[Federal Register: January 18, 2008 (Volume 73, Number 13)] [Proposed Rules] [Page 3545-3566] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr18ja08-24] [[Page 3545]] ----------------------------------------------------------------------- Part II Department of Health and Human Services ----------------------------------------------------------------------- Centers for Medicare & Medicaid Services ----------------------------------------------------------------------- 42 CFR Part 441 Medicaid Program; Self-Directed Personal Assistance Services Program State Plan Option (Cash and Counseling); Proposed Rule [[Page 3546]] ----------------------------------------------------------------------- DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 441 [CMS-2229-P] RIN 0938-AO52 Medicaid Program; Self-Directed Personal Assistance Services Program State Plan Option (Cash and Counseling) AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: This proposed rule provides guidance to States that want to administer self-directed personal assistance services through their State plans. DATES: Comment Date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on February 19, 2008. ADDRESSES: In commenting, please refer to file code CMS-2229-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (no duplicates, please): 1. Electronically. You may submit electronic comments on specific issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click on the link ``Submit electronic comments on CMS regulations with an open comment period.'' (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.) 2. By regular mail. You may mail written comments (one original and two copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2229-P, P.O. Box 8016, Baltimore, MD 21244-8016. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments (one original and two copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-2229-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410)-786-7195 in advance to schedule your arrival with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850. (Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. Submission of comments on paperwork requirements. You may submit comments on this document's paperwork requirements by mailing your comments to the addresses provided at the end of the ``Collection of Information Requirements'' section in this document. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Marguerite Schervish, (410) 786-7200. SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments from the public on all issues set forth in this rule to assist us in fully considering issues and developing policies. You can assist us by referencing the file code CMS-2229-IFC and the specific ``issue identifier'' that precedes the section on which you choose to comment. Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on CMS Regulations'' on that Web site to view public comments. Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951. I. Background [If you choose to comment on issues in this section, please include the caption ``BACKGROUND'' at the beginning of your comments.] A. Section 6087 of the Deficit Reduction Act of 2005 The Deficit Reduction Act (DRA) of 2005 was enacted into law on February 8, 2006 (Pub. L. 109-171). Section 6087 of the DRA provided for a new State Plan option that is built on the experiences and lessons learned from the disability rights movement and States that pioneered self-direction programs. Self-direction is an important component of independence as it promotes quality, access, and choice. Specifically, section 6087 of the DRA amended section 1915 of the Social Security Act (the Act) to add new paragraph (j). Section 1915(j)(1) of the Act would allow a State the option to provide, as ``medical assistance,'' payment for part or all of the cost of self- directed personal assistance services (PAS) provided pursuant to a written plan of care to individuals for whom there has been a determination that, but for the provision of such services, the individuals would require and receive State Plan personal care services, or section 1915(c) home and community-based waiver services. Section 1915(j)(1) of the Act also expressly excludes Medicaid payment for room and board. Finally, section 1915(j)(1) of the Act requires that self-directed PAS may not be provided to individuals who reside in a home or property that is owned, operated, or controlled by a provider of services, not related by blood or marriage. Section 1915(j)(2) of the Act sets forth five assurances that States must provide in order for the Secretary to approve self-directed PAS under this State Plan option. First, States must assure that necessary safeguards are in place to protect the health and welfare of individuals provided services under this State Plan option, and to assure the financial accountability for funds expended with respect to such services. Second, States must assure the provision of an evaluation of the need for State Plan personal care services, or [[Page 3547]] personal services under a section 1915(c) waiver. Third, States must assure that individuals who are likely to require State Plan personal care services, or section 1915(c) waiver services, are informed of the feasible alternatives to the self-directed PAS State Plan option (if available) such as personal care under the regular State plan option or personal assistance services under a section 1915(c) waiver program. Fourth, States must assure that they provide a support system that ensures that participants in the self-directed PAS program are appropriately assessed and counseled prior to enrollment and are able to manage their budgets. Fifth, States must assure that they will provide to the Secretary an annual report on the number of individuals served under the State Plan option and the total expenditures on their behalf in the aggregate. States must also provide an evaluation of the overall impact of this new option on the health and welfare of participating individuals compared to non-participants every 3 years. Section 1915(j)(3) of the Act indicates that States that offer self-directed PAS under this State Plan option are not subject to the statewideness and comparability requirements of the Act. Section 1915(j)(4)(A) of the Act defines self-directed PAS to mean personal care and related services under the State Plan, or home and community-based waiver services under a section 1915(c) waiver, provided to a participant eligible under this self-directed PAS State Plan option. Furthermore, the statute states that within an approved self-directed services plan and budget, individuals can purchase personal assistance and related services and hire, fire, supervise, and manage the individuals providing such services. Section 1915(j)(4)(B) of the Act gives States the option to permit participants to hire any individual capable of providing the assigned tasks, including legally liable relatives, as paid providers of the services. The statute also gives States the option to permit participants to purchase items that increase independence or substitute for human assistance to the extent that expenditures would otherwise be made for the human assistance. Section 1915(j)(5) of the Act sets forth the requirements for an ``approved self-directed services plan and budget''. Section 1915(j)(5)(A) of the Act authorizes the individual or a defined representative to exercise choice and control over the budget, planning, and purchase of self-directed PAS, including the amount, duration, scope, provider, and location of service provision. Section 1915(j)(5)(B) of the Act requires an assessment of participants' needs, strengths, and preferences for PAS. Section 1915(j)(5)(C) of the Act requires States to develop a service plan based on the assessment of need using a person-centered planning process. Section 1915(j)(5)(D) of the Act requires States to develop and approve a budget for participants' services and supports based on the assessment of need and service plan and on a methodology that uses valid, reliable cost data, is open to public inspection, and includes a calculation of the expected cost of such services if those services were not self- directed. The budget may not restrict access to other medically necessary care and services furnished under the State Plan and approved by the State but not included in the budget. Section 1915(j)(5)(E) of the Act requires that there are appropriate quality assurance and risk management techniques used in establishing and implementing the service plan and budget that recognize the roles and responsibilities in obtaining services in a self-directed manner and assure the appropriateness of such plan and budget based upon the participant's resources and capabilities. Section 1915(j)(6) of the Act indicates that States may employ a financial management entity to make payments to providers, track costs, and make reports. Payment for the activities of the financial management entity shall be at the administrative rate established in section 1903(a) of the Act. B. History of Self-Direction The Independent Living movement in the 1960s was premised on the concept that people with disabilities should have the same civil rights, options, and control over choices in their own lives as do people without disabilities, and that individuals with cognitive impairments should not be prohibited from exercising control over their lives. One mechanism that allows individuals to exercise more involvement, control, and choice over their lives is self-directed care. Self-directed care is a service delivery mechanism that empowers individuals with the opportunity to select, direct, and manage their needed services and supports identified in an individualized service plan and budget. Self-direction is not a service, but rather an alternative to the traditional service delivery model whereby a worker hired by the Medicaid recipient will furnish the Medicaid service to the Medicaid recipient and the Medicaid recipient retains the control and authority over who provides the services, how the services are provided, the hours they work, and their rate of pay. Two national pilot projects demonstrated the success of self- directed care. During the mid-1990s, the Robert Wood Johnson Foundation awarded grants to develop self-determination in 19 States. These projects primarily evolved into Medicaid-funded programs under the section 1915(c) home and community-based services waiver authority. In the late 1990s, the Robert Wood Johnson Foundation again awarded grants to develop the ``Cash and Counseling'' national demonstration and evaluation project in three States. These projects evolved into demonstration programs under the section 1115 authority of the Act. Evaluations were conducted in both of these national projects. Results in both projects were similar--persons directing their personal care experienced fewer unnecessary institutional placements, experienced higher levels of satisfaction, had fewer unmet needs, experienced higher continuity of care because of less worker turnover, and maximized the efficient use of community services and supports. On February 1, 2001, the President announced the New Freedom Initiative, which included the following three elements: Promoting full access to community life through efforts to implement the Supreme Court's decision in Olmstead vs. L.C., 527 U.S. 581 (1999) (``Olmstead''), integrating Americans with disabilities into the workforce with programs under the Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA) (Pub. L. 106-170, enacted on December 19, 1999), and creating the National Commission on Mental Health. The President subsequently expanded this initiative through Executive Order 13217 (June 18, 2001) by directing Federal agencies to work together to ``tear down the barriers'' to community living by developing a government-wide framework for providing elders and people with disabilities the supports necessary to learn and develop skills, engage in productive work, choose where to live, and fully participate in community life. On May 9, 2002, as part of its response to the New Freedom Initiative, the Department of Health and Human Services unveiled the Independence Plus templates and the initiative to help States broaden their ability to offer individuals the opportunity to maximize choice and control over [[Page 3548]] services in their own homes and communities. The Department developed two templates that allowed States to choose different self-directed design features to satisfy their unique programs. The section 1115 demonstration template was developed for States that wanted to permit individuals to receive a prospective cash allowance equivalent to the amount of their Medicaid personal care benefit. Under the section 1115 authority, individuals could directly manage their cash allowance and direct the purchases of their personal care and related services and goods. For those States not wanting to offer the cash allowance, a section 1915(c) home and community-based services waiver template was developed. The section 1915(c) waiver template allowed Medicaid recipients to self-direct a wide array of services, so long as these services are required to keep a person from being institutionalized in a hospital, nursing facility or intermediate care facility for the mentally retarded (ICFMR). However, a program was only given the Independence Plus designation when a State demonstrated a strong commitment to self-direction by developing a comprehensive program that offered a person-centered planning process, individualized budgeting, self-directed supports including financial management services, and a quality assurance and improvement plan. The intended purposes of the Independence Plus Initiative were to: Delay or avoid institutional or other high cost out-of- home placement by strengthening supports to individuals or families. Recognize the essential role of the individual or family in the planning and purchasing of health care supports and services by providing individual or family control over an agreed upon resource amount. Encourage cost effective decision-making in the purchase of supports and services. Increase individual or family satisfaction through the promotion of self-direction, control, and choice--a major theme expressed during the New Freedom Initiative-National Listening Session. Promote solutions to the problem of worker availability. Provide supports including financial management services to support and sustain individuals or families as they direct their own services. Assist States with meeting their legal obligations under the Americans with Disabilities Act (ADA) and the U.S. Supreme Court's Olmstead decision. Provide flexibility for States seeking to increase the opportunities afforded individuals and families in deciding how best to enlist or sustain home and community services. A new section 1915(c) waiver application was also developed effective spring 2005 that incorporates our requirements for an Independence Plus program. In 2003 we awarded 12 systems change grants to States for the development of Independence Plus programs. On October 7, 2004, the Robert Wood Johnson Foundation awarded a second round of ``Cash and Counseling'' grants to 11 States to develop Independence Plus programs using either the Section 1915(c) waiver or section 1115 demonstration application. As of March 20, 2006, 15 States had 17 approved Independence Plus programs. In addition, there were 2 other States that included self-direction options in their section 1115 demonstrations and a multitude of States that offered self-directed program options in their section 1915(c) home and community-based services waiver programs. II. Provisions of the Proposed Rule [If you choose to comment on issues in this section, please include the caption ``PROVISIONS OF THE PROPOSED RULE'' at the beginning of your comments.] Section CFR 441.450 Basis, Scope and Definitions This proposed rule would implement section 1915(j) of the Act, allowing States to provide a self-directed PAS through a State Plan option. We propose to implement this provision in 42 CFR part 441 subpart J. This part would set forth the requirements of the self- directed PAS delivery model administered through the Medicaid State plan and indicates how individuals may qualify to participate in a self-directed PAS State plan option. The overall purpose of section 1915(j) of the Act is to allow States the option to amend their State Plans to offer individuals the opportunity to self-direct their PAS. This self-directed PAS State plan option is a service delivery model and is premised in the experience and lessons learned from the self- direction and Independence Plus section 1115 demonstrations and section 1915(c) waiver programs. Based on the demonstrated success of self- directed services in these programs, we learned that individuals can successfully exercise decision-making authority over their PAS and supports identified in an individualized service plan and budget. Consequently, in 42 CFR 441.450(b), we propose that individuals be allowed to exercise decision-making authority in identifying, accessing, managing and purchasing their PAS. We propose a list of the minimum activities over which individuals may exercise authority, in order to implement the basic elements of self-direction, which convey control over both employer-related and budget-related activities. Individuals' decision-making authority includes, at a minimum, the purchase of PAS and supports for PAS, recruiting workers, hiring and discharging workers, specifying worker qualifications, determining worker duties, scheduling workers, supervising workers, evaluating worker performance, determining the amount paid for a service, support, or item, scheduling when services are provided, identifying service workers, and reviewing and approving invoices. This proposed list was determined through our review of States' experiences with existing self-directed programs and we believe it represents the minimum authority required by an individual to self-direct care. A State can include additional activities in its submitted State plan option request. Since we view self-directed care as a method of service delivery rather than cash assistance, we do not view the following Medicaid provisions as a barrier to use of the self-directed PAS option: When States elect to offer a cash option to participants, funds made available to the individual solely for the purchase of medically necessary items and services (as outlined in the approved service plan) are not income or resources to the individual. Thus, they would not be counted for purposes of determining or redetermining eligibility (under 1902(a)(10)(A) or 1902(a)(10)(C) of the Act, or any demonstration project). Medicaid requirements for direct payment to providers found at section 1902(a)(32) of the Act and prepayment review found at section 1902(a)(37)(B) of the Act may be satisfied by specific responsibilities individuals undertake as part of self-direction, such as activities to effectively manage their funds, review all payment requests, and make payments to providers, either directly or through a financial management entity. These responsibilities are further described in Sec. 441.470. In the service delivery model of self-direction, the mechanisms that an [[Page 3549]] individual undertakes to document delivery of services, such as having timesheets signed by the provider of services, should include the basic elements needed to satisfy the objective of the Medicaid requirements on provider agreements found at section 1902(a)(27) of the Act. There are many terms specific to the self-directed PAS State plan option. Because of the need to be consistent with their usage within the context of section 1915(j), we are proposing to define the following terms for purposes of this section in Sec. 441.450(c): Assessment of Need Section 1915(j)(5)(B) of the Act requires an assessment of a participant's needs, strengths, and preferences for PAS. Our proposed definition at Sec. 441.450(c) reflects this statutory language. An assessment of an individual's needs, strengths and preferences is crucial because it forms the basis for the identification of the needed services and supports that will be authorized in the individual's service plan and the subsequent service budget. It is also important to identify an individual's strengths and preferences that will enable self-direction of PAS. Therefore, we also propose in Sec. 441.450(c) that the assessment includes one or more processes to obtain information about an individual's health condition, personal goals and preferences for the provision of services, functional limitations, age, school, employment, household, and other factors that are relevant to the authorization and provision of services. We believe our proposed definition reflects the need for such an assessment to be a comprehensive assessment of all an individual's needs. Individualized Backup Plan We propose to add a definition for an individualized backup plan because we think it is an important beneficiary protection and a necessary communication device to convey important information should a situation occur that would pose a risk of harm to an individual that would necessitate a plan to ensure alternative arrangements for service delivery. Accordingly, in Sec. 441.450(c), we would define an individualized backup plan to mean a written plan that addresses critical contingencies or incidents that would pose a risk of harm to the participant's health or welfare. We propose to require that the individualized backup plan be incorporated into the participant's service plan. For example, a typical critical contingency or incident could include the failure of a worker to appear when scheduled to provide necessary services and the individualized backup plan would include the steps necessary to continue to provide the necessary services in such a case. The individualized backup plan could include arranging for designated provider agencies to furnish staff support on an on-call basis, or use of other services and agencies in existence in the participant's community. We note each backup plan must necessarily be crafted to meet the unique needs and circumstances of each participant. Legally Liable Relatives Section 1915(j)(4)(B)(i) of the Act permits, at the State's option, participants in the self-directed PAS option to hire legally liable relatives as paid providers of services. In 42 CFR 441.450(c), we propose to define legally liable relatives to mean persons who have a duty under the provisions of State law to care for another person. Legally liable relatives may include: (1) The parent (biological or adoptive) of a minor child or the guardian of a minor child who must provide care to the child, (2) legally-assigned caretaker relatives, or (3) a spouse. It has been our experience that these are the most commonly used relationships in providing care, but we solicit comments on other possible relationships that could be used. Self-Directed Personal Assistance Services Section 1915(j)(4)(A) of the Act defines self-directed PAS to mean personal care and related services, or home and community-based services otherwise available under the State Plan or a 1915(c) waiver, that are provided to an individual determined to be eligible for the self-directed PAS program. We propose at Sec. 441.450(c) to adopt the statutory language in our definition. We further note that we believe it is clear that ``personal care and related services'' refers to those services that an individual receives that are within the State's defined personal care State Plan optional service (for example, activities of daily living, instrumental activities of daily living, supervision, and cueing). Notwithstanding an individual's eligibility to participate in the self-directed PAS option because of their eligibility for and receipt of services under a State Plan personal care services option or a section 1915(c) waiver program, we also propose that self-directed PAS include, at the State's option, items that increase an individual's independence or substitute for human assistance, according to section 1915(j)(4)(B)(ii) of the Act. We believe it is clear that the State has the option to allow the individual to acquire these items, and that these items can be considered as self-directed PAS. Self-Direction Section 1915(j)(5)(A) of the Act defines self-direction to mean the opportunity for participants or their representatives to exercise choice and control over the budget, planning, and purchase of self- directed PAS, including the amount, duration, scope, provider, and location of service provision. We propose to reflect this statutory definition in the rule at Sec. 441.450(c). Service Budget Section 1915(j)(5)(D) of the Act sets out the requirement for a service budget as part of an ``approved self-directed services plan and budget.'' We propose, at Sec. 441.450(c), to define a service budget to mean an amount of funds that is under the control and direction of a participant when the State has selected the State Plan option for provision of self-directed PAS. We further propose that the budget be developed using a person-centered and directed process, and be individually tailored in accordance with the participant's needs and personal preferences as established in the service plan. We further note that the statutory requirements that the budget be based upon an assessment of need, approved by the State, developed using a valid methodology, is open to public inspection, and includes a calculation of the expected cost of the PAS if not self-directed are inherent in the process for approval of a self-directed PAS State plan option and we are not proposing these requirements as part of the proposed definition. Service Plan The statute at section 1915(j)(5)(C) of the Act references the requirement for a service plan to be developed and approved by the State based on an assessment of need through a person-centered process. At Sec. 441.450(c), we propose to define a service plan to mean the written document that specifies the services and supports (regardless of funding source) that are to be furnished to meet the needs of a participant in the self-directed PAS option so the participant can successfully direct the PAS and live in the community. We believe that an assessment of an individual's needs, strengths and preferences is crucial because it forms the basis for the identification of the needed services and supports that will [[Page 3550]] be authorized in the individual's service plan and the subsequent service budget. We also propose to reflect the statutory requirement that the service plan be based on the assessment of need using a person-centered and directed planning process. We also propose to incorporate the principles of a person-centered planning process since we believe that the service plan must build upon the participant's capacity to actively engage in and lead the development of the plan, including identifying persons who will be involved in the process. We anticipate that States will provide individuals with information, assistance and training, as needed or desired, in advance of and during the service planning process in order to help them develop their service plans, thereby ensuring that the plan reflects their needs, strengths and preferences. Specifically, we propose to require that the process build upon the participant's capacity to engage in activities that promote community life and that respects the participant's preferences, choices, and abilities. We also propose to allow families, friends and professionals, as desired or required by the participant, to be involved in the service-planning process. Support System Section 1915(j)(2)(D) of the Act requires that States provide a support system that ensures that participants are appropriately assessed and counseled prior to their decision to participate in the self-directed PAS State Plan option and are able to manage their budgets. The statute further requires that additional counseling and management support may be provided at the request of the individual. In Sec. 441.450(c), we propose to define support system to mean information, counseling, training, and assistance that support the participant (or the participant's family or representative, as appropriate) in identifying, accessing, managing, and directing their PAS and supports and in purchasing their PAS identified in the service plan and budget. The following proposed provisions of subpart J deal with General Administration. Section 441.452 Self-Direction: General We note that the statute is written such that States must have in place, before electing the self-directed PAS option, personal care services through their State plan, or home and community-based services in a section 1915(c) waiver program. In this way, States that choose to amend their State plans to add self-directed PAS, will have both the traditional delivery system (that is, non-self-directed) and the self- directed PAS service delivery option available in the event that individuals voluntary disenroll from or are involuntarily disenrolled from the self-directed PAS service delivery option. This also reflects the choice requirement for such individuals as set forth in section 1915(j)(2)(C) of the Act. In the traditional delivery system, the provider of the PAS is an entity such as a home health agency. The entity, and not the Medicaid recipient, exercises authority over who will furnish the PAS and retains the control and authority over how the services are provided, the worker's hours, and the worker's rate of pay. We are also proposing to require that the State's assessment of an individual's needs should form the basis for the level of services for which the individual is eligible. This requirement will ensure that, regardless of service delivery system, individuals will receive the services identified in the assessment of need. The proposed regulation should not be construed as affecting an individual's Medicaid eligibility, including that of an individual whose Medicaid eligibility is attained through receipt of section 1915(c) waiver services. We are proposing in Sec. 441.452 to reflect the general concepts of section 1915(j)(1) statutory requirements as noted above. We are available to all States to provide technical assistance in structuring this new self-directed PAS State Plan option. Section 441.454 Use of Cash In the section 1115 self-direction demonstration programs, participants could receive a prospective cash allowance equivalent to the amount of Medicaid expenditures for the services included in the demonstration and could, if they chose this option, directly manage their cash allowance. We learned that participants who chose to directly manage their cash allowance were able to do so successfully and that they became more prudent purchasers of their needed supports and services. Some individuals also chose to perform all the employer tax-related responsibilities that are associated with being an employer of record, while others desired to use a fiscal/employer agent or financial management entity to help them with some or all of these responsibilities. We are aware that individuals who have been directly receiving and managing their cash allowance wish to continue to have this option. We are also aware that individuals in States where this option has not heretofore been available wish to be able to access this option. Accordingly, we are proposing in Sec. 441.454, that States can elect to disburse cash prospectively to participants who are self-directing their PAS and must ensure compliance with the IRS requirements if they adopt this option. Further, if the cash option is made available by the State, we would require States to permit individuals who select the cash option the choice of whether to use a financial management entity. Individuals must be given flexibility to determine whether to use a financial management entity, and the functions, if any, to be performed on their behalf by the financial management entity. For example, some individuals may want the financial management entity to perform all employer-related tax functions, while they retain responsibility for paying their providers of PAS. Individuals choosing not to use a financial management entity must comply with all employer-related tax functions of the IRS requirements. However, we are also proposing that if States choose to allow the cash option, that they make available a financial management entity to participants who have demonstrated, after additional counseling, information, training, or assistance, that they cannot effectively manage the cash option. Section 441.456 Voluntary Disenrollment We understand that a self-directed service delivery model may not necessarily work for everyone. Individuals who initially elect to self- direct their PAS may subsequently decide to move to a traditional service delivery system. At Sec. 441.456, we propose to specify that individuals may voluntarily disenroll from the self-directed PAS State plan option at any time and elect to receive their services through the traditional service delivery system. As required by statute, PAS will be offered to the individual so long as the individual still qualifies for State Plan personal care services or home and community based services provided through a 1915(c) waiver program. If individuals decide to leave the self-directed care option, we want to be assured that individuals continue to receive the services for which they are eligible and that their health and welfare are maintained. Accordingly, we propose to require that States specify in the State plan the safeguards that will be in place to ensure continuity of services during the transition from self-directed services. In order to effectuate a prompt and efficient transition, we would expect that any revisions to the service plan be made promptly and that [[Page 3551]] participants are quickly linked with alternate service providers to prevent a break in the delivery of services. Section 441.458 Involuntary Disenrollment We understand there may be circumstances, where in the interest of the participant's health and welfare, the State may wish to involuntarily disenroll the participant from the self-directed PAS option. For example, involuntary disenrollment may be necessary when the individual does not carry out the necessary responsibilities, thereby jeopardizing their health and welfare, or in other circumstances where action must be taken to ensure an individual's health and welfare. Accordingly, in Sec. 441.458, we propose to permit States to determine the conditions under which an individual may be involuntarily disenrolled from the self-directed PAS State plan option. We also note that we propose that we approve these conditions, and plan to do so as part of the review of the State plan amendment to provide self-directed PAS. Again, we want to be assured that individuals continue to receive the services for which they are eligible and that their health and welfare are maintained. Accordingly, we would also propose to require that States specify in the State plan the safeguards that will be in place to ensure continuity of services during the transition from self- directed services. In order to effectuate a prompt and efficient transition, we would expect that any needed revisions to the service plan would be made promptly and that participants are quickly linked with alternate service providers for a seamless delivery of services. Section 441.460 Participant Living Arrangements Section 1915(j)(1) of the Act states that self-directed PAS cannot be made available to individuals who reside in a home or property that is owned, operated, or controlled by a provider of services, who is not related to the individual by blood or marriage. We are proposing to reflect the statutory requirement in Sec. 441.460(a). We note programs that have successfully provided the self-directed care option have typically provided it to individuals who live in homes of their own or in the homes of their families. We believe successfully directing one's own care may become less feasible when individuals receive services and reside in large, provider-owned, operated or controlled residential living arrangements. For example, if the residential facility also provides and receives payment for the provision of personal care and related services, it may prohibit the self-directed service delivery option for fear of duplication of services. We are also proposing in Sec. 441.460(b) to allow States to specify additional restrictions on participant living arrangements, if they have been approved by CMS. We further note that we believe this limitation should be applied to individuals residing in assisted living facilities, as we anticipate that the provider would both control the housing and be expected to provide the PAS. However, we do not believe this limitation would apply to situations in which the individual resides in the home of someone whom they wish to employ under the self-directed PAS option. We invite comment on our proposal as well as on other situations to which this limitation should apply. Section 441.462 Statewideness, Comparability, and Limitations on Number Served Section 1915(j)(3) of the Act permits a State to provide self- directed PAS without regard to the requirements for statewideness (section 1902(a)(1) of the Act), comparability of services or the number of individuals served (section 1902(a)(10)(B) of the Act). In Sec. 441.462, we propose to reflect section 1915(j)(3) of the Act. However, we also wish to note below our understanding of the extent to which these provisions provide flexibilities in the State plan PAS option. 1. Geographic Limitations Under this new State plan option, States are not bound by the ``statewideness'' requirement of section 1902(a)(1) of the Act. (The statewideness requirement of section 1902(a)(1) of the Act provides, in part, that the provisions of a State plan be in effect in all political subdivisions of the State.) Therefore, consistent with the statute, we propose in Sec. 441.462 to permit States to limit the provision of self-directed PAS to any defined location of the State (that is, city, county, community, etc.). We note that the exception to the statewideness requirement applies only to the provision of self-directed PAS under section 1915(j) of the Act. The statewideness requirement of section 1902(a)(1) of the Act continues to apply to all other Medicaid services for which an individual may be eligible, unless those services are subject to their own statewideness exception. In other words, the State cannot geographically limit other services. Receipt of State plan PAS does not in any way alter an individual's eligibility to receive any other service under the State plan. 2. Comparability Under this State plan option, the statute permits a State to provide self-directed PAS to individuals without regard to the ``comparability'' provision in section 1902(a)(10)(B) of the Act. Thus, a State can limit the populations eligible to receive these services. (The ``comparability'' provision of section 1902(a)(10)(B) of the Act generally requires States to make Medicaid services available in the same amount, duration, and scope to one group of categorically needy individuals as it offers to another group of categorically needy individuals. The comparability provision also requires that the Medicaid services available to any individual in a categorically needy group are not less in amount, duration, and scope than those Medicaid services available to an individual in a medically needy group). Section 1915(j)(3) of the Act thus permits States to offer self- directed PAS to certain populations, such as those with developmental disabilities, physical disabilities or aged. As with the statewideness exception, we note that the exception to the comparability requirement applies only to the provision of self- directed PAS under section 1915(j) of the Act. For all other Medicaid services for which an individual may be eligible, the comparability requirements of section 1902(a)(10)(B) of the Act continue to apply, unless those services are subject to their own comparability exception. In other words, receipt of self-directed PAS State plan does not in any way alter an individual's eligibility to receive any other service under the State plan. 3. Limitations on Number of People Served The statute also permits a State to limit the number of persons served under this State plan option. This means that the State may limit the number of individuals receiving self-directed PAS. For example, States could offer self-directed PAS to only 150 individuals. Section 441.464 State Assurances Section 1915(j)(2) of the Act requires States that elect this option to assure the appropriate protection of Medicaid recipients. The statute does not permit us to approve a program that does not provide certain specified assurances. Specifically, section 1915(j)(2) of the Act requires States to assure the Secretary of the following: [[Page 3552]] 1. Necessary Safeguards States must assure that necessary safeguards have been taken to protect the health and welfare of individuals furnished services under this program and to assure the financial accountability for funds expended for self-directed services. In proposed Sec. 441.464(a), we reflect this general requirement. More specifically, in proposed Sec. 441.464(a)(1), we would require that safeguards must prevent the premature depletion of the participant directed budget as well as identify potential service delivery problems that might be associated with budget underutilization. We believe it is important that States have a system to oversee the expenditures being made by participants. Premature depletion of the funds in a budget could signal a health crisis which would require the State to immediately determine the health status of a participant and conduct a new assessment of the participant's needs. It could also signal misuse of the funds, for which the State would need to take corrective action. The corrective action could be the provision of additional counseling and training on how to manage the budget, or recoupment of the misspent funds. In contrast, under-utilization of the funds could signal a problem with the provision of services, or the lack of understanding of how the funds may be used to purchase PAS and supports. We propose, in Sec. 441.464(a)(2), a minimum list of safeguards that must be provided, but States would have the ability to implement additional safeguards to protect health and welfare and to prevent premature depletion of the participant-directed budget. Our experience with self-direction indicated that, at a minimum, a certain level of oversight by the State is necessary to help flag potential issues, particularly as to budget issues. The proposed list is based, in part, on this experience. We believe that the proposed list represents reasonable activities that a State should have in place so that any health or other problems associated with use of the budgeted funds will be brought to the attention of a case manager, support broker, financial management entity, or other person with oversight responsibilities. In proposed Sec. 441.464(a)(3) we would require that safeguards must be designed so that budget problems are identified on a timely basis so that corrective action may be taken, if necessary, in order to protect health and welfare and ensure financial accountability. 2. Evaluation of Need States must assure the performance of an evaluation of the need for personal care under the State plan or personal services under a section 1915(c) home and community-based services waiver program. In addition, section 1915(j)(2)(B) of the Act states that those subject to the evaluation of need are individuals who: (1) Are entitled to medical assistance for personal care services under the State plan, or receive home and community-based services under a section 1915(c) waiver; (2) may require self-directed PAS; and (3) may be eligible for self- directed PAS. We would reflect these statutory requirements in proposed Sec. 441.464(b). 3. Notification of Feasible Alternatives Individuals likely to require personal care under the State plan, or home and community-based services under a section 1915(c) waiver program, are informed of feasible alternatives, if available under the State's self-directed PAS State plan option, at the choice of such individuals, to the provision of personal care services under the State plan, or personal assistance services under a section 1915(c) home and community-based services waiver program. With the implementation of this new State plan option, there could be multiple programs offering individuals opportunities to receive their services through different service delivery mechanisms. We believe it is important that individuals be made aware, before enrolling in a program, of feasible alternatives for which they may be eligible and the requirements of all self-directed and non-self- directed programs operating within a State. We have historically required that participation in a self-directed program be voluntary and informed in order to ensure that participants'' choice of the self- directed model of service delivery is meaningful. To reflect both the statutory requirement and our longstanding policy, we propose in Sec. 441.464(c)(1), that individuals receive information about self- direction opportunities that is sufficient to inform decision-making about the election of self-direction and provided on a timely basis to individuals or their representatives. The information given to individuals must minimally include the elements of self-direction compared to non-self-directed PAS, self-direction responsibilities and potential liabilities, their choice to receive PAS under a section 1915(c) waiver program, if applicable, and the option, if available, to receive and manage the cash amount of their individual budget allocation. We also propose to require a State, at Sec. 441.464(c)(2), to inform individuals about when and how the information is provided. 4. Support System Section 1915(j)(2)(D) of the Act requires States to provide a support system to ensure that participants in the self-directed PAS State plan option are appropriately assessed and counseled before enrollment and are able to manage their budgets. Participants may also request additional counseling and management support during participation in the self-directed PAS option in an effort to address any difficulties they may experience. Based on our experience with self-direction programs, we are aware that individuals of different ages and with different abilities and disabilities, will desire to self-direct their PAS. In consideration of the potential differences in abilities to self-direct services, we have long required that States offer participants a support system that includes information about self-direction, as well as any counseling, training and assistance that may be needed or desired to effectively manage their services and budgets. We propose to reflect both the statutory requirement and our long-standing policy at Sec. 441.464(d). While we do not prescribe the way States are to design their support system in order to allow flexibility, based on our experience, we include in the proposed regulation a minimum list of activities for which individuals may need information, counseling, training and/or assistance, but States may offer supports for additional activities. Generally, the activities requiring support include participant rights information and how the self-directed model of service delivery operates. For example, the list includes providing important beneficiary rights and protections such as freedom of choice of providers, information about the grievance process and how participants would recognize and report critical incidents. In order to convey all the necessary information to individuals, we understand some States have developed a ``consumer training manual'' and/or an orientation and training program that includes necessary information about self- direction, person-centered planning, the services that may be self- directed, the roles and responsibilities of participants, providers, supports brokers/counselors and financial management service entities, as well as a host of other information about managing and directing the services and [[Page 3553]] supports identified in the service plan and budget. We encourage States to have such a manual or an orientation and training program in place because it will give clear guidance to the involved and interested parties in the self-directed PAS State plan option. We also realize that as self-direction assumes a level of independence and the ability of individuals to make decisions and choices, the extent to which individuals use the information and assistance may vary with their abilities and preferences. Individuals may elect whether and to what extent they will avail themselves of the support system, although States must require individuals not participating in the cash option to utilize financial management services. However, we do recognize that situations could arise in which individuals experience episodic difficulty in effectively managing and directing their PAS services and budgets. It has been our experience with self-direction waiver and demonstration programs that States have chosen to increase the level of support an individual may temporarily need and to offer additional information, counseling, training or assistance that may be needed and desired by individuals to overcome the difficulty. States have found that by flexibly providing ongoing support, success in self-directing services can usually be attained. Based on these States'' experiences, we would require at proposed Sec. 441.464(d)(3), that States would have information, counseling, training or assistance available, including financial management services, on an ongoing basis to participants at their request or when the State has determined that the participant is not effectively managing the services identified in the service plan or budget. However, to ensure that participants continue to receive needed services, we are also proposing in Sec. 441.464(d)(4), that if, after additional information, counseling, training or assistance is provided, the situation has not improved, States may mandate additional assistance or may initiate an involuntary disenrollment in accordance with Sec. 441.458. 5. Annual Report and Evaluation of Impact Section 1915(j)(2)(E) of the Act requires that the State provide to the Secretary an annual report reflecting the number of individuals served under the State plan option and total expenditures on their behalf. This section also requires that the State provide an evaluation of the overall impact of the self-directed PAS option on participants'' health and welfare, in comparison to that of non-participants, every 3 years. We propose to include these requirements in the regulations at Sec. 441.464(e) and (f). We plan to issue further guidance on the requirements and structure of the annual report, and we invite comments on other information that we should consider in the development of this guidance. We also plan to issue further guidance regarding expected requirements and implementation of the evaluation component. We also invite comment on the structure of this evaluation. For purposes of this evaluation requirement, the comparison group of ``non- participants'' should be individuals receiving PAS that are not self- directed. Section 441.466 Assessment of Need Section 1915(j)(5)(B) of the Act requires that States conduct an assessment of participants' needs, strengths, and preferences for self- directed PAS. We propose to implement this requirement at Sec. 441.466. An assessment of an individual's needs, strengths and preferences is crucial because it forms the basis for the identification of the needed services and supports that will be authorized in the individual's subsequent service plan and budget. It is also important to identify an individual's strengths and preferences that will enable self-direction of PAS. The assessment should include a determination of whether there are any persons available to support the individual, including family members. These persons may be able to provide unpaid personal assistance, or fulfill more formal roles such as acting in the capacity of a paid provider of PAS or as an individual's representative. We do not prescribe the assessment tool to be used by States, but we expect that the assessment will be sufficiently comprehensive to support the determination that an individual would require personal care services under the State plan or personal assistance services under a section 1915(c) waiver program and the development of the individual's subsequent service plan and budget. Accordingly, we reflect this understanding that while the format of the assessment is within the State's discretion, we expect the assessment to be comprehensive and minimally meet the statutory requirement. We propose that it include information about an individual's health condition, personal goals and preferences for the provision of services, functional limitations, age, school, employment, household, and other factors that are relevant to the authorization and provision of services, and support the finding for need of PAS and development of the service plan and budget. Section 441.468 Service Plan Elements Section 1915(j)(5)(C) of the Act requires States to develop and approve a service plan for each participant that includes the services and supports for such services, based on the assessment of need through a person-centered process. Section 1915(j)(5)(C) of the Act also requires that the service-planning process build on the participant's capacity to engage in activities that promote community life and that respects the participant's preferences, choices, and abilities, and must involve families, friends, and professionals in the planning or delivery of services or supports as desired or required by the participant. We propose to reflect these requirements at Sec. 441.468. Specifically, at proposed Sec. 441.468(a), we list those service plan elements we have found to be minimally necessary in developing a service plan that adequately describes the services to be furnished. We also propose, as explained previously in our Definitions section, that we believe the service plan includes the individualized backup plan. Furthermore, based on our experience with States' self-direction waivers and demonstrations, we are aware that States implement the person-centered planning process differently. Some States interpret the process to be simply focused on the participant's needs, and do not allow participants to also direct the process. Others allow the process to be person-directed as well as person-centered. We propose to require, at Sec. 441.468(b), that the process must be both person- centered and directed because we believe that a person-centered and directed service planning process will ensure that the resultant service plan actively engages a participant, accurately reflects a participant's abilities, preferences, and choices, and better meets the underlying purpose of the self-directed PAS option. Therefore, we would propose at Sec. 441.468(b)(1) that each participant's preferences, choices and abilities are identified and strategies to address those preferences, choices and abilities are included in the service plan. We would also propose at Sec. 441.468(b)(2) that the participant is permitted to exercise choice and control over services and supports discussed in the plan. Finally, we would propose at Sec. 441.468(b)(3) that risks that may pose harm to the participant are assessed and planned for. For example, we would expect that the assessment would identify potential risks to the [[Page 3554]] participant. The participant, or the participant's representative, if any, together with the persons designated by the State to develop the service plan, and others from whom the participant may seek guidance, would discuss a plan for how any potential risks may be mitigated or eliminated. The resultant plan is the individualized backup plan and would be included in the service plan. We would also propose at Sec. 441.468(c) that States have in place policies and procedures associated with service plan development. In Sec. 441.468(c)(1) through (c)(7), we propose a minimum list of policies and procedures that we believe are necessary to ensure the proper administration and development of the service plan. These include that the participant has the opportunity to engage in and direct the process to the extent desired, the participant has the opportunity to involve family, friends, and professionals as desired or required, the planning process is timely, the participant's needs are assessed and services meet the needs, the responsibilities for service plan development are identified, the qualifications of the individuals who are responsible for service plan development are reflective of the nature of the program's target population(s) and that service plans be reviewed annually, or whenever necessary due to a change in the participant's needs or health status. In this way, the service plan would continuously address all of the participant's assessed needs and goals, including health and safety factors, and would be updated to add or delete services or modify the amount and frequency of services. We also propose to require, at Sec. 441.468(d), that safeguards be established when an entity that provides other State Plan services is responsible for service plan development to ensure that the service provider's role in the planning process is fully disclosed to the participant and controls are in place to avoid any possible conflict of interest. Based on our review of the demonstrations and 1915(c) waiver programs, we are aware that States sometimes choose to delegate the service planning function to an entity that provides other State Plan services. In order to ensure free choice of providers, we propose to add this beneficiary protection to the regulation. We also propose to require that approval of the service plan conveys authority to the participant to perform, at a minimum, the tasks listed in Sec. 441.468(e), such as recruiting, hiring, firing, supervising and managing workers. It is the approval of the service plan by the State that authorizes the individual to undertake these activities as part of self-directed service delivery. The service plan must encompass both the general decision-making authority that a participant has and outline the individualized services and supports to address the participant's needs, abilities, preferences and choices. Section 441.470 Service Budget Elements Section 1915(j)(5)(D) of the Act requires the establishment of a budget for the provision of PAS and sets forth certain requirements for the service budget. Specifically, this includes that the budget is developed and approved by the State based on the assessment of need and service plan. We propose to reflect this requirement in Sec. 441.470 and also propose to require that States inform participants of the specific dollar amount that may be used for their services and supports so they can properly develop a budget for how they will purchase their services and supports. Similarly, we propose to require that the specific dollar amount that may be used is indicated in the budget so there is no question about the amount available to the participant. We believe these requirements are necessary because it is important for participants to have sufficient and clear information to allow them to adequately plan for how they will use the funds to secure their needed services and supports. Section 1915(j)(5)(D) of the Act also requires that the budget not restrict access to other medically necessary care and services furnished under the State plan and approved by the State but not included in the budget and sets forth the requirements for determining the budget. We address these statutory requirements at proposed Sec. 441.472. Based on our experience with the self-direction waivers and demonstrations, we learned that participants benefited from the flexibility to be able to shift funds among authorized services within the total amount of the budget without prior review and approval. To require the State's review and approval of each budget modification would be administratively untenable and would run counter to the philosophy of self-direction. Therefore, we propose to require at Sec. 441.470(c) that the State have procedures in place that govern how participants may flexibly adjust their budgets. The procedures must minimally include how the participant may freely make changes to the budget; the circumstances that may require prior approval before a budget adjustment is made, for example, purchases above a certain dollar amount; and the circumstances that may also require a modification to the participant's service plan. Section 1915(j)(4)(B)(ii) of the Act allows States, at their option, to permit individuals to use their budget to acquire items that increase independence or substitute for human assistance, to the extent that expenditures would otherwise be made for the human assistance. Based on our experience, we learned that participants benefited from this option and were able to purchase items that allowed them greater independence, such as an accessibility ramp, or that substituted for human assistance, such as a microwave oven. The States that offered this option required that the items to be purchased related to a need identified in the service plan. Some of these states also limited participants' purchases to a list of allowable items for which no prior approval was necessary. Still other States required prior approval for all items, while some others provided a list of allowable items and required prior approval for other items not on the list. In addition, each State developed procedures that governed how participants could save an amount of their monthly budget to purchase these items and how and at what intervals the State would recoup funds that were not spent according to the purchase plan. Accordingly, if a State has elected this option, we propose to require at Sec. 441.470(d), that the State have procedures that govern how a person may put aside or reserve funds to purchase items that increase independence or substitute for human assistance. These items could include additional supports, goods, equipment, or supplies, and the State should indicate if prior approval is required. As stated above, participants benefited from this option and the ability to reserve funds to purchase these items likewise proved beneficial to the participants. Accordingly, we believe it is worthwhile to continue this option under this State plan option. We also recognize that some of the ``Cash and Counseling'' programs allowed participants to use a small amount of their budget to purchase items not otherwise delineated in the budget or earmarked for savings. For example, participants used this discretionary amount to purchase or supplement needed items or services not otherwise covered by Medicaid, such as non-Medicaid covered prescription drugs or transportation to a doctor's appointment. States typically set a dollar limit on the amount of the [[Page 3555]] discretio