost of this final rule to be $127 million 
over the period from FY 2008 to FY 2012. In addition, we project the 
total State cost of this final rule to be $96 million over the period 
from FY 2008 to FY 2012.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 441

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

0
The Centers for Medicare & Medicaid Services amends 42 CFR chapter IV 
as set forth below:

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

0
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).

0
2. Amend part 441 by adding new subpart J to read as follows:
Subpart J--Optional Self-Directed Personal Assistance Services Program
Sec.
441.450 Basis, scope, and definitions.
441.452 Self-direction: General.
441.454 Use of cash.
441.456 Voluntary disenrollment.
441.458 Involuntary disenrollment.
441.460 Participant living arrangements.
441.462 Statewideness, comparability, and limitations on number 
served.
441.464 State assurances.
441.466 Assessment of need.
441.468 Service plan elements.
441.470 Service budget elements.
441.472 Budget methodology.
441.474 Quality assurance and improvement plan.
441.476 Risk management.
441.478 Qualifications of providers of personal assistance.
441.480 Use of a representative.
441.482 Permissible purchases.
441.484 Financial management services.

Subpart J--Optional Self-Directed Personal Assistance Services 
Program


Sec.  441.450  Basis, scope, and definitions.

    (a) Basis. This subpart implements section 1915(j) of the Act 
concerning the self-directed personal assistance services (PAS) option 
through a State Plan.
    (b) Scope. A self-directed PAS option is designed to allow 
individuals, or their representatives, if applicable, to exercise 
decision-making authority in identifying, accessing, managing and 
purchasing their PAS. This authority includes, at a minimum, all of the 
following:
    (1) The purchase of PAS and supports for PAS.
    (2) Recruiting workers.
    (3) Hiring and discharging workers.
    (4) Training workers and accessing training provided by or through 
the State if additional worker training is required or desired by the 
participant, or participant's representative, if applicable.
    (5) Specifying worker qualifications.
    (6) Determining worker duties.
    (7) Scheduling workers.
    (8) Supervising workers.
    (9) Evaluating worker performance.
    (10) Determining the amount paid for a service, support or item.
    (11) Scheduling when services are provided.
    (12) Identifying service workers.
    (13) Reviewing and approving invoices.
    (c) Definitions. As used in this part--
    Assessment of need means an evaluation of the needs, strengths, and 
preferences of participants for services. This includes one or more 
processes to obtain information about an individual, including health 
condition, personal goals and preferences, functional limitation, age, 
school, employment, household, and other factors that are relevant to 
the authorization and provision of services. Assessment information 
supports the development of the service plan and the subsequent service 
budget.
    Individualized backup plan means a written plan that meets all of 
the following:
    (1) Is sufficiently individualized to address each participant's 
critical contingencies or incidents that would pose a risk of harm to 
the participant's health or welfare;
    (2) Must demonstrate an interface with the risk management 
provision at Sec.  441.476 which requires States to assess and identify 
the potential risks to the participant (such as any critical health 
needs), and ensure that the risks and how they will be managed are the 
result of discussion and negotiation among the persons involved in the 
service plan development;

[[Page 57882]]

    (3) Must not include the 911 emergency system or other emergency 
system as the sole backup feature of the plan; and
    (4) Must be incorporated into the participant's service plan.
    Legally liable relatives means persons who have a duty under the 
provisions of State law to care for another person. Legally liable 
relatives may include any of the following:
    (1) The parent (biological or adoptive) of a minor child or the 
guardian of a minor child who must provide care to the child.
    (2) Legally-assigned caretaker relatives.
    (3) A spouse.
    Self-directed personal assistance services (PAS) means personal 
care and related services, or home and community-based services 
otherwise available under the State plan or a 1915(c) waiver program 
that are provided to an individual who has been determined eligible for 
the PAS option. Self-directed PAS also includes, at the State's option, 
items that increase the individual's independence or substitutes (such 
as a microwave oven or an accessibility ramp) for human assistance, to 
the extent the expenditures would otherwise be made for the human 
assistance.
    Self-direction means the opportunity for participants or their 
representatives to exercise choice and control over the budget, 
planning, and purchase of self-directed PAS, including the amount, 
duration, scope, provider, and location of service provision.
    Service budget means an amount of funds that is under the control 
and direction of a participant, or the participant's representative, if 
any, when the State has selected the State plan option for provision of 
self-directed PAS. It is developed using a person-centered and directed 
process and is individually tailored in accordance with the 
participant's needs and personal preferences as established in the 
service plan.
    Service plan means the written document that specifies the services 
and supports (regardless of funding source) that are to be furnished to 
meet the needs of a participant in the self-directed PAS option and to 
assist the participant to direct the PAS and to remain in the 
community. The service plan is developed based on the assessment of 
need using a person-centered and directed process. The service plan 
builds upon the participant's capacity to engage in activities that 
promote community life and respects the participant's preferences, 
choices, and abilities. The participant's representative, if any, 
families, friends and professionals, as desired or required by the 
participant, will be involved in the service-planning process.
    Support system means information, counseling, training, and 
assistance that support the participant (or the participant's family or 
representative, as appropriate) in identifying, accessing, managing, 
and directing their PAS and supports and in purchasing their PAS 
identified in the service plan and budget.
    Supports broker or consultant means an individual who supports 
participants in directing their PAS and service budgets. The supports 
broker or consultant is an agent of the participants and takes 
direction from the participants, or their representatives, if 
applicable, about what information, counseling, training or assistance 
is needed or desired. The supports broker or consultant is primarily 
responsible for facilitating participants' development of a service 
budget and effective management of the participants' PAS and budgets in 
a manner that comports with the participants' preferences. States must 
develop a protocol to ensure that supports brokers or consultants: are 
accessible to participants; have regularly scheduled phone and in-
person contacts with participants; monitor whether participants' health 
status has changed and whether expenditure of funds are being made in 
accordance with service budgets. States must also develop the training 
requirements and qualifications for supports brokers or consultants 
that include, at a minimum, the following:
    (1) An understanding of the philosophy of self-direction and 
person-centered and directed planning;
    (2) The ability to facilitate participants' independence and 
participants' preferences in managing PAS and budgets, including any 
risks assumed by participants;
    (3) The ability to develop service budgets and ensure appropriate 
documentation; and
    (4) Knowledge of the PAS and resources available in the 
participant's community and how to access them.
    The availability of a supports broker or consultant to each 
participant is a requirement of the support system.


Sec.  441.452  Self-direction: General.

    (a) States must have in place, before electing the self-directed 
PAS option, personal care services through the State plan, or home and 
community-based services under a section 1915(c) waiver.
    (b) The State must have both traditional service delivery and the 
self-directed PAS service delivery option available in the event that 
an individual voluntarily disenrolls or is involuntarily disenrolled, 
from the self-directed PAS service delivery option.
    (c) The State's assessment of an individual's needs must form the 
basis of the level of services for which the individual is eligible.
    (d) Nothing in this subpart will be construed as affecting an 
individual's Medicaid eligibility, including that of an individual 
whose Medicaid eligibility is attained through receipt of section 
1915(c) waiver services.


Sec.  441.454  Use of cash.

    (a) States have the option of disbursing cash prospectively to 
participants, or their representatives, as applicable, self-directing 
their PAS.
    (b) States that choose to offer the cash option must ensure 
compliance with all applicable requirements of the Internal Revenue 
Service, including, but not limited to, retaining required forms and 
payment of FICA, FUTA and State unemployment taxes.
    (c) States must permit participants, or their representatives, as 
applicable, using the cash option to choose to use the financial 
management entity for some or all of the functions described in Sec.  
441.484(c).
    (d) States must make available a financial management entity to a 
participant, or the participant's representative, if applicable, who 
has demonstrated, after additional counseling, information, training, 
or assistance, that the participant cannot effectively manage the cash 
option described in paragraph (a) of this section.


Sec.  441.456  Voluntary disenrollment.

    (a) States must permit a participant to voluntarily disenroll from 
the self-directed PAS option at any time and return to a traditional 
service delivery system.
    (b) The State must specify in a section 1915(j) State plan 
amendment the safeguards that are in place to ensure continuity of 
services during the transition from self-directed PAS.


Sec.  441.458  Involuntary disenrollment.

    (a) States must specify the conditions under which a participant 
may be involuntarily disenrolled from the self-directed PAS option.
    (b) CMS must approve the State's conditions under which a 
participant may be involuntarily disenrolled.
    (c) The State must specify in the section 1915(j) State plan 
amendment the safeguards that are in place to ensure continuity of 
services during the transition from self-directed PAS.

[[Page 57883]]

Sec.  441.460  Participant living arrangements.

    (a) Self-directed PAS are not available to an individual who 
resides in a home or property that is owned, operated, or controlled by 
a PAS provider who is not related to the individual by blood or 
marriage.
    (b) States may specify additional restrictions on a participant's 
living arrangements if they have been approved by CMS.


Sec.  441.462  Statewideness, comparability and limitations on number 
served.

    A State may do the following:
    (a) Provide self-directed PAS without regard to the requirements of 
statewideness.
    (b) Limit the population eligible to receive these services without 
regard to comparability of amount, duration, and scope of services.
    (c) Limit the number of persons served without regard to 
comparability of amount, duration, and scope of services.


Sec.  441.464  State assurances.

    A State must assure that the following requirements are met:
    (a) Necessary safeguards. Necessary safeguards have been taken to 
protect the health and welfare of individuals furnished services under 
the program and to assure the financial accountability for funds 
expended for self-directed services.
    (1) Safeguards must prevent the premature depletion of the 
participant directed budget as well as identify potential service 
delivery problems that might be associated with budget 
underutilization.
    (2) These safeguards may include the following:
    (i) Requiring a case manager, support broker or other person to 
monitor the participant's expenditures.
    (ii) Requiring the financial management entity to flag significant 
budget variances (over and under expenditures) and bring them to the 
attention of the participant, the participant's representative, if 
applicable, case manager, or support broker.
    (iii) Allocating the budget on a monthly or quarterly basis.
    (iv) Other appropriate safeguards as determined by the State.
    (3) Safeguards must be designed so that budget problems are 
identified on a timely basis so that corrective action may be taken, if 
necessary.
    (b) Evaluation of need. The State must perform an evaluation of the 
need for personal care under the State Plan or services under a section 
1915(c) waiver program for individuals who meet the following 
requirements:
    (1) Are entitled to medical assistance for personal care services 
under the State plan or receiving home and community based services 
under a section 1915(c) waiver program.
    (2) May require self-directed PAS.
    (3) May be eligible for self-directed PAS.
    (c) Notification of feasible alternatives. Individuals who are 
likely to require personal care under the State plan, or home and 
community-based services under a section 1915(c) waiver program are 
informed of the feasible alternatives, if available, under the State's 
self-directed PAS State plan option, at the choice of these 
individuals, to the provision of personal care services under the State 
plan, or PAS under a section 1915(c) home and community-based services 
waiver program. Information on feasible alternatives must be 
communicated to the individual in a manner and language understandable 
by the individual. Such information includes, but is not limited to, 
the following:
    (1) Information about self-direction opportunities that is 
sufficient to inform decision-making about the election of self-
direction and provided on a timely basis to an individual or the 
representative which minimally includes the following:
    (i) Elements of self-direction compared to non-self-directed PAS.
    (ii) Individual responsibilities and potential liabilities under 
the self-direction service delivery model.
    (iii) The choice to receive PAS through a waiver program 
administered under section 1915(c) of the Act, regardless of delivery 
system, if applicable.
    (iv) The option, if available, to receive and manage the cash 
amount of their individual budget allocation.
    (2) When and how this information is provided.
    (d) Support system. States must provide, or arrange for the 
provision of, a support system that meets the following conditions:
    (1) Appropriately assesses and counsels an individual, or the 
individual's representative, if applicable, before enrollment, 
including information about disenrollment.
    (2) Provides appropriate information, counseling, training, and 
assistance to ensure that a participant is able to manage the services 
and budgets. Such information must be communicated to the participant 
in a manner and language understandable by the participant. The support 
activities must include at least the following:
    (i) Person-centered planning and how it is applied.
    (ii) Information about the services available for self-direction.
    (iii) Range and scope of individual choices and options.
    (iv) Process for changing the service plan and service budget.
    (v) Grievance process.
    (vi) Risks and responsibilities of self-direction.
    (vii) The ability to freely choose from available PAS providers.
    (viii) Individual rights.
    (ix) Reassessment and review schedules.
    (x) Defining goals, needs, and preferences.
    (xi) Identifying and accessing services, supports, and resources.
    (xii) Development of risk management agreements.
    (xiii) Development of an individualized backup plan.
    (xiv) Recognizing and reporting critical events.
    (xv) Information about an advocate or advocacy systems available in 
the State and how a participant, or a participant's representative, if 
applicable, can access the advocate or advocacy systems.
    (3) Offers additional information, counseling, training, or 
assistance, including financial management services under either of the 
following conditions:
    (i) At the request of the participant, or participant's 
representative, if applicable, for any reason.
    (ii) When the State has determined the participant, or 
participant's representative, if applicable, is not effectively 
managing the services identified in the service plan or budget.
    (4) The State may mandate the use of additional assistance, 
including the use of a financial management entity, or may initiate an 
involuntary disenrollment in accordance with Sec.  441.458, if, after 
additional information, counseling, training or assistance is provided 
to a participant (or participant's representative, if applicable), the 
participant (or participant's representative, if applicable) has 
continued to demonstrate an inability to effectively manage the 
services and budget.
    (e) Annual report. The State must provide to CMS an annual report 
on the number of individuals served and the total expenditures on their 
behalf in the aggregate.
    (f) Three-year evaluation. The State must provide to CMS an 
evaluation of the overall impact of the self-directed PAS option on the 
health and welfare of participating individuals compared to non-
participants every 3 years.

[[Page 57884]]

Sec.  441.466  Assessment of need.

    States must conduct an assessment of the participant's needs, 
strengths, and preferences in accordance with the following:
    (a) States may use one or more processes and techniques to obtain 
information about an individual, including health condition, personal 
goals and preferences for the provision of services, functional 
limitations, age, school, employment, household, and other factors that 
are relevant to the need for and authorization and provision of 
services.
    (b) Assessment information supports the determination that an 
individual requires PAS and also supports the development of the 
service plan and budget.


Sec.  441.468  Service plan elements.

    (a) The service plan must include at least the following:
    (1) The scope, amount, frequency, and duration of each service.
    (2) The type of provider to furnish each service.
    (3) Location of the service provision.
    (4) The identification of risks that may pose harm to the 
participant along with a written individualized backup plan for 
mitigating those risks.
    (b) A State must develop a service plan for each program 
participant using a person-centered and directed planning process to 
ensure the following:
    (1) The identification of each program participant's preferences, 
choices, and abilities, and strategies to address those preferences, 
choices, and abilities.
    (2) The option for the program participant, or participant's 
representative, if applicable, to exercise choice and control over 
services and supports discussed in the plan.
    (3) Assessment of, and planning for avoiding, risks that may pose 
harm to a participant.
    (c) All of the State's applicable policies and procedures 
associated with service plan development must be carried out and 
include, but are not limited to, the following:
    (1) Allow the participant, or participant's representative, if 
applicable, the opportunity to engage in, and direct, the process to 
the extent desired.
    (2) Allow the participant, or participant's representative, if 
applicable, the opportunity to involve family, friends, and 
professionals (as desired or required) in the development and 
implementation of the service plan.
    (3) Ensure the planning process is timely.
    (4) Ensure the participant's needs are assessed and that the 
services meet the participant's needs.
    (5) Ensure the responsibilities for service plan development are 
identified.
    (6) Ensure the qualifications of the individuals who are 
responsible for service plan development reflect the nature of the 
program's target population(s).
    (7) Ensure the State reviews the service plan annually, or whenever 
necessary due to a change in the participant's needs or health status.
    (8) Ensure that a participant may request revisions to a service 
plan, based on a change in needs or health status.
    (d) When an entity that is permitted to provide other State plan 
services is responsible for service plan development, the State must 
describe the safeguards that are in place to ensure that the service 
provider's role in the planning process is fully disclosed to the 
participant, or participant's representative, if applicable, and 
controls are in place to avoid any possible conflict of interest.
    (e) An approved self-directed service plan conveys authority to the 
participant, or participant's representative, if applicable, to 
perform, at a minimum, the following tasks:
    (1) Recruit and hire workers to provide self-directed services, 
including specifying worker qualifications.
    (2) Fire workers.
    (3) Supervise workers in the provision of self-directed services.
    (4) Manage workers in the provision of self-directed services, 
which includes the following functions:
    (i) Determining worker duties.
    (ii) Scheduling workers.
    (iii) Training workers in assigned tasks.
    (iv) Evaluating workers performance.
    (5) Determine the amount paid for a service, support, or item.
    (6) Review and approve provider invoices.


Sec.  441.470  Service budget elements.

    A service budget must be developed and approved by the State based 
on the assessment of need and service plan and must include the 
following:
    (a) The specific dollar amount a participant may utilize for 
services and supports.
    (b) How the participant is informed of the amount of the service 
budget before the service plan is finalized.
    (c) The procedures for how the participant, or participant's 
representative, if applicable, may adjust the budget, including the 
following:
    (1) How the participant, or participant's representative, if 
applicable, may freely make changes to the budget.
    (2) The circumstances, if any, that may require prior approval 
before a budget adjustment is made.
    (3) The circumstances, if any, that may require a change in the 
service plan.
    (d) The procedure(s) that governs how a person, at the election of 
the State, may reserve funds to purchase items that increase 
independence or substitute for human assistance, to the extent that 
expenditures would otherwise be made for the human assistance, 
including additional goods, supports, services or supplies.
    (e) The procedure(s) that governs how a person may use a 
discretionary amount, if applicable, to purchase items not otherwise 
delineated in the budget or reserved for permissible purchases.
    (f) How participants, or their representative, if applicable, are 
afforded the opportunity to request a fair hearing under Sec.  441.300 
if a participant's, or participant's representative, if applicable, 
request for a budget adjustment is denied or the amount of the budget 
is reduced.


Sec.  441.472  Budget methodology.

    (a) The State shall set forth a budget methodology that ensures 
service authorization resides with the State and meets the following 
criteria:
    (1) The State's method of determining the budget allocation is 
objective and evidence based utilizing valid, reliable cost data.
    (2) The State's method is applied consistently to participants.
    (3) The State's method is open for public inspection.
    (4) The State's method includes a calculation of the expected cost 
of the self-directed PAS and supports, if those services and supports 
were not self-directed.
    (5) The State has a process in place that describes the following:
    (i) Any limits it places on self-directed services and supports, 
and the basis for the limits.
    (ii) Any adjustments that will be allowed and the basis for the 
adjustments.
    (b) The State must have procedures to safeguard participants when 
the budgeted service amount is insufficient to meet a participant's 
needs.
    (c) The State must have a method of notifying participants, or 
their representative, if applicable, of the amount of any limit that 
applies to a participant's self-directed PAS and supports.
    (d) The budget may not restrict access to other medically necessary 
care and services furnished under the plan and approved by the State 
but not included in the budget.

[[Page 57885]]

    (e) The State must have a procedure to adjust a budget when a 
reassessment indicates a change in a participant's medical condition, 
functional status or living situation.


Sec.  441.474  Quality assurance and improvement plan.

    (a) The State must provide a quality assurance and improvement plan 
that describes the State's system of how it will perform activities of 
discovery, remediation and quality improvement in order to learn of 
critical incidents or events that affect participants, correct 
shortcomings, and pursue opportunities for system improvement.
    (b) The quality assurance and improvement plan shall also describe 
the system performance measures, outcome measures, and satisfaction 
measures that the State must use to monitor and evaluate the self-
directed State plan option. Quality of care measures must be made 
available to CMS upon request and include indicators approved or 
prescribed by the Secretary.


Sec.  441.476  Risk management.

    (a) The State must specify the risk assessment methods it uses to 
identify potential risks to the participant.
    (b) The State must specify any tools or instruments it uses to 
mitigate identified risks.
    (c) The State must ensure that each service plan includes the risks 
that an individual is willing and able to assume, and the plan for how 
identified risks will be mitigated.
    (d) The State must ensure that the risk management plan is the 
result of discussion and negotiation among the persons designated by 
the State to develop the service plan, the participant, the 
participant's representative, if any, and others from whom the 
participant may seek guidance.


Sec.  441.478  Qualifications of providers of personal assistance.

    (a) States have the option to permit participants, or their 
representatives, if applicable, to hire any individual capable of 
providing the assigned tasks, including legally liable relatives, as 
paid providers of the PAS identified in the service plan and budget.
    (b) Participants, or their representatives, if applicable, retain 
the right to train their workers in the specific areas of personal 
assistance needed by the participant and to perform the needed 
assistance in a manner that comports with the participant's personal, 
cultural, and/or religious preferences. Participants, or their 
representatives, if applicable, also have the right to access other 
training provided by or through the State so that their PAS providers 
can meet any additional qualifications required or desired by 
participants, or participants' representatives, if applicable.
    (c) Participants, or their representatives, if applicable, retain 
the right to establish additional staff qualifications based on 
participants' needs and preferences.


Sec.  441.480  Use of a representative.

    (a) States may permit participants to appoint a representative to 
direct the provision of self-directed PAS on their behalf. The 
following types of representatives are permissible:
    (1) A minor child's parent or guardian.
    (2) An individual recognized under State law to act on behalf of an 
incapacitated adult.
    (3) A State-mandated representative, after approval by CMS of the 
State criteria, if the participant has demonstrated, after additional 
counseling, information, training or assistance, the inability to self-
direct PAS.
    (b) A person acting as a representative for a participant receiving 
self-directed PAS is prohibited from acting as a provider of self-
directed PAS to the participant.


Sec.  441.482  Permissible purchases.

    (a) Participants, or their representatives, if applicable, may, at 
the State's option, use their service budgets to pay for items that 
increase a participant's independence or substitute (such as a 
microwave oven or an accessibility ramp) for human assistance, to the 
extent that expenditures would otherwise be made for the human 
assistance.
    (b) The services, supports and items that are purchased with a 
service budget must be linked to an assessed participant need or goal 
established in the service plan.


Sec.  441.484  Financial management services.

    (a) States may choose to provide financial management services to 
participants, or their representatives, as applicable, self-directing 
PAS, with the exception of those participants utilizing the cash option 
who directly perform those functions, utilizing a financial management 
entity, through the following arrangements:
    (1) States may use a reporting or subagent through its fiscal 
intermediary in accordance with section 3504 of the IRS Code and 
Revenue Procedure 80-4 and Notice 2003-70; or
    (2) States may use a vendor organization that has the capabilities 
to perform the required tasks in accordance with Section 3504 of the 
IRS Code and Revenue Procedure 70-6. When private entities furnish 
financial management services, the procurement method must meet the 
requirements set forth in 45 CFR 74.40 through 74.48.
    (b) States must provide oversight of financial management services 
by performing the following functions:
    (1) Monitoring and assessing the performance of financial 
management entity, including assuring the integrity of financial 
transactions they perform.
    (2) Designating a State entity or entities responsible for this 
monitoring.
    (3) Determining how frequently financial management entity 
performance will be assessed.
    (c) A financial management entity must provide functions including, 
but not limited to, the following:
    (1) Collect and process timesheets of the participant's workers.
    (2) Process payroll, withholding, filing and payment of applicable 
Federal, State and local employment-related taxes and insurance.
    (3) Maintain a separate account for each participant's budget.
    (4) Track and report disbursements and balances of participant 
funds.
    (5) Process and pay invoices for goods and services approved in the 
service plan.
    (6) Provide to participants periodic reports of expenditures and 
the status of the approved service budget.
    (d) States not utilizing a financial management entity must perform 
the functions listed in paragraph (c) of this section on behalf of 
participants self-directing PAS, with the exception of those 
participants utilizing the cash option who directly perform those 
functions.
    (e) States will be reimbursed for the cost of financial management 
services, either provided directly or through a financial management 
entity, at the administrative rate of 50 percent.

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

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)


[[Page 57886]]


    Dated: June 18, 2008.s
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 6, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-23102 Filed 9-29-08; 11:15 am]
BILLING CODE 4120-01-P