[Federal Register Volume 79, Number 11 (Thursday, January 16, 2014)]
[Rules and Regulations]
[Pages 2948-3039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00487]



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Vol. 79

Thursday,

No. 11

January 16, 2014

Part II





 Department of Health and Human Services





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 Centers for Medicare and Medicaid Services





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42 CFR Part 430, 431 et al.





Medicaid Program; State Plan Home and Community-Based Services, 5-Year 
Period for Waivers, Provider Payment Reassignment, and Home and 
Community-Based Setting Requirements for Community First Choice and 
Home and Community-Based Services (HCBS) Waivers; Final Rule

  Federal Register / Vol. 79 , No. 11 / Thursday, January 16, 2014 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 430, 431, 435, 436, 440, 441 and 447

[CMS-2249-F; CMS-2296-F]
RIN 0938-AO53; 0938-AP61


Medicaid Program; State Plan Home and Community-Based Services, 
5-Year Period for Waivers, Provider Payment Reassignment, and Home and 
Community-Based Setting Requirements for Community First Choice and 
Home and Community-Based Services (HCBS) Waivers

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

ACTION: Final rule.

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SUMMARY: This final rule amends the Medicaid regulations to define and 
describe state plan section 1915(i) home and community-based services 
(HCBS) under the Social Security Act (the Act) amended by the 
Affordable Care Act. This rule offers states new flexibilities in 
providing necessary and appropriate services to elderly and disabled 
populations. This rule describes Medicaid coverage of the optional 
state plan benefit to furnish home and community based-services and 
draw federal matching funds.
    This rule also provides for a 5-year duration for certain 
demonstration projects or waivers at the discretion of the Secretary, 
when they provide medical assistance for individuals dually eligible 
for Medicaid and Medicare benefits, includes payment reassignment 
provisions because state Medicaid programs often operate as the primary 
or only payer for the class of practitioners that includes HCBS 
providers, and amends Medicaid regulations to provide home and 
community-based setting requirements related to the Affordable Care Act 
for Community First Choice State plan option. This final rule also 
makes several important changes to the regulations implementing 
Medicaid 1915(c) HCBS waivers.

DATES: Effective Date: These regulations are effective on March 17, 
2014.

FOR FURTHER INFORMATION CONTACT:  Kathy Poisal, (410)786-5940.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
II. State Plan Home and Community-Based Services, 5-Year Period for 
Waivers, Provider Payment Reassignment, and Home and Community-Based 
Setting Requirements for Community First Choice
    A. Background
    B. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments
    1. 5-Year Period for Certain Demonstration Projects and Waivers 
(part 430)
    2. State Organization and General Administration (part 431)
    3. Eligibility in the States, District of Columbia, the Northern 
Mariana Islands, and American Samoa (part 435) and Eligibility in 
Guam, Puerto Rico and the Virgin Islands (part 436)
    4. Services: General Provisions (part 440)
    5. State Plan Home and Community-based Services under section 
1915(i)(1) of the Act (Sec.  441.710) and Community First Choice 
State Plan Option: Home and Community-Based Setting Requirements 
(Sec.  441.530)
    6. Needs-based Criteria and Evaluation (Sec.  441.715)
    7. Independent assessment (Sec.  441.720)
    8. Person-Centered Service plan (Sec.  441.725)
    9. Provider qualifications (Sec.  441.730)
    10. Definition of Individual's Representative (Sec.  441.735)
    11. Self-directed Services (Sec.  441.740)
    12. State Plan HCBS Administration: State Responsibilities and 
Quality Improvement (Sec.  441.745)
    13. Prohibition Against Reassignment of Provider Claims (Sec.  
447.10)
III. Home and Community-Based Services (HCBS) Waivers (Section 
1915(c) of the Act)
    A. Background
    B. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments
    1. Contents of request for a waiver (Sec.  441.301)
    2. State Assurances (Sec.  441.302)
    3. Duration, extension, and amendment of a waiver (Sec.  
441.304)
IV. Provisions of the Final Regulations
V. Collection of Information Requirements
VI. Regulatory Impact Analysis
VII. Regulatory Flexibility Act Analysis
VIII. Unfunded Mandates Reform Act Analysis
IX. Federalism Analysis
Regulation Text

Acronyms

    Because of the many terms to which we refer by acronym in this 
final rule, we are listing the acronyms used and their corresponding 
terms in alphabetical order below.
ADA Americans with Disabilities Act of 1990 (Pub. L. 110-325)
ADLs Activities of daily living
AHRQ Agency for Healthcare Research and Quality
ANPRM Advance Notice of Proposed Rulemaking
CFC Community First Choice (1915(k) State plan Option)
CHIPRA Children's Health Insurance Program Reauthorization of 2009 
(Pub. L. 111-3)
CMS Centers for Medicare & Medicaid Services
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
EPSDT Early and Periodic Screening, Diagnosis and Treatment
FBR Federal benefit rate
FFP Federal financial participation
FPL Federal poverty line
FY Federal fiscal year
HCB Home and community based
HCBS Home and Community-Based Services
HHS Department of Health and Human Services
IADLs Instrumental activities of daily living
ICF/IID Intermediate care facility for individuals with intellectual 
disabilities
LOC Level of care
NF Nursing facility
OBRA`81 Omnibus Budget Reconciliation Act of 1981 (Pub. L. 97-35)
OT Occupational therapy
PT Physical therapy
RFA Regulatory Flexibility Act
SPA State Plan Amendments
SSI Supplemental Security Income
SSI/FBR Supplemental Security Income Federal Benefit Rate
UPL Upper payment limit

I. Executive Summary

A. Purpose

    This final rule amends Medicaid regulations consistent with the 
requirements of section 2601 of the Patient Protection and Affordable 
Care Act of 2010 (Affordable Care Act), which added section 1915(h)(2) 
to the Act to provide authority for a 5-year duration for certain 
demonstration projects or waivers under sections 1115, 1915(b), (c), or 
(d) of the Act, at the discretion of the Secretary, when they provide 
medical assistance to individuals who are dually eligible for both 
Medicaid and Medicare benefits.
    This final rule also provides additional limited exception to the 
general requirement that payment for services under a state plan must 
be made directly to the individual practitioner providing a service 
when the Medicaid program is the primary source of reimbursement for a 
class of individual practitioners. This exception will allow payments 
to be made to other parties to benefit the providers by ensuring 
workforce stability, health and welfare, and trainings, and provide 
added flexibility to the state. We are including the payment 
reassignment provision, because states' Medicaid programs often operate 
as the primary or only payer for the class of practitioners that 
includes HCBS providers.
    In addition, this final rule also amends Medicaid regulations to 
provide home and community-based setting requirements related to 
section 2401 of the Affordable Care Act for section

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1915(k) of the Act, the Community First Choice State plan option.
    This final rule further amends the Medicaid regulations to define 
and describe state plan home and community-based services (HCBS). This 
regulation outlines the optional state plan benefit to furnish home and 
community-based state plan services and draw federal matching funds. As 
a result, states will be able to design and tailor Medicaid services to 
better accommodate individual needs. This may result in improved 
patient outcomes and satisfaction, while enabling states to effectively 
manage their Medicaid resources.
    This final rule also revises the regulations implementing Medicaid 
home and community-based services (HCBS) waivers under section 1915(c) 
of the Social Security Act (the Act) by providing states the option to 
combine the existing three waiver targeting groups identified in Sec.  
441.301. In addition, this final rule will include other changes to the 
HCBS waiver provisions to convey expectations regarding person-centered 
plans of care, to provide characteristics of settings that are home and 
community-based as well as settings that may not be home and community-
based, to clarify the timing of amendments and public input 
requirements when states propose modifications to HCBS waiver programs 
and service rates, and to describe the additional strategies available 
to CMS to ensure state compliance with the statutory provisions of 
section 1915(c) of the Act. The final rule also includes requirements 
for person-centered plans of care that document, among other things, an 
individual's choice of a HCB setting from among options that meet the 
individual's needs.

B. Summary of the Major Provisions

1. State Plan Home Community-Based Services (Section 1915(i) of the 
Act)
    The Deficit Reduction Act (DRA) added a new provision to the 
Medicaid statute entitled ``Expanded Access to Home and Community-Based 
Services for the Elderly and Disabled.'' This provision allows states 
to provide HCBS (as an optional program) under their state Medicaid 
plans. This option allows states to receive federal financial 
participation for services that were previously eligible for federal 
funds only under waiver or demonstration projects. This provision was 
further amended by the Affordable Care Act. The statute now provides 
additional options for states to design and implement HCBS under the 
Medicaid state plan. In the April 4, 2008, Federal Register, (73 FR 
18676) we published a proposed rule to amend Medicaid regulations to 
implement HCBS under the DRA. That proposed rule was not finalized, and 
with the passage of section 2402 of the Affordable Care Act, some 
previously proposed regulations would no longer be in compliance with 
the current law under section 1915(i) of the Act. In addition, several 
new provisions were added. Specifically, the Affordable Care Act 
amended the statute by adding a new optional categorical eligibility 
group for individuals to provide full Medicaid benefits to certain 
individuals who will be receiving HCBS. It also authorized states to 
elect not to comply with section 1902(a)(10)(B) of the Act pertaining 
to comparability of Medicaid services. After closely analyzing the 
Affordable Care Act provisions, we concluded that a new proposed rule 
was necessary. This final rule also establishes home and community-
based setting requirements. We will allow states a transition/phase-in 
period for current approved 1915(i) State plan HCBS to demonstrate 
compliance with these requirements.
2. 5-Year Period for Certain Demonstration Projects and Waivers
    This final rule provides for a 5-year approval or renewal period, 
subject to the discretion of the Secretary, for certain Medicaid 
waivers. Specifically, this time period applies for demonstration and 
waiver programs through which a state serves individuals who are dually 
eligible for both Medicare and Medicaid benefits.
3. Provider Payment Reassignments
    Section 1902(a)(32) of the Act provides that state plans can allow 
payments to be made only to certain individuals or entities. 
Specifically, payment may only be made to an individual practitioner 
who provided the service. The statute provides several specific 
exceptions to the general principle of direct payment to the individual 
practitioner.
    Over the years, some states have requested that we consider 
adopting additional exceptions to the direct payment principle to 
permit withholding from the payment due to the individual practitioner 
for amounts paid by the state directly to third parties for health and 
welfare benefits, training costs and other benefits customary for 
employees. These amounts would not be retained by the state, but would 
be remitted to third parties on behalf of the practitioner for the 
stated purpose.
    While the statute does not expressly provide for additional 
exceptions to the direct payment principle, we believe the 
circumstances at issue were not contemplated under the statute. 
Therefore, we proposed that the direct payment principle should not 
apply because we think its application would contravene the fundamental 
purpose of this provision. The apparent purpose of the direct payment 
principle was to prohibit factoring arrangements, and not to preclude a 
Medicaid program that is functioning as the practitioner's primary 
source of revenue from fulfilling the basic responsibilities that are 
associated with that role. Therefore, we proposed an additional 
exception to describe payments that we do not see as within the 
intended scope of the statutory direct payment requirement, that would 
allow the state to claim as a provider payment amounts that are not 
directly paid to the provider, but are withheld and remitted to a third 
party on behalf of the provider for health and welfare benefit 
contributions, training costs, and other benefits customary for 
employees.
4. Community First Choice State Plan Option: Home and Community-Based 
Setting Requirements (Section 1915(k) of the Act)
    Section 1915(k)(1)(A)(ii) of the Act provides that home and 
community-based attendant services and supports must be provided in a 
home and community-based setting. The statute specifies that home and 
community-based settings do not include a nursing facility, institution 
for mental diseases, or an intermediate care facility for individuals 
with intellectual disabilities. We have adopted this statutory language 
in our regulations. Additionally, to provide greater clarity, we have 
established that home and community-based settings must exhibit 
specific qualities to be eligible sites for delivery of home and 
community-based services.
    After consideration of comments received in response to the 
Community First Choice (CFC) proposed rule published in the Federal 
Register (76 FR 10736) on February 25, 2011, we decided to revise the 
setting provision and publish our proposed definition as a new proposed 
rule to allow for additional public comment before this final rule. The 
public comment process has been valuable in assisting us to develop the 
best policy on this issue for Medicaid beneficiaries. We have fully 
considered all comments received, and have aligned the requirements 
pertaining to home and community-based settings across CFC, section 
1915(i) State plan HCBS, and section 1915(c) of the Act HCBS waivers.

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5. Home and Community Based Services Waivers (Section 1915(c) of the 
Act)
    Section 1915(c) of the Act authorizes the Secretary of Health and 
Human Services to waive certain Medicaid statutory requirements so that 
a state may offer Home and Community-Based Services (HCBS) to state-
specified group(s) of Medicaid beneficiaries who otherwise would 
require services at an institutional level of care. This final rule 
will give states the option to combine the existing three waiver 
targeting groups as identified in Sec.  441.301. In addition, it will 
implement requirements regarding person-centered service plans, clarify 
the timing of amendments when states modify HCBS waiver programs and 
service rates, and describe the additional strategies available to us 
to ensure state compliance with the provisions of section 1915(c) of 
the Act. This final rule also establishes home and community-based 
setting requirements. We will allow states a transition/phase-in period 
for current approved 1915(c) HCBS waivers to demonstrate compliance 
with these requirements.

C. Summary of Costs, Benefits and Transfers

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       Provision description             Total costs             Total benefits             Total transfers
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1915(i) State Plan Home Community-  The estimated total    We anticipate that states   We estimate that,
 Based Services.                     annual collection of   will make varying use of    adjusted for a
                                     information            the state plan HCBS         phase[dash]in period
                                     requirements cost to   benefit provisions to       during which states
                                     states is $21,805..    provide needed long-term    gradually elect to offer
                                                            care services for           the state plan HCBS
                                                            Medicaid beneficiaries.     benefit, in FY 2014 the
                                                            These services will be      federal cost would be
                                                            provided in the home or     $150 million, and the
                                                            alternative living          estimated state cost
                                                            arrangements in the         would be $115million.
                                                            community, which is of      (Some portion of these
                                                            benefit to the              impacts would actually
                                                            beneficiary, and is less    be societal costs rather
                                                            costly than institutional   than ``transfers'', to
                                                            care..                      the extent that new
                                                                                        users of the HCBS in
                                                                                        this rule are previously
                                                                                        not receiving services.)
Section 2601 of the Affordable      N/A..................  As this provision           No impact on federal or
 Care Act: 5-Year Period for                                elongates the time period   state Medicaid funding.
 Demonstration Projects (Waivers).                          under which states may      This rule is voluntary
                                                            operate certain waiver      on the part of states.
                                                            programs without renewal,
                                                            it will help states to
                                                            minimize administrative
                                                            and renewal requirements
                                                            in order to better focus
                                                            on program implementation
                                                            and quality oversight..
Provider Payment Reassignments....  N/A..................  This rule implements        We do not anticipate any
                                                            additional operational      impact on federal
                                                            flexibilities for states    Medicaid funding. This
                                                            to help ensure a strong     rule is voluntary on the
                                                            provider workforce..        part of states.
Section 2401 of the Affordable      N/A..................  This rule provides states   We do not anticipate
 Care Act: Community First Choice                           with necessary guidance     there is an impact on
 State Plan Option: Home and                                to support compliance       federal or state
 Community-Based Setting                                    with the requirement that   Medicaid funding, as the
 Requirements.                                              CFC services are provided   purpose of the rule is
                                                            in a home or community      merely to define home
                                                            based-setting. This rule    and community-based
                                                            also provides beneficiary   settings in which CFC
                                                            protections to support an   services may be
                                                            individual's choice to      provided.
                                                            receive HCBS in a manner
                                                            that allows for
                                                            integration with the
                                                            greater community..
1915(c) Home and Community-Based    States may incur       These changes will support  We do not anticipate any
 Services Waivers.                   costs in coming into   beneficiaries by enabling   impact on federal
                                     compliance with this   services to be planned      Medicaid funding.
                                     rule. Given the        and delivered in a manner
                                     variability in state   driven by the beneficiary
                                     programs, and the      and will maximize
                                     varying extent to      opportunities for
                                     which some are         beneficiaries to have
                                     already complying,     access to the benefits of
                                     it is difficult to     community living and
                                     estimate these         receive services in the
                                     costs..                most integrated setting.
                                                            These changes will also
                                                            enable states to realize
                                                            administrative and
                                                            program design
                                                            simplification and
                                                            improve efficiency of
                                                            operation..
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II. State Plan Home and Community-Based Services, 5-Year Period for 
Waivers, Provider Payment Reassignment, and Home and Community-Based 
Setting Requirements for Community First Choice

A. Background

    On February 8, 2006, the Deficit Reduction Act (DRA) of 2005 (Pub. 
L. 109-171) was signed into law. Section 6086 of the DRA is entitled 
``Expanded Access to Home and Community-Based Services for the Elderly 
and Disabled.'' Section 6086(a) of the DRA adds a new section 1915(i) 
to the Act that allows states, at their option, to provide home and 
community-based services (HCBS) under their regular state Medicaid 
plans. This option allows states to receive federal financial 
participation (FFP) for services that were previously eligible for the 
funds only under waiver or demonstration projects, including those 
under sections 1915(c) and 1115 of the Act. Section 1915(i) of the Act 
was later amended by sections 2402(b) through (g) of the Patient 
Protection and Affordable Care Act of 2010 (Pub. L. 111-148, enacted 
March 23, 2010) (Affordable Care Act) to provide additional options for 
states to design and implement HCBS under the Medicaid state plan.
    In the following discussion of this regulation, we refer to 
particular home and community-based service(s) offered under section 
1915(i) of the Act as ``State plan HCBS'' or simply ``HCBS'' \1\. We 
refer to the ``State plan HCBS benefit'' when describing the collective 
requirements of section 1915(i) of the Act that apply to states 
electing to provide one, or several, of the authorized HCBS. We choose 
to use the

[[Page 2951]]

term ``benefit'' rather than ``program'' to describe section 1915(i) of 
the Act to avoid possible confusion with section 1915(c) HCBS waiver 
programs. The State plan HCBS benefit shares many features with section 
1915(c) waiver programs, but it is a state plan benefit, although one 
with very unique features not common to traditional state plan 
services.
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    \1\ Note that the abbreviation HCBS does not distinguish between 
singular and plural. Where this could be confusing, we spell out 
home and community-based service(s).
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    Under section 1915(i) of the Act, states can provide HCBS to 
individuals who require less than institutional level of care (LOC) and 
who would, therefore, not be eligible for HCBS under section 1915(c) 
waivers, in addition to serving individuals who have needs that would 
meet entry requirements for an institution. As with other state plan 
services, the benefits must be provided statewide, and states must not 
limit the number of eligible people served.
    Section 1915(i) of the Act explicitly provides that State plan HCBS 
may be provided without determining that, but for the provision of 
these services, individuals would require the LOC provided in a 
hospital, a nursing facility (NF), or an intermediate care facility for 
individuals with intellectual disabilities \2\ (ICF/IID) as is required 
in section 1915(c) HCBS waivers. While HCBS provided through section 
1915(c) waivers must be ``cost-neutral'', as compared to institutional 
services, no cost neutrality requirement applies to the section 1915(i) 
State plan HCBS benefit. States are not required to produce comparative 
cost estimates of institutional care and the State plan HCBS benefit. 
This significant distinction allows states to offer HCBS to individuals 
whose needs are substantial, but not severe enough to qualify them for 
institutional or waiver services, and to individuals for whom there is 
not an offset for cost savings in NFs, ICFs/MR, or hospitals.
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    \2\ While the Social Security Act still refers to these types of 
facilities as intermediate care facilities for the mentally retarded 
(ICFs/MR), the language used in this rule reflects ``intellectual 
disability'' as the appropriate way to discuss this type of 
disability, based on Rosa's Law and we now refer to this types of 
facility as an intermediate care facility for individuals with 
intellectual disabilities (ICF/IID).
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    To be eligible for the State plan HCBS benefit, an individual must 
be included in an eligibility group that is contained in the state 
plan, including if the state elects, the new eligibility group defined 
at section 1902(a)(10)(A)(ii)(XXII) of the Act. Each individual must 
meet all financial and non-financial criteria set forth in the plan for 
the applicable eligibility group.
    HCBS benefits that are not otherwise available through section 
1905(a) of the Act state plan services under the Medicaid Early and 
Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit may be 
furnished to Medicaid eligible children who meet the State plan HCBS 
needs-based eligibility criteria, and who meet the state's medical 
necessity criteria for the receipt of services. In addition to meeting 
EPSDT requirements through the provision of 1905(a) services, a state 
may also meet, in part, a particular child's needs under EPSDT through 
services that are also available through the 1915(i) benefit. However, 
all Medicaid-eligible children must have full access to services 
required under EPSDT, and the provision of 1915(i) State plan HCBS 
should in no way hinder their access to such services.
    Section 1915(i)(1)(H)(i) of the Act requires the state to ensure 
that the State plan HCBS benefit meets federal and state guidelines for 
quality assurance, which we interpret as assurances of quality 
improvement. Consistent with current trends in health care, the 
language of quality assurance has evolved to mean quality improvement, 
a systems approach designed to continuously improve services and 
support and prevent or minimize problems prior to occurrences. 
Guidelines for quality improvement have been made available through CMS 
policies governing section 1915(c) HCBS waivers available at 
www.hcbswaivers.net and published manuscripts available at 
www.nationalqualityenterprise.com.
    Section 1915(i) provides states the option to provide home and 
community-based services, but does not define ``home and community-
based.'' Along with our overarching goal to improve Medicaid HCBS, we 
seek to ensure that Medicaid is supporting needed strategies for states 
in their efforts to meet their obligations under the ADA and the 
Supreme Court decision in Olmstead v. L.C., 527 U.S. 581 (1999). In the 
Olmstead decision, the Court affirmed a state's obligations to provide 
covered program services to eligible individuals with disabilities in 
the most integrated setting appropriate to their needs. A state's 
obligations under the ADA and section 504 of the Rehabilitation Act are 
not defined by, or limited to, the services provided under the State's 
Medicaid program. However, the Medicaid program can support compliance 
with the ADA, section 504 of the Rehabilitation Act, and Olmstead 
through the provision of Medicaid services to Medicaid-eligible 
individuals in integrated settings.
    We noted in the May 3, 2012 proposed rule published in the Federal 
Register (77 FR 26362), that home and community-based settings do not 
include nursing facilities, institutions for mental diseases, 
intermediate care facilities for the mentally retarded, hospitals, or 
any other locations that have the qualities of an institutional setting 
as determined by the Secretary.
    While HCBS are not available while an individual resides in an 
institution, HCBS may be available to assist individuals to transition 
from an institution to the community. Recognizing that individuals 
leaving institutions require assistance to establish themselves in the 
community, we would allow states to include in a section 1915(i) 
benefit, as an ``other'' service, certain transition services to be 
offered to individuals to assist them in their transition to the 
community. We proposed that community transition services could be 
commenced prior to discharge and could be used to assist individuals 
during the period of transition from an institutional residence. 
Additionally, services could be provided to assist individuals 
transitioning to independent living in the community, as described in a 
letter to the State Medicaid Directors on May 9, 2002 (SMDL 
02-008). We further recognize that, for short hospital stays, 
an individual may benefit from ongoing support through the State plan 
HCBS benefit to meet needs not met through the provision of hospital 
services that are identified in the individual's person-centered 
service plan, to ensure smooth transitions between acute care settings 
and home and community-based settings, and to preserve the individual's 
functions. Importantly, these services must be exclusively for the 
benefit of the individual, not the hospital, and must not substitute 
for services that the hospital is obligated to provide through its 
conditions of participation or under federal or state laws. However, 
payments for room and board are expressly prohibited by section 
1915(i)(1) of the Act, except for respite care furnished in a setting 
approved by the state that is not the individual's residence.
    Section 2601 of the Affordable Care Act adds a new paragraph to 
section 1915(h) of the Act to permit the Secretary, at her discretion, 
to approve a waiver that provides medical assistance for individuals 
dually eligible for Medicare and Medicaid (``dual eligibles'') for an 
initial period of up to 5 years and renewed for up to 5 years, at the 
state's request. The statute defines a dual eligible as: ``an 
individual who is entitled to, or enrolled for, benefits under part A 
of title XVIII, or enrolled for benefits under part B of title XVIII, 
and is eligible for medical assistance

[[Page 2952]]

under the state plan under this title or under a waiver of such plan.'' 
This new authority enhances existing tools available to improve and 
coordinate care and services for this particularly vulnerable group of 
beneficiaries. This change provides an important tool for states to 
design programs to better coordinate services for dual eligible 
individuals.
    Section 1902(a)(32) of the Act generally states that ``no payment 
under the plan for care and services provided to an individual shall be 
made to anyone other than such individual or the person or institution 
providing such care or service, under an assignment or power of 
attorney or otherwise.'' However, section 1902(a)(32) of the Act 
contains several specific exceptions to the general principle of direct 
payment to individual practitioners. There are exceptions for payments 
for practitioner services where payment is made to the employer of the 
practitioner, and the practitioner is required as a condition of 
employment to turn over fees to the employer; payments for practitioner 
services furnished in a facility when there is a contractual 
arrangement under which the facility bills on behalf of the 
practitioner; reassignments to a governmental agency, through a court 
order, or to a billing agent; payments to a practitioner whose patients 
were temporarily served by another identified practitioner; or payments 
for a childhood vaccine administered before October 1, 1994.
    Section 1915(k)(1)(A)(ii) of the Act provides that home and 
community-based attendant services and supports must be provided in a 
home and community-based setting. The statute specifies that home and 
community-based settings do not include a nursing facility, institution 
for mental diseases, or an intermediate care facility for the mentally 
retarded.\3\ We are aware of settings other than those specified in 
section 1915(k)(1)(A)(ii) of the Act that may exhibit qualities of an 
institutional setting, such as public hospitals. Over the past several 
years, we have sought input on how to define the characteristics of 
what makes a setting ``home and community-based'' (HCB). To provide 
greater clarity, we are establishing with this final rule that home and 
community-based settings must exhibit specific qualities to be eligible 
sites for delivery of HCBS under Medicaid. Any modifications to these 
qualities must be justified in an individual's person-centered plan, 
and we believe this gives states the flexibility to address specific 
needs of beneficiaries. We have included these provisions to move 
toward a stronger articulation of the qualities that make a setting a 
home and truly integrated in the broader community. These are the 
qualities most often articulated by persons with disabilities as key 
determinants of independence and community integration. We believe that 
these qualities of home and community-based settings will support the 
use of the Medicaid program to maximize the opportunities for 
individuals to access the benefits of home and community living. We 
expect states electing to provide benefits under section 1915(k), 
1915(i), and/or 1915(c) to include a definition of home and community-
based setting that incorporates these qualities and will review all 
SPAs and 1915(c) waivers to determine whether they propose settings 
that are home or community-based. We will permit states with approved 
section 1915(k) SPAs, 1915(i) SPAs, and 1915(c) waivers a reasonable 
transition period to come into compliance with the HCB setting 
requirements as promulgated in our final rule.
---------------------------------------------------------------------------

    \3\ Although we recognize that the language used here is 
outdated, and that ``intellectual disability'' is the appropriate 
way to discuss this type of disability, the Social Security Act 
still refers to these types of facilities in this manner.
---------------------------------------------------------------------------

    For a detailed description of the background of this rule, please 
refer to ``State Plan Home and Community-Based Services, 5-Year Period 
for Waivers, Provider Payment Reassignment, and Setting Requirements 
for Community First Choice'' proposed rule published in the May 3, 2012 
Federal Register (77 FR 26362).

B. Provisions of the Proposed Regulations and Analysis of and Responses 
to Public Comments

    On May 3, 2012, we published a proposed rule (77 FR 26362) in the 
Federal Register entitled ``Medicaid Program; State Plan Home and 
Community-Based Services, 5-Year Period for Waivers, Provider Payment 
Reassignment, and Setting Requirements for Community First Choice,'' 
(hereinafter referred to as ``HCBS proposed rule'') that proposed to 
amend the Medicaid regulations to define and describe state plan home 
and community-based services (HCBS) under the Affordable Care Act. This 
rule offers states new flexibilities in providing necessary and 
appropriate services to elderly and disabled populations. The rule also 
proposed to amend Medicaid regulations consistent with the requirements 
of section 2601 of the Affordable Care Act, which added section 
1915(h)(2) to the Act to provide authority for a 5-year duration for 
certain demonstration projects or waivers under sections 1115, 1915(b), 
(c), or (d) of the Act. In addition, the proposed rule includes payment 
reassignment provisions because states' Medicaid programs often operate 
as the primary or only payer for the class of practitioners that 
includes HCBS providers. Finally, the rule proposed Medicaid 
regulations to provide home and community-based setting requirements 
related to section 2401 of the Affordable Care Act for the section 
1915(k) Community First Choice State plan option.
    We received a total of 401 timely comments from state agencies, 
advocacy groups, health care providers, employers, health insurers, 
health care associations, and the general public. The comments ranged 
from general support or opposition to the proposed provisions to very 
specific questions or comments regarding the proposed changes. We note 
that many expressed overall satisfaction with the benefit as a whole, 
in that it offers another opportunity for individuals served through 
the Medicaid program to return or remain in the community with family 
and friends. A couple stated that this opportunity offers additional 
flexibility and will not only provide people the opportunity to live 
and thrive where they choose, but also has the potential to save 
states' dollars.
    After consideration of comments received in response to the 
Community First Choice (CFC) proposed rule published in the Federal 
Register on February 25, 2011, we revised the setting provision and 
published our proposed definition as a new proposed rule to allow for 
additional public comment before this final rule. Since CFC and section 
1915(i) both pertain to home and community-based services, we have 
aligned this CFC proposed language with the section 1915(i) proposed 
home and community-based setting requirements also included in this 
rule.
    Brief summaries of each proposed provision, a summary of public 
comments we received (with the exception of specific comments on the 
paperwork burden or the economic impact analysis), and our responses to 
the comments follow. Comments related to the paperwork burden and the 
impact analyses are addressed in the ``Collection of Information 
Requirements'' and ``Regulatory Impact Analysis'' sections in this 
preamble.

[[Page 2953]]

1. 5-Year Period for Certain Demonstration Projects and Waivers (part 
430)
    In accordance with section 2601 of the Affordable Care Act, we 
proposed a 5-year approval or renewal period, subject to the discretion 
of the Secretary, for Medicaid waivers under sections 1915(b), 1915(c), 
1915(d) and 1115 of the Act. Specifically, this time period applies for 
demonstration and waiver programs through which a state serves 
individuals who are dually eligible for both Medicare and Medicaid 
benefits. While section 2601 of the Affordable Care Act did not provide 
a new type of waiver, it did provide an important opportunity for 
states to simplify the operation of existing or future waivers under 
current authorities that serve dually eligible individuals, especially 
important when states combine waiver authorities that have different 
approval periods. The approval of such periods is at the Secretary's 
discretion, and determinations will be made regarding applications for 
5-year waivers in a manner consistent with the interests of 
beneficiaries and the objectives of the Medicaid program. We proposed 
that if a demonstration or waiver program does not serve or excludes 
dually eligible individuals, the 5-year approval period will not be 
available under this authority, and existing approval period 
requirements will apply. In addition, we proposed that in order for 
coverage-related waivers to be approved for 5 years periods, they must 
meet all necessary programmatic, financial, and quality requirements.
    Comment: Commenters on this section expressed agreement with this 
provision. One also requested that we be mindful of the demonstrations 
under the Financial Alignment Initiative for dual eligibles. Another 
recommended clarification that this provision would also apply to other 
future waiver demonstration requests by states to combine Medicare and 
Medicaid funding at the state level for delivering care to Medicare-
Medicaid eligibles.
    Response: This provision is available for waivers that serve dually 
eligible individuals, under sections 1915(b), 1915(c), 1915(d) and 1115 
of the Act, and that meet all necessary programmatic, financial, and 
quality requirements.
    Comment: One commenter requested that CMS make wise and appropriate 
use of this authority. Another commenter recommended that CMS include a 
statement in the regulation language like one in the preamble to the 
proposed rule that determinations ``be made regarding applications for 
5-year waivers in a manner consistent with the interests of 
beneficiaries and the objectives of the Medicaid program.'' This 
commenter stated that one example would be a waiver that effectively 
reduces services for dual eligibles, which should not be approvable as 
it would not be consistent with the purposes of Title XIX.
    Response: We have added ``and in a manner consistent with interests 
of the beneficiaries and the objectives of the Medicaid program'' to 
the final regulation. In the event that the state finds a need to make 
reductions to its program, the state would have to explain to CMS how 
they will account for the interest of individuals before taking such 
action.
2. State Organization and General Administration (part 431)
    In Sec.  431.54, we proposed to add paragraphs (a)(3) and (h) to 
include state plan HCBS as exceptions to comparability and community 
income and resource rules. For specific discussion, see the published 
May 3, 2012 proposed rule (77 FR 2012 through 10385).
    Comment: Commenters requested that we clarify that under section 
1915(i)(3) of the Act noncompliance with comparability or community 
income and resource rules is optional, not mandatory. Specifically, 
they requested that we modify Sec.  431.54 (a)(3) and (h) as follows:
     For Sec.  431.54 (a)(3): Section 1915(i) of the Act 
provides that if a state may provide, as medical assistance, home and 
community-based services under an approved state plan amendment that 
meets certain requirements, it may elect to do so without regard to the 
requirements of sections 1902(a)(10)(B) and 1902(a)(10)(C)(i)(III) of 
the Act, with respect to such services only.
     For Sec.  431.54(h): State plan home and community-based 
services. If the state so elects, the requirements of Sec.  440.240 of 
this chapter related to comparability of services do not apply with 
respect to State plan home and community-based services defined in 
Sec.  440.182 of this chapter.
    Response: We believe that the language in the regulation is clear 
and we are finalizing the rule as proposed.
3. Eligibility in the States, District of Columbia, the Northern 
Mariana Islands, and American Samoa (part 435) and Eligibility in Guam, 
Puerto Rico and the Virgin Islands (part 436)
    We received several comments that were in support of the 
eligibility policies pertaining to the new eligibility group specified 
at Sec.  435.219 and Sec.  436.219. Commenters were pleased that the 
regulation offers states flexibility in providing HCBS to elderly and 
disabled populations who do not meet an institutional level of care. 
Commenters were also pleased that the methodology proposed for the new 
eligibility group described at Sec.  435.219(a) & (c) did not have a 
resource test and that the income standard for this new eligibility 
group is set at 150 percent of the FPL. Comments on eligibility 
policies not contained in this rule are not addressed.
    Comment: A few commenters believed that the language in the 
regulation should be more detailed to better reflect the language in 
the preamble.
    Response: We do not believe that the regulatory language should be 
as detailed as the language in the preamble. The language in the 
preamble contains the rationale for the requirements described in the 
regulatory language. Therefore, we are not revising the regulatory 
language to be as detailed as the preamble. We will be revising the 
regulatory language to correct an error which inaccurately indicated 
that a State could cover some but not all people described in paragraph 
(a) or (b). The response to that comment is addressed separately.
    Comment: A few commenters suggested that the regulation at Sec.  
435.219(c) should be revised to include a requirement that the 
methodology elected by the state can be no more restrictive than the 
SSI methodology.
    Response: To provide states with flexibility, we are not 
prescribing a methodology. We will review the methodology proposed by 
the state to determine whether it meets the criteria set forth at Sec.  
435.219(c) and Sec.  436.219(c). We believe that the current regulatory 
language is in the best interest of the beneficiary.
    Comment: One commenter suggested revising the introductory language 
in Sec.  435.219 and Sec.  436.219 to make it clearer that a state may 
choose to cover persons described in paragraph (a), persons described 
in paragraph (b) or both sets of persons. The commenter suggested 
deleting the language ``any group or groups of'' because the language 
suggests inaccurately that a state might be able to cover some but not 
all of the persons described in either of paragraphs (a) or (b) of the 
regulation.
    Response: We agree with the commenter. The state has the option to 
provide Medicaid to individuals described in one or both of the 
paragraphs under (a) or (b) of this

[[Page 2954]]

section but cannot cover some but not all of the individuals that may 
be eligible under either or both parts of the eligibility group. We are 
revising the regulatory language at Sec.  435.219 and Sec.  436.219 by 
removing the phrase ``any group or groups of.''
    Comment: A few commenters suggested that the language in Sec.  
453.219 should be revised to specify that any income methodologies must 
be applied to all members of the eligibility group.
    Response: The state must use the same income methodology for all 
members within the eligibility group. Specifically, if a state elects 
to cover Sec.  435.219(a) the income methodology must be the same for 
all members determined eligible under Sec.  435.219(a). If the state 
elects Sec.  435.219(b) the state must use the same income and resource 
methodologies and standards that it uses for the Sec.  435.236 (the 
special income level) group. As described in the previous comment, 
states have the option to provide Medicaid to individuals described in 
one or both of the paragraphs under (a) or (b) of this section.
    Comment: One commenter commended CMS for proposing regulations to 
implement optional categorical eligibility for Medicaid for individuals 
in need of section 1915(i) of the Act services. The commenter believes 
that this category has the potential to help secure coverage for 
uninsured and underinsured individuals and will provide states with a 
useful option to consolidate coverage groups.
    Response: The intent of the regulation is to provide eligibility 
for more individuals needing State plan HCBS not to consolidate 
coverage groups.
    Comment: One commenter urged CMS to retain the regulatory language 
that requires states to use income standards, which are, ``reasonable, 
consistent with the objective of the Medicaid program . . . and in the 
best interest of the beneficiary.
    Response: We are not changing this regulatory language, which is 
specified at Sec.  435.219(c) and Sec.  436.219(c).
4. Services: General Provisions (part 440)
    Section 1915(i)(1) of the Act grants states the option to provide, 
under the state plan, the services and supports listed in section 
1915(c)(4)(B) of the Act governing HCBS waivers. The HCBS may not 
include payment for room and board. Eligibility for this option is 
based upon several different factors that are either specified by the 
statute or that a state may define. These include financial 
eligibility, the establishment of needs-based criteria, and the state 
option to target the benefit and to offer benefits differing in type, 
amount, duration or scope to specific populations. Section 1915(i) of 
the Act provides that State plan HCBS may be provided without 
determining that, but for the provision of these services, individuals 
would require the LOC provided in a hospital, a nursing facility (NF), 
or an intermediate care facility for individuals with intellectual 
disabilities (ICF/IID) as is required in section 1915(c) HCBS waivers. 
While HCBS provided through section 1915(c) waivers must be ``cost-
neutral'' as compared to institutional services, no cost neutrality 
requirement applies to the section 1915(i) State plan HCBS benefit. 
State plan HCBS are intended to enable individuals to receive needed 
services in their own homes, or in alternative living arrangements in 
what is collectively termed the ``community'' in this context.
    Comment: A few commenters requested that CMS add additional 
services to Sec.  440.182. One additional commenter requested that 
nursing services be added to the list of services specifically listed 
in section 1915(c)(4)(B) of the Act governing HCBS waivers.
    Response: The services that section 1915(i)(1) of the Act 
authorizes states to include are the services and supports listed in 
section 1915(c)(4)(B) of the Act governing HCBS waivers. While we are 
unable to expand on this list of services, we note that the ``other 
services'' specifically referenced in the statute may include coverage 
of services not designated in the list of specific services, and gives 
states the flexibility to propose and define other specific services.
    Comment: Many commenters requested that CMS add to the regulation 
text that ``other services'' can include services that have been, or 
could be, approved as ``other services'' under a 1915(c) waiver and to 
list specific examples, such as transition services or services for 
individuals with traumatic brain injury.
    Response: ``Other services'' may include coverage of services not 
specifically designated, and states have the flexibility to propose and 
define other specific services. We will provide examples of ``other 
services'' in future guidance.
    Comment: A couple of commenters requested revisions to Sec.  
440.182(c) to emphasize that the habilitation services that can be 
covered by the state include, but are not limited to, expanded 
habilitation services as specified in Sec.  440.180(c).
    Response: We have revised Sec.  440.182(c) to add the phrase ``may 
include expanded habilitation services'' to specify that states can 
choose whether or not to include expanded habilitation services as 
defined in Sec.  440.180(c).
    Comment: One commenter expressed that the final regulation 
regarding home and community-based settings must continue to permit the 
full array of home and community-based services, as defined by the 
Medicaid HCBS statute and regulations and included in the individual's 
person-centered service plan.
    Response: We agree and, as in the proposed rule, the final 
regulation will continue to convey this flexibility for states.
    Comment: Another commenter applauded the flexibility given to 
states to not only provide specified HCBS benefits under the state 
Plan, but to also provide other services at a state's request with 
Secretary approval, and encourages CMS to work with states on an 
ongoing basis to educate, train, and support the use of this new state 
plan option.
    Response: We appreciate this comment and believe that this option 
provides states with an opportunity to deliver long-term supports and 
services to individuals in need. Since implementation of this benefit, 
we have directly and indirectly provided states with technical 
assistance in the use of section 1915(i) of the Act, and we are 
committed to continuing to offer such assistance to states.
    Comment: One commenter stated that CMS should not allow section 
1915(i) of the Act to be used to provide instrumental activities of 
daily living (IADL) services while an individual is in a general acute 
hospital short-term stay, as this would be duplicative to the services 
received in the hospital and would be hard to administer without 
increased costs to the state.
    However, another commenter was supportive of allowing HCBS to 
continue, as applicable for people who are temporarily hospitalized, 
stating that based on the needs of the individual, there could be a 
genuine necessity for HCBS while an individual is hospitalized in a 
short-term acute care setting and would not be a duplication of 
hospital care services:

    ``Some individuals may need assistance from their personal care 
provider to communicate their needs, medical history, redirect 
behaviors, and provide consistent person-directed physical 
assistance. Most hospitals do not have adequate, nor trained staff 
to provide the level and type of ongoing `personal care' many people 
using HCBS

[[Page 2955]]

require. Providing continuation of HCBS while someone is in a 
hospital is not letting hospitals avoid their responsibilities, but 
rather acknowledging the reality that their focus/responsibility is 
on `medical care', while HCBS' focus is on `personal care'.''

    Response: We agree with the second commenter and believe that this 
should remain an option afforded to the state subject to the conditions 
and limitations stated in our rule. To support program integrity, 
states are required to perform claims edits or adopt other systematic 
approaches that prevent duplicate payment.
    Comment: One commenter noted that the inclusion of ``other 
services'' including certain transition services can make a significant 
difference in addressing chronic homelessness.
    Response: We agree.
    Comment: One commenter suggested providing FFP for rent and food 
expenses reasonably attributed to a related caregiver providing State 
plan HCBS, just as CMS proposed in the proposed rule for unrelated 
caregivers.
    Response: Section 1915(i) of the Act does not include authority 
that would allow payment for the costs of rent and food attributable to 
a related personal caregiver residing in the same household as the 
participant.
    Comment: One commenter asked us to clarify if there can be 
differences in the amount, scope or duration of services provided under 
1915(i) and similarly named services provided in a section 1915(c) HCBS 
waiver, and whether rates or rate methodologies could differ. The 
commenter also asked whether there could be different provider 
qualifications for a covered State plan HCBS benefit and a similar 
covered HCBS waiver service.
    Response: States are permitted the flexibility to define the 
section 1915(i) of the Act services they will include under their 
benefit, including the amount, duration, and scope of those services. 
If a proposed section 1915(i) service is also available under another 
Medicaid authority, states must explain how the section 1915(i) 
services would not be provided in duplicate, or incur duplicate 
payment. However, we note that while 1915(i) services are not 
identified in 1905(a) and are not part of the EPSDT requirement, all 
Medicaid-eligible children must have full access to services required 
under EPSDT, and the provision of section 1915(i) of the Act State plan 
HCBS should in no way hinder their access to such services.
    With regard to rate methodologies, while rate determination methods 
may vary, payments for Medicaid services must be consistent with the 
provision of section 1902(a)(30)(A) of the Act (that is, ``payments are 
consistent with efficiency, economy, and quality of care and are 
sufficient to enlist enough providers'') and the related federal 
regulations at Sec.  447.200 through 205. If the state-established 
rates will vary for different providers of a service (including a 
service that is also available under a section 1915(c) of the Act 
waiver), the state must explain the basis for the variation.
    Provider qualifications must be reasonable and appropriate to the 
nature of the service, reflect sufficient training, experience and 
education to ensure that individuals will receive services in a safe 
and effective manner, and not have the effect of limiting the number of 
providers by the inclusion of requirements that are unrelated to 
quality and effectiveness. If the state-established minimum provider 
qualifications will vary for a service that is also available under a 
section 1915(c) of the Act waiver, the state must explain the basis for 
the variation.
    Comment: One commenter requested that CMS amend the language to 
ensure that the rule addresses individuals with disabilities across the 
lifespan, including children, in order to help states understand that 
they can serve children under the special population classification. 
They expressed concern that the proposed rule does not explicitly 
address children. They also requested that CMS add language to specify 
children with physical and sensory disabilities, not just those with 
cognitive and behavioral disorders.
    Response: Our intention was not to exclude children with 
disabilities or any other population as we cited examples in the 
preamble to the proposed rules. The regulation text does not cite 
specific populations who can receive Medicaid HCBS, nor do we think it 
prudent to do so, as it may imply limitations on state flexibility.
    Comment: One commenter requested that CMS allow federal financial 
payment for room and board costs to be included in payment for State 
plan HCBS, in order to make such alternatives viable for individuals 
who, without housing assistance, must seek institutional placement.
    Response: The statute explicitly excludes coverage of room and 
board and our rule cannot override that exclusion.
    Comment: For Sec.  440.182(c)(8), which refers to conditions set 
forth at Sec.  440.180 for persons with chronic mental illness, one 
commenter proposed instead a reference to Sec.  440.180(d)(2).
    Response: We agree that this reference is more precise and have 
incorporated this revision.
    Comment: One commenter expressed support for not including the 
phrase ``as cost effective and necessary to avoid 
institutionalization,'' which appears in Sec.  440.180(b)(9) to 
describe the ``other'' services that might be authorized under section 
1915(c) of the Act, in Sec.  440.182(c)(9) pertaining to section 
1915(i) of the Act.
    Response: We agree that this phrase is not appropriate to include 
in Sec.  440.182(c)(9), as State plan HCBS under 1915(i) are not 
subject to cost neutrality.
    Comment: One commenter indicated that the regulation text should 
indicate that services must be furnished to individuals with an 
assessed need, and must not be based on available funds.
    Response: This is reflected in Sec.  441.725(b) regarding the 
person-centered service plan.
    Income Eligibility:
    Section 1915(i)(1) of the Act requires that in order to receive 
State plan HCBS, individuals must be eligible for Medicaid under an 
eligibility group covered under the State's Medicaid plan. In 
determining whether either of the relevant income requirements 
(discussed) is met, the regular rules for determining income 
eligibility for the individual's eligibility group apply, including any 
less restrictive income rules used by the state for that group under 
section 1902(r)(2) of the Act.
    Section 2402(b) of the Affordable Care Act added a new option at 
section 1915(i)(6) of the Act, to allow states, in addition to 
continuing to provide services to individuals described in section 
1915(i)(1) of the Act, to provide section 1915(i) of the Act services 
to certain individuals who meet the needs-based criteria, who would be 
eligible for HCBS under sections 1915(c), (d) or (e) of the Act waivers 
or a section 1115 waiver approved for the state, and who have income up 
to 300 percent of the Supplemental Security Income Federal Benefit Rate 
(SSI/FBR).
    Section 2402(d) of the Affordable Care Act also amended section 
1902(a)(10)(A)(ii) of the Act by adding a new optional categorically 
needy eligibility group specified at section 1902(a)(10)(A)(ii)(XXII) 
of the Act to provide full Medicaid benefits to certain individuals who 
will be receiving section 1915(i) services. This eligibility group has 
two parts, and states can cover individuals under either or both parts 
of the group. Under this group, states can elect to cover individuals 
who are not otherwise eligible for Medicaid who meet the needs-based 
criteria of the section 1915(i) of the Act benefit, have income up to 
150 percent of the Federal poverty line (FPL) with no resource test

[[Page 2956]]

and who will receive section 1915(i) of the Act services, or 
individuals with income up to 300 percent of the SSI/FBR, who would be 
eligible under an existing section 1915(c), (d) or (e) \4\ waiver or 
section 1115 waiver approved for the state and who will receive section 
1915(i) services. These individuals do not have to be receiving 
services under an existing section 1915(c), (d) or (e) waiver or 
section 1115 waiver; the individual just has to be determined eligible 
for the waiver.
---------------------------------------------------------------------------

    \4\ 1915(d) and (e) waivers are State options to provide HCBS to 
the elderly and to individuals with disabilities, respectively. 
Currently, no State elects to provide services under either of these 
authorities.
---------------------------------------------------------------------------

    Comment: One commenter indicated that there is not a lot of 
difference between 300 percent FBR and 150 percent FPL. In 2012 the 
amounts were $2094 versus approximately $1400 per month. The commenter 
believes that having two income levels to administer will cause more 
work for the states and make explaining the program more confusing. The 
commenter recommended that for all 1915(i) services, the income 
standard be 300 percent of the SSI/FBR.
    Response: The statute does not permit the income standard to be 
raised to 300 percent of the SSI/FBR for all individuals receiving 
1915(i) services. Electing the new eligibility group specified at Sec.  
435.219 and Sec.  436.219 in order to provide state plan HCBS to 
individuals who were not previously eligible to receive these services 
is strictly a state option. Therefore, if a state believes that the 
requirements for this eligibility group are too burdensome, the state 
does not have to elect to cover this optional eligibility group.
    Comment: One commenter believes that existing financial eligibility 
rules should remain in place.
    Response: Electing any changes to financial eligibility set forth 
in this final rule are strictly a state option.
5. State Plan Home and Community-Based Services Under Section 
1915(i)(1) of the Act (Sec.  441.710) (Proposed Sec.  441.656) and 
Community First Choice State Plan Option: Home and Community-Based 
Setting Requirements (Sec.  441.530)
    a. Home and Community-Based Settings Under 1915(i) and 1915(k) of 
the Act
    To implement the statutory requirement that the benefit be ``home 
and community-based,'' we proposed to require in Sec.  441.656(a) that 
the individual reside in the home or community, not in an institution, 
and that the settings must have qualities of community-based settings 
prescribed by the Secretary. We stated our recognition of the need for 
a consistent definition of this term across Medicaid HCBS, and our goal 
to align the final language pertaining to this topic across the 
regulations for sections 1915(i), 1915(k), and 1915(c) of the Act 
Medicaid HCBS authorities.
    Section 1915(i) of the Act provides states the option to provide 
home and community-based services, but does not define ``home and 
community-based.'' Along with our overarching interest in making 
improvements to Medicaid HCBS, we seek to ensure that Medicaid is 
supporting needed strategies for States in their efforts to meet their 
obligations under the ADA and the Supreme Court decision in Olmstead v. 
L.C., 527 U.S. 581 (1999). We proposed language defining the qualities 
and requirements for settings in which section 1915(i) of the Act 
services and supports could be provided and sought additional comments 
on this issue. Instead of attempting to provide one singular definition 
to encompass all settings that are home and community-based, we 
described the qualities that apply in determining whether a setting is 
community-based. We stated that we would expect states electing to 
provide HCBS under section 1915(i) of the Act to include a definition 
of home and community-based settings that incorporates these qualities, 
and that we would review all SPAs to determine whether they propose 
settings that are home and community-based.
    In the proposed rule, we stated that we would permit states with 
approved section 1915(i) of the Act SPAs a reasonable transition 
period, a minimum of one year, to come into compliance with the HCBS 
setting requirements that are promulgated in our final rule.
    Overall, we received 280 comments in response to the HCB settings 
section of the proposed rule regarding 1915(i) State plan HCBS and 
1915(k) CFC. Commenters included advocacy organizations, individuals 
receiving services, family members, friends and guardians of 
individuals receiving services as well as providers, government 
entities and the general public. Because we are proposing the same 
requirements for home and community-based settings in regulations 
implementing 1915(i) and 1915(k), we are discussing comments pertaining 
to both in this section. The comments were mixed, with commenters 
providing both support and disagreement within subsections of the HCBS 
settings provision. A few of the issues that elicited a substantial 
number of comments are: qualities, integration, providers, choice, 
accessibility and privacy in addition to general comments.
    Comment: We received many comments related to this section of the 
proposed rule. These comments are reflected as follows:
    Many commenters expressed concern about the effect the criteria 
will have on existing home and community-based services, and expressed 
concern that the proposed rule will eliminate community based-services 
that elderly individuals and people with disabilities are currently 
receiving. Several commenters suggested eliminating all provisions that 
restrict the consumer's freedom of choice regarding the residential 
settings in which they can utilize their Medicaid funds, stating that 
the qualities and characteristics of home are determined by the 
individual.
    Some commenters stated that affordable rental options, especially 
those in apartment complexes where home maintenance responsibilities 
are handled by the landlord, are hard to find or non-existent in some 
communities. They indicated that lack of affordable housing is a huge 
challenge for people seeking to live in the community while being 
supported for severe disabilities, and that many individuals who 
experience multiple disabilities need housing that is tailored for 
their specific physical needs. These commenters stressed that group 
homes that were built and owned by a third party, specifically for the 
purpose of serving people with disabilities, would not be available if 
they tried to rent on the open market and that ruling out such homes 
for HCBS funding imposes further hardship and segregation on the 
population in need of HCBS.
    One commenter believes the requirements will drive up costs.
    Some commenters believe that the changes would effectively 
eliminate their freedom to provide their adult child a setting that is 
protected from exposure to community members that do not understand the 
effect of a community's environment on individuals with disabilities.
    One commenter indicated that if adopted, the criteria would have a 
significant adverse impact on its ability to continue to serve 
individuals with the most significant disabilities in the community. 
The language included in the proposed regulation would: (1) Thwart 
informed choice by negating or severely restricting longstanding 
program options and opportunities to provide services and supports 
expressly authorized by the HCBS provisions of

[[Page 2957]]

the Medicaid statute and regulations; and (2) Significantly restrict 
state flexibility to respond to identified needs of Medicaid 
beneficiaries.
    Some commenters stated within the broad disability community, 
different groups have different needs and desires and any definition of 
home and community-based needs to be broad enough to encompass these 
divergent needs and desires with one not outweighing others. They 
indicated that it may not be possible to have a single definition to 
meet these needs.
    One commenter stated that the standards proposed for home and 
community-based settings are impractical, overly prescriptive, 
inappropriate for persons with cognitive impairments and 
neurobehavioral challenges, and cannot be delivered at a rate that 
states and taxpayers can afford.
    Another commenter disagreed with eliminating congregate care 
options and requested CMS clearly state policies which encourage states 
to operate a range of services for people with disabilities which 
reflect the diversity of their care and that of their families, 
including congregate care.
    Several commenters disagreed with the notion embedded in the CMS 
proposal that ``community based'' can only be defined as a totally 
independent setting or small stand-alone group home in an urban or 
suburban environment.
    We received many comments supporting the proposed criteria. These 
indicate that the criteria are a step in the right direction and 
support the goal of HCBS to assist individuals to be able to live fully 
in the greater community. One of these commenters stated that the 
criteria proposed appropriately establish the essential elements of 
resident autonomy and person-centered care.
    Many commenters stated their belief that the provisions are key to 
assisting states with complying with the Olmstead decision. One 
recommended that the regulation quote verbatim the conclusion of the 
Olmstead decision and that reference to the ``integration mandate'' in 
the final regulation restates actual language in the ADA regulations 
for instance, ``most integrated setting appropriate to the needs of 
qualified individuals with disabilities.''
    Another indicated that the requirements appropriately ensure that 
individuals have control over their care environment while also making 
allowances for serving people with cognitive disabilities. Several 
commenters stated that the rule offers appropriate flexibility to 
ensure that individuals can remain in the community for as long as 
possible.
    Many commenters commended CMS for its efforts to promote the rights 
of people with disabilities to live in the most integrated setting 
possible. They stated that the proposed rule has the potential to 
improve the care of many adults and children in the public mental 
health and developmental disabilities system.
    A few commenters stated that making an institutional setting more 
``homelike'' does not mean that it becomes community-based, and that 
the intent is to ensure that people with disabilities have more self-
direction and ability to govern and control important components of 
their personal living environment.
    One commenter stated appreciation and support for criteria that 
support individual choice, the ability for a recipient to exercise 
control over his or her immediate environment and day to day 
activities, and that do not restrict the individual's ability to live 
in the community in which his or her residence is located. However, the 
commenter is concerned that residency in some of the more creative 
congregated living arrangements may be disqualified. The commenter 
added that CMS should be as flexible as possible to ensure that these 
homes are able to continue to support individuals with disabilities and 
illnesses in the least restrictive environment possible.
    Response: We appreciate all of the comments submitted. We believe 
the requirements we are finalizing are critical to ensure that 
individuals have the opportunity to receive services in a manner that 
protects individual choice and promotes community integration. 
Individuals who are elderly and/or disabled who commented made it clear 
that their personal rights should not be curtailed because of where 
they live or because there is a need to receive HCBS. It is not the 
intent of this rule to prohibit congregate settings from being 
considered home and community-based settings. State plan HCBS must be 
delivered in a setting that meets the HCB setting requirements as set 
forth in this rule (except for HCBS that may be delivered in an 
institutional setting, such as institutional respite). Also, since this 
authority provides states the opportunity to provide individuals HCBS 
and not institutional services, individuals must be living in settings 
that comport with the HCB setting requirements as set forth in this 
rule. We acknowledge that for some settings, implementing these 
requirements will require a change to operational protocol, and perhaps 
changes to licensure requirements, but we believe that the requirements 
are achievable and provide for reasonable transition time to facilitate 
such changes as may be necessary. We are committed to working with 
states as they examine their systems and develop plans to bring their 
HCBS programs/benefits into compliance.
    Comment: One commenter noted that Medicaid reimbursement for room 
and board is expressly prohibited, yet the criteria laid out in 
Sec. Sec.  441.530 and 441.656(a) are primarily focused on 
considerations of what is a beneficiary's room and board choice and 
therefore arguably outside CMS' authority to regulate. This commenter 
stated that CMS lacks authority to regulate these features of 
alternative housing arrangements for which it does not provide 
reimbursement and requested that CMS clarify under what authority CMS 
can mandate physical structure alternative housing requirements and 
whether such authority extends to non-provider controlled alternative 
housing arrangements. Other commenters stated that creating an 
exhaustive list of potential requirements will be difficult and 
suggested that CMS carefully consider the wide range of states' 
specific programs over the next year before providing guidance through 
a State Medicaid Director letter.
    Response: While we do not regulate housing, we are required to 
determine whether Medicaid State plans and waivers comply with the 
statutes authorizing the provision of medical assistance. In 
authorizing HCBS Medicaid expenditures, we must ensure that such 
settings are home and community-based.
    Comment: We received many comments in response to our request for 
input on whether the regulation should be modified to prohibit housing 
providers from requiring individuals to receive services from that 
provider, or requiring an individual to receive a particular service as 
a condition of living or remaining in the setting. Many commenters 
believe that housing should not be conditioned upon the acceptance of 
services and believe that individuals should have the right to choose 
their living environment, as well as their supports and services. Some 
commenters expressed concern that such an arrangement is inconsistent 
with the requirement that Medicaid beneficiaries have a free choice of 
provider. Other commenters believe that if assisted living facilities, 
and other congregate settings that bundle housing and services, were 
required to separate housing and services, those providers could 
maintain their customer base by providing services of a quality that 
appeals to individuals, not by taking

[[Page 2958]]

advantage of a captive pool of residents. Others expressed concern that 
people would become homeless or institutionalized because the services 
they require change, and individuals are not given the opportunity to 
age in place. Some commenters believe that individuals should have the 
opportunity to make their own decisions about where they live, free of 
any coercion. One commenter supporting the restriction acknowledged 
that compliance with such a provision would require monumental changes 
to certain business models and service delivery systems and that such a 
change may be beyond the scope of this regulation. Overall, the 
commenters supporting the prohibition believe that individuals with 
disabilities deserve choice among livable options and control over the 
space they call home. Alternatively, we received comments opposing a 
separation of housing services requirement, stating that it is too 
restrictive. Some commenters expressed concern that such a requirement 
would limit a provider's ability to evict tenants who become a threat 
to other tenants and staff or repeatedly refuse a particular service 
that would treat their medical condition. Other commenters believe that 
while the inclusion of this criterion is important in some settings, 
such as an individual's home or apartment, it should not be applied to 
settings such as group homes or assisted living residences, where the 
provision of services is inherent in the setting. Several commenters 
suggested that instead of modifying the regulation to require 
separating housing and services, this issue could be handled in a 
different manner, such as the use of resident agreements in specific 
residential settings or through the person centered planning process. 
Commenters believe that this regulation should not preclude reasonable 
conditions for residency that are consistent with the rules of the 
regulating agency. There is also concern with the effect such 
restriction could have on specialized programs, such as those targeted 
toward the homeless population. Such programs include residential 
services and require individuals to maintain sobriety. Other commenters 
expressed concern regarding how such a requirement would be 
operationalized in assisted living facilities whose model is to provide 
both housing and services. In such settings, multiple service providers 
and multiple staff with multiple lines of authority, sorting through 
oversight and management issues becomes very complex. A few commenters 
suggested that CMS should provide guidance that as a matter of 
practice, individuals should not be locked into a particular service 
package as a condition of their receipt of housing services. Other 
commenters suggest that in arrangements where placement is contingent 
on acceptance of a specific program, it should be clearly specified as 
part of the person-centered planning process that individuals have been 
apprised of all alternatives and that the decision to accept the 
placement is free from coercion. The commenter notes that adult care 
and assisted living facilities are also guided by state regulations and 
in most cases these regulations indicate that residents may not reside 
in the facility if they are a threat to themselves or others. The 
commenter explains that if a facility fails to ``discharge'' a resident 
to a more appropriate environment, the facility may be in conflict with 
those state regulations, running the risk of being cited with a 
deficiency or endangerment, which can threaten its viability.
    Response: Upon consideration of the thoughtful comments submitted, 
we are not requiring the separation of the housing provider from the 
provider of HCBS. Commenters provided compelling arguments both in 
support and against the proposed prohibition. We recognize that the 
needs of the individuals receiving HCBS vary greatly. Just as there 
should be a variety of service options to meet those needs, there 
should be a variety of residential options as well. We agree with 
commenters that the issue of choice regarding the provision of services 
can be addressed as part of the person-centered planning process and 
reflected in the individual's person-centered service plan. States must 
ensure that when an individual chooses a home and community based 
setting, the individual has made an informed choice among options. In 
the event the individual has made an informed choice to reside in a 
setting that provides both housing and services, the individual must 
acknowledge that he has also chosen that provider to be the service 
provider. Our decision not to require the separation of housing and 
services in the final rule does not preclude a state from structuring 
its service delivery system to promote separation. Nor does it preclude 
a provider from allowing for such an arrangement if all parties agree, 
and the arrangement does not violate state licensing requirements. At 
this time, we do not believe that there should be a federal mandate 
requiring such a separation.
    Comment: Several commenters requested that Sec.  441.656(a)(1)(vi) 
be modified to include a ``right to refuse service'' provision. One 
commenter suggested the following modification ``in a provider-owned or 
controlled residential setting, that receipt of any particular service 
or support either from the provider/owner or other qualified provider 
cannot be a condition for living in the unit and that this shall mean 
that the owner of the unit cannot terminate occupancy/tenancy of 
someone for not agreeing to participate in a particular service.'' A 
few commenters suggest that if CMS decides against including a ``right 
to refuse service'' provision, then a narrow exception should be 
provided, allowing the requirement to be waived only for substance 
abuse treatment services, on the grounds that such treatment services 
are distinct in character from other forms of service provision focused 
on ADLs, IADLs, etc. One commenter believes that while providers should 
receive adequate reimbursement for housing and services, the individual 
should be protected against restrictive (service utilization) 
requirements for tenancy and should maintain the right to elect, 
receive or deny services without risk of eviction. Another commenter 
indicated that this interpretation could have an effect on residential 
settings as some of these settings include a structure in which 
individuals are required to participate in treatment (substance use, 
for example) as a condition of residing in the unit. Overall, the 
commenters believe that individuals should not be forced to move out of 
their homes because they do not want a particular service offered by 
the provider.
    Response: We do not believe that a ``right to refuse'' provision is 
necessary as it is a basic tenet of the Medicaid program that 
individuals cannot be compelled to receive any Medicaid service. 
Additionally, we believe the requirements specified under the person-
centered planning process, and the requirement at Sec.  
441.530(a)(1)(iii) and Sec.  441.710(a)(1)(iii) that an individual is 
free from coercion and restraint, achieve the same purpose as a ``right 
to refuse'' provision. Although Medicaid beneficiaries have the right 
to refuse a service, we recognize that depending on the setting, rules 
other than those of the Medicaid program may be applicable and may 
reflect health and safety concerns related to the refusal of services. 
We plan to issue additional guidance on how other components of this 
regulation can be useful tools in addressing such concerns.

[[Page 2959]]

    Comment: Several commenters recommend that the proposed regulation 
be amended to reference the ADA, which generally requires a provider to 
accommodate a resident's needs by making necessary services available 
to the extent that those accommodations are setting-appropriate and are 
not legally prohibited. Commenters believe that this type of 
accommodation should be required in a community-based setting, as it 
values the individual's interest in staying in the home over the 
facility's interest in limiting the care needs that must be met.
    Response: The requirements of this rule do not replace or override 
the requirements of the ADA. There are already a few general provisions 
in our regulations that prohibit discrimination in State Medicaid 
programs on the basis of nationality, disability, etc., (Sec.  430.2, 
Sec.  435.901, Sec.  435.905, and Sec.  435.908). As these regulations 
apply in determining eligibility and administering the Medicaid program 
generally, it is not necessary to add a regulation on this subject 
specific to section 1915(i) of the Act.
    Comment: One commenter suggested that clear contracts and 
boundaries need to be defined in order to recognize that no matter the 
setting, that location is the individual's home.
    Response: We agree with the commenter that regardless of the type 
of setting, the location is the person's home.
    Comment: One commenter suggested CMS include the concept of ``aging 
in place,'' as defined by the Center for Disease Control. The commenter 
believes that regardless of whether or not the setting is provider-
owned or controlled, individuals should be protected by a reasonable 
accommodation requirement in their current settings as their needs 
change in order to prevent individuals from being evicted or losing 
their home. The commenter further suggests that individuals should also 
have access to an appeals process through an objective third party to 
dispute decisions about terminations of agreements and evictions.
    Response: We do not believe this support requires a change to the 
regulations. The requirements set forth in this final rule also address 
the commenters' additional suggestion regarding an appeals process for 
evictions and terminations of agreements.
    Comment: One commenter indicated that their state has a long 
history of providing services that are institutionally-based, with 
misplacement of younger people in adult care homes that are for the 
frail elderly. This commenter urged CMS to ensure that individuals have 
assessments of need to ensure they are not placed in the wrong 
settings.
    Response: Sections 1915(c), 1915(i) and 1915(k) of the Act all 
require that individuals have an individual assessment of needs that 
includes the individual's needs, strengths, preferences and goals for 
services and supports provided under the respective authorities.
    Comment: One commenter appreciates CMS noting in the preamble to 
the proposed rule the other authorities for providing Medicaid services 
in certain institutional care settings (such as SNFs and ICFs), but 
notes that this should not be construed to mean that assisted living 
can or should be lumped with SNFs simply because both provide regulated 
services in a congregate setting. The commenter does not support the 
premise that residents of assisted living settings should ``fall back'' 
on the institutional model in order to access Medicaid services.
    Response: It is not our intent to imply that all congregate 
settings should be categorized as nursing facilities and/or 
intermediate care facilities for individuals with intellectual 
disabilities. State plan HCBS must be delivered in a setting that meets 
the HCB setting requirements as set forth in this rule (except where 
HCBS are permitted to be delivered in an institutional setting, such as 
institutional respite). Also, since this authority provides states the 
opportunity to provide individuals with HCBS and not institutional 
services, individuals must be living in settings that comport with the 
HCB setting requirements as set forth in this rule. Settings that do 
not meet the requirements may be qualified to provide institutional 
services.
    Comment: One commenter suggests that states should consider whether 
individuals have meaningful options among settings located in the 
community, which afford them the choices that are integral to some of 
the qualities that define HCB settings. The commenter suggests that 
states should collect data on the choices and expressed preferences of 
Medicaid beneficiaries who require HCBS and set goals to build adequate 
infrastructure to meet these needs.
    Response: We appreciate the commenters' thoughtful suggestions. The 
regulation already requires that the setting be selected by the 
individual from among housing options, and that the individual's choice 
is documented in the person-centered service plan. We will not revise 
the regulation to include the commenter's suggestion to require states 
to use the data on the choices and expressed preferences to set goals 
to build adequate infrastructure to meet these needs; however, we will 
consider that suggestion as we develop future guidance.
    Comment: One commenter agreed that these requirements should apply 
to other HCBS funding streams such as the section 1915(c) waiver 
program.
    Response: We appreciate the commenter's support. As stated in the 
preamble of the proposed regulation, these requirements will also apply 
to section 1915(c) of the Act Home and Community Waiver programs and 
the section 1915(k) of the Act Community First Choice state plan 
option.
    Comment: One commenter stated that individuals should not be forced 
to live in the community, as this might not always be the individual's 
preference.
    Response: This requirement does not require individuals to live in 
the community to receive necessary Medicaid services. Medicaid services 
are available in a variety of settings. This regulation sets forth 
requirements that must be met for individuals to receive services under 
sections 1915(i), (c) and (k) of the Act.
    Comment: We received many comments supporting the proposed 
language. Several commenters support CMS' efforts in aligning HCBS 
setting qualities under sections 1915(i) and 1915(k) of the Act and 
agree with the proposed list of qualities for home and community based 
settings at Sec.  441.656(a)(1) of the proposed rule that promote 
patient autonomy, dignity, choice and preference. Several commenters 
believe the provisions are strongly reflective of the belief that home- 
and community-based services should be organized in a person-centered 
manner, driven by the needs and preferences of the individual and that 
those services acknowledge the rights of the individual to ``privacy, 
dignity and respect''. Several commenters generally believe that the 
provisions establish the essential elements of autonomy and person-
centered care in a way that promotes choice and independence. Many 
commenters believe that the list of qualities promotes integration of 
people with disabilities into the greater community and does not 
restrict individuals with disabilities. One commenter recognized the 
policy on this issue is complicated and believes that the proposed 
language is a big improvement over previous proposals.

[[Page 2960]]

    Response: We agree and appreciate the commenters' support.
    Comment: A few commenters asked if the rule applies to private 
homes and non-residential community settings where services may be 
provided, such as adult day settings or day habilitation settings.
    Response: 1915(i) State plan HCBS and 1915(k) CFC services (for 
example, residential, day or other) must be delivered in a setting that 
meets the HCB setting requirements as set forth in this rule. We will 
provide further guidance regarding applying the regulations to non-
residential HCBS settings. In addition, since this authority provides 
states the opportunity to provide individuals HCBS and not 
institutional services, individuals receiving 1915(i) State plan HCBS 
or 1915(k) CFC services must be living in settings that comport with 
the HCB setting requirements as set forth in this rule regardless of 
whether they are receiving HCBS in that residence. This is consistent 
with CMS' longstanding policy regarding 1915(c) HCBS. We are unsure 
what the commenter means by the term ``private home'' but a residence 
owned or leased by an individual for his or her personal use would 
generally meet these criteria.
    Comment: One commenter suggests that CMS should consider requiring 
and monitoring state reporting on measures related to the qualities of 
home and community-based settings. The commenter suggests alignment 
with section 1915(i) of the Act quality and reporting standards. An 
alternative approach also suggested by the commenter is for CMS to 
require a Memorandum of Understanding (MOU) between state agencies 
documenting how they will work together to ensure consistency with the 
quality requirements.
    Response: Sections 1915 (c), (i) and (k) of the Act all require 
states to demonstrate at the time of approval that they have a quality 
improvement strategy that includes performance and outcome measures for 
the HCBS, including measures for the HCB setting requirements. We are 
currently working towards a streamlined approach to be used across 
Medicaid HCBS.
    Comment: One commenter recommended the rule be revised to include a 
requirement that individual choice regarding supplementation of 
services and supports and who provides them is facilitated, if 
providers meet all applicable requirements of the licensed entity.
    Response: We do not believe it is necessary to add language 
addressing provider qualifications to this provision. Implementing 
regulations for sections 1915(c), 1915(i) and 1915(k) of the Act all 
include provisions that address provider qualification requirements.
    Comment: Several commenters indicated that people with disabilities 
should have the same rights, responsibilities and protections as 
nondisabled people have under every state's Landlord and Tenant Law. 
One commenter indicated that their state's landlord and tenant laws 
currently in place are sufficient to satisfy the requirements of the 
regulation (absent a court order, a person may not be involuntarily 
evicted even if they need a higher level of care, are delinquent in 
payment or create significant disruption for others living in the 
congregate setting). Another commenter indicated that their state's 
landlord tenant law must operate equally for everyone.
    Response: We believe these comments are consistent with the intent 
of this regulation. We note that we do not have the authority to 
require states to modify their landlord and tenant laws.
    Comment: One commenter suggested that CMS should clarify that all 
settings in which the individual does not have a regular lease or full 
ownership rights should be considered ``provider-controlled.''
    Response: Any setting where the provider of HCBS also owns and 
operates an individual's residential service is considered provider-
controlled.
    Comment: A few commenters indicated that because there is no 
definition of an individual's ``sleeping or living unit'' it is unclear 
what area the individual's rights pertain to. The commenters requested 
clarification that the ``unit or room'' to which the person is legally 
entitled is at least the space to which the rights in Sec.  
441.530(a)(1)(vi)(B)(1-3) should apply.
    Response: The requirements set forth at Sec.  
441.530(a)(1)(vi)(B)(1-3) apply to the sleeping or living unit that is 
used by the individual, and is not a common area used by others 
residing in the setting.
    Comment: One commenter indicated that their state's landlord-tenant 
laws and their housing with services regulations both apply to their 
housing with services settings and the commenter wants to ensure that 
anything that is finalized by CMS does not negatively impact the 
consumer based system developed over the last two decades in that 
state.
    Response: The proposed language specified that ``the individual 
has, at a minimum, the same responsibilities and protections from 
eviction that tenants have under the landlord/tenant law of the state, 
county, city or other designated entity.'' However, we heard from many 
commenters that depending on the state, tenant law may not apply to 
congregate settings, such as group homes or assisted living facilities. 
To address such situations, we revised Sec.  441.530 and Sec.  
441.710(a)(1)(vi)(A) to add the following language: ``For settings in 
which landlord tenant laws do not apply to such units or dwellings, the 
state must ensure that a lease, residency agreement or other form of 
written agreement will be in place for each HCBS participant that 
provides protections that address eviction processes and appeals 
comparable to those provided under the jurisdiction's landlord tenant 
law''. In all instances, these agreements must address eviction 
processes and appeals. In summary, we believe that our language creates 
a minimum requirement, but allows states to use existing laws or 
establish new laws as long as they meet our minimum requirements.
    Comment: One commenter found it difficult to support this 
requirement based on the fact that each designated entity in the same 
state can have different tenant laws.
    Response: It is expected that states would establish policy and 
procedures to assure compliance with this provision.
    Comment: One commenter indicated that it might not be appropriate 
to require all provider-owned and operated settings be subject to local 
landlord and tenant laws or to meet all the requirements in Sec.  
441.530(a)(2)(v) adding that for some individuals with chronic mental 
illness or cognitive impairment, this strict requirement may exclude 
the least restrictive environment in which they can reside. The 
commenter indicated that CMS and state Medicaid agencies can use the 
other provisions in Sec.  441.530 to insure that settings in which 
residents receive services are designed to facilitate the actual 
integration of the individual in the surrounding community without 
prohibiting some residences that are provider-owned or controlled from 
providing residential support to recipients.
    Response: We have modified the regulation to include language to 
address situations in which state landlord/tenant rules do not apply.
    Comment: One commenter requested clarification as to whether the 
provider has to hold the space when the terms of the lease are broken 
and there is no payment of rent and suggested that CMS use the typical 
landlord tenant language.

[[Page 2961]]

    Response: It is beyond the scope of this regulation to address 
issues such as when the terms of a lease are broken or rent is not 
paid. This regulation defers to the state and local law, as applicable. 
Absent applicable state or local law, the regulation provides minimum 
requirements that the state must make sure are in place to inform 
individuals of the eviction process and the process to appeal the 
eviction.
    Comment: One commenter noted that if the provider cannot evict the 
individual from provider controlled housing all the other residents may 
suffer and require new housing arrangements. The commenter stated that 
providers of services have experience balancing the rights of multiple 
residents and added that there are circumstances when eviction is in 
the best interest of all residents.
    Response: This regulation is not intended to override existing 
rules governing adherence to proper eviction procedures. This rule 
requires that individuals receiving Medicaid HCBS who are in provider 
owned or controlled settings have the same or comparable protections 
related to evictions as individuals not receiving Medicaid HCBS.
    Comment: One commenter asked about situations where the individual 
decides to participate in an activity that is contrary to the person-
centered plan, putting the individual in danger, and asked who is 
liable for the outcome of the risky behavior. The commenter also wanted 
to know if, when all parties have agreed to a plan and the individual 
receiving supports departs from that to which s/he has agreed, the 
provider has standing to require the individual to adhere to the plan 
and may take steps to ensure compliance.
    Response: We appreciate the commenter's questions. There is an 
expectation that individuals and providers will adhere to the services 
and activities identified in the person-centered service plan. If 
individuals place themselves or those around them in danger, we expect 
the state and provider to take the appropriate action necessary to 
address the situation. However, after the immediate crisis is resolved, 
we would expect a reassessment of needs to occur using the person-
centered service planning process and an update to the person-centered 
service plan.
    Comment: Many commenters expressed concern that the application of 
landlord/tenant law would create a conflict with state licensing laws 
governing assisted living providers or other congregate settings, and 
indicated that the state licensure laws protect individuals from 
arbitrary eviction and define the circumstances in which a provider may 
and may not discharge an individual. The commenter added that providers 
have an obligation to take all reasonable steps to accommodate an 
individual before seeking a discharge, and recommended that CMS 
consider the logistical and technical difficulties in referring to 
state, county or city landlord/tenant laws, as these vary significantly 
and would subject providers in different areas of the same state to 
different standards depending on where they are located. The commenter 
indicated that it would be burdensome for a state to create an HCBS 
program that would take into account all the variations when trying to 
meet these requirements, and suggested that providers that are not 
licensed under an existing state licensing law be required to only 
adhere to the state landlord/tenant law, to create uniformity and avoid 
the administrative difficulties created by including county and city 
laws. One commenter added that the legal relationship between a 
provider and a resident is very different than that of a landlord 
tenant relationship, as landlords typically do not provide, nor are 
required by law to provide, food, housekeeping or assistance with ADLs 
pursuant to a rental agreement. The commenters recommend that in lieu 
of mandating eviction protections under landlord tenant laws, assisted 
living facility resident protections be provided through specific 
disclosure provisions as part of the resident agreement and approved by 
the applicable state licensing authority. The commenter added that such 
provision would specify the terms and conditions for move-in, including 
conditions for discharge or transfer and an appeals process for 
resolving disputes that are non-emergency in nature.
    Response: We are pleased to hear that states have robust 
beneficiary protections included in the licensing requirements of 
certain settings. It is not our intent to replace a state's current 
system. The intent of the language was to assert the expectation that 
for a setting to be considered home and community-based, residents of 
provider-owned or controlled residential settings must have comparable 
protections available to them as those provided under the landlord 
tenant law of the state, county, city or other designated entity. As a 
result of the comments received, we have added to this requirement, for 
settings in which landlord tenant laws do not apply, that the state 
must ensure that a lease, residency agreement or other form of written 
agreement is in place for each participant and that such agreements 
provide protections that address the eviction processes and appeals 
comparable to those provided under the jurisdiction's landlord tenant 
law.
    Comment: One commenter believes the Sec.  441.530 (a)(1)(vi)(A) 
should be revised to permit discharge when an individual's condition 
changes and care needs can no longer be met under the license of the 
dwelling they occupy adding that there is nothing in the regulation 
that abolishes the Keys amendment requirements for SSI recipients or 
HCB waiver recipients.
    Response: While we understand that there may be circumstances in 
which an individual's needs require a different level of service, we 
expect that the assessment of functional need, the person-centered plan 
and the availability of HCBS will be able to address an individual's 
changing needs. If it is determined that eviction or an involuntary 
discharge is necessary, the state must ensure that proper procedures 
for such actions are followed and individuals are fully informed of 
their rights.
    Comment: One commenter wanted to know if it is the responsibility 
of the provider to assist the individual in finding other housing, 
services, and supports.
    Response: The state is responsible for addressing this assistance 
through the person-centered planning process.
    Comment: One commenter recommends the regulation require that 
states and providers delineate (a) the conditions under which an 
individual may be involuntarily moved from a setting he or she prefers, 
and (b) the methods by which the individual will be informed of such 
conditions at the time the individual chooses the setting.
    Response: The regulation has been modified to provide that, in 
circumstances where tenant landlord tenant laws do not apply, a lease, 
residency agreement or other form of written agreement must be in place 
that provides protections that address eviction processes and appeals 
comparable to those provided under the jurisdiction's landlord tenant 
law. Under circumstances where tenant landlord rules do apply, the 
state will ensure compliance with those rules.
    Comment: One commenter indicated that their state requires a 
contract between the residents and providers and wanted to know if it 
could be used in lieu of a lease.
    Response: It is possible that this arrangement would comply with 
the revised language allowing other forms of

[[Page 2962]]

written agreements to implement protections that are at least minimally 
comparable to the protection provided under the jurisdiction's landlord 
tenant law. A final determination of whether such contracts comply with 
the regulatory requirements will be made through the state plan 
amendment or waiver review process.
    Comment: One commenter indicated that current requirements in their 
State allow for adequate service planning and transition (30-day 
notice) when a provider is unable to meet the needs of an individual, 
and the State suggested that the proposed rule reflect a similar 
requirement.
    Response: We believe it is a good protection to include, however, 
we do not propose to amend the regulation to require a specific 
timeframe. We would like the state to retain flexibility in 
establishing timeframes.
    Comment: Two commenters indicated that in their state, the assisted 
living model separates the assisted living services from housing. The 
commenters noted that providers of assisted living services are 
licensed and the services must be provided in a ``Managed residential 
community'' consisting of individual apartments where residents can 
continue to live and maintain personal autonomy. The commenters added 
that residents are considered tenants and are protected under the 
state's landlord tenant laws and that under this arrangement the 
assisted living services provided within the managed residential 
community are regulated by state licensure laws. The commenters 
requested that the rule recognize laws and state licensure laws and 
regulations that govern the provision of HCBS in their state.
    Response: We believe the regulation allows for this.
    Comment: Many commenters requested further clarification of the 
``specific physical place'' language. In general, the commenters 
support the idea that individuals in congregate settings should have 
agreements for a specific room or unit and should not be arbitrarily 
moved around by providers. However, the commenters note that landlord 
tenant laws vary tremendously by state and their application to 
specific residential arrangements tends to be fact specific and subject 
to complex statutory and judicial interpretation. The commenters also 
note that the federal Fair Housing Act prohibits discrimination in 
almost all housing activities based on disability and requires housing 
providers to make reasonable accommodations to rules and policies when 
such accommodations are needed for the individual to use and enjoy the 
housing. The application of the fair housing laws to residential 
settings that are also subject to state licensure and regulatory 
schemes can be complex, and the law in this area is continuing to 
develop. Additionally the state's ``level of care'' licensure standards 
that require the discharge of residents with certain types or acuity of 
conditions are at odds with civil rights protections designed to allow 
consumers to live and receive services in places they choose. Providers 
are not required to make accommodations where to do so would result in 
an undue financial and administrative burden or would fundamentally 
alter the nature of the provider's operations. However, providers and 
state licensing agencies are required to make reasonable accommodations 
to enable people to remain in the homes that they choose if the 
accommodations meet those tests. The commenters suggest that state plan 
amendments and waiver applications should specify processes by which 
they would make ``reasonable accommodations'' decisions without forcing 
residents to make claims in court or forcing providers to jeopardize 
their licensure by reasonably accommodating residents whose service 
needs have intensified, for example. Reasonable accommodations 
processes should provide plenty of notice and be easily used. A number 
of states have enacted interactive processes to provide appeals and 
individual determinations of the ability to remain, even if their 
continued residency represents a violation of the level of care 
requirements. Finally, a legally enforceable agreement under this 
subsection should include a right to appeal decisions affecting 
tenancy. Agreements should clearly specify the conditions that would 
trigger a termination, including conditions related to the person's 
health status or level of disability that would necessitate a move. The 
individual should have the right to appeal termination decisions to an 
objective third party in a timely manner, such as 30 days, which should 
be defined in the state's waiver application. This appeals process 
should be accompanied by the reasonable accommodation process noted 
above. Other commenter's recommended that if a state's licensing 
standards do not include such protections, then the landlord tenant 
statutes should be the default law. Several commenters recommended the 
following language: ``An individual has, under state licensing law, 
protections from evictions. If these protections are not provided, the 
individual shall have, at a minimum, the same responsibilities and 
protections from eviction that tenants have under the landlord/tenant 
law of the state, country, city or other designated entity.''
    Response: We appreciate the commenter's thoughtful comments 
highlighting the complexities of applying tenant landlord rules to 
settings that normally do not have such an application. The regulation 
has been modified to specify that in circumstances where landlord 
tenant laws do not apply, a lease, residency agreement or other form of 
written agreement must be in place that provides at least comparable 
protections to those provided under the jurisdiction's landlord tenant 
law. At a minimum, these agreements must address eviction processes and 
appeals. Under circumstances where tenant landlord rules do apply, the 
state will ensure compliance with those rules. We are not amending the 
regulation to include specific language referencing state licensing 
laws. Rather we have amended the language to add ``For settings in 
which landlord tenant laws do not apply, the State must ensure that a 
lease, residency agreement or other form of written agreement will be 
in place for each HCBS participant and that the document provides 
protections that address eviction processes and appeals comparable to 
those provided under the jurisdiction's landlord tenant law.''
    Comment: One commenter recommended replacing the proposed language 
``the individual has, at a minimum, the same responsibilities and 
protections from eviction that tenants have under the landlord tenant 
law of the state, county, city or other designated entity'' with the 
following:

    (A)Individual has a lease, residency agreement or other form of 
written agreement that includes the ability to appeal move-out 
decisions to an objective third-party. Reasonable accommodations are 
made both by the provider and the state to accommodate aging in 
place. An appeal of a move-out decision should not prevent the move-
out when there is a significant risk of harm to the resident, other 
residents, or staff. The appeal process will include nonpayment of 
fees unless the state has a demonstrated alternative process for 
addressing payment disputes. All appeals should be pursued 
expeditiously and should not take longer than 30 days.

    Response: We appreciate the commenter's recommendation, however we 
do not believe it is appropriate to include as a requirement. We note 
that the suggested language represents some good practice, and would 
encourage states to include such protections in

[[Page 2963]]

their policy and procedures if they do not already exist.
    Comment: One commenter recommended the following changes to the 
proposed language: ``The unit or room is a specific physical place 
that, if a `family care home', includes a private bedroom, and if not a 
`family care home', includes, at a minimum, its own kitchen facilities, 
sleeping area, and private bathroom with toilet, sink and shower or 
bathtub, that can be owned, rented or occupied . . .''
    Response: We appreciate the commenter's suggestions, however, we 
will not revise the rule to include these types of specifications as 
they would be overly prescriptive.
    Comment: One commenter requested that we revise the regulation to 
specify that the unit can be owned, rented or occupied under another 
legally enforceable agreement by the individual receiving services ``or 
his/her chosen surrogate, who must not be an agent of the service 
provider,'' could be inserted.
    Response: We do not believe the commenter's recommendation to add 
language regarding a surrogate is necessary. The HCBS regulations 
already address this in the definition of individual's representative.
    Comment: Several commenters supported giving individuals who 
receive HCBS in provider-owned or operated residential settings 
protections under landlord tenant law, and suggested adding protections 
afforded by the ADA to this section to ensure that individuals living 
in these settings whose health needs change are afforded appropriate 
accommodations (such as increased staff), in order to continue living 
in the setting.
    Response: While we do not administer or enforce the ADA, we note 
that Medicaid regulations prohibit discrimination in State Medicaid 
programs (Sec.  430.2, Sec.  435.901, Sec.  435.905, and Sec.  
435.908). As these regulations apply in determining eligibility and 
administering the Medicaid program generally, it is not necessary to 
amend this regulation on this subject.
    Comment: A few commenters recommended the word ``unit'' be replaced 
with ``room'' throughout the document.
    Response: We do not agree with the recommendation to remove the 
term unit, but to provide additional clarification, we have revised the 
language to add the term ``dwelling'' since this is the common term 
used under prevailing state and local landlord/tenant laws.
    Comment: Several commenters agreed with the list of requirements 
for provider owned and controlled residential settings. One commenter 
added that preservation of the right to privacy, including having a 
lockable unit and the ability to control access to the unit, and self-
control of the participant's schedule, are also important indicators 
for basic human dignity. Another commenter noted that individuals with 
disabilities should be afforded the same rights as anyone else in the 
country.
    Response: We agree and appreciate the commenter's support.
    Comment: One commenter indicated that ``the freedom to furnish and 
decorate their sleeping or living unit'' could use clarification noting 
that there are many landlords that have restrictions on water beds, or 
permission prior to painting. The commenter added that all rules 
relating to entrance locks, roommates, furniture preferences, daily 
schedules, food, visitors, etc., must include caveats as to feasibility 
and reasonableness.
    Response: These requirements pertain to settings that are owned or 
controlled by a provider. Landlord tenant laws may allow landlords to 
set reasonable limits as long as the limits are not discriminatory or 
otherwise deny rights granted to tenants under the state law. 
Therefore, we have added additional language to this requirement to 
clarify that, in a provider-owned or controlled setting, the 
individual's freedom to furnish and decorate sleeping or living units 
may contain limits within the scope of the lease or agreement.
    Comment: One commenter expressed support of the criteria when an 
individual lives alone, but wanted to know in situations where an 
individual chooses to live with a roommate who is responsible for 
collaborating schedules and ensuring that one person's right to have 
visitors does not infringe on the privacy of the other.
    Response: While this is not specifically addressed through 
regulation, we note that there are many ways to address this concern, 
including through good roommate communication.
    Comment: Several commenters recommended that ``their'' be changed 
to ``the,'' since ``individual'' is singular but ``their'' is plural.
    Response: We agree with the commenter and have revised the 
regulation accordingly.
    Comment: One commenter noted that individuals requiring care and 
services will have their privacy limited in some fashion while those 
care and services are being provided and suggested the following 
revision to Sec.  441.530 and Sec.  441.656(a)(1)(vi)(B): Each 
individual has privacy in their sleeping or living unit, to the extent 
care and services are provided in accordance with the individual's 
assessed needs.
    Response: We do not believe the recommended revision is necessary 
as there is a general requirement that services are provided in 
accordance with an individual's assessed needs. This requirement is 
expressed at Sec.  441.530(a)(1) and Sec.  441.710(a)(1) and also under 
person-centered planning provision of the regulations for sections 
1915(c), 1915(i) and 1915(k) of the Act.
    Comment: A few commenters disagreed with the proposed language 
requiring that units have lockable doors. The commenters believe that 
this requirement poses a safety risk in the event of an emergency and 
added that clarification is also needed on a unit owned by the resident 
who may not want to provide the appropriate staff with keys to his/her 
door. The commenters pointed out that in some apartment buildings the 
entrance door is the unit's door and asked if the resident owns the 
unit whether he/she will be required to provide appropriate staff with 
keys.
    Response: We disagree that the recommended change is necessary. 
However, the requirement for a lockable entrance door may be modified 
if supported by a specific assessed need and justified and agreed to in 
the person-centered service plan. Additionally, the state must ensure 
adherence to requirements set forth at Sec.  441.530(a)(1)(vi)(F) and 
Sec.  441.710(a)(1)(vi)(F).
    We would like to clarify that this regulation does not require 
individuals to provide keys to anyone. The language is meant to curtail 
the issuing of resident keys to all employees or staff regardless of 
the employee's responsibilities, thus granting employees unlimited 
access to an individual's room. This provision indicates that only 
appropriate individuals should have access to an individual's room. For 
example, it may be appropriate for the property manager to have keys, 
but it might not be appropriate for the individual working at a 
reception area.
    Comment: One commenter recommended the additional phrase ``if 
necessary'' be added after ``appropriate staff,'' as there may be 
occasions when the particular setting will not have staff members 
holding keys to living units. Several commenters recommend adding the 
phrase ``as appropriate'' at the end of the provision since there may 
be times when a setting will not have staff members with keys to living 
units.
    Response: We agree with the second commenter's concern and have

[[Page 2964]]

modified the regulatory language accordingly to indicate ``as needed.''
    Comment: Other commenters advised that they support lockable 
entrance doors with appropriate staff having keys to doors, since there 
are also provisions under the individual modification of requirements 
discussed below that can be used for individuals with cognitive 
impairments for whom lockable doors and free egress may present safety 
and other issues. In such cases, alternative means for assuring 
meaningful individual privacy should be required (for example, knocking 
and waiting for a reply before entering a person's private space, 
respecting private possessions, etc.).
    Response: We appreciate the commenter's support.
    Comment: Two commenters expressed concern that the regulation does 
not specify a process to determine which staff will have keys, or that 
the individuals themselves must have keys. One of the commenters is 
aware of instances where people have been denied key access to their 
own homes without appropriate justification. The commenter recommended 
that CMS add language to require that (1) the staff that will have keys 
are included/identified in the person-centered service plan and chosen 
by the individual and (2) the individual must also have a key to the 
door. The commenter recommended the following language: ``Staff holding 
keys will be named in the person-centered service plan and individuals 
must have keys to their own units'' to Sec.  441.530(1)(vi)(B)(1), 
Sec.  441.656(1)(vi)(B)(1), and Sec.  441.665(b)(3) for clarity across 
the regulations.
    Response: We do not agree that the regulation should require that 
the person who has keys should be identified in the person centered 
plan, but we do agree that the individuals should have a say and agree 
with who that person is. We agree with the recommendation that 
individuals have keys to their door, and have clarified the language in 
the appropriate sections of the regulation so that this is unambiguous. 
As noted above, an individual's use of the room key may be modified if 
supported by a specific assessed need and justified and agreed to in 
the person-centered service plan.
    Comment: One of the commenters requested that CMS clarify whether 
the proposed rule requires the homes to be locked or the bedroom doors 
to be locked.
    Response: We would like to clarify that the individual must be able 
to lock the door to their unit or dwelling, that the individual has a 
key to the door, and that only appropriate staff have keys.
    Comment: Several commenters offered support of the requirement that 
individuals share units only at the individual's choice. One commenter 
does not believe that sharing units is faithful to the principles of 
HCBS. We also received comments opposing the requirement or requesting 
further clarification of the intent of the requirement. Several 
commenters believe this provision is inappropriate and recommended that 
the private room/living space requirement be deleted completely. 
Commenters noted that Medicaid does not cover room and board costs so 
they believe that the term ``choice'' could be misleading, as the 
determining factor for choosing double occupancy versus a single-
occupancy unit may be whether a resident can afford to. Many 
individuals are not financially able to afford a private room in 
settings such as assisted living facilities. One commenter expressed 
concern that, as proposed, allowing individuals to choose to share 
units without also requiring states to provide (financially needy) 
individuals with adequate funding, such as increasing the maintenance 
needs allowance, will force those individuals into nursing facility 
settings. One commenter added that ``individual choice'' should be 
reflective of an individual's resources and care needs. Another 
commenter believes that since beneficiaries typically pay for room and 
board out of their SSI benefit the proposed language would effectively 
exclude assisted living as an option for Medicaid individuals in many 
states since providers cannot afford to offer private rooms at the rate 
Medicaid beneficiaries pay. A few commenters added that sharing living 
units may be necessary to ensure a range of housing options the HCBS 
waiver program and at the same time manage resources to meet the cost-
neutrality standard under the section 1915(c) of the Act waiver 
program. A few commenters interpreted the regulation to require 
separate bedrooms for all individuals receiving residential services 
unless the individual requests otherwise and stated that this 
requirement will result in a huge unfunded mandate that will double the 
cost of residential group home care. Commenters suggested the following 
regulatory changes related to this provision:
     Revise the rule to say ``Individuals in shared rooms will 
have a choice of roommate.''
     Revise the rule to say ``Individual roommate preferences 
are accommodated to the maximum extent practical and documented in the 
individual's person-centered service plan.''
     Revise the rule to add a requirement that individuals 
should not have to share a unit unless it is with a spouse, partner, or 
other family member.
     One commenter recommended that sharing a bedroom is 
clearly documented as the choice of the individual and that the room is 
shared only with a person of the individual's choosing.
     One commenter suggested that the rule needs to make it 
clear that a resident's choice acknowledges his economic situation.
     Other commenters noted that if the requirement is 
finalized, CMS needs to add an exception to the requirement for 
residential settings that do not meet the private room/living space 
requirement but are appropriate to meet the waiver client's needs and 
preferences according to the individual, the client's designated 
representative and the case manager.
     Revise the rule to say '' Individuals with disabilities 
receiving HCBS share units with other individuals with disabilities 
receiving HCBS, whether the unit is a single bedroom or a multi-room 
living space, only at the choice of the individual with disabilities 
receiving HCBS, at all times and under all circumstances. Individuals 
with disabilities receiving HCBS may share such units with a person who 
is present to provide services to the individual if necessary for 
safety reasons, if appropriately justified and documented.''
    Response: We understand the concerns raised by the commenters. We 
have clarified that we are not requiring that every individual 
receiving HCBS have their own bedroom when receiving residential 
services. The rule is requiring that individuals be provided options of 
residential settings, including an option of a private room. This rule 
does not require every provider to have a private room option. Instead 
it requires the State to ensure that there are private room options 
available within a state's HCBS program. We agree with the commenters 
that the financial resources available to an individual may impact the 
options available to a particular individual and we have changed the 
regulatory text to make that clear. We also agree with the commenters 
that if an individual chooses to share a room, that individual also 
must have a choice of their roommate. We have changed the regulatory 
text to clarify this. We plan to address these issues further through 
future guidance.

[[Page 2965]]

    Comment: One commenter indicated that in their assisted living 
facility, all residents have a private room but share a \1/2\ bath with 
the private room next door and believes that under the proposed 
regulation a resident in this kind of situation would never find the 
appropriate bath mate because the rule would require that they have 
their own \1/2\ bath and the commenter believes this was not CMS' 
intent.
    Response: We believe that the arrangement described by the 
commenter, that one bathroom is shared between two private rooms, will 
meet the requirement at Sec.  441.530(a)(1)(vi)(B)(2) and Sec.  
441.710(a)(1)(vi)(B)(2) that individuals share units only at the 
individual's choice.
    Comment: One commenter recommended that CMS form a work group of 
stakeholders to determine a method for ensuring that Medicaid waiver 
applications and renewals demonstrate how the state assisted living 
program ensures adequate reimbursement for private room occupancy (that 
is, the state assisted living program does not restrict room and board 
payments to less than the cost of providing a private room and provides 
housing assistance as required).
    Response: States are required to provide opportunities for public 
input in the development of Medicaid service rate methodologies. During 
the SPA review process, we ensure that the state has met this 
requirement and that the state's proposed reimbursement methodologies 
comport with requirements at section 1902(a) of the Act. These include 
safeguards against unnecessary utilization of services, assurance that 
payments are consistent with efficiency, economy, and quality of care, 
and that payments are sufficient to enlist enough providers so that 
care and services are available under the plan at least to the extent 
that such services are available to the general population in the 
geographic area.
    Comment: One commenter suggested that the requirement that 
individuals have privacy in their sleeping or living unit should not be 
waived by the provider/state.
    Response: We agree that an individual's privacy should always be 
respected. Where any modification of this condition occurs, we have 
included protections in the rule to ensure the individual's rights are 
respected.
    Comment: Several commenters strongly urged CMS to require that a 
bathroom be in the unit for all settings with a capacity of six or more 
residents as the commenters believe that having one's own bathroom is a 
fundamental characteristic of living in one's own home. The commenters 
noted that CMS proposed a similar requirement last year, and believes 
that such a requirement is no less important today and added that it 
would be difficult to consider a setting ``community-based'' if, for 
example, a building housed 10 or 20 residents who shared a bathroom or 
bathrooms located off a main hallway, and a resident at 2 a.m. had to 
walk down the facility hallway in order to use the bathroom. The 
commenters recommended the following provision be added to the 
requirements at (B): Units include at least one full bathroom (unless 
the setting is in a building with a capacity of six or fewer 
residents).
    Response: We understand the commenters' concern; however, the 
standard for how many bathrooms a dwelling must have is governed by 
building code, and is beyond the scope of this regulation.
    Comment: One commenter expressed the opinion that the bathroom is 
the most private part of their home, and inability to control functions 
performed in that room is a major source of feelings of loss of dignity 
and personal autonomy among people with disabilities. As such, the 
commenter believes that privacy in the bathroom should be maximized and 
assistance should be provided only when actually needed, limited to 
specific tasks and carried out one-on-one with the bathroom door 
closed.
    Response: We agree with the commenter and believe that an 
individual's privacy should be respected in all activities of an 
individual's life.
    Comment: Several commenters expressed strong support and 
appreciation for the inclusion of this provision and two noted that the 
inability to decorate or furnish a living unit would be a clear 
indicator of an institutional model.
    Response: We appreciate the commenters' support.
    Comment: A few commenters supported the proposed rule as written.
    Response: We appreciate the commenter's support.
    Comment: One commenter supports the regulation, but believes the 
rule should go further and require living units to have access to food 
storage and preparation space (with the caveat that stoves or 
microwaves could be removed if the assessment documented that it would 
be a danger because of the resident's cognitive impairment).
    Response: We agree with the commenter and believe that this is 
reflected in this regulatory language.
    Comment: Several commenters generally supported the proposal that 
individuals have the freedom and support to control their schedules and 
activities, but recommended that the word ``control'' be changed to 
``choose'' noting that choice is a foundational element of HCBS and 
merely allowing individuals to control schedules and activities is 
inadequate. According to commenters, supporting an individual and 
providing the support necessary to participate in activities (for 
example, the transportation to attend a selected activity) allows for 
full community living.
    Response: We believe that it is fundamental for individuals to have 
the control to make their own choices. Therefore, we do not believe it 
is necessary to change the word control.
    Comment: While commenters agreed with the principle that a resident 
should be able to eat, socialize and come and go freely, several 
commenters expressed concern with the proposed language and suggested 
that (a)(1)(vi)(C) should not focus on ``access'' but rather on the 
individual's choice to select the foods they eat, to store food in 
their rooms, to bring back food from the facility's kitchen and to 
reschedule meal times. The commenters pointed out that because HCBS 
facilities most likely schedule meals at specific times, as required by 
regulation, a resident may not have access to all food in the building 
all the time, and a residential setting cannot reasonably accommodate 
each individual's preference on a 24-hour a day basis. One commenter 
requested clarification as to whether or not the proposed ``access'' 
requirement would result in a housing arrangement that includes a daily 
activity (such as meals) at pre-arranged time not being considered a 
home and community-based setting. A few commenters requested that the 
final regulation be stronger in its intent to ensure meaningful choice 
and provide for activities that will support integration with the 
community. The commenters noted that as written the language could be 
easily interpreted to maintain institution-like settings instead of 
true community living. The commenters are concerned about situations in 
which individual choice is not meaningful, for example, an individual 
being given access to food by having the choice of a snack bar or a 
pitcher of water and crackers.
    Response: We disagree with the commenters' belief that a 
residential setting cannot reasonably accommodate an individual's 
preference on a 24-hour a day basis. The opportunity for individuals to 
select the foods they eat,

[[Page 2966]]

store food in their room, eat in their room, and decide when to eat are 
all ways in which the access to food requirement can be met. Under this 
provision, giving an individual the choice of a snack bar or a pitcher 
of water and crackers does not meet the access to food requirement. An 
individual should not be presented with narrow options, decided by 
someone else, without input from the individual.
    Comment: One commenter believes the term ``food'' can be 
interpreted broadly and could lead participants to believe that there 
must be 24/7 access to full service dining. The commenter recommended 
that in order to eliminate the range in interpretation, CMS replace the 
word ``food'' with ``snacks.''
    Response: We disagree with the recommended change. We expect that 
the individual will have access to food. This requirement does not 
pertain to full dining services or to meal preparation, only access to 
food.
    Comment: One commenter cautioned that the freedom and support of 
access to food at any time needs to be carefully monitored and offered 
the example that unrestricted access to food may be unrealistic for 
individuals with eating disorders or brain injury.
    Response: Modification to this requirement may occur as long as it 
is done in compliance with Sec.  441.530(a)(1)(vi)(F) and Sec.  441.710 
(a)(1)(vi)(F).
    Comment: One commenter noted that freedom to control schedules and 
activities with support to do so is a different issue from ``access to 
food at any time'' and requested if CMS intended the support to be 
available for food related activities as well?
    Response: It is unclear what the commenter means by ``food related 
activities.''
    Comment: One commenter believes that the requirement that 
individuals have ``freedom to control schedules and activities with 
support to do so'' should not be permitted to be changed by the 
provider/state. The commenter explains that this is a particularly 
important point because many residential facilities have policies and 
procedures that say that residents have freedom to choose and 
participate in preferred activities, but as a matter of actual fact, 
the facilities do not provide the necessary support to make such 
freedom a reality. The commenter suggests that this subsection may be 
an appropriate place to state that ``a person's ability to receive any 
service from any provider described in his/her person-centered plan 
will not be infringed upon by any provider for any reason.''
    Response: We agree that a person's ability to receive services 
identified in the person-centered service plan should not be infringed 
upon by any provider for any reason. We believe that preventing an 
individual from receiving any service identified in the person-centered 
service plan is a direct violation of the person-centered plan 
requirements and the home and community based setting requirements 
specified in this regulation. Additionally, any setting not adhering to 
the regulatory requirements will not be considered home and community-
based. The supports necessary to achieve an individual's goals must be 
reflected in the person-centered service plan as required under Sec.  
441.725(b)(5).
    Comment: One commenter suggested that, to modify the condition 
pertaining to individuals having visitors of their choosing at any 
time, provider documentation should be required for a safety need to 
restrict access to a person's desired visitors, the names of specific 
visitors whose access will be controlled, how access will be 
controlled, along with a description of the specific independently-
verifiable threats of real harm that uncontrolled access by those 
visitors represent to the person. The commenter suggested that the plan 
should allow visits even by people on this controlled-access list if 
they can be conducted safely by providing a monitor or other means.
    Response: We appreciate the commenter's general support. The 
regulation has been modified at Sec.  441.530(a)(1)(vi)(F) and Sec.  
441.710(a)(1)(vi)(F) to specify the requirements that must be met to 
modify the condition pertaining to individuals having visitors of their 
choosing at any time.
    Comment: One commenter expressed concerns that some assisted living 
settings may have policies about visitation and that as a result they 
would be automatically eliminated from being considered community-based 
settings.
    Response: Settings that do not comply with the requirements of this 
regulation will not be considered home and community-based settings.
    Comment: Several commenters supported individuals' rights to have 
visitors of their choosing at any time; however, the commenters noted 
that in a provider-based setting this right should be viewed in the 
context of shared living arrangements. Several commenters noted that 
the safety of other residents and their ability for quiet enjoyment of 
their living setting must be considered and suggested that the rule be 
revised to add language that allows for reasonable rules for safety and 
the quiet enjoyment of the provider setting.
    Response: We acknowledge that in certain living situations the 
preferences of others must also be respected. We expect that there will 
need to be communication and coordination between all parties affected.
    Comment: A few commenters voiced concern that allowing some 
individuals to have any visitors of their choosing at any time in some 
cases could be a safety issue. Another commenter added that it is not 
reasonable that residents be allowed to have visitors to the extent 
that they can ``visit'' for extended and/or indefinite periods of time, 
noting under the proposed language, these visitors could actually live 
in the HCB setting.
    Response: It would be reasonable for there to be limitations on the 
amount of time a visitor can stay as to avoid occupancy issues. Such 
limitations should be clearly stated in a lease, residency agreement, 
or other form of written agreement.
    Comment: Several commenters supported the proposed language in 
general but one recommended that CMS add ``including overnight'' to 
allow for individuals to have visitors of their choosing at any time as 
this is a right that others have.
    Response: We believe the language adequately addresses this issue, 
and allows for flexibility as appropriate.
    Comment: Several commenters recommended that the proposed 
requirement on visitors have additional language and protections, which 
would allow for reasonable limitations on how and where visits are 
conducted for safety and the quiet enjoyment of the provider setting 
for all residents. One commenter suggested that the provision be 
changed to read: ``individuals are able to have visitors of their 
choosing at any time that is reasonably and mutually agreeable with 
other members of the household and consistent with their support 
needs.'' Two commenters recommended adding the phrase ``provided such 
visitors are not disruptive to individuals in the residential setting'' 
to the end of the proposed language. One commenter recommended the rule 
be revised to say ``if the building rules are established and approved 
by the residents, they are allowable and residents can receive HCBS.'' 
Another commenter believes CMS should add a provision that the provider 
can deny access of visitors if there is a reasonable belief that the 
visitor presents a danger.
    Response: We believe the regulatory language adequately addresses 
the visitation requirement. We will take the

[[Page 2967]]

commenters' suggestions under consideration as we develop further 
guidance.
    Comment: Several commenters strongly supported this provision as 
proposed and stressed that it is an essential provision. These 
commenters expressed concern that under current standards, some 
assisted living settings are not physically accessible and have 
nonetheless received HCBS waiver funding for setting services. One 
commenter supported this requirement and added that the modifications 
and justifications for physical accessibility are included in the 
service plan.
    Response: We appreciate the commenters' support.
    Comment: One commenter believes that the proposed language is too 
vague and noted that additional guidance is essential, especially given 
the limited availability of resources to upgrade existing facilities 
and the varying degrees of accessibility needed depending on the nature 
of any particular disability. Some commenters noted that settings must 
be physically accessible under the ADA and Section 504 of the 
Rehabilitation Act without reference to any specific characteristics of 
the individual and therefore, indicated that this provision isn't 
necessary. A commenter indicated that there are no possible legitimate 
safety reasons for not providing a physically accessible residential or 
program setting to any person with a disability, and that failure to do 
so may be a safety hazard. These commenters advised that this condition 
must not be modifiable for any reason.
    Response: We agree and revised the regulations so that they do not 
include Sec.  441.530(a)(1)(vi)(E) and Sec.  441.710(a)(1)(vi)(E) as an 
additional condition that can be modified.
    Comment: Two commenters indicated that to ensure the exclusion of 
segregated settings and promotion of integrated settings, CMS should 
revise this provision to specify that a provider-owned or controlled 
residential setting should not only be ``physically accessible,'' in 
terms of architecture for persons with mobility disabilities, but 
should also be accessible for persons with sensory disabilities. This 
includes ensuring effective communication through the provision of 
auxiliary aids and services, such as but not limited to sign language 
interpreters, alternative formats, and adapted equipment and devices, 
such as smoke alarms and telephones.
    Response: We do not agree with commenter's suggestion to revise the 
regulatory language. Items and services that are needed by individuals 
to live in their homes and communities would need to be identified 
through the person-centered planning process and some of those items 
and services may be covered through a Medicaid service, such as 1915(i) 
HCBS, State plan home health or under a 1915(c) HCBS waiver.
    Comment: One commenter supports the list of excluded settings.
    Response: We appreciate the commenter's support. The excluded 
settings included in the regulation are consistent with the settings 
excluded in statute.
    Comment: Many commenters noticed the difference between Sec.  
441.530(a)(2)(iv) and Sec.  441.656(a)(2)(iv). The commenters wanted to 
know if the difference exists because the 1915(i) statute refers to 
``hospital'' as institutionalized care, whereas 1915(k) does not. To 
the extent possible, the commenter encouraged CMS to be consistent 
across authorities if it intends to clarify this difference.
    Response: Whereas section 1915(k)(1)(A)(ii) of the Act expressly 
prohibits a nursing facility, institution for mental diseases, or an 
intermediate care facility for the mentally retarded from being 
considered home and community based settings, the statute did not 
include a hospital among the list of excluded settings. In an effort to 
be consistent with other authorities providing HCBS, we proposed to 
exclude hospitals providing long-term care services from the definition 
of a home and community setting for the provision of the Community 
First Choice Option. We believe that it would be duplicative to provide 
CFC services, such as assistance with activities of daily living, in 
such settings. Additionally, we believe this exclusion aligns with 
section 1915(k)(1)(A)(ii) of the Act requiring that services are 
provided in a home and community-based setting and section 
1915(k)(3)(B) of the Act requiring that services are provided in the 
most integrated setting appropriate to the individual's needs. However, 
we understand that individuals will likely have a continued need for 
certain types of assistance while experiencing a short-term stay in a 
general acute hospital setting. Under such circumstances, most services 
provided in a general acute care hospital are not CFC services, but 
individuals who have an assessed need for assistance with IADLs may 
continue to receive such services while an inpatient in such a setting.
    Comment: Many commenters requested this section be revised to 
exclude ``a hospital'' without the proposed qualification that it must 
provide long-term care services. One commenter also agreed with the 
recommended revision and expressed concern about duplication of 
services. The commenter believes that allowing an individual to receive 
IADL services during a short-term stay in a general acute hospital 
would be hard to administer without increased costs to the state. The 
commenters want the language to be consistent with Sec.  
441.656(a)(2)(iv), which excludes any section 1915(i) of the Act 
service from being provided in a hospital.
    Response: As with payment for any Medicaid service, we expect 
states to have processes in place to safeguard against unnecessary 
utilization of such care and services and prevent the duplication of 
the payments of Medicaid services. We understand that individuals may 
have a continued need for assistance with certain IADLs while 
experiencing a short-term stay in general acute hospital settings. 
Therefore, while services provided in a general acute care hospital are 
not CFC services, individuals who have an assessed need for assistance 
with IADLs may continue to receive such services, as long as those 
services do not duplicate services provided by the hospital setting 
while an inpatient in an acute hospital setting.
    Comment: A few commenters agreed with the regulatory language 
stating that individuals in an acute care hospital who need assistance 
with IADLs, should not be prevented from receiving such services while 
they are in an acute hospital setting. The commenters further stated 
that the ability to receive these services, as needed, while in the 
hospital could enable a smoother transition after hospital discharge 
back to a home or community setting and help prevent 
institutionalization.
    Response: We appreciate the commenters' support, and will include 
this provision into the final regulation.
    Comment: Several commenters requested the regulation be revised to 
add ``Board and Care homes'' for people with disabilities to the list 
of excluded settings, because of the institutional manner in which they 
operate.
    Response: We do not believe it is necessary to identify specific 
settings, beyond what is specified in statute. States define settings 
differently, and the way board and care operates in one state, may be 
very different from the way board and care settings operate in another 
state. Recognizing the lack of national standard-setting definitions, 
we believe defining the qualities that all settings must exhibit to be 
considered home and community-based is the best way to apply a national 
standard. We believe the most effective and consistent

[[Page 2968]]

way to assure that individuals receiving Medicaid HCBS, regardless of 
age or type of disability, are offered HCBS in the most integrated 
setting appropriate to their needs and preferences, is to focus on the 
qualities of ``home'' and ``community'' that assure independence and 
integration from the perspective of the individuals. We will provide 
additional guidance to states to identify any other setting that has 
the effect of isolating individuals receiving Medicaid HCBS from the 
broader community of individuals not receiving Medicaid HCBS.
    Comment: In response to the request in the preamble for comments on 
whether there are settings in addition to those currently enumerated 
that are, by their nature, location, or administration inherently non-
community based, several commenters suggested Sec.  441.530(a)(2)(v) 
and Sec.  441.710(a)(2)(v) be revised to say ``Any other locations that 
have qualities of an institutional setting, as determined by the 
Secretary. The Secretary will apply a rebuttable presumption that a 
setting is not a home and community-based setting, and engage in 
heightened scrutiny, for any setting that is isolated from the larger 
community, does not allow individuals to choose whether or with whom 
they share a room, limits individual's freedom of choice on daily 
living experiences such as meals, visitors, and activities or limits an 
individual's opportunity to pursue community activities.'' The 
commenters also stated that if CMS does not make the recommended 
revision, then the regulations in Sec.  441.530(a)(2)(v) and Sec.  
441.710(a)(2)(v) should specify that such characteristics give rise to 
a rebuttable presumption that the setting is not home and community 
based.
    Response: We appreciate the commenters' suggestions, however we 
believe they are already addressed in Sec.  441.530(a)(1) and Sec.  
441.710(a)(1). Therefore we will not revise Sec.  441.530(a)(2)(v) and 
Sec.  441.710(a)(2)(v) to include the commenters' suggestions as we 
believe it would be duplicative.
    Comment: One commenter indicated that it is difficult to imagine 
how settings located on or adjacent to the grounds of an institution 
could be considered home and community based. Another commenter further 
added that the regulation should be revised to add that the settings 
listed in Sec.  441.530(a)(2)(v) to the list of excluded settings.
    Response: In response to the many comments we received, we will not 
amend the regulation to explicitly prohibit settings listed in section 
Sec.  441.530(a)(2)(v) from the definition of home and community-based. 
However, such settings are presumed to be institutional. States wishing 
to identify such settings as home and community-based may, during the 
SPA and waiver submission and review process, provide evidence as to 
how such settings are not institutional in nature. We will determine if 
the setting is not an institution and meets the HCB setting 
requirements.
    Comment: One commenter requests CMS reconsider its position with 
regard to the provision of HCBS on ICFs/MR campuses and planned 
residential communities for people with developmental disabilities.
    Response: ICF/IIDs (formally known as ICF/MRs) are statutorily 
prohibited from being considered home and community-based under the 
authorities of sections 1915(c), (k) and (i) of the Act and services 
provided on the campuses of these facilities are presumed to not have 
the qualities of HCBS under this rule and subject to the heightened 
scrutiny provision of this rule.
    Comment: A few commenters requested the rule clarify that the 
exclusion is intended for residential supports and not supported 
employment or other vocational activity that may find an individual 
choosing competitive employment in a setting that may be located in a 
building on the grounds of, or immediately adjacent to a public 
institution or disability-specific housing complex.
    Conversely, another commenter expressed concern that people with 
disabilities are being served in segregated work and day settings that 
do not meet the ``most integrated setting'' definition and do not 
comply with guidance related to the ADA and the Olmstead decision 
issued by the US Department of Justice (DOJ). Additionally, the 
commenter indicated that DOJ has made it clear that the ADA's 
integration mandate includes day and employment services, and that 
unwarranted placement in segregated day programs is a violation of this 
mandate. Thus, this commenter recommends that CMS consider excluding 
segregated, congregate facilities and programs from the definition of 
HCBS. The commenter also recommends specifying the following settings 
are excluded (per DOJ guidance): (1) Congregate day and employment 
services populated exclusively or primarily with individuals with 
disabilities, (2) Congregate day and employment services settings 
characterized by regimentation in daily activities, lack of privacy or 
autonomy, policies limiting visitors, or limits on individuals' ability 
to engage freely in community activities and to manage their own 
activities of daily living; or (3) Day and employment services settings 
that provide for daytime activities primarily with other individuals 
with disabilities. The commenter recognizes that if these 
recommendations are adopted, a transition period is necessary to ensure 
sufficient time for services to meet these new requirements.
    Response: CMS does not have the general authority to enforce the 
ADA independently of its oversight of the Medicaid program. To the 
extent that the services described are provided under 1915(i) or 
1915(k) (for example, residential, day, or other), they must be 
delivered in settings that meet the HCB setting requirements as set 
forth in this rule. We will provide further guidance regarding applying 
the regulations to non-residential HCBS settings. In addition, since 
this authority provides states the opportunity to provide individuals 
HCBS and not institutional services, individuals receiving 1915(i) 
State plan HCBS or 1915(k) CFC services must be living in settings that 
comport with the HCB setting requirements as set forth in this rule 
regardless of whether they are receiving HCBS in that residence. This 
is consistent with CMS' longstanding policy regarding 1915(c) HCBS.
    Comment: One commenter recommends establishing a maximum limit to 
the number of individuals living in a provider-owned or controlled 
residential setting.
    Response: We do not believe there is a maximum number beneath which 
we could determine with certainty that the setting would meet the 
requirements of HCB settings. The focus should be on the experience of 
the individual in the setting. In addition, we respect a state's right 
to establish state laws to implement such a requirement regarding size. 
We intend to provide additional guidance to states to identify any 
other setting that has the effect of isolating individuals receiving 
Medicaid HCBS from the broader community of individuals not receiving 
Medicaid HCBS. We plan to include in the guidance examples of specific 
settings that will require heightened scrutiny and may identify 
additional qualities, including the size of the facility, triggering 
such scrutiny. Our experience through our work with other federal 
Departments and current research indicates that size can play an 
important role in whether a setting has institutional qualities and may 
not be home and community-based.
    Comment: One commenter added that an approach focused on 
characteristics,

[[Page 2969]]

rather than locations, provides a useful framework to define home and 
community-based settings, while allowing consumers of long-term 
services and supports choices regarding the services and supports they 
receive and from whom they receive them, rather than limiting the 
person's choices arbitrarily. However, several other commenters 
expressed opposition to this language and requested that it be removed 
completely. These commenters stated that, if a provider-based setting 
can meet all of the criteria in paragraph (1), it should not matter 
where the provider is located, and applying a rebuttable presumption is 
redundant. They also stated that the focus should be on the autonomy of 
the individuals receiving services. One from this group of commenters 
stated that the ``rebuttable presumption'' could create a standard that 
is difficult to meet and imposes obstacles that are unnecessary and 
unreasonable. This commenter also stated that each setting regardless 
of physical location should be evaluated in accordance with the same 
quality review criteria and that the rebuttable presumption is not good 
public policy and has the potential to be prejudicial. Another 
commenter stated that the focus should not be on the setting, but 
rather on an individual's choices and the person-centered service plan, 
and does not believe arbitrary geographic or location-specific criteria 
are appropriate. One expressed that this requirement will hinder 
current initiatives to rebalance state's long term care systems. 
Another expressed concern with the effect this language would have on 
settings financed by the Department of Housing and Urban Development 
(HUD) with millions of dollars to develop group homes, apartment 
complexes and other housing for individuals with developmental 
disabilities. Another stated that some individuals make the choice to 
live in disability-specific housing with proximity to friends that rent 
from the same provider, or that they choose housing in a convenient 
location with access to services such as transportation.
    Response: We appreciate the comments provided about the challenges 
of the term rebuttable presumption. The proposed language provided a 
list of settings that, from our experience in approving and monitoring 
HCB programs, typically exhibit qualities of an institutional setting. 
However, we recognize that state innovations, creative and proactive 
efforts to promote community integration, and market changes could 
result in the settings being located in a building that also provides 
inpatient institutional treatment, or in a building on the grounds of, 
or immediately adjacent to a public institution, that in some instances 
could be considered home and community-based. In response to public 
comments, we have revised the regulatory language to say ``Any setting 
that is located in a building that is also a publicly or privately 
operated facility that provides inpatient institutional treatment, or 
in a building on the grounds of, or immediately adjacent to, a public 
institution, or any other setting that has the effect of isolating 
individuals receiving Medicaid HCBS from the broader community of 
individuals not receiving Medicaid HCBS will be presumed to be a 
setting that has the qualities of an institution unless the Secretary 
determines through heightened scrutiny, based on information presented 
by the state or other parties, that the setting does not have the 
qualities of an institution and that the setting does have the 
qualities of home and community-based settings.'' We believe the 
revised language more clearly reflects the intent of this provision.
    Comment: One commenter expressed concern with the ultimate 
discretion granted the Secretary through this regulation; the commenter 
categorizes it as ``authority with strings attached.'' The presumption, 
coupled with the requirement of heightened scrutiny for certain 
proposals, makes it very difficult for the Secretary to find in favor 
of innovative partnerships that provide immediate and consistent access 
to necessary health care, peer relationships, and legitimate 
``integration,'' including HCBS homes located on ICF/MR campuses and 
planned residential communities.
    Response: We do not agree with the commenter. We believe the 
requirements set forth in this regulation will support innovative 
partnerships that support community integration and provide individuals 
with maximum control.
    Comment: One commenter recommended the rule apply a presumption of 
``community-based'' if an individual has lived in an assisted living 
facility for at least 12 months and is the only available alternative 
to the institutional settings.
    Response: We do not believe that the amount of time spent in a 
setting should be used to classify the setting as home and community-
based.
    Comment: Several commenters stated that while the concept of a 
rebuttable presumption may be attractive in the abstract, the 
commenters doubt that it can be operationalized effectively. The 
commenters expressed concern that this will be done as an 
individualized determination falling under ``we-know-it-when-when-we-
see-it.'' The commenters stated that providers need clear guidance 
ahead of time, before the individual moves in and/or before the 
provider develops property. A couple of commenters expressed concern 
about the lack of guidance regarding rebuttable presumption and what 
would constitute adequate rebuttal of the presumption. One stated that 
the proposed rule already creates a set of requirements specific to 
provider-owned and controlled residential settings receiving HCBS 
funding, which effectively create heightened scrutiny for such 
settings. The commenter also questioned what procedural safeguards will 
be in place to allow appeals of decisions, who will make the final 
determinations, what are the additional administrative burdens placed 
on states and providers to add this additional layer of heightened 
scrutiny, and if a setting meets an individual's needs and preferences 
and meets the other criteria for home and community-based settings, who 
should bear the burden of proof to demonstrate that a setting is not 
home and community-based. Some commenters believe that the settings to 
which the rebuttable presumption will apply should be explicitly 
excluded rather than subjected to ``heightened scrutiny.''
    Response: The regulation has been revised to make it clear that 
states wishing to present evidence that such settings are home and 
community-based may do so. Under such circumstances, we will engage in 
heightened scrutiny in the course of the review of a SPA and/or the 
state's transition plan of supporting documentation of this evidence to 
make a determination that the settings do comply with the requirements 
set forth in Sec.  441.530 and Sec.  441.710. This review will also 
include assessment of how the settings allow for full integration into 
the broader community. In addition to information provided from the 
state, we also will accept information from stakeholders and other 
third parties regarding whether such settings have the qualities of 
being home and community-based and do not have the qualities of an 
institution. We stress, however, that lacking strong evidence to the 
contrary, we will presume the settings are not HCB.
    Comment: One commenter indicated disagreement with the application 
of a rebuttable presumption. Specifically, the commenter does not agree 
with

[[Page 2970]]

housing arrangements that encourage spouses and family members to tie 
their own housing to the institutional housing of the family member who 
requires the most care, rather than encouraging the development of 
innovative solutions for how individuals with various chronic and high 
care needs may be housed in the most integrated settings. The commenter 
also indicated that while it is tempting to cleanly differentiate 
between the needs and wishes of senior constituents and the disability 
community regarding this regulation, it does not take into account the 
increasing numbers of people with disabilities who are aging, who must 
be assured that they will not have any weaker protections around 
gaining access to services and supports in a truly integrated community 
setting.
    Response: We appreciate the commenter's opinion. We believe our HCB 
setting requirements are beneficial to everyone regardless of age, 
condition or level of disability.
    Comment: Several commenters suggest that rather than creating a 
rebuttable presumption, CMS should state that the settings listed in 
Sec.  441.530(a)(2)(v) and Sec.  441.710(a)(2)(v) are not home and 
community-based even if these settings meet the requirements in 
paragraph Sec.  441.530(a)(1) and Sec.  441.710(a)(1). The commenters 
urged that one of the most important qualities of a home and community-
based setting is its location; a setting that is literally on the 
grounds of, in, or synonymous with an institution cannot be home and 
community-based.
    Response: We appreciate the commenter's perspective. Such settings 
are presumed to be institutional and not home and community-based. 
However, we recognize that it could be possible for some of these 
settings to operate in a manner that is consistent with the HCB 
requirements set forth in this rule. Therefore, we will engage in a 
formal review of such settings if the state would like to recognize 
them as home and community-based settings under the applicable Medicaid 
authorities.
    Comment: One commenter suggests that if we retain the heightened 
scrutiny of settings described in this section, then we should modify 
the regulation to include an exception from the requirement if the 
client, the client's designated representative and client's case 
manager believe it is in the client's best interest to be allowed to 
live in such a setting.
    Response: We believe that individuals must have the opportunity to 
receive services under 1915(i) in settings that support integration 
with the greater community. Therefore, State plan HCBS must be 
delivered in a setting that meets the HCB setting requirements as set 
forth in this rule and since this authority provides states the 
opportunity to provide individuals HCBS and not institutional services, 
individuals must be living in settings that comport with the HCB 
setting requirements as set forth in this rule. For settings that do 
not meet these requirements, we note that there may be other Medicaid 
authorities under which such services may be covered.
    Comment: One commenter expressed concern that the presumptive 
ineligibility of certain congregate settings and disability specific 
housing may have a chilling effect on the development of innovative 
service delivery approaches designed to meet the preferences of and 
provide a wider array of options to people with limited income and 
resources. For example, the commenter notes that continuing care 
retirement communities (CCRCs) and dementia-specific assisted living 
have been important options for older persons who want to plan for a 
future in which increased disability is likely. But most of such 
settings and services are very expensive--well out of the reach of 
people who are likely to need Medicaid assistance. In response, some 
innovative providers of subsidized housing are co-locating assisted 
living settings on the same location or converting parts of their 
buildings to assisted living. If such approaches would mean that these 
settings were presumptively ineligible to participate in Medicaid HCBS 
programs, it could have a chilling effect on developing such 
innovations--effectively restricting them to those consumers who have 
substantial resources. One potential solution would be to recognize 
what the Fair Housing Amendments Act of 1988 has recognized in civil 
rights law--namely that ``housing for older persons'' is desired by a 
substantial number of people age 55 and older and that it is not 
considered discriminatory. It is relevant to recall that assisted 
living and CCRCs emerged largely as private pay options, reflecting 
strong consumer demand for age-specific housing with services that 
enable older people to live more independently than they would in a 
nursing home. This history stands in contrast to state mental hospitals 
or institutions for those with intellectual or developmental 
disabilities, where state policies created segregated environments for 
people with such disabilities. The history of age-specific housing with 
service approaches also contrasts with the history of nursing homes, 
which grew dramatically after the enactment of Medicaid with its 
institutional funding bias. In correcting the history of state and 
federal actions that have segregated people with disabilities, CMS 
should not prevent the ability of older persons with low incomes to 
access innovative approaches to housing and services that have 
demonstrated strong consumer demand and are permissible under civil 
rights law.
    Response: It is not our intent to hinder innovative ideas for 
future development of HCBS. Rather, we believe that the requirements 
set forth in this regulation are a result of many comments we received 
from stakeholders, including individuals receiving services. Thus, we 
believe that developers and states should use this as a foundation as 
they look at developing plans to provide long-term care services and 
supports in their communities. We believe that this could be a tool to 
assist states with adhering to the Olmstead mandate and the 
requirements of ADA.
    Comment: The commenters also requested that CMS clarify that it did 
not intend to include such group homes located in and fully integrated 
into typical neighborhoods or small community ICF/MR homes in the 
definition of a ``facility that provides inpatient institutional 
treatment.''
    Response: It is possible that the setting described by the 
commenter could be considered a home and community-based setting, if it 
meets the requirements set forth at Sec.  441.530 and Sec.  441.710. 
ICF/IIDs regardless of size are statutorily prohibited from being 
considered a home and community-based setting, because they are 
institutions under the statute.
    Comment: Several commenters indicated that a setting should not be 
disqualified based solely on physical proximity to an institution. One 
commenter expressed concern this provision could force people into 
nursing homes as the only financially viable option. Providers have 
been encouraged to diversify and move into HCBS, including converting 
portions of what would be considered ``institutional'' settings to 
assisted living or other type of residential setting. Similarly, some 
commenters believe that if a converted nursing home space meets the 
requirements of Sec.  441.530(a) and Sec.  441.710(a) then there should 
not apply a rebuttable presumption that the setting is not a home and 
community-based setting.
    Response: We appreciate the commenters' concerns. It is not our 
intent to have individuals move into long term care facilities, when 
their

[[Page 2971]]

needs could be met safely and adequately in a less restrictive 
environment. Our experience has shown that settings in close proximity 
to institutional settings, whether on the same campus, in the same 
building, sharing the same staff, and perhaps sharing some common areas 
are more likely to be operated in a manner similar to the institution. 
They are often also similarly segregated from the larger community of 
individuals not receiving Medicaid HCBS. Therefore, we strongly believe 
in applying a presumption that such settings are institutional in 
nature. However, we recognize that not all settings co-located, or 
closely located with an institutional setting, exhibit the same 
institutional characteristics. Therefore, through the applicable state 
plan amendment process, states will have the opportunity to describe 
how such settings meet the HCB setting requirements set forth in this 
final rule and do not have the qualities of an institutional setting.
    Comment: One commenter indicates that there is a strong incentive 
for states, local government authorities, and providers to work 
together to use existing segregated institutional locations. The 
incentive falls toward keeping these properties fully utilized. These 
incentives will not be easily overcome, and may well require an 
outright prohibition on providing public funding to settings that share 
the buildings or grounds of an institution that provides in-patient 
care. A few commenters expressed concern with the effect this rule will 
have on the commenter's state plan to rebalance its long term care 
system. The state is currently seeking to ``right size'' the nursing 
home bed supply. The driving force behind this initiative is to 
rebalance the long term care system and provide an optimal level of 
choice for the consumer. It would only be natural for long-term care 
providers to participate in this right size initiative by utilizing the 
state's successful model of affordable assisted living to create campus 
settings that would provide a full continuum of long term care 
services. Many nursing home providers possess land and existing 
structures that could be used to develop managed residential 
communities, individual homes or cottages, or other independent living 
options where assisted living or home care services could be delivered 
in accordance with an individualized person-centered plan.
    Response: We recognize that repurposing existing building 
structures is a tool used to control costs. However, we believe that 
such structures should not be a state's first option when looking to 
increase the pool of community-based residential settings. Such 
structures were often built and operated in such a way that they 
inherently hinder individuals from participating in the broader 
community, and reduce individuals' control of how and where they 
receive services. However, there may be circumstances where such a 
setting could be repurposed in a way that it would meet the 
requirements for HCB settings and would no longer have the 
characteristics of an institution. The final rule allows a state to 
submit evidence for CMS' consideration in this circumstance.
    Comment: Many commenters requested Sec.  441.530(a)(2)(v) and Sec.  
441.710(a)(2)(v) be modified to also include settings on the grounds of 
or adjacent to a privately operated institution. These commenters noted 
that a private institution is no less institutional than a public one 
and should be treated the same for purposes of this provision.
    Response: We appreciate the commenters' concern. It is expected 
that all settings, public and private, meet the HCB setting 
requirements of this regulation. We specifically make reference to a 
setting that is adjacent to a public institution in the regulation 
language due to public input. However, while we did not incorporate 
this suggestion into the regulation, we note that heightened scrutiny 
will be applied to any setting that hinders or discourages integration 
with the broader community.
    Comment: One commenter agreed that it is important to have rules 
that circumvent practices such as building many group homes or 
apartments on the grounds of institutions or on the property where an 
institution once stood. However, the commenter believes the 
requirements proposed go too far, as the standards would preclude 
people from choosing to live in many neighborhoods that might be in 
proximity to an institution, such as the VA hospital where they worked, 
even if they live in proximity to other aspects of community living as 
well.
    Response: The presumption will be applied to settings that 
discourage integration of individuals from the broader community. We 
will describe these settings in future guidance and will take into 
account the commenter's concerns about group homes on the grounds of an 
institution that are recently closed. Regarding the concerns about 
settings adjacent to VA hospitals, a residential setting that allows 
individuals to have full access to community services, and allows for 
active participation in neighborhood/community events, resources and 
integrated activities, but is located in close proximity to a VA 
hospital might meet the qualities for a home and community-based 
setting and not the qualities of an institution.
    Comment: A few commenters indicated that older persons often seek 
out settings in which they can stay as they grow older and develop 
service needs. A significant number of older persons prefer to live in 
a senior community or similar setting that includes a nursing facility, 
particularly when one spouse or partner needs nursing facility care and 
the other does not. The commenter recommends that being on the grounds 
of, or adjacent to an institution not be a disqualifying 
characteristic.
    Response: We will engage in discussion with any state who proposes 
that such settings would meet the qualities for home and community-
based and not the qualities for an institution.
    Comment: One commenter indicated that the Fair Housing Act contains 
an exception that allows distinctions based on age, and believes this 
rule should do so also.
    Response: The purpose of this section of the regulation is to 
define qualities for home and community-based settings. Since Medicaid 
services are available to individuals of all ages, we do not believe it 
is appropriate to create age-based distinctions.
    Comment: One commenter believes that hospital-based providers 
should not be allowable HCBS providers. The commenter also believes 
that there should be two types of HCBS allowed for a non-hospital 
entity to offer, even if they are provided on the grounds of a 
hospital: (1) Services provided by an HCBS provider in the emergency 
room before the patient is admitted to the hospital, and (2) Discharge 
planning with a patient in a hospital or long term care setting in 
order to help facilitate a more rapid, seamless, and coordinated 
transition into community-based care.
    Response: We recognize that while an individual is moving through a 
state's overall service delivery system, there may be certain 
circumstances in which services provided under various authorities may 
overlap. Services should be provided as appropriate to meet an 
individual's needs; however, it is incumbent upon the state to ensure 
that there is no duplication of payment for the same services. A 
provider of HCBS could provide services in the emergency room, as long 
as those services are necessary and do not duplicate the services being 
provided by the emergency room.

[[Page 2972]]

    We believe it would be a best practice for there to be 
communication between those settings and the program that will assist 
the individual in the community. However, such communication should not 
supplant the discharge planning activities that hospitals and long-term 
care settings are required to perform for any individual leaving its 
setting.
    Comment: A few commenters requested the regulation define public 
institution. One commenter requested clarification on the definition of 
a public institution. Specifically the commenter wanted to know if 
``public institution'' means an ICF/MR, or whether it also includes a 
university, library or community care hospital. Another commenter 
wanted to know if this provision presumptively excludes HCBS in 
publicly funded housing for older persons if a nursing home happens to 
be located on the same campus.
    Response: The term public institution is already defined in 
Medicaid regulations for purposes of determining the availability of 
Federal Financial Participation (FFP). Section 435.1010, specifies that 
the term public institution means an institution that is the 
responsibility of a governmental unit or over which a governmental unit 
exercises administrative control. Medical institutions, intermediate 
care facilities, child care institutions and publicly operated 
community residences are not included in the definition, nor does the 
term apply to universities, public libraries or other similar settings. 
We will apply this existing definition in implementing the provisions 
of this final rule. However, we note that any setting that has the 
effect of isolating individuals receiving Medicaid HCBS from the 
broader community of individuals not receiving Medicaid HCBS will be 
presumed to be a setting that has the qualities of an institution 
unless the Secretary determines through heightened scrutiny that it has 
the qualities of home and community-based settings. Thus, settings that 
are located on the grounds of, or adjacent to, institutions that are 
not defined as public institutions under the existing regulation will 
still be subject to heightened scrutiny if such settings have the 
effect of isolating or segregating those receiving HCBS from the 
broader community.
    Comment: One commenter expressed concern about the effect this 
regulation will have on individuals living in continuing care 
retirement communities (CCRC's). Another commenter believes that co-
location on a campus facilitates efficiency, reduces administrative and 
food service costs, and potentially increases the quality of services 
provided in the nursing home since the independent living residents 
often visit their friends who reside in the CCRC's nursing home. The 
commenter added that co-location facilitates seamless transition among 
the various levels of care on campus. One commenter expressed concern 
that the regulation would have a particularly negative impact on not-
for-profit long term care providers that more often provide services in 
a multi-level campus setting because of their missions to meet the 
multiple needs of the community.
    Response: In general, CCRC's are a combination of residential 
settings and care options that include independent living, assisted 
living, and nursing home care. It is possible that currently the state 
considers the independent living units to be home and community-based. 
Nursing facilities are statutorily prohibited from being considered 
home and community-based and is considered an institutional setting. 
The independent living units and assisted living units would be 
presumed institutional and receive heightened scrutiny if they are (1) 
located in the same building as the nursing home or other facility 
providing inpatient treatment; or (2) if they are located on the 
grounds of, or immediately adjacent to, a public institution.
    Comment: One commenter believes that excluding assisted living 
facilities that are on the same grounds of an institutional facility 
may be limiting the choices available to individuals. The commenter 
believes that offering a variety of locations for community based 
services better addresses the diverse population that receives these 
services.
    Response: Assisted living facilities are not excluded from being 
considered home and community-based if they are structured and operate 
in a manner that adheres to the requirements set forth in this rule.
    Comment: One commenter requested that CMS clarify what is 
``inpatient institutional treatment'' and asked whether ``provides'' 
means direct provision of services by the facility, any provision of 
services in the facility, or facilitating the provision of such 
services.
    Response: Inpatient institutional treatment means that services are 
provided 24 hours/7 days a week. Therefore, to avoid confusion, we have 
retained the language ``inpatient institutional treatment.''
    Comment: Many commenters believe the proposed regulations would 
eliminate or severely restrict the provision of HCBS in programs 
located adjacent to a public institution even though the program is 
also adjacent to other buildings such as local community colleges and 
universities, stores and businesses, and residential communities. Other 
commenters indicated that proximity to an institutional setting should 
not alone be the basis to disqualify a setting as HCB and stated that 
many seniors choose to live in a community that offers a range of 
settings.
    Response: We believe that if the setting meets the requirements set 
forth in Sec.  441.530(a)(1) and Sec.  441.710(a)(1), is not described 
as prohibited under Sec.  441.530(a)(2) and Sec.  441.710(a)(2), and 
does not exhibit qualities of an institutional setting, then the 
services could be provided in settings like those to which the 
commenters refer.
    Comment: A few commenters expressed concern that the language in 
the proposed regulation could be construed to prohibit the use of HCBS 
to fund appropriate services on a campus that provides a variety of day 
habilitation services and employment opportunities for individuals with 
intellectual and related disabilities. For the commenters this would be 
an unacceptable and radical policy change from the perspective of these 
individuals and families who have relied on these services for years. 
The commenters believe the location allows individuals to be part of 
the community. The program is located adjacent to a residential 
neighborhood and shares a parking lot with a college. The commenters 
are concerned that if these longstanding programs are no longer 
permissible for these individuals, their alternative would be 
institutional placement. The commenters request the language ``adjacent 
to'' not be included in the final regulation or that the interpretative 
language accompanying the publication of the final regulation 
explicitly clarify that the circumstances described above do not make 
this type of program ineligible for HCBS funding.
    Response: 1915(i) State plan HCBS and 1915(k) CFC services (for 
example, residential, day or other) must be delivered in a setting that 
meets the HCB setting requirements as set forth in this rule. We will 
provide further guidance regarding applying the regulations to non-
residential HCBS settings. In addition, since this authority provides 
states the opportunity to provide individuals HCBS and not 
institutional services, individuals receiving 1915(i) State plan HCBS 
or 1915(k) CFC services must be living in settings that comport with 
the HCB setting requirements as set forth in this rule regardless of 
whether they are

[[Page 2973]]

receiving HCBS in that residence. This is consistent with CMS' 
longstanding policy regarding 1915(c) HCBS.
    Comment: We received many comments both in support of and 
opposition to the requirement that would have resulted in heightened 
scrutiny over a disability-specific housing complex. The comments we 
received on this provision are reflected as follows:
    Several commenters recommend the regulation be revised to remove 
``disability specific housing complex'' as a setting in which HCBS may 
not be provided. The commenters believe that people with disabilities 
should be able to choose to live in disability specific housing if the 
housing addresses their needs. One commenter stated that being a 
disability focused apartment building does not warrant the need for 
extra scrutiny. There are significant differences between an 
institution and a housing development.
    Many commenters requested the rule clarify that the reference to a 
``disability-specific housing complex'' was intended to refer to 
settings located in a disability-specific housing complex--as well as 
on the grounds of, or immediately adjacent to, such a complex.
    Many commenters expressed concern that the proposed regulations 
would eliminate or severely restrict HCB services to residents with 
disabilities in supported living arrangements authorized under and 
meeting the requirements of HUD Section 811 and Section 202 multi-
family housing units, because the homes built under HUD Section 811 or 
202 are specifically restricted to people with specific disabilities. 
They believe the proposed rule appears to conflict with HUD policies.
    Several commenters believe that regulatory language will result in 
the elimination of longstanding services that meet the needs of a large 
number of individuals. The commenters recommended that CMS issue 
interpretive guidance accompanying the final regulation to explain that 
a program located in a building on the premises of a disability-
specific housing complex may receive HCBS if the housing complex is in 
compliance with the underlying laws and implementing regulations, 
including Section 811 of the National Affordable Housing Act of 1990, 
as amended and implementing regulations (supported housing for persons 
with disabilities), the Fair Housing Act, and the ADA.
    Many commenters expressed concern that the use of the term 
disability specific complex would eliminate or severely restrict the 
provision of HCBS in group homes set around a courtyard where 
individuals with disabilities have many needed services and supports 
built into their day-to-day living and have transportation and other 
assistance to access the general community.
    Many commenters requested the regulation provide a definition of 
the term ``disability-specific housing complex.'' Many commenters 
believe that undefined, the term is unclear, and too broad.
    Several commenters requested we clarify that ``CMS did not intend 
to include group homes located in and fully integrated into typical 
neighborhoods within the meaning of ``disability-specific housing 
complex.''
    A few commenters requested the rule clarify whether the presumption 
that a disability-specific complex is not a home and community based 
setting applies only if the setting does not meet the other criteria 
established in the regulation.
    One commenter believes the potential elimination of disability-
specific housing complexes as home and community-based settings will 
compromise viable housing alternatives in a housing market that is 
already in crisis, devastate the ability of providers to deliver 
services in settings that promote health and safety, and force 
individuals with developmental disabilities to move from their homes or 
lose their services and supports.
    One commenter expressed opposition to the heightened scrutiny level 
of review, as proposed in the regulation. According to the commenter, 
families believe their loved ones benefit from these settings. Some 
planned residential communities are much like retirement communities 
where amenities such as bowling alleys, theatre, community centers, 
restaurants and shopping are readily available, along with necessary 
health care, support staff, vocational training. The commenter further 
stated that while the rule seems to embrace certain principles of 
community, such as individual choice and person-centered planning, 
there remains a bias that characterizes any sort of program-wide 
structure and safety measures as too ``institutional'' without any 
regard to the input of individuals, their families and their legal 
guardians. This commenter also stated that given that there is already 
a Medicaid definition of institution, it is improper for CMS to be 
proposing an expansion of current Medicaid law redefining the term. 
Another commenter believes that the proposed rule that considers a 
``disability-specific housing complex'' an ``institution'' could be 
confusing and a barrier to effective community housing options for 
those with intellectual disabilities.
    Many commenters objected to the inclusion of disability specific 
housing as institutional in that many people choose, as a function of 
age, to live with others with similar needs. The commenters indicated 
that senior housing, assisted living, and other such options are freely 
chosen by seniors without disabilities and inquired why people with 
disabilities who are eligible for HCBS be denied the same array of 
options available to their peers without disabilities. The commenter 
noted that the key is that the person-centered plan should provide for 
individuals making free choices in where they live as long as they do 
not include nursing facilities, institutions for mental diseases, 
intermediate care facilities for mentally retarded, hospitals, or other 
locations that have the qualities of an institutional setting as 
determined by the Secretary. Other commenters suggested that seniors 
often choose to live together in a variety of settings and request that 
CMS respect this preference by establishing exemptions from the 
proposed setting requirements for continuing care campuses, assisted 
living settings, and other housing for older persons. The commenter 
stated that CMS should not preclude successful options for people with 
disabilities simply based on location or proximity. Alternatively, one 
commenter indicated that he does not have the same philosophy and 
asserted that this provision must remain in these regulations. This 
opinion is based on the commenter's experience with the 
deinstitutionalization of people with intellectual and developmental 
disabilities and the commenter's knowledge of recent efforts in certain 
states to try and use waivers to fund settings that do not promote full 
inclusion in community life. If CMS does decide to create an exception, 
the commenter urges we keep it very narrowly tailored to senior 
communities only, so that it cannot be used to limit the opportunities 
of people with intellectual and developmental disabilities to 
experience true integration.
    A few commenters requested the regulation clarify if housing or 
units within general housing, designated for persons with dementia or 
other cognitive impairments would meet the definition of disability-
specific housing complexes. Other commenters added that it is 
discriminatory to deny HCBS waivers to individuals residing in an 
Assisted Living Facility providing care specifically to those with 
Alzheimer's

[[Page 2974]]

and dementia just because of where they live.
    Response: As a result of comments we received on the use of the 
term disability specific-complex, we have revised the rule to remove 
the term ``disability-specific housing complex'' and replace it with 
the following language: ``any other setting that has the effect of 
isolating individuals receiving Medicaid HCBS from the broader 
community of individuals not receiving Medicaid HCBS[hellip]'' We note 
that we are not redefining the term ``institution'' but rather defining 
what characteristics we will see as institutional and not HCB in 
nature. We plan to issue future guidance to provide examples of the 
types of settings that will be subject to heightened scrutiny.
    Comment: One commenter shared the opinion that disability-specific 
housing complexes are established for the convenience of service 
providers, or because the developer believes that people with 
disabilities should be segregated, or both. The commenter further 
explains that disability-specific housing complexes are not integrated 
at all, and therefore certainly not the most integrated setting 
appropriate to anyone's needs. The commenter recommends that they must 
not be included as home and community based settings.
    Response: We appreciate the commenter's perspective. We do not 
believe that all settings should be excluded; however, we do believe a 
close review of such settings may be necessary.
    Comment: Many commenters indicated that if the rule is finalized 
with application of a rebuttable presumption then it should only apply 
to disability-specific housing complexes. The commenters recommended 
that CMS should specify that the presumption may be rebutted only when 
(1) the setting meets all of the requirements for home and community-
based settings in Sec.  441.530(a)(1) and Sec.  441.656(a)(1), and (2) 
the setting was selected by the individual following a meaningful 
opportunity to choose from among alternatives, including the most 
integrated setting for the individual as documented in the person-
centered service plan.
    Response: We do not agree with the commenter's recommendations. 
Section 441.530(a)(2)(v) and Sec.  441.710(a)(2)(v) have been revised 
to better articulate the settings that are presumed institutional in 
nature and will receive heightened scrutiny to determine if they can be 
considered home and community-based settings.
    Comment: One commenter believes the rebuttable presumption language 
also applies to settings where there are specialized services for 
individuals with similar diagnoses. Many of these programs were 
designed, developed and chosen by consumers to reflect new standards of 
care and treatment. The commenter urges CMS to change the language in 
the rule to reflect this model of care and not limit these programs to 
only non-Medicaid persons.
    Response: We recognize that there are many forms of settings and 
service delivery models serving individuals with a need for long term 
care services and supports. Due to this variability across the country, 
we do not believe it would be best to carve out certain models in this 
rule.
    Comment: Many commenters were concerned about the effect the 
proposed rules would have on settings specifically designed for 
individuals with autism. The commenters stated that many of these 
individuals failed to thrive in both institutional and totally 
independent settings, but they do thrive in certain non-urban community 
based models. The commenters believe the proposed rule ignores the 
community based nature of these models and inaccurately and 
unreasonably categorizes these settings as institutions. One commenter 
believes the proposed regulations will cause downsizing and elimination 
of public and private specialized residential facilities for persons 
with severe and profound cognitive-developmental disabilities
    Response: We believe that settings that are designed to prevent an 
individual from having the opportunity to participate in the broader 
community are not home and community-based. We believe that 
individuals, regardless of service need, can benefit from having the 
opportunity to participate in the broader community. The goal of this 
regulation is not to take services from individuals, or make 
individuals move from a location where they have always lived, but to 
describe the qualities of settings in which services intended to 
provide an alternative to institutional care may be delivered. The goal 
of this regulation is to widen the door of opportunity for individuals 
receiving Medicaid HCBS to support the same choices to participate in 
community activities as are available to individuals not receiving 
Medicaid HCBS; to have a choice in how, when, and where they receive 
services; and to remove unnecessary barriers and controls. We believe 
that the Medicaid program provides many options for states to develop 
delivery systems that meet the needs of individuals regardless of where 
they fall on the continuum of care.
    Comment: A few commenters expressed the belief that individuals 
with severe cognitive impairments should be allowed to live together, 
because the commenters believe that this is not a population that can 
benefit by integration within the community at large. The commenter 
stated that special programming and physical plan improvements for this 
population have contributed to increased quality of life and quality of 
care for this population. The commenters request the rule be amended to 
allow individuals with cognitive impairments to live together and that 
this not be considered disability-related segregation.
    Response: We disagree with the commenter in part. We agree that 
individuals benefit from services that are specialized and tailored to 
meet their specific needs. However, we firmly believe that all 
individuals regardless of type or degree of disability would benefit 
from opportunities for community integration if it is their choice to 
live in the community and not an institution. We note that Medicaid 
continues to provide other service options that can support individuals 
who choose to receive services in non-HCB settings.
    Comment: One commenter believes the proposed changes to the rules 
would prevent an individual from making a choice to live in a rural 
agricultural community setting with several homes on the property. The 
commenter requested the rules be revised so that every person with 
every type of disability is given a choice that would meet the 
individual needs and unique characteristics of the person.
    Response: Under the requirements of this regulation, for a setting 
to be home and community-based, it may not discourage an individual's 
integration with the broader community. The determination would not be 
based on whether the setting was in a rural, urban, or suburban 
community, but on whether it has the qualities of home and community-
based settings as specified in this rule.
    Comment: One commenter indicated that in their state, there is the 
option for individuals to choose fully accessible individual apartments 
and accessible complexes that are disability-specific housing settings 
located in community neighborhoods that provide quick response and 24-
hour onsite coverage. The commenter stated that the number of these 
settings has grown and consistently includes waiting lists, and to 
eliminate these settings for Medicaid

[[Page 2975]]

HCBS recipients unfairly limits their choice.
    Other commenters expressed concern that many seniors living in age-
specific communities will inadvertently be prohibited from receiving 
HCBS due to proximity to a hospital or nursing facility. The rule, they 
believe, will lead to more nursing home admissions among seniors and 
limit choices available to them to receive services in an assisted 
living facility (ALF). The commenters also stated the proposed language 
would likely reduce the number of individuals in nursing homes who are 
able to transition to a more integrated setting, because many 
individuals transition to ALFs. It should be considered desirable that 
those served by Medicaid would have the same array of choices as those 
not on Medicaid.
    Response: We have removed the references to disability-specific 
housing in the text of the final regulation. However, if the settings 
have the effect of isolating individuals receiving Medicaid HCBS from 
the broader community, we will apply heightened scrutiny to these 
settings to determine if they meet the required qualities for a home 
and community-based setting as set forth in this rule. The State could 
present information to CMS to demonstrate that the settings have the 
qualities of community-based settings.
    Comment: Several commenters supported the language as written, 
stating appreciation that CMS has clarified that the term ``community'' 
refers to the greater community and not solely a community of one's 
peers and, that integration also means more than integration in a 
community of peers. They further stated that focusing on the purpose of 
HCBS helps define its characteristics. A few commenters agreed that a 
home and community setting should facilitate individuals' full access 
to the greater community as they choose, including in the areas noted. 
However, the commenters noted that individuals may vary in their 
choices as they seek full access to and participation in the greater 
community, and a home and community-based setting should facilitate 
such full access consistent with an individual's choices and 
preferences. The commenters recommended adding the following language 
related to access ``based on the individual's needs and preferences.'' 
Another commenter stated the belief that the language is very broad and 
ambiguous and should be defined along with ``the greater community.'' 
Another commenter requested that we define ``community'' and suggested 
the language parallel the language used under the section pertaining to 
person-centered service plan, stressing that individuals should be 
given the right to obtain services ``from the provider and the 
community of his or her choice.''
    Response: We support individual choice and agree that individuals 
may vary in their choices as they seek full access and participation in 
the greater community. However, in order to receive approval of a State 
plan under which it will receive Medicaid funding for HCBS, a state 
must ensure that the choices available to individuals meet the 
requirements for community integration at Sec.  441.710 of the final 
rule.
    Comment: Some commenters expressed concern with the requirement as 
proposed at Sec.  441.530(a)(1)(i) that the setting must permit access 
to the greater community ``in the same manner as individuals without 
disabilities.'' One commenter stated that it would be more appropriate 
to require access ``to the same extent'' and that this language will 
give HCBS providers reasonable flexibility in regards to making 
accommodations for disabilities and to avoid disputes and possible 
litigation on the exact manner in which such accommodation must be 
provided. Other commenters indicated that this requirement is not 
measurable and may reduce choice for rural populations.
    Response: After significant consideration, we have removed from 
Sec.  441.530(a)(1)(i) ``in the same manner as'' from this requirement, 
and replaced it with ``to the same degree of access as,'' to best 
describe our intent to ensure access to the greater community that 
includes individuals with and without disabilities.
    Comment: One commenter stated that licensed facilities may be 
located in both urban and rural settings resulting in variation with 
the amount of ``integration'' available. The settings are chosen with 
this in mind, and one that seems to be less integrated to CMS may be 
preferred by some over living where it appears participation in 
community activities is greater.
    Response: We agree that there is a large degree of variance 
regarding the geographical settings where licensed homes are located. 
We agree that an individual should be able to exercise choice in regard 
to these settings. We do not express preference in regard to the 
proximity of activities to where an individual lives; the emphasis is 
on access to those chosen activities and whether the individual has the 
same degree of access to such activities as individuals not receiving 
Medicaid HCBS.
    Comment: One commenter believes that CMS should not disqualify any 
setting from receiving federal financial participation (FFP) solely 
based on the fact that it is a congregate setting.
    Response: It is not our intention to exclude a state from receiving 
FFP for a setting solely based on the fact that it is a congregate 
setting. Our intention is to specify qualities necessary for a setting 
to be considered a HCB setting. Congregate settings may be included if 
they meet the HCB setting requirements set forth in this rule.
    Comment: Several commenters stated that a service provider (for 
example, a job coach), not a setting, facilitates employment-seeking 
opportunities. Similarly, a service provider, not a setting, assists 
individuals in managing what few disposable resources are available to 
them. One commenter seeks clarification regarding what facilitating 
``full access to . . . employment opportunities'' entails and what 
possibilities, if any, would be imposed on the housing provider. One 
commenter supports the concept of community integration, but believes 
CMS has blurred the distinction between the setting and the service 
provider. One commenter believes that CMS is wrong to assume that 
location will enforce the goals of integration, for example, social 
interaction, productivity and competitive employment. The commenter 
further notes that having the ability to access the general community 
is very different from being forced to live in a community ``setting'' 
that is not only unwilling, but unable to provide resources for safety, 
supports, interaction, social integration and employment in competitive 
settings. One commenter encourages CMS to ensure that the settings in 
which residents receive services are designed to facilitate the actual 
integration of the recipients into the surrounding community.
    Response: We agree that it is the responsibility of the service 
provider rendering the services and therefore we have added language 
under person-centered service plan requirements to ensure a clear 
understanding of our expectation. We believe the section on person-
centered planning clarifies CMS' expectations with regard to services 
being delivered in a manner that promotes/supports community 
integration to the extent of the individual's preferences and desired 
outcomes.
    Comment: Several commenters expressed strong support for the 
setting integration provision, but recommended modifying Sec.  
441.530(a)(1)(i) to specify that the employment-related provision apply 
only to those individuals who are interested in being employed. They

[[Page 2976]]

recommended modifying Sec.  441.530(a)(1)(i) by adding the following 
language ``for those individuals interested in being employed'' 
following the words ``integrated settings.'' Another commenter 
recommended the following revision to Sec.  441.530(a)(1)(i): ``For 
individuals seeking to enter the job market, the setting should include 
opportunities to seek employment and work in a competitive integrated 
setting. For all individuals, the setting should permit them to engage 
in. . . .''
    Response: We believe that individuals should be supported in 
seeking employment when interested in being employed and that the 
statement ``opportunities to seek employment'' implies choice. In 
addition, we believe that adding the suggested language to the 
regulation text is unnecessary.
    Comment: One commenter offered support of CMS' general approach of 
identifying the characteristics of integrated care, but suggested that 
CMS will need to take an active monitoring role to ensure that all the 
individual quality requirements are enforceable.
    Response: States are required to demonstrate at the time of 
approval that quality measures with a monitoring plan are in place. 
This information must be included in the SPA and at a frequency to be 
determined by us or upon request by us. The review and monitoring of 
quality requirements will be covered in future guidance.
    Comment: One commenter stated that, it would be unpatriotic to 
curtail any services in a manner that would adversely affect humans 
with limited abilities.
    Response: It is not our intention to negatively impact any 
individuals we serve. Rather the purpose of the rule is to ensure that 
states will be better able to design and tailor Medicaid services to 
accommodate individual's needs and preferences.
    Comment: Commenters stated that all people need meaningful choices 
about where and with whom they live, how they spend their time and 
their activities, friends, and services (including who provides them). 
Permitting individuals the freedom to make their own choices allows 
them to remain as independent as possible. One commenter applauded 
efforts that focus on the individual's ability to choose his or her own 
life setting and one that promotes community rather than institutions. 
Several commenters noted that while providers may make different 
choices than the client and have a different perspective, the provider 
must respect and honor the choices and autonomy of people with 
disabilities. One commenter supports the proposed language as long as 
it provides assurances that real alternatives exist. Additionally, 
another commenter recommends reinforcing the idea that states should 
provide unbiased and informed options counseling for individuals 
seeking HCBS so that individuals are able to choose the setting that 
best assists them in meeting their needs and life goals.
    Response: We agree that meaningful choices that allow individuals 
to make decisions that best meet their needs are important. In 
addition, they should be addressed as part of the person-centered 
planning process and reflected in the individual's person-centered 
service plan.
    Comment: One commenter stated that the proposed regulation would 
eliminate or at least severely restrict client and family choice of 
program options and opportunities and that consumers and families need 
more options, not fewer during these difficult times. Several other 
commenters expressed serious concern that the proposed regulation will 
eliminate instead of enhance choice for individuals with significant 
disabilities.
    Response: We disagree. We are not eliminating the choice of 
institutional options. We are specifying the qualities necessary for 
settings to be considered home and community-based settings.
    Comment: Many commenters stated the proposed language in Sec.  
441.530(a)(1)(ii) and Sec.  441.656(a)(1)(ii) should be modified to 
more closely reflect the tenets of the ADA and the Olmstead decision by 
including additional language that conveys the individual's choice of 
setting must be an informed choice, based on more than verbal 
descriptions or pictures of alternatives. Modifications should include 
language that permits individuals a meaningful opportunity to choose 
from among all available alternatives. Commenters conclude that the 
level of specificity with which a particular setting must be identified 
in a service plan is not clear and the requirement could 
inappropriately prevent individuals from receiving services when their 
desired living setting is specifically identified in a service plan.
    Response: We believe the final regulation language supports these 
principles. Within future guidance, we will reinforce the importance of 
complying with other federal requirements such as ADA and Olmstead.
    Comment: One commenter recommends striking the word ``available'' 
from Sec.  441.530(a)(1)(ii) and Sec.  441.656(a)(1)(ii) of the 
proposed regulation. The commenter believes that this word could limit 
choices of HCBS settings offered to individuals and offers the example 
of long waiting lists for certain section 1915(c) HCBS waiver programs/
settings not being considered and reflected in the person-centered plan 
due to lack of availability.
    Response: We have revised Sec.  441.530(a)(1)(ii) pertaining to CFC 
settings and the final regulation text at Sec.  441.710(a)(1)(ii) and 
we have removed the term ``available.''
    Comment: One commenter was supportive of this language as written. 
Another commenter supported CMS' proposed list of essential personal 
rights in this section. The commenter stated that, in addition to 
freedom from coercion and restraint, people with disabilities in a 
community setting should have the freedom to pursue their sexuality, 
voting, and worship. In addition, a community setting should not be 
permitted to restrict access to the community as a form of punishment.
    Response: We are concerned that one of the commenters believes we 
have provided a comprehensive list of rights. The factors related to 
determining whether settings are home and community-based and the 
description of the rights that individuals must have in these settings 
are not intended to be an exhaustive list of all legal rights of the 
individual. Individuals have many other legal rights not addressed in 
this regulation. For example, civil rights against various forms of 
discrimination are protected under the ADA and elsewhere. We regularly 
work with the HHS Office for Civil Rights, Department of Justice (DOJ), 
and others to assure that we provide appropriate guidance and 
assistance to states related to civil rights issues that bear on 
Medicaid requirements.
    Comment: Many commenters stated that the inclusion of ``essential 
personal'' may create confusion and suggest that the term be omitted 
from Sec.  441.530(a)(1)(iii) to more clearly demonstrate intent to 
protect the individuals' human rights. Several commenters indicated 
that they strongly agree that these important personal rights should be 
protected. However, as currently written the placement of ``essential'' 
may imply that other rights are not essential and thus do not need to 
be protected. These commenters recommended removing the term 
``essential'' from this paragraph.
    Response: We agree with the suggested revision to Sec.  
441.530(a)(1)(iii) and have finalized the provision at Sec.  
441.710(a)(1)(iii) by removing the words ``essential personal.''

[[Page 2977]]

    Comment: One commenter generally supports the proposed language, 
but recommends that CMS delete the reference to restraint and/or 
provide an exception when the individual has a documented history of 
risk of elopement or susceptibility to behavioral flare-ups that can 
only be controlled by temporary restraint.
    Response: We disagree with the recommendation as this is an 
important protection.
    Comment: Several commenters supported the protection of 
independence and the autonomy of individuals in making life choices. 
One commenter stated that the post-rulemaking implementation must 
ensure that the intent of the proposal is carried out in practice. 
Another commenter generally supported the proposed concept, but noted 
that the life choices principles are dictated by the service provider 
and not the setting.
    Response: The State Medicaid Agency will be responsible for 
ensuring that the HCB setting requirements are met by providers who own 
or control settings where individuals reside and/or receive services.
    Comment: Some commenters stated that the language may potentially 
result in limited choice, scattered living proposals, limiting staffing 
resources and increasing costs associated with some individuals 
choosing to live secluded from others with disabilities. The commenter 
stated that individuals make choices that increase their independence 
(within the resources that are provided through Medicaid) based on 
informed experiences to ``live and play'' with others who are 
developmentally disabled because they have much in common. Another 
commenter disagreed with this proposed requirement and believes that 
individuals should have the right to choose where they want to live. 
Commenters stated that one size does not fit all and that different 
populations have differing needs. Commenters supported an individual's 
right to choose to reside in a living arrangement that best suits his/
her needs. The commenter also stated that this proposed requirement 
would eliminate important options that now contribute to the array of 
settings available to adults with disabilities and the elderly and the 
move to a more restrictive setting would ignore the participant's 
choice, diminish the participant's quality of life and increase costs 
to Medicaid.
    Response: We believe that individual choice is important and we 
have worked to promote choice in the final rule, though we also 
acknowledge the challenge of doing so in a manner that addresses the 
interests of diverse populations with differing needs. We have revised 
the language in the final rule to be more flexible and less 
prescriptive. Instead of automatically excluding certain settings from 
qualifying as HCB, the language in the final rule includes a 
presumption that these settings are not HCB. In other words, we will 
assume that certain types of settings--specifically, those located in a 
building that is also a publicly or privately operated facility that 
provides inpatient institutional treatment, on the grounds of or 
immediately adjacent to a public institution, or any other setting that 
has the effect of isolating individuals receiving HCBS from the broader 
community--are not HCB, but afford states the opportunity to refute 
this categorization by providing additional information about the 
characteristics of specific settings. We have also included language in 
the final rule that focuses on the critical role of person-centered 
planning and addresses fundamental protections regarding privacy, 
dignity, respect, and freedoms.
    Comment: Several commenters recommended that CMS delete the phrase 
``and not regimented'' from the proposed language. The commenters 
expressed concern that under the proposed language, group programming 
could be viewed as ``regimented'' because it is provided in a 
congregate setting. One commenter noted that structured activities and 
socialization opportunities could be deemed inappropriate under the 
proposed language since they may be provided in a uniform manner.
    Response: We disagree with removing this language from the final 
rule. We do not intend to invalidate all activities in a congregate 
setting. Individuals must be afforded choice regarding the activities 
in which they wish to participate including whether to participate in a 
group activity or to engage in other activities which may not be pre-
planned.
    Comment: One commenter recommended adding the following language to 
this provision of the rule: ``(iv) Individual initiative, autonomy, and 
independence in making life choices, including but not limited to, 
daily activities, physical environment, and with whom to interact are 
optimized to the greatest extent possible and not regimented.'' One 
commenter recommended that CMS clarify that the term ``optimized'' 
refers to the individual's autonomy and does not refer to optimizing 
the institution's promotion of autonomy. Another commenter requested 
that CMS clarify who will determine and how to determine whether the 
individual initiative, autonomy, and independence in making life 
choices were optimized.
    Response: We do not believe that ``to the greatest extent 
possible'' adds significantly to the term ``optimized.'' We believe the 
commenter's concern about referencing individual autonomy is addressed 
in the regulation language. There are a number of methods inherent in 
the flexibility of the HCBS benefits to determine who and how the 
individual's initiative, autonomy, and independence are optimized.
    Comment: Many commenters stated that an individual's choice 
regarding services and supports and who provides them is a key element 
of HCBS and, thus, must be ensured. Some commenters suggested 
substituting the word ``ensured'' in place of ``facilitated.'' One 
commenter stated that the word ``facilitated'' establishes a weak 
standard and should be replaced with ``maximized.'' Another commenter 
suggested that individuals be given choices about when services are 
provided and recommended deleting ``is facilitated'' and replacing it 
with ``is honored'' for further assurance. One commenter stated that an 
individual's choice must be ensured, meaning ``made certain or safe'' 
and stated that in a home and community-based setting, personal choice 
should not only be brought about, but is safe. Another commenter 
expressed concern that ``is facilitated'' is not used to water down 
individuals exercising choice over services, supports, and providers. 
The commenter stated that some individuals may need assistance in 
exercising choice and the commenter suggested revising this criterion 
to note that support should be provided, as needed, to facilitate such 
choices and to acknowledge that an individual's chosen representative 
may be acting on behalf of the individual.
    Response: After consideration of the commenters' thoughtful 
suggested text changes, we believe the proposed text/language reflects 
the intent of the provision.
    Comment: Several commenters indicated that provider owned or 
controlled settings licensed by state law have requirements that make 
them responsible for the well-being of the resident and restrictions on 
who (in addition to the licensed provider) can provide services in the 
setting. Commenters stated that residents' rights allow for individuals 
to supplement existing services provided by the providers, but not 
replace them. Several commenters recommended revisions to

[[Page 2978]]

this section of the rule and some of the commenters suggested that 
language be included to reference state licensure laws and licensing 
entities.
    Response: We disagree with the suggested changes. Some of these 
were too descriptive to include in regulation and could have the effect 
of excluding numerous populations served through HCBS programs. We will 
instead consider these suggestions in future guidance.
    Comment: One commenter requested that the rule clarify how a 
person's choice about the type of services they want and who they want 
to provide them ``is facilitated.'' The commenter suggests this can be 
done by clarifying the qualifications that the facilitator must 
possess--for example, the facilitator must be knowledgeable of all 
community-based options (not only those that are considered readily 
available) and must be able to present options in a way that is 
accessible and is sensitive to the person's disability-related 
communication needs.
    Response: States are responsible for determining the provider 
qualifications of the entities who will conduct the assessments and 
person-centered planning process as long as the requirements in the 
final regulations have been met. It is expected that these entities 
would have adequate training to perform this function. We agree that 
additional guidance should be provided to states and we intend to issue 
future guidance regarding the person-centered process and how we intend 
to apply it across Medicaid HCBS programs.
    Comment: Several commenters supported the additional conditions 
stating that they are critical to ensuring that provider-controlled 
settings designated as home and community-based operate in a way that 
promoted choice, autonomy and independence.
    Response: We appreciate this comment of support regarding the 
importance of the additional conditions.
    Comment: One commenter generally supported the provisions but 
suggested that the language include ``health needs'' in addition to 
``safety needs'' and that the term ``dementia'' be changed to 
``cognitive impairment'' to include individuals with severe mental 
illnesses, traumatic brain injuries, and developmental disabilities, as 
well as Alzheimer's and other forms of dementia.
    Response: The reference to dementia was only included as an example 
and was not meant to convey all of the possible situations in which a 
modification of the conditions might be supported by a specific 
assessed and documented need. We have, therefore, removed this example 
from regulation text as this is more appropriate for us to address in 
future guidance, and we will consider these comments in that context.
    Comment: Several commenters strongly agreed with the proposed 
language requiring that should a provider choose to modify conditions, 
changes must be supported by documentation in the person's service 
plan. Another commenter expressed support of CMS' efforts to allow 
necessary flexibility to address individual circumstances in provider-
based settings, but urged CMS to allow flexibility in interpretation of 
the language, ``specific assessed'' need. Two commenters also expressed 
concern over this language, noting that in some instances residents may 
require services based on overall condition rather than a specific 
assessed need and suggested revision to this subsection of the rule.
    Response: We acknowledge and appreciate support of the requirement 
that any modification of the conditions for provider-owned or 
controlled residential settings must be supported by a specific 
assessed need and documented in the person-centered service plan. 
However, we disagree that such modification would be acceptable based 
on a condition that does not also result in a specific assessed need of 
an individual. Allowing for modifications based on a condition that is 
not also supported by a specific assessed need and documented in the 
person-centered service plan could result in decisions being made based 
on global assertions as opposed to individual need, and thus be 
contrary to the purpose of this section of the rule. Therefore, we have 
not made the requested revision to this requirement.
    Comment: Several commenters stated that modifications must be 
related to a clearly established assessed need and recommended a change 
to the proposed rule so that the requirements must apply to all 
settings where services are provided, regardless of whether or not they 
are controlled by the service provider.
    Response: We agree that any modification of additional conditions 
must be based on the specific assessed need of the individual. The 
regulation includes qualities that apply to all home and community-
based settings, but we disagree that the additional requirements for 
provider-owned or controlled settings must be required of all settings 
where services are provided, regardless of whether or not they are 
provider-owned or operated. The additional conditions were designed to 
ensure that individuals who are living in settings in which the 
individual does not have ownership or control, will be afforded the 
same opportunities and community access as individuals living in their 
own private or family homes.
    Comment: One commenter recommended that States should be able to 
detail their own policies and practices to address rights and 
restrictions as part of their application for HCBS authority, an 
expectation currently embedded in the waiver application but not in 
regulation.
    Response: We disagree that states should detail their own policies 
to address rights and restrictions. Based on our experience and on 
input received from the public, we believe we must set these minimum 
additional conditions to ensure individual rights are protected.
    Comment: Several commenters stated that CMS should take into 
account the differences between different disabilities in determining 
when departure from the additional conditions may be permitted. These 
commenters stated that, if CMS allows for the modifications to provider 
requirements, CMS should require that the restrictions be directly 
proportionate to a specific safety need and be reviewed for 
effectiveness and continuing need.
    Response: Any modifications of the conditions can only be 
considered on an individual basis in accordance with the person-
centered planning process and documented in the person-centered service 
plan in accordance with section 441.725.
    Comment: One commenter recommends adding a component whereby direct 
feedback is gathered from the beneficiary or the beneficiary's 
representative regarding initial and ongoing overall satisfaction with 
the modification of conditions.
    Response: The rule has been modified to require that any 
modification to the additional conditions under Sec.  
441.710(a)(1)(vi)(A) through (D) must have the informed consent of the 
individual (or representative).
    Comment: One commenter stated that a modification may be needed to 
reflect the involvement of an individual's representative, as 
appropriate, when individuals are unable to act on their own behalf.
    Response: The regulation already specifies the involvement of an 
individual's representative in the evaluation of eligibility (Sec.  
441.715), independent assessment (Sec.  441.720), and person-centered 
service plan (Sec.  441.725). The regulations also include a definition 
for individual's representative in section 441.735 of this subpart. 
Since any modifications of the

[[Page 2979]]

conditions would need to comply with the requirements for these 
processes, we do not believe that modification to the regulation text 
is needed.
    Comment: We received some comments related to the difficulty of 
achieving compliance with the proposed requirements. A few commenters 
expressed concern that the conditions for provider-driven settings 
might exclude assisted living residences (ALRs), as it remains unclear 
whether they would meet the proposed criteria. Another commenter 
expressed great concern that privately-owned residential settings that 
have proven successful in their state would not qualify under the 
proposed guidelines since many would not provide separate kitchens or 
sleeping and living areas. Another commenter stated that this 
regulation severely restricts program options and opportunities because 
of the impact the regulation has on HUD financed housing owned by 
providers, and that this regulation would restrict the use of HCBS 
waiver funding for services provided in these settings.
    Response: We believe there will be residential settings that meet 
the HCB requirements as outlined in this regulation. However, we 
recognize that there may be some residential facilities that may not 
currently meet all of the HCB setting requirements for provider-owned 
or controlled settings. We will allow states a transition/phase-in 
period for states to demonstrate compliance with the requirements. In 
an effort to balance those comments that were concerned with the loss 
of a residential setting and the subsequent displacement of the service 
recipient based on the settings requirements and those comments that 
urged us to draw an immediate and clear demarcation for HCBS, our 
expectation is that the transition plan would facilitate a brief 
transition period wherever possible. However, we will afford states the 
opportunity to propose a transition plan that encompasses a period up 
to five years after the effective date of the regulation if the state 
can support the need for such a period of time. States are expected to 
demonstrate substantial progress toward compliance throughout any 
transition period.
    Comment: One commenter expressed concern that the proposed language 
requires full participant direction even when such direction may not be 
appropriate for certain populations.
    Response: Self-direction is an optional service delivery method, 
not a federal home and community-based setting requirement in the 
proposed or the final rule.
    Comment: Many commenters indicated that the proposed language 
provides an unchecked and overbroad right for a service provider to 
modify any of the requirements, as long as the modification is 
supported by an assessed need and documented in a service plan. The 
commenters stated that CMS should allow modifications of the 
``additional conditions'' only in rare and extraordinary circumstances, 
and then only after a provider has documented that less intrusive 
measures have already been tried, data has been collected on the 
modification's effectiveness, and the need for the modification has 
been reviewed at least quarterly. Many commenters stated that allowable 
modifications should be limited to the requirements pertaining to 
access to food and lockable doors. Several commenters stated that the 
only appropriate reason to modify any of the listed conditions would be 
to address safety needs, and several recommended a revision to this 
subsection of the rule. However, other commenters stated that there is 
no reason for an exception/modification under any circumstances for 
many of the requirements and have recommended revisions to the 
regulation.
    Response: We agree with the commenters that the basis for 
modifications should be justified through the person-centered planning 
process. The service provider does not lead the person-centered service 
planning process; it is driven by the individual and includes people 
chosen by the individual. We have revised the rule to require that any 
modification to the additional conditions under Sec.  
441.710(a)(1)(vi)(A) through (D) must be supported by a specific 
assessed need and justified in the person-centered service plan. We 
also delineated specific requirements to support that justification as 
well as expectations for the intervention.
    Comment: Several commenters asked how frequently the assessment 
must be made if the condition causing the modification of the 
``additional conditions'' was not likely to improve. One commenter 
recommended that CMS amend the current language to clarify that the 
specific assessed need must be of the individual, and should indicate 
that a determination has been made regarding the timeframe that the 
modification of conditions will be in effect.
    Response: Per the response to the previous comments, we have 
revised the rule to require that any modification to the additional 
conditions under Sec.  441.710(a)(1)(vi)(A) through (D) must be 
supported by a specific assessed need and justified in the person-
centered service plan. We also state in the rule that reviews and any 
needed revision of the independent assessment and the person-centered 
service plan, must occur at least every 12 months, when the 
individual's circumstances or needs change significantly, and at the 
request of the individual.
    Comment: Several commenters stated that CMS should not allow any 
departures from or modifications to the conditions.
    Response: We disagree as there may be reasons why a modification of 
the conditions may be necessary.
    Comment: One commenter offered general support of the proposed 
language's intent and believes that the ``legally enforceable 
agreement'' condition should never be limited, or modified.
    Response: We appreciate the commenter's support and concern. While 
the final rules maintain the ability for a provider to modify this 
condition, we have added that this must be supported by a specific 
assessed need and justified in the person-centered service plan and 
delineated specific requirements to support that justification.
    Comment: Several commenters stated that CMS should clarify that all 
settings in which the individual does not have a regular lease or full 
ownership (including adult foster care settings) be considered 
provider-controlled.
    Response: For the purposes of this rule, a setting is considered 
provider-owned or controlled, when the setting in which the individual 
resides is a specific physical place that is owned, co-owned, and/or 
operated by a provider of HCBS.
    Comment: Several commenters suggest that CMS clarify that all 
settings that require individuals to automatically transfer their 
income to service providers for the purpose of SSI/SSDI or other 
disability payments are not HCB settings for purposes of the Medicaid 
program.
    Response: Room and board is not covered under Medicaid state plan 
HCBS. This rule does not specify how payment for room and board should 
be made.
    Comment: One commenter expressed that all requirements listed for 
provider-owned or controlled settings should be a part of the final 
rule. The commenter also indicated concern that the example given in 
the rule creates the impression that addressing safety needs of persons 
with dementia is only one of many possible examples of how conditions 
might be modified.

[[Page 2980]]

    Response: This was only intended as one example of this provision 
and is not depicting a full range of possible situations. To avoid 
confusion, and to clarify that person-centered planning is based on the 
person and not on his/her diagnosis, we have deleted this example from 
the regulation text.
    Comment: One commenter stated that, in addition to the provisions 
at Sec.  441.530(a)(1)(vi) and Sec.  441.530(a)(2)(v), other provisions 
can be used to ensure that the settings in which residents receive 
1915(k) CFC services are designed to facilitate the actual integration 
of the residences that are provider-owned or controlled for providing 
residential support to recipients.
    Response: We agree with the commenter. For a setting proposed under 
1915(k) CFC to be determined home and community-based, the setting must 
meet all requirements set forth in Sec.  441.530.
    Comment: One commenter urged CMS to give serious consideration to 
striking the ``conditions for provider-driven setting'' provision. The 
commenter stated that though the rules attempt to create a homelike 
environment by proposing conditions, no reasonable person would accept 
these conditions as homelike. In addition, the commenter stated that 
regardless of the size of a provider controlled setting, the very 
nature of these environments isolates, congregates and segregates the 
individuals living there, and limits personal freedom.
    Response: We disagree. We believe there are provider-owned or 
controlled settings that not only meet the overall HCB qualities but 
also meet the additional conditions and allow for full integration into 
the community; therefore, we will keep the conditions to ensure the 
standards for HCB settings are met. We believe the commenter's request 
to delete the conditions for provider-controlled settings would not 
accomplish the suggested purpose.
    Comment: Several commenters suggested that CMS consider giving 
human rights reviewing committees the added responsibility of reviewing 
modifications, and requiring a clear appeals process for any individual 
who does not agree to the conditions.
    Response: We have amended the regulations to include a requirement 
for informed consent and we specified that any modification of the 
additional conditions must be supported by a specific assessed need and 
justified in the person-centered service plan. We will add further 
descriptions in future guidance.
    Comment: Several commenters request that CMS specify the 
requirements for provider-controlled settings so that providers and 
developers get the message that facilities cannot be built or 
established that are not the most integrated settings.
    Response: We believe that all home and community based settings 
should be integrated into and allow access to the greater community and 
our regulation already outlines additional criteria that must be met to 
qualify as a home and community-based setting where the setting is 
provider-controlled. Adding further criteria may be too prescriptive 
and could limit individual choice of settings.
    Comment: A few commenters believe the proposed regulations would 
eliminate or severely restrict HCBS in group homes for people with 
disabilities in which providers have adopted reasonable policies 
governing their operation designed to respect the individual's rights 
and at the same time respect the rights of other residents.
    Response: Based on our experience and significant public input, we 
believe we must set minimum additional conditions for provider-owned or 
controlled settings to ensure that they are home and community-based. 
The commenters did not indicate which conditions would result in this 
impact, nor provide suggestions for minimum conditions to meet the 
intent of this provision of the rule. In an effort to address the 
concerns raised by commenters who feared loss of current residential 
options and the subsequent displacement of the individuals living in 
such settings who receive HCB services and the concerns raised by other 
commenters who urged us to draw an immediate and clear line of 
demarcation for HCBS, we will permit states to propose transition plans 
for existing approved HCBS under 1915(i) in accordance with section 
441.710(a)(3). While our expectation is that states would transition to 
compliance with this final rule in as brief a period as possible, we 
will allow states to propose a transition plan that encompasses a 
period up to five years after the effective date of the regulation if 
the state can support the need for such a period of time. States are 
expected to demonstrate substantial progress toward compliance 
throughout any transition period.
    Comment: One commenter believes the proposed regulations are biased 
against provider-owned or controlled residential settings through the 
proposed imposition of additional regulatory conditions on such 
settings. The commenter believes that many provider-owned residential 
settings are developed to assist with improving the availability of 
accessible and affordable housing so that individuals with 
developmental disabilities have some choice in community housing 
options and can avoid the need for unnecessary institutionalization.
    Response: We believe that it is appropriate to specify additional 
conditions for provider-owned or controlled settings to ensure that all 
individuals receiving HCBS are afforded the opportunities that are 
characteristic of living in the community.
    Comment: A few commenters stated their belief that the focus should 
not be on the setting, but rather an individual's choices and the 
person-centered service plan. The commenter stated that arbitrary 
geographic or location specific criteria are not appropriate, and if a 
provider-based setting can meet all of the criteria in Sec.  
441.530(a)(1) or Sec.  441.710(a)(1), it should not matter where the 
provider is located.
    Response: We agree with these comments and believe the regulatory 
language at Sec.  441.530(a)(1) and Sec.  441.710(a)(1) achieves this 
purpose.
    Comment: One commenter applauds use of the more general term 
``provider-owned or controlled residential settings,'' but since CMS is 
creating a new technical term defining a class of services, it would be 
prudent to offer clearer regulatory guidance regarding the reach of 
such a term. For example, would an elderly housing project that 
included service coordination and other services be subject to these 
provisions as a provider-owned residential setting? CMS may want to 
consider limiting this term to apply to state-licensed or certified 
settings to avoid confusion.
    Response: We are not defining a class of services. We are 
describing the conditions that provider-owned or controlled settings 
must meet to be considered home and community-based settings. If the 
elderly housing project is provider-owned or controlled, it would have 
to meet these additional HCB setting conditions. We do not believe 
limiting the application of the term ``provider-owned or controlled 
residential settings'' to those licensed or certified by the state is 
in the best interests of the individuals served under the HCBS 
programs, nor would that approach be adequate to achieve the goal of 
defining the qualities and other requirements for settings that are 
home and community-based.
b. Target Population
    The Affordable Care Act added section 1915(i)(7) to the Act, which 
allows states to target the section 1915(i)

[[Page 2981]]

benefit to specific populations. We proposed that target population(s) 
may be based on diagnosis, disability, Medicaid eligibility groups, 
and/or age. States may target services only to eligible individuals in 
their chosen target groups, or provide different services within the 
1915(i) benefit to different target groups. Due to the ability to 
define targeted populations, a state may now propose more than one set 
of section 1915(i) benefits, with each benefit package targeted toward 
a specific population. A state may also propose one section 1915(i) 
benefit that targets multiple populations, and may offer different 
services to each of the defined target groups within the benefit. 
Additionally, a state may propose a section 1915(i) benefit that is not 
targeted to a specific population and instead uses only the needs-based 
criteria to establish eligibility for the benefit. The targeting option 
does not permit states to target the benefit in a manner that would not 
comply with section 1902(a)(23) of the Act regarding free choice of 
providers, or that forestalls the opportunity for individuals to 
receive services in the most integrated setting possible. Therefore, 
targeting criteria cannot have the impact of limiting the pool of 
qualified providers from which an individual would receive services, or 
have the impact of requiring an individual to receive services from the 
same entity from which they purchase their housing. For example, we 
would not allow states to establish targeting criteria that would 
restrict eligibility to only individuals who reside in provider-owned 
and/or operated settings. If a state elects to target the benefit to a 
specific population or populations, it must still establish needs-based 
criteria that individuals must meet in order to be eligible for section 
1915(i) of the Act services and the state may also establish needs-
based criteria for individual services within the benefit. The needs-
based criteria may include specific needs that are applicable to the 
targeting criteria, but may also include general needs that apply 
across all of the populations included in the benefit.
    Comment: One commenter requested that CMS not limit people seeking 
mental health treatment.
    Response: We believe this commenter has misunderstood the intent of 
this provision of the rule, which does not allow states to limit number 
of participants but allows states the option to target section 1915(i) 
of the Act to specific population types. So in this example, a state 
could target a section 1915(i) benefit to individuals with a chronic 
mental illness, but would not be able to limit or cap the number of 
people meeting this target criterion. Anyone meeting this target 
criterion, and also meeting the other eligibility requirements under 
section 1915(i) of the Act, would be eligible to receive any needed 
services included in the state's benefit.
    Comment: A couple of commenters pointed out that the reference to 
target criteria in Sec.  441.656(b)(2) of this section was incorrect.
    Response: We thank the commenters for noting this error and we have 
corrected this reference so that it now reads as ``Sec.  441.710 
(e)(2).''
    Comment: Two commenters expressed concern that allowing multiple 
target groups within one 1915(i) state plan HCBS benefit might result 
in a net reduction of service availability, and lead to institutional 
care. One ``fears that the blending of target audiences'' will ``leave 
the voiceless minority without access to adequate services.''
    Response: As an optional approach available to states, this option 
is not intended to restrict or compromise service availability. States 
can choose which services they will offer under a 1915(i) State plan 
benefit, regardless of whether they take up the additional option to 
target a population(s). As with all state plan services, states must 
offer all needed services that they choose to include under their 
benefit to all who are eligible.
    Comment: One commenter expressed concerns that allowing states to 
serve multiple target populations in one benefit will lead to states 
serving ``incompatible populations in the same service setting.'' They 
cited examples in states where individuals with one type of disability 
were harmed by others with a different disability, and requested CMS to 
expressly prohibit states from serving different populations in the 
same location.
    Response: This section of the regulation does not speak to 
combining different target groups in the same living situations, but 
rather the inclusion of multiple target groups in the overall benefit 
design and operation. Including multiple target groups in one benefit 
will not alleviate responsibilities of States for quality assurance and 
detailing their quality improvement strategies for that benefit.
    Comment: A few commenters indicated that we should explicitly state 
that ``a state may propose more than one set of section 1915(i) of the 
Act benefits, with each benefit package targeted toward a specific 
population'' and that the state may also target multiple populations 
under one set of benefits or offer different services to each of the 
defined target groups within the benefit.
    Response: Under Sec.  441.710(e)(2)(ii) of the regulation text, we 
specify ``The State may elect in the State plan amendment to limit the 
availability of specific services defined under the authority of Sec.  
440.182(c) or to vary the amount, duration, or scope of those services, 
to one or more of the group(s) described in this paragraph.'' In the 
preamble to the proposed rule, we stated ``Due to the ability to define 
targeted populations, a state may now propose more than one set of 
section 1915(i) benefits, with each benefit package targeted toward a 
specific population. A state may also propose one set of section 
1915(i) benefits that targets multiple populations, and may offer 
different services to each of the defined target groups within the 
benefit. Additionally, a state may propose a section 1915(i) benefit 
that does not choose non-application of comparability and instead uses 
only the needs-based criteria to establish eligibility for the 
benefit.'' A change to the regulation text is not necessary but we will 
include this information in future guidance.
    Comment: One commenter recognized the benefit of the targeting 
option as ``many states will not consider the State Plan HCBS benefit 
if it does not include mechanisms to control costs, especially given 
this existing economic climate.'' However, the commenter also noted 
that ``generally systems should be designed to promote community access 
over institutional access, regardless of individuals' presenting 
characteristics.''
    Response: We agree with this commenter and note that the ability to 
target the benefit to specific populations is a state option afforded 
by section 1915(i) of the Act, and thus, not something being made 
available solely through this regulation.
    Comment: A couple commenters noted that Sec.  441.656(e)(2)(ii) 
references ``Sec.  440.182(b)'' which should be referenced as Sec.  
440.182(c).
    Response: We thank the commenters for noting this error and have 
corrected this reference at Sec.  441.710(e)(2)(ii) so that it now 
references services defined under the authority of Sec.  440.182(c).
    Comment: A couple of commenters requested that the regulation 
explicitly state in Sec.  441.656(e) that states may propose a section 
1915(i) benefit that ``does not choose non-application of comparability 
and instead uses only the needs-based criteria to establish eligibility 
for the benefit.''
    Response: Revision to regulatory text is not needed as Sec.  
441.710(e)(2) already specifies that disregarding

[[Page 2982]]

comparability is a State option: ``In the event that a State elects not 
to apply comparability requirements:* * *'' And Sec.  441.715 specifies 
the requirement that States establish needs-based criteria for 
determining an individual's eligibility under the State plan for the 
HCBS benefit.
6. Needs-Based Criteria and Evaluation (Sec.  441.715) (Proposed Sec.  
441.659)
    Section 1915(i)(1)(A) of the Act requires states to establish 
needs-based criteria for eligibility for the State plan HCBS benefit. 
Institutional level of care criteria must be more stringent than the 
needs-based criteria for the State plan HCBS benefit. Additionally, the 
state may establish needs-based criteria for each specific State plan 
home and community-based service that an individual would receive.
    Comment: Some commenters supported the use of needs-based criteria 
in determining eligibility for State plan HCBS. Several also expressed 
appreciation of the statutory requirement that a state notify CMS and 
the public 60 days in advance of any proposed restriction on the needs-
based eligibility criteria (adjustment authority), if the number of 
individuals enrolled in the benefit exceeds the projected number 
submitted annually to CMS. These commenters agreed that notification to 
CMS should take the form of a State plan amendment.
    Response: We appreciate these comments supporting this provision of 
the rule.
    Comment: A couple of commenters suggested that CMS clarify that a 
60-day public notice be required for any changes in need-based 
criteria, as well as any related level of care changes, and to include 
notifying the individual and any authorized representative. They also 
requested that this notice include guidance for states on the 
individual's appeals rights and stipulate that appeals information must 
be included in communications to individuals. A couple of commenters 
also recommended a formal comment period, to provide an established 
mechanism for public input on the state proposed modification prior to 
federal action.
    Response: Section 441.715(c)(1) requires states to provide at least 
60 days notice of a proposed modification of the needs-based criteria 
to the Secretary, the public, and each individual enrolled in the State 
plan HCBS benefit. In addition, Sec.  441.715(c)(5) requires any 
changes in service due to the modification of needs-based criteria 
under the adjustment authority to be treated as actions as defined in 
Sec.  431.201 and these actions are subject to the fair hearing 
requirements of part 431 subpart E of this chapter. States are also 
required under Sec.  431.12 to provide for a medical care advisory 
committee to advise the Medicaid agency director about health and 
medical care services, and the committee must have the opportunity for 
participation in policy development and program administration. We 
encourage states to seek effective public engagement in all of their 
Medicaid 1915(i) activities.
    Comment: A couple of commenters recommended a formal comment 
period/participant notice be required when a state proposes to change 
its level-of-care criteria for institutional care.
    Response: Criteria for institutional care (level of care) are set 
by states as a means to determine an individual's medical necessity for 
a service. These criteria are state policy, not approved by us, and not 
articulated in the Medicaid State plan, so we do not have an 
opportunity to require notice or comment periods. States could adopt 
their own notice and comment requirements. We note that to the extent a 
change in level of care would affect access to Medicaid services, 
states are required to notify beneficiaries and provide an appeal 
process. We may review state institutional level of care criteria, for 
example, to determine if stringency requirements are met in considering 
a state plan amendment to establish the State Plan HCBS benefit under 
section 1915(i) of the Act. Such review is for approval of the proposed 
benefit, not approval of the level of care criteria, and our review 
does not reopen state level of care policy for public comment.
    Comment: A couple of commenters recommended that we change ``will'' 
to ``may'' in the proposed regulatory language so that CMS will retain 
some discretion to adapt to unexpected circumstances.
    Response: We agree with this recommendation from commenters. This 
sentence in the regulation at Sec.  441.715(c) now reads ``The 
Secretary may approve a retroactive effective date for the State plan 
amendment modifying the criteria, as early as the day following the 
notification period required under paragraph (c)(1) of this section, if 
all of the following conditions are met . . .''
    Comment: One commenter recommended that the 60 day written notice 
to the Secretary (for proposals to revise needs-based criteria) be 
provided at the same time as tribal notice is made, 60 days in advance 
of submission of the State plan amendment.
    Response: We acknowledge the comment with the following reminders: 
Sec.  430.16 provides the Secretary 90 days to approve or disapprove a 
State plan amendment, or request additional information. If the state 
implements the modified criteria prior to the Secretary's final 
determination with respect to the state plan amendment, the state would 
be at risk for any actions it takes that are later disapproved. 
Further, Section 5006(e) of the American Recovery and Reinvestment Act 
of 2009 (Recovery Act), Public Law 111-5, codified at section 
1902(a)(73), requires states to solicit advice from tribes and Indian 
Health Programs prior to the state's submission of any Medicaid or CHIP 
State plan amendment likely to have a direct effect on Indians, Indian 
Health Programs, or Urban Indian Organizations. The statutory 
requirement is that states must solicit this advice prior to submission 
of a SPA or waiver to CMS following the process described for 
soliciting advice from Indian Health Providers and Urban Indian 
Organizations in each state's approved State Plan.
    Comment: One commenter requested revision to Sec.  441.659(b) to 
specify that there it is not a requirement that institutional or home 
and community-based waiver criteria be higher than their level prior to 
implementing the State plan HCBS benefit.
    Response: We are unable to make this revision as it is would not 
comport with section 1915(i)(1)(B) of the Act, which requires needs-
based criteria for receipt of services in nursing facilities, 
intermediate care facilities for individuals with intellectual 
disabilities, and hospitals, or waivers offering HCBS, to be more 
stringent than the needs-based criteria for the State plan HCBS 
benefit.
    Comment: One commenter indicated that their state is attempting to 
further change the Medicaid institutional level of care criteria to 
restrict Medicaid eligibility to the lower need individuals in several 
categories of settings, including the HCBS setting, and expressed 
concern about how the federal proposal would intersect with this state 
proposal, and whether the criteria would align, be duplicative, or 
conflicting.
    Response: In order to implement and maintain section 1915(i) State 
plan HCBS, the state's institutional level of care criteria must be 
more stringent than the needs-based criteria for the State plan HCBS 
benefit.
    We note that there are issues for states to consider other than 
section 1915(i) of the Act that will influence decisions on levels of 
care and needs-based criteria,

[[Page 2983]]

that are beyond the scope of this regulation, for example, statutory 
requirements for maintenance of effort (MOE) in effect at the time of 
this final rule, requirements of the ADA and the Olmstead decision, and 
funding constraints. Under section 2001(b) of the Affordable Care Act, 
States are not permitted to establish eligibility standards, 
methodologies, or procedures that are more restrictive than those in 
place on the date of the Affordable Care Act's enactment (March 23, 
2010). For adults, this requirement lasts until the Secretary 
determines that a health insurance exchange is fully operational in the 
state; for children under the age of 19, the requirement lasts until 
September 30, 2019. Because the application of LOC requirements for 
institutions and HCBS waivers may have an impact on Medicaid 
eligibility for some individuals, we encourage states interested in 
using the State plan HCBS to contact CMS for technical assistance in 
meeting these statutory requirements.
    Comment: While several commenters expressed support for 
grandfathering of institutional and waiver participants when states 
increase stringency for institutional level of care, they also had 
concerns that the stringency requirements might be interpreted to allow 
a state to change the needs-based criteria between the institutional 
and waiver level of care and the state plan home and community-based 
level of care with the net effect that people would not be eligible for 
either. They recommended that CMS revise the regulation to require 
states to grandfather HCBS participants who would lose Medicaid 
eligibility due to ``stringency'' adjustments. Two other commenters 
also noted that CMS misinterpreted the statute where it specifies that 
FFP ``shall'' continue to be available, as a state option stating their 
belief that this indicates a state requirement and not an option.
    Response: The statute at section 1915(i)(5) of the Act does not 
create a mandate for states to continue to provide assistance to such 
individuals and to claim FFP. The statute permits states the option to 
continue receiving FFP for individuals who are in an institution or 
HCBS waiver, if a state needs to modify section 1915(i) needs-based 
criteria after implementation of a section 1915(i) benefit, and also 
needs to modify institutional needs-based criteria in order to meet the 
1915(i) stringency requirement. Therefore, we have not adopted this 
change as requested to regulation text language at Sec.  441.715(b)(2). 
However, we note that other legal provisions, such as those related to 
discharge planning, might require the continued provision of certain 
services to individuals.
    Comment: One commenter recommended deletion of the provision at 
proposed Sec.  441.659(c)(4)(ii). The commenter believes that the HCBS 
population has predictable fluctuations in status and therefore the 
grandfathering provision should be flexible enough to protect 
individuals who go through short-term transitions.
    Response: We disagree with this recommendation and have not made 
this revision as requested. Section 441.715(c)(4)(ii) is an important 
provision that requires states, when they revise needs-based criteria 
after implementation of the benefit (adjustment authority), to continue 
providing State plan HCBS to individuals who were eligible prior to the 
change but no longer meet the state's new needs-based criteria until 
such time as they no longer meet Medicaid eligibility requirements or 
eligibility requirements to be served under the state's section 1915(i) 
benefit.
    Comment: One commenter recommended that CMS define the term 
``independent'' in the regulation.
    Response: This is defined at Sec.  441.730. Section 441.715 already 
indicates that an agent (who performs the evaluation) must be 
independent and qualified as defined in Sec.  441.730.
    Comment: A couple of commenters commended the inclusion of a 
requirement at Sec.  441.659(d)(3) to consult with the individual, but 
recommend this be defined and strengthened to include a more central 
role for the individual, including for example consultation with 
providers, social service staff, or others identified by the 
individual. Another requested Sec.  441.659(d)(3) be changed to reflect 
that the person-centered service plan should have the person 
``directing'' the plan whenever possible and suggested that if the 
individual wishes, other people of the individual's choice be 
consulted.
    Response: This section of the rule pertains to the independent 
evaluation to determine eligibility. Therefore, we do not believe it is 
necessary to include requirements about the person-centered service 
planning process, for which there are separate regulations at Sec.  
441.725(a) and which already reflect the recommendations of this 
commenter.
    Comment: A couple of commenters noticed that Sec.  441.659(b)(2) 
includes an incorrect reference to (c)(7).
    Response: We have corrected the text in Sec.  441.715(b)(2) of the 
final rule to change the reference from (c)(7) to (c)(6).
    Comment: One commenter noticed that Sec.  441.659(d) incorrectly 
references Sec.  441.656(a)(1) through (5), and that Sec.  
441.659(d)(2) incorrectly references Sec.  441.656(a)(1) through (3) 
and (b)(2).
    Response: In Sec.  441.715(d), we have corrected the reference so 
that it now reads as Sec.  441.715. In Sec.  441.715(d)(2), we have 
also revised the reference so that it now reads correctly as Sec.  
435.219 and Sec.  436.219.
    Comment: One commenter requested that we eliminate the word 
``eligibility'' from Sec.  441.659 and replace it with ``services'' to 
eliminate confusion so that eligibility would be centered on 
categorical eligibility while service criteria were used for needs-
based criteria.
    Response: We are unable to make this requested revision, since 
needs-based criteria are necessary for eligibility, in addition to the 
other eligibility requirements specified in Sec.  435.219 and Sec.  
436.219.
    Comment: A couple of commenters requested that the regulation 
include an individual's inability to perform 2 or more ADLs or IADLs as 
a requirement for eligibility under section 1915(i) of the Act.
    Response: This is not an eligibility requirement under the statute 
and we are not able to make this requested revision. While 
1915(i)(1)(F)(i) requires that the independent assessment include an 
objective evaluation of an individual's inability or need for 
assistance to perform 2 or more ADLs, this is only a suggested element 
at 1915(i)(1)(D)(i) and thus, not required for an individual to be 
determined eligible for 1915(i) State plan HCBS.
    Comment: One commenter requested that we add a provision to Sec.  
441.659(d)(3) to include consultation with the parents of a child.
    Response: We believe that the broader term ``individual's 
authorized representative,'' used in 1915(i) of the Act and in this 
regulation, would include, in the case of a child, the child's parents 
or legal guardian, and does not need to be explicitly stated in 
regulation.
    Comment: Another commenter recommended that when assessing the 
individual's support needs for purposes of evaluation of eligibility, 
that informal supports arranged by the individual not be considered 
unless the individual explicitly chooses to include them.
    Response: This suggestion is already captured in Sec.  
441.720(a)(2) where the regulation requires the assessment to 
``[hellip]include the opportunity for the individual to identify other 
persons to be consulted, such as, but not limited to, the individual's 
spouse, family,

[[Page 2984]]

guardian, and treating and consulting health and support professionals 
responsible for the individual's care.''
    Comment: A couple of commenters stressed the importance that FFP be 
available for evaluations even when an individual is subsequently found 
ineligible for section 1915(i) of the Act services.
    Response: As stated in section III.N.2.of the preamble to the 
proposed rule, FFP is available for evaluation and assessment as 
administration of the approved state plan prior to an individual's 
determination of eligibility for and receipt of other section 1915(i) 
of the Act services. If the individual is found not eligible for the 
State plan HCBS benefit, the state may claim the evaluation and 
assessment as administration, even though the individual would not be 
considered to have participated in the benefit for purposes of 
determining the annual number of individuals served by the benefit.
    Comment: Some commenters requested clarification regarding level of 
need, as defined by the state and provider, including whether a state 
may leverage existing and/or specific instruments that are used to 
determine HCBS waiver eligibility in order to determine whether a 
beneficiary meets the State plan HCBS needs assessment criteria for 
participation, understanding that the State plan HCBS benefit 
eligibility criteria must be less stringent than that used for HCBS 
waiver programs.
    Response: The state's process for determining eligibility must meet 
the requirements at Sec.  441.715(d). We do not require a specific 
instrument(s) that states must use in meeting these requirements.
    Comment: One commenter indicated that if states establish needs-
based criteria for each specific service that an individual receives, 
it would add to the complexity of the assessment service planning, the 
overall costs of program administration, and potential beneficiary and 
family caregiver confusion. They stressed that such variability in 
Medicaid across states could become extremely difficult to track and 
monitor.
    Response: As specified in the regulation, this is optional for 
states. This option could be of benefit for states that wish to include 
services for individuals with specific needs within a section 1915(i) 
of the Act benefit that is not targeted to a specific population 
group(s) and is designed to provide a broad array of services.
    Comment: One commenter requested CMS require states to make needs-
based criteria publicly available, including public Web site posting. 
Another inquired how CMS will maintain publicly available documents 
relating to the state's modification proposal, approval and denial 
letters, comments submitted and communications with the state.
    Response: We agree that web posting is an ideal way to make state 
plans and amendments available to the public, and we are building a 
web-based information system for all of Medicaid and CHIP that will 
provide immediate access to state plan amendments. Section 1915(i) of 
the Act SPAs will be part of that system. Until then, SPAs are 
processed on paper and posted sometime after approval. We encourage 
states to provide for effective public engagement in all of their 
Medicaid program activities, and states are required to provide 60 day 
public notice when states change reimbursement methodology or revise 
CMS approved section 1915(i) needs-based criteria.
7. Independent Assessment (Sec.  441.720) (Proposed Sec.  441.662)
    Section 1915(i)(1)(E) of the Act describes the relationship of 
several required functions. Section 1915(i)(1)(E)(i) of the Act refers 
to the independent evaluation of eligibility in section 1915(i)(1)(A) 
and (B) of the Act, emphasizing the independence requirement. Section 
1915(i)(1)(E)(ii) of the Act introduces the requirement of an 
independent assessment following the independent evaluation. Thus, 
there are two steps to the process: The eligibility determination, 
which requires the application of the needs-based criteria and any 
additional targeting criteria the state elects to require; and the 
assessment for individuals who were determined to be eligible under the 
first step, to determine specific needed services and supports. The 
assessment also applies the needs-based criteria for each service (if 
the state has adopted such criteria). Like the eligibility evaluation, 
the independent assessment is based on the individual's needs and 
strengths. The Act requires that both physical and mental needs and 
strengths are assessed. We note that while section 1915(i)(1)(F)(i) of 
the Act requires that the independent assessment include an objective 
evaluation of an individual's inability or need for assistance to 
perform 2 or more ADLs, this is only a suggested element at section 
1915(i)(1)(D)(i) of the Act and thus, not required for an individual to 
be determined eligible for 1915(i) State plan HCBS.
    These requirements describe a person-centered assessment including 
behavioral health, which will take into account the individual's total 
support needs as well as the need for the HCBS to be offered. Section 
1915(i)(1)(E)(ii) of the Act requires that states use the assessment 
to: determine the necessary level of services and supports to be 
provided; prevent the provision of unnecessary or inappropriate care; 
and establish a written individualized service plan.
    To achieve the three purposes of the assessment listed above, the 
assessor must be independent; that is, free from conflict of interest 
with regard to providers, to the individual and related parties, and to 
budgetary concerns. Therefore, we proposed specific requirements for 
independence of the assessor in accordance with section 
1915(i)(1)(H)(ii) of the Act, and we will apply these also to the 
evaluator and the person involved with developing the person-centered 
service plan, where the effects of conflict of interest would be 
equally deleterious. These considerations of independence inform the 
discussion below under section 1915(i)(1)(H)(ii) of the Act regarding 
conflict of interest standards.
    Comment: Many commenters expressed support of the independent 
assessment requirements in this section of the rule. One commenter who 
expressed agreement with Sec.  441.662(a)(1), stated that individuals 
with disabilities have a right to choose their own lifestyle, just like 
their peers without disabilities.
    Response: We appreciate these comments and support.
    Comment: One commenter stated that clear assessment standards are 
necessary to ensure that individuals deemed eligible for section 
1915(i) of the Act services receive the services that are most 
appropriate and effective.
    Response: We agree and have specified these requirements in Sec.  
441.720.
    Comment: A commenter requested that we ensure there are assessments 
of need for individuals residing in facility-based settings before the 
development of their person-centered service plans.
    Response: The requirements of this regulation pertain to all 
section 1915(i) of the Act eligible and enrolled individuals residing 
in home and community-based settings, regardless of the setting.
    Comment: One commenter stated concern that Sec.  
441.662(a)(1)(i)(A) refers to ``health care professionals,'' given that 
often assessments of support needs--such as the Supports Intensity 
Scale and functional-behavioral needs assessments--are made by case

[[Page 2985]]

managers or social workers, rather than health care professionals.
    Response: As enrolled Medicaid providers of Medicaid services or 
administrative activities, case managers and social workers are 
included in our regulation as ``health care professionals.''
    Comment: A couple of commenters requested that CMS add to paragraph 
(a)(2) ``friends'' as respondents that the individual may identify to 
participate in the assessment. They also commented that this paragraph 
should require that the assessor actually contact and involve 
individuals identified.
    Response: We do not believe it is necessary to add an exhaustive 
list of all the examples of the persons that an individual participant 
may choose to include in this process. The requirement specifies a few 
examples but emphasizes that these are just examples and not a 
limitation.
    Comment: A couple of commenters requested clarification in Sec.  
441.662 (a)(4) on the requirements for a caregiver assessment, 
including what it means, the process, and purpose. Another commenter 
suggested its removal, stating that it unnecessary since there is 
already an assurance elsewhere in the regulations that states must 
assure the enrollees' health and welfare. However, many others 
expressed their support of this provision and stressed the importance 
of its inclusion in the regulation; some even urged CMS to include this 
under other Medicaid HCBS authorities. One of these commenters 
requested the addition that the caregiver assessment will assess the 
training, support and respite needs and identifying options for 
receiving these services. Another stated that the assessment should 
evaluate the caregiver's well-being, needs, strengths and preferences, 
as well as the consequences of caregiving on the caregivers.
    Response: We included this provision in the proposed rule as a 
result of comments received in response to the first proposed rule 
pertaining to section 1915(i) of the Act, which was not finalized. 
Those commenters stated that taking into account the capacity of 
primary caregivers to provide for the individual's assessed needs is 
necessary, and some stated that natural supports often have declining 
capacity, and to fail to take this into account leads to unrealistic 
plans. We agree that when caregivers are being relied upon to implement 
the person-centered service plan, it is important that a caregiver 
assessment be required in order to acknowledge and support the needs of 
informal family caregivers. We agree that caregivers provide critical 
care and support that enables individuals to live in their homes and 
communities. When there is a caregiver involved, an assessment of the 
caregiver's needs is essential to facilitate the individual's linkage 
to needed supports. We appreciate the comments regarding definition and 
process, which we will consider for future guidance.
    Comment: Many commenters requested that CMS add language to the 
rule that specifically addresses assessment of needs related to 
cognitive impairment. A couple of commenters noted that this is needed 
to promote early diagnosis of memory problems and prevent the cycle of 
under-diagnosis and misdiagnosis of Alzheimer's disease. They stated 
that many individuals with dementia need supervision and cueing or are 
unable to perform instrumental activities of daily living. Others 
expressed support of a more comprehensive approach to include social, 
medical, behavioral, emotional, physical and cognitive strengths and 
challenges, and also noted that on-going training and coaching in 
understanding cognitive and behavioral issues unique to brain injury in 
the planning process should be a part of the delivery system. They 
stated that CMS and states will need to work with program participants 
and community advocates to determine the appropriate depth of 
assessment, allowing for an informed planning process while also being 
respectful of some individuals' desire for a non-intrusive approach. 
They also noted that a range of professionals may be suitable for 
assessing cognitive as well as behavioral issues, including 
neuropsychologists, psychologists trained in brain injury, educators, 
and speech and language therapists.
    Response: We agree with these comments and have added ``cognitive'' 
to Sec.  441.720(a)(4).
    Comment: One commenter expressed support of the requirement for a 
person-centered assessment process.
    Response: We agree that this is essential to the assessment and 
person-centered service planning process.
    Comment: One commenter stated that it would be helpful for 
providers and practitioners to have a degree of flexibility in 
prioritization and to override recommendations for lower levels of 
care. They noted that this could be kept at a particular level (that 
is, no more than 5 percent of the time), but there are certain 
conditions and situations that can result in skewed assessment results.
    Response: We do not agree with this comment. We do not believe it 
would be consistent with the intent of this sub-section, or with the 
person-centered process requirements at Sec.  441.725, and would 
enhance the potential for conflict of interest.
    Comment: A few commented on the statutory requirement regarding 
assessment of an individual's inability to perform two or more ADLs. 
One suggested that the assessor also consider cueing as assistance, 
whether by someone, a device or service animal in addition to 
individual assistance or assistive technology. Another stated that the 
statute does not set any specific needs-based or ADL criteria as a 
standard for eligibility for any HCBS, and that CMS should clarify that 
states should not interpret the two ADLs evaluation criteria in the 
assessment to mean that two ADLs is the standard for eligibility for 
the state plan option or for any specific services under the state plan 
option. One commenter recommended that CMS clarify in the preamble that 
while ADL review is a required element of the assessment, the result of 
the ADL review cannot be a litmus test for access to services.
    Response: An objective evaluation of the individual's inability to 
perform two or more ADLs is, in statute, a required element of the 
independent assessment but it is only a permissible element of the 
independent eligibility evaluation. The statute does not specify that 
eligibility for state plan HCBS must be based on the evaluation of the 
individual's inability to perform a minimum number of ADLs. We 
concluded that partial or complete inability to perform two or more 
ADLs is not a statutory prerequisite to eligibility for State plan 
HCBS. However, the evaluation of an individual's inability to perform 
two or more ADLs, as required under section 1915(i)(1)(F)(i) of the 
Act, is related to the state's responsibility under section 
1915(i)(1)(E)(ii) of the Act to use the results of the assessment to 
determine a necessary level of services and supports, prevent the 
provision of unnecessary or inappropriate care, and establish an 
individualized care plan.
    Comment: Some commenters recommended that in-person assessments be 
required or, alternatively, that telemedicine assessments be allowed 
only in very limited circumstances when in-person assessments cannot 
practically be performed. Other commenters agreed that it may be 
appropriate to use technology to conduct assessments in certain 
circumstances, such as for individuals in rural or underserved areas, 
but not for beneficiaries for whom such circumstances do not create

[[Page 2986]]

barriers to an in-person and in-home assessment. They suggested 
additional language to limit use of technology to conduct assessments 
to individuals in rural areas, or other special circumstances by 
requiring states to make an individualized determination of the need 
for substituting telemedicine for genuinely in-person assessments. One 
commenter stated that it should only be allowed if the state makes an 
individualized determination of the need for substituting telemedicine 
for genuinely in-person assessments. Another stated that assistive 
technology or other alternative or augmentative communication should be 
made available for those who would benefit from it. A few commenters 
stated that Sec.  441.662(a)(1)(i)(B) should include, if the individual 
wishes, the presence of family, a peer/parent support provider, or 
other people of the individual's choice.
    Response: In our preamble to the proposed rule, we indicated that 
we added this provision of the regulation in recognition that many 
states are developing infrastructure and policies to support the use of 
telemedicine and other ways to provide distance-care to individuals in 
order to increase access to services in rural areas or other locations 
with a shortage of providers. However, we are concerned that by 
limiting this technology to only these circumstances, the regulation 
may end up precluding instances where it may be useful, maybe even 
essential. Therefore, we are not adding this limitation to the 
regulation, but will include this example in future guidance and 
monitor its use by states. We also note that these requirements do not 
override the other requirements for the assessment in this section, 
including the person-centered process and consultation with persons 
that the individuals choose to include.
    Comment: A couple of commenters stated that Sec.  441.662(a)(7) 
regarding habilitation services specifies that only Section 110 of the 
Rehabilitation Act of 1973 and the Individuals with Disabilities 
Education Improvement Act of 2004 are primary payors and that (a)(8) 
should require documentation indicating that State plan HCBS also 
available through other Medicaid services or other federally funded 
programs, will not be provided:
    ``No State plan HCBS are provided which would otherwise be 
available in the same amount, scope, and duration to the individual 
through other Medicaid services or other federally funded programs 
available under Section 110 of the Rehabilitation Act of 1973 and the 
Individuals with Disabilities Education Improvement Act of 2004.''
    Response: We do not agree with this suggested addition. The broader 
requirement of this provision ensures that if the same services are 
available through other sources, then State plan HCBS would not be 
provided. Adding the suggested clause would leave the possibility for a 
state to claim FFP for a service through section 1915(i) of the Act 
before or instead of claiming it through these other authorities/
programs. Since the intent of this provision is to ensure that states 
only claim for State plan HCBS when they are unavailable through other 
sources, we are unable to incorporate the language requested.
    Comment: A couple of commenters recommended adding a modification 
so that Sec.  441.662(a)(8) would require that the services be 
``immediately'' available to the individual.
    Some commenters stated concern that a state might deny an 
individual's ability to choose to receive a service through the section 
1915(i) of the Act benefit, if that service would be theoretically 
available under another federal program but the fact that the 
individual was not provided with assistance in applying for those 
services would result in delayed access to services or no access to 
services. They instead proposed a ``no wrong door'' policy in enrolling 
individuals in the section 1915(i) of the Act State plan benefit, so 
that regardless of their eligibility status for services under other 
programs the individual begins receiving the services they are 
determined to need through their individualized assessment without 
having to apply or complete additional eligibility determinations. They 
also stated that individuals should be able to utilize the program that 
best meets their needs and preferences, and provides for the greatest 
degree of service coordination and administrative simplification.
    Response: We developed the requirements at Sec.  441.720(a)(7) and 
(8) due to concern over duplication of habilitation services and other 
state-defined services. Additionally, since some individuals may be 
simultaneously receiving services through a HCBS waiver and the section 
1915(i) benefit, we require in Sec.  441.720(a)(9) documentation that 
the services provided through section 1915(c) and section 1915(i) of 
the Act authorities are not duplicative for the same individual. This 
will also include coordination of assessments, person-centered service 
plan development, and case-management to ensure that individuals 
receiving services under both authorities are not subject to multiple 
assessments and person-centered service plans. We believe the term 
``available,'' addresses the concern and revision is unnecessary.
    Comment: A commenter asked whether individuals would be required to 
utilize the State plan HCBS benefit first, when those services are 
duplicative of services also offered under a HCBS waiver for which that 
individual is eligible, such as habilitation services.
    Response: The determination of how such services would be provided 
must be made during the development of the person-centered service 
plan. Additionally, if the State plan HCBS will provide the same 
amount, duration, and scope of service as another covered Medicaid 
service, states must explain in their proposed SPA how they will ensure 
against duplication of service and payment.
    Comment: Several commenters expressed support of the requirement 
for the assessment to be conducted ``in consultation with the 
individual, and if applicable, the individual's authorized 
representative, and include the opportunity for the individual to 
identify other persons to be consulted, such as, but not limited to, 
the individual's spouse, family, guardian, and treating and consulting 
health and support professionals responsible for the individual's 
care.'' However, one of these commenters stated this language stops 
short from stating that the participant has a role in deciding who 
participates in the assessment process, indicating that person-centered 
practices require that participants drive the assessment process, and 
this includes decisions pertaining to who is part of their team when 
identifying and addressing unmet need.
    Response: We believe this concern is fully addressed in the section 
pertaining to the person-centered planning process at Sec.  441.725(a), 
and we have added a cross reference to this section to Sec.  
441.720(a)(1).
    Comment: A commenter asked whether states can set limits on amount/
scope/duration of State plan HCBS benefits, as approved via the State 
plan amendment process.
    Response: Yes. Section 441.700 specifies that states are to 
describe the services that they will cover under the State plan HCBS 
benefit, including any limitations of the services.
    Comment: One commenter expressed that states should have 
flexibility in choosing the independent assessor to serve populations.
    Response: States have the flexibility to determine the entity that 
can perform this function, consistent with the

[[Page 2987]]

requirements at Sec.  441.730 regarding qualifications and Sec.  
441.720 regarding the independent assessment.
    Comment: One commenter noted that they have seen great variability 
in assessment results for the same individual depending on what 
incentives staff have for scoring a child or adult into or out of 
particular specialty services. They expressed that it needs to be clear 
which care provider or entity is responsible for completion of 
assessment for a particular patient and, if there are competing 
assessment results, which provider's or entity's assessment is 
prioritized.
    Response: We agree, which is why we emphasized the section 1915(i) 
of the Act requirement for conflict of interest standards at Sec.  
441.730(b). When a state proposes a SPA to add section 1915(i) of the 
Act HCBS, we require that the state specify the entity that will be 
responsible for the assessment, the qualifications of that entity, and 
how the state will meet the conflict of interest requirements at Sec.  
441.730(b). The commenter mentions the presence of multiple assessments 
with competing assessment results, so we further note that there should 
be one assessment that incorporates the findings of any other records 
or information needed to develop the person-centered service plan as 
required in Sec.  441.725.
    Comment: One commenter asked that Sec.  441.662(a)(2) also require 
that the assessor actually contact and involve the individuals 
identified.
    Response: Section 441.720 (a)(1) requires the assessment to be a 
face-to-face contact with the individual and to be a person-centered 
process.
    Comment: One commenter stated that it will be important for CMS and 
states to incorporate core elements of assessment that inform the 
participant direction process and at minimum, are not in conflict with 
participant-directed processes. They also stated that assessment 
questions should not lead to premature assumptions pertaining to who is 
appropriate for participant-direction simply based on diagnosis, the 
availability of informal caregivers, the individual's functional need, 
or cognitive status. Instead, assessment questions should be built on 
an assumption that all individuals, with the appropriate level of 
support, can participate in some form of participant direction. 
Assessment questions should assist the participant and others involved 
in the assessment process to identify unmet needs and the type of 
support that may be beneficial to the individual to allow for 
successful participant direction. In addition to identifying unmet need 
(as defined by the individual), this could include an assessment of 
strengths, abilities, individual goals, need for a representative, 
capacity to self-direct with an eye for developing a support system to 
ensure success in self-directing, and risks. For a participant 
direction assessment to be successfully integrated into a larger 
assessment process, those performing the assessment need to be well-
informed of participant direction programs, benefits, and requirements. 
Those performing and overseeing assessment processes also need training 
on the difference between traditional and participant-directed 
paradigms of service delivery. State and local leaders need to be 
informed, as well as educate their program staff, of the core 
competencies required to effectively support people to self-direct.
    Response: We appreciate these comments and will consider them in 
future guidance that we develop after final publication of this rule.
    Comment: One commenter recommended that the requirement to use a 
``person-centered process'' in Sec.  441.662(a) cross reference Sec.  
441.665, and suggests the phrase ``. . . and meeting the requirements 
of Sec.  441.665'' be added to the end of Sec.  441.662(a).
    Response: We agree with this recommendation and have added ``that 
meets the requirements at Sec.  441.725(a)'' to Sec.  441.720(a)(1).
    Comment: A couple of commenters requested clarification of the 
relationship between the needs-based criteria that states must 
establish for determining eligibility for HCBS, and for each specific 
service. One of these commenters noted that Sec.  441.662(a)(5) implies 
that need-based criteria must be in place for each service and 
suggested moving the term ``(if any)'' to after the word ``criteria,'' 
and editing it to ``(if any have been established)''.
    Response: We agree with this suggestion and have revised the first 
sentence of Sec.  441.720(a)(5).
    Comment: One commenter stated that clarification is needed 
regarding the independent assessment that is conducted by a qualified 
health care professional (suggesting a medical model approach), and a 
true person-centered planning process.
    Response: We acknowledge that this term used in this paragraph is 
inconsistent with other language in this regulation, and have revised 
Sec.  441.720(a)(1)(i)(A) accordingly.
    Comment: A commenter recommended that in Sec.  441.662(a)(6) CMS 
create a stronger regulation to promote self-direction of services, and 
recommended the term ``any information'' be modified to ``notice, all 
information, and any supports.''
    Response: We did not make the changes requested by this commenter. 
This paragraph pertains to what must be included in the assessment with 
regards to self-direction if the State offers this under the State plan 
HCBS benefit. Other requirements regarding self-direction of services 
are contained in Sec.  441.740.
    Comment: Several commenters had opinions on the frequency 
requirements of the assessment. One requested that CMS expand this to 
``at the request of the individual,'' as is similarly provided in the 
regulation at Sec.  441.665(c). Another stated that the assessment 
should be required every 3 years if clients are stable and engaged in 
the community, to reduce stress on the case management system. A couple 
of others just stated that re-assessments should occur ``frequently'' 
and when an individual's support needs or circumstances change 
significantly. Some stressed that the assessment and re-assessment 
process should be based primarily on individual need, and not place 
burdensome processes on the individual. One stated that for individuals 
unable to communicate via spoken, signed, written, or alternative/
augmentative communication, the regulations should include language 
that significant changes in behavior and/or temperament indicate a need 
for reassessment of services. And another stated that CMS should 
clarify that the requirement for reassessment should not be interpreted 
to mean that each individual requires a full-scale medical re-
evaluation, but instead re-assessment of services currently being used 
and new services requested by the individual or those important to him 
or her. One commenter asked how frequently the assessment must be made 
if the individual's condition is one that is not likely to improve.
    Response: The current regulation language states ``the re-
assessment of needs must be conducted at least every 12 months and as 
needed when the individual's support needs or circumstances change 
significantly, in order to revise the person-centered service plan.'' 
We believe that this language captures some of the concerns noted by 
the commenters. For others, in order to accommodate the varying and 
sometimes opposing comments, we believe that we should not change this 
requirement as provided in the proposed rule. This minimum frequency is 
consistent with the minimum frequency requirement for the review of the 
person-centered service plan, which

[[Page 2988]]

is based on the statute at section 1915(i)(1)(G)(ii)(III) of the Act.
    Comment: Several commenters noted language from the preamble of the 
proposed rule that indicates that an assessment of ``needs and 
strengths'' is more appropriate than needs and capabilities, as the 
words capability and ability are historically connected with a deficit 
oriented approach to assessment. They requested that CMS add the word 
``strengths'' to Sec.  441.662(a). Some also requested that the 
reference to needs in Sec.  441.662(a) specifically include physical 
and mental health needs stating that it must be made clear in the 
opening paragraph of this sub-section that these must also be assessed 
in order to establish a service plan.
    Response: While we agree that these are elements that must be 
included in the assessment process, we believe this is already captured 
sufficiently under Sec.  441.720 (a)(4) of this section which states, 
``Include in the assessment the individual's physical, cognitive, and 
behavioral health care and support needs, strengths and preferences, . 
. .'' Therefore, we have not adopted this change as requested.
    Comment: Several commenters stated the regulation text should also 
include the language from the preamble that indicates that services 
must be furnished to individuals with an assessed need, and must not be 
based on available funds.
    Response: This was an explanatory statement of the requirement at 
Sec.  441.677(a)(1)(ii) of the proposed rule, which is now at Sec.  
441.745 (a)(1)(ii) of the final rule, and is not necessary to 
specifically state in regulation.
    Comment: Several expressed that the regulation should include 
language from the preamble that states the ``role of the assessor is to 
facilitate free communication from persons relevant to the support 
needs of the individual.''
    Response: This is an explanatory statement in the preamble of the 
requirement already included at Sec.  441.720(a)(2) regarding 
consultation with the individual and if applicable, the individual's 
authorized representative, and others that the individual would like to 
include. We will plan to include this explanation in future guidance.
8. Person-Centered Service Plan (Sec.  441.725) (Proposed Sec.  
441.665)
    Section 1915(i)(1)(G) of the Act requires that the State plan HCBS 
benefit be furnished under an individualized care plan based on the 
assessment. The terms ``care plan'' and ``service plan'' are used 
interchangeably in practice. As explained in the May 3, 2012 proposed 
rule (77 FR 2012-10385), we have adopted the term ``person-centered 
service plan'' in this regulation. To fully meet individual needs and 
ensure meaningful access to their surrounding community, systems that 
deliver HCBS must be based upon a strong foundation of person-centered 
planning and approaches to service delivery. Thus, we proposed to 
require such a process be used in the development of the individualized 
person-centered service plan for all individuals to be served by 
section 1915(i) of the Act benefit. We proposed certain requirements 
for developing the person-centered service plan, but noted that the 
degree to which the process achieves the goal of person-centeredness 
can only be known with appropriate quality monitoring by the state, 
which should include substantial feedback provided by individuals who 
received or are receiving services.
a. Person-Centered Planning Process Sec.  441.725(a)
    Comment: One commenter requested that CMS ensure that there is a 
plan in place and implemented for more than medication management for 
individuals residing in facility-based settings.
    Response: The requirements of this regulation pertain to all 
section 1915(i) of the Act eligible and enrolled individuals residing 
in home and community-based settings, regardless of the setting.
    Comment: One commenter states that the driver and focus of the 
person-centered planning process is the individual and this concept is 
presented in Sec.  441.665. However, it is not referenced at all in the 
provisions of Sec.  441.659 pertaining to needs-based criteria and 
evaluation, nor in the provisions of Sec.  441.662 related to 
independent assessment.
    Response: The needs-based criteria established by each state 
determine an individual's eligibility through an independent assessment 
and evaluation, which by its nature, focuses on the person. The 
individual does not drive or control these processes; however, the 
individual is the center of this process. The regulation at Sec.  
441.720(a)(1), regarding independent assessment, references Sec.  
441.725, person-centered service plan.
    Comment: One commenter supports the expectation that states support 
individuals in the planning process as well as monitor the person-
centeredness of the process itself. The commenter requests further 
refinement of the rule to ensure that program participants and 
community stakeholders are actively engaged in the states' design of 
the program as well as its ongoing quality management structure so that 
person-centered processes can be designed and monitored with 
substantial involvement of stakeholders. The commenter is also pleased 
to see that as part of the service planning process, program 
participants (including those not self-directing) will be offered 
choices pertaining to the services and supports they receive. The 
commenter requests that specific examples or guidelines be offered to 
states to demonstrate what this choice may look like within traditional 
services.
    Response: We agree with the commenter's suggestion and will take it 
into consideration in developing future guidance.
    Comment: Some commenters stated that it is important that the 
regulation include the statement in the preamble that indicates that 
the service plan ``should be constructed in a manner that promotes 
service delivery and independent living in the most integrated setting 
possible.''
    Response: It is our expectation that the person-centered process 
incorporate the ideals stated in the preamble and we believe that this 
expectation is expressed in the regulation text at Sec.  441.725(b)(1).
    Comment: A few commenters recommended the following revision to 
Sec.  441.665(a)(1), ``Includes people chosen by the individual, 
including a parent and a parent support provider in case of a child and 
a youth support provider when the individual is under the age of 25.'' 
A few commenters recommended the person-centered planning process allow 
HCBS providers and other health care providers to participate in 
service plan development and/or be the service plan developer.
    Response: We appreciate the commenters' perspective and 
suggestions. We do not want to prescribe all people who may be included 
in the planning process since that action may unintentionally exclude 
someone who is chosen by the individual.
    Comment: Several commenters recommended that Sec.  441.665(a) 
address those individuals not able to indicate a choice of whom they 
would like to participate in the person-centered planning process and 
that in these instances, the process should allow inclusion of people 
who know and care about the individual. One commenter encourages CMS to 
note the potential role of family members, peers, providers, and others 
during the person-centered service planning for HCBS. One commenter 
recommended that individuals who require assistance in

[[Page 2989]]

making decisions due to profound cognitive limitations may need the 
protection of legally-appointed guardianship arrangements, preferably 
by a family member or another individual who is familiar with an 
individual's unique needs. In many instances, it will not be feasible 
for service planning for individuals with brain injury to be furnished 
by any other individual or entity. One commenter encourages the use of 
advance directives to assure that a person's wishes are clear in the 
event he/she needs assistance, but is unable to otherwise express 
himself/herself.
    Response: We believe that the regulation text as proposed, and 
which we are finalizing at Sec.  441.725(a)(1), encompasses the 
suggestions that the commenter proposes.
    Comment: A few commenters recommended that Sec.  441.665(a) of the 
proposed rule should also require that person-centered service plans 
include examples and language referring to positive strategies to 
minimize the use of all types of restraints (chemical, physical, and 
mechanical) and other restrictive procedures.
    Response: We have strengthened the language of this section in the 
final rule at Sec.  441.725(b)(13) by indicating that any modification 
of the additional conditions must be justified in the person-centered 
service plan and added specific requirements about what must be 
documented in the person-centered service plan in these instances.
    Comment: Several commenters recommend the following revision to 
Sec.  441.665(a)(2), ``Provides necessary information, support and 
experiences, if needed, to ensure that the individual directs the 
process to the maximum extent possible, and is provided meaningful 
opportunity to make informed choices and decisions.'' One commenter 
requested that the regulation more clearly state that an individual 
must be given information about all available supports and services.
    Response: We believe that the regulation text at Sec.  
441.725(a)(2) is complete and clear.
    Comment: A commenter suggested that the regulation must more 
clearly state that an individual must be given information about all 
available supports and services. The commenter also states that the 
individual must be given complete and accurate information about his/
her right to a fair hearing and the regulation should require that this 
information be provided at every person-centered planning meeting and 
that a simple easy to use form be provided to request a fair hearing.
    Response: It is our expectation that during the person-centered 
planning process and development of the person-centered service plan, 
all services and support options available will be articulated and 
discussed with the individual. States must adhere to the fair hearing 
requirements at part 431, subpart E for all Medicaid programs.
    Comment: A few commenters recommended modifying Sec.  441.665(a)(3) 
to read, ``Is timely, flexible, and occurs at times and locations of 
convenience to the individual.'' One commenter requested clarification 
regarding the standard against which a state's ``person-centered'' 
process will be reviewed or the timeline for development of those 
criteria.
    Response: We believe that the requirement regarding scheduling the 
meeting at the convenience of the individual addresses the flexibility 
issue and are not incorporating the suggested language. The minimum 
standards for person centered planning are enumerated in the 
regulation.
    Comment: Many commenters recommended that the language in the 
regulation text at Sec.  441.665(a)(4) be revised to include physical, 
linguistic and cultural accessibility in the person-centered planning 
process. One commenter requested that cultural considerations be 
expanded to include ``lifestyle'' choices of the individual.
    Response: We appreciate the commenters' suggestions and note that 
the regulation text at Sec.  441.665(a)(4) addresses cultural 
considerations. We have added regulation text at Sec.  441.725(a)(4) to 
specify that the person-centered planning process must be accessible to 
persons who are limited English proficient and persons with 
disabilities, consistent with the Medicaid programmatic accessibility 
provision at Sec.  435.905(b). Policy guidance to promote compliance 
with Title VI's prohibition against national origin discrimination 
affecting persons with limited English proficiency is available on the 
Department of Health and Human Services Office for Civil Rights Web 
site at http://www.hhs.gov/ocr/civilrights/resources/laws/revisedlep.html.
    Comment: Several commenters suggest inserting language at Sec.  
441.665(a)(2) such as meaningful choice, informed decision-making, 
provision of meaningful information about settings, including the most 
integrated setting alternatives appropriate for that individual.
    Response: We appreciate the commenters' suggestions. While we have 
not made any revisions to Sec.  441.725(a)(2), we have considered these 
comments for other revisions made to the regulation.
    Comment: Many commenters agreed with the provision at Sec.  
441.665(b)(1) that the person-centered plan should record the 
alternative home and community-based settings that were considered by 
the individual. Another commenter requested CMS add a requirement that 
``all residents have selected this setting from a meaningful choice of 
alternatives, including the most integrated setting appropriate for 
each resident.'' One commenter requests with respect to Sec.  
441.665(a)(8), that this provision should be modified to read, 
``Documents how the home and community-based settings, services and 
supports, including both residential and employment settings and 
supports, are in line with the USDOJ most integrated setting mandate 
under the ADA and Olmstead decision, and in cases where settings and 
services are not fully aligned with the `most integrated setting' 
mandate, provides full documentation regarding why less integrated/
congregate settings and services are being utilized.''
    Response: We appreciate the commenters' support. We have addressed 
the concern regarding meaningful choice and most integrated settings by 
clarifying that the individual's selection must include non-disability 
specific housing opportunities. We support the mandates of the ADA and 
the Olmstead decision and believe the final regulation reflects the 
spirit of these mandates.
    Comment: A commenter supports the expectation that states support 
individuals in the planning process as well as monitoring the person-
centeredness of the process itself. The commenter requests further 
refinement of the rule to ensure that program participants and 
community stakeholders are actively engaged in the states' design of 
the program as well as its ongoing quality management structure so that 
person-centered processes can be designed and monitored with 
substantial involvement of stakeholders. The commenter is also pleased 
to see that as part of the service planning process, program 
participants (including those not self-directing) will be offered 
choices pertaining to the services and supports they receive. The 
commenter requests that specific examples or guidelines be offered to 
states to demonstrate what this choice may look like within traditional 
services.
    Response: We appreciate the support. States are provided the 
latitude to determine how they will operationalize

[[Page 2990]]

the regulation. We do not wish to be as prescriptive as suggested.
    Comment: A few commenters recommended that CMS require any 
modifications to the conditions placed upon provider-controlled or 
owned residential settings be supported by a specific assessed need 
documented in the person's person-centered plan. One commenter stated 
that they did not support unnecessarily restrictive methods for 
providing person-centered services and supports even though they may be 
well-meaning.
    Response: We agree with the commenters' statements and have 
strengthened the language of this section in the final rule by 
requiring at Sec.  441.725(b)(13) that any modification of the 
additional conditions must be justified in the person-centered service 
plan. We also added specific requirements about what must be documented 
in the person-centered service plan in these instances.
    Comment: One commenter suggested that CMS make the person-centered 
process the critical identification for what is determined to be 
community-based not where the site is located or what it looks like. 
Another commenter states that the person-centered planning meeting 
should be where the needs and preferences are matched with compatible 
and appropriate services/living arrangements and where modifications to 
existing services and acceptable compromises are determined. They state 
that maintaining a full continuum of services and settings is a better 
plan than limiting options or making them harder to access because some 
people might find them objectionable. One commenter states that 
specific restrictions on living arrangements should not supersede 
supports and services identified through the person-centered planning 
process.
    Response: We believe that our regulations need to address the issue 
of what constitutes home and community-based settings. While the 
person-centered service plan can and does assist individuals with 
integration into the community, it is not the vehicle to determine 
whether a setting meets the requirements for being home and community-
based.
    Comment: One commenter requested deletion of the requirement that 
services be based on the needs of the individual as indicated in their 
person-centered service plan, stating that these plans are often 
limited by the experience of the individuals developing them and the 
most effective treatments/supports may not always be included. The 
commenter noted that service needs and ideas for how best to offer them 
evolve, particularly as a person progresses and service plans often 
become stale before they are reviewed/updated.
    Response: We do not agree with removing this requirement, and note 
that it is based on statute at section 1915(i)(1)(G) of the Act. States 
are responsible for determining that requirements related to the 
qualifications of the entities who will conduct the assessments and the 
person-centered planning process have been met. It is expected that the 
providers would have adequate training to perform the function 
consistent with the requirements set forth in the regulation. States 
must ensure the person-centered service plan process is timely and 
includes a method for the individual to request updates to the plan. 
Additionally, an assessment of need must be conducted when the 
individual's support needs or circumstances change significantly and 
revisions to the person centered services plan are necessary.
    Comment: Many commenters recommend deletion of the language that 
says the requirements are ``based on the needs of the individual as 
indicated in their person-centered service plan.'' The commenters 
believe that without deletion or modification of the proposed language, 
it would be too easy for a provider to insert certain language in a 
service plan.
    Response: The person centered planning process includes provisions 
to protect a person-centered service plan from being changed without 
the individual's consent. We believe the inclusion of this language is 
a necessary beneficiary protection; therefore we did not revise the 
regulation to remove this requirement.
b. Person-Centered Service Plan Sec.  441.725(b)
    Comment: One commenter states that if CMS defines what a service 
plan should be, it may be in direct conflict with how states define 
their services and the commenter does not believe that this is the 
intent of CMS.
    Response: We do not define specific services. However, we do define 
what should be included in the person-centered service plan, and by 
adopting the terminology and process of a person-centered service plan, 
the services and supports should reflect the individuals preferences 
based on their needs.
    Comment: One commenter recommended, for high-need children and 
older adult beneficiaries, the option of further assessment and 
recommends that there be allowable reimbursement for these activities 
necessary for developing the service plan, including communication with 
collateral treatment partners (that is, pediatrician, teacher, school 
representative, parent) as these partners and activities are critical 
for development of a service plan for vulnerable beneficiaries and are 
absolutely essential for proper care for children and for seniors.
    Response: States may be able to claim reimbursement for assessment 
activity, as well as person-centered service plan development, as a 
Medicaid administrative activity that is in accordance with an approved 
cost allocation plan.
    Comment: One commenter recommended enhancing regulation language to 
ensure that states have the flexibility to include services and 
supports that are appropriate and essential for child and youth 
development, but may not be Medicaid reimbursable, including education, 
housing, and transportation, as to encompass a comprehensive service 
provision supported by HCBS.
    Response: We believe the language in Sec.  441.725(b)(5) of the 
final rule supports this concept: ``the plan must . . . reflect the 
services and supports (paid and unpaid) that will assist the individual 
to achieve identified goals, and the providers of those services and 
supports, including natural supports.''
    Comment: Commenters supported Sec.  441.665(b) and suggested that 
equal emphasis be placed on what is important for the individual and 
what is important to the individual. One commenter recommended the 
following, ``The person-centered service plan must reflect the services 
and supports that are important for the individual to meet the needs 
identified through an assessment of functional need, and what is 
important to the individual with regard to preferences for the delivery 
of such services and supports, including, but not limited to, living 
arrangement, neighborhood, leisure activities, and relationships.''
    Response: We appreciate the commenters' support. As the language of 
the proposed rule supports this concept, we do not believe that the 
suggested revisions for the final rule at Sec.  441.725(b) are 
necessary.
    Comment: Many commenters stated their support of person-centered 
planning and expressed that when the individual welcomes the 
involvement of family or other informal caregivers, family members 
should be engaged as part of the care planning and care-giving teams. 
They stated that services to be provided by family caregivers should 
only be included in the person-and family-centered plan if they have 
agreed to provide these services and feel

[[Page 2991]]

prepared to carry out the actual tasks. One commenter agreed with 
preamble language that the service plan should neither duplicate, nor 
compel, natural supports, expressing that unpaid supports should be 
provided voluntarily. This commenter suggested that CMS include this 
specific language in the regulation text.
    Response: We appreciate the support of the commenters. The language 
in Sec.  441.725(b)(5) of this final rule states: ``Natural supports 
are unpaid supports that are provided voluntarily to the individual in 
lieu of State plan HCBS.''
    Comment: One commenter supported requirements for the development 
of a person-centered plan but recommends that Sec.  441.665(b)(9) 
should clarify that even though the service plan is ``finalized and 
agreed to in writing by the individual'' the individual retains the 
right to appeal a denial, reduction, suspension, or termination of a 
service described in part 431, subpart E.
    Response: As the fair hearing requirements at part 431, subpart E, 
apply to all Medicaid services, it is not necessary to revise the text 
of the regulation at Sec.  441.725.
    Comment: Some commenters recommended that each person-centered 
service plan include the dollar figures of the budget allocations 
provided to each beneficiary, the starting date of services/supports, 
the scope and duration of service, and all other services that are not 
Medicaid reimbursable.
    Response: We agree that the person centered service plan should be 
comprehensive and the language in the final rule supports this concept.
    Comment: Two commenters were against requiring the signatures of 
all individuals and providers responsible for implementation of the 
service plan, stating that this is impractical and will make the 
process untenable. They also expressed that giving all providers the 
entire service plan would share personal health information of the 
member with providers who do not necessarily need to see that 
information. One commenter was concerned about liability and who is 
responsible if an individual has risky behavior.
    Response: The regulation language at Sec.  441.725(b) gives the 
flexibility for the individual to determine to whom the plan will be 
provided, in whole or in part, commensurate with the level of need of 
the individual and the scope of the services and supports available. 
Sharing of this information must be consistent with federal and state 
laws regarding privacy and confidentiality.
    Comment: Several commenters recommended the following revisions for 
Sec.  441.665(c): ``The person-centered service plan must be reviewed, 
and revised upon reassessment of functional need as required in Sec.  
441.662 of this subpart, at least every 12 months, when the 
individual's circumstances or needs change significantly, and at the 
request of the individual, an authorized representative, or healthcare 
or support providers.'' One of these commenters stated that while 
having a service plan required every 12 months may be minimally okay 
for some populations, it is insufficient (too lengthy) for those with 
chronic mental health and substance use disorders. Another commenter 
stated that, at a minimum, requiring service plan review every 6 months 
is adequate. Another commenter stated that the reassessment being done 
``at the request of the individual'' could lead to inflated service 
hours and costs, both of which will add unnecessary costs to the 
provision of HCBS. This commenter believed the language at Sec.  
441.662(b) is better language. Another commenter was against requiring 
assessments before the meeting.
    Response: We proposed 12 months as the minimum time period for an 
individual's person-centered service plan to be reviewed and revised. 
We agree and support reviews and revisions of an individual's person-
centered service plan more frequently as needed. The person-centered 
service plan should be reviewed and revised when the individual's 
circumstances or needs change significantly and at the request of the 
individual, authorized representative or healthcare provider.
    Comment: One commenter did not support standardized functional 
assessment. In addition, the commenter stated that when service 
providers use a functional assessment, it has been typically to 
establish funding levels, which should only be determined by a person-
centered planning process and allowing such an instrument to overrule 
the person-centered plan completely negates the person-centered 
planning process.
    Response: An individual's person-centered plan must be based on 
that individual's assessment of functional need. We have not specified 
the instruments or techniques that should be used to secure the 
information necessary to determine an individual's functional need, 
person-centered service plan, or service budget. States do have the 
ability to establish limits on amount, duration, and scope of services.
    Comment: With respect to Sec.  441.665(b)(6), one commenter stated 
that individual back-up plans have been a critical component of 
participant direction. A commenter suggested when refining the proposed 
language, it will be important to reflect on the impact the traditional 
paradigm has on the role providers and participants play in defining, 
identifying, and addressing risk.
    Response: We have strengthened the language in the final rule to 
ensure that reducing risk for individuals receiving Medicaid HCBS does 
not involve abridgement of their independence, freedom, and choice. 
Restricting independence or access to resources is appropriate only to 
reduce specific risks, and only when considered carefully and reflected 
in the person-centered service plan.
9. Provider Qualifications (Sec.  441.730) (Proposed Sec.  441.668)
    In the proposed rule, we proposed to require states to provide 
assurance that necessary safeguards have been taken to protect the 
health and welfare of the enrollees in State plan HCBS by provision of 
adequate standards for all types of providers of HCBS. States must 
define qualifications for providers of HCBS, and for those persons who 
conduct the independent evaluation of eligibility for State plan HCBS 
and independent assessment of need, and who are involved with 
developing the person-centered service plan. We noted that we will 
refer to the individuals and entities involved with determining access 
to care as ``agents'' to distinguish this role from providers of 
services. We also noted that the proposal in no way preempts broad 
Medicaid requirements, such as an individual's right to obtain services 
from any willing and qualified provider of a service.
    We believe that these qualifications are important safeguards for 
individuals enrolled in the State plan HCBS benefit and proposed that 
they be required whether activities of the agents are provided as an 
administrative activity or whether some of the activities are provided 
as a Medicaid service. At a minimum, these qualifications include 
conflict of interest standards, and for providers of assessment and 
person-centered service plan development, these qualifications must 
include training in assessment of individuals whose physical or mental 
condition may trigger a need for HCBS and supports, and an ongoing 
knowledge of current best practices to improve health and quality of 
life outcomes.
    The minimum conflict of interest standards we proposed to require 
would ensure that the agent is not a relative of the individual or 
responsible for the individual's finances or health-related decisions. 
The standards also require that the agent must not hold a financial 
interest in any of the entities that

[[Page 2992]]

provide care. Our experience with HCBS in waivers indicates that 
assessment and person-centered service plan development should not be 
performed by providers of the services prescribed. However, we 
recognize that in some circumstances there are acceptable reasons for a 
single provider of service that performs all of those functions. In 
this case, the Secretary would require the State Plan to include 
provisions assuring separation of functions within the provider entity.
    Comment: One commenter questioned the reason for defining persons 
responsible for the independent evaluation, independent assessment and 
the service plan as ``agents'' to distinguish them from ``providers'' 
of HCBS. Another commenter indicated that it is unclear whether one 
agent performs an assessment, or different agents with different 
expertise.
    Response: In the preamble to the proposed rule, we discussed that 
we will refer to persons or entities responsible for the independent 
evaluation, independent assessment, and the person-centered service 
plan as ``agents'' to distinguish them from ``providers'' of home and 
community-based services. We also explain that this does not preclude 
the inclusion of input from other individuals with expertise in the 
provision of long-term services and supports, or the delivery of acute 
care medical services, as long as an independent agent retains the 
final responsibility for the evaluation, assessment, and person-
centered service plan functions.
    Comment: A commenter requested whether states would be permitted to 
allow a transition period for agents conducting the individualized 
independent evaluation, assessment and service plan development to 
attain any new qualifications, if necessary.
    Response: We believe that it is important for individuals 
responsible for evaluation, assessment, and/or person-centered service 
plan development to fully meet the qualifications specified at Sec.  
441.730(c) prior to performing these activities.
    Comment: Several commenters recommended adding a requirement to 
this section of the regulation that service providers not discriminate 
against recipients on the basis of race, color, national origin, 
religion, sex, sexual orientation, gender identity, marital status, 
source of payment, or mental or physical disability. Similar 
protections are contained in the regulations for the Program for All-
Inclusive Care for the Elderly (PACE).
    Response: There are already general provisions in other regulations 
that pertain to the issues raised by the commenters and that prohibit 
discrimination in State Medicaid programs on the basis of race, color, 
national origin, disability, etc., (for example, see Sec.  430.2, Sec.  
435.901, Sec.  435.905, and Sec.  435.908). As these regulations apply 
in determining eligibility and administering the Medicaid program 
generally, it is not necessary to add a regulation on this subject 
specific to section 1915(i) of the Act.
    Comment: Several commenters requested further clarification 
pertaining to provider qualifications for the participant direction 
option and requested that provider qualifications for participant-
directed workers not limit participants' access to these providers but 
be defined by the program participant receiving services once s/he is 
trained on the program rules and expectations. One commenter 
recommended that CMS make provider qualifications ``default rules'' 
that could be waived through an informed and affirmative choice, with a 
signed statement, by consumers who are directing their own care. 
Another commenter requested that CMS add to the regulation ``Such 
standards shall not be construed to limit the ability of self-directing 
individuals who have employer authority to hire, train, manage, or 
discharge providers pursuant to Sec.  441.674.''
    Response: As stated in the proposed rule, and retained in the final 
rule, individuals who choose to self-direct will be subject to the same 
requirements as other enrollees in the State plan HCBS benefit, 
including Sec.  441.730 for provider qualifications. Section 441.730 
requires states to define in writing standards for providers (both 
agencies and individuals) of HCBS, and for agents conducting 
individualized independent evaluation, independent assessment, and 
person-centered service plan development. As with section 1915(c) of 
the Act waivers, states have to define minimum service provider 
qualifications that apply across the service delivery models.
    Comment: Many commenters expressed support of the conflict of 
interest provisions of the proposed rule. One such commenter stated 
support of standards that will result in service plans that have 
realistic expectations and payment for providers while adequately 
addressing the client's individual needs, noting that too often costs 
are driving decisions about the appropriate services for the 
individual. One mentioned that it is difficult for a system to be 
completely free of conflict of interest, since any assessor that works 
for the state has an interest in controlling costs, but stated their 
belief that acknowledging the conflicts helps to mitigate the effects. 
Another indicated that guidance should reflect administrative 
safeguards that consider each state individually and consider the 
unique characteristics and needs of each state, and include conflict 
free protections that address the development of the plan and choice of 
providers with an emphasis on individual preferences. Another requested 
that this be closely monitored.
    Response: We appreciate the support and agree with the commenters. 
We will consider these additional comments as we develop future 
guidance.
    Comment: Several commenters requested that Sec.  441.668 exclude a 
managed care organization from conducting the independent evaluation of 
individuals. Another stated a managed care organization should not be 
permitted to conduct the independent assessment of individuals. And 
another requested this section also exclude ``the state'' from 
conducting the independent assessment of individuals.
    Response: We do not believe it is necessary to list specific 
entities that would not meet these requirements in regulation. We 
believe the specific requirements of Sec.  441.730 capture the purpose 
of these requirements to mitigate and prevent conflict of interest.
    Comment: One commenter indicated that the requirements regarding an 
independent evaluator would not work in a capitation model, and that it 
adds another level of bureaucracy and impacts service systems already 
in place by some states that delegate or contract out this function to 
another agency. Another commenter stated that the requirements would 
limit states to the development or use of models that contradict 
decades of long term care policy and efforts to coordinate an otherwise 
fragmented system. They expressed that models that consolidate 
evaluation, assessment, care planning, case management and the 
provision of services into integrated, single entry systems enable 
beneficiaries to more seamlessly access services and receive 
coordinated, integrated plans of care (for example, long term home 
health care programs, managed long term care, PACE). Another commenter 
disagreed with the independent agent requirement, stating there may be 
cost implications if an independent contractor is used to develop the 
person-centered service plan and that this proposed requirement may 
work in a fee-for-service benefit, but would not work in a benefit that 
is capitated.

[[Page 2993]]

    Response: We disagree and have experience with states where this 
does and is working in these models. While the evaluation to determine 
whether an individual is eligible for the benefit would need to be 
retained by an independent entity that is not the provider, providers 
can contribute information to the entity responsible for the final 
determination. Regarding the independent assessment of need and person-
centered service plan, to summarize Sec.  441.730(b)(5), states can 
allow providers of State plan HCBS, or those who have an interest in or 
are employed by a provider of State plan HCBS, to be the entity 
responsible for the assessment and person-centered service plan 
functions, when the state demonstrates that they are the only willing 
and qualified agent to perform these two functions in a geographic 
area, and the state devises conflict of interest protections including 
separation of agent and provider functions within provider entities, 
and a clear and accessible alternative dispute resolution process for 
individuals. In summary, the requirements at Sec.  441.730, which are 
based on our experience as well as state and other public feedback, 
specify how states must comply with statutory requirements. Therefore, 
we are retaining the requirements from the proposed rule at Sec.  
441.730 regarding independent evaluation and conflict of interest 
standards, in this final regulation. We note that CMS stands ready to 
assist any State Medicaid agency in need of technical assistance with 
these requirements.
    Comment: Several commenters requested that Sec.  441.668(b)(5) be 
expanded to make it clear that when there is only one provider 
available, the provider may serve as the agent performing the 
assessment and the agent developing the plan of care, as long as the 
requirements in Sec.  441.668(b)(5) are met. Another commenter proposed 
permitting providers in some cases to serve as both agent and provider 
of services, but with guarantees of independence of function within the 
provider entity.
    Response: We believe that Sec.  441.730(b)(5) already includes this 
requirement: ``Providers of State plan HCBS for the individual, or 
those who have an interest in or are employed by a provider of State 
plan HCBS for the individual, except when the state demonstrates that 
the only willing and qualified agent to perform independent assessments 
and develop plans of care in a geographic area also provides HCBS, and 
the state devises conflict of interest protections including separation 
of agent and provider functions within provider entities, which are 
described in the State plan for medical assistance and approved by the 
Secretary, and individuals are provided with a clear and accessible 
alternative dispute resolution process.''
    Comment: A couple of commenters recommended deletion of Sec.  
441.668 (b)(5), indicating that this provision to waive the conflict of 
interest standards minimizes safeguards to protect individual health, 
welfare, choice, and control. They indicate that states should be 
required to develop in all geographic areas sufficient systems of 
independent evaluators, independent assessors, and providers to develop 
service plans. They noted that since CMS's experience with HCBS waivers 
has shown that assessment and service plan development should not be 
performed by service providers, this should be carried over and applied 
to State plan HCBS as well.
    Response: Section 441.730 (b)(5) requires that service providers 
not be permitted to be the agent responsible for these functions, but 
includes an exception to allow a state to permit a service provider to 
serve as the agent performing independent assessments and development 
of the person-centered service plan when that service provider is the 
only entity available in a certain area. This is only permitted to 
address this potential problem of not having any entity available that 
is not a provider to perform these essential functions of independent 
assessment and person-centered service plan development (under any 
circumstances, determination of eligibility for the State plan HCBS 
benefit cannot be performed by a HCBS provider or an entity with an 
interest in providers of HCBS). Without this exception, states would be 
unable to make State plan HCBS available to participants in these 
areas. If a state employs this exception it must guarantee the 
independence of this function(s) within the provider entity. In certain 
circumstances, we may require that states develop ``firewall'' 
policies, for example, separating staff that perform assessments and 
develop person-centered service plans from those that provide any of 
the services in the plan; and meaningful and accessible procedures for 
individuals and representatives to appeal to the state. We also will 
not permit states to circumvent these requirements by adopting state or 
local policies that suppress enrollment of any qualified and willing 
provider.
    Comment: A couple of commenters expressed concerns that an 
independent agent may not have sufficient knowledge about the needs of 
an individual, and that providers who have longer histories with the 
individuals are better qualified to conduct evaluations and assessments 
and develop care plans and would improve individuals' access to the 
benefit. One indicated that independent agents may not have the 
capacity to follow-up with individuals who are hard to reach, such as 
individuals experiencing homelessness. Another indicated that we should 
allow service providers within supportive housing to complete 
assessments or it might unintentionally limit the availability of 
supportive housing for HCBS beneficiaries. They suggest that CMS engage 
independent agents in oversight activities to ensure individuals are 
made aware of all available options and that providers do not 
inappropriately advantage themselves.
    Response: We recognize the importance of ensuring that the agents 
responsible for the evaluations, assessment, and person-centered 
service plans are trained in assessment of individual needs for HCBS 
and knowledgeable about best practices. That is why we included 
requirements at Sec.  441.730(a) for states to define in writing 
standards for agents, and at Sec.  441.730(c), that these 
qualifications must include training in assessment of individuals whose 
physical or mental conditions trigger a potential need for home and 
community-based services and supports, and current knowledge of best 
practices to improve health and quality of life outcomes. We further 
note that we understand that the process of developing appropriate 
plans of care often requires the inclusion of individuals with 
expertise in the provision of long-term services and supports or the 
delivery of acute care medical services.
    Comment: Another commenter stated that CMS's proposal to remove 
providers from participating in assessments, evaluations, and plans of 
care does not appear required by the DRA and requested that CMS remove 
this prohibition on providers' ability to carry out these critical 
functions and deliver the needed services to their beneficiaries.
    Response: This rule does not prevent providers from participating 
in these functions, but requires that an independent agent retains the 
final responsibility for the evaluation, assessment, and person-
centered service plan functions. We understand that the process of 
developing appropriate plans of care often requires the inclusion of 
individuals with expertise in the provision of long-term services and 
supports or the delivery of acute care

[[Page 2994]]

medical services. In order to meet the intent of the statute for 
standards that safeguard against conflict of interest standards, we are 
retaining these requirements as proposed.
    Comment: Several commenters recommended that minimum safeguards/
standards be prescribed in the regulation, including standards related 
to training, skills, and competency, with state flexibility to develop 
additional standards and CMS reviewing the state standards for 
approval. One recommended giving service providers and agencies rate 
incentives to partner with training providers and community colleges to 
ensure that the qualifications of the workforce meet the needs of their 
clients. Others recommended adding that agents must have current 
knowledge/training in evidence-based practices for assessment and 
evidence-based best practices to improve health and quality of life 
outcomes, person-centered planning, and informed decision making. 
Another recommended that CMS identify broad competency areas and then 
identify the specific skills associated with each of these competency 
areas. Another noted that individuals performing assessments will need 
to be sufficiently trained to assess cognitive impairment.
    Response: Section 441.730(a) of the proposed rule would require 
states to define in writing standards for agents, and at Sec.  
441.730(c), that these qualifications must include training in 
assessment of individuals whose physical or mental conditions trigger a 
potential need for home and community-based services and supports, and 
current knowledge of best practices to improve health and quality of 
life outcomes. We agree with the commenters' suggestions and have added 
``cognitive'' to Sec.  441.730(c).
    Comment: One commenter encouraged the addition of language that 
focuses on the qualifications, training and outcomes ``of the case 
manager in the areas of case management, the populations they are 
serving, funding and resources available in their community, the 
offering of free choice of providers and service options and training 
and expectations regarding conflict-free case management.''
    Response: We note that we are not restricting the individuals or 
entities who can perform these administrative activities to case 
managers. We also note that conflict of interest requirements are found 
at Sec.  441.730(b). We agree that knowledge of available resources, 
service options, and providers is not an element specifically captured 
in the proposed regulation language, so we have added language to Sec.  
441.730(c).
    Comment: A couple of commenters requested that CMS revise the 
regulation to provide that the required training of agents must include 
person-centered and family driven services planning, as well as 
participant-directed practices.
    Response: We believe that this idea is already reflected for 
purposes in the broader phrase ``and current knowledge of best 
practices to improve health and quality of life outcomes.''
    Comment: One commenter pointed out that evaluators should also 
obtain proper training and should be reflected in Sec.  441.668(c).
    Response: The independent evaluators determine whether or not an 
individual meets the eligibility requirements for the benefit, but 
unless they are also the same entity responsible for the independent 
assessment and plan of care development, we do not believe it would be 
reasonable to require that they meet these minimum training 
requirements that are appropriate minimum qualifications for agents 
responsible for independent assessment and person-centered service plan 
development (assessment of individuals whose physical or mental 
conditions trigger a potential need for HCBS and supports, and current 
knowledge of available resources, service options, providers, and best 
practices to improve health and quality of life outcomes).
10. Definition of Individual's Representative (Sec.  441.735) (Proposed 
Sec.  441.671)
    In Sec.  441.671, we proposed to define the term ``individual's 
representative'' to encompass any party who is authorized to represent 
the individual for the purpose of making personal or health care 
decisions, either under state law or under the policies of the State 
Medicaid agency. We did not propose to regulate the relationship 
between an individual enrolled in the State plan HCBS benefit and his 
or her authorized representative, but noted that states should have 
policies to assess for abuse or excessive control and ensure that 
representatives conform to applicable state requirements. We noted that 
states must not refuse to allow a freely-chosen person to serve as a 
representative unless the state has tangible evidence that the 
representative is not acting in the best interest of the individual, or 
that the representative is incapable of performing the required 
functions.
    General Comments: All commenters for this section agreed with this 
provision, and some additionally suggested some revision to the 
language as described in the comments below.
    Comment: A couple of commenters recommended changing ``family 
member'' to ``a parent support provider.''
    Response: The language in this phrase is statutory, from section 
1915(i)(2) of the Act. The commenter did not provide any definition of 
this term or explanation. For these reasons, we are unable to accept 
this change as requested, but note that this provision at Sec.  
441.735(b) is not an exhaustive list.
    Comment: Another commenter expressed that an individual's 
representative may not necessarily be the individual's guardian, but 
some other representative freely chosen by the individual and important 
to him or her.
    Response: We agree and believe the language in the regulation 
supports this as an option to the individual.
    Comment: We received many comments about the term ``best 
interest.'' Most of these commenters requested that CMS substitute the 
term ``substituted judgment'' instead of ``best interest.'' One 
cautioned that ``best interests'' may be a highly subjective 
assessment, and stated their belief that substantial deference should 
be established for the stated interests of the individual and the 
decisions of their chosen representative. Others referenced guidelines 
established by the National Guardianship Association (NGA), which 
indicate that substituted judgment is a principle of decision-making 
that promotes the self-determination of the beneficiary and that 
substitutes, as the guiding force in any surrogate decision made by the 
guardian, the decision the beneficiary themselves would make based on 
their own preferences and wishes. This process involves consultation 
with the individual and those important to the individual. If a 
substituted judgment is not available, guardians can implement a ``best 
interest'' principle, which considers all options and alternatives and 
bases the decision on what a reasonable person would do in the given 
situation.
    Response: We agree with these commenters and have revised this 
section of the regulation, Sec.  441.735(c), so that it now reads as 
follows:

    ``When the state authorizes representatives in accordance with 
paragraph (b) of this section, the state must have policies 
describing the process for authorization; the extent of decision-
making authorized; and safeguards to ensure that the representative 
uses substituted judgment on behalf of the individual. State 
policies must address exceptions to using substituted judgment when 
the individual's wishes cannot be ascertained or when the 
individual's wishes would result in substantial harm to the

[[Page 2995]]

individual. States may not refuse to recognize the authorized 
representative that the individual chooses, unless in the process of 
applying the requirements for authorization, the state discovers and 
can document evidence that the representative is not acting in 
accordance with these policies or cannot perform the required 
functions. States must continue to meet the requirements regarding 
the person centered planning process at Sec.  441.725 of the rule.''

    Comment: We received one comment about state laws regarding 
guardianship and the jurisdiction of the courts, in which they stated 
that guardians are appointed by the court, not chosen by the 
individual.
    Response: We believe this concept is captured with the use of the 
term ``legal'' prior to ``guardian'' in the language of the final 
regulation at Sec.  441.735(a) which pertains to a legal guardian 
authorized under State law to represent the individual. We note that 
the provision at Sec.  441.735(c) only applies to individuals specified 
at Sec.  441.735(b) who are authorized under the policy of the State 
Medicaid agency to represent the individual.
    Comment: A couple of commenters confirmed the importance of 
participants' access to a representative option. One requested that CMS 
add ``States should ensure that representatives conform to good 
practice concerning free choice of the individual, and assess for abuse 
or excessive control.'' Another stated that supports providers (for 
example, consultants, support brokers) need to be appropriately trained 
on the participant direction paradigm to be prepared to successfully 
identify when a representative may be using ``excessive control'' as 
well as to enforce ``free choice'' of representatives.
    Response: If by ``free choice of the individual'' the commenter 
means the individual's free choice of providers, this Medicaid 
requirement at section 1902(a)(23) of the Act is not waived or 
disregarded under section 1915(i) of the Act and is not a subject of 
this rule. We believe that the proposed language broadly covers the 
other elements of this comment, and we will consider addressing this 
issue further in future guidance.
    Comment: One commenter requested that the word ``should'' be 
replaced with ``must'' or ``implement policies to.''
    Response: The proposed and final regulation language does not 
contain the word ``should.''
    Comment: One commenter expressed the need for a representative to 
be identified by the participant after s/he is well informed of the 
program and his/her responsibilities. They further commented that 
effective practices for identifying and choosing representatives should 
be shared with the participants during program orientation and as 
needed.
    Response: We believe this would be an example of a good state 
practice, which we will consider for inclusion in future guidance.
    Comment: One commenter stated that based on the general principles 
of participant direction, states should not require that individuals 
have representatives without prior attempts to train and support the 
participant.
    Response: The purpose of this provision is not to require an 
individual to have a representative but it is to require states to 
allow the option for an individual to choose a representative for the 
purpose of participating in decisions related to the person's care or 
well-being when the individual requires assistance in making such 
decisions, and to have policies for the process for authorization, the 
extent of decision-making authorized, and safeguards. We note that 
where a legal guardian, conservator, or other person has the sole 
authority under state law to make decisions related to the individual's 
care, the state must comply with the decisions of the legal surrogate.
    Comment: One commenter requested that the following language from 
the preamble of the proposed rule, or something similar, be added to 
the actual regulation text: ``. . . process should still be focused on 
the individual requiring services, and that supports should be provided 
to allow the individual to meaningfully participate and direct the 
process to the maximum extent possible.''
    Response: We have added the following to Sec.  441.735(c) of this 
rule:
    ``States must continue to meet the requirements regarding the 
person-centered planning process at Section 441.725 of this rule.''
11. Self-Directed Services (Sec.  441.740) (Proposed Sec.  441.674)
    Section 1915(i)(1)(G)(iii)(I) and (II) of the Act provides that 
states may offer enrolled individuals the option to self-direct some or 
all of the State Plan HCBS that they require. Self-directed State plan 
HCBS allow states another avenue by which they may afford individuals 
maximum choice and control over the delivery of services, while 
comporting with all other applicable provisions of Medicaid law. We 
have urged all states to afford waiver participants the opportunity to 
direct some or all of their waiver services, without regard to their 
support needs. With the release of an updated, revised section 1915(c) 
of the Act waiver application in 2008, we refined the criteria and 
guidance to states surrounding self-direction (also referred to as 
participant-direction), and established a process by which states are 
encouraged, to whatever degree feasible, to include self-direction as a 
component of their overall HCBS waiver programs. While section 1915(i) 
of the Act does not require that states follow the guidelines for 
section 1915(c) of the Act waivers in implementing self-direction in 
the State plan HCBS benefit, we anticipate that states will make use of 
their experience with section 1915(c) of the Act waivers to offer a 
similar pattern of self-directed opportunities with meaningful supports 
and effective protections.
    Comment: Several commenters recommended that CMS include training 
as one aspect of employer-authority activities that self-directing 
beneficiaries may be allowed to exercise. A couple of commenters urged 
CMS to require states to offer training for individuals on selecting, 
hiring, supervising and firing service providers, in addition to 
service provider training.
    Response: We agree with this recommendation and have added the 
following to the Sec.  441.740(e)(3):

    ``Voluntary training on how to select, manage, and dismiss 
providers of State plan HCBS.''

    We note that many states currently have existing training programs 
available that could potentially be leveraged or modified to meet such 
a requirement. Training programs should be able to meet the needs of 
individuals at varying levels of need with regard to selecting, 
managing, and dismissing providers. Consistent with the philosophy of 
self-direction, this training must be voluntary, and may not be a 
mandatory requirement for the individual to receive services under this 
option.
    Comment: One commenter requested training for agents conducting 
evaluations, assessments, and service planning.
    Response: Training for agents conducting evaluations, assessments, 
and person-centered service planning is a requirement that was 
stipulated under the proposed rule at Sec.  441.668, provider 
qualifications, and remains unchanged in this final rule at Sec.  
441.730.
    Comment: One commenter recommended that CMS consider requiring 
states to provide joint trainings for both consumers and providers, as 
they have resulted in improved services, better

[[Page 2996]]

communication and a stronger relationship.
    Response: We believe that this would be more suited as one option 
that a state could put into practice to meet training requirements.
    Comment: One commenter indicated that states should be provided 
guidance on elements that are important for participant direction 
assessment (for example, strengths, abilities, individual goals, need 
for a representative, capacity to self-direct with an eye for 
developing a support system to ensure success in self-directing, and 
risks).
    Response: These elements are already required under Sec.  
441.725(b), pertaining to the person-centered service plan.
    Comment: One commenter applauded CMS for their inclusion of 
participant direction support functions, stating that they are well 
documented by research and that successful participant direction 
opportunities are dependent on the appropriate execution of each of 
these support functions. The commenter requests that CMS describe 
within the rule the elements of each of these functions (as seen with 
the financial management services function).
    Response: We appreciate the support of the commenter. Experience 
with section 1915(c) of the Act and other Medicaid HCBS authorities 
have been instrumental in demonstrating the importance of the 
availability of information, assistance, and support to participants 
who self-direct their HCBS. Since the purpose of this regulation is to 
stipulate the minimum requirements that states must meet for the 
section 1915(i) of the Act authority, we believe the commenter's 
request will be best suited as future sub-regulatory guidance/policy.
    Comment: One commenter expressed appreciation of well-structured 
definitions for both employer authority and budget authority, and 
recommended an edit to the ``employer authority'' definition to ensure 
its consistency with existing best practices: replace the ``or'' in 
``the ability to select, manage, or dismiss providers of State plan 
HCBS'' with an ``and'' since the ability to do all three functions is 
critical to the model.
    Response: Since each of these functions is optional, and we want to 
ensure that the protections at Sec.  441.740(c) are provided with 
selection of any of these optional functions, we are unable to adopt 
the commenter's recommended revision.
    Comment: Several commenters requested revising the provisions 
related to budget authority in Sec.  441.674(d)(5) to make it clear 
that self-directing individuals with budget authority may be allowed to 
pay providers directly. Another commenter requested revision to Sec.  
441.674(e)(2)(iii) of the proposed rule to clarify that employer-
related financial transactions, such as paying worker wages and taxes, 
may also be made for individuals with employer authority.
    Response: Section 1915(i) of the Act does not give states the 
authority to allow participants to perform transactions or convey cash 
to the individual or representative. It does allow for budget authority 
to grant individuals control of expenditures. In addition, with 
sufficient state Medicaid agency process and oversight, states may 
choose to employ alternate methods to maximize participant autonomy 
within the parameters of the section 1915(i) of the Act authority.
    Comment: One commenter requested that we add a requirement to Sec.  
441.674(b)(4) that ``there are state procedures to ensure the 
continuity of services during the transition from self-direction to 
other models of service.''
    Response: We agree with this comment and have added additional 
language to the rule at Sec.  441.740(b)(4).
    Comment: One commenter requested that Sec.  441.674(d) regarding 
budget authority require that the service plan specify the authority to 
be assumed by the individual, any limits to the authority, and specify 
parties responsible for functions outside of the authority to be 
assumed.
    Response: The commenter's request is already addressed in the 
requirement as included in the proposed rule under Sec.  441.674(b)(2), 
which we are finalizing at Sec.  441.740(b)(2).
    Comment: Section Sec.  441.674(e)(2) regarding financial management 
supports should clarify that federal financial participation (FFP) is 
available for this service.
    Response: States have the option of providing this type of activity 
as a Medicaid administrative activity or as a Medicaid service, as long 
as the activity meets Medicaid requirements. It is not necessary for 
this to be specified in the text of the regulation. We will explain 
these options in future guidance.
    Comment: One commenter requested clarification to indicate that a 
state may provide for employer functions itself, or through a fiscal/
employer agent or other state-contracted entity under the state's 
direction and control. They stated that it should also be clear that 
states have the option to offer these supports to individuals directly 
or through a public entity.
    Response: States have the option of providing this type of activity 
as a Medicaid administrative activity or as a Medicaid service, as long 
as the activity meets Medicaid requirements. We do not believe that 
this degree of specificity would be appropriate as a requirement under 
regulation text, but will be considered in the development of any 
future guidance.
    Comment: Two commenters requested CMS to revise the requirement 
that states offer individual supports so that it includes peer-to peer 
support and family-driven care.
    Response: While we agree that these are important supports that 
states should consider making available to individuals, we do not 
believe that this degree of specificity would be appropriate as a 
requirement under regulation text. We will however, consider this in 
the future development of additional guidance.
    Comment: Two commenters indicated that it is unclear what is meant 
by, and stated concerns about, the statement that evaluation results 
will lead to the determination of ``ability to self-direct [both with 
and without specific supports].'' One of these commenters expressed 
support of any evaluation criteria that encourages an individual to 
personally assess his/her interests and abilities to self-direct while 
not leading to professional decisions made in isolation based solely on 
the individual's disability, personal characteristics, or experiences. 
The other commenter stated the belief that, with appropriate supports, 
essentially all individuals are able to self-direct, using Michael 
Weymeyer's concept of the individual as causal agent in their life, and 
that it is hard to understand the purpose of determining the ability of 
someone to self-direct without supports. Both agree that a person-
centered system that includes participant direction should be able to 
support people to make informed decisions pertaining to their care 
while providing the individualized support s/he needs to successfully 
self-direct.
    Response: The purpose of inclusion of ``without supports'' in this 
paragraph is to be inclusive of the individual's option to not avail 
him/herself of the opportunity to use the self-directed supports that 
states are required to offer under this option, while also preserving 
the responsibility of states to ensure that the individual receives the 
needed services in accordance with his/her person-centered service 
plan.
    Comment: One commenter stated that self-directed service plans 
should be aligned with the most integrated setting definition under the 
ADA and Olmstead and recommended additional language be added under 
Sec.  441.674(b).

[[Page 2997]]

    Response: This recommendation is already captured under Sec.  
441.725(b)(1), which pertains to all person-centered service plans.
    Comment: One commenter expressed an opinion about the requirement 
in the proposed rule that the service plan indicate not only the 
services that will be self-directed, but also the ``methods by which 
the individual will plan, direct, or control these services.'' The 
commenter expressed that this language is dangerously vague, and as a 
result, may lead to specificity within the service plan that is not 
sensitive to the flexible and dynamic processes required for successful 
participant direction.
    Response: This language is referring to participant preferences 
with regards to how they choose to self-direct their services, 
including employer and/or budget authority if elected by the state. 
More detail and requirements regarding these two authorities is 
specified under Sec.  441.740(c) and (d).
    Comment: One commenter stated the importance of individualized 
contingency plans as being well stated, and appropriate in the proposed 
regulation. Another stated that risk management techniques should not 
interfere with the right to self-direct and other choices and rights 
unless there is a documented, clear, concrete danger present. Another 
commenter indicated that it is important that participant direction 
philosophy inform any risk management techniques, which are required in 
the proposed rule to be listed in the service plan, with the 
participant leading the process and creating back-up plans unique to 
his/her needs. The commenter also supports a transparent individual 
budget development and monitoring process, but at the same time 
recognizes the importance of providing participants with accessible 
information that is not too overwhelming and easy to digest. They 
recommend that any tools for this purpose be simple and straight 
forward, making them accessible to all program participants.
    Response: We appreciate and agree with these comments and will 
consider them for inclusion in future guidance.
    Comment: One commenter indicated that states are using the self-
directed option to save money, and that self-directed services are 
often reimbursed at a lower rate than agency-directed services for no 
clear reason, causing wages for workers in self-directed programs to be 
substantially lower than wages for agency-controlled workers.
    Response: Self-directed provision of services provides the states 
with the option to give individuals the flexibility to negotiate 
preferred rates for services, frequently with individuals that have a 
pre-existing relationship with the consumer, for example, a friend or 
neighbor. This may result in costs for services that are lower than 
comparable services provided by an agency. The rates selected by 
individuals who are self-directing may or may not include the 
administrative overhead that occurs when an agency employs individual 
workers to provide services.
    Comment: Several commenters stated that self-direction as a 
delivery method and supports to participants to self-direct, should be 
required and not state options. Another stated that agency-based 
services should be available only for those who cannot manage self-
direction (with supports) and have no authorized representative.
    Response: Section 1915(i)(G)(iii) of the Act allows states the 
option to offer individual election for self-directed services. The 
statute does not include the authority for the Secretary to require 
that the services that states offer under section 1915(i) of the Act 
must be self-directed. For states that choose to offer individual 
election to self-direct their HCBS, states must make information and 
assistance available to those individuals to support their direction of 
services.
    Comment: One commenter applauded the ability for states to allow 
participants to direct any or all of the State plan HCBS benefit, and 
stated the potential for confusion, unnecessary complexity, and limited 
control when states decide to limit the ability to self-direct to one 
specific service. They strongly recommended that states receive 
technical assistance and guidance on the benefits of participant 
direction and how to implement participant direction opportunities to 
the furthest extent possible, including providing access to an 
individual budget model.
    Response: We appreciate these comments. We are available to provide 
guidance and assistance to states and encourage states to contact us 
with any such requests.
    Comment: One commenter stated that the following statement is 
extremely vague and requires clarification: ``According to the proposed 
rule, individuals who choose to self-direct will be subject to the 
`same requirements' as other enrollees in the State plan HCBS 
benefit.'' They stated that it is important that any requirements 
created be sensitive to the participant direction philosophy and 
informed by evidence-based participant direction practices.
    Response: This statement in the preamble was only stating that the 
other requirements of section 1915(i) of the Act, such as eligibility, 
adjustment authority, independent evaluation and assessment, person-
centered service plan, etc., are still requirements that must be 
applied for individuals who choose to self-direct their services. 
Additional requirements specific to the self-direction option were 
included in the proposed rule, and were based on our experience with 
section 1915(c) of the Act waivers and other Medicaid authorities in 
order to include a similar pattern of self-directed opportunities with 
meaningful supports and effective protections.
    Comment: One commenter stated the assumption that states have the 
option to provide program participants with employer authority or 
budget authority (as opposed to requiring both), but indicated that 
they find the language in the proposed rule pertaining to this point 
vague.
    Response: Section 441.740(b)(2) already specifies ``and/or'' to 
indicate this option.
    Comment: One commenter, with a reminder that the proposed rule 
allows states to enter into a ``co-employer'' relationship with 
participants, stated that it is important to recognize that there is no 
one standard definition for ``Agency with Choice,'' leading to 
inconsistent application and monitoring of this model. The commenter 
strongly encouraged CMS, in collaboration with the Department of Labor 
and informed by existing state labor laws and stakeholders, to set 
standards for the ``Agency with Choice'' model that are reflective of 
the participant direction paradigm and the liabilities specific to this 
model.
    Response: We appreciate this comment and will take it under 
consideration in the development of future guidance.
    Comment: One commenter recommended that Sec.  441.674(b) include a 
reference to Sec.  441.674(e) requiring self-direction supports to be 
included in the service plan, since paragraph (e) is cross- referenced 
in other paragraphs, at Sec.  441.674(c)(2) and Sec.  441.674(d)(4)).
    Response: After consideration of this comment, we believe the 
inclusion of this requirement under both Sec.  441.740(c)(2) and (d)(4) 
is repetitive and would be better placed under Sec.  441.740(b) as a 
new paragraph (5). Therefore, we made this addition to Sec.  441.740.
    Comment: One commenter recommended that Sec.  441.674(e) should 
explicitly include the requirement suggested in the preamble (77 Fed. 
Reg. 26373, first column) for an ``independent advocate.''

[[Page 2998]]

    Response: We are not adding this as a requirement to this final 
rule. However, we believe the availability of an independent advocate 
to assist the individual with the access to and oversight of their 
waiver services, including self-direction, is an important component of 
a strong self-directed system.
    Comment: One commenter recommended that CMS explain, in Sec.  
441.674(a), that individuals should be encouraged to retain authority 
over all functions (budgeting, staffing, etc.), but that individuals 
could choose only to retain authority over specific functions. They 
also recommended that CMS add the term ``, but not limited to,'' after 
the term ``including.''
    Response: The purpose of Sec.  441.740(a) is to specify the state 
option to offer the election for self-directing HCBS. The language that 
the commenter has suggested would not be appropriate for this 
regulation since it would not stipulate a state requirement. Regarding 
the second comment, we do not agree with leaving this open-ended, and 
since it is unclear what else would be self-directed in addition to 
amount, duration, scope, provider, and location of the HCBS, we are 
unable to make the suggested revision.
    Comment: One commenter urges CMS to promote matching service 
registries as robust models of information and assistance as a way to 
assist participants with identifying and accessing independent 
providers.
    Response: We appreciate this comment and will consider it for 
inclusion in future guidance.
12. State Plan HCBS Administration: State Responsibilities and Quality 
Improvement (Sec.  441.745) (Proposed Sec.  441.677)
a. State Responsibilities
    States are required to provide CMS annually with the projected 
number of individuals to be enrolled in the benefit, and the actual 
number of unduplicated individuals enrolled in the State plan HCBS 
benefit in the previous year. Section 1915(i) of the Act authorizes a 
state to elect not to apply comparability requirements, thus permitting 
states to target the entire section 1915(i) of the Act benefit, 
specific services within the benefit, or both. Under Sec.  
441.745(a)(1)(ii), we specify that the state may not limit enrollee 
access to services in the benefit for any reason other than assessed 
need or targeting criteria. This includes the requirement that services 
be provided to all individuals who are assessed to meet the targeting 
criteria and needs-based criteria, regardless of income. This is an 
important distinction between the limits states place on the services 
to be offered when they design the benefit, as opposed to limiting 
access to the services that are in the benefit for particular enrolled 
individuals. As discussed in the proposed rule, states have a number of 
permitted methods to control utilization. We proposed that once an 
individual is found eligible and enrolled in the benefit, access to 
covered services can be limited on the basis of the needs-based 
criteria as evaluated by the independent assessment and incorporated 
into the person-centered service plan. By not limiting access, we mean 
that an enrollee must receive any or all of the HCBS offered by the 
benefit, in scope and frequency up to any limits on those services 
defined in the state plan, to the degree the enrollee is determined to 
need them. Enrollees should receive no more, and no fewer, HCBS than 
they are determined to require.
b. Administration
    We proposed in Sec.  441.677(a)(2)(i) an option for presumptive 
payment. In accordance with section 1915(i) of the Act, the state may 
provide for a period of presumptive payment, not to exceed 60 days, for 
evaluation of eligibility for the State plan HCBS benefit and 
assessment of need for HCBS. This period of presumptive payment would 
be available for individuals who have been determined to be Medicaid 
eligible, and whom the state has reason to believe may be eligible for 
the State plan HCBS benefit. We proposed that FFP would be available 
for evaluation and assessment as administration of the approved state 
plan prior to an individual's determination of eligibility for and 
receipt of other section 1915(i) of the Act services. If the individual 
is found not eligible for the State plan HCBS benefit, the state may 
claim the evaluation and assessment as administration, even though the 
individual would not be considered to have participated in the benefit 
for purposes of determining the annual number of individuals served by 
the benefit. FFP would not be available during this presumptive period 
for receipt of State plan HCBS.
    In Sec.  441.677(a)(2)(ii), we proposed that a state may elect to 
phase-in the provision of services or the enrollment of individuals if 
the state also elects not to apply comparability requirements and to 
target the benefit to specific populations. However, there is no 
authority to limit the numerical enrollment in the benefit or to create 
waiting lists. Therefore, we proposed that any phase-in of services may 
not be based on a numerical cap on enrollees. Instead, a state may 
choose to phase-in the benefit or the provision of specific services 
based on the assessed needs of individuals, the availability of 
infrastructure to provide services, or both. Infrastructure is defined 
as the availability of qualified providers or of physical structures 
and information technology necessary to provide any service or set of 
services. A state that elects to phase-in the benefit must submit a 
plan, subject to CMS approval, that details the criteria used for 
phasing in the benefit. In the event that a state elects to phase-in 
the benefit based on needs, all individuals who meet the criteria 
described in the phase-in plan must receive covered services. If a 
state elects to phase-in services based upon infrastructure, the plan 
must describe the capacity limits, strategies to increase capacity, and 
must assure that covered services will be provided to all individuals 
who are able to acquire a willing and qualified provider. Any phase-in 
plan must provide assurance that the benefit, and all included 
services, will be available statewide to all eligible individuals 
within the first 5-year approval period.
    In Sec.  441.677(a)(2)(iii), we proposed that a state plan 
amendment submitted to establish the State plan HCBS benefit must 
include a reimbursement methodology for each covered service. In some 
states, reimbursement methods for self-directed services may differ 
from the same service provided without self-direction. In such cases, 
the reimbursement methodology for the self-directed services must also 
be described.
    In Sec.  441.677(a)(2)(iv), we proposed that the state Medicaid 
agency describe the line of authority for operating the State plan HCBS 
benefit. The State plan HCBS benefit requires several functions to be 
performed in addition to the service(s) provided, such as eligibility 
evaluation, assessment, and developing a person-centered service plan. 
To the extent that the state Medicaid agency delegates these functions 
to other entities, we proposed that the agency describe the methods by 
which it will retain oversight and responsibility for those activities, 
and for the operation and quality improvement of the benefit as a 
whole. Delegation of responsibilities by the state Medicaid agency must 
comply with the single state agency requirements of section 1902(a)(5) 
of the Act and Sec.  431.10.
    In Sec.  441.677(a)(2)(v), we included a provision regarding the 
effective dates of amendments with substantive changes. Substantive 
changes may

[[Page 2999]]

include, but are not limited to changes in eligible populations, 
constriction of service amount, duration or scope, or other 
modifications as determined by the Secretary. We added regulatory 
language reflective of our guidance that section 1915(i) of the Act 
amendments with changes that CMS determines to be substantive may only 
take effect on or after the date when the amendment is approved by CMS, 
and must be accompanied by information on how the State has assured 
smooth transitions and minimal adverse impact on individuals impacted 
by the change.
    In Sec.  441.677(a)(2)(vi), we indicated that State plan amendments 
including targeting criteria are subject to a 5-year approval period 
and that successive approval periods are subject to CMS approval, 
contingent upon state adherence to federal requirements. In order to 
renew State plan HCBS for an additional 5-year period, the state must 
provide a written request for renewal to CMS at least 180 days prior to 
the end of each approval period.
c. Quality Improvement Strategy
    We proposed in Sec.  441.677(b) requirements for quality assurance 
which states are required to meet under section 1915(i)(1)(H)(i) of the 
Act. We proposed to require a state, for quality assurance purposes, to 
maintain a quality improvement strategy for its State plan HCBS 
benefit. The state's quality improvement strategy should reflect the 
nature and scope of the benefit the State will provide. We proposed 
that the State plan HCBS benefit include a quality improvement strategy 
consisting of a continuous quality improvement process, and outcome 
measures for program performance, quality of care, and individual 
experience, as approved and prescribed by the Secretary, and applicable 
to the nature of the benefit. In Sec.  441.677(b), we proposed to 
require states to have program performance measures, appropriate to the 
scope of the benefit, designed to evaluate the state's overall system 
for providing HCBS. Program performance measures can be described as 
process and infrastructure measures, such as whether plans of care are 
developed in a timely and appropriate manner, or whether all providers 
meet the required qualifications to provide services under the benefit. 
In Sec.  441.677(b)(1), we also proposed to require states to have 
quality of care measures as approved or prescribed by the Secretary. 
Quality of care measures may focus on program standards, systems 
performance, and individual outcomes.
    Comment: A commenter stated that the proposed regulations would 
result in cut backs, loss of jobs, and subsequent loss of care for 
people who cannot survive without assistance with all their basic 
needs.
    Response: These regulations explain requirements for a new 
provision that provides states with the option to add additional HCBS 
to their state plan. Since these regulations allow for new additional 
services, we do not see how this would result in the impact that the 
commenter suggests.
    Comment: One commenter requested revision to Sec.  
441.677(a)(1)(iii) to add to the requirements advance written notice 
and the right to appeal denials.
    Response: This provision of this rule refers to requirements at 
part 431, subpart E, which is not a subject of this regulation. 
However, since advance notice is a topic in part 431, subpart E, we 
have added ``advance notice'' to this regulation at Sec.  
441.745(a)(1)(iii).
    Comment: One commenter stated the belief that operating different 
parts of the state plan under different rules would be burdensome to 
states, and opposition to Sec.  441.677(a)(2)(v), which would impose 
rules for effective dates of state plan amendments that differ from 
current state plan amendment policy.
    Response: As explained in the preamble to the rule, and as required 
at Sec.  441.745(a)(2)(v), state plan amendments which result in a 
reduction of eligibility or services to section 1915(i) of the Act 
participants must be submitted with a prospective, rather than 
retroactive, effective date. While this requirement differs from 
current SPA procedures, it is consistent with section 1915(c) of the 
Act submissions. And as section 1915(i) of the Act allows states to add 
services under section 1915(c)(4)(B) of the Act, we are requiring 
states submitting section 1915(i) of the Act SPAs to follow the same 
requirements for those section 1915(c) services outlined in CMS CMCS 
Bulletin dated April 16, 2012, regarding actions that result in 
reductions. If a state submits an amendment or renewal to an approved 
SPA that includes reductions, the reductions would be effective for the 
remainder of the approved period (once approved), but cannot be applied 
retroactively to the SPA action's approval date.
    Comment: One commenter agreed that retroactive amendments should 
not be available for elimination or reductions in services, but does 
not consider changes to provider qualifications or rate methodologies 
to be substantive changes. The commenter stated that defining 
substantive change to include changes to rate methodology or provider 
requirements prevents states from acting quickly and efficiently to 
address legislative direction or changing state needs.
    Response: We disagree. Since changes to provider qualifications 
and/or rate methodologies could negatively impact provider availability 
and result in a reduction of services to a participant, we are 
requiring a state to submit such SPAs, and receive CMS approval, prior 
to implementing any changes of this nature.
    Comment: One commenter stated disagreement with Sec.  
441.677(a)(2)(vi), limiting approval period for SPAs with targeting to 
5 years and requiring submission of renewals 180 days in advance of 
expiration, and indicated that these provisions seem contrary to 
requirements for services under the state plan and are like the 
creation of a new waiver authority.
    Response: Section 1915(i)(7)(B) of the Act specifies that when a 
state elects to target the provision of State plan HCBS to specific 
populations, that this election will be for a period of 5 years. 
Therefore, since the 5 year period of operation with the option to 
renew is a statutory requirement, we are unable to change this 
provision. Section 1915(i)(7)(C) of the Act permits states to renew for 
additional 5 year terms if we determine prior to the beginning of each 
renewal period that the state has adhered to section 1915(i) of the Act 
requirements and that the state has met its objectives with respect to 
quality improvement and individual participant outcomes. In order for 
us to determine that these requirements are met, states must submit 
renewal SPAs at least 180 days in advance of expiration in order to 
allow us sufficient time to review. The need for this review timeframe 
is consistent with our experience under section 1915(c) of the Act 
renewals.
    Comment: A few commenters recommended that CMS add to the periods 
of approval requirement for states that elect to target specific 
populations at Sec.  441.677(a)(2)(vi), so that it specifically 
includes the statutory renewal requirement at section 1915(i)(7)(c)(ii) 
to meet ``the state's objectives with respect to quality improvement 
and beneficiary outcomes.'' They stressed the importance of quality 
improvement and good beneficiary outcomes, and indicated that a State 
plan HCBS benefit should not be renewed if it cannot meet such 
criteria.
    Response: We agree with these commenters and have revised Sec.  
441.745(a)(2)(vi) accordingly.
    Comment: We received many comments regarding the option for

[[Page 3000]]

presumptive payment at Sec.  441.677(a)(2)(i), as noted below:
     ``CMS should clarify that home and community-based 
services furnished to individuals in the 3 months prior to a final 
determination of eligibility are also eligible for FFP once eligibility 
has been confirmed.''
     ``Presumptive Eligibility is confusing, and should not be 
limited to evaluations and assessment; however, if someone needed 
medical data to prove eligibility including disability determination, 
those services should be provided.''
     ``. . . encourages CMS to take this authority one step 
further to permit, on a time limited basis, federal financial 
participation for State plan HCBS furnished to consumers who are 
presumptively enrolled.''
     ``Please clarify that the availability of Federal 
financial participation for medically necessary State plan HCBS benefit 
payments under this option when the individual beneficiary has been 
found not to be eligible, allows states to hold the beneficiary 
harmless for the state financial portion.''
     ``We strongly encourage CMS to use its discretion, if 
possible, to include payment for the HCBS which a state believes the 
individual would be eligible to receive. This expanded authority is 
especially important in emergency situations, such as avoiding 
institutional care.''
     ``We support the creation of flexibility for states to 
provide HCBS based on presumed eligibility for assessment due to the 
fact that many disabilities occur rather suddenly, and because there is 
no guarantee as to when informal support networks may give out or 
end.''
     ``We commend the inclusion of authority in Sec.  
441.677(a)(2) to allow presumptive payment for HCBS evaluations and 
assessments, and the provision to allow FFP in the cases where 
presumptive payment was made based on good faith.''
    Response: We appreciate these comments. Section 1915(i)(1)(J) of 
the Act gives states the option of providing for a period of 
presumptive eligibility, not to exceed 60 days, for individuals the 
state has reason to believe may be eligible for the State plan HCBS 
benefit. However, eligibility for services under section 1915(i) of the 
Act is not the same as an eligibility determination for Medicaid 
generally, as this provision ``shall be limited to medical assistance 
for carrying out the independent evaluation and assessment'' under 
section 1915(i)(1)(E) of the Act. Therefore, for clarity, we refer to 
this limited option as ``presumptive payment.'' Since individuals not 
eligible for Medicaid may not receive State plan HCBS, the statutory 
phrase ``and if the individual is so eligible, the specific HCBS that 
the individual will receive,'' is further describing the assessment 
under section 1915(i)(1)(E) of the Act for which presumptive payment is 
available. Payment for State plan HCBS is available once the individual 
is determined eligible, and not prior to that point. However, FFP would 
be available for both 1905(a) services and administrative costs 
incurred for evaluation and assessment activities for individuals who 
are already eligible for Medicaid. During any such period of 
presumptive payment, the individual would not receive State plan HCBS, 
and would not be considered to be enrolled in Medicaid or eligible for 
the HCBS benefit for purposes of computing the number of individuals 
being served under the benefit.
    Comment: One commenter requested clarification as to how states 
must ensure people are able to move from a needs-based criteria 
benefits package to benefits that require a level of care. They also 
requested guidance to states as to how they will monitor for unexpected 
changes in services and support needs, which might result in the need 
for services associated with an institutional level of care. They asked 
that we provide guidance on time lines and processes for conducting 
level of care assessments as well as for enrolling individuals in a 
program or benefit that requires a level of care that will best meet 
their needs.
    Response: In order to receive approval of a section 1915(i) of the 
Act SPA, states must establish that the institutional level of care is 
based on needs-based criteria that are more stringent than the proposed 
section 1915(i) of the Act needs-based criteria. Although states are 
required to establish minimum needs-based criteria that an individual 
would have to meet in order to receive section 1915(i) benefits, the 
statute did not establish a maximum or ceiling. Therefore, states are 
permitted to allow access to those who meet institutional needs-based 
eligibility criteria. We also note that Sec.  441.715(e) requires 
states to re-evaluate and re-assess individuals receiving the State 
plan HCBS benefit at least every 12 months, and when the individual's 
circumstances or needs change significantly or at the request of the 
individual.
    Comment: In Sec.  441.677 (a)(1)(i), no details are provided about 
how states would ``project'' HCBS enrollment. This is a critical 
calculation because states might have an incentive to understate 
projections to gain the discretion associated with over-enrollment.
    Response: We do not believe it is necessary to include such details 
in the regulation. We note that this paragraph also requires states to 
report the actual numbers of unduplicated individuals enrolled in the 
State plan HCBS benefit on an annual basis.
    Comment: One commenter commended CMS on the inclusion of Sec.  
441.677(a)(1)(ii)(C) prohibiting the state from limiting access to HCBS 
based on income, cost, or location.
    Response: We appreciate the support of the commenter regarding the 
inclusion of this requirement which is now at Sec.  
441.745(a)(1)(ii)(C).
    Comment: One commenter recommended that CMS require that states 
make publicly available targeting, phase-in, and quality improvement 
plans, including by posting on public Web sites.
    Response: At this time, we do not post state plans on our Web site. 
We are working on a project to make approved state plans publicly 
available. We encourage states to provide for effective public 
engagement in all of their Medicaid program activities, and states are 
required to provide 60 day public notice when states change 
reimbursement methodology or revise CMS approved section 1915(i) of the 
Act needs-based criteria.
    Comment: A couple of commenters noted that Sec.  
441.677(a)(1)(ii)(B) incorrectly cross-references Sec.  441.656(b)(2), 
which should be changed to Sec.  441.656(e)(2).
    Response: We appreciate this comment and have made a revision to 
this final rule at Sec.  441.745(a)(1)(ii)(B) with the corrected cross-
reference to Sec.  441.710(e)(2).
    Comment: One commenter expressed that CMS should consider requiring 
states to report on quality measures related to home and community-
based settings and community integration for HCBS provided under 
sections 1915(k), 1915(c), and 1915(i) of the Act.
    Response: We agree. States are required to demonstrate at the time 
of approval that they have quality measures in place with a monitoring 
plan, must include them in the SPA or waiver, and will report to CMS at 
a frequency to be determined by CMS or upon request by CMS.
    Comment: One commenter emphasized the important role that non-
medical quality measures play in the meaningful evaluation of HCBS. The 
commenter stated that quality measures should reflect the ultimate 
mandate resulting from the Olmstead decision and the importance of 
quality of life,

[[Page 3001]]

independence, and community integration. The commenter further stated 
that for those who choose participant direction, measures sensitive to 
this mode of service delivery need to be implemented, including 
measures that recognize the role of participants as decision makers and 
evaluators of the quality of services and supports they receive.
    Response: We recognize the importance of non-medical quality 
measures and will incorporate these areas (quality of life, community 
integration and factors specific to participant-directed services) in 
development of future guidance.
    Comment: One commenter noted that due to reported abuses in some 
states, it must be clear that observation of actual conditions, through 
on-site monitoring and review and by interviews with service recipients 
and their advocates and family members, will be the method used to 
measure compliance; and not simply by reviewing policies, procedures, 
or assertions. The commenter further stated that it is crucial that the 
final rule contain the details so CMS has the legal authority to 
prevent creation of new loopholes or allow for misinterpretation.
    Response: There may be multiple methods of monitoring health and 
welfare in a quality monitoring plan. States are required by the 
regulation to have a quality improvement strategy consisting of a 
continuous quality improvement process, and outcome measures for 
program performance, quality of care, and individual experience.
    Comment: A commenter inquired about the applicability of the state 
assurances for HCBS waiver programs required by Sec.  441.302, 
particularly Sec.  441.302(a) Health and Welfare, noting that there is 
equivalent vulnerability potential for individual beneficiaries 
receiving HCBS under state plan authority as under section 1915(c) of 
the Act waiver authority.
    Response: The regulations noted by this commenter specifically 
apply to section 1915(c) of the Act home and community-based waiver 
services and do not specifically apply to section 1915(i) of the Act 
State plan HCBS. The regulations that implement section 
1915(i)(1)(H)(i) of the Act, which requires states to ensure that the 
provision of HCBS meets federal and state guidelines for quality 
assurance, can be found in Sec.  441.745(b) and require that states 
have a quality improvement strategy consisting of a continuous quality 
improvement process, and outcome measures for program performance, 
quality of care, and individual experience.
    Comment: One commenter encouraged CMS to require states to submit 
their quality improvement strategy to CMS at a specific frequency and 
consider making such information public.
    Response: We have required through these regulations that states 
make this information available to CMS at a frequency determined by CMS 
or upon the request of CMS. We will consider further specification of 
these requirements in the development of future guidance.
    Comment: One commenter recommended revision to Sec.  
441.677(b)(1)(ii) to include the following language from the preamble 
in the text of the final rule: ``Be evidence-based, and include outcome 
measures for program performance, quality of care, and individual 
experience as determined by the Secretary.''
    Response: This recommendation has been adopted in this final rule 
at Sec.  441.745(b)(1)(ii).
    Comment: One commenter noted that in order to determine if there is 
a sufficient infrastructure to effectively implement HCBS, it is 
necessary for states to gather direct-care worker data such as numbers 
of direct service workers, gaps in services data, stability of 
workforce, and average compensation of workers.
    Response: We agree that this would be useful data for states to 
consider in the development of a State plan HCBS benefit, but we have 
not required specific measures, such as the one recommended by the 
commenter.
    Comment: One commenter further encouraged CMS to consider how 
quality principles/requirements would work within the management of 
long term services and supports and its impact on network adequacy.
    Response: We appreciate the commenter's recommendation and will 
take this under consideration as we develop future guidance.
13. Prohibition Against Reassignment of Provider Claims (Sec.  447.10)
    Regarding the proposed provider payment reassignment provision, we 
received a total of 7 timely items of correspondence from home care 
provider representatives and other professional associations, state 
Medicaid directors, non-profit organizations, and other individuals. 
These comments ranged from general support for the proposed provision, 
to specific questions and detailed comments and recommendations 
regarding the proposed changes. A summary of the public comments and 
our responses are set forth below.
    The proposed rule included a provision, retained in this final 
rule, that will allow states to enter into third party payment 
arrangements on behalf of individual practitioners for health and 
welfare benefit contributions, training costs, and other costs 
customary for employees.
    Comment: Several commenters expressed support for the proposed 
provision. Two state Medicaid agency directors appreciate the 
clarification that third party payments on behalf of certain providers 
are allowed for customary benefits. That ability, they recommend, is 
essential and cost-effective for a large group of individual providers 
of personal care.
    Response: We appreciate the commenters' support for the proposed 
provision. CMS has long sought to ensure maximum state flexibility to 
design state-specific payment methodologies that help ensure a strong, 
committed, and well-trained work force. Currently, certain categories 
of Medicaid covered services, for which Medicaid is a primary payer, 
such as personal care services, suffer from especially high rates of 
turnover and low levels of participation. We believe the proposed 
provider payment reassignment provision retained in the final rule will 
provide to states additional tools to help foster a stable and high 
performing workforce.
    Comment: One commenter stated that authorizing payments on behalf 
of an individual practitioner to a third party for health and welfare 
benefit costs, training costs, or other benefits customary for 
employees aligns with essential elements that they advocate for quality 
direct-care jobs. They stated their belief that this will support state 
efforts to expand and improve consumer employment and direction of in-
home personal care workers. They further stated that workers need 
affordable health insurance, other family-supportive benefits, and 
excellent training that helps each worker develop and hone all skills--
both technical and relational--necessary to support long-term care 
consumers in order to ensure that all direct-care workers are able to 
provide the highest-quality care to all long-term care consumers. They 
believe that for consumer-directed home care workers, it is even more 
vital that states assume some of the human resources functions of 
typical employers.
    Response: We appreciate the commenter's support for the proposed 
provision and agree with its potential to improve both the stability 
and the skills of the health care provider workforce.

[[Page 3002]]

The payment arrangements that we are permitting will enhance state 
options to provide practitioners with benefits that improve their 
ability to function as health care professionals. For the classes of 
practitioners for whom the state is the only or primary payer, these 
payment arrangements are an efficient and effective method for ensuring 
that the workforce has health and welfare benefits and adequate 
training for their functioning.
    Comment: One commenter stated that it will be essential for CMS, 
states, advocates, program participants, and organizations to 
understand how this proposed rule is appropriately applied within a 
participant direction model. The proposed provision, they suggested, 
should by no means be interpreted to allow for restrictions on 
participants' decisions pertaining to what s/he feels is critical to 
the managing of workers. In their own training, program participants 
should be informed of the benefits for which workers are eligible to 
ensure informed decisions are made. They urged that any additional 
deductions should be paid for with increased funding for the program 
rather than be paid directly from individuals' budgets already 
allocated to needed services and supports.
    Response: Direct payment of funds by states to third parties on 
behalf of practitioners, to ensure benefits that support those 
practitioners and provide skills training, may help ensure that 
beneficiaries have greater access to such practitioners and higher 
quality services. In addition, if a state elects to withhold certain 
payments from practitioners, as the proposed provision would allow, and 
forwards those amounts to a third party on behalf of that practitioner 
for health and welfare contributions, training programs, or in support 
of other employee benefits, there will not necessarily be any impact on 
program budgets. This rule will not require any change in state funding 
to the extent that practitioner rates already factored in the costs of 
benefits and skills training. This rule will simply provide flexibility 
for states to fund such costs directly and ensure uniform access to 
benefits and skills training for practitioners. Indeed, there may be 
cost savings resulting from the collective purchase of such benefits 
and greater workforce stability.
    Comment: One commenter supports CMS' objective of clarifying the 
prohibition on reassignment in section 1902(a)(32) of the Act to ensure 
that it is limited to its intended application and that it does not 
have any unintended adverse impact on important state Medicaid 
operations. They suggested that states have long sought this 
clarification primarily in the context of state efforts to expand and 
improve programs that maximize consumer choice and independence and 
allow individuals to receive long term care services and supports in 
their homes and communities. They stated that the health care providers 
who assist these individuals are considered independent service 
practitioners both due to their relationship to the state and the 
consumer, and as a result face barriers including a lack of access to 
benefits and training. It makes sense, therefore, for states to be able 
to make ``employer-like payments from the Medicaid service fee to 
fulfill employer-like functions'' that overcome these employment 
barriers.
    Response: CMS appreciates the commenter's support for the proposed 
provision and agrees that for the classes of practitioners for whom the 
state is the sole or primary payer, and has many attributes of an 
employer, the state should be afforded flexibilities to help ensure a 
stable, high performing workforce.
    Comment: One commenter indicated that as a future nurse 
practitioner, she believes the application of this proposed provision 
is timely and she believes it will support state efforts to claim 
``excess provider payments that are not directly going to the provider 
but could be used to advance statewide practice from a global 
perspective.''
    Response: We appreciate the commenter's support for the proposed 
provision. However, we would note that the proposed provider payment 
reassignment provision does not involve ``excess provider payments''. 
Rather, as in the proposed rule, the final rule will offer states 
flexibility in determining appropriate costs to consider in their 
development of payment rate methodologies to ensure adequate training, 
health and welfare benefits, and other benefits customary for employees 
within the development of that rate. States will be permitted to 
directly pay third parties for health and welfare benefits, training, 
and other employee benefit costs. These amounts would not be retained 
by the state, but would be paid on behalf of the practitioner for the 
stated purpose. In fact, we believe that direct payment of funds to 
third parties on behalf of the practitioner may be viewed as 
advantageous by the practitioner insofar as they have increased 
opportunities for training. In addition, direct payment of funds to 
third parties on behalf of the practitioners may ensure that 
beneficiaries have greater access to such practitioners and higher 
quality services.
    Comment: One commenter noted that, using the proposed provision, 
Medicaid can leverage its dominant role and help stabilize the direct 
care workforce. Specifically, the commenter noted that by encouraging 
Medicaid to directly pay practitioners for health and welfare benefit 
costs, training, or other benefits customary for employees, job quality 
will improve leading to improving recruitment and retention of skilled 
direct-care workers and better quality care. The commenter also 
recommended that CMS provide states with the appropriate technical 
assistance in order to assist them in adequately conducting needs 
assessments of their own direct-care workforce.
    Response: We agree that states that voluntarily elect to utilize 
the proposed provider payment reassignment provision may help improve 
their own health care provider workforce. We also agree with the need 
for states to receive adequate technical assistance from us in order to 
implement the provision. States with questions regarding the provision 
are encouraged to contact their Regional Office for further guidance.
    Comment: One state asked if the third parties to whom withheld 
funds are provided would be subject to the provisions of part 455, 
subpart E, Provider Screening and Enrollment.
    Response: No. If the state elects to reassign provider payments for 
health and welfare costs, training expenses, or other employee 
benefits, the third party to whom those payments are assigned would be 
the recipient of such funds, but not the provider of record and hence 
not subject to provider qualification requirements. The amounts paid to 
a third party would be on behalf of the individual practitioner.
    Comment: One commenter seeks clarification as to what would 
constitute a health and welfare benefit contribution. Specifically, one 
state would like to know if this would include amounts for paid time 
off for personal care attendants.
    Response: The proposed change, retained in the final rule, permits 
each state the option to elect such payment arrangements to the extent 
that the state determines that they are related to benefits such as 
health care, skills training and other benefits customary for 
employees. States will need to review their individual circumstances 
and workforce needs to determine if the measures are related to such 
benefits, and would help serve program objectives such as to ensure a 
stable, high performing workforce. We do not wish to prescribe the 
types of benefits

[[Page 3003]]

the state might wish to include in its definition of health and welfare 
benefits, such as paid time off for personal care attendants. As in the 
proposed rule, the final rule offers states flexibility in determining 
appropriate aspects to consider in their development of payment rate 
methodologies to ensure adequate training, health care, and other 
employee benefits for practitioners, as defined by the state.
    Comment: One commenter requested a modification to the proposed 
regulatory text for the provider payment reassignment provision to 
avoid a possible misunderstanding as to its coverage. Specifically, the 
commenter recommended a change to clarify that it is applicable to 
providers for whom the main source of service revenue is the Medicaid 
program. As proposed, the language states that the provider payment 
reassignment exception is ``[in] the case of practitioners for which 
the Medicaid program is the primary source of revenue . . .'' Without 
such clarifying language, the commenter recommends, a state may not be 
able to make deductions for health care, training, and other benefits 
that it provides for individuals who operate adult foster care homes in 
their residences. Since the consumer pays the provider for room and 
board in that instance, the provider's primary source of revenue may 
not be considered to be the Medicaid program.
    Response: We have clarified the language in the final rule by 
specifying that the state must be the primary source of service revenue 
for the practitioner. The proposed regulatory text would permit states 
to make payment to third parties for provider benefits when the state 
is operating in the role of the provider's employer (even if the state 
is not the employer for other purposes). As clarified, the text will 
provide flexibility for a state to look at revenue only related to 
services furnished by the practitioner, rather than revenue related to 
shelter and food costs. We believe the proposed regulatory text, which 
we are retaining, provides the necessary latitude for states to 
determine whether it is acting in the role of an employer for a 
particular class of practitioners.

III. Home and Community-Based Services (HCBS) Waivers (Section 1915(c) 
of the Act)

A. Background

    Section 1915(c) of the Social Security Act (the Act) authorizes the 
Secretary of Health and Human Services to waive certain Medicaid 
statutory requirements so that a state may offer Home and Community-
Based Services (HCBS) to state-specified group(s) of Medicaid 
beneficiaries who otherwise would require services at an institutional 
level of care. This provision was added to the Act by the Omnibus 
Budget and Reconciliation Act of 1981 (Pub. L. 97-35, enacted August 
13, 1981) (OBRA'81) (with a number of subsequent amendments). 
Regulations were published to effectuate this statutory provision, with 
final regulations issued on July 25, 1994 (59 FR 37719). In the June 
22, 2009 Federal Register (74 FR 29453), we published the Medicaid 
Program; Home and Community-Based Services (HCBS) advance notice of 
proposed rulemaking (ANPRM) that proposed to initiate rulemaking on a 
number of areas within the section 1915(c) of the Act program. In the 
proposed rule published on April 15, 2011 (76 FR 21311-21317), we 
discussed the comments relating to questions posed by the ANPRM, which 
are addressed in this final rule. We included proposed language for 
settings in which HCBS could be provided to elicit further comments on 
this issue in the section 1915(c) of the Act proposed rule, in the 
section 1915(k) of the Act proposed rule published on February 25, 2011 
and also in the section 1915(i) of the Act proposed rule published on 
May 3, 2012 as we recognize the need for a consistent definition of 
home and community-based settings. It is our goal to align the final 
rule language pertaining to home and community-based setting across the 
sections 1915(c), 1915(i) and 1915(k) of the Act Medicaid HCBS 
authorities. We further sought to use this opportunity to clarify 
requirements regarding timing of amendments and public input 
requirements when states propose modifications to HCBS waiver programs 
and service rates, and strategies available to CMS to ensure state 
compliance with the requirements of section 1915(c) of the Act.
    We have earlier explained our purpose for proposing definitions 
regarding home and community-based settings (see discussion under 
section II.A. of this rule).
    We believe that these final changes will have numerous benefits for 
individuals and states alike. In addition to addressing individual and 
stakeholder input, these changes will improve HCBS waiver programs and 
support beneficiaries by enabling services to be planned and delivered 
in a manner driven by individual needs rather than diagnosis. These 
changes will enable states to realize administrative and program design 
simplification, as well as improve efficiency of operation. The changes 
related to clarification of HCBS settings will maximize the 
opportunities for waiver participants to have access to the benefits of 
community living and to receive services in the most integrated 
setting, and will effectuate the law's intention for Medicaid home and 
community-based services to provide alternatives to services provided 
in institutions.

B. Provisions of the Proposed Regulations and Analysis of and Responses 
to Public Comments

    On April 15, 2011, we published a proposed rule (76 FR 21311) 
entitled, ``Medicaid Program: Home and Community-Based Services (HCBS) 
Waivers'' which proposed revising the regulations implementing Medicaid 
home and community-based services under section 1915(c) of the Act in 
several key policy areas. First, the proposed rule provides states the 
option to combine the existing three waiver targeting groups as 
identified in Sec.  441.301. In addition, we proposed changes to the 
HCBS waiver provisions to convey requirements regarding person-centered 
service plans, characteristics of settings that are, as well as are 
not, home and community-based, to clarify the timing of amendments and 
public input requirements when states propose modifications to HCBS 
waiver programs and service rates, and to describe the additional 
strategies available to us to ensure state compliance with the 
statutory provisions of section 1915(c) of the Act.
    We received a total of 1653 comments from State Medicaid agencies, 
advocacy groups, health care providers, employers, health insurers, and 
health care associations. The comments ranged from general support or 
opposition to the proposed provisions to very specific questions or 
comments regarding the proposed changes.
    Brief summaries of each proposed provision, a summary of the public 
comments we received (with the exception of specific comments on the 
paperwork burden or the economic impact analysis), and our responses to 
the comments are as follows.
    The following summarizes a few general comments received regarding 
the notice of proposed rulemaking and also comments regarding issues 
not contained in specific provisions. We appreciate and thank the 
commenters for these various remarks. We realize these commenters raise 
important considerations in support of persons receiving Medicaid HCBS 
living in community settings, in integrated

[[Page 3004]]

settings, and working in jobs with meaningful wages. Since these 
important comments did not address any specific regulatory provisions 
in the proposed rule, there is no need to respond to them further in 
the final rule:
    Comment: We received many comments supporting the proposed policies 
in the proposed rule, as well as some comments expressing concerns 
about the various aspects of the rule.
    Response: We appreciate the feedback received on the proposed rule 
and have relied heavily on the insights provided by states, advocacy 
groups, consumers and health care providers. We appreciate the 
acknowledgement and support of the policies.
    Comment: We received several comments expressing concern about 
stakeholder input with respect to these rules.
    Response: We recognized the need for a diversity of stakeholder 
input. Thus, in the June 22, 2009 Federal Register (74 FR 29453), we 
released an advance notice of proposed rulemaking that proposed to 
initiate rulemaking on a number of areas within the section 1915(c) of 
the Act program and to solicit diverse comment. Additionally, after we 
published the proposed rule on April 15, 2011 (76 FR 21311), we 
continued to meet with stakeholders that included advocacy groups, 
states, other federal agencies, provider groups and assisted living 
groups as we developed this rule.
    We plan to continue to communicate with states and build upon state 
experience as we work with states to implement new policies and program 
changes as a means of ensuring a successful partnership between states 
and federal government. In addition, we will provide technical 
assistance and support to states. We encourage states to share across 
states as implementation continues. The public comments we receive will 
inform the development of future operational guidance and tools that 
will be designed to support state implementation efforts.
1. Contents of Request for a Waiver (Sec.  441.301)
a. Person-Centered Planning Process Sec.  441.301(c)(1) (Proposed Sec.  
441301(b)(1)(i)(A))
    The provisions of this final rule will apply to all states offering 
Medicaid HCBS waivers under section 1915(c) of the Act. Comments were 
supportive of our interest in setting forth requirements regarding 
person-centered service and support plans that reflect what is 
important to the individual. The final revisions to Sec.  441.301(c)(1) 
(proposed Sec.  441.301(b)(1)(i)(A)) will require that a written 
services and support plan be based on the person-centered approach. 
This provision includes minimum requirements for this approach.
    At Sec.  441.301(b)(1)(i)(A) we proposed that a state request for a 
waiver must include explanation of how the state will use a person-
centered process to develop a written services and support plan, 
subject to approval by the Medicaid agency. We received 286 comments 
about person-centered planning, most indicating how important it is to 
individuals that HCBS are provided in a manner that supports their 
values and preferences, rather than to satisfy an impersonal or 
provider-centered plan of care. In the comments immediately below we 
outline the suggestions that do not directly affect the regulatory 
language, and indicate in some cases where we will consider these ideas 
in developing future guidance. Comments that pertain to the proposed 
regulation language will be considered in more detail, under the 
corresponding section of proposed text.
    Comment: Many of the comments had to do with effective methods for 
conducting an individual person-centered planning meeting. While some 
commenters seemed to favor requiring certain features, a variety of 
commenters made the opposite general point, cautioning that too many or 
overly specific requirements would cause the process to become 
bureaucratic instead of personal. Comments that specific proposed 
provisions are too prescriptive are noted in those sections below. A 
few commenters agreed with the concept, but not the language of the 
proposed person-centered planning rule. They suggested replacing the 
entire person-centered planning section with the language 
``contemporary, promising practices that result in consumers having 
control over the services, resources, and planning of their lives.'' 
Finally a few commenters believe that the proposed changes implement a 
``one size fits all'' ideology.
    Response: States administer Medicaid and have flexibility in how 
federal Medicaid requirements are implemented. Therefore, the language 
we are including in the final rule expresses what must occur rather 
than how. The federal regulations set the requirements and minimum 
standards for an activity. We may issue, as needed, additional guidance 
to states to assist in the interpretation and implementation of the 
rule.
    Comment: Some commenters requested general clarification of terms 
and illustration by example. Specifically, commenters presented 
questions around how person-centered planning is to be implemented and 
whether any substantive rights are established for the individual.
    Response: Examples and other explanations are generally included in 
the preamble to a notice of proposed or final rulemaking rather than in 
the regulation text. The commenter is correct that beyond the 
requirements in subparagraph (A) we do not specify how the planning 
process is to be implemented, for the reasons given immediately above. 
The commenter did not specify the particular rights of concern, so we 
cannot respond specifically to that issue. We consider the requirements 
outlined here to confer to individuals the right to a person-centered 
service plan, and a planning process, that meets these requirements. 
Individuals also have other rights under different authorities, which 
do not rely on this regulation. For example, civil rights against 
various forms of discrimination are protected under the ADA and 
elsewhere. CMS regularly works with the HHS Office for Civil Rights, 
Department of Justice (DOJ), and others to assure that we address civil 
rights issues as they bear on Medicaid requirements.
    Comment: Many and varied commenters suggested that CMS make person-
centered planning requirements consistent across all the authorities in 
which HCBS may be offered, such as the new Community First Choice 
program and the State Plan HCBS benefit. Specific language from 
proposed rules for those authorities was recommended.
    Response: We agree that person-centered planning, as well as other 
HCBS requirements, should be consistent across authorities. In response 
to comments, proposed rules for some HCBS authorities have been 
published in the last several years, reflecting development in the 
concept of person-centered planning. We are working to bring all rules 
into harmony. We do point out that rules reflect the nature of the 
service--for example, planning for Community First Choice involves the 
plan for that particular service, and may not involve some of the 
program elements of a section 1915(c) of the Act HCBS waiver. We will 
endeavor to make the requirements parallel across authorities; however, 
they may not be identical due to some statutory differences.
    Comment: A variety of commenters requested that the planning 
process consider the needs of individuals more than satisfying 
regulations or ``paper-completion.'' Many asked that the regulation 
focus on outcomes, not process.

[[Page 3005]]

    Response: We agree that the planning process should not be about 
filling out forms. The final rule requires actions and outcomes that 
result in a very active process and an individualized plan that is not 
focused on paper completion. We also note that the degree to which the 
process achieves the goal of person-centeredness can only be known with 
appropriate quality monitoring by the state, which should include 
substantial feedback provided by individuals who received or are 
receiving services.
    Comment: A commenter believes that these requirements will be very 
expensive for states to implement because of added staff and IT system 
costs. The requirements should take into account states' current budget 
problems.
    Response: States are currently required to develop a plan of care 
sufficient to meet HCBS waiver participants' assessed needs for health 
and welfare. We do not believe the provisions in these regulations will 
significantly increase burden and note that investment in effective 
information technology, with federal financial participation, will 
increase efficiency.
    In Sec.  441.301(b)(1)(i)(A)(1) through (7), we proposed 
requirements for the Person-Centered Planning Process. Following are 
general comments we received on these requirements.
    Comment: Several commenters objected to the term ``plan of care,'' 
which they believe dismisses active person controlled service planning, 
and would prefer something about outcomes.
    Response: The regulatory text reads, ``. . . . a written person-
centered service plan (also called plan of care) that is based on a 
person-centered approach. . . .'' The term plan of care is widely used, 
and reflected in waiver application documents. We indicated 
parenthetically that we are not referring to another separate process, 
but to that function we have until now called plan of care. While we do 
not agree that either term necessarily implies lack of individual 
control, we agree that ``person-centered service plan'' is superior 
because it is less medical in connotation and conveys that it is a plan 
for long term services and supports and it is developed with a person-
centered process. We will change the term ``plan of care'' to ``person-
centered service plan.'' Also, as noted in more specific comments 
below, many commenters wanted stronger language about the individual 
leading the process. We believe the phrase ``led by the individual'' 
clearly indicates that the individual is leading the process; however, 
we have further revised the language to read ``led by the individual 
receiving services and supports'' instead of ``led by the individual 
receiving services.'' Throughout the rest of the section, we will 
change any references to ``services'' or ``supports'' to ``services and 
supports.''
    Comment: Some commenters objected to mandating person-centered 
planning on two grounds: some individuals may not want it, and some 
individuals may not be able to do it. They believe that CMS was 
assuming both interest and ability would be present in all HCBS 
participants. Some commenters listed specific disabilities they believe 
limit cognitive or expressive ability to such an extent that the 
individual could not lead the process.
    Response: With regard to the issue of choice, the regulation 
language does not require individuals to be more involved than they 
choose to be in their own planning processes. Individuals may decline 
to participate in the process if they so choose. Regarding the issue of 
ability, we noted that commensurate with the level of need of the 
individual, the person-centered service plan must reflect the service 
and support needs as identified through a person-centered functional 
assessment. Individuals may select another person(s) to assist or 
represent them in the process. In addition, where state law confers 
decision-making authority to a legal representative, such as a 
guardian, that individual may direct the person-centered planning 
process on behalf of the individual.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(1) of the proposed rule, which is Sec.  
441.301(c)(1)(i) of the final rule.
    Comment: Quite a few commenters urged that the individual be 
allowed to choose who attends the meeting. Many stated that a person-
centered service plan should provide freedom from unwanted intrusion in 
preferences and choices which could be from family, providers and 
professionals, or others. In other words, the individuals should have 
``veto power.''
    Response: We believe the language in the final rule clearly 
indicates that individuals are allowed to choose who does or does not 
attend the meeting; we are therefore retaining the proposed language.
    Comment: Most of the comments about assuring that certain persons 
could be present concerned the role of guardians and legal 
representatives or chosen surrogates. Some wanted these terms defined 
and roles specified, especially ``legal'' representative and attorneys. 
Others wanted to be sure that the rule allows for representatives who 
are not a legally designated representative, but might be a family 
member, friend, advocate, or other trusted person chosen by the 
individual. Another asked for a statement that a public guardian may 
not act as the designated representative due to the inherent 
unavoidable conflict of interest. Several commenters believed that the 
participation of various surrogates would result in them, not the 
individual, leading the planning process. A few also asserted that 
parental and guardian authority prevents abuses by professionals in the 
person-centered planning (PCP) process. A few commenters believed that 
the proposed rule reduces the authority of a parent or guardian in the 
PCP process, as the Medicaid manual previously entitled them. Several 
other very specific suggestions were made for requirements applicable 
to representatives.
    Response: Our omission of explicit mention of representatives and 
other surrogates was not intentional and did not signal any intention 
to exclude them from among those whom individuals may choose to include 
in planning. Any references in this rule to ``individuals'' include the 
role of the individual's representative. We are aware of the essential 
role that representatives, guardians, and family members play in the 
lives of some individuals with receiving Medicaid HCBS. We are also 
aware of the published literature on the problem and conflicts of 
interest that occur, particularly with publicly appointed guardians in 
some jurisdictions. We proposed in Sec.  441.301(b)(1)(i)(A)(5) a 
process for identifying and resolving conflicts of interest. We do not 
agree with those who expressed the belief that guardians would lead the 
planning process, instead of the individual. Though we recognize that 
some individuals without receptive or expressive communication depend 
on others to determine and articulate their needs, we will continue to 
speak of the individual as being in the center. Therefore, we have 
revised the rule to clarify the expectation that the individual will 
lead the planning process where possible and that the legal 
representative should have a participatory role, as needed and as 
defined by the individual, unless state law confers decision-making 
authority to the legal representative. We note that the term 
``individual's representative'' is also defined under 1915(i) State 
plan HCBS regulations at Sec.  441.735 of this rule, and further note 
that this rule does not abridge the legal authority of a parent or 
legal guardian.
    Comment: Two commenters stated that CMS appears to attempt to 
regulate

[[Page 3006]]

unpaid family members and friendly volunteers by including them in the 
rule. Another concern is that including lay persons could violate 
confidentiality protections for the individual.
    Response: We do not agree that the rule inadvertently regulates 
unpaid participants in the planning process in a general or undesirable 
manner. Rather, we intend that individuals have a meaningful choice of 
who can assist them in the planning process. We also see no reason to 
believe that states will relax their responsibility to protect client 
confidentiality in this process. The individual chooses who 
participates in the planning process, and thus retains direct control 
over who has access to private information.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(2), which is now Sec.  441.301(c)(1)(ii) of the 
final rule.
    Comment: Commenters pointed out that the proposed language is 
ambiguous. Several commenters recognized the intent of the proposed 
regulation to strengthen the person-centered service plan development 
process, but were concerned that the language undermines the progress 
made to empower people with disabilities in their planning process. 
Commenters expressed concern that playing a ``meaningful role'' is not 
the same thing as authority for decision making. Several comments 
indicated a belief that at least some HCBS participants cannot lead or 
even contribute to the service plan; several specifically mentioned 
people with intellectual disabilities or dementia. A few suggested 
specific supports, such as decision making tools and communications 
support.
    Response: We do not intend a shift from the individual directing 
the process. We agree that the language should be clarified. 
``Meaningful'' is a subjective standard. We will clarify that the 
person-centered planning process provides necessary information and 
support to ensure that the individual directs the process to the 
maximum extent possible, and is enabled to make informed choices and 
decisions. We believe the language ``to the maximum extent possible'' 
reflects the level at which the individual desires or is able to 
participate. We believe that with skillful facilitation, individuals 
can express themselves to their fullest extent.
    Many commenters urged us to favor empowering the individual; others 
urged empowering those who believe they have the best insight into the 
individual's needs and wishes. The regulation does not put these 
interests in competition. This final rule requires a process that puts 
the individual in the center, driving the process to the extent 
feasible, and recognizes the other persons' insights into the 
individual's strengths, needs, and preferences. The supports help to 
identify and sort out differing views among those present. At Sec.  
441.301(c)(1)(v) we discuss further the role of the facilitation 
process in managing disagreements and the inherent differences in self-
interest present in any diverse team.
    We agree that some of the specific types of support commenters 
suggested will be valuable for some individuals, but we do not 
prescribe in regulation all the specific supports that can be offered. 
These vary according to many factors including the type of disability.
    We have revised this final rule to read: ``Provides necessary 
information and support to ensure that the individual directs the 
process to the maximum extent possible, and is enabled to make informed 
choices and decisions.''
    Comment: We received a few comments expressing opposite views on 
professionals participating in the planning. Two commenters did not 
believe that a planning process can include professionals and be 
person-centered because the individual will not direct the process. 
Others requested adding a provision to assure that the planning process 
is facilitated by a professional trained and skilled in person-centered 
planning techniques, possibly an independent facilitator.
    Response: Person-centered service planning is a complex concept and 
requires both commitment and skill to implement. We agree that if 
professionals take control from individuals in the planning process, 
the requirements of this rule will not have been met. We do not agree 
that it is impossible for professionals to participate in the process 
appropriately. Indeed, as in many professional disciplines, the values, 
ethics, and the evolution of best practices in the profession offer the 
best means of consistently implementing a process that supports and 
serves the individual. We require that supports be available to assist 
all individuals in leading the planning process, and sometimes those 
supports include professionals skilled in facilitation. We believe the 
revised language is sufficiently clear in that it states an outcome--
the individual directs the process, with supports if needed.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(3), which is now Sec.  441.301(c)(1)(iii) of the 
final rule.
    Comment: We received relatively few comments in response to this 
provision. Some commenters stated that the time and location preference 
only belonged to the individual, or that it should occur only in the 
individual's home, while others pointed out that the logistics should 
be negotiated with all participants. Some wanted more specificity, 
including whether the process must always be face to face; others 
believe the rule to be too prescriptive. We also address here a comment 
that the rule lacks any requirement for timeliness.
    Response: As proposed, the regulation text aims to address a 
problem significant numbers of waiver participants may have 
experienced: that the planning process is scheduled entirely at the 
convenience of the state and/or provider agency. This language is 
silent about the convenience or preference of other participants, and 
we do not agree that silence precludes taking these and other factors 
into account. We agree that timeliness is important. When individuals 
rely heavily on services and supports, waiting to update a plan in 
response to a changed need could be a significant hardship or even a 
danger. Because the need for planning can range from urgent to 
optional, we do not believe it is appropriate or helpful to specify 
time frames in regulation. However, we are revising this provision in 
the final rule atSec.  441.301(c)(1)(iii) as follows: ``Is timely and 
occurs at times and locations of convenience to the individual.''
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(4), which is now Sec.  441.301(c)(1)(iv) of the 
final rule.
    Comment: Several commenters suggested that the regulation be more 
specific and more clearly articulate and strengthen ``cultural 
considerations,'' include more detailed state responsibilities, and 
offer translation services in the individual's first language. No 
comments objected to this provision specifically.
    Response: We have added text to specify that a State's waiver 
request include how the person centered planning process is accessible 
to persons who are LEP and persons with disabilities, consistent with 
the Medicaid programmatic accessibility provision at Sec.  435.905(b).
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(5), which is now Sec.  441.301(c)(1)(v) of the 
final rule.
    Comment: Several commenters asked that we clarify this statement, 
including how to implement it and the types of conflict anticipated. 
Many comments

[[Page 3007]]

suggested types of disagreement or conflicts of interest to address, 
including interpersonal disagreement, denial or reduction in service, 
failure to implement the plan or comply with regulations, and whether 
providers have an inherent conflict and should not be present.
    Response: We do not think that additional clarification is 
appropriate in the regulation. Furthermore, states can exercise 
multiple strategies to comply with this requirement.
    We note that some commenters confused a provider being in 
attendance with a provider being in charge of the process or the plan. 
The latter (a provider being in charge of the process or plan) is not 
appropriate; the former (the provider being in attendance) depends on 
the circumstance and is not a matter subject to blanket requirements. 
Individuals may choose, or not, to include a provider of service in the 
planning team. In some situations a direct care worker or a therapist 
has worked so long and closely with the individual that his or her 
perspective is very important. Also, some providers point out that they 
should be able to voice any limits in what they can provide, so that a 
plan for someone with intense need does not commit providers to 
services they are not able to provide. In other situations, for 
example, if the individual is anxious about repercussions from voicing 
problems, or has a tendency to defer to a provider, that provider's 
presence would be detrimental. Clearly some actions, such as 
intimidating the individual, are unacceptable.
    We do not believe it is possible to define more specific conflict 
of interest requirements that would be meaningful in the variety of 
arrangements currently used to develop person-centered service and 
support plans. We have strengthened the language by requiring that the 
state devise clear conflict of interest guidelines addressed to all 
parties who participate in the planning process.
    Comment: Several commenters asked to strengthen the provision by 
requiring case managers to be independent of any service provider, as 
an assurance that the individual's goals and services will be 
appropriate, and will reduce actual or potential conflicts of interest. 
Others indicated that we do not define conflict of interest.
    Response: We agree that complete independence of the person(s) 
facilitating the planning process is important to promote the statutory 
objectives. In the final rule, we have added an additional requirement 
to the person-centered planning process at Sec.  441.301(c)(1)(vi) to 
address conflict of interest.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(6), which is now Sec.  441.301(c)(1)(vii) of the 
final rule.
    Comment: One commenter stated that current overarching Medicaid 
regulations already require full freedom of choice of qualified 
providers and CMS requires that states document that individuals have 
been offered freedom of choice. This is duplicative.
    Response: The regulations at Sec.  431.51 describe the various 
statutory bases for the free choice of provider, and specify the 
requirements and exceptions to the principle. The phrase ``full freedom 
of choice,'' however, is not from existing regulation. We assume the 
commenter's reference to a documentation requirement pertains to the 
section 1915(c) of the Act requirement that waiver participants be 
offered the choice of institutional alternatives to HCBS options in the 
waiver, which is unrelated to being informed of non-institutional 
service alternatives. Some persons with disabilities and their 
advocates have described the experience of ``choice'' in long term 
services and supports as being considerably different than that of a 
Medicaid beneficiary looking through a list of participating acute or 
general health care providers. We believe that a person-centered 
planning process should include providing the individual information 
about the services and supports relevant to their particular needs and 
goals.
    Comment: Individuals receiving long term services and supports and 
their families discussed the experience of both being presented with 
options and not being given choices. Comments noted that individuals 
wish to be respected and offered choices, rather than others deciding 
what may be best for them. On the other hand, being presented with an 
exhaustive list of theoretical options and a directory of providers is 
overwhelming and not very useful, a familiar experience to many people 
negotiating a new health care need. One comment stated, ``Ensure the 
person has the support he or she needs to understand all of the choices 
and options, their rights, and what they are agreeing to.'' Some 
commenters suggested adding the word ``informed'' before ``choices,'' 
as this would be more consistent with the ADA.
    Response: We agree that it is difficult to articulate a rule that 
ensures a perfect balance between too much and too little information. 
We believe that taken as a whole, the requirements in this final rule 
make clear that the process of planning services and supports puts the 
person at the center of a highly individualized process. We agree with 
the suggestion to change ``Offers choices'' to ``Offers informed 
choices.'' Individuals should be informed of all the possibilities from 
which they may choose, as well as the consequences of those choices, in 
a manner that is meaningful to the recipient and easily understood.
    Comment: Several suggestions were made regarding specific issues or 
special circumstances regarding individual choice, including 
documentation of court orders or other legal issues, identification of 
rights, and linkage to entitlements or resources other than Medicaid.
    Response: These suggestions appear to be good practices, but too 
detailed for regulation. We will consider them in the context of our 
ongoing efforts to provide information about best practices.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(A)(7), which is now Sec.  441.301(c)(1)(viii) of the 
final rule.
    Comment: Two commenters pointed out that ``as needed'' may or may 
not include periodic scheduled updates, and does not address the 
timeframe within which a requested update be accomplished. They 
suggested changing the language to: ``Include opportunities for 
periodic and ongoing plan updates as needed and/or requested by the 
individual and a time frame for reasonably scheduling meetings 
requested by the individual.'' One suggestion was to define timeliness 
in terms of the individual's goals. Another asked to make explicit that 
all individuals participating in the planning process be contacted so 
that they can be kept up to date.
    Response: This section proposed a process requirement, having to do 
with informing the individual about what steps to take to schedule an 
update to the plan. We do not address timeliness regarding the response 
to request, as we are not able to set a single national standard that 
would be applicable across all HCBS waivers in the country. States must 
respond to urgent needs more quickly than to other types of requests, 
in order to meet the health and welfare requirements of the HCBS waiver 
program. States could accomplish this through an expedited process. 
Requiring that plan participants be notified when an update is 
scheduled has merit. However, given the requirements concerning who 
participates in the plan, who should sign the plan, and who should have 
copies of the plan, we cannot construct a notification policy that 
respects the various levels of confidentiality and

[[Page 3008]]

disclosure that may be required in some cases. At this time we believe 
that the individual or individual and representative should control 
notification about updates, consistent with the control they have under 
item (1) over who participates in the planning process.
b. Person-Centered Service Plan Sec.  441.301(c)(2) (Proposed Sec.  
441.301(b)(1)(i)(B))
    At Sec.  441.301(b)(1)(i)(B) we proposed that the Person-Centered 
Service Plan must include specific content. After further review, we 
believe the requirement at Sec.  441.301(b)(1)(i)(A)(3) regarding 
timeliness and this requirement at Sec.  441.301(b)(1)(i)(A)(7) 
regarding a method for individuals to request updates to the plan are 
sufficient and respectful of the individual's timeframe as reflected in 
the person-centered planning process. Therefore, we are removing the 
requirement at Sec.  441.301(b)(1)(i)(A)(3) regarding a timeline for 
review because this will now be addressed through the requirements at 
Sec.  441.301(c)(1)(iii) and (c)(1)(viii)).
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(2), which is now Sec.  441.301(c)(2)(iii) of the 
final rule.
    Comment: A commenter stated that a ``person-centered functional 
assessment'' is superior to a disability or diagnosis-based assessment. 
Another pointed out that ``person-centered functional assessment'' is 
not recognized terminology and suggested ``individual assessment 
appropriate to the age and circumstances of the person'' instead.
    Response: We agree with parts of both comments. Applying ``person-
centered'' to ``functional assessment'' is incorrect. Although in a 
general sense all long term service and support activities are to be 
centered on the person and not the provider, a functional assessment is 
objective. We also agree with the comment that ``functional'' 
assessment imparts an important distinction from other forms of 
evaluation such as diagnostic assessment. We therefore modify the 
proposed language to ``through an assessment of functional need.''
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(3), which is now Sec.  441.301(c)(2)(iv) of the 
final rule.
    Comment: A commenter pointed out that there is no specific mention 
of mental health. Many comments in various sections mentioned that the 
rule should focus on outcomes.
    Response: We agree with both observations. We recognize that we 
cannot provide an exhaustive list to reflect an individual's identified 
goals. Therefore, we are removing the examples and we are revising the 
final rule at Sec.  441.301(c)(2)(iv) by adding ``desired outcomes.''
    Comment: Related to the proposal to define home and community-based 
settings, we received many suggestions that the person-centered plan 
address the issue of housing and living arrangement in a definite 
manner. The proposed list of example goals included ``community 
living'' but this was not believed to sufficiently capture the 
complexity of housing and services issues.
    Response: We appreciate the thoughtful comments and agree that this 
important subject warrants a separate item in the list of the plan 
content. We will add a new requirement at Sec.  441.301(c)(2)(i) to 
read: ``Reflect that the setting in which the individual resides is 
chosen by the individual The state must ensure that the setting chosen 
by the individual is integrated in, supports full access of individuals 
receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources and 
receive services in the community to the same degree of access as 
individuals not receiving Medicaid HCBS.''
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(4) which is now Sec.  441.301(c)(2)(v) of the final 
rule.
    Comment: We received few comments on this requirement. One 
commenter suggested replacing this language with ``Respect and honor 
the choices made by the individual regarding supports.'' Another 
suggested adding the ``full range'' of services and supports. Others 
commented on or requested clarification about unpaid services, or urged 
us to clarify that unpaid services must not be required.
    Response: We believe that natural supports and other unpaid 
services must be included in order to have a comprehensive plan 
reflecting all the services and supports required. The availability of 
unpaid supports may change from time to time and the plan must be 
written so as to be able to adjust the proportion of formal and 
informal supports without starting over at assessment. The planning 
process must not compel unpaid services. We have included the term 
``natural supports'' in the regulation text at Sec.  441.301(c)(2)(v) 
and have added the following sentence: ``Natural supports are unpaid 
supports that are provided voluntarily to the individual in lieu of 
section 1915(c) HCBS waiver services and supports.'' We do not believe 
other wording suggestions are required to achieve the intended meaning.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(5), which is now Sec.  441.301(c)(2)(vi) of the 
final rule.
    Comment: Comments supported the proposed language. We choose to 
address here similar comments on several sections of the proposed rule. 
Some commenters were concerned that in taking care to protect freedoms, 
the regulation did not provide for reducing risk due to certain kinds 
of disabilities. Dementia was mentioned most often, with many examples 
of why some believe individual freedoms may need to be curtailed to 
prevent wandering, injury with cooking equipment and so on.
    Response: Based on the comments received, we conclude that 
additional language is needed to ensure that reducing risk for 
individuals receiving Medicaid HCBS does not involve abridgement of 
their independence, freedom, and choice either generally or at the 
spontaneous decision of persons providing services and supports. 
Restricting independence or access to resources is appropriate only to 
reduce specific risks, and only when considered carefully in the 
person-centered service plan. The person-centered planning process 
required in this regulation will engage the individual and others 
involved in the planning process as fully as possible in making these 
difficult but necessary decisions. As comments indicated, there may be 
a need for immediate action in emergent or changing circumstances--that 
is the purpose of backup strategies. In thinking through risk, the 
planning team will identify temporary measures to be used if needed, 
and then update the plan when needs have stabilized. Back-up strategies 
are to be individualized to the unique mix of risks, strengths, and 
supports represented by each waiver participant. We will articulate 
this in the final rule by amending the language at Sec.  
441.301(c)(2)(vi) to read: ``Reflect risk factors and measures in place 
to minimize them, including individualized backup plans and strategies 
when needed.'' We have also added at Sec.  441.301(c)(2)(xiii) that any 
modification of the additional conditions must be supported by a 
specific assessed need and justified in the person-centered service 
plan, and specified what must be documented in

[[Page 3009]]

the person-centered service plan in these instances.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(6), which is now Sec.  441.301(c)(2)(ix) of the 
final rule.
    Comment: Many comments on this requirement addressed the variety of 
persons who may be involved in formulating the plan and in carrying it 
out, any of whom may have complex relationships with the individual and 
each other. Some comments were primarily concerned with being 
inclusive, and in clearly communicating the plan for services to all 
involved; they noted that a person-centered plan is only effective if 
the people providing supports know what is included in the plan. Other 
comments were primarily concerned with privacy and control over 
personal information, noting that it is inappropriate to have an 
individual commit intimate details to paper (such as goals, hopes for 
personal relationships, etc.) and then require everyone involved in 
that person's care--no matter their role--to read, sign, and keep a 
copy. Many comments dealt with both signing and distributing the plan, 
but we address these comments separately.
    Response: In response to the commenters' concerns about privacy and 
control over personal information, we have clarified in the final rule 
who will sign the plan and who will receive copies of the plan by 
revising Sec.  441.301(c)(2)(ix)) as follows: ``Be finalized and agreed 
to, with the informed consent of the individual in writing, and signed 
by all individuals and providers responsible for its implementation.''
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(7), which is now at Sec.  441.301(c)(2)(vii) of the 
final rule.
    Comment: The few comments received supported the proposed language 
and went on to suggest specific examples, including making use of 
interpretation and translation, customized communication supports, in a 
format that is easily understood by the individual (Braille, ASL video, 
diagram/pictures, etc.), and taking enough time for decision making.
    Response: As with some other requirements in this rule, we 
appreciate the examples given, but we do not think that CMS can list in 
regulation all the possible specific methods and tools to accomplish 
the desired outcome. For clarity purposes, we have added the term 
``supports'' to this requirement.
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(8).
    Most of the comments we received on this proposed requirement were 
more applicable to other requirements and are summarized under those 
headings. The requirements at Sec.  441.301(c)(1)(iii) regarding 
timeliness and the requirements at Sec.  441.301(c)(1)(viii) regarding 
a method for individuals to request updates to the plan are sufficient 
and respectful of the individual's timeframe as reflected in the 
person-centered planning process. Therefore, we are removing this 
proposed requirement from the final rule. We did not receive comments 
on the proposed requirement at Sec.  441.301(b)(1)(i)(B)(9), and adopt 
it in the final rule at Sec.  441.301(c)(2)(viii).
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(10), which is now Sec.  441.301(c)(2)(x) of the 
final rule.
    Comment: Many of the comments on this proposed requirement are also 
related to Sec.  441.301(b)(1)(i)(B)(6), regarding who must sign the 
plan. Comments offered unique to the issue of distribution include 
suggestions of specific parties who should get copies of the plan and 
suggestions for case recordkeeping, including court or legal documents. 
Commenters also inquired whether distribution meant to every entity 
(for example, a company providing long term services and supports to 
the individual), or also given to every individual from that entity 
(for example, every direct service worker).
    If the latter, concerns were expressed that parts of a true person-
centered plan include very personal information, as required in Sec.  
441.301(c)(2)(iv) above--such as the individual's needs, aspirations, 
and even complaints--making it inappropriate to distribute the plan to 
everyone (that is, a housekeeper does not need to know about an 
individual's relationship goals).
    Response: We appreciate the comments on this section of the rule. 
The language in the final rule specifies that the person-centered 
service plan will be distributed to the individual and other people 
involved in the plan. We have also revised the language in the final 
rule at the Sec.  441.301(c)(2)(iv) to remove the examples and added 
the term ``desired outcomes.''
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(11), which is now Sec.  441.301(c)(2)(xi) of the 
final rule.
    Comment: Some comments discussed ``self direction'' or 
``participant direction,'' which while they sound similar to ``person-
centered'' are terms of art for a different concept, a method of 
managing long term services and supports in which the individual 
assumes employer authority and/or manages a budget for the services and 
supports. A few comments discussed the distinction, while a few were 
confused by these concepts.
    Response: Amendments to this regulation do not specifically address 
the issue of self direction. We issued extensive sub-regulatory 
guidance and technical assistance on self direction of services, to 
which we refer these commenters. We agree with commenters who pointed 
out the importance of a person-centered planning process in 
implementing self direction of services, and believe that the 
requirements in this rule will facilitate self direction and other 
complexities in planning long term services and supports.
    Comment: Several commenters stated that this requirement is 
unclear. One commenter thought the proposed regulation would require 
self direction for all participants.
    Response: We have clarified that the person-centered service plan 
covers all aspects of services and supports, including self direction 
where applicable, by rewording the text as follows: ``Include those 
services, the purpose or control of which the individual elects to 
self-direct.''
    Following are the comments we received on Sec.  
441.301(b)(1)(i)(B)(12), which is now Sec.  441.301(c)(2)(xii) of the 
final rule.
    Comment: One commenter stated that the funding for identified 
supports needs to be in place for the plan to be implemented. Two other 
commenters asked us to clarify that the full range of services 
authorized by statute and included in the state's waiver proposal be 
made available to program participants.
    Response: These observations about providing all needed care are 
the logical complement to the proposed language about unnecessary care. 
Taken together they address proper utilization of services. We agree 
that states must provide needed services to an eligible individual 
enrolled in the waiver. We believe the current language appropriately 
indicates that needed services must be provided, while unnecessary or 
inappropriate services should not; however, we have changed the term 
``care'' to ``services and supports.''
    Comment: One commenter found this language to be ambiguous because 
``prevent'' is imprecise. Services should not be unnecessary or 
inappropriate.
    Response: This requirement does not imply that the waiver offers 
services that are inherently inappropriate or unnecessary. It refers to 
the possibility

[[Page 3010]]

that particular services, or that the scope or frequency of them, may 
be inherently inappropriate or unnecessary for a given individual, 
especially as the individual's situation changes. One of the purposes 
of any service plan for health or long term care services is to specify 
the services a particular individual requires. There is no legitimate 
advantage to the individual or to Medicaid in providing unneeded 
services. However, some states or particular programs have historically 
had difficulty controlling utilization; individuals may all be given 
the maximum scope or frequency of service. We think that with the 
addition noted in the response above, the existing language adequately 
conveys the concept of appropriate utilization.
    Comment: Some commenters asked that the rule include a reference to 
the ``most integrated setting appropriate'' standard. Two commenters 
consider this the most important aspect of the person-centered service 
plan. Many commenters of all types stated that person-centered planning 
should promote choice. However, regarding settings there was less 
agreement on what choices should be offered. Many who were concerned 
about preserving their present setting suggested they should be allowed 
to choose to live wherever they wish, and not have their current choice 
removed by a government policy.
    Other commenters addressed the process of choice. They agreed with 
the planning process as proposed and stated that setting should be 
addressed, in terms of the individual's needs and goals. They asked 
that in the planning process no types of residential provider or 
housing options being offered to section 1915(c) of the Act HCBS waiver 
participants be omitted from the discussion. They and some others also 
suggested that this subject could be raised at regular intervals when 
appropriate, as the person centered service plan is updated. Their 
position was that competition among providers of residential settings 
for waiver participants is a good thing and will promote growth of the 
types of settings CMS seems to want to encourage, but will only work if 
it is a fair competition with all approved settings presented neutrally 
to the individual.
    Some comments about settings in person-centered planning had more 
to do with the definition of setting than with the planning process.
    Response: We agree that the setting options in which an individual 
resides should be an element in the person-centered service plan. We 
have included it as a separate item under the list of ``Person-Centered 
Planning Process'' requirements at Sec.  441.301(c)(1)(ix). It reads: 
``Records the alternative home and community-based settings that were 
considered by the individual.'' We respond to all of the setting 
issues, such as landlord/tenant relationship, in our discussion of that 
section of the rule. As all the comments on this subject make clear, 
the process of choosing among the housing and service options actually 
available to a particular waiver participant is an extraordinarily 
multi-faceted issue. A truly person-centered planning process as 
required in this rule is the best venue for facilitating this important 
choice.
    We also agree that part of meaningful choice is to be presented 
with all available options. A person-centered planning process is not 
about promoting certain options deemed to be more ``person-centered'' 
or otherwise desirable, than other options. A person-centered process 
is one that puts the individual in the center, facilitated to make 
choices that may be agreeable or disagreeable to some participating in 
the process.
    Therefore, we will require that the process of informed choice be 
documented. Best practices that develop will inform future policy. A 
new provision has been added at Sec.  441.301(c)(2)(i) to read: 
``Reflect that the setting in which the individual resides is chosen by 
the individual. The state must ensure that the setting chosen by the 
individual is integrated in, and supports full access of individuals 
receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources and 
receive services in the community to the same degree of access as 
individuals not receiving Medicaid HCBS.''
    Comment: One commenter stated that CMS should use the person-
centered plan to ensure community integration.
    Response: We agree that one of the essential purposes of the 
person-centered service plan is to ensure community integration. In the 
regulation at Sec.  441.301(c)(4)(i) we have clarified that home and 
community-based settings must be integrated in, and that individuals 
have full access to the greater community.
    Comment: Other commenters offered specific additions to the 
proposed rule that we considered but found to be either too 
prescriptive or too detailed to require in regulation. For example, one 
commenter urged CMS to establish benchmarks in the rule, as a 
requirement for states to receive FFP for person-centered HCBS waivers.
    Response: Many of these comments reflect good practice in 
administering services. We believe that states have both sufficient 
incentive and practical experience to be following such practices. 
Where they are not, we offer a variety of technical assistance services 
to state agencies, at no charge, to assist with these sorts of 
practical strategies. We find this approach more productive and 
flexible than specifying detailed regulations for operating the 
program. In addition, some of these suggestions we have addressed in 
sub-regulatory guidance such as instructions for the section 1915(c) 
waiver application, letters or bulletins to State Medicaid directors, 
and other vehicles.
    Comment: One commenter recommended that CMS include specific 
language in the final rule that updates to person-centered service 
plans must be completed within a sufficient timeframe to meet the 
individual's goals.
    Response: Person-centered service plans must be reassessed at least 
annually, and more frequently if the condition of the individual 
changes, as indicated inSec.  441.365(e).
2. HCBS Settings Sec.  441.301(b)(1)(iv) (final Sec.  441.301(c)(4))
    Through the proposed rule, we proposed to clarify and sought public 
input on how to define the characteristics of home and community-based 
(HCB) settings where waiver participants may receive services. In new 
paragraph, Sec.  441.301(b)(1)(iv), we proposed clarifying language 
regarding settings that will not be considered home and community-based 
under section 1915(c) of the Act. We clarified that HCBS settings are 
integrated in the community and may not include: facilities located in 
a building that is also a publicly or privately-operated facility that 
provides inpatient institutional treatment or custodial care; or in a 
building on the grounds of, or immediately adjacent to, a public or 
private institution; or a disability-specific housing complex designed 
expressly around an individual's diagnosis, that is segregated from the 
larger community, as determined by the Secretary.
    We noted that this rule change does not exclude living settings on 
tribal lands that reflect cultural norms or ALS for persons who are 
older regardless of disability, when the conditions noted above in the 
background section are met.
    The clarification and request for input was partially in response 
to instances in

[[Page 3011]]

which states or other stakeholders expressed interest in using HCBS 
waivers to serve individuals in segregated settings or settings with a 
strong institutional nature, for example, some proposed settings on 
campuses of institutional facilities, segregated from the larger 
community. These settings often do not allow individuals to choose 
whether or with whom they share a room; limit individuals' freedom of 
choice on daily living experiences such as meals, visitors, activities; 
and limit individuals' opportunities to pursue community activities.
    CMS' definition of HCBS setting characteristics has evolved over 
the past four years, based on experience and learning from throughout 
the country and feedback about the best way to differentiate between 
institutional and community-based care. For example, in our April 4, 
2008, proposed rule, Medicaid Program; Home and Community-Based State 
Plan Services, (73 FR 18676), we used the number of unrelated people 
living together in a facility to define whether or not a setting was 
HCB. Our April 15, 2011,proposed rule, Medicaid Program; Home and 
Community-Based Services (HCBS) Waivers, (76 FR 21432), no longer 
included the number of residents as an HCB characteristic, but did 
include a detailed list of the types of settings that do not qualify 
for HCBS waivers because they are not integrated into the community. 
Based on further public comment on these proposed regulations and on 
the comments we received on the 1915(i) and 1915(k) proposed rule, we 
are moving away from defining HCB settings by what they are not, and 
towards defining them by the nature and quality of beneficiaries' 
experiences. These final regulations establish a more outcome-oriented 
definition of HCB settings, rather than one based solely on a setting's 
location, geography, or physical characteristics.
    Comment: Many commenters believe quite passionately that public 
funds should only be used to support persons in ``home and community-
based'' settings--not institution-like or congregate facilities. A 
commenter wrote, ``Please protect the interests of the disabled people 
of the world and stand your ground and allow HCBS funds to be used for 
their intended purposes.'' Another commenter stated, ``HCBS funds are 
limited and designed to serve specific purposes, not to be available to 
any and all settings which operate under the name `community'.''
    Response: We agree with the general statement that waiver funds 
should only be used for their intended purpose of supporting 
individuals in the community. HCBS must be delivered in a setting that 
meets the HCB setting requirements as set forth in this rule (except 
for HCBS that is permitted to be delivered in an institutional setting, 
such as institutional respite), and since the purpose of this authority 
is to provide individuals with HCB alternatives to institutional 
settings, individuals must be living in settings that comport with the 
HCB setting requirements as set forth in this rule. We believe the 
criteria set forth in the final rule will enable CMS to differentiate 
between HCBS settings and non-HCBS settings for funding purposes.
    Comment: Several commenters shared the sentiment that true 
community integration is more than being in the community, but rather 
truly participating in that community through working side by side with 
others without disabilities in community activities, such as jobs, 
clubs and other civic activities.
    Response: We agree with this comment and believe that the changes 
in the text of the final rule address tenets of community integration. 
A home and community-based setting must be integrated in, and supports 
full access of individuals receiving Medicaid HCBS to the greater 
community, including opportunities to seek employment and work in 
competitive integrated settings, engage in community life, control 
personal resources, and receive services in the community, to the same 
degree of access as individuals not receiving Medicaid HCBS.
    Comment: A number of individual commenters shared personal stories 
expressing satisfaction with their current living arrangements and 
displeasure that new regulations might force them to move or dictate 
where they should live. One person wrote, ``Please allow Medicaid 
waivers to continue to pay for services in planned communities similar 
to retirement communities. I want to live in a community with my 
friends.'' Another noted, ``I believe this proposed rule would . . . 
deny access to residential care and assisted living for those who need 
it most.'' Many commenters talked about the importance of retaining 
freedom of choice. One commenter stated, ``. . . what I am advocating 
is CHOICE. We should be expanding options rather than narrowing 
possibilities and options, and we should ask those with disabilities 
and their families what they want, not what others think they want.'' 
Finally, quite a few commenters echoed a warning to stay away from a 
``one size fits all'' approach in defining HCBS and to embrace more 
flexibility: ``The needs and circumstances of each individual are too 
diverse to warrant an outright ban on HCBS funding for individuals who 
might need specialized care.'' They further challenged CMS that housing 
and setting options should not be arbitrarily limited by defining HCBS 
through physical and geographic structures, but rather through the 
person-centered plan, personal outcomes and satisfaction.
    Response: We very much appreciate hearing personal stories as they 
help us better understand how our proposed actions will affect 
individuals receiving services under the HCBS waiver program. We 
believe that individual choice is important and have worked to promote 
choice in the final rule. In addition, it is important to note that 
HCBS waiver funding is only one way in which federal Medicaid finances 
long term services and supports; a setting that may not meet the HCB 
definition may still qualify for Medicaid financing, but not as a home 
and community based service.
    We agree that the definition we included in the proposed rule for 
HCBS settings may have had the result of restricting the settings in 
which HCB waiver services can be provided in a way that we did not 
intend and in narrowing choices for participants. The final rule is 
more flexible and less prescriptive in that it does not preclude 
certain settings per se but rather establishes affirmative, outcome-
based criteria for defining whether a setting is or is not home and 
community-based. The language in the final rule specifies that any 
setting that is located in a building that is also a publicly or 
privately operated facility that provides inpatient treatment, or in a 
building on the grounds of, or immediately adjacent to, a public 
institution, or any other setting that has the effect of isolating 
individuals receiving Medicaid HCBS from the broader community of 
individuals not receiving Medicaid HCBS, will be presumed to be a 
setting that has the qualities of an institution unless the Secretary 
determines, through heightened scrutiny, based on information presented 
by the state or other parties, that the setting does not have the 
qualities of an institution and that the setting does have the 
qualities of home and community-based settings. Therefore, states and 
others have the opportunity to refute this categorization by providing 
sufficient evidence that the individuals in the facility are, in fact, 
integrated in the community in a manner that overcomes any 
institutional appearance of the setting. This means

[[Page 3012]]

that we will continue to be discerning about what types of settings 
qualify for waiver funds. We are including language in the final rule 
that focuses on the critical role of person-centered planning and 
addresses fundamental protections regarding freedom, dignity, control, 
daily routines, privacy and community integration.
    Comment: A number of commenters cautioned that restricting living 
situations reduces access to long term care in the community and may 
force people back into nursing facilities. They advised that CMS not 
include any specific restrictions on settings.
    Response: We have made significant changes to this section of the 
rule, but still define general tenets and characteristics of HCBS that 
will preclude institutional settings from qualifying as HCB, although 
they might qualify for Medicaid financing under other authorities. We 
specifically noted that home and community-based settings do not 
include: ``a nursing facility; an institution for mental diseases, an 
intermediate care facility for individuals with intellectual 
disabilities; a hospital, or any other locations that have qualities of 
an institutional setting, as determined by the Secretary.'' Statutory 
requirements specify that an individual be offered a choice between 
services in an institutional setting or in a HCBS setting, therefore 
making it necessary for us to define the difference. We recognize that 
there are limited long-term care options in many communities and may be 
few alternatives beyond institutional care. However, states need to 
understand what qualifies as a home and community-based setting, and 
also understand that this might trigger change and even dislocation. To 
mitigate, we have developed specific provisions to allow for a 
transition period, for existing approved HCBS waivers under 1915(c) in 
accordance with section 441.301(c)(6). We will afford states the 
opportunity to propose a transition plan that encompasses a period up 
to five years after the effective date of the regulation if the state 
can support the need for such a period of time. States are expected to 
demonstrate substantial progress toward compliance throughout any 
transition period. For states that are submitting renewals early in the 
first year after this final regulation takes effect, states may submit 
a request for a temporary extension to allow time to fully develop the 
transition plan for that HCBS waiver program.
    Comment: A couple of commenters expressed concern about negative 
financial impact on providers.
    Response: We appreciate the concerns regarding service providers 
and wish to point out that states will have tremendous flexibility in 
how they design 1915(c) waivers, including how they define services, 
provider qualifications and service rate methodologies in their 
programs. The purpose of this regulation is to ensure that 
beneficiaries in Medicaid HCBS waivers receive services in home and 
community-based settings that are true alternatives to institutional 
settings and that states and providers have a clear understanding of 
how applicable definitions will be applied by us.
    Comment: One commenter thought that privacy is already protected in 
administrative rules, so it is not necessary to address in this rule.
    Response: We disagree with this comment and have included a 
statement in the final rule about qualities that must be included in 
HCBS, including the right to privacy.
    Comment: A significant number of commenters recommended that CMS 
remove the entire section on HCBS settings in the proposed rule from 
the final rule.
    Response: CMS has made significant changes to this section of the 
rule, but has not eliminated it. We have listened to the many concerns 
expressed by commenters regarding the description of HCBS settings and 
have chosen a different, more person-centered and outcome-driven 
approach for defining settings than what was described in the proposed 
rule.
    Comment: Commenters generally liked the CMS prohibition against 
using HCBS waiver funds to provide services to individuals living in a 
setting in which they are required to receive and participate in 
services as a condition of continued tenancy. Further, some commenters 
wanted CMS to require providers to promote aging in place. They stated 
the need for additional qualified services and supports should not be 
justification for asking a person to leave a setting; however, should 
the person's needs exceed what legally can be provided in the setting, 
appropriate transfer processes and protections must be in place.
    Response: There is nothing in this rule that negates or waives 
compliance with other Medicaid requirements, not specifically waived by 
section 1915(c) authority, such as an individual's right to obtain 
services from any willing and qualified provider of a service. In the 
final rule, we have revised Sec.  441.301(c)(4) by replacing the 
language with new requirements for HCBS settings, and at Sec.  
441.301(c)(4)(v) we have included the following requirement that the 
setting, ``facilitates individual choice regarding services and 
supports, and who provides them.'' This requirement applies to all 
settings including provider-owned or controlled residential settings.
    Comment: A commenter asked if people currently living in settings 
that do not meet the new criteria will have a grandfathering period to 
move out or disenroll from the waiver. Many commenters strongly 
encouraged CMS to allow sufficient time for states, providers, and 
individual waiver participants and their families to make the 
transition away from historic legacy settings that may not comport with 
the proposed rule language, in order to minimize adverse impacts on 
individuals and systems of services and supports. Some commenters 
suggested that if we consider grandfathering non-compliant programs, we 
should not make the grandfathered period permanent, but should only 
allow grandfathering of existing homes located on the periphery of a 
campus, but not separated by fencing or barriers.
    Response: We understand that time is required to adjust to the new 
requirements set forth in the final rule. The revised language in the 
final rule includes the requirements for states to submit transition 
plans for coming into compliance for existing programs and HCBS 
waivers.
    Comment: One commenter emphasized the need to involve stakeholders 
in dialogue as CMS moves forward on working with states to implement 
final regulations. Another commenter recommended that the Department of 
Defense have the opportunity to provide recommendations that will 
enhance military families' access to the waiver as they move from state 
to state.
    Response: We engaged in a public input process on the 1915(c) 
regulation, which included both an Advanced Notice of Proposed 
Rulemaking (ANPRM) and the Notice of Proposed Rulemaking (NPRM), 
producing well over 2500 separate comments. We have taken the time to 
thoroughly analyze comments from a wide range of stakeholders and 
incorporate stakeholder suggestions in crafting the final rule. We have 
also reviewed comments from the proposed rules for the 1915(i) and 
1915(k) programs and have incorporated suggestions into this final rule 
so that all three HCBS authorities are aligned. CMS is committed to 
working with states and providing technical assistance, as needed, with 
implementation of the final rule.

[[Page 3013]]

    Comment: Many commenters suggested CMS clearly outline the 
qualities of an institutional setting in the regulatory text and not 
just in the preamble. One commenter proposed including a list of 12 
qualities of an institution in the regulatory text.
    Response: Rather than explicitly outlining the qualities of an 
institution, we have chosen to more clearly outline the qualities of 
home and community-based settings in the regulatory text. The final 
language provides a specific list of five qualities that must be 
present in order for a setting to be classified as home and community-
based, as well as additional criteria that must be met by provider-
owned or controlled settings. The final rule also notes that home and 
community-based settings do not include nursing facilities, 
institutions for mental diseases, intermediate care facilities for 
individuals with intellectual disabilities, or hospitals.
    Comment: Several commenters wanted more detail in the rule defining 
HCBS ``settings.'' One commenter proposed that the following language 
be added to the description of appropriate HCBS ``settings'' in the 
rule: ``support exercising full rights and responsibilities as 
community citizens'' and ``individualized services and supports.'' 
Another commenter proposed a list of nine person-centered attributes 
that it believes should be found in all HCBS settings. The nine 
attributes are: core values and philosophy, relationships and sense of 
community, governance/ownership, leadership, workforce practices, 
meaningful life and engagement, services, environment, and 
accountability. Other commenters also provided differing views on 
whether sheltered workshops, adult day care services, and other 
congregate settings and non-residential facilities solely for persons 
with disabilities should be considered HCB. Some believed that the rule 
should exclude these settings from the HCBS definition as they still 
have the qualities of an institution. Others, however, believed these 
settings should qualify for waiver funding, stating that HCBS 
characteristics should not apply only to residential services.
    Response: 1915(c) HCBS must be delivered in a setting that meets 
the HCB setting requirements as set forth in this rule. In addition, 
since the purpose of this authority is to provide individuals with HCB 
alternatives to institutional settings, individuals receiving 1915(c) 
HCBS must be living in settings that comport with the HCB setting 
requirements as set forth in this rule regardless of whether they are 
receiving HCBS in that residence. This is consistent with CMS' 
longstanding policy regarding 1915(c) HCBS.
    Comment: Many commenters stated that they thought the regulation 
should specify that an HCBS setting must not be located on the grounds 
of, or immediately adjacent to, a private as well as a public 
institution.
    Response: We appreciate the commenters' concerns. It is expected 
that all settings, public and private, meet the HCB setting 
requirements of this regulation. These final rules specifically make 
reference to a setting that is adjacent to a public institution in the 
regulation language due to public input that stressed how such settings 
inherently discourage integration with the broader community. We will 
apply heightened scrutiny to such settings because of the likelihood 
that they do not offer the characteristics of a home and community-
based setting and hinder or discourage integration with the broader 
community.
    Comment: Many commenters thought some terms in the proposed rule 
were vague and/or needed further defining. For example, many commenters 
wanted the rule to include clearer definitions for terms such as 
``immediately adjacent to a public institution'' and ``housing complex 
designed expressly around an individual's diagnosis or disability.'' At 
least one commenter stated that terms like ``meaningful access'' and 
``choice'' were too subjective to have a place in regulation.
    Response: We appreciate some commenters' desires for more specific 
and clear definitions in the final rule, but believe that highly 
specific, close-ended parameters are limiting and often prove 
ineffective. We are instead moving towards evaluating outcomes and 
characteristics to determine whether or not a particular setting 
produces desirable outcomes--while attempting to be as clear and 
precise as possible in describing those outcomes and characteristics. 
Where appropriate, CMS has added additional specificity to the final 
rule.
    Comment: Some commenters believe that ``immediately adjacent to a 
public institution'' was unnecessarily restrictive. In contrast, 
another commenter believed that use of the term ``immediately 
adjacent'' was not restrictive enough, as ``it could allow HCBS housing 
at an institution separated by a nature trail, parking lot or tree 
line.'' One comment included the recommendation that we add the phrase: 
``or sharing common employees or management with a public institution'' 
after the phrase ``immediately adjacent to a public institution.''
    Response: We believe that the process for heightened scrutiny, as 
described in the final rule, allows us to appropriately determine 
whether such settings meet the HCBS requirements. We believe this 
approach will allow us to take into account the kinds of issues the 
commenters described.
    Comment: Several commenters believed CMS should strike the term 
``custodial care'' from the rule. Another commenter wanted us to 
clarify whether ``custodial care'' prohibits care in foster care 
settings.
    Response: We agree that the term ``custodial care'' is unclear and 
confusing and should not be included in the final rule. We have deleted 
it from the regulatory text.
    Comment: We received many comments that certain settings--such as 
group homes, adult foster care, and assisted living facilities--should 
qualify as home and community-based because many individuals consider 
them to be their homes and to be a part of the community. On the other 
hand, we also received comments from others that these types of 
facilities are never appropriate as HCBS settings.
    Response: Given the variability within and between types of housing 
arrangements, CMS cannot determine simply by the type of group housing, 
whether it complies with HCBS characteristics. As a result, particular 
settings, beyond those specifically excluded in the regulation text, 
will not automatically be included or excluded, but rather will be 
evaluated using the heightened scrutiny approach described in the 
regulation.
    Comment: Commenters stated that the regulation should specify that 
a ``housing complex designed expressly around an individual's diagnosis 
or disability'' includes complexes that serve individuals with 
different diagnoses or disabilities, as opposed to just individuals 
with a particular diagnosis or disability. Another commenter requested 
a definition of a housing complex that is designed expressly around an 
individual's diagnosis or disability.
    Response: We appreciated these comments, which indicated to us that 
the language means different things to different populations and 
programs. As a result of the comments we received, we have revised the 
rule to remove the language, ``housing complex designed expressly 
around an individual's diagnosis or disability,'' In the final rule, we 
have removed this language. The regulatory text now includes the 
following language: ``any other setting that has the effect of 
isolating individuals receiving Medicaid HCBS

[[Page 3014]]

from the broader community of individuals not receiving Medicaid HCBS 
will be presumed to be a setting that has the qualities of an 
institution unless the Secretary determines through heightened 
scrutiny, based on information presented by the state or other parties, 
that the setting does not have the qualities of an institution and that 
the setting does have the qualities of home and community-based 
settings.'' We intend to issue additional guidance to provide examples 
of the types of settings that will be subject to heightened scrutiny. 
The guidance will also specify the process we will use to determine if 
a setting meets the home and community-based criteria.
    Comment: Commenters disagreed with proposed language that would 
exclude ``housing designed expressly around an individual's diagnosis 
or disability'' from the definition of an HCBS setting. They noted that 
certain disabled populations (such as those with brain injury and 
spinal cord injuries or Alzheimer's disease) require specialized 
facilities and care designed to meet their specific needs. Commenters 
stated that complexes designed around an individual's diagnosis or 
disability serve as alternatives to institutionalized care and allow 
residents to function with greater independence. We received a 
significant number of comments from diverse groups of individuals 
commenting that there are good reasons to live in residential settings 
specific to individuals' needs.
    Response: As noted above, the final rule no longer includes the 
term ``housing designed expressly around an individual's diagnosis or 
disability.'' The new regulatory language is restated above. We agree 
that certain kinds of specialized settings may prove highly beneficial 
to particular populations and may be well integrated into the 
community. These factors will be taken into account when deciding 
whether or not a setting should qualify for HCBS waiver funding.
    Comment: Some commenters asked CMS to look into HCBS settings' 
implications for intersection with HUD 811 and 202 projects and whether 
this will result in people losing housing. They encouraged CMS to look 
at potential conflicts with Fair Housing rules and work collaboratively 
with HUD and the Department of Agriculture so that we better coordinate 
available federally subsidized housing options with delivery of waiver 
services. One commenter who believed that HUD-funded independent 
housing should qualify stated, ``We would urge the Secretary to use her 
discretion to recognize that even those Section 811 housing 
developments that are designed `expressly around an individual's 
diagnosis or disability' are often the most community-based and 
inclusive housing model available, and it would be illogical to deny 
HCBS waiver funds to support services to an individual living in such a 
setting.''
    Response: We have worked closely with HUD and other federal 
agencies on the impact of this regulation on federally supported 
housing options. We believe the changes to the final rule allow for the 
appropriate designation of HCBS settings and for sufficient transition 
time for states to comply.
    Comment: One commenter suggested that a ``home'' should not be 
considered ``in the community'' if more than four unrelated people live 
in the home.
    Response: In the 2008 1915(i) Notice of Proposed Rulemaking, we did 
propose defining institutional care based on the number of residents 
living in the facility. However, we were persuaded by public comments 
that this was not a useful or appropriate way to differentiate between 
institutional and home and community-based care. As a result, we have 
now determined not to include or exclude specific kinds of facilities 
from qualifying as HCBS settings based on the number of residents in 
that facility. We have, however, established a list of specific 
conditions that must be met in provider-owned or controlled residential 
settings in order to qualify as HCBS.
    Comment: A commenter thought CMS should not allow clusters of homes 
in gated communities to qualify as an HCBS setting. Others objected to 
classifying facilities on campus settings or farms as HCBS. On the 
other hand, many people supported categorizing these facilities as 
HCBS, noting that cluster or campus living may promote health and 
welfare in emergencies because of physical proximity. Many commenters 
expressed concern that the proposed rule would exclude rural farmsteads 
and farm communities for individuals with autism from receiving waiver 
funds. These commenters noted that rural, agricultural settings are 
desirable for people with autism, as they provide safe, calm 
environments--whereas urban settings can prove dangerous and 
disorienting.
    Response: The Secretary will determine through heightened scrutiny, 
based on information presented by the state or other parties, whether 
such complexes do or do not have the qualities of an institution and 
whether these complexes have or do not have the qualities of home and 
community-based settings. We will evaluate both rural and urban 
settings based on whether they have the characteristics required under 
the regulation.
    Comment: Several commenters suggested that CMS needed to be careful 
of the unintended consequences of the prescriptive language about 
settings in the proposed rule that would force people to move from 
their long term homes in the community and lose services. Some 
commenters stated that CMS must also be open to unique situations and 
different types of living situations that may be designed for people in 
rural areas.
    Response: We have considered the many concerns expressed by 
commenters regarding the description of HCBS settings in the proposed 
rule. Through the final rule we have chosen a different, more person-
centered, outcomes-based approach than what was described in the 
proposed rule in part to address concerns about unintended consequences 
of specific language that was used in the proposed rule about settings.
    Comment: There were several themes that emerged amongst the many 
commenters who agreed with the proposed language in the rule regarding 
home and community-based settings. Some commended CMS for taking a 
stand on what comprises home and community qualities. Others 
appreciated that we were using characteristics that will help people 
truly be included in their communities and not just focusing on size or 
location of settings. Other commenters specifically mentioned that 
institutions and other congregate settings should not be a part of a 
waiver and should not be allowed to call themselves HCBS. Commenters 
agreed that use of person centered planning, flexibility regarding 
meals and availability of food, control over daily activities, free 
access to visitors and privacy are all hallmarks of community living. 
Individual commenters and the general public focused on the importance 
of using waiver funding for people with disabilities to live in the 
community like everyone else and not be shut away from other people.
    Response: We concur with much of the content from these commenters. 
Through the final rule we have chosen to take a somewhat different 
approach from what was described in the proposed rule in order to 
address the different commenters with divergent views on this issue. 
Specifically, we have chosen to be somewhat less prescriptive regarding 
physical and geographical characteristics of settings and to focus 
instead on the critical role of person-centered service planning

[[Page 3015]]

and on characteristics that are associated with independence, control, 
daily routines, privacy and community integration. Further, with 
respect to certain types of settings, the final rule specifies that the 
Secretary will determine through heightened scrutiny, based on 
information presented by the state or other parties, that the setting 
does not have the qualities of an institution and that the setting does 
have the qualities of home and community-based settings.
    Comment: One commenter suggested that the proposed language runs 
counter to consumer choice, would restrict important specialized 
programming, and is counter to the entire course and direction of the 
waiver program recommending that CMS delete the proposed section in its 
entirety and begin anew by convening stakeholders to discuss this 
critical definition. The commenter added that these conditions are a 
first attempt to regulate federally the assisted living environment 
which could and should remain at the state level.
    Response: This rule applies to all settings where individuals are 
receiving HCBS and does not single out assisted living environments. It 
is intended to assure, consistent with the statute, that Medicaid 
financing provided through HCBS waivers is available to participants 
who are receiving services in settings that are true alternatives to 
institutional care.
3. Target Groups Sec.  441.301(b)(6)
    Under section 1915(c) of the Act, the Secretary is authorized to 
waive section 1902(a)(10)(B) of the Act, allowing states not to apply 
requirements that the medical assistance available to categorically-
eligible Medicaid individuals must not be less in amount, duration or 
scope than the medical assistance made available to any other such 
individual, or the medical assistance available to medically needy 
individuals. We have interpreted this authority to permit States to 
target an HCBS waiver program to a specified group of individuals who 
would otherwise require institutional care. A single section 1915(c) 
waiver may, under current regulation, serve one of the three target 
groups identified in Sec.  441.301(b)(6). As provided in the rule, 
these target groups are: ``Aged or disabled, or both; Individuals with 
intellectual or developmental disabilities, or both; and Mentally 
ill.'' States must currently develop separate section 1915(c) waivers 
in order to serve more than one of the specified target groups. A 
federal regulatory change that permits combining targeted groups within 
one waiver will remove a barrier for states that wish to design a 
waiver that meets the needs of more than one target population.
    This regulatory change will enable states to design programs to 
meet the needs of Medicaid-eligible individuals and potentially achieve 
administrative efficiencies. For example, a growing number of Medicaid-
eligible individuals with intellectual disabilities reside with aging 
caregivers who are also eligible for Medicaid. The proposed change will 
enable the state to design a coordinated section 1915(c) waiver 
structure that meets the needs of the entire family that, in this 
example, includes both an aging parent and a person with intellectual 
disabilities. In this illustration, the family currently would be 
served in two different waivers, but with the proposed change, both 
could now be served under the same waiver program.
    The revisions to Sec.  441.301(b)(6) will allow states, but not 
require them, to combine target groups. Under this rule, states must 
still determine that without the waiver, participants will require 
institutional level of care, in accordance with section 1915(c) of the 
Act. The regulation will not affect the cost neutrality requirement for 
section 1915(c) waivers, which requires the state to assure that the 
average per capita expenditure under the waiver for each waiver year 
not exceed 100 percent of the average per capita expenditures that will 
have been made during the same year for the level of care provided in a 
hospital, nursing facility, or ICF/IID under the state plan had the 
waiver not been granted. We will provide states with guidance on how to 
demonstrate cost neutrality for a waiver serving multiple target 
groups.
    The comments provided on this provision were largely positive, 
advising CMS to carefully consider quality elements and protections 
needed to ensure that all target groups are protected sufficiently in 
such a structure. Through this final rule, we include the requirements 
that each individual within the waiver, regardless of target group, has 
equal access to the services necessary to meet their unique needs.
    Comment: A theme expressed by the majority of commenters who 
disagreed with this provision in the rule centered around potential 
negative impact on consumers. These included using the combining of 
target groups to limit service packages, serve less people overall, 
limit choices and create infighting among different disability groups. 
Several commenters were concerned that states would make decisions 
based on service/cost, which may lead to less adequate services for 
people with disabilities.
    Response: Challenges regarding limited resources at the state level 
already exist and will continue to exist whether or not a state chooses 
to pursue combining target populations in one waiver. This change to 
the regulation is not intended to have any impact on payment rates for 
services. To ensure transparency and input, we strongly encourage 
states interested in this option to consult with affected stakeholders 
in advance of implementation.
    Comment: Several commenters expressed concern that combining of 
target groups will lead to frustration for states and cause barriers to 
timely innovations.
    Response: The intention in the rule is to provide options to states 
that foster creativity and better integration of services across 
populations, which may lead to administrative efficiencies in state 
Medicaid agencies. The intent is not to prevent or inhibit innovation 
and the decision to combine target groups is optional for the state.
    Comment: A few commenters noted that people with various 
disabilities, for example people with developmental disabilities, 
people with mental illness and frail elders, have different needs from 
each other and should not be residing together in housing situations. 
Further, they described how this can lead to dangerous situations that 
may threaten the well-being of more vulnerable individuals, such as 
frail elders when they reside with younger people with disabilities, 
particularly if there is any potential that such disabilities would 
make a person more likely to engage in any dangerous or aggressive 
behavior.
    Response: The changes to this section of the regulation do not 
speak to combining different target groups in the same living 
situations, but rather to the inclusion of multiple target groups in 
the overall waiver design and operation. Including multiple target 
groups in one waiver will not alleviate responsibilities of states for 
ensuring the health and welfare of all participants and detailing their 
quality improvement strategies for that waiver. The final rule at Sec.  
441.302(a)(4) specifies that, if a state chooses the option to serve 
more than one target group under a single waiver, the state must assure 
that it is able to meet the unique service needs that each individual 
may have regardless of the target group.
    Comment: A commenter recommended that if states are permitted to 
combine target populations

[[Page 3016]]

in a single waiver, CMS must expressly require a right of beneficiary 
choice.
    Response: Including multiple target populations in one waiver does 
not change freedom of choice requirements that exist in Medicaid 
generally and in 1915(c) waivers specifically. Regardless of whether a 
state includes multiple target populations, all included services must 
be made available to those enrolled in the waiver who demonstrate a 
need for the services (as indicated in the person-centered assessment 
and service plan).
    Comment: A number of commenters who disagreed with this provision 
responded to perceived changes that were not contemplated in the 
proposed rule. One commenter thought this rule would cause cost-
neutrality issues between populations. Interestingly, some commenters 
thought the proposed rule would mandate states to combine target 
populations and believed it should be a state choice.
    Response: The concern that cost neutrality would become problematic 
in waivers with combined target groups should not be a factor, as cost 
neutrality is calculated based on the relevant level of care group in 
the waiver, not by target population. For example, people with physical 
disabilities who meet nursing facility level of care would need to meet 
that cost neutrality level and people with intellectual disabilities 
would still need to meet the cost neutrality for ICF/IID level of care. 
In fact, multiple levels of care are an option currently in waivers 
where a particular target population may include multiple levels of 
care within the same waiver. As this choice is optional, the state will 
have the opportunity to submit two separate waivers if cost neutrality 
was not initially met with one waiver. Neither the proposed rule nor 
the final rule mandates states to combine target populations, but 
rather provides this option for states.
    Comment: Several commenters were concerned that people who are 
currently receiving waiver services would lose their services if the 
state combined population specific waivers into one waiver that 
included multiple target groups. They suggested that CMS require 
appropriate safeguards to protect current participants.
    Response: In an effort to ensure that safeguards are in place to 
protect the health and welfare of each waiver participant, the 
requirement in the final rule at Sec.  441.302(a)(4) specifies that 
states must assure us that they are able to meet the unique service 
needs that particular target groups may present when the state elects 
to serve more than one target group under a single waiver. In the 
Instructions and Technical Guide for section 1915(c) HCBS waiver 
applications, we currently require a transition plan for waiver 
participants who may be adversely affected when a change through 
amendment, renewal consolidation, or the termination of a waiver 
occurs.
    Comment: Several commenters asked for clearer expectations around 
quality measurement and related documentation.
    Response: Combining waiver target groups will not alleviate 
responsibilities of states for ensuring the health and welfare of all 
participants and detailing their quality improvement strategies for 
that waiver. Further guidance on waiver quality improvement strategies 
is addressed in the Instructions and Technical Guide for section 
1915(c) HCBS waiver applications. We believe there may be potential for 
efficiencies by having a uniform quality system in one waiver that 
serves multiple target populations.
    Comment: Several commenters would like to see CMS allow states to 
define different services packages for subgroups within combined 
waivers. Other commenters asked CMS to clarify that equal access does 
not mean that each individual receives the same type, amount, duration 
or scope of service. In addition, one commenter recommended that 
waivers serving multiple target groups should not be required to cover 
the array of services specifically needed by each of the covered groups 
as well as generic services that will benefit all. Another commenter 
suggested that CMS require a common service menu for all target 
populations.
    Response: States may continue to design and keep 1915(c) waivers by 
individual target group and not choose to combine target groups. If 
they combine target groups in one waiver, equal access means that all 
included services must be made available to those who need them (as 
indicated in the person-centered assessment and service plan). This 
does not mean that individuals with differing needs would receive the 
same array, amount, duration or scope of services. Nothing in the 
proposed or final rule changes state flexibility in choosing services 
to meet the needs of people in waivers.
    Comment: Several commenters raised the issue of waiting lists and 
the potential to crowd out one population group due to pent up demand 
with long wait lists for another group; this was specifically mentioned 
in relation to older adults not having timely access to services.
    Response: One of the options available to states to ensure the 
continuation of services to incoming multiple target groups under one 
waiver is to reserve capacity. Reserving capacity is only a means to 
hold waiver openings for the entrance of specific sets of individuals 
to the waiver. Capacity cannot be reserved to limit access to a 
specific waiver service. All individuals who enter the waiver must have 
comparable access to the services offered under the waiver. For 
example, capacity may not be reserved to limit the number of waiver 
participants who may direct some or all of their waiver services.
    Comment: Several commenters pointed out that due to Medicaid's 
historic institutional bias, home and community-based services are 
still generally under-resourced relative to facility-based care. One 
commenter suggested that CMS not allow states to use newly combined 
waivers to cut back on HCBS services overall, as such a move would be 
inconsistent with a state's obligations under Olmstead.
    Response: We intend to offer more opportunities to states to 
facilitate their participation in HCBS options, not to reduce states' 
participation in 1915(c) waivers or limit HCBS services. Further, this 
regulation change does not alleviate states' independent obligations 
under the Americans with Disabilities Act or the Supreme Court's 
Olmstead decision.
    Comment: One commenter recommended that states be allowed the 
flexibility to create waivers that include hybrid care arrangements 
that have some institutional components.
    Response: Since the waivers are statutorily designed for the 
purpose of providing HCBS as an alternative to institutional care, we 
disagree with this comment.
    Comment: Several commenters agreed with this section of the rule 
but recommended that cost neutrality calculations be based either on 
combined calculations or on the target group with the higher estimated 
cost--not calculated separately for each population group. It was also 
recommended that we provide more detail on cost neutrality calculations 
in the regulation text, including whether states would have the option 
to combine populations with different institutional levels of need into 
one waiver. Several other commenters thought that states should be able 
to limit the number of waiver participants in each target group to 
maintain fiscal neutrality.
    Response: Combining target groups allows states to combine people 
with different levels of care, for example, people with ICF/IID level 
of care and NF level of care, in the same waiver. Cost neutrality is 
calculated by level of care,

[[Page 3017]]

not target group. The Instructions and Technical Guide for section 
1915(c) HCBS waivers provide guidance on calculating cost neutrality 
with multiple levels of care in one waiver. The current waiver 
application already prompts the user to enter costs for each level of 
care and then aggregates them for one combined cost neutrality test. 
States can choose to combine multiple target groups in a single waiver 
or continue to use separate waivers for each target group.
    Comment: Several commenters shared concerns about cost limits 
negatively impacting particular populations by either being set too low 
or too high. CMS was also asked to calculate and monitor the baseline 
combined funding for individual populations.
    Response: We do not believe that this change to regulation will 
have any impact on a state's choice to select or not select individual 
cost limits. We currently require states to report on funding for 
waiver services to ensure cost neutrality by waiver. At Sec.  
441.302(a)(4)(i), we have also included a requirement for states to 
report annually in the quality section of the CMS-372, data that 
indicates the state continues to serve multiple target groups in a 
single waiver and that a single target group is not being prioritized 
to the detriment of other groups.
    Comment: A few commenters recommended that CMS require states to 
apply savings from newly combined waivers proportionately and equitably 
to target groups affected for the purpose of addressing waiting lists 
and expansion of access to waiver services.
    Response: This comment goes beyond the statutory scope of what we 
can require in the context of section 1915(c) waivers.
    Comment: A commenter asked CMS to clarify which state agency(s) 
will be authorized to implement the waiver (for example, state agency 
on aging or state agency dealing with ID/DD issues) when a state 
chooses to submit a combined waiver.
    Response: In accordance with Sec.  431.10, the Medicaid Agency is 
responsible for ensuring that a waiver is operated in accordance with 
applicable federal regulations and the provisions of the waiver itself. 
However, it may delegate operational activities and functions to 
another state agency (operating agency) to perform under the 
supervision and oversight of the State Medicaid Agency. Decisions 
around the design of waiver administrative structures rest with the 
state, subject to CMS requirements that the Medicaid Agency retains 
ultimate authority and responsibility for the operation of the waiver. 
Greater detail on waiver administrative structures is provided in the 
Instructions and Technical Guide for section 1915(c) waivers.
    Comment: Several commenters indicated that CMS should employ the 
lessons learned through the Aging and Disability Resource Center (ADRC) 
model.
    Response: We agree that allowing states, at their discretion, to 
combine target groups in one waiver is consistent with one of the 
principles of the ADRC model to allow a cross disability population 
approach, as appropriate. Further, and as some other commenters noted, 
it is critical that if states choose to combine target populations in 
one waiver, they must assure CMS that they are able to meet the unique 
service needs that each individual may have regardless of target group, 
and that each individual in the waiver has equal access to all needed 
services.
    Comment: Several commenters raised clarifying questions about 
combining of target groups. One commenter asked how waitlists would be 
handled--by population group, services or in some other manner. Several 
other commenters requested further clarification around wait lists.
    Response: Through current guidance in the Instructions and 
Technical Guide for section 1915(c) waivers, CMS allows states to 
prioritize selection of entrants into a waiver, so a state has the 
flexibility to structure prioritization for waiver entry. However, once 
a person has entered the waiver all included services must be made 
available to those who need them (as indicated in the person-centered 
assessment and service plan).
    Comment: One commenter asked CMS to clarify what ``equal access'' 
means. ``Can there be different sets of services within a combined 
waiver targeted to specific groups?''
    Response: Equal access means that once individuals have enrolled in 
the waiver all services in the waiver must be made available to them, 
if needed (as indicated in the person-centered assessment and service 
plan).
    Comment: Commenters raised several concerns related to case 
management. One commenter stated that the case management entity should 
not be able to also be the agency that is administering the self-
directed hours as the payroll agent. Another commenter expressed 
concern about combining disability populations in terms of quality of 
case management provided, the number of people for whom states can 
provide case management and how states can differentiate populations 
and services.
    Response: We continue to appreciate the critical role of case 
management in the lives of waiver participants. How states set up their 
case management system for a waiver with combined target groups will be 
an important consideration. Through appropriate provider 
qualifications, we believe that states will be able to ensure that 
waiver case management services meet the needs of populations served.
    Comment: There were several themes amongst the many commenters who 
agreed with the proposed language in the rule. These themes included 
supporting flexibility to allow a family-based approach to service 
design and delivery, improving access, reducing inequities and 
fragmentation between disability groups and improving administrative 
efficiencies at both the provider and state levels. Several commenters 
spoke favorably about how combining target groups would allow both an 
aging parent and a person with intellectual disabilities to be served 
in the same waiver. Other commenters commended CMS for breaking down 
``silos'' between populations of people with different disabilities by 
allowing states to combine target groups in waivers. A few commenters 
expressed particular support related to the rule change's potential 
impact on expanding opportunities for people with mental illness to be 
served in waivers, as they have historically been underserved in 
section 1915(c) of the Act waivers.
    Response: We appreciate these comments and are retaining the 
proposed language in this section of the rule.
4. State Assurances (Sec.  441.302)
    In an effort to ensure that safeguards are in place to protect the 
health and welfare of each waiver participant, we proposed in a new 
paragraph Sec.  441.302(a)(4) that to choose the option of more than 
one target group under a single waiver, states must assure CMS that 
they are able to meet the unique service needs that each individual may 
have regardless of target group, and that each individual in the waiver 
has equal access to all needed services.
    Comment: Many commenters who agreed with the proposed changes in 
targeting stated that a comprehensive service array that ``meets the 
unique service needs'' of each individual in each target group is 
critical and that regulation language needs to be strengthened. 
Additionally, they believe that the provider expertise for specialty 
populations needs to be maintained. Multiple commenters singled out 
people with ID/DD in this vein as being at risk without appropriate 
safeguards to tailor

[[Page 3018]]

service packages and provider qualifications to meet their needs.
    Response: We agree with this comment and strengthened the language 
included in Sec.  441.302(a)(4) that directs states to ensure that the 
unique service needs are met. For participants enrolled in the same 
waiver, states cannot restrict services to certain target groups or 
choose to provide some services only to people with particular 
diagnoses. The language in the final rule at Sec.  441.302(a)(4) will 
now read, ``Assurance that the state is able to meet the unique service 
needs of the individuals when the state elects to serve more than one 
target group under a single waiver, as specified in Sec.  
441.301(b)(6).''
    Comment: One commenter noted that ``selects to serve'' should be 
changed to ``elects to serve'' in regard to state choice about 
combining target populations in proposed Sec.  441.302(a)(4).
    Response: We agree and will change the regulation text to read 
``elects to serve'' instead of ``selects to serve'' at Sec.  
441.302(a)(4).
    In addition, to ensure that services are provided in settings that 
are home and community-based, we proposed in a new paragraph Sec.  
441.302(a)(5) that states provide assurance that the settings where 
services are provided are home and community based, and comport with 
new paragraph Sec.  441.301(c)(4). While we are not changing the 
existing quality assurances through this rule, we clarified that states 
must continue to assure health and welfare of all participants when 
target groups are combined under one waiver, and assure that they have 
the mechanisms in place to demonstrate compliance with that assurance.
    We received no comments on Sec.  441.302(a)(5) and we will adopt 
the proposed language.
5. Duration, Extension, and Amendment of a Waiver (Sec.  441.304)
    At Sec.  441.304, we made minor revisions to the heading to 
indicate the rules addressed under this section. We revised Sec.  
441.304(d) and redesignated current Sec.  441.304(d) as new Sec.  
441.304(g).
a. Waiver Amendments With Substantive Changes (Sec.  441.304(d))
    The new Sec.  441.304(d) will codify and clarify our guidance 
(Application for a section 1915(c) Home and Community-Based Waiver, V. 
3.5, Instructions, Technical Guide and Review Criteria, January 2008) 
regarding the effective dates of waiver amendments with substantive 
changes, as determined by CMS. Substantive changes include, but are not 
limited to changes in eligible populations, constriction of service 
amount, duration, or scope, or other modifications as determined by the 
Secretary. We added regulatory language reflective of our guidance that 
waiver amendments with changes that we determine to be substantive may 
only take effect on or after the date when the amendment is approved by 
CMS, and must be accompanied by information on how the state has 
assured smooth transitions and minimal adverse impact on individuals 
impacted by the change.
    CMS received 43 comments regarding Sec.  441.304(d), which will 
clarify and codify existing technical guidance governing the effective 
dates of waiver amendments that make substantive changes.
    Comment: Several commenters expressed concern that this requirement 
could be problematic if a state is directed by its legislature to make 
a change to a waiver program prior to CMS approval of an amendment 
implementing that change. CMS should consider this possibility as it 
finalizes this rule. There is no allowance for emergency situations or 
changes that might benefit clients or providers in the broad definition 
of ``substantive.''
    Response: The intention in the rule is to codify our current 
practice regarding what types of amendments must be implemented 
prospectively.
    Comment: A commenter thought that retroactive approvals of waiver 
amendments should never be allowed.
    Response: We believe there are situations when a retroactive 
approval is permissible. For example, codifying the continuation of the 
current practice for states of being able to increase the number of 
waiver participants served retroactively allows states to serve more 
people, while continuing to plan and manage waiver growth within their 
budgets.
    Comment: A number of commenters wanted CMS to further clarify what 
constitutes a substantive change; however, the commenters varied in 
what they believe a substantive change should include. Several 
suggested that only changes to eligibility standards, procedures, or 
methodologies should be considered substantive; others recommended that 
elimination or reduction in services, and changes in the scope, amount 
and duration of services, as well as changes in provider rates, would 
always constitute ``substantive changes.''
    Response: Given the range of comments on what a list of substantive 
changes should include, we believe it prudent to maintain most of the 
language in the proposed rule around the types of examples of 
substantive changes, while leaving flexibility to the Secretary to 
determine other types of proposed changes that may also be considered 
substantive. We have, however, changed the phrase ``change in the 
eligible population'' to ``constriction in the eligible population'' in 
the final rule to be more specific about the kind of change that would 
constitute a ``substantive change.'' We have also rewritten the phrase 
``changes in the scope, amount, and durations of the services'' to read 
``reduction in the scope, amount, or duration of any service'' to 
further clarify what constitutes a substantive change. We also believe 
that a listing of only changes to eligibility standards, procedures, or 
methodologies is too broad regarding what constitutes a substantive 
amendment. We do, however, make clear that a state must submit 
amendments for prospective review and approval by CMS that may have a 
potentially negative impact on waiver participants, as well as that the 
amendment must be accompanied by information on how the state has 
assured smooth transitions and minimal adverse impact on individuals 
affected by the change.
    Comment: Several commenters wanted CMS to be more precise with 
language in this section of the rule. One asked that the list of 
examples of substantive items not be defined as exhaustive and several 
other commenters thought the use of ``may include'' in regard to 
substantive changes, was too permissive. Another commenter recommended 
that CMS state that the elimination or reduction in services and 
changes in the scope, amount, and duration of services will always 
constitute ``substantive changes.''
    Response: We agree that the term ``may include'' is not 
sufficiently precise to be helpful. We have deleted the word ``may'' 
from Sec.  441.304(d)(1) and have rewritten this section of the rule as 
follows: ``Substantive changes include, but are not limited to, 
revisions to services available under the waiver including elimination 
or reduction of services, or reduction in the scope, amount, and 
duration of any service, a change in the qualifications of service 
providers, changes in rate methodology or a constriction in the 
eligible population.'' We believe the current language noting that the 
list of substantive examples is not limited to just the changes listed 
is sufficiently clear.
    Comment: A few commenters wanted CMS to allow states to gain 
retroactive

[[Page 3019]]

approval to the date of the submission of the amendment, as opposed to 
the date CMS approved the amendment. The commenters noted that using 
the date of CMS approval can present significant challenges to a state 
when it is under legislative mandate to make a change or implement a 
budget initiative.
    Response: While we are sympathetic to the budgetary challenges 
faced by states, we believe it would not be in the best interest of 
waiver participants to allow approval retroactive to the date of 
substantive amendment submissions. The rule reflects and maintains our 
current waiver amendment review procedures.
    Comment: Commenters agreed with several aspects of the proposed 
language in the rule regarding substantive changes to amendments. Some 
liked that CMS is not allowing substantive changes in an already 
existing waiver to take effect until the waiver has been approved by 
CMS, as this will help ensure that waivers fulfill the mandate of the 
HCBS waiver program. A commenter agreed with CMS's definition of 
substantive changes. Another commenter noted that he liked that a state 
will need to demonstrate how it will ensure smooth transition and 
minimal disruption to service or adverse impact of a change on 
beneficiaries.
    Response: We concur with these comments. We agree that the rule is 
being changed to achieve the purposes outlined by these commenters.
b. Public Notice and Input (Sec.  441.304(e) and (f))
    Given the important requirement at Sec.  447.205, which describes 
states' responsibilities to provide public notice when states propose 
significant changes to their methods and standards for setting payment 
rates for services, we added a new paragraph Sec.  441.304(e) to remind 
states of their obligations under Sec.  447.205. We further included a 
new paragraph Sec.  441.304(f) directing that states establish public 
input processes specifically for HCBS changes. These processes, 
commensurate with the change, could include formalized information 
dissemination approaches, conducting focus groups with affected 
parties, and establishing a standing advisory group to assist in waiver 
policy development. These processes must be identified expressly within 
the waiver document and used for waiver policy development. The input 
process must be accessible to the public (including individuals with 
disabilities) and states must make significant efforts to ensure that 
those who want to participate in the process are able to do so. These 
processes must include consultation with federally-recognized Indian 
Tribes in accordance with federal requirements and the state must seek 
advice from Indian health programs or Urban Indian Organizations prior 
to submission of a waiver request, renewal, amendment or action that 
would have a direct effect on Indians or Indian health providers or 
Urban Indian Organizations in accordance with section 5006(e) of the 
American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5, enacted 
on February 17, 2009).
    We received 102 comments regarding Sec.  441.304(e) and (f), which 
would clarify the public input and notice requirements for all section 
1915(c) waiver actions.
    Comment: One commenter thought the description of a public input 
process for any changes in services or operations of a waiver was too 
broad.
    Response: The intent in the rule is to strengthen our current 
practice of encouraging states to engage in a public input process in 
order to ensure such input without being overly prescriptive to states 
in how that process is implemented. The language in the rule gives 
states examples for soliciting such public input, while not limiting 
additional methods that may work better in particular states and/or for 
particular waivers.
    Comment: Several commenters asked CMS to provide more specific 
requirements around process, time frames and methods used for public 
input. One suggested adding a provision that states must provide public 
notice of waiver amendments and provide information, training, and 
technical assistance to stakeholders, including individuals enrolled in 
the waiver and their families, when waiver amendments include 
substantive changes. Another suggested that we require specific 
activities that would ensure real input, participation and 
transparency; such as minimum times for posting notice of changes (30 
days), listing of specific mechanisms or venues for posting, a 
listserv, mandatory stakeholder meetings, posting on CMS Web sites of 
all active and pending waivers, submission of all public comments and 
state actions to address those comments. Other commenters suggested 
more generally that CMS establish some threshold for minimum public 
input process elements in the regulation. Another approach recommended 
was for CMS to provide a standard against which a state will be 
measured to demonstrate that a public input process is ``sufficient.''
    Response: While we appreciate the suggestions of the commenters to 
strengthen the public notice and input requirements in the regulation, 
we believe that the level of detail suggested in some of the comments 
is not appropriate for regulation; additionally, some of these 
suggestions may be addressed in future guidance. However, we do agree 
with the comment suggesting implementing a minimum amount of time for 
posting notice of changes. In the final rule, we have included language 
stating that we will require that the State provide the public a period 
of no less than 30 days in which to provide input on a rule change 
prior to implementation of that change or submission of the proposed 
change to CMS, whichever comes first.
    Comment: One commenter was concerned that extensive public input 
periods could prove challenging.
    Response: We believe that the time period specified is not 
extensive, but rather appropriate to allow for meaningful public input 
based on the breadth of the changes.
    Comment: A commenter expressed concerns that since states are 
already required to develop a process for tribal consultation that 
meets ARRA requirements, requiring the state to consult with all the 
tribes would require a different process for waiver changes.
    Response: We do not believe that the guidance in the rule is in 
conflict with provisions in 5006(e) of the American Recovery and 
Reinvestment Act of 2009 (ARRA), which required solicitation of advice 
from Indian health programs and urban Indian organizations.
    Comment: A number of commenters thought CMS should provide further 
clarification on what types of actions are considered substantive and 
would be subject to a public input process; however, there were 
differing opinions as to what level of change required public input. 
Several commenters thought it should include changes in policies such 
as qualifications of service providers, eligibility requirements, and 
changes to services covered in the waiver. Others thought that any 
changes in services or operations of the waiver would require public 
notice and input.
    Response: Consistent with our response to comments regarding waiver 
amendments with substantive changes, we believe that it would be 
difficult to come up with an exhaustive list of specific items that 
would be considered substantive beyond the general categories we listed 
in the proposed rule. Further, what may be a substantive change for one 
waiver may be less significant in a different waiver or in a different 
state depending on the waiver design and the service package. 
Therefore, we believe that the regulation

[[Page 3020]]

is currently worded to invite public input when it is appropriate; 
adding further detail in the regulation would not be beneficial.
    Comment: A number of commenters made recommendations about 
accessibility standards to ensure that the broadest range of 
stakeholder input is obtained. Most specifically, commenters wanted to 
assure that people with disabilities, including people with vision and 
hearing impairments; other cognitive, mental, or physical disabilities; 
and people with limited English proficiency were included in the 
process in a meaningful way. One of the suggestions was to make sure 
they were included on standard advisory groups. Again, the suggested 
methods to accomplish this level of accessibility varied greatly. A 
commenter asked that CMS include language from the preamble in 
regulatory text that requires accessibility for public input. Others 
asked that CMS detail how individuals or organizations can submit oral 
or written input. While there were a few comments that service 
providers should be required to be part of an input process, we 
received more comments about making sure that people with disabilities 
have access to an input process.
    Response: By requiring states to detail the processes they used to 
solicit input from the public in the waiver application, we will have 
an appropriate oversight mechanism to review the integrity of a 
specific waiver and specific state processes. We also have a mechanism, 
as noted in the proposed rule at Sec.  441.304(f)(1), to specifically 
look at how the process included and was made accessible to people with 
disabilities. This requirement specifies that, ``this process must be 
described fully in the state's waiver application and be sufficient in 
light of the scope of the changes proposed, to ensure meaningful 
opportunities for input for individuals served, or eligible to be 
served, in the waiver.''
    Comment: A theme from several commenters was that CMS should 
establish specific guidelines and accountability mechanisms for states 
around public notice. Some of the types of suggestions we received 
included requests for CMS to: add a requirement that the agency reply 
to public comments received; file the public comments and agency 
replies with CMS; include language to require written legal decisions 
for compliance with Open Meetings Act/Sunshine Laws; add an 
accountability measure to use a public input process for a state 
agency; and monitor compliance through subsequent audits that would 
include interviews with people with disabilities and other stakeholders 
to determine the level of public input and decision making.
    Response: By requiring states to describe in the waiver application 
the processes they used to solicit input from the public, we will have 
an appropriate oversight mechanism to review the integrity of the 
process, while allowing states flexibility to implement public input 
processes that make sense for the specific waiver and the state or are 
required under state law. We will consider whether further guidance 
along these lines would be helpful.
    Comment: A commenter wanted CMS to clarify that the public input 
process should apply to new waivers and not just existing waivers.
    Response: We concur with this comment and clarified in the rule 
that the public input process should be for both existing waivers that 
have substantive changes proposed, either through the renewal or the 
amendment process, and new waivers. We also clarified that the public 
input process must be fully described in a state's waiver application.
    Comment: Several other comments received went beyond the scope of 
the regulation, such as asking for more transparency in negotiations 
between CMS and states regarding review of waiver actions. Another 
asked for an assurance that input gathered from the public should 
influence change.
    Response: The scope of the regulation was not intended to address 
our review process and review criteria, which is addressed further in 
the Instructions and Technical Guide for section 1915(c) HCBS waivers. 
We believe that the regulation changes strengthen requirements for 
states to solicit meaningful public input prior to waiver submissions 
to CMS, which will help states in making decisions about the design and 
operation of their waiver programs that benefit the populations to be 
served.
    Comment: Commenters noted CMS was not clear on whether there were 
any differences between public input regarding rate changes and notice 
for operations and service changes, as these two areas were described 
separately in the proposed rule.
    Response: Since there are already existing regulations that address 
notice requirements to methods and standards of setting payment rates 
across Medicaid authorities, we are reminding states of those 
obligations with the rule. In addition, in this rule we are adding new 
provisions regarding public notice for HCBS changes that are similar to 
those for setting payment rates.
    Comment: There were several themes among the many commenters who 
agreed with the proposed language in the rule regarding public notice 
and input. Commenters supported the requirement that state agencies 
must provide public notice of any significant proposed change in their 
methods and standards for setting payment rates for services. They also 
appreciated the inclusion of stakeholders in the process. Commenters 
expressed agreement with CMS that public input is important for waiver 
development and that the input process must be accessible to the public 
(including persons with disabilities), and a state must be required to 
make efforts to ensure that those who want to participate can do so.
    Response: We concur with these comments. We agree that the rule is 
being changed to achieve the purposes outlined by those commenters who 
support the proposed rule change.
c. Selecting Strategies To Ensure Compliance (Sec.  441.304(g))
    In new paragraph, Sec.  441.304(g), we added language describing 
additional strategies we may employ to ensure state compliance with the 
requirements of a waiver, short of termination or non-renewal. Our 
regulation at new Sec.  441.304(g) reflects an approach to encourage 
state compliance. We are interested in working with states to achieve 
full compliance without having to resort to termination of a waiver. 
Therefore, we proposed strategies to ensure compliance in serious 
situations short of termination. These strategies include use of a 
moratorium on waiver enrollments or withholding federal payment for 
waiver services or administration of waiver services in accordance with 
the seriousness and nature of the state's noncompliance. These 
strategies could continue, if necessary, as the Secretary determines 
whether termination is warranted. Our primary objective is to use such 
strategies rarely, only after other efforts to resolve issues to ensure 
the health and welfare of individuals served or to resolve other 
serious non-compliance issues have not succeeded.
    Once CMS employs a strategy to ensure compliance, the state must 
submit an acceptable corrective action plan in order to resolve all 
areas of noncompliance. The corrective action plan must include detail 
on the actions and timeframe the state will take to correct each area 
of noncompliance, including necessary changes to the quality 
improvement strategy and a detailed timeline for the completion and 
implementation of corrective actions.

[[Page 3021]]

We will determine if the corrective action plan is acceptable.
    We received 50 comments on Sec.  441.304(g) regarding the actions 
we can take if a Medicaid agency is substantively out of compliance 
with waiver requirements.
    Comment: One commenter stated that they believed the standard audit 
process was the best way to achieve compliance.
    Response: Onsite visits and audits are a tool we utilize to ensure 
states clearly understand our guidance and adhere to regulatory 
requirements. After 30 years of running the section 1915(c) waiver 
program, it has become clear that other methods are needed to ensure 
the welfare of our beneficiaries.
    Comment: Commenters stated their concern with the potential harm to 
beneficiaries that could result from moratoria on waiver enrollments 
and urged us to use the moratoria as a last resort.
    Response: We understand the potential negative effects a moratorium 
on waiver enrollments may have on beneficiaries. Opportunities exist, 
such as technical assistance and corrective action plans, to assist a 
state to achieve compliance without the use of a moratorium. We will 
always be ready to assist states through these means before moving 
forward with a moratorium. We also note that the main compliance tool 
currently available to us, termination of the waiver, has the potential 
to harm an even higher number of individuals needing HCBS.
    Comment: Many commenters agreed with the use of withholding a 
portion of federal payment.
    Response: Certain tools, such as withholding a portion of federal 
payment, will only be utilized when necessary and after most other 
options have been exhausted. At this time, we believe we will see the 
necessary results to be assured that the care of our beneficiaries is 
foremost to states.
    Comment: One commenter recommended transparency as to where 
withheld funds will go and how these funds will be used.
    Response: We are committed to transparency. We will release the 
information we are legally allowed to make public.
    Comment: One commenter suggested we clarify whether the opportunity 
for a hearing will be afforded when a state disputes compliance rulings 
similar to the processes and safeguards specified in part 430 subpart 
D.
    Response: We reiterate that these additional enforcement measures 
are part of a broader array of approaches we may take to achieve and 
maintain full compliance with the requirements specified in section 
1915(c) of the Act, in addition to waiver termination. States will be 
afforded an opportunity to appeal. The procedures specified in subpart 
D of part 430 of this chapter are applicable to state requests for 
hearings on all non-compliance actions, including terminations.
    Comment: Many commenters wanted assurances from CMS that due 
process procedure will be followed before a moratorium is set or funds 
are withheld and that enforcements should be waiver specific.
    Response: The tools discussed to ensure compliance will only be 
utilized after we have tried several other remedies, including 
technical assistance and action plans. We will provide states with a 
written notice of the impending strategies to ensure compliance for a 
waiver program. The notice of our intent to use strategies to ensure 
compliance will include the nature of the noncompliance, the strategy 
to be employed, the effective date of the compliance strategy, the 
criteria for removing the compliance strategy and the opportunity for a 
hearing as specified in subpart D of part 430.
    Comment: One commenter suggested that CMS develop a way to cover 
the cost of training while a state is under a compliance strategy.
    Response: Compliance is a state's responsibility when accepting 
federal financial funding. That funding may be used to ensure 
compliance measures are in place.
    Comment: One commenter expressed support for the use of compliance 
strategies other than termination or nonrenewal.
    Response: We agree that additional options for promoting and 
ensuring state compliance with HCBS waiver requirements should be 
available. We have therefore added the phrase ``or other actions as 
determined by the Secretary as necessary to address non-compliance with 
section 1915(c) of the Act'' to the regulation text.

IV. Provisions of the Final Regulations

A. 1915(k) Community First Choice and 1915(i) State Plan Home and 
Community-Based Services

    The provisions proposed as new subpart L, consisting of Sec.  
441.650 through Sec.  441.677, added to part 441 will be codified as 
subpart M, consisting of Sec.  441.700 through Sec.  441.745.
    For the most part, this final rule incorporates the provisions of 
the proposed rule. In response to comments as explained in the 
responses in the above section, those provisions of this final rule 
that differ from the proposed rule are as follows:
    Under Sec.  430.25 (waivers of State plan requirements), we added 
``and in a manner consistent with the interests of beneficiaries and 
the objectives of the Medicaid program.'' This was language from the 
preamble of the proposed rule, for which we received a comment 
requesting that it also be incorporated into the text of the final 
regulation.
    In response to many comments received, and for the reasons provided 
in the responses above for each specific provision, we revised and 
added new language to Sec.  441.530(a), regarding home and community-
based setting requirements for 1915(k) and to Sec.  441.710(a), 
regarding home and community-based setting requirements for 1915(i). In 
addition to those specific provisions, we examined the overall themes 
of the commentary received and our basis for the HCB settings 
requirements as a whole. All of the overall ideas may be found within 
the summary of comments and our responses in the above section, which 
are organized by specific provisions of the proposed rules.
    In Sec.  440.182(c)(8), which refers to conditions set forth at 
Sec.  440.180 for persons with chronic mental illness, we have revised 
this reference to Sec.  440.180(d)(2) to be more precise.
    Under eligibility for home and community-based services under Sec.  
441.710(d), we corrected the reference to target criteria from (b)(2) 
to (e)(2).
    Under Sec.  441.710(e)(2)(ii), we corrected the reference to Sec.  
440.182(b) to Sec.  440.182(c).
    We have corrected Sec.  441.715(b)(2) to replace the reference to 
(c)(7) to instead specify (c)(6).
    We have corrected Sec.  441.715(c) by replacing ``the Secretary 
will approve'' with ``the Secretary may approve.''
    We have corrected Sec.  441.715(d) to replace the reference to 
section 441.710(a)(1) to Sec.  441.658.
    In Sec.  441.715(d)(2), we have revised the reference to Sec.  
441.656 so that it now reads correctly as a reference to Sec.  435.219 
and Sec.  436.219.
    At Sec.  441.720(a)(1), we made a minor correction and added a 
cross reference after ``person-centered process'' to Sec.  441.725(a).
    At Sec.  441.720(a)(1)(i)(A), we revised the language to be 
consistent with other language in this regulation.
    We added ``cognitive'' to Sec.  441.720(a)(4) in response to 
comments received, to specifically include assessment of needs related 
to cognitive impairment.
    We have revised the first sentence of Sec.  441.720(a)(5).
    In response to numerous comments received regarding the section 
1915(i) of

[[Page 3022]]

the Act person-centered planning process and person-centered service 
plan, and in order to align these requirements across sections 1915(c) 
and 1915(i) of the Act HCBS, we have modified the requirements in Sec.  
441.725 of this final rule. In addition, we examined the overall themes 
of the commentary received. An explanation of changes to regulation as 
a result of comments received may be found within the responses in the 
section above.
    In Sec.  441.730(c), we added ``cognitive'' and current knowledge 
of ``available resources, service options, and providers'' to this 
requirement.
    We added a new statement to Sec.  441.735(a) regarding the 
definition of individual's representative to indicate that in instances 
where state law confers decision-making authority to the individual 
representative, the individual will lead the service planning process 
where possible and the individual representative will have a 
participatory role, as needed and as defined by the individual.
    We revised Sec.  441.735(c).
    We revised Sec.  441.740(b)(4).
    For clarity, we have moved the requirement regarding financial 
management supports that was previously at both Sec.  441.674(c)(2) and 
Sec.  441.674(d)(4) of the proposed rule, to a new (5) under Sec.  
441.740(b) of this final rule.
    We edited employer authority at Sec.  441.740(c) to ensure 
consistency with statutory language, by replacing ``or'' with ``and'' 
so that it now reads as ``the ability to select, manage, and dismiss 
providers of State plan HCBS.''
    We revised Sec.  441.740(e)(3).
    Since advance notice is a topic in part 431, subpart E, we have 
added ``advance notice'' to the regulation at Sec.  441.745(a)(1)(iii).
    We revised Sec.  441.745(a)(2)(vi) to specify that for renewal, the 
state's 1915(i) benefit must meet the state's objectives with respect 
to quality improvement and beneficiary outcomes.
    We revised Sec.  441.745(b)(1)(ii) to add language that was in the 
preamble of the proposed rule.

B. 1915(c) Home and Community Based Services Waivers

    We have outlined in section III of this preamble the revisions in 
response to the public comments. Those provisions of this final rule 
that differ from the proposed rule are as follows:
    Based upon the complexities of the comments received, we have 
reorganized the regulations to finalize the provisions proposed at 
Sec.  441.301(b)(1)(i)(A) through Sec.  441.301(b)(1)(i)(B)(12) as new 
paragraph Sec.  441.301(c).
    At Sec.  441.301(c)(1) and (2), we made some general revisions to 
the terminology utilized to strengthen language regarding services. We 
added the term ``supports'' when referencing services to now use the 
language ``services and supports.'' We also revised person-centered 
plan as ``person-centered service plan.''
    At Sec.  441.301(c)(1)(i) we added language to more clearly define 
the role of the individual's representative and refer to the 1915(i) 
definition of the individual's representative at Sec.  441.735 in this 
rule.
    We have revised Sec.  441.301(c)(i)(ii) to more clearly state the 
individual's role in directing the person-centered planning process.
    We have revised Sec.  441.301(c)(1)(iii) to include a requirement 
for timeliness.
    We have revised Sec.  441.301(c)(1)(v) to strengthen this language 
to direct that the state devise clear conflict-of-interest guidelines 
addressed to all parties who participate in the person-centered 
planning process.
    We have added a new provision at Sec.  441.301(c)(1)(vi) to clarify 
conflict of interest standards pertaining to providers of HCBS. The 
proposed text at Sec.  441.301(b)(1)(i)(A)(6) through (8) all shifted 
down by one number and are included in the final rule at Sec.  
441.301(c)(1)(vii) through (ix).
    We have revised Sec.  441.301(c)(1)(vii) to clarify that 
individuals should be informed of all the possibilities from which they 
may choose regarding services, as well as the consequences of these 
choices.
    We added a new provision at Sec.  441.301(c)(1)(ix) to clarify that 
the setting in which an individual resides is an important part of the 
person-centered planning process.
    We have revised Sec.  441.301(c)(2) to align the language with 
other HCBS authorities.
    We have added a new provision at Sec.  441.301(c)(2)(i) to ensure 
that the individual's choice of setting is documented in the person-
centered service plan. The proposed text at 441.301(b)(1)(i)(B)(1) 
through (5) all shifted down by one number and is included in the final 
rule at Sec.  441.301(c)(2)(ii) through (vi). In addition, we added 
language to ensure community integration.
    We have revised Sec.  441.301(c)(2)(iii) and (iv) to align the 
language with other HCBS authorities.
    We have revised Sec.  441.301(c)(2)(v) by adding further clarifying 
language regarding ``natural supports.''
    We have revised previously numbered Sec.  441.301(b)(1)(i)(B)(6) to 
clarify privacy and control over personal information and have moved 
this requirement to Sec.  441.301(c)(2)(ix).
    We have revised Sec.  441.301(c)(2)(vi) to strengthen the language 
regarding risks for individuals.
    We removed Sec.  441.301(b)(1)(i)(B)(8) from the final rule because 
this requirement is a part of the person-centered planning requirements 
at Sec.  441.301(c)(1)(iii) and (vii).
    We revised Sec.  441.301(c)(2)(xi) to provide clarifying language 
regarding the requirement for self-direction of services.
    We revised Sec.  441.301(c)(2)(xii) to replace the term ``care'' 
with the term ``services and supports.''
    We added new language at Sec.  441.301(c)(2)(xiii) and at Sec.  
441.301(c)(3) to align with other HCBS authorities.
    We revised Sec.  441.301(c)(4) by replacing the language with new 
standards for HCBS settings that are aligned with other HCBS 
authorities.
    We added a provision at Sec.  441.301(c)(5) to specify the settings 
that are not home and community-based.
    We added a new provision at Sec.  441.301(c)(6)to specify the 
requirements for States to achieve compliance with the HCB settings 
standards.
    We revised Sec.  441.302(a)(4) to clarify the expectations that 
each individual within a waiver, regardless of target group, has equal 
access to the services necessary to meet their unique needs. In 
addition, we made a technical correction by changing ``selects to 
serve'' to ``elects to serve.''
    We have added a new provision at Sec.  441.302(a)(4)(i) directing 
states to annually report data in the quality section of the CMS-372 
regarding serving multiple target groups in a single waiver to ensure 
that a single target group is not being prioritized to the detriment of 
other groups.
    We revised Sec.  441.304(d)(1) to be more specific about the kind 
of change that constitutes a ``substantive change'' regarding HCBS 
waiver amendments.
    We added a new provision at Sec.  441.304(f)(2) to strengthen the 
public notice and input process by including a minimum time limit for 
posting notice of changes.
    We added a new provision at Sec.  441.304(f)(3) to clarify when the 
public input process applies.
    We revised Sec.  441.304(g)(3)(i) to clarify that additional 
options for promoting and ensuring state compliance with

[[Page 3023]]

HCBS waiver requirements should be allowed.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 (PRA) requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements:
 ICRs Regarding Individuals Receiving State Plan Home and 
Community-based Services (Sec.  435.219(b) and Sec.  436.219(b))
    To cover the categorically needy eligibility group, the State would 
be required to submit a SPA and may elect to cover individuals who meet 
certain requirements in Sec.  435.219(a) or Sec.  436.219(a). The 
burden associated with this requirement is the time and effort put 
forth by the State to complete, review, process and transmit/submit the 
pre-print which describes the eligibility criteria for the group. We 
estimate it would take each State 30 hours to meet this one-time 
requirement. We estimate that on an annual basis, 3 States will submit 
a SPA to meet these requirements; therefore, the total annual burden 
hours for this requirement are 90 hours. We believe that a State 
employee, with pay equivalent to GS-13 step one ($34.34 per hour) would 
be responsible for this requirement. Thus, the cost for each State is 
anticipated to be $1,030; this equates to an annual cost of $3,091.
 ICRs Regarding Eligibility for State Plan HCBS (Sec.  441.710) 
(Proposed Sec.  441.656)
    If a State elects to target the benefit to specific populations, 
Sec.  441.710(e)(2) requires submission of targeting criteria to CMS. 
The burden associated with this requirement is the time and effort put 
forth by the State to establish such criteria. We estimate it would 
take 1 State 10 hours to meet this one-time requirement. We estimate 
that on an annual basis, 3 States will submit a SPA to offer the State 
plan HCBS benefit that targets specific populations, and be affected by 
this requirement; therefore, the total annual burden hours for this 
requirement is 30 hours. We believe that a State employee, with pay 
equivalent to GS-13 step one ($34.34 per hour) would be responsible for 
this requirement. Thus, the cost for each State is anticipated to be 
$343; this equates to an annual cost of $1,030.
 ICRs Regarding Needs-Based Criteria and Evaluation Sec.  
441.715 (Proposed Sec.  441.659)
    Section 441.715(a) requires a State to establish needs-based 
criteria for determining an individual's eligibility under the State 
plan for the HCBS benefit, and may establish needs-based criteria for 
each specific service. The burden associated with this requirement is 
the time and effort put forth by the State to establish such criteria. 
We estimate it would take 1 State 24 hours to meet this requirement. We 
estimate that on an annual basis, 3 States will submit a SPA to offer 
the State plan HCBS benefit, and be affected by this one-time 
requirement; therefore, the total annual burden hours for this 
requirement is 72 hours. We believe that a State employee, with pay 
equivalent to GS-13 step one ($34.34 per hour) would be responsible for 
this requirement. Thus, the cost for each responding State is 
anticipated to be $824; this equates to an annual cost of $2,472.
    Section 441.715(b) reads that if a State defines needs-based 
criteria for individual State plan home and community-based services, 
the needs-based institutional eligibility criteria must be more 
stringent than the combined effect of needs-based State plan HCBS 
benefit eligibility criteria and individual service criteria. Section 
441.715(b)(1)(ii) requires the State to submit the more stringent 
criteria to CMS for inspection with the State plan amendment that 
establishes the State Plan HCBS benefit.
    The burden associated with this requirement is the time and effort 
for the State to define the more stringent criteria and submit it to 
CMS along with the State plan amendment that establishes the HCBS 
benefit. We anticipate 3 States would be affected by this requirement 
on an annual basis and it would require 1 hour to prepare and submit 
this information. The one-time burden associated with this requirement 
is 3 hours. We believe that a State employee, with pay equivalent to 
GS-13 step one ($34.34 per hour) would be responsible for this 
requirement. Thus, the cost for each State is anticipated to be $34; 
this equates to an annual cost of $102. This would be a one-time burden 
for each responding State.
    Section 441.715(c) reads that a state may modify the needs-based 
criteria established under paragraph (a) of this section, without prior 
approval from the Secretary, if the number of individuals enrolled in 
the state plan HCBS benefit exceeds the projected number submitted 
annually to CMS.
    Section 441.715(c)(1) requires the state to provide at least 60 
days notice of the proposed modification to the Secretary, the public, 
and each individual enrolled in the State plan HCBS benefit. The State 
notice to the Secretary will be considered an amendment to the State 
plan.
    Section 441.715(c)(2) requires the State notice to the Secretary be 
submitted as an amendment to the State plan.
    The burden associated with the requirements found under Sec.  
441.715(c) is the time and effort put forth by the State to modify the 
needs-based criteria and provide notification of the proposed 
modification to the Secretary. We estimate it would take 1 State 24 
hours to make the modifications and provide notification. This would be 
a one-time burden.
    The total annual burden of these requirements (Sec.  441.715(c), 
Sec.  441.715(c)(1), and Sec.  441.715(c)(2)) would vary according to 
the number of States who choose to modify their needs-based criteria. 
We do not expect any States to make this modification in the next 3 
years, thus there is no anticipated burden.
    Section 441.715(d) states that eligibility for the State plan HCBS 
benefit is determined, for individuals who meet the requirements of 
Sec.  441.710(a)(1) through (5), through an independent evaluation of 
each individual that meets the specified requirements. Section 
441.715(d)(5) requires the evaluator to obtain information from 
existing records, and when documentation is not current and accurate, 
obtain any additional information necessary to draw a valid conclusion 
about the individual's support needs. Section 441.715(e) requires at 
least annual reevaluations.
    The burden associated with this requirement is the time and effort 
put forth by the evaluator to obtain information to support their 
conclusion. We estimate it would take one evaluator 2 hours per 
participant to obtain

[[Page 3024]]

information as necessary. The total annual burden of this requirement 
would vary according to the number of participants in each State who 
may require and be eligible for HCBS under the State plan. The 
individuals performing this assessment would vary based upon State 
benefit design, but will likely include individuals such as registered 
nurses, qualified developmental disability professionals, qualified 
mental health professionals, case managers, or other professional staff 
with experience providing services to individuals with disabilities or 
the elderly. While there is burden associated with this requirement, we 
believe the burden is exempt as defined in 5 CFR 1320.3(b)(2) because 
the time, effort, and financial resources necessary to comply with this 
requirement would be incurred by persons in the normal course of their 
activities.
 ICRs Regarding Independent Assessments Sec.  441.720 (Proposed 
Sec.  441.662)
    Section 441.720 requires the State to provide for an independent 
assessment of need in order to establish a person-centered service 
plan. At a minimum, the person-centered service plan must meet the 
requirements as discussed under Sec.  441.725.
    While the burden associated with the requirements under Sec.  
441.720 is subject to the PRA, we believe the burden is exempt as 
defined in 5 CFR 1320.3(b)(2) because the time, effort, and financial 
resources necessary to comply with this requirement would be incurred 
by persons in the normal course of their activities.
 ICRs Regarding State Plan HCBS Administration: State 
Responsibilities and Quality Improvement Sec.  441.745 (Proposed Sec.  
441.677)
    Section 441.745(a)(1)(i) reads that a State will annually provide 
CMS with the projected number of individuals to be enrolled in the 
benefit, and the actual number of unduplicated individuals enrolled in 
State plan HCBS in the previous year.
    The burden associated with this requirement is the time and effort 
put forth by the state to annually project the number of individuals 
who will enroll in State plan HCBS. We estimate it will take one state 
2 hours to meet this requirement. The total annual burden of these 
requirements would vary according to the number of States offering the 
State plan HCBS benefit. The maximum total annual burden is 112 hours 
(56 States x 2 hours = 112 hours). We believe that a state employee, 
with pay equivalent to GS-13 step one ($34.34 per hour) would be 
responsible for this requirement. Thus, the anticipated for each state 
is anticipated to be $69; this equates to a maximum annual cost of 
$3,864 if all 56 states elect to provide this benefit. There are 
currently six states with approved State plan HCBS benefits. Thus, we 
anticipate based on current benefits that the total annual aggregated 
burden will be $414.
    Section 441.745(a)(2)(iii) reads that the SPA to provide State plan 
HCBS must contain a description of the reimbursement methodology for 
each covered service.
    The burden associated with this requirement is the time and effort 
put forth by the state to describe the reimbursement methodology for 
each State plan HCBS. We estimate that it will take one state an 
average of 2 hours to determine the reimbursement methodology for one 
covered HCBS. This would be a one-time burden. The total annual burden 
for this requirement would vary according to the number of services 
that the state chooses to include in the state plan HCBS benefit. We 
believe that a state employee, with pay equivalent to GS-13 step one 
($34.34 per hour) would be responsible for this requirement. Thus, the 
cost to each state for each covered service is anticipated to be $69; 
this would vary based upon the number of services covered. This would 
be an annual burden for each responding state. Since we have estimated 
that 3 states will annually describe the reimbursement methodology, the 
total annual aggregated burden associated with this requirement is 
estimated to be $207.
    Section 441.745(a)(2)(iv) reads that the SPA to provide State plan 
HCBS must contain a description of the State Medicaid agency line of 
authority for operating the State plan HCBS benefit, including 
distribution of functions to other entities.
    The burden associated with this requirement is the time and effort 
put forth by the state to describe the State Medicaid agency line of 
authority. We estimate it will take one state 2 hours to meet this 
requirement. Since we have estimated that 3 states will annually 
request State plan HCBS, the total annual burden associated with this 
requirement is estimated to be 6 hours. This would be a one-time burden 
for each responding state. We believe that a state employee, with pay 
equivalent to GS-13 step one ($34.34 per hour) would be responsible for 
this requirement. Thus, the cost for each State is anticipated to be 
$69.
    Section 441.745(a)(2)(vi) limits the approval period for states 
that target the benefit to specific populations. If a state elects to 
target the benefit, this section requires a renewal application every 5 
years in order to continue operation of the benefit. Actual time to 
meet this requirement will vary depending on the scope of the program 
and any changes the state includes. However, we estimate that it will 
take one state an average of 40 hours to meet this requirement. This 
includes reviewing the previous submission, making any necessary 
changes to the state plan document(s), and communicating with CMS 
regarding the renewal. This burden would occur once every five years 
and would be recurring. We estimate that, beginning in 2016, 3 states 
will annually request renewal and the total burden will be 120 hours. 
We believe that a state employee, with pay equivalent to GS-13 step one 
($34.34 per hour) would be responsible for this requirement. Thus, the 
cost for each State is anticipated to be $1,374; this equates to an 
annual cost of $4,122. This would be a burden for each State that 
targets its benefit once every 5 years; however, this burden will not 
take effect until 2016.
    Section 441.745(b) requires States to develop and implement a 
quality improvement strategy that includes methods for ongoing 
measurement of program performance, quality of care, and mechanisms for 
remediation and improvement proportionate to the scope of services in 
the State plan HCBS benefit and the number of individuals to be served, 
and make this information available to CMS upon the frequency 
determined by the Secretary or upon request.
    The burden associated with this requirement is the time and effort 
put forth by the state to develop and implement a quality improvement 
strategy, and to make this information available to CMS upon the 
frequency determined by the Secretary or upon request. We estimate it 
will take one state 45 hours for the development of the strategy, and 
for making information available to CMS. The total annual burden of 
these requirements would vary according to the number of states 
offering the state plan HCBS benefit. The maximum total annual burden 
is estimated to be 2,520 hours (56 states x 45 hours = 2,520 hours). We 
estimate that the burden associated with implementation of the quality 
improvement strategy will greatly vary, as the necessary time and 
effort to perform these activities is dependent upon the scope of the 
benefit and the number of persons receiving state plan HCBS. We believe 
that a state employee, with pay equivalent to GS-13 step one ($34.34 
per hour) would be responsible

[[Page 3025]]

for this requirement. Thus, the cost for each State is anticipated to 
be $1,545; this equates to a maximum annual cost of $86,537. Currently, 
there are 6 states with approved benefits, thus we anticipate an annual 
burden based on current States of $9,270.

                                                Table 1--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Hourly
                                                                                 Burden per    Total     labor cost  Total labor     Total
        Regulation section(s)         OMB Control    Respondents    Responses     response     annual        of        cost of      capital/     Total
                                          No.                                     (hours)      burden    reporting    reporting   maintenance   cost ($)
                                                                                              (hours)       ($)          ($)       costs ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
435.219(b) and 436.219(b)...........    0938-1148               3            3           30         90        34.34        1,030            0      1,030
441.656(e)(2) of proposed rule;         0938-1148               3            3           10         30        34.34        1,030            0      1,030
 441.710(e)(2) of final rule........
441.659(a) of proposed rule;            0938-1148               3            3           24         72        34.34        2,472            0      2,472
 441.715(a) of final rule...........
441.659(b) of proposed rule;            0938-1148               3            3            1          3        34.34          103            0        103
 441.715(b) of final rule...........
441.677(a)(1)(i) of proposed rule;      0938-1148               6            6            2         12        34.34          414            0        414
 441.745 (a)(1)(i) of final rule....
441.677(a)(2)(iii) of proposed rule;    0938-1148               3            3            2          6        34.34          207            0        207
 441.745 (a)(2)(iii) of final rule..
441.677(a)(2)(iv) of proposed rule;     0938-1148               3            3            2          6        34.34          207            0        207
 441.745(a)(2)(iv) of final rule....
441.677(b) of proposed rule; 441.745    0938-1148               6            6           45        270        34.34        9,270            0      9,270
 of final rule......................
                                                  ------------------------------------------------------------------------------------------------------
    Total...........................  ...........  ..............  ...........  ...........        489  ...........       14,733            0     14,733
--------------------------------------------------------------------------------------------------------------------------------------------------------

VI. Regulatory Impact Analysis

A. Statement of Need

    The state plan HCBS benefit is authorized under section 1915(i) of 
the Act. Section 1915(i) was created by the Deficit Reduction Act of 
2005 (DRA) and was amended by the Affordable Care Act of 2010. The 
resulting statute provides states with authority to establish state 
plan HCBS benefits in their Medicaid program.
    These regulations are necessary in order to include the state plan 
HCBS within the Code of Federal Regulations (CFR). Additionally, these 
regulations provide states with direction and clarity regarding the 
framework under which the programs can be established.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993) and 
Executive 13563 on Improving Regulation and Regulatory Review (January 
18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, 
Pub. L. 96-354), section 1102(b) of the Social Security Act, section 
202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. 
L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the 
Congressional Review Act (5 U.S.C. 804(2).
    Executive Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any one year). This final rule has been designated an ``economically 
significant'' rule under section 3(f)(1) of Executive Order 12866. 
Accordingly, the rule has been reviewed by the Office of Management and 
Budget.

C. Overall Impacts

    We estimate that, as a result of this final rule, the Medicaid cost 
impact for provisions under 1915(i) for fiscal year (FY) 2014 will be 
$150 million for the federal share and $115 million for the state 
share. The estimates are adjusted for a phase-in period during which 
states gradually elected to offer the state plan HCBS benefit. 
Furthermore, the estimated total annual collection of information 
requirements cost (including fringe benefits and overhead) to states is 
$21,805 (see section V. Collection of Information Requirements).
    Provisions in this rule pertaining to section 2601 of the 
Affordable Care Act: 5-Year Period for Demonstration Projects 
(Waivers), Provider Payment Reassignments, section 2401 of the 
Affordable Care Act: 1915(k) Community First Choice State Plan Option: 
Home and Community-Based Setting Requirements, and 1915(c) Home and 
Community-Based Services Waivers will not impact federal or state 
Medicaid funding. While States may incur costs in coming into 
compliance with these provisions in this rule, given the variability in 
State programs, and the varying extent to which some are already 
complying, it is difficult to estimate these costs.

D. Detailed Impacts

1. State Plan HCBS
    State Medicaid programs will make use of the optional flexibility 
afforded by the state plan HCBS benefit to provide needed long-term 
care HCBS to eligible individuals the state has not had means to serve 
previously, or to provide services to these individuals more 
efficiently and effectively. The state plan HCBS benefit will afford 
states a new means to comply with requirements of the Olmstead 
decision, to serve individuals in the most integrated setting.
    The cost of these services will be dependent upon the number of 
states electing to offer the benefit, the scope of the benefits states 
design, and the degree to which the benefits replace existing Medicaid 
services. States have more control over expenditures for this benefit 
than over other state plan services. For states that choose to offer 
these services, states may specify limits to the scope of HCBS, target 
the benefit to specific populations, and have the option to adjust 
needs-based criteria

[[Page 3026]]

requirements if costs escalate too rapidly.
    If states elect to include the new optional group, eligibility 
could be expanded because the group may include individuals who would 
not otherwise be eligible for Medicaid. However, costs of the state 
plan HCBS benefit may be offset by lowered potential federal and state 
costs of more expensive institutional care. Additionally, the 
requirement for a written person-centered service plan, and the 
provision of needed HCBS in accordance with the person-centered service 
plan, may discourage inappropriate utilization of costly services such 
as emergency room care for routine procedures, which may be beneficial 
to Medicare and Medicaid when individuals are eligible for both 
programs. If a state targets this benefit, only individuals who meet 
the targeting criteria would receive 1915(i) services and be eligible 
for the group, thus limiting Medicaid HCBS expansion.
    After considering these factors, we assumed that, if all states 
adopted this measure, program expenditures would increase by 1 percent 
of current HCBS expenditure projections. We further assumed that 
ultimately, states representing 50 percent of the eligible population 
would elect to offer this benefit, and that this ultimate level would 
be reached in FY 2014,. Based on these assumptions, the federal and 
state cost estimates are shown in Table 2.

             Table 2--Medicaid Cost Estimates Resulting From Changes to the State Plan HCBS Benefit
                                          [FYs 2014-2018, in $millions]
----------------------------------------------------------------------------------------------------------------
                                 FY 2014      FY 2015      FY 2016      FY 2017      FY 2018      FYs 2014-2018
----------------------------------------------------------------------------------------------------------------
Federal Share................         $150         $165         $185         $200         $225              $925
State Share..................          115          125          140          155          170               705
                              ----------------------------------------------------------------------------------
    Total....................          265          290          325          355          395             1,630
----------------------------------------------------------------------------------------------------------------

    The effect on Medicaid beneficiaries who receive the state plan 
HCBS benefit will be substantial and beneficial in States where 
optional 1915(i) state plan HCBS are included, as it will provide 
eligible individuals with the opportunity to receive needed long-term 
care services and supports in their homes and communities.
    The state plan HCBS benefit will afford business opportunities for 
providers of the HCBS. We do not anticipate any effects on other 
providers. Section 1915(i) of the Act delinks the HCBS from 
institutional LOC, and requires that eligibility criteria for the 
benefit include a threshold of need less than that for institutional 
LOC, so that it is unlikely that large numbers of participants in the 
state plan HCBS benefit will be discharged from the facilities of 
Medicaid institutional providers. There may be some redistribution of 
services among providers of existing non-institutional Medicaid 
services into State plan HCBS, but providers who meet qualifications 
for the state plan HCBS benefit have the option to enroll as providers 
of HCBS.
    This rule has no direct effect on the Medicare program; however, an 
indirect and beneficial effect may occur if individuals eligible for 
both Medicare and Medicaid are enrolled in a state plan HCBS benefit.

E. Alternatives Considered

    This final rule incorporates provisions of new section 1915(i) of 
the Act into federal regulations, providing for Medicaid coverage of a 
new optional state plan benefit to furnish home and community-based 
state plan services. The statute provides states with an option under 
which to draw federal matching funds; it does not impose any 
requirements or costs on existing state programs, on providers, or upon 
beneficiaries. States retain their authority to offer HCBS through the 
existing authority granted under section 1915(c) waivers and under 
section 1115 waivers. States can also continue to offer, and 
individuals can choose to receive, some but not all components of HCBS 
allowable under section 1915(i) through existing state plan services 
such as personal care or targeted case management services.
1. Not Publishing a Rule
    Section 1915(i) of the Act was effective January 1, 2007. States 
may propose state plan amendments (SPAs) to establish the state plan 
HCBS benefit with or without this final rule. We considered whether 
this statute could be self-implementing and require no regulation. 
Section 1915(i) of the Act is complex; many states have contacted us 
for technical assistance in the absence of published guidance, and some 
have indicated they are waiting to submit a state plan amendment until 
there is a rule. We further considered whether a State Medicaid 
Director letter would provide sufficient guidance regarding CMS review 
criteria for approval of an SPA. We concluded that section 1915(i) of 
the Act establishes significant new features in the Medicaid program, 
and that it was important to provide states and the public the 
published invitation for comment provided by the proposed rule. 
Finally, state legislation and judicial decisions are not alternatives 
to a federal rule in this case since section 1915(i) of the Act 
provides federally funded benefits.
2. Modification of Existing Rules
    We considered modifying existing regulations at Sec.  440.180, part 
441 subpart G, Home and Community-Based Services: Waiver Requirements, 
which implement the section 1915(c) HCBS waivers, to include the 
authority to offer the state plan HCBS benefit. This would have the 
advantage of not duplicating certain requirements common to both types 
of HCBS. However, we believe that any such efficiency would be 
outweighed by the substantial discussion that would be required of the 
differences between the Secretary's discretion to approve waivers under 
section 1915(c) of the Act, and authority to offer HCBS under the State 
plan at section 1915(i) of the Act. While Congress clearly considered 
the experience to date with HCBS under waivers when constructing 
section 1915(i) of the Act, it did not choose to modify section 1915(c) 
of the Act, but chose instead to create a new authority at section 
1915(i) of the Act.

F. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in the Table 3, we have 
prepared an accounting statement showing the classification of the 
transfers and other impacts associated with the provisions of this 
final rule. This table provides our best estimate of the increase in 
aggregate Medicaid outlays resulting from offering states the option to 
provide the state plan HCBS

[[Page 3027]]

benefit established in section 1915(i) of the Act.

Table 3--Accounting Statement: Classification of Estimated Transfers and
                  Other Impacts, From FYs 2014 to 2018
                            [In $millions] a
------------------------------------------------------------------------
 
------------------------------------------------------------------------
            Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers..  3% Units Discount   7% Units Discount
                                   Rate $183.5.        Rate $182.1
------------------------------------------------------------------------
From Whom To Whom?..............    Federal Government to Beneficiaries
                                         and/or State Governments b
------------------------------------------------------------------------
            Category                             Transfers
------------------------------------------------------------------------
Other Annualized Monetized        3% Units Discount   7% Units Discount
 Transfers.                        Rate $138.6.        Rate $137.5
------------------------------------------------------------------------
From Whom To Whom?..............  State Governments to Beneficiaries and/
                                           or State Governments b
------------------------------------------------------------------------
            Category                               Costs
------------------------------------------------------------------------
  Total Annual Collection of Information Requirements Cost to States is
                                 $0.02.
------------------------------------------------------------------------
a The potential benefits of this rule have not been quantified. If
  beneficiaries who newly use HCBS as a result of this rule are
  currently being institutionalized at states' expense, the rule would
  generate some combination of savings to states (equal to the cost
  difference between institutionalization and HCBS) and benefits to
  beneficiaries of being at home or in some other setting in the
  community, rather than an institution. Similarly, there would be
  benefits to beneficiaries who newly use HCBS if they are currently not
  receiving needed services.
b If the current status is that beneficiaries are paying for services
  alternative to HCBS themselves, then transfers are flowing from
  federal and state governments to beneficiaries. If beneficiaries are
  currently being institutionalized at states' expense, then transfers
  are from the federal government to state governments and possibly
  between pools of money within a state--from one pool with inflexible
  spending rules that require institutional care to another pool that
  allows for HCBS. Finally, to the extent that beneficiaries are
  currently not receiving needed services, then some portion of the
  impacts currently categorized as ``transfers'' would actually be
  societal costs.

G. Conclusion

    We anticipate that states will make widely varying use of the 
section 1915(i) state plan HCBS benefit to provide needed long-term 
care services for Medicaid beneficiaries. These services will be 
provided in the home or alternative living arrangements in the 
community, which is of benefit to the beneficiary and is less costly 
than institutional care. Requirements for independent evaluation and 
assessment, individualized care planning, and requirements for a 
quality improvement program will promote efficient and effective use of 
Medicaid expenditures for these services.

VII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 
96-354), as modified by the Small Business Regulatory Enforcement 
Fairness Act of 1996 (SBREFA) (Pub. L. 104-121), requires agencies to 
analyze options for regulatory relief of small entities, if a rule has 
a significant impact on a substantial number of small entities. 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 less than $7.0 million to 
$34.5 million in any 1 year. Medicaid providers are required, as a 
matter of course, to follow the guidelines and procedures as specified 
in state and federal laws and regulations. Furthermore, this final rule 
imposes no requirements or costs on providers or suppliers for their 
existing activities. The rule implements a new optional state plan 
benefit established in section 1915(i) of the Act. Small entities that 
meet provider qualifications and choose to provide HCBS under the state 
plan will have a business opportunity under this final rule. The 
Secretary has determined that this final rule will 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. This final rule does not 
offer a change in the administration of the provisions related to small 
rural hospitals. Therefore, the Secretary has determined that this 
final rule will not have a significant impact on the operations of a 
substantial number of small rural hospitals.

VIII. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995, Pub. L. 104-4) 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. In 2013, that threshold is approximately $141 million. This 
final rule does not mandate any spending by state, local, or tribal 
governments, in the aggregate, or by the private sector, of $141 
million.

IX. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
proposed rule (and subsequent final rule) that imposes substantial 
direct requirement costs on state and local governments, preempts state 
law, or otherwise has federalism implications. Since this regulation 
does not impose any costs on state or local governments, the 
requirements of E.O. 13132 are not applicable.

List of Subjects

42 CFR Part 430

    Administrative practice and procedure, Grant programs-health, 
Medicaid, Reporting and recordkeeping requirements.

[[Page 3028]]

42 CFR Part 431

    Grant programs-health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 435

    Aid to Families With Dependent Children, Grant programs-health, 
Medicaid, Reporting and recordkeeping requirements, Supplemental 
Security Income, Wages.

42 CFR Part 436

    Aid to Families With Dependent Children, Grant programs-health, 
Guam, Medicaid, Puerto Rico, Supplemental Security Income (SSI), Virgin 
Islands.

42 CFR Part 440

    Grant programs-health, Medicaid.

42 CFR Part 441

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

42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs-health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 430--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

0
1. The authority citation for part 430 continues to read as follows:

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


0
2. Section 430.25 is amended by revising paragraphs (h)(2) to read as 
follows:


Sec.  430.25  Waivers of State plan requirements.

* * * * *
    (h) * * *
    (2) Duration of waivers. (i) Home and community-based services 
under section 1915(c) of the Act.
    (A) The initial waiver is for a period of 3 years and may be 
renewed thereafter for periods of 5 years.
    (B) For waivers that include individuals who are dually eligible 
for Medicare and Medicaid, 5-year initial approval periods may be 
granted at the discretion of the Secretary for waivers meeting all 
necessary programmatic, financial and quality requirements, and in a 
manner consistent with the interests of beneficiaries and the 
objectives of the Medicaid program.
    (ii) Waivers under section 1915(b) of the Act.
    (A) The initial waiver is for a period of 2 years and may be 
renewed for additional periods of up to 2 years as determined by the 
Administrator.
    (B) For waivers that include individuals who are dually eligible 
for Medicare and Medicaid, 5-year initial and renewal approval periods 
may be granted at the discretion of the Secretary for waivers meeting 
all necessary programmatic, financial and quality requirements, and in 
a manner consistent with the interests of beneficiaries and the 
objectives of the Medicaid program.
    (iii) Waivers under section 1916 of the Act. The initial waiver is 
for a period of 2 years and may be renewed for additional periods of up 
to 2 years as determined by the Administrator.
* * * * *

PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION

0
3. The authority citation for part 431 continues to read as follows:

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


0
4. Section 431.54 is amended by adding new paragraphs (a)(3) and (h) to 
read as follows:


Sec.  431.54  Exceptions to certain State plan requirements .

    (a) * * *
    (3) Section 1915(i) of the Act provides that a State may provide, 
as medical assistance, home and community-based services under an 
approved State plan amendment that meets certain requirements, without 
regard to the requirements of sections 1902(a)(10)(B) and 
1902(a)(10)(C)(i)(III) of the Act, with respect to such services.
* * * * *
    (h) State plan home and community-based services. The requirements 
of Sec.  440.240 of this chapter related to comparability of services 
do not apply with respect to State plan home and community-based 
services defined in Sec.  440.182 of this chapter.

PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE 
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

0
5. The authority citation for part 435 continues to read as follows:

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


0
6. Section 435.219 is added to subpart C under the undesignated center 
heading ``Options for Coverage of Families and Children and the Aged, 
Blind, and Disabled'' to read as follows:


Sec.  435.219  Individuals receiving State plan home and community-
based services.

    If the agency provides State plan home and community-based services 
to individuals described in section 1915(i)(1), the agency, under its 
State plan, may, in addition, provide Medicaid to individuals in the 
community who are described in one or both of paragraphs (a) or (b) of 
this section.
    (a) Individuals who--
    (1) Are not otherwise eligible for Medicaid;
    (2) Have income that does not exceed 150 percent of the Federal 
poverty line (FPL);
    (3) Meet the needs-based criteria under Sec.  441.715 of this 
chapter; and
    (4) Will receive State plan home and community-based services as 
defined in Sec.  440.182 of this chapter.
    (b) Individuals who--
    (1) Would be determined eligible by the agency under an existing 
waiver or demonstration project under sections 1915(c), 1915(d), 
1915(e) or 1115 of the Act, but are not required to receive services 
under such waivers or demonstration projects;
    (2) Have income that does not exceed 300 percent of the 
Supplemental Security Income Federal Benefit Rate (SSI/FBR); and
    (3) Will receive State plan home and community-based services as 
defined in Sec.  440.182 of this chapter.
    (c) For purposes of determining eligibility under paragraph (a) of 
this section, the agency may not take into account an individual's 
resources and must use income standards that are reasonable, consistent 
with the objectives of the Medicaid program, simple to administer, and 
in the best interests of the beneficiary. Income methodologies may 
include use of existing income methodologies, such as the SSI program 
rules. However, subject to the Secretary's approval, the agency may use 
other income methodologies that meet the requirements of this 
paragraph.

PART 436--ELIGIBILITY IN GUAM, PUERTO RICO AND THE VIRGIN ISLANDS

0
7. The authority citation for part 436 continues to read as follows:

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


[[Page 3029]]



0
8. Section 436.219 is added to read as follows:


Sec.  436.219  Individuals receiving State plan home and community-
based services.

    If the agency provides State plan home and community-based services 
to individuals described in section 1915(i)(1) of the Act, the agency, 
under its State plan, may, in addition, provide Medicaid to of 
individuals in the community who are described in one or both of 
paragraphs (a) or (b) of this section.
    (a) Individuals who--
    (1) Are not otherwise eligible for Medicaid;
    (2) Have income that does not exceed 150 percent of the Federal 
poverty line (FPL);
    (3) Meet the needs-based criteria under Sec.  441.715 of this 
chapter; and
    (4) Will receive State plan home and community-based services as 
defined in Sec.  440.182 of this chapter.
    (b) Individuals who--
    (1) Would be determined eligible by the agency under an existing 
waiver or demonstration project under sections 1915(c), 1915(d), 
1915(e) or 1115 of the Act, but are not required to receive services 
under such waivers or demonstration projects;
    (2) Have income that does not exceed 300 percent of the 
Supplemental Security Income Federal Benefit Rate (SSI/FBR); and
    (3) Will receive State plan home and community-based services as 
defined in Sec.  440.182 of this chapter.
    (c) For purposes of determining eligibility under paragraph (a) of 
this section, the agency may not take into account an individual's 
resources and must use income standards that are reasonable, consistent 
with the objectives of the Medicaid program, simple to administer, and 
in the best interests of the beneficiary. Income methodologies may 
include use of existing income methodologies, such as the rules of the 
OAA, AB, APTD or AABD programs. However, subject to the Secretary's 
approval, the agency may use other income methodologies that meet the 
requirements of this paragraph.

PART 440--SERVICES: GENERAL PROVISIONS

0
9. The authority citation for part 440 continues to read as follows:

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

0
10. Section 440.1 is amended by adding the new statutory basis 1915(i) 
in sequential order to read as follows:


Sec.  440.1  Basis and purpose.

* * * * *
    1915(i) Home and community-based services furnished under a State 
plan to elderly and disabled individuals.

0
11. Section 440.180 is amended by revising the section heading to read 
as follows:


Sec.  440.180  Home and community-based waiver services.

* * * * *

0
12. Section 440.182 is added to read as follows:


Sec.  440.182  State plan home and community-based services.

    (a) Definition. State plan home and community-based services (HCBS) 
benefit means the services listed in paragraph (c) of this section when 
provided under the State's plan (rather than through an HCBS waiver 
program) for individuals described in paragraph (b) of this section.
    (b) State plan HCBS coverage. State plan HCBS can be made available 
to individuals who--
    (1) Are eligible under the State plan and have income, calculated 
using the otherwise applicable rules, including any less restrictive 
income disregards used by the State for that group under section 
1902(r)(2) of the Act, that does not exceed 150 percent of the Federal 
Poverty Line (FPL); and
    (2) In addition to the individuals described in paragraph (b)(1) of 
this section, to individuals based on the State's election of the 
eligibility groups described in Sec.  435.219(b) or Sec.  436.219(b) of 
this chapter.
    (c) Services. The State plan HCBS benefit consists of one or more 
of the following services:
    (1) Case management services.
    (2) Homemaker services.
    (3) Home health aide services.
    (4) Personal care services.
    (5) Adult day health services.
    (6) Habilitation services, which include expanded habilitation 
services as specified in Sec.  440.180(c).
    (7) Respite care services.
    (8) Subject to the conditions in Sec.  440.180(d)(2), for 
individuals with chronic mental illness:
    (i) Day treatment or other partial hospitalization services;
    (ii) Psychosocial rehabilitation services;
    (iii) Clinic services (whether or not furnished in a facility).
    (9) Other services requested by the agency and approved by the 
Secretary as consistent with the purpose of the benefit.
    (d) Exclusion. FFP is not available for the cost of room and board 
in State plan HCBS. The following HCBS costs are not considered room or 
board for purposes of this exclusion:
    (1) The cost of temporary food and shelter provided as an integral 
part of respite care services in a facility approved by the State.
    (2) Meals provided as an integral component of a program of adult 
day health services or another service and consistent with standard 
procedures in the State for such a program.
    (3) A portion of the rent and food costs that may be reasonably 
attributed to an unrelated caregiver providing State plan HCBS who is 
residing in the same household with the recipient, but not if the 
recipient is living in the home of the caregiver or in a residence that 
is owned or leased by the caregiver.

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

0
13. 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
14. Section 441.301 is amended by revising paragraphs (b)(1)(i) and 
(b)(6) and adding paragraph (c) to read as follows:


Sec.  441.301  Contents of request for a waiver.

* * * * *
    (b) * * *
    (1) * * *
    (i) Under a written person-centered service plan (also called plan 
of care) that is based on a person-centered approach and is subject to 
approval by the Medicaid agency.
* * * * *
    (6) Be limited to one or more of the following target groups or any 
subgroup thereof that the State may define:
    (i) Aged or disabled, or both.
    (ii) Individuals with Intellectual or Developmental Disabilities, 
or both.
    (iii) Mentally ill.
    (c) A waiver request under this subpart must include the 
following--
    (1) Person-Centered Planning Process. The individual will lead the 
person-centered planning process where possible. The individual's 
representative should have a participatory role, as needed and as 
defined by the individual, unless State law confers decision-making 
authority to the legal representative. All references to individuals 
include the role of the individual's representative. In addition to 
being led by the individual receiving services and supports, the 
person-centered planning process:

[[Page 3030]]

    (i) Includes people chosen by the individual.
    (ii) Provides necessary information and support to ensure that the 
individual directs the process to the maximum extent possible, and is 
enabled to make informed choices and decisions.
    (iii) Is timely and occurs at times and locations of convenience to 
the individual.
    (iv) Reflects cultural considerations of the individual and is 
conducted by providing information in plain language and in a manner 
that is accessible to individuals with disabilities and persons who are 
limited English proficient, consistent with Sec.  435.905(b) of this 
chapter.
    (v) Includes strategies for solving conflict or disagreement within 
the process, including clear conflict-of-interest guidelines for all 
planning participants.
    (vi) Providers of HCBS for the individual, or those who have an 
interest in or are employed by a provider of HCBS for the individual 
must not provide case management or develop the person-centered service 
plan, except when the State demonstrates that the only willing and 
qualified entity to provide case management and/or develop person-
centered service plans in a geographic area also provides HCBS. In 
these cases, the State must devise conflict of interest protections 
including separation of entity and provider functions within provider 
entities, which must be approved by CMS. Individuals must be provided 
with a clear and accessible alternative dispute resolution process.
    (vii) Offers informed choices to the individual regarding the 
services and supports they receive and from whom.
    (viii) Includes a method for the individual to request updates to 
the plan as needed.
    (ix) Records the alternative home and community-based settings that 
were considered by the individual.
    (2) The Person-Centered Service Plan. The person-centered service 
plan must reflect the services and supports that are important for the 
individual to meet the needs identified through an assessment of 
functional need, as well as what is important to the individual with 
regard to preferences for the delivery of such services and supports. 
Commensurate with the level of need of the individual, and the scope of 
services and supports available under the State's 1915(c) HCBS waiver, 
the written plan must:
    (i) Reflect that the setting in which the individual resides is 
chosen by the individual. The State must ensure that the setting chosen 
by the individual is integrated in, and supports full access of 
individuals receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources, and 
receive services in the community to the same degree of access as 
individuals not receiving Medicaid HCBS.
    (ii) Reflect the individual's strengths and preferences.
    (iii) Reflect clinical and support needs as identified through an 
assessment of functional need.
    (iv) Include individually identified goals and desired outcomes.
    (v) Reflect the services and supports (paid and unpaid) that will 
assist the individual to achieve identified goals, and the providers of 
those services and supports, including natural supports. Natural 
supports are unpaid supports that are provided voluntarily to the 
individual in lieu of 1915(c) HCBS waiver services and supports.
    (vi) Reflect risk factors and measures in place to minimize them, 
including individualized back-up plans and strategies when needed.
    (vii) Be understandable to the individual receiving services and 
supports, and the individuals important in supporting him or her. At a 
minimum, for the written plan to be understandable, it must be written 
in plain language and in a manner that is accessible to individuals 
with disabilities and persons who are limited English proficient, 
consistent with Sec.  435.905(b) of this chapter.
    (viii) Identify the individual and/or entity responsible for 
monitoring the plan.
    (ix) Be finalized and agreed to, with the informed consent of the 
individual in writing, and signed by all individuals and providers 
responsible for its implementation.
    (x) Be distributed to the individual and other people involved in 
the plan.
    (xi) Include those services, the purpose or control of which the 
individual elects to self-direct.
    (xii) Prevent the provision of unnecessary or inappropriate 
services and supports.
    (xiii) Document that any modification of the additional conditions, 
under paragraph (c)(4)(vi)(A) through (D) of this section, must be 
supported by a specific assessed need and justified in the person-
centered service plan. The following requirements must be documented in 
the person-centered service plan:
    (A) Identify a specific and individualized assessed need.
    (B) Document the positive interventions and supports used prior to 
any modifications to the person-centered service plan.
    (C) Document less intrusive methods of meeting the need that have 
been tried but did not work.
    (D) Include a clear description of the condition that is directly 
proportionate to the specific assessed need.
    (E) Include a regular collection and review of data to measure the 
ongoing effectiveness of the modification.
    (F) Include established time limits for periodic reviews to 
determine if the modification is still necessary or can be terminated.
    (G) Include informed consent of the individual.
    (H) Include an assurance that interventions and supports will cause 
no harm to the individual.
    (3) Review of the Person-Centered Service Plan. The person-centered 
service plan must be reviewed, and revised upon reassessment of 
functional need as required by Sec.  441.365(e), at least every 12 
months, when the individual's circumstances or needs change 
significantly, or at the request of the individual.
    (4) Home and Community-Based Settings. Home and community-based 
settings must have all of the following qualities, and such other 
qualities as the Secretary determines to be appropriate, based on the 
needs of the individual as indicated in their person-centered service 
plan:
    (i) The setting is integrated in and supports full access of 
individuals receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources, and 
receive services in the community, to the same degree of access as 
individuals not receiving Medicaid HCBS.
    (ii) The setting is selected by the individual from among setting 
options including non-disability specific settings and an option for a 
private unit in a residential setting. The setting options are 
identified and documented in the person-centered service plan and are 
based on the individual's needs, preferences, and, for residential 
settings, resources available for room and board.
    (iii) Ensures an individual's rights of privacy, dignity and 
respect, and freedom from coercion and restraint.
    (iv) Optimizes, but does not regiment, individual initiative, 
autonomy, and independence in making life choices, including but not 
limited to, daily activities, physical environment, and with whom to 
interact.

[[Page 3031]]

    (v) Facilitates individual choice regarding services and supports, 
and who provides them.
    (vi) In a provider-owned or controlled residential setting, in 
addition to the qualities at Sec.  441.301(c)(4)(i) through (v), the 
following additional conditions must be met:
    (A) The unit or dwelling is a specific physical place that can be 
owned, rented, or occupied under a legally enforceable agreement by the 
individual receiving services, and the individual has, at a minimum, 
the same responsibilities and protections from eviction that tenants 
have under the landlord/tenant law of the State, county, city, or other 
designated entity. For settings in which landlord tenant laws do not 
apply, the State must ensure that a lease, residency agreement or other 
form of written agreement will be in place for each HCBS participant, 
and that the document provides protections that address eviction 
processes and appeals comparable to those provided under the 
jurisdiction's landlord tenant law.
    (B) Each individual has privacy in their sleeping or living unit:
    (1) Units have entrance doors lockable by the individual, with only 
appropriate staff having keys to doors.
    (2) Individuals sharing units have a choice of roommates in that 
setting.
    (3) Individuals have the freedom to furnish and decorate their 
sleeping or living units within the lease or other agreement.
    (C) Individuals have the freedom and support to control their own 
schedules and activities, and have access to food at any time.
    (D) Individuals are able to have visitors of their choosing at any 
time.
    (E) The setting is physically accessible to the individual.
    (F) Any modification of the additional conditions, under Sec.  
441.301(c)(4)(vi)(A) through (D), must be supported by a specific 
assessed need and justified in the person-centered service plan. The 
following requirements must be documented in the person-centered 
service plan:
    (1) Identify a specific and individualized assessed need.
    (2) Document the positive interventions and supports used prior to 
any modifications to the person-centered service plan.
    (3) Document less intrusive methods of meeting the need that have 
been tried but did not work.
    (4) Include a clear description of the condition that is directly 
proportionate to the specific assessed need.
    (5) Include regular collection and review of data to measure the 
ongoing effectiveness of the modification.
    (6) Include established time limits for periodic reviews to 
determine if the modification is still necessary or can be terminated.
    (7) Include the informed consent of the individual.
    (8) Include an assurance that interventions and supports will cause 
no harm to the individual.
    (5) Settings that are not Home and Community-Based. Home and 
community-based settings do not include the following:
    (i) A nursing facility;
    (ii) An institution for mental diseases;
    (iii) An intermediate care facility for individuals with 
intellectual disabilities;
    (iv) A hospital; or
    (v) Any other locations that have qualities of an institutional 
setting, as determined by the Secretary. Any setting that is located in 
a building that is also a publicly or privately operated facility that 
provides inpatient institutional treatment, or in a building on the 
grounds of, or immediately adjacent to, a public institution, or any 
other setting that has the effect of isolating individuals receiving 
Medicaid HCBS from the broader community of individuals not receiving 
Medicaid HCBS will be presumed to be a setting that has the qualities 
of an institution unless the Secretary determines through heightened 
scrutiny, based on information presented by the State or other parties, 
that the setting does not have the qualities of an institution and that 
the setting does have the qualities of home and community-based 
settings.
    (6) Home and Community-Based Settings: Compliance and Transition:
    (i) States submitting new and initial waiver requests must provide 
assurances of compliance with the requirements of this section for home 
and community-based settings as of the effective date of the waiver.
    (ii) CMS will require transition plans for existing section 1915(c) 
waivers and approved state plans providing home and community-based 
services under section 1915(i) to achieve compliance with this section, 
as follows:
    (A) For each approved section 1915(c) HCBS waiver subject to 
renewal or submitted for amendment within one year after the effective 
date of this regulation, the State must submit a transition plan at the 
time of the waiver renewal or amendment request that sets forth the 
actions the State will take to bring the specific waiver into 
compliance with this section. The waiver approval will be contingent on 
the inclusion of the transition plan approved by CMS. The transition 
plan must include all elements required by the Secretary; and within 
one hundred and twenty days of the submission of the first waiver 
renewal or amendment request the State must submit a transition plan 
detailing how the State will operate all section 1915(c) HCBS waivers 
and any section 1915(i) State plan benefit in accordance with this 
section. The transition plan must include all elements including 
timelines and deliverables as approved by the Secretary.
    (B) For States that do not have a section 1915(c) HCBS waiver or a 
section 1915(i) State plan benefit due for renewal or proposed for 
amendments within one year of the effective date of this regulation, 
the State must submit a transition plan detailing how the State will 
operate all section 1915(c) HCBS waivers and any section 1915(i) State 
plan benefit in accordance with this section. This plan must be 
submitted no later than one year after the effective date of this 
regulation. The transition plan must include all elements including 
timelines and deliverables as approved by the Secretary.
    (iii) A State must provide at least a 30-day public notice and 
comment period regarding the transition plan(s) that the State intends 
to submit to CMS for review and consideration, as follows:
    (A) The State must at a minimum provide two (2) statements of 
public notice and public input procedures.
    (B) The State must ensure the full transition plan(s) is available 
to the public for public comment.
    (C) The State must consider and modify the transition plan, as the 
State deems appropriate, to account for public comment.
    (iv) A State must submit to CMS, with the proposed transition plan:
    (A) Evidence of the public notice required.
    (B) A summary of the comments received during the public notice 
period, reasons why comments were not adopted, and any modifications to 
the transition plan based upon those comments.
    (v) Upon approval by CMS, the State will begin implementation of 
the transition plans. The State's failure to submit an approvable 
transition plan as required by this section and/or to comply with the 
terms of the approved transition plan may result in compliance actions, 
including but not limited to deferral/disallowance of Federal Financial 
Participation.

0
15. Section 441.302 is amended by adding paragraphs (a)(4) and (a)(5) 
to read as follows:

[[Page 3032]]

Sec.  441.302  State assurances.

* * * * *
    (a) * * *
    (4) Assurance that the State is able to meet the unique service 
needs of the individuals when the State elects to serve more than one 
target group under a single waiver, as specified in Sec.  
441.301(b)(6).
    (i) On an annual basis the State will include in the quality 
section of the CMS-372 form (or any successor form designated by CMS) 
data that indicates the State continues to serve multiple target groups 
in the single waiver and that a single target group is not being 
prioritized to the detriment of other groups.
    (5) Assurance that services are provided in home and community 
based settings, as specified in Sec.  441.301(c)(4).

0
16. Section 441.304 is amended by--
0
A. Revising the section heading as set forth below.
0
B. Redesignating paragraph (d) as new paragraph (g).
0
C. Adding new paragraphs (d), (e), and (f).
0
D. Revising newly designated paragraph (g).
    The additions and revisions read as follows:


Sec.  441.304  Duration, extension, and amendment of a waiver.

* * * * *
    (d) The agency may request that waiver modifications be made 
effective retroactive to the first day of a waiver year, or another 
date after the first day of a waiver year, in which the amendment is 
submitted, unless the amendment involves substantive changes as 
determined by CMS.
    (1) Substantive changes include, but are not limited to, revisions 
to services available under the waiver including elimination or 
reduction of services, or reduction in the scope, amount, and duration 
of any service, a change in the qualifications of service providers, 
changes in rate methodology or a constriction in the eligible 
population.
    (2) A request for an amendment that involves a substantive change 
as determined by CMS, may only take effect on or after the date when 
the amendment is approved by CMS, and must be accompanied by 
information on how the State has assured smooth transitions and minimal 
effect on individuals adversely impacted by the change.
    (e) The agency must provide public notice of any significant 
proposed change in its methods and standards for setting payment rates 
for services in accordance with Sec.  447.205 of this chapter.
    (f) The agency must establish and use a public input process, for 
any changes in the services or operations of the waiver.
    (1) This process must be described fully in the State's waiver 
application and be sufficient in light of the scope of the changes 
proposed, to ensure meaningful opportunities for input for individuals 
served, or eligible to be served, in the waiver.
    (2) This process must be completed at a minimum of 30 days prior to 
implementation of the proposed change or submission of the proposed 
change to CMS, whichever comes first.
    (3) This process must be used for both existing waivers that have 
substantive changes proposed, either through the renewal or the 
amendment process, and new waivers.
    (4) This process must include consultation with Federally-
recognized Tribes, and in accordance with section 5006(e) of the 
American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5), Indian 
health programs and Urban Indian Organizations.
    (g)(1) If CMS finds that the Medicaid agency is not meeting one or 
more of the requirements for a waiver contained in this subpart, the 
agency is given a notice of CMS' findings and an opportunity for a 
hearing to rebut the findings.
    (2) If CMS determines that the agency is substantively out of 
compliance with this subpart after the notice and any hearing, CMS may 
employ strategies to ensure compliance as described in paragraph (g)(3) 
of this section or terminate the waiver.
    (3)(i) Strategies to ensure compliance may include the imposition 
of a moratorium on waiver enrollments, other corrective strategies as 
appropriate to ensure the health and welfare of waiver participants, or 
the withholding of a portion of Federal payment for waiver services 
until such time that compliance is achieved, or other actions as 
determined by the Secretary as necessary to address non-compliance with 
1915(c) of the Act, or termination. When a waiver is terminated, the 
State must comport with Sec.  441.307.
    (ii) CMS will provide states with a written notice of the impending 
strategies to ensure compliance for a waiver program. The notice of 
CMS' intent to utilize strategies to ensure compliance would include 
the nature of the noncompliance, the strategy to be employed, the 
effective date of the compliance strategy, the criteria for removing 
the compliance strategy and the opportunity for a hearing.

0
17. Section 441.530 is added to read as follows:


Sec.  441.530  Home and Community-Based Setting.

    (a) States must make available attendant services and supports in a 
home and community-based setting consistent with both paragraphs (a)(1) 
and (a)(2) of this section.
    (1) Home and community-based settings must have all of the 
following qualities, and such other qualities as the Secretary 
determines to be appropriate, based on the needs of the individual as 
indicated in their person-centered service plan:
    (i) The setting is integrated in and supports full access of 
individuals receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources, and 
receive services in the community, to the same degree of access as 
individuals not receiving Medicaid HCBS.
    (ii) The setting is selected by the individual from among setting 
options, including non-disability specific settings and an option for a 
private unit in a residential setting. The setting options are 
identified and documented in the person-centered service plan and are 
based on the individual's needs, preferences, and, for residential 
settings, resources available for room and board.
    (iii) Ensures an individual's rights of privacy, dignity and 
respect, and freedom from coercion and restraint.
    (iv) Optimizes but does not regiment individual initiative, 
autonomy, and independence in making life choices, including but not 
limited to, daily activities, physical environment, and with whom to 
interact.
    (v) Facilitates individual choice regarding services and supports, 
and who provides them.
    (vi) In a provider-owned or controlled residential setting, in 
addition to the above qualities at paragraphs (a)(1)(i) through (v) of 
this section, the following additional conditions must be met:
    (A) The unit or dwelling is a specific physical place that can be 
owned, rented or occupied under a legally enforceable agreement by the 
individual receiving services, and the individual has, at a minimum, 
the same responsibilities and protections from eviction that tenants 
have under the landlord tenant law of the State, county, city or other 
designated entity. For settings in which landlord tenant laws do not 
apply, the State must ensure that a lease, residency agreement or other 
form of written agreement will be in

[[Page 3033]]

place for each participant and that the document provides protections 
that address eviction processes and appeals comparable to those 
provided under the jurisdiction's landlord tenant law.
    (B) Each individual has privacy in their sleeping or living unit:
    (1) Units have entrance doors lockable by the individual, with only 
appropriate staff having keys to doors as needed.
    (2) Individuals sharing units have a choice of roommates in that 
setting.
    (3) Individuals have the freedom to furnish and decorate their 
sleeping or living units within the lease or other agreement.
    (C) Individuals have the freedom and support to control their own 
schedules and activities, and have access to food at any time.
    (D) Individuals are able to have visitors of their choosing at any 
time.
    (E) The setting is physically accessible to the individual.
    (F) Any modification of the additional conditions, under paragraphs 
(a)(1)(vi)(A) through (D) of this section, must be supported by a 
specific assessed need and justified in the person-centered service 
plan. The following requirements must be documented in the person-
centered service plan:
    (1) Identify a specific and individualized assessed need.
    (2) Document the positive interventions and supports used prior to 
any modifications to the person-centered service plan.
    (3) Document less intrusive methods of meeting the need that have 
been tried but did not work.
    (4) Include a clear description of the condition that is directly 
proportionate to the specific assessed need.
    (5) Include regulation collection and review of data to measure the 
ongoing effectiveness of the modification.
    (6) Include established time limits for periodic reviews to 
determine if the modification is still necessary or can be terminated.
    (7) Include the informed consent of the individual.
    (8) Include an assurance that interventions and supports will cause 
no harm to the individual.
    (2) Home and community-based settings do not include the following:
    (i) A nursing facility;
    (ii) An institution for mental diseases;
    (iii) An intermediate care facility for individuals with 
intellectual disabilities;
    (iv) A hospital providing long-term care services; or
    (v) Any other locations that have qualities of an institutional 
setting, as determined by the Secretary. Any setting that is located in 
a building that is also a publicly or privately operated facility that 
provides inpatient institutional treatment, or in a building on the 
grounds of, or immediately adjacent to, a public institution, or any 
other setting that has the effect of isolating individuals receiving 
Medicaid HCBS from the broader community of individuals not receiving 
Medicaid HCBS will be presumed to be a setting that has the qualities 
of an institution unless the Secretary determines through heightened 
scrutiny, based on information presented by the State or other parties, 
that the setting does not have the qualities of an institution and that 
the setting does have the qualities of home and community-based 
settings.
    (b) [Reserved]

0
18. A new subpart M, consisting of Sec.  441.700 through Sec.  441.745, 
is added to part 441 to read as follows:
Subpart M--State Plan Home and Community-Based Services for Elderly and 
Disabled Individuals
Sec.
441.700 Basis and purpose.
441.705 State plan requirements.
441.710 State plan home and community-based services under section 
1915(i)(1) of the Act.
441.715 Needs-based criteria and evaluation.
441.720 Independent assessment.
441.725 Person-centered service plan.
441.730 Provider qualifications.
441.735 Definition of individual's representative.
441.740 Self-directed services.
441.745 State plan HCBS administration: State responsibilities and 
quality improvement.

Subpart M--State Plan Home and Community-Based Services for the 
Elderly and Individuals with Disabilities


Sec.  441.700  Basis and purpose.

    Section 1915(i) of the Act permits States to offer one or more home 
and community-based services (HCBS) under their State Medicaid plans to 
qualified individuals with disabilities or individuals who are elderly. 
Those services are listed in Sec.  440.182 of this chapter, and are 
described by the State, including any limitations of the services. This 
optional benefit is known as the State plan HCBS benefit. This subpart 
describes what a State Medicaid plan must provide when the State elects 
to include the optional benefit, and defines State responsibilities.


Sec.  441.705  State plan requirements.

    A State plan that provides section 1915(i) of the Act State plan 
home and community-based services must meet the requirements of this 
subpart.


Sec.  441.710  State plan home and community-based services under 
section 1915(i)(1) of the Act.

    (a) Home and Community-Based Setting. States must make State plan 
HCBS available in a home and community-based setting consistent with 
both paragraphs (a)(1) and (a)(2) of this section.
    (1) Home and community-based settings must have all of the 
following qualities, and such other qualities as the Secretary 
determines to be appropriate, based on the needs of the individual as 
indicated in their person-centered service plan:
    (i) The setting is integrated in and supports full access of 
individuals receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources, and 
receive services in the community, to the same degree of access as 
individuals not receiving Medicaid HCBS.
    (ii) The setting is selected by the individual from among setting 
options, including non-disability specific settings and an option for a 
private unit in a residential setting. The setting options are 
identified and documented in the person-centered service plan and are 
based on the individual's needs, preferences, and, for residential 
settings, resources available for room and board.
    (iii) Ensures an individual's rights of privacy, dignity and 
respect, and freedom from coercion and restraint.
    (iv) Optimizes, but does not regiment, individual initiative, 
autonomy, and independence in making life choices, including but not 
limited to, daily activities, physical environment, and with whom to 
interact.
    (v) Facilitates individual choice regarding services and supports, 
and who provides them.
    (vi) In a provider-owned or controlled residential setting, in 
addition to the above qualities at paragraphs (a)(1)(i) through (v) of 
this section, the following additional conditions must be met:
    (A) The unit or dwelling is a specific physical place that can be 
owned, rented, or occupied under a legally enforceable agreement by the 
individual receiving services, and the individual has, at a minimum, 
the same responsibilities and protections from eviction that tenants 
have under the landlord/tenant law of the state, county, city, or other 
designated entity. For settings in which landlord tenant laws do not 
apply, the State must ensure that

[[Page 3034]]

a lease, residency agreement or other form of written agreement will be 
in place for each HCBS participant and that the document provides 
protections that address eviction processes and appeals comparable to 
those provided under the jurisdiction's landlord tenant law;
    (B) Each individual has privacy in their sleeping or living unit:
    (1) Units have entrance doors lockable by the individual, with only 
appropriate staff having keys to doors;
    (2) Individuals sharing units have a choice of roommates in that 
setting; and
    (3) Individuals have the freedom to furnish and decorate their 
sleeping or living units within the lease or other agreement.
    (C) Individuals have the freedom and support to control their own 
schedules and activities, and have access to food at any time;
    (D) Individuals are able to have visitors of their choosing at any 
time;
    (E) The setting is physically accessible to the individual; and
    (F) Any modification of the additional conditions, under paragraphs 
(a)(1)(vi)(A) through (D) of this section, must be supported by a 
specific assessed need and justified in the person-centered service 
plan. The following requirements must be documented in the person-
centered service plan:
    (1) Identify a specific and individualized assessed need.
    (2) Document the positive interventions and supports used prior to 
any modifications to the person-centered service plan.
    (3) Document less intrusive methods of meeting the need that have 
been tried but did not work.
    (4) Include a clear description of the condition that is directly 
proportionate to the specific assessed need.
    (5) Include regular collection and review of data to measure the 
ongoing effectiveness of the modification.
    (6) Include established time limits for periodic reviews to 
determine if the modification is still necessary or can be terminated.
    (7) Include the informed consent of the individual.
    (8) Include an assurance that interventions and supports will cause 
no harm to the individual.
    (2) Home and community-based settings do not include the following:
    (i) A nursing facility.
    (ii) An institution for mental diseases.
    (iii) An intermediate care facility for individuals with 
intellectual disabilities.
    (iv) A hospital.
    (v) Any other locations that have qualities of an institutional 
setting, as determined by the Secretary. Any setting that is located in 
a building that is also a publicly or privately operated facility that 
provides inpatient institutional treatment, or in a building on the 
grounds of, or immediately adjacent to, a public institution, or any 
other setting that has the effect of isolating individuals receiving 
Medicaid HCBS from the broader community of individuals not receiving 
Medicaid HCBS will be presumed to be a setting that has the qualities 
of an institution unless the Secretary determines through heightened 
scrutiny, based on information presented by the State or other parties, 
that the setting does not have the qualities of an institution and that 
the setting does have the qualities of home and community-based 
settings.
    (3) Compliance and transition:
    (i) States submitting state plan amendments for new section 1915(i) 
of the Act benefits must provide assurances of compliance with the 
requirements of this section for home and community-based settings as 
of the effective date of the state plan amendment;
    (ii) CMS will require transition plans for existing section 1915(c) 
waivers and approved state plans providing home and community-based 
services under section 1915(i) to achieve compliance with this section, 
as follows:
    (A) For each approved section 1915(i) of the Act benefit subject to 
renewal or submitted for amendment within one year after the effective 
date of this regulation, the State must submit a transition plan at the 
time of the renewal or amendment request that sets forth the actions 
the State will take to bring the specific 1915(i) State plan benefit 
into compliance with this section. The approval will be contingent on 
the inclusion of the transition plan approved by CMS. The transition 
plan must include all elements required by the Secretary; and within 
one hundred and twenty days of the submission of the first renewal or 
amendment request the State must submit a transition plan detailing how 
the State will operate all section 1915(c) HCBS waivers and any section 
1915(i) State plan benefit in accordance with this section. The 
transition plan must include all elements including timelines and 
deliverables as approved by the Secretary.
    (B) For States that do not have a section 1915(c) waiver or a 
section 1915(i) State plan benefit due for renewal or proposed for 
amendments within one year of the effective date of this regulation, 
the State must submit a transition plan detailing how the State will 
operate all section 1915(c) waivers and any section 1915(i) State plan 
benefit in accordance with this section. This plan must be submitted no 
later than one year after the effective date of this regulation. The 
transition plan must include all elements including timelines and 
deliverables as approved by the Secretary.
    (iii) A State must provide at least a 30-day public notice and 
comment period regarding the transition plan(s) that the State intends 
to submit to CMS for review and consideration, as follows:
    (A) The State must at a minimum provide two (2) statements of 
public notice and public input procedures.
    (B) The State must ensure the full transition plan(s) is available 
to the public for public comment.
    (C) The State must consider and modify the transition plan, as the 
State deems appropriate, to account for public comment.
    (iv) A State must submit to CMS, with the proposed transition plan:
    (A) Evidence of the public notice required.
    (B) A summary of the comments received during the public notice 
period, reasons why comments were not adopted, and any modifications to 
the transition plan based upon those comments.
    (v) Upon approval by CMS, the State will begin implementation of 
the transition plans. The State's failure to submit an approvable 
transition plan as required by this section and/or to comply with the 
terms of the approved transition plan may result in compliance actions, 
including but not limited to deferral/disallowance of Federal Financial 
Participation.
    (b) Needs-Based Eligibility Requirement. Meet needs-based criteria 
for eligibility for the State plan HCBS benefit, as required in Sec.  
441.715(a).
    (c) Minimum State plan HCBS Requirement. Be assessed to require at 
least one section 1915(i) home and community-based service at a 
frequency determined by the State, as required in Sec.  441.720(a)(5).
    (d) Target Population. Meet any applicable targeting criteria 
defined by the State under the authority of paragraph (e)(2) of this 
section.
    (e) Nonapplication. The State may elect in the State plan amendment 
approved under this subpart not to apply the following requirements 
when determining eligibility:
    (1) Section 1902(a)(10)(C)(i)(III) of the Act, pertaining to income 
and resource eligibility rules for the medically needy living in the 
community, but only for the purposes of providing State plan HCBS.

[[Page 3035]]

    (2) Section 1902(a)(10)(B) of the Act, pertaining to comparability 
of Medicaid services, but only for the purposes of providing section 
1915(i) State plan HCBS. In the event that a State elects not to apply 
comparability requirements:
    (i) The State must describe the group(s) receiving State plan HCBS, 
subject to the Secretary's approval. Targeting criteria cannot have the 
impact of limiting the pool of qualified providers from which an 
individual would receive services, or have the impact of requiring an 
individual to receive services from the same entity from which they 
purchase their housing. These groups must be defined on the basis of 
any combination of the following:
    (A) Age.
    (B) Diagnosis.
    (C) Disability.
    (D) Medicaid Eligibility Group.
    (ii) The State may elect in the State plan amendment to limit the 
availability of specific services defined under the authority of Sec.  
440.182(c) of this chapter or to vary the amount, duration, or scope of 
those services, to one or more of the group(s) described in this 
paragraph.


Sec.  441.715  Needs-based criteria and evaluation.

    (a) Needs-based criteria. The State must establish needs-based 
criteria for determining an individual's eligibility under the State 
plan for the HCBS benefit, and may establish needs-based criteria for 
each specific service. Needs-based criteria are factors used to 
determine an individual's requirements for support, and may include 
risk factors. The criteria are not characteristics that describe the 
individual or the individual's condition. A diagnosis is not a 
sufficient factor on which to base a determination of need. A criterion 
can be considered needs-based if it is a factor that can only be 
ascertained for a given person through an individualized evaluation of 
need.
    (b) More stringent institutional and waiver needs-based criteria. 
The State plan HCBS benefit is available only if the State has in 
effect needs-based criteria (as defined in paragraph (a) of this 
section), for receipt of services in nursing facilities as defined in 
section 1919(a) of the Act, intermediate care facilities for 
individuals with intellectual disabilities as defined in Sec.  440.150 
of this chapter, and hospitals as defined in Sec.  440.10 of this 
chapter for which the State has established long-term level of care 
(LOC) criteria, or waivers offering HCBS, and these needs-based 
criteria are more stringent than the needs-based criteria for the State 
plan HCBS benefit. If the State defines needs-based criteria for 
individual State plan home and community-based services, it may not 
have the effect of limiting who can benefit from the State plan HCBS in 
an unreasonable way, as determined by the Secretary.
    (1) These more stringent criteria must meet the following 
requirements:
    (i) Be included in the LOC determination process for each 
institutional service and waiver.
    (ii) Be submitted for inspection by CMS with the State plan 
amendment that establishes the State Plan HCBS benefit.
    (iii) Be in effect on or before the effective date of the State 
plan HCBS benefit.
    (2) In the event that the State modifies institutional LOC criteria 
to meet the requirements under paragraph (b) or (c)(6) of this section 
that such criteria be more stringent than the State plan HCBS needs-
based eligibility criteria, States may continue to receive FFP for 
individuals receiving institutional services or waiver HCBS under the 
LOC criteria previously in effect.
    (c) Adjustment authority. The State may modify the needs-based 
criteria established under paragraph (a) of this section, without prior 
approval from the Secretary, if the number of individuals enrolled in 
the State plan HCBS benefit exceeds the projected number submitted 
annually to CMS. The Secretary may approve a retroactive effective date 
for the State plan amendment modifying the criteria, as early as the 
day following the notification period required under paragraph (c)(1) 
of this section, if all of the following conditions are met:
    (1) The State provides at least 60 days notice of the proposed 
modification to the Secretary, the public, and each individual enrolled 
in the State plan HCBS benefit.
    (2) The State notice to the Secretary is submitted as an amendment 
to the State plan.
    (3) The adjusted needs-based eligibility criteria for the State 
plan HCBS benefit are less stringent than needs-based institutional and 
waiver LOC criteria in effect after the adjustment.
    (4) Individuals who were found eligible for the State plan HCBS 
benefit before modification of the needs-based criteria under this 
adjustment authority must remain eligible for the HCBS benefit until 
such time as:
    (i) The individual no longer meets the needs-based criteria used 
for the initial determination of eligibility; or
    (ii) The individual is no longer eligible for or enrolled in 
Medicaid or the HCBS benefit.
    (5) Any changes in service due to the modification of needs-based 
criteria under this adjustment authority are treated as actions as 
defined in Sec.  431.201 of this chapter and are subject to the 
requirements of part 431, subpart E of this chapter.
    (6) In the event that the State also needs to modify institutional 
level of care criteria to meet the requirements under paragraph (b) of 
this section that such criteria be more stringent than the State plan 
HCBS needs-based eligibility criteria, the State may adjust the 
modified institutional LOC criteria under this adjustment authority. 
The adjusted institutional LOC criteria must be at least as stringent 
as those in effect before they were modified to meet the requirements 
in paragraph (b) of this section.
    (d) Independent evaluation and determination of eligibility. 
Eligibility for the State plan HCBS benefit must be determined through 
an independent evaluation of each individual according to the 
requirements of this subpart. The independent evaluation complies with 
the following requirements:
    (1) Is performed by an agent that is independent and qualified as 
defined in Sec.  441.730.
    (2) Applies the needs-based eligibility criteria that the State has 
established under paragraph (a) of this section, and the general 
eligibility requirements under Sec.  435.219 and Sec.  436.219 of this 
chapter.
    (3) Includes consultation with the individual, and if applicable, 
the individual's representative as defined under Sec.  441.735.
    (4) Assesses the individual's support needs.
    (5) Uses only current and accurate information from existing 
records, and obtains any additional information necessary to draw valid 
conclusions about the individual's support needs.
    (6) Evaluations finding that an individual is not eligible for the 
State plan HCBS benefit are treated as actions defined in Sec.  431.201 
of this chapter and are subject to the requirements of part 431 subpart 
E of this chapter.
    (e) Periodic redetermination. Independent reevaluations of each 
individual receiving the State plan HCBS benefit must be performed at 
least every 12 months, to determine whether the individual continues to 
meet eligibility requirements. Redeterminations must meet the 
requirements of paragraph (d) of this section.

[[Page 3036]]

Sec.  441.720  Independent assessment.

    (a) Requirements. For each individual determined to be eligible for 
the State plan HCBS benefit, the State must provide for an independent 
assessment of needs, which may include the results of a standardized 
functional needs assessment, in order to establish a service plan. In 
applying the requirements of section 1915(i)(1)(F) of the Act, the 
State must:
    (1) Perform a face-to-face assessment of the individual by an agent 
who is independent and qualified as defined in Sec.  441.730, and with 
a person-centered process that meets the requirements of Sec.  
441.725(a) and is guided by best practice and research on effective 
strategies that result in improved health and quality of life outcomes.
    (i) For the purposes of this section, a face-to-face assessment may 
include assessments performed by telemedicine, or other information 
technology medium, if the following conditions are met:
    (A) The agent performing the assessment is independent and 
qualified as defined in Sec.  441.730 and meets the provider 
qualifications defined by the State, including any additional 
qualifications or training requirements for the operation of required 
information technology.
    (B) The individual receives appropriate support during the 
assessment, including the use of any necessary on-site support-staff.
    (C) The individual provides informed consent for this type of 
assessment.
    (ii) [Reserved]
    (2) Conduct the assessment in consultation with the individual, and 
if applicable, the individual's authorized representative, and include 
the opportunity for the individual to identify other persons to be 
consulted, such as, but not limited to, the individual's spouse, 
family, guardian, and treating and consulting health and support 
professionals responsible for the individual's care.
    (3) Examine the individual's relevant history including the 
findings from the independent evaluation of eligibility, medical 
records, an objective evaluation of functional ability, and any other 
records or information needed to develop the person-centered service 
plan as required in Sec.  441.725.
    (4) Include in the assessment the individual's physical, cognitive, 
and behavioral health care and support needs, strengths and 
preferences, available service and housing options, and if unpaid 
caregivers will be relied upon to implement any elements of the person-
centered service plan, a caregiver assessment.
    (5) For each service, apply the State's additional needs-based 
criteria (if any) that the individual may require. Individuals are 
considered enrolled in the State plan HCBS benefit only if they meet 
the eligibility and needs-based criteria for the benefit, and are also 
assessed to require and receive at least one home and community-based 
service offered under the State plan for medical assistance.
    (6) Include in the assessment, if the State offers individuals the 
option to self-direct a State plan home and community-based service or 
services, any information needed for the self-directed portion of the 
service plan, as required in Sec.  441.740(b), including the ability of 
the individual (with and without supports) to exercise budget or 
employer authority.
    (7) Include in the assessment, for individuals receiving 
habilitation services, documentation that no Medicaid services are 
provided which would otherwise be available to the individual, 
specifically including but not limited to services available to the 
individual through a program funded under section 110 of the 
Rehabilitation Act of 1973, or the Individuals with Disabilities 
Education Improvement Act of 2004.
    (8) Include in the assessment and subsequent service plan, for 
individuals receiving Secretary approved services under the authority 
of Sec.  440.182 of this chapter, documentation that no State plan HCBS 
are provided which would otherwise be available to the individual 
through other Medicaid services or other Federally funded programs.
    (9) Include in the assessment and subsequent service plan, for 
individuals receiving HCBS through a waiver approved under Sec.  
441.300, documentation that HCBS provided through the State plan and 
waiver are not duplicative.
    (10) Coordinate the assessment and subsequent service plan with any 
other assessment or service plan required for services through a waiver 
authorized under section 1115 or section 1915 of the Social Security 
Act.
    (b) Reassessments. The independent assessment of need must be 
conducted at least every 12 months and as needed when the individual's 
support needs or circumstances change significantly, in order to revise 
the service plan.


Sec.  441.725  Person-centered service plan.

    (a) Person-centered planning process. Based on the independent 
assessment required in Sec.  441.720, the State must develop (or 
approve, if the plan is developed by others) a written service plan 
jointly with the individual (including, for purposes of this paragraph, 
the individual and the individual's authorized representative if 
applicable). The person-centered planning process is driven by the 
individual. The process:
    (1) Includes people chosen by the individual.
    (2) Provides necessary information and support to ensure that the 
individual directs the process to the maximum extent possible, and is 
enabled to make informed choices and decisions.
    (3) Is timely and occurs at times and locations of convenience to 
the individual.
    (4) Reflects cultural considerations of the individual and is 
conducted by providing information in plain language and in a manner 
that is accessible to individuals with disabilities and persons who are 
limited English proficient, consistent with Sec.  435.905(b) of this 
chapter.
    (5) Includes strategies for solving conflict or disagreement within 
the process, including clear conflict of interest guidelines for all 
planning participants.
    (6) Offers choices to the individual regarding the services and 
supports the individual receives and from whom.
    (7) Includes a method for the individual to request updates to the 
plan, as needed.
    (8) Records the alternative home and community-based settings that 
were considered by the individual.
    (b) The person-centered service plan. The person-centered service 
plan must reflect the services and supports that are important for the 
individual to meet the needs identified through an assessment of 
functional need, as well as what is important to the individual with 
regard to preferences for the delivery of such services and supports. 
Commensurate with the level of need of the individual, and the scope of 
services and supports available under the State plan HCBS benefit, the 
written plan must:
    (1) Reflect that the setting in which the individual resides is 
chosen by the individual. The State must ensure that the setting chosen 
by the individual is integrated in, and supports full access of 
individuals receiving Medicaid HCBS to the greater community, including 
opportunities to seek employment and work in competitive integrated 
settings, engage in community life, control personal resources, and 
receive services in the community to the same degree of access as 
individuals not receiving Medicaid HCBS.
    (2) Reflect the individual's strengths and preferences.

[[Page 3037]]

    (3) Reflect clinical and support needs as identified through an 
assessment of functional need.
    (4) Include individually identified goals and desired outcomes.
    (5) Reflect the services and supports (paid and unpaid) that will 
assist the individual to achieve identified goals, and the providers of 
those services and supports, including natural supports. Natural 
supports are unpaid supports that are provided voluntarily to the 
individual in lieu of State plan HCBS.
    (6) Reflect risk factors and measures in place to minimize them, 
including individualized backup plans and strategies when needed.
    (7) Be understandable to the individual receiving services and 
supports, and the individuals important in supporting him or her. At a 
minimum, for the written plan to be understandable, it must be written 
in plain language and in a manner that is accessible to individuals 
with disabilities and persons who are limited English proficient, 
consistent with Sec.  435.905(b) of this chapter.
    (8) Identify the individual and/or entity responsible for 
monitoring the plan.
    (9) Be finalized and agreed to, with the informed consent of the 
individual in writing, and signed by all individuals and providers 
responsible for its implementation.
    (10) Be distributed to the individual and other people involved in 
the plan.
    (11) Include those services, the purchase or control of which the 
individual elects to self-direct, meeting the requirements of Sec.  
441.740.
    (12) Prevent the provision of unnecessary or inappropriate services 
and supports.
    (13) Document that any modification of the additional conditions, 
under Sec.  441.710(a)(1)(vi)(A) through (D) of this chapter, must be 
supported by a specific assessed need and justified in the person-
centered service plan. The following requirements must be documented in 
the person-centered service plan:
    (i) Identify a specific and individualized assessed need.
    (ii) Document the positive interventions and supports used prior to 
any modifications to the person-centered service plan.
    (iii) Document less intrusive methods of meeting the need that have 
been tried but did not work.
    (iv) Include a clear description of the condition that is directly 
proportionate to the specific assessed need.
    (v) Include a regular collection and review of data to measure the 
ongoing effectiveness of the modification.
    (vi) Include established time limits for periodic reviews to 
determine if the modification is still necessary or can be terminated.
    (vii) Include informed consent of the individual; and
    (viii) Include an assurance that the interventions and supports 
will cause no harm to the individual.
    (c) Reviewing the person-centered service plan. The person-centered 
service plan must be reviewed, and revised upon reassessment of 
functional need as required in Sec.  441.720, at least every 12 months, 
when the individual's circumstances or needs change significantly, and 
at the request of the individual.


Sec.  441.730  Provider qualifications.

    (a) Requirements. The State must provide assurances that necessary 
safeguards have been taken to protect the health and welfare of 
enrollees in State plan HCBS, and must define in writing standards for 
providers (both agencies and individuals) of HCBS and for agents 
conducting individualized independent evaluation, independent 
assessment, and service plan development.
    (b) Conflict of interest standards. The State must define conflict 
of interest standards that ensure the independence of individual and 
agency agents who conduct (whether as a service or an administrative 
activity) the independent evaluation of eligibility for State plan 
HCBS, who are responsible for the independent assessment of need for 
HCBS, or who are responsible for the development of the service plan. 
The conflict of interest standards apply to all individuals and 
entities, public or private. At a minimum, these agents must not be any 
of the following:
    (1) Related by blood or marriage to the individual, or to any paid 
caregiver of the individual.
    (2) Financially responsible for the individual.
    (3) Empowered to make financial or health-related decisions on 
behalf of the individual.
    (4) Holding financial interest, as defined in Sec.  411.354 of this 
chapter, in any entity that is paid to provide care for the individual.
    (5) Providers of State plan HCBS for the individual, or those who 
have an interest in or are employed by a provider of State plan HCBS 
for the individual, except when the State demonstrates that the only 
willing and qualified agent to perform independent assessments and 
develop person-centered service plans in a geographic area also 
provides HCBS, and the State devises conflict of interest protections 
including separation of agent and provider functions within provider 
entities, which are described in the State plan for medical assistance 
and approved by the Secretary, and individuals are provided with a 
clear and accessible alternative dispute resolution process.
    (c) Training. Qualifications for agents performing independent 
assessments and plans of care must include training in assessment of 
individuals whose physical, cognitive, or mental conditions trigger a 
potential need for home and community-based services and supports, and 
current knowledge of available resources, service options, providers, 
and best practices to improve health and quality of life outcomes.


Sec.  441.735  Definition of individual's representative.

    In this subpart, the term individual's representative means, with 
respect to an individual being evaluated for, assessed regarding, or 
receiving State plan HCBS, the following:
    (a) The individual's legal guardian or other person who is 
authorized under State law to represent the individual for the purpose 
of making decisions related to the person's care or well-being. In 
instances where state law confers decision-making authority to the 
individual representative, the individual will lead the service 
planning process to the extent possible.
    (b) Any other person who is authorized under Sec.  435.923 of this 
chapter, or under the policy of the State Medicaid Agency to represent 
the individual, including but not limited to, a parent, a family 
member, or an advocate for the individual.
    (c) When the State authorizes representatives in accordance with 
paragraph (b) of this section, the State must have policies describing 
the process for authorization; the extent of decision-making 
authorized; and safeguards to ensure that the representative uses 
substituted judgment on behalf of the individual. State policies must 
address exceptions to using substituted judgment when the individual's 
wishes cannot be ascertained or when the individual's wishes would 
result in substantial harm to the individual. States may not refuse the 
authorized representative that the individual chooses, unless in the 
process of applying the requirements for authorization, the State 
discovers and can document evidence that the representative is not 
acting in accordance with these policies or cannot perform the required 
functions. States must continue to meet the requirements regarding the 
person-

[[Page 3038]]

centered planning process at Sec.  441.725 of this chapter.


Sec.  441.740  Self-directed services.

    (a) State option. The State may choose to offer an election for 
self-directing HCBS. The term ``self-directed'' means, with respect to 
State plan HCBS listed in Sec.  440.182 of this chapter, services that 
are planned and purchased under the direction and control of the 
individual, including the amount, duration, scope, provider, and 
location of the HCBS. For purposes of this paragraph, individual means 
the individual and, if applicable, the individual's representative as 
defined in Sec.  441.735.
    (b) Service plan requirement. Based on the independent assessment 
required in Sec.  441.720, the State develops a service plan jointly 
with the individual as required in Sec.  441.725. If the individual 
chooses to direct some or all HCBS, the service plan must meet the 
following additional requirements:
    (1) Specify the State plan HCBS that the individual will be 
responsible for directing.
    (2) Identify the methods by which the individual will plan, direct 
or control services, including whether the individual will exercise 
authority over the employment of service providers and/or authority 
over expenditures from the individualized budget.
    (3) Include appropriate risk management techniques that explicitly 
recognize the roles and sharing of responsibilities in obtaining 
services in a self-directed manner and assure the appropriateness of 
this plan based upon the resources and support needs of the individual.
    (4) Describe the process for facilitating voluntary and involuntary 
transition from self-direction including any circumstances under which 
transition out of self-direction is involuntary. There must be state 
procedures to ensure the continuity of services during the transition 
from self-direction to other service delivery methods.
    (5) Specify the financial management supports, as required in 
paragraph (e) of this section, to be provided.
    (c) Employer authority. If the person-centered service plan 
includes authority to select, manage, or dismiss providers of the State 
plan HCBS, the person-centered service plan must specify the authority 
to be exercised by the individual, any limits to the authority, and 
specify parties responsible for functions outside the authority the 
individual exercises.
    (d) Budget authority. If the person-centered service plan includes 
an individualized budget (which identifies the dollar value of the 
services and supports under the control and direction of the 
individual), the person-centered service plan must meet the following 
requirements:
    (1) Describe the method for calculating the dollar values in the 
budget, based on reliable costs and service utilization.
    (2) Define a process for making adjustments in dollar values to 
reflect changes in an individual's assessment and service plan.
    (3) Provide a procedure to evaluate expenditures under the budget.
    (4) Not result in payment for medical assistance to the individual.
    (e) Functions in support of self-direction. When the State elects 
to offer self-directed State plan HCBS, it must offer the following 
individualized supports to individuals receiving the services and their 
representatives:
    (1) Information and assistance consistent with sound principles and 
practice of self-direction.
    (2) Financial management supports to meet the following 
requirements:
    (i) Manage Federal, State, and local employment tax, labor, 
worker's compensation, insurance, and other requirements that apply 
when the individual functions as the employer of service providers.
    (ii) Make financial transactions on behalf of the individual when 
the individual has personal budget authority.
    (iii) Maintain separate accounts for each individual's budget and 
provide periodic reports of expenditures against budget in a manner 
understandable to the individual.
    (3) Voluntary training on how to select, manage, and dismiss 
providers of State plan HCBS.


Sec.  441.745  State plan HCBS administration: State responsibilities 
and quality improvement.

    (a) State plan HCBS administration.
    (1) State responsibilities. The State must carry out the following 
responsibilities in administration of its State plan HCBS:
    (i) Number served. The State will annually provide CMS with the 
projected number of individuals to be enrolled in the benefit and the 
actual number of unduplicated individuals enrolled in State plan HCBS 
in the previous year.
    (ii) Access to services. The State must grant access to all State 
plan HCBS assessed to be needed in accordance with a service plan 
consistent with Sec.  441.725, to individuals who have been determined 
to be eligible for the State plan HCBS benefit, subject to the 
following requirements:
    (A) A State must determine that provided services meet medical 
necessity criteria.
    (B) A State may limit access to services through targeting criteria 
established by Sec.  441.710(e)(2).
    (C) A State may not limit access to services based upon the income 
of eligible individuals, the cost of services, or the individual's 
location in the State.
    (iii) Appeals. A State must provide individuals with advance notice 
of and the right to appeal terminations, suspensions, or reductions of 
Medicaid eligibility or covered services as described in part 431, 
subpart E.
    (2) Administration.
    (i) Option for presumptive payment.
    (A) The State may provide for a period of presumptive payment, not 
to exceed 60 days, for Medicaid eligible individuals the State has 
reason to believe may be eligible for the State plan HCBS benefit. FFP 
is available for both services that meet the definition of medical 
assistance and necessary administrative expenditures for evaluation of 
eligibility for the State plan HCBS benefit under Sec.  441.715(d) and 
assessment of need for specific HCBS under Sec.  441.720(a), prior to 
an individual's receipt of State plan HCBS or determination of 
ineligibility for the benefit.
    (B) If an individual the State has reason to believe may be 
eligible for the State plan HCBS benefit is evaluated and assessed 
under the presumptive payment option and found not to be eligible for 
the benefit, FFP is available for services that meet the definition of 
medical assistance and necessary administrative expenditures. The 
individual so determined will not be considered to have enrolled in the 
State plan HCBS benefit for purposes of determining the annual number 
of participants in the benefit.
    (ii) Option for Phase-in of Services and Eligibility
    (A) In the event that a State elects to establish targeting 
criteria through Sec.  441.710(e)(2), the State may limit the 
enrollment of individuals or the provision services to enrolled 
individuals based upon criteria described in a phase-in plan, subject 
to CMS approval. A State which elects to target the State plan HCBS 
benefit and to phase-in enrollment and/or services must submit a phase-
in plan for approval by CMS that describes, at a minimum:
    (1) The criteria used to limit enrollment or service delivery.
    (2) The rationale for phasing-in services and/or eligibility.
    (3) Timelines and benchmarks to ensure that the benefit is 
available

[[Page 3039]]

statewide to all eligible individuals within the initial 5-year 
approval.
    (B) If a State elects to phase-in the enrollment of individuals 
based on highest need, the phase-in plan must use the needs-based 
criteria described in Sec.  441.715(a) to establish priority for 
enrollment. Such criteria must be based upon the assessed need of 
individuals, with higher-need individuals receiving services prior to 
individuals with lower assessed need.
    (C) If a State elects to phase-in the provision of any services, 
the phase-in plan must include a description of the services that will 
not be available to all eligible individuals, the rationale for 
limiting the provision of services, and assurance that all individuals 
with access to a willing and qualified provider may receive services.
    (D) The plan may not include a cap on the number of enrollees.
    (E) The plan must include a timeline to assure that all eligible 
individuals receive all included services prior to the end of the first 
5-year approval period, described in paragraph (a)(2)(vi) of this 
section.
    (iii) Reimbursement methodology. The State plan amendment to 
provide State plan HCBS must contain a description of the reimbursement 
methodology for each covered service, in accordance with CMS sub-
regulatory guidance. To the extent that the reimbursement methodologies 
for any self-directed services differ from those descriptions, the 
method for setting reimbursement methodology for the self-directed 
services must also be described.
    (iv) Operation. The State plan amendment to provide State plan HCBS 
must contain a description of the State Medicaid agency line of 
authority for operating the State plan HCBS benefit, including 
distribution of functions to other entities.
    (v) Modifications. The agency may request that modifications to the 
benefit be made effective retroactive to the first day of a fiscal year 
quarter, or another date after the first day of a fiscal year quarter, 
in which the amendment is submitted, unless the amendment involves 
substantive change. Substantive changes may include, but are not 
limited to, the following:
    (A) Revisions to services available under the benefit including 
elimination or reduction in services, and changes in the scope, amount 
and duration of the services.
    (B) Changes in the qualifications of service providers, rate 
methodology, or the eligible population.
    (1) Request for Amendments. A request for an amendment that 
involves a substantive change as determined by CMS--
    (i) May only take effect on or after the date when the amendment is 
approved by CMS; and
    (ii) Must be accompanied by information on how the State will 
ensure for transitions with minimal adverse impact on individuals 
impacted by the change.
    (2) [Reserved]
    (vi) Periods of approval.
    (A) If a State elects to establish targeting criteria through Sec.  
441.710(e)(2)(i), the approval of the State Plan Amendment will be in 
effect for a period of 5 years from the effective date of the 
amendment. To renew State plan HCBS for an additional 5-year period, 
the State must provide a written request for renewal to CMS at least 
180 days prior to the end of the approval period. CMS approval of a 
renewal request is contingent upon State adherence to Federal 
requirements and the state meeting its objectives with respect to 
quality improvement and beneficiary outcomes.
    (B) If a State does not elect to establish targeting criteria 
through Sec.  441.710(e)(2)(i), the limitations on length of approval 
does not apply.
    (b) Quality improvement strategy: Program performance and quality 
of care. States must develop and implement an HCBS quality improvement 
strategy that includes a continuous improvement process and measures of 
program performance and experience of care. The strategy must be 
proportionate to the scope of services in the State plan HCBS benefit 
and the number of individuals to be served. The State will make this 
information available to CMS at a frequency determined by the Secretary 
or upon request.
    (1) Quality Improvement Strategy. The quality improvement strategy 
must include all of the following:
    (i) Incorporate a continuous quality improvement process that 
includes monitoring, remediation, and quality improvement.
    (ii) Be evidence-based, and include outcome measures for program 
performance, quality of care, and individual experience as determined 
by the Secretary.
    (iii) Provide evidence of the establishment of sufficient 
infrastructure to implement the program effectively.
    (iv) Measure individual outcomes associated with the receipt of 
HCBS, related to the implementation of goals included in the individual 
service plan.
    (2) [Reserved]

PART 447--PAYMENTS FOR SERVICES

0
19. The authority citation for part 447 continues to read as follows:

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


0
20. Section 447.10 is amended by adding new paragraph (g)(4) to read as 
follows:


Sec.  447.10  Prohibition against reassignment of provider claims.

* * * * *
    (g) * * *
    (4) In the case of a class of practitioners for which the Medicaid 
program is the primary source of service revenue, payment may be made 
to a third party on behalf of the individual practitioner for benefits 
such as health insurance, skills training and other benefits customary 
for employees.
* * * * *

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

    Dated: September 18, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 9, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-00487 Filed 1-10-14; 11:15 am]
BILLING CODE 4120-01-P