Medicaid Program: Rescission of School-Based Administration/Transportation Final Rule, Outpatient Hospital Services Final Rule, and Partial Rescission of Case Management Interim Final Rule, 31183-31196 [E9-15345]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 74, Number 124 (Tuesday, June 30, 2009)]
[Rules and Regulations]
[Pages 31183-31196]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-15345]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 431, 433, 440 and 441

[CMS-2287-F2; CMS-2213-F2; CMS 2237-F]
RIN 0938-AP75


Medicaid Program: Rescission of School-Based Administration/
Transportation Final Rule, Outpatient Hospital Services Final Rule, and 
Partial Rescission of Case Management Interim Final Rule

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule finalizes our proposal to rescind the December 28, 
2007 final rule entitled, ``Elimination of Reimbursement under Medicaid 
for School Administration Expenditures and Costs Related to 
Transportation of School-Age Children Between Home and School;'' the 
November 7, 2008 final rule entitled, ``Clarification of Outpatient 
Hospital Facility (Including Outpatient Hospital Clinic) Services 
Definition;'' and certain provisions of the December 4, 2007 interim 
final rule entitled, ``Optional State Plan Case Management Services.'' 
These regulations have been the subject of Congressional moratoria and 
have not yet been implemented (or, with respect to the case management 
interim final rule, have only been partially implemented) by CMS. In 
light of concerns raised about the adverse effects that could result 
from these regulations, in particular, the potential restrictions on 
services available to beneficiaries and the lack of clear evidence 
demonstrating that the approaches taken in the regulations are 
warranted, CMS is rescinding the two final rules in full, and partially 
rescinding the interim final rule. Rescinding these provisions will 
permit further opportunity to determine the best approach to further 
the objectives of the Medicaid program in providing necessary health 
benefits coverage to needy individuals.

DATES: Effective Date: These regulations are effective on July 1, 2009.

FOR FURTHER INFORMATION CONTACT: Sharon Brown (410) 786-0673 or Judi 
Wallace (410) 786-3197, for issues related to the School-Based 
Administration/Transportation final rule.
    Jeremy Silanskis (410) 786-1592, for issues related to the 
Outpatient Hospital Services final rule.
    Jean Close (410) 786-2804 or Melissa Harris (410) 786-3397, for 
issues related to the Case Management interim final rule.

SUPPLEMENTARY INFORMATION:

I. Background

A. Elimination of Reimbursement Under Medicaid for School 
Administration Expenditures and Costs Related to Transportation of 
School-Age Children Between Home and School

    Under the Medicaid program, Federal payment is available for the 
costs of administrative activities as found necessary by the Secretary 
for the proper and efficient administration of the State plan. On 
December 28, 2007, we published a final rule entitled, ``Elimination of 
Reimbursement under Medicaid for School Administration Expenditures and 
Costs Related to Transportation of School-Age Children Between Home and 
School'' (hereinafter referred to as the School-Based Administration/
Transportation final rule (72 FR 73635)), to eliminate Federal Medicaid 
payment for the costs of certain school-based administrative and 
transportation activities based on a Secretarial finding that these 
activities are not necessary for the proper and efficient 
administration of the Medicaid State plan and are not within the 
definition of the optional transportation benefit. Under the final 
rule, Federal Medicaid payments were not available for administrative 
activities performed by school employees or contractors, or anyone 
under the control of a public or private educational institution, or 
for transportation between home and school. Federal financial 
participation (FFP) remained available for covered services furnished 
at or through a school that are included in a child's individualized 
education program (IEP), and for transportation from school to a 
provider in the community for a covered service. FFP also remained 
available for the costs of school-based Medicaid administrative 
activities conducted by employees of the State or local Medicaid 
agency, and for transportation to and from a school for children who 
are not yet school age but are receiving covered direct medical 
services at the school.
    The December 28, 2007, School-Based Administration/Transportation 
final rule became effective on February 26, 2008. Subsequent to 
publication of the final rule, section 206 of the Medicare, Medicaid, 
and SCHIP Extension Act of 2007 (Pub. L. 110-173) imposed a moratorium 
until June 30, 2008, that precluded CMS from imposing any restrictions 
contained in the rule that are more stringent than those applied as of 
July 1, 2007. Section 7001(a)(2) of the Supplemental Appropriations Act 
of 2008 (Pub. L. 110-252) extended this moratorium until April 1, 2009; 
and section 5003(b) of the American Recovery and Reinvestment Act of 
2009 (the Recovery Act) (Pub. L. 111-5) further extended the moratorium 
until July 1, 2009.

[[Page 31184]]

B. Clarification of Outpatient Hospital Facility (Including Outpatient 
Hospital Clinic) Services Definition

    Outpatient hospital services are a required service under Medicaid. 
On November 7, 2008, we published a final rule entitled, 
``Clarification of Outpatient Hospital Facility (Including Outpatient 
Hospital Clinic) Services Definition'' (hereinafter referred to as 
Outpatient Hospital Services final rule), to introduce new limitations 
on which treatments could be billed and paid as an outpatient hospital 
service, thereby altering the pre-existing definition of ``outpatient 
hospital services.'' The final rule became effective on December 8, 
2008. Section 5003(c) of the Recovery Act precludes CMS from taking any 
action to implement the final rule with respect to services furnished 
between December 8, 2008 and June 30, 2009.

C. Optional State Plan Case Management Services

    On December 4, 2007, we published an interim final rule entitled, 
``Optional State Plan Case Management Services'' (hereinafter referred 
to as the Case Management interim final rule (72 FR 68077)), that 
revised current Medicaid regulations to incorporate changes made by 
section 6052 of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-
171). In addition, we placed new limitations on the services and 
activities that could be covered and paid as an optional targeted case 
management (TCM) service or optional case management service.
    The interim final rule became effective on March 3, 2008. Section 
7001(a)(3)(B)(I) of the Supplemental Appropriations Act imposed a 
partial moratorium until April 1, 2009, precluding CMS from taking any 
action to impose restrictions on case management services that were 
more restrictive than those in effect on December 3, 2007. The law 
contained an exception for the portion of the regulation as it related 
directly to implementing the definition of case management services and 
targeted case management services. That partial moratorium was extended 
by section 5003(a) of the Recovery Act until July 1, 2009.

II. Provisions of the Proposed Regulation and Response to Comments

    Since the publication of these final regulations, we have received 
additional public input about the adverse effects that could result 
from these regulations. In addition, the statutory moratoria indicate 
strong concern in Congress about the effects of these regulations. In 
particular, we have become aware that the provisions of these rules 
could result in restrictions on services available to beneficiaries and 
there is a lack of clear evidence demonstrating that the approaches 
taken in the regulations are warranted at this time.
    On May 6, 2009, we published a proposed rule (74 FR 21230) in the 
Federal Register to rescind the November 7, 2008 Outpatient Hospital 
Services final rule; the December 28, 2007 School-Based Administration/
Transportation final rule; and certain provisions of the December 4, 
2007 Case Management interim final rule. The May 6, 2009 proposed rule 
solicited public comments on our proposal to rescind these rules and to 
aid our consideration of the many complex questions surrounding these 
issues and the need for regulation in these areas.
    We received a total of 556 timely comments from State officials, 
school districts and consortia, educational organizations, child 
advocacy groups, health care organizations, school nurses, parents, 
teachers, school officials, providers, and other interested 
individuals. All comments were reviewed and analyzed. After associating 
like comments, we placed them in categories based on subject matter. 
The commenters were overwhelmingly supportive of our proposal to 
rescind the School-Based Administration/Transportation final rule, the 
Outpatient Hospital Services final rule, and portions of the Case 
Management interim final rule. Summaries of the public comments and our 
responses to those comments are set forth under the appropriate 
headings below.

A. Elimination of Reimbursement Under Medicaid for School 
Administration Expenditures and Costs Related to Transportation of 
School-Age Children Between Home and School

    We proposed to rescind the December 28, 2007 School-Based 
Administration/Transportation final rule in its entirety. The proposed 
rescission was based on concerns that the adverse consequences of the 
final rule may be more significant than previously assumed, and that 
the consideration of alternative approaches may be warranted. Since 
issuing the School-Based Administration/Transportation final rule, we 
became aware that the limitations on Federal Medicaid funding under the 
final rule could adversely affect State outreach and enrollment efforts 
in schools, and therefore limit services for families in need. We had 
previously assumed that, since such activities were within the scope of 
the overall mission of the schools, the activities would continue with 
funding from other sources available for educational activities. 
Conversely, we thought that State Medicaid agencies had sufficient 
resources to outsource its employees in schools to absorb these 
functions. In summary, we were concerned that the assumptions 
underlying the promulgation of the rule may have been invalid, and that 
implementation of the rule could adversely affect Medicaid 
beneficiaries. We requested comments on this issue.
    Moreover, we were concerned that there is insufficient evidence on 
the need for the particular approach taken by the final rule. The 
oversight reviews that we cited in issuing the final rule, indicating 
some deficiencies in procedures for claiming school-based 
administrative expenditures and necessary transportation, were several 
years old and based on data collected more than 5 years ago. These 
claims did not reflect CMS guidance issued after the review data was 
collected; nor did they reflect the greater administrative oversight 
and technical assistance that we have made available more recently. 
Moreover, since CMS has tools at its disposal to address inappropriate 
claiming that could arise in any setting, we would continue to monitor 
claims and evaluate the efficacy of these tools in addressing any 
claiming issues even in the absence of this rule.
    In light of these concerns, we proposed to rescind the provisions 
of the final rule while we further review the underlying issues and 
determine whether a different approach is necessary, and revise the 
regulations to remove the regulatory provisions added by the December 
28, 2007 final rule. We proposed to apply the policies in effect before 
the December 28, 2007 final rule became effective, as set forth in the 
May 2003 Medicaid School-Based Administrative Claiming Guide which 
provides guidance to States on school-based administrative claiming and 
school transportation.
    Specifically, we proposed to revise Sec.  431.53(a) and Sec.  
440.170(a) to remove language indicating that, for purposes of Medicaid 
reimbursement, transportation does not include transportation of 
school-age children from home to school and back when a child is 
receiving a Medicaid-covered service at school. In addition, we 
proposed to remove Sec.  433.20, which provides that Federal financial 
participation (FFP) under Medicaid is not available for expenditures 
for administrative activities by school employees, school contractors, 
or anyone under the control of a public or private educational 
institution.

[[Page 31185]]

    Comment: Many commenters applauded CMS' decision to reconsider the 
merits of the School-Based Administration/Transportation final rule. 
Commenters stated that the final rule was ``bad public policy'' and 
that efforts to rescind the rule are an acknowledgment of the impact 
the final rule would have had on a myriad of stakeholders.
    Response: We appreciate the commenters' support of our proposal to 
rescind the School-Based Administration/Transportation final rule. 
After careful consideration of the concerns raised by commenters, we 
agree that the final rule should be rescinded.
    Comment: The largest number of comments in support of rescinding 
the School-Based Administration/Transportation final rule focused on 
funding issues, noting that rescission will enable school districts and 
many others to continue receiving the desperately needed Federal funds 
to support school-based outreach, enrollment assistance, and improved 
access to medical and transportation services. Many commenters stated 
that students who receive specialized transportation and medical needs 
require schools to expend large sums of money and that reducing or 
eliminating Medicaid funds would have had a major impact on their 
ability to serve this population. The majority of commenters who 
supported the proposed rescission stated that the loss of funds would 
have been devastating to the school district and to the students 
served. The commenters also indicated that staff and services would 
have been cut due to loss of funding.
    Many commenters cited the economy in supporting the proposed 
rescission. ``In light of the recent budget problems,'' one commenter 
stated, ``school districts need all the resources they can get.'' 
Another commenter stated that it is especially important during this 
time of dire budget constraints to maintain the ability of school staff 
to provide outreach and continue to be able to be reimbursed. In 
addition, the commenters believe that this reimbursement is a wise 
investment.
    Response: Since issuing the School-Based Administration/
Transportation final rule, we have become aware that limitations on 
Federal Medicaid funding would have adversely affected State outreach 
and enrollment efforts in schools, therefore limiting services for 
families in need. We previously assumed that, since such activities 
were within the scope of the overall mission of the schools, the 
activities would continue with funding from other sources available for 
educational activities.
    We agree that rescission of the School-Based Administration/
Transportation final rule is necessary to ensure that Medicaid 
administrative activities in schools, and certain transportation 
services, will continue to be provided in schools with Federal Medicaid 
funding. We will continue to apply the policies set forth in guidance 
issued prior to that rule, including the 1999 letter to State Medicaid 
Directors concerning school-based transportation services and the 2003 
Medicaid School-Based Administrative Claiming Guide.
    We will continue to evaluate the efficacy of these tools in 
addressing school-based claiming issues and collaborate with education 
and Medicaid stakeholder groups to discuss ways to improve such tools.
    Comment: Some commenters applauded the proposed rescission of the 
School-Based Administration/Transportation final rule because it would 
allow their school district to continue to help identify students that 
are in need of proper medical attention, as a service to the community, 
and provide needed services to eligible students. Other commenters 
stated that Medicaid funding not only leads to an increase in the 
number of children receiving health insurance, but also increases the 
number of students who receive vital health services. One commenter 
stated that the final rule would have only served to reduce school 
efforts to bring health services to medically compromised children in 
schools across the nation.
    Response: We agree that rescission of the School-Based 
Administration/Transportation final rule is necessary to ensure that 
Medicaid administrative activities in schools, and certain 
transportation services, will continue to be provided in schools with 
Federal Medicaid funding. We will continue to apply the policies set 
forth in guidance issued prior to that rule, including the 1999 letter 
to State Medicaid Directors concerning school-based transportation 
services and the 2003 Medicaid School-Based Administrative Claiming 
Guide.
    We will continue to evaluate the efficacy of these tools in 
addressing school-based claiming issues and collaborate with education 
and Medicaid stakeholder groups to discuss ways to improve such tools.
    Comment: Some commenters stated that the proposed rescission will 
make it easier for States to fulfill requirements under the Early and 
Periodic Screening, Diagnosis and Treatment (EPSDT) benefit specified 
in section 1905(a) of Social Security Act (the Act). They believe that 
the School-Based Administration/Transportation final rule contradicted 
Medicaid's requirements for EPSDT and CMS' previous guidance. The 
commenter indicated that this mandate requires States to inform 
families about the availability of EPSDT services and assist them in 
accessing services. In addition, commenters stated that many school 
systems have contracted with States so that school nurses and staff may 
inform families about EPSDT. Since schools are mandated to provide 
certain services for students with special needs, one commenter stated, 
the funds that support these services must not be cut off.
    Commenters cited the State Medicaid Manual as not only encouraging 
State Medicaid agencies to coordinate EPSDT administrative activities 
with ``school health programs of State and local health agencies,'' but 
also offering FFP to cover the costs to public agencies of providing 
direct support to the Medicaid agency in administering the EPSDT 
program.
    Response: We agree that rescission of the School-Based 
Administration/Transportation final rule is necessary to ensure that 
Medicaid administrative activities, and certain transportation 
services, will continue to be provided in schools with Federal Medicaid 
funding. We will instead reinforce the policies that preceded the 
issuance of that final rule.
    Comment: Some commenters stated that the School-Based 
Administration/Transportation final rule would have had a negative 
impact on Medicaid outreach activities in schools. One commenter 
stated, ``* * * the practical effect of the final rule would [have 
been] to eradicate the successful efforts made by schools to identify 
and enroll low-income children with disabilities into Medicaid.'' A 
substantial number of commenters stated that schools provide a unique 
opportunity to enroll children in Medicaid because the bulk of the 
eligible that are uninsured children attend schools. Other commenters 
stated that schools serve as a safe haven and gateway to health care 
for some of the State's most vulnerable residents, special education 
students, and children in families whose circumstances have limited 
their access to health care.''
    Another commenter stated that reimbursing schools for Medicaid 
administrative activities and health related services is an efficient 
and effective way of ensuring that Federal funds are directed to those 
schools that need them the most. Other commenters recommended that CMS 
continue its support for school-based Medicaid

[[Page 31186]]

administrative activities because it can be an effective way to reach 
children in need of services and to ensure adequate medical care for 
disabled students and their families, who are often low-income and 
uninsured.
    Some commenters referenced the May 2003 CMS Medicaid School-Based 
Administrative Claiming Guide, which states that ``* * * the school 
setting provides a unique opportunity to enroll * * * and to assist'' 
Medicaid eligible children ``access the benefits available to them'' as 
evidence that school-based Medicaid administrative claims should remain 
eligible for FFP.
    Response: We appreciate the commenters' support of our proposal to 
rescind the School-Based Administration/Transportation final rule, and 
of the policies set out in the 2003 CMS Medicaid School-Based 
Administrative Claiming Guide. After careful consideration of the 
concerns raised by commenters, we agree that the final rule should be 
rescinded, and the policies set out in the Medicaid School-Based 
Administrative Claiming Guide, will be reinforced.
    Comment: Some commenters stated that, in supporting the proposed 
rescission of the School-Based Administration/Transportation final 
rule, asking outside agencies to provide the services that schools 
currently provide would be more costly to the State. Other commenters 
stated that, even if employees of State or local Medicaid agencies were 
given this task, it would be far less efficient and effective than the 
current approach to outreach and enrollment activities, which is 
valuable specifically because staff and employees of schools are 
familiar to and trusted by families.
    Response: We agree that rescission of the School-Based 
Administration/Transportation final rule is necessary to ensure that 
needed Medicaid administrative activities and related funding will 
continue in school settings. We will reinforce the policies that 
preceded the issuance of that final rule.
    Comment: Some commenters supported the proposed rescission of the 
School-Based Administration/Transportation final rule because they 
believe their State's claiming practices have improved considerably 
since the early 2000's and that the rationale for developing the final 
rule was based on old data and old practices. As one commenter 
indicated, the main reason cited by CMS was the concern that school-
based administrative expenditures are recognized and claimed properly, 
consistent with Federal law. One commenter indicated that there have 
been no published audit findings to gauge States' compliance with the 
2003 guidelines issued by CMS. Medicaid administrative funding for all 
schools should not have been eliminated for all schools due to the 
problems of a few schools, they concluded. The commenter believes CMS 
should focus its efforts on working with States to ensure proper 
claiming. The commenter also stated that CMS knows that schools provide 
critical administrative services to children in Medicaid.
    Response: We agree that rescission of the School-Based 
Administration/Transportation final rule is necessary to ensure that 
needed Medicaid administrative activities and related funding will 
continue. We intend to provide additional guidance and greater 
administrative oversight and technical assistance. We will also focus 
on program and fiscal integrity to provide guidance and direction to 
avoid duplication and improper claiming.
    Comment: Some commenters focused on alternative approaches to meet 
the objectives of the School-Based Administration/Transportation final 
rule in ensuring valid Medicaid claiming procedures. In support of the 
proposed rescission, several commenters suggested measures that could 
achieve the objectives set out in the final rule, to include: issuance 
of one national standard for claiming developed in conjunction with 
public school officials; one national office to provide clear, 
consistent guidance; consistency of regulation implementation for 
administrative claiming among all regional CMS offices; annual national 
training of State officials overseeing school claiming to ensure 
compliance; individual States to determine how to process claims and 
audit; and a national committee to study the best methods to deliver 
information and services to families in need.
    Other commenters applauded CMS' decision to explore alternatives 
and use existing tools to address inappropriate claiming to the extent 
that any questionable practices continue. Commenters stated that there 
was insufficient evidence to support the approach of the final rule and 
encourage CMS to investigate other, more appropriate methods of 
fulfilling its oversight role. These commenters believe that CMS can 
accomplish this objective without eliminating critically needed Federal 
funding of school-based Medicaid administrative and transportation 
services. The commenters stated that CMS has already increased its 
administrative oversight following reports of improper claiming.
    Many commenters recommended that CMS further promote sound Medicaid 
program operation through clear guidance and technical assistance 
specifically addressing the unique settings and circumstances in which 
school-based services are delivered. Several commenters recommended 
that CMS should simplify claiming for school-based administrative and 
direct medical services provided in the school setting. The commenters 
also stated that methodologies that allow schools to access funds 
legitimately available for Medicaid program services and administrative 
activities will provide the most effective means of serving 
beneficiaries while ensuring proper and efficient program 
administration.
    Response: In the proposed rescission, we specifically requested 
alternative approaches from the public that would allow us to achieve 
the objectives of the School-Based Administration/Transportation final 
rule without eliminating funding for allowable school-based 
expenditures. We agree that consideration of alternative approaches 
with stakeholder input and transparency is warranted. We further agree 
that we already have tools at our disposal to address inappropriate 
claiming that could arise in any setting, including schools. We will 
continue to evaluate the efficacy of these tools in addressing school-
based claiming issues and collaborate with education and Medicaid 
stakeholder groups to discuss ways to improve such tools.

B. Clarification of Outpatient Hospital Facility (Including Outpatient 
Hospital Clinic) Services Definition

    We proposed to rescind the November 7, 2008 Outpatient Hospital 
Services final rule in its entirety. While we previously had perceived 
the rule as having little impact (because it affected only the 
categorization of covered services), we became aware that this 
perception may have been based on inaccurate assumptions. In 
particular, we assumed that, to the extent that covered services were 
no longer within the outpatient hospital benefit category, those 
services could be easily shifted to other benefit categories. However, 
after publication of the final rule, we received input indicating that 
such shifts may be difficult in light of the complexity of State 
funding and payment methodologies and health care service State 
licensure and certification limits. As a result, we became concerned 
that the Outpatient Hospital Services final rule could have an adverse 
impact on the availability of covered services for beneficiaries.

[[Page 31187]]

    Therefore, we proposed to rescind the November 7, 2008 Outpatient 
Hospital Services final rule in its entirety and reinstate the 
regulatory definition of ``outpatient hospital services'' at Sec.  
440.20 that existed before the final rule became effective. 
Specifically, we proposed to remove the provisions at Sec.  
440.20(a)(4)(i), which define Medicaid outpatient hospital services to 
include those services recognized under the Medicare outpatient 
prospective payment system (defined under Sec.  419.2(b)) and those 
services paid by Medicare as an outpatient hospital service under an 
alternate payment methodology. We also proposed to remove the 
requirement at Sec.  440.20(a)(4)(ii) that services be furnished by an 
outpatient hospital facility or a department of an outpatient hospital 
as described at Sec.  413.65. Finally, we proposed to remove the 
provision at Sec.  440.20(a)(4)(iii) that limits the definition of 
outpatient services to exclude services that are covered and reimbursed 
under the scope of another Medicaid service category under the Medicaid 
State plan.
    In addition, we proposed to withdraw Sec.  447.321 of the proposed 
rule published on September 28, 2007 (72 FR 55158) upon which we 
reserved action in the final rule. These provisions contained 
regulatory guidance on the calculation of the outpatient hospital and 
clinic services upper payment limit (UPL).
    Overall, many commenters offered general support for the rescission 
of the Clarification of Outpatient Hospital Facility (Including 
Outpatient Hospital Clinic) Services Definition as part of comments 
that specifically addressed other aspects of Outpatient Hospital 
Services final rule.
    Comment: One commenter explained that the Outpatient Hospital 
Services final rule could result in access and quality issues for 
Medicaid physical therapy services. The commenter reasoned that since 
outpatient hospital services are a mandatory Medicaid benefit and 
physical therapy services are optional, outpatient hospital settings 
offer ``a bridge to care for thousands of physical therapy patients 
under their State Medicaid program'' in States that offered a limited 
physical therapy benefit. The commenter stated that removing physical 
therapy services from the definition of outpatient hospital services 
would cause access and quality of care to suffer.
    Response: We understand the commenters' concerns. However, we never 
intended to restrict access to physical therapy services and States 
have some flexibility in defining optional Medicaid benefits. The 
provisions of the Outpatient Hospital Services final rule should not 
have limited the access to and the quality of physical therapy 
services. This action rescinding the Outpatient Hospital Services final 
rule will eliminate this confusion.
    Comment: Several commenters stated that the clarification of 
Medicaid outpatient hospital services failed to recognize services that 
may be unique to individuals served under Medicaid, in particular 
services covered in children's hospitals. These commenters stated that 
the Medicare outpatient hospital definition is too restrictive to meet 
the needs of those served under the Medicaid program.
    Response: The Outpatient Hospital Services final rule did not 
restrict the services which States could provide in outpatient hospital 
facilities or to individuals covered under the Medicaid program. The 
rule merely clarified which of those services could be defined as and 
reimbursed under ``outpatient hospital services.'' States would have 
continued to be able to reimburse for other services provided in the 
outpatient hospital facility, if those services were authorized under 
the State's approved Medicaid State plan. This final rule should 
alleviate any potential concerns with coverage limitations by 
reinstating the regulatory definition of ``outpatient hospital 
services'' at Sec.  440.20 that existed before the previous final rule 
became effective.
    Comment: A number of commenters offered concerns that the 
Outpatient Hospital Services final rule placed limitations on payment 
for Medicaid services or restricted States' abilities to move services 
from costly inpatient settings to less costly outpatient settings.
    Response: The Outpatient Hospital Services final rule did not place 
restrictions on States' abilities to reimburse Medicaid providers, set 
payment rates within applicable upper payment limits, or provide 
services in outpatient settings. Medicaid outpatient hospital services 
are limited to a reasonable estimate of what Medicare would pay for 
Medicaid equivalent services in accordance with Sec.  447.321. This is 
an aggregate test for State government-owned or operated, non-State 
government-owned or operated and private facilities. The rescission 
does not impact the UPL requirements for outpatient hospital or clinic 
services that are currently in the regulations.
    We are fully supportive of States' efforts to provide quality 
services in low-cost settings. This final rule to rescind the previous 
rule should eliminate any potential issues with shifting services from 
more costly to less costly hospital settings.
    Comment: A few commenters supported the proposal to withdraw the 
outpatient hospital and clinic UPL requirements that were proposed in 
our Outpatient Hospital Services proposed rule (CMS reserved action on 
these provisions as part of Outpatient Hospital Services final rule). 
These commenters explained that the proposed UPL requirements were 
overly restrictive and excluded several Medicaid costs typically paid 
by States through the outpatient hospital benefit.
    Response: CMS appreciates the support of these commenters. However, 
we note that we will continue to require States to demonstrate that 
Medicaid outpatient hospital and clinic service payments, in the 
aggregate for State government-owned or operated, non-State government-
owned or operated and private facilities, do not exceed a reasonable 
estimate of the amount that would be paid for the services furnished by 
the group of facilities under Medicare payment principles. To do so, 
States will need to show that they are comparing the same scope of 
covered services.
    Comment: Many rural health clinics commented that the Outpatient 
Hospital Services final rule would result in individuals seeking 
services through emergency departments ``at a higher cost to 
taxpayers.'' These providers also stated that excluding rehabilitative, 
school-based, and practitioner services from the outpatient hospital 
benefit would cut funding and services. Many of the rural health clinic 
providers were concerned that the final rule would eliminate the 
clinics' costs from a hospital's disproportionate share hospital (DSH) 
calculations. Several other commenters also raised concern that the 
clarification of the outpatient hospital services definition would 
reduce hospital DSH costs.
    Response: The Outpatient Hospital Services final rule did not 
require any shifting of services to more costly settings or cut funding 
for Medicaid covered services. Rather, the Outpatient Hospital Services 
rule was limited to requiring States to distinctly define outpatient 
hospital facility services and other Medicaid benefits in the Medicaid 
State plan. This final rule should eliminate the concerns expressed by 
the clinics and other providers by reinstating the regulatory 
definition of ``outpatient hospital services'' at Sec.  440.20 that 
existed before the final rule became effective.
    Comment: One commenter stated concerns that the assumptions

[[Page 31188]]

acknowledged by CMS as inaccurate with respect to the Outpatient 
Hospital Services final rule were carried over into other Medicaid 
rulemaking. The commenter referenced the December 19, 2008 DSH 
reporting and auditing requirements final rule (73 FR 77904). The 
commenter did not specify which provisions of the rulemaking were 
carried over from the Outpatient Hospital Services final rule to the 
Medicaid DSH Auditing and Reporting final rule. However, the commenter 
requested that CMS clarify that States are not bound by any of the 
provisions or policies reflected in the subject outpatient hospital 
regulations when determining the uncompensated costs of services for 
DSH purposes.
    Response: The Outpatient Hospital Services final rule addressed 
different policies than those discussed under the Medicaid DSH Auditing 
and Reporting final rule. The rescission of the Outpatient Hospital 
Services final rule has no impact on the provisions of the DSH Auditing 
and Reporting final rule. The DSH rule provides guidance to States on 
those outpatient hospital service costs that should be included in DSH 
calculations, which is independent from the outpatient hospital service 
clarification provided in the Outpatient Hospital Services final rule. 
For further discussion of the DSH Auditing and Reporting provisions, we 
refer readers to the December 19, 2008 final rule (73 FR 77904). Any 
concerns over the potential impact of the Outpatient Hospital Services 
final rule on DSH should be alleviated by restoring the regulatory 
definition of ``outpatient hospital services'' at Sec.  440.20 that 
existed before the Outpatient Hospital Services final rule became 
effective.
    Comment: One commenter supports the rescission of the Outpatient 
Hospital Services final rule because the clarification to the 
outpatient definition resulted in an administrative burden to States 
and offered no real policy purpose.
    Response: The proposed rescission acknowledged that we initially 
believed the Outpatient Hospital Services final rule would result in 
little administrative burden on States based on information we received 
through the State plan review process. Based on additional information 
from stakeholders, these assumptions appear inaccurate. The rescission 
should alleviate the concerns of the commenter by restoring the 
regulatory definition of ``outpatient hospital services'' at Sec.  
440.20 that existed before the Outpatient Hospital Services final rule 
became effective.

C. Optional State Plan Case Management Services

    We proposed to rescind certain provisions of the December 4, 2007 
Case Management interim final rule. In discussions with States about 
the implementation of case management requirements, we became concerned 
that certain provisions of the Case Management interim final rule may 
unduly restrict beneficiary access to needed covered case management 
services, and limit State flexibility in determining efficient and 
effective delivery systems for case management services.
    In particular, we were concerned that the Case Management interim 
final rule may be overly narrow in defining individuals transitioning 
to community settings. Specifically, the interim final rule contained 
parameters specifying short-term and long-term stays and included 
limits on days of targeted case management services associated with 
these different lengths of stay. In addition, we were concerned that 
States' service delivery systems would be affected by the limitations 
in the interim final rule on payment methodologies, and on the 
provision of case management services by other agencies or programs.
    We were also concerned that the Case Management interim final rule 
may have unintentionally impacted Federal Medicaid requirements with 
respect to administrative claiming, as the regulation was not intended 
to redefine the types of activities that are allowable as Medicaid 
administrative case management.
    Many of these same issues were raised by public commenters, and we 
share their concern that beneficiaries and the program as a whole may 
be adversely impacted if these provisions were implemented. We believe 
that these same concerns were also reflected in the Congressional 
moratorium on the implementation of this rule and the administrative 
requirements and limitations included in the interim final rule. 
Therefore, we proposed to rescind certain provisions of the Case 
Management interim final rule.
    Specifically, we proposed to remove Sec.  440.169(c) and Sec.  
441.18(a)(8)(viii), because we were concerned that these provisions may 
be overly restrictive in defining ``individuals transitioning to a 
community setting,'' for whom case management services may be covered 
under Sec.  440.169(a). We thought that, until we address the comments 
submitted on the Case Management interim final rule, States should have 
additional flexibility to provide coverage using a reasonable 
definition of this term. We also proposed to remove Sec.  441.18(a)(5), 
which would have required case management services to be provided on a 
one-on-one basis to eligible individuals by one case manager. We 
believed that this provision may unduly limit States' delivery systems 
for case management services. We further proposed to remove Sec.  
441.18(a)(8)(vi) because the requirement for payment methodologies in 
this provision may be administratively burdensome, may result in 
restrictions on available providers of case management services, and 
generally may limit beneficiary access to services. For similar 
reasons, in Sec.  441.18, we proposed to rescind paragraphs (c)(1), 
(c)(4), and (c)(5) that limit the provision of case management 
activities that are an integral component of another covered Medicaid 
service, another non-medical program, or an administrative activity. On 
the issues addressed by these rescinded provisions, we proposed to 
continue to apply the interpretive policies in force prior to issuance 
of the Case Management interim final rule.
    We proposed to rescind parts of Sec.  441.18(c)(2) and (c)(3) to 
remove references to programs other than the foster care program, 
because we are concerned that these provisions may be overly 
restrictive in defining State options for the delivery of case 
management services. We proposed to consolidate the remaining 
provisions of these paragraphs as paragraph (c) (see 74 FR 21237, May 
6, 2009).
    We proposed to retain the remaining provisions of the Case 
Management interim final rule, and finalize those provisions in a 
future rulemaking.
    Most commenters supported the rescissions included in the Case 
Management proposed rule. The following section summarizes general 
comments about the rule or issues not contained in specific provisions 
included in the proposed rule:
General Comments
    Comment: Many commenters asked CMS to rescind all provisions of the 
Case Management interim final rule. Many commenters expressed concern 
that the provisions would significantly limit State flexibility in 
providing case management in the most effective and efficient manner 
possible. In addition, the commenters stated the provisions would pose 
additional barriers and would be more burdensome for providers of case 
management services. Several commenters stated the restrictions on case 
management included in the interim final rule would

[[Page 31189]]

inevitably shift the financial responsibility for case management to 
school districts across the nation.
    Response: Under section 6052 of the DRA, the Secretary of the 
Department of Health and Human Services was authorized to promulgate an 
interim final regulation to define case management and targeted case 
management services.
    We agree with commenters that certain provisions in the interim 
final rule may limit State flexibility in structuring case management 
services. Therefore, we proposed to rescind certain provisions of the 
Case Management interim final rule which are discussed in this 
document. However, we do not have the authority to rescind the interim 
final rule in its entirety, as section 6052 of the DRA amended the 
statute directly by defining case management services in section 
1915(g) of the Act. We disagree with comments contending that the 
proposed or interim final rules regarding Medicaid case management 
services would shift the financial responsibility for case management 
to school districts. It is important to clarify that Medicaid 
reimbursement remains available for targeted case management services 
and other covered services, which are included in an eligible child's 
Individualized Education Program (IEP) or Individualized Family Service 
Plan, consistent with section 1903(c) of the Act.
    Comment: Many commenters indicated the final regulation should not 
apply to Home and Community-Based Services (HCBS) waiver programs 
operated under section 1915(c) of the Act. Several commenters expressed 
concern that the Case Management interim final rule would impede State 
efforts to end the institutional bias in Medicaid. The commenters 
expressed that it is contrary to a number of programs already 
implemented by the Administration such as the Money Follows the Person 
grant program and Aging and Disability Resource Centers grants, which 
provided States with the tools necessary to serve frail older people in 
their homes and communities. The commenters stated that States would 
have to revamp their existing programs in order to adhere to the rules 
set forth in the rule. The commenters stated the rule undermines State 
level efforts to streamline and provide more efficient and cost-
effective targeted case management systems and home and community-based 
services through the aging services network under Medicaid and works 
against the Supreme Court's decision in Olmstead and the Older 
Americans Act.
    Response: We clarify that the rule does not apply to those 
activities that HCBS waiver programs must perform to meet the statutory 
assurances and other requirements of section 1915(c) of the Act. These 
functions include--(1) an eligibility determination; (2) an evaluation 
of need that includes both an initial evaluation and periodic re-
evaluations; (3) a written plan of care; and (4) monitoring of the plan 
of care to assure the health and welfare of each individual served 
through the waiver program. However, in those instances in which States 
elect to offer targeted case management service as a State Plan service 
under section 1915(g) of the Act to persons enrolled in a 1915(c) 
waiver program, the provisions of the interim final rule would apply.
    We disagree that clearly defining case management and targeted case 
management services impedes State efforts to end institutional bias in 
Medicaid. In addition, we disagree that the rule is contrary to the 
Money Follows the Person grant program or Aging and Disability Resource 
Center initiatives which CMS and the Administration on Aging have 
promoted and funded. These initiatives are based on partnerships 
between the Federal government, State governments, and private 
organizations to serve and provide access to long-term care services 
and supports for older people and people with disabilities. These 
initiatives are not solely, or even primarily, dependent upon a funding 
stream under the Medicaid case management benefit.
    To the extent that the basis for the commenters' concerns is that 
the rule restricts Medicaid beneficiaries to case management furnished 
through particular providers, these concerns are inconsistent with the 
Medicaid freedom of choice requirements in section 1902(a)(23) of the 
Act (and the exceptions authorized to ensure qualified providers), 
which provide individuals with a choice of qualified, Medicaid 
providers.
    Comment: Several commenters submitted comments on provisions of the 
Case Management interim final rule, which were not included in the Case 
Management proposed partial rescission rule.
    Response: The comment period for the December 4, 2007 Case 
Management Services interim final rule closed on February 4, 2008. We 
appreciate the submitted comments; however, these comments are beyond 
the scope of the Case Management proposed partial rescission rule. CMS 
will respond to comments received on the interim final rule in a future 
rulemaking document.
    Comment: We received several comments in support of our proposal to 
remove Sec.  440.169(c) and Sec.  441.18(a)(8)(viii), which defined 
case management services for the transitioning of individuals from 
medical institutions to the community as well as related State plan 
requirements. Commenters indicated the provisions would have limited 
services to individuals transitioning to community settings and 
applauded CMS for recognizing the provisions were overly restrictive in 
defining individuals transitioning to community settings. One commenter 
stated that these provisions would place stricter limits on the 
duration of case management services when an individual is 
transitioning from a hospital or other institution to the community. 
One commenter expressed concern that these provisions would have 
imposed unrealistic and impractical deadlines on the amount of time 
needed to assist in the safe and orderly transition of such 
individuals. One commenter stated these provisions were at odds with 
the Olmstead v. L.C. decision.
    One commenter requested clarification about transitional Targeted 
Case Management (TCM) services provided to residents of an institution 
for mental disease (IMD).
    A commenter stated that prohibiting Federal financial participation 
(FFP) until the date individuals leave the institution would place a 
significant cost burden on case management providers under Money 
Follows the Person grant and waiver programs.
    Response: Public comments on the rescission of Sec.  440.169(c) and 
Sec.  441.18(a)(8)(viii) support our contention that the definition of 
targeted case management for the purpose of assisting individuals 
residing in medical institutions to community living was overly 
restrictive. We agree with commenters that some target groups receiving 
case management services in institutions may need a period of longer 
than 60 days of services in order to successfully transition to 
community living. We considered the many comments that indicated the 
period for facilitating transition is impacted by individuals' changing 
health status as well as behavioral challenges, which may delay or 
prevent transition into the community.
    Our rescissions provide States with the flexibility to determine 
the duration of this service, up to 180 consecutive days, to respond to 
the complexity of the needs and the current capacities of the supports 
needed to successfully transition individuals to the

[[Page 31190]]

community. Guidance from the July 25, 2000 State Medicaid Directors 
Letter, Olmstead Update No. 3, will continue to provide the parameters 
under which States may receive reimbursement for case management 
services for the purpose of transitioning from medical institutions to 
the community. Specifically, TCM, as defined in section 1915(g) of the 
Act, may be furnished as a service to institutionalized persons who are 
about to leave the institution in order to facilitate their transition 
to community services and enable them to gain access to needed medical, 
social, educational and other services in the community. TCM may be 
furnished during the last 180 consecutive days of a Medicaid eligible 
person's institutional stay for the purpose of community transition. 
States may specify a shorter time period or other conditions under 
which targeted case management may be provided. FFP is not available 
for any Medicaid service, including targeted case management services, 
provided to persons who are receiving services in an institution for 
mental disease (IMD), except for services provided to elderly 
individuals and children under the age of 21 who are receiving 
inpatient psychiatric services.
    Comment: One commenter supported our proposal to remove Sec.  
441.18(a)(4), which required that the State's plan provide that case 
management services will not duplicate payments made to public agencies 
or private entities under the State plan and other program authorities, 
for the same purpose. (We note that this provision was included among 
the provisions to be rescinded in the Case Management proposed rule's 
regulation text under Part 441.18; however, the proposed rule's 
preamble did not discuss this provision.)
    Response: We acknowledge that this provision was included in the 
proposed rule's regulation text in error. We are retaining Sec.  
441.18(a)(4). While we believe that States must have flexibility in 
establishing Medicaid programs that best meet their unique 
circumstances as well as those of Medicaid participants, we are also 
concerned that consistent guidance has not been available regarding the 
circumstances under which FFP would be available. The requirement that 
FFP would not be available for duplicate payments to public or private 
entities for the same purpose arose from the conference report of the 
Consolidated Omnibus Budget Reconciliation Act of 1985 which 
accompanied the original authorization of case management under section 
1915(g) of the Act. Subsequently, this guidance was reiterated in the 
State Medicaid Manual (SMM) at section 4302.2(F).
    Comment: One commenter stated that CMS needs to make it clear to 
State Medicaid agencies that this rule does not provide a basis for 
States requiring a Federally Qualified Health Center (FQHC) to use its 
section 330 grant funds to cover any portion of case management 
services provided by the health center to its patients. The commenter 
stated that such a requirement would be inconsistent with the long 
standing recognition on the part of the Congress and the Department of 
Health and Human Services (HHS) that Medicaid and Medicare are first 
payers for Medicaid and Medicare covered services provided to Medicaid 
and Medicare patients of a health center.
    Response: Federally Qualified Health Centers (FQHCs) will continue 
to be reimbursed in accordance with section 1902(bb) of the Act, under 
which States reimburse FQHCs through either a prospective payment 
system or an alternative reimbursement methodology. The Case Management 
proposed rule would not have an impact on FQHC reimbursement 
methodologies or grants received under section 330 of the Public Health 
Service Act.
    Comment: We received many comments in support of our proposal to 
remove Sec.  441.18(a)(5), which would require case management services 
to be provided on a one-to-one basis to eligible individuals by one 
case manager. The commenters expressed concern that the provision would 
limit the States' flexibility by prohibiting a State from providing a 
child with more than one case manager even when the complexity of the 
child's condition demands the expertise of more than one program. The 
commenters recognized the importance of limiting the number of case 
managers that may be involved; however, some individuals have multiple 
and complex needs that intersect with several service delivery systems 
of care. One commenter suggested States should be required to provide 
assurances in their State plans that case management will not be 
duplicative and to indicate a methodology that ensures that duplication 
does not occur.
    Response: We agree with the commenters and have removed Sec.  
441.18(a)(5). Even though case management and targeted case management 
services are comprehensive services, we believe that more than one case 
manager may be responsible and accountable for facilitating access to 
needed services. In rescinding this provision, we recognize that case 
managers may need to draw on other practitioners with special 
expertise, and may also tap the resources of a larger organization for 
support and overhead. In addition, if case managers were on leave or 
vacation, others could be assigned as substitutes to facilitate 
continuity of care and services. In addition, we recognize that case 
managers may need to rely on other practitioners to provide support for 
particular tasks. That is, reimbursement would be available for 
services other than case management, including direct services provided 
to the individual, that may contribute to the case management process, 
such as assessments furnished under the benefit for physicians' 
services or psychologists' services under the rehabilitative services 
benefit.
    By removing the one case manager provision, we recognize the 
advantages of a team approach to case management services. For example, 
a lead case manager could coordinate resources and expertise from 
providers of medical, education, social, or other services for the 
benefit of the individual in developing a comprehensive plan of care 
and facilitating access to services. To facilitate this service model, 
States may set differential rates to reflect case or task complexity 
that would ensure sufficient payment to reflect the costs that case 
managers may incur in consulting with other practitioners. States 
should ensure that differential payment methodologies are reflected in 
the State's Medicaid plan.
    Comment: We received a few comments in support of our proposal to 
remove Sec.  441.18(a)(6), which prohibited providers of case 
management services from exercising the State Medicaid agency's 
authority to authorize or deny the provision of other services under 
the plan. (We note that this provision was included among the 
provisions to be rescinded as described in the Case Management proposed 
rule's preamble; however, this provision was not listed among those to 
be rescinded in the proposed rule's regulation text under Sec.  
441.18.) The commenters stated this provision is administratively 
burdensome and may limit beneficiary access to services. One commenter 
indicated it should be left to the States to delegate the agency's 
authority to authorize or deny certain services to a case manager who 
is most familiar with the individual's needs.
    Response: We acknowledge that this provision was included, in 
error, in the Case Management proposed rule preamble. We disagree with 
comments that this provision is administratively burdensome and have 
retained this

[[Page 31191]]

provision to clarify that the State Medicaid agency authorizes or 
denies services. The provision would not require the State Medicaid 
agency to review each individual's care plan. Operating agencies or 
other entities such as counties may approve service plans as part of 
day-to-day operations. However, the Medicaid agency, at a minimum, must 
review at least a sample of care plans retrospectively or employ other 
methods to ensure that plans have been developed in accordance with 
applicable policies and procedures and that the plans ensure the health 
and welfare of participants. This oversight activity is a critical 
element of the Medicaid agency's responsibility. Furthermore, the 
function of prior authorization requires the judgment of the Medicaid 
agency and may not be delegated to anyone other than a Medicaid agency 
employee. Prior authorization is a legitimate function of the State 
Medicaid agency, which is performed as an appropriate component of the 
administration of the State plan.
    Comment: We received many comments in support of our proposal to 
remove Sec.  441.18(a)(8)(vi) concerning the payment methodology for 
case management services. This provision would have required a payment 
methodology under which case management providers would be paid at 
rates calculated using a unit of service that would not exceed 15 
minutes. One commenter recommended that each State be allowed to design 
its own reimbursement methodology, rather than having one mandated. One 
commenter expressed concern that the 15 minute unit requirement would 
be seen as the minimum standard of providing the service. Many 
commenters stated this provision was administratively burdensome and 
may limit beneficiary access to services. One commenter stated the 15 
minute unit requirement may have resulted in additional costs for the 
State due to increased staffing needs, increased payments for case 
management activities, fewer controls, the need to restructure 
eligibility and service authorization and significant changes to 
information technology systems. A few commenters recommended CMS 
continue to allow flexibility in reimbursement methodologies. The 
commenters indicated that per diem, daily, weekly or monthly rates 
should be allowed as well as fifteen minute units.
    A few commenters expressed concern that the proposed rule did not 
address the prohibition on payment methodologies that bill under a 
``bundled'' rate. The commenters stated the continuation of this 
prohibition could lead to fragmentation in State systems, multiple 
providers duplicating activities, and decreased access to home and 
community based services through a single point of entry system. One 
commenter expressed concern that the 15 minute unit would have required 
extensive cost analysis with accompanying time studies in order to 
validate rates.
    Response: We agree with commenters that the payment methodologies 
included in the Case Management interim final rule may be 
administratively burdensome and overly restrict service models employed 
by States, and therefore we are rescinding this provision. We believe 
States should have the flexibility to develop payment methodologies 
other than 15 minute units. By removing this provision, we are 
permitting billing units of 15 or fewer minutes, as well as hourly, 
daily and weekly units; however, States must continue to demonstrate 
the economy and efficiency of all billing units and rates. This policy 
is based on section 1902(a)(30)(A) of the Act, which requires that 
States have methods and procedures to assure that payments are 
consistent with efficiency, economy, and quality of care.
    Specifically, States will be required to demonstrate the 
development of each of the billing unit rates based on identified cost 
elements, including the salaries of the professionals providing the 
service, the percentage of time case managers spend on case management 
activities, substantiated overhead or indirect costs and the 
methodology used to allocate those costs to Medicaid. States may not 
always have access to commercial provider costs, and in such 
circumstances, States will be permitted to provide evidence that rates 
are market-based. Evidence may include the demonstration of commercial 
rates charged for case management-like services in the State or other 
demonstrations of rates for like services in the local health care 
market. CMS does not permit the use of fee-for-service rates paid to 
providers on a monthly basis. States seeking to use monthly rates are 
to meet the managed care requirements of 42 CFR part 438.
    This rule does not address the issue of ``bundled'' payments. CMS 
will continue to work with States on an individual basis to establish 
an acceptable reimbursement methodology for TCM services.
    Comment: We received a few comments specifically supporting our 
proposal to remove Sec.  441.18(c)(1), which stated that case 
management does not include and FFP is not available for expenditures 
for services defined in Sec.  440.169 when case management activities 
are an integral component of another covered Medicaid service.
    Another commenter requested clarification that case management 
activities provided or arranged by a provider in a Primary Care Case 
Management (PCCM) program are allowable.
    Response: We agree with the comments and have removed this 
provision. We will continue to apply existing interpretive policies 
regarding reimbursement for case management activities that are a 
component of another covered Medicaid service. Existing policies are 
summarized in the State Medicaid Manual at section 4302.A.1. and 
4302.B. To include those activities as a separate benefit would result 
in duplicate coverage and payment. This activity would not be 
consistent with effective and efficient operation of the program.
    To clarify, the rule does not apply to Primary Care Case Management 
(PCCM) services. PCCM services remain unchanged and are defined in 
Sec.  440.168 of the Medicaid regulation.
    Comment: We received several comments specifically supporting or 
disagreeing with our proposal to rescind parts of Sec.  441.18(c)(2) 
and Sec.  441.18(c)(3) and consolidate the remaining provisions of 
these paragraphs as paragraph (c). These provisions stated that case 
management does not include and FFP is not available for activities 
which constitute the direct delivery of underlying medical, 
educational, social, or other services to which an eligible individual 
has been referred, as well as activities integral to the administration 
of foster care programs, such as those described in proposed Sec.  
441.18(c)(1) through (c)(8). The commenters supporting the rescission 
of the provisions stated that the provisions would force States to 
fragment services provided to children in foster care, a situation that 
is contrary to the purpose of the case management benefit. One 
commenter did not support the rescission of 441.18(c)(3). The commenter 
stated case management is done appropriatel