Medicaid Program; Self-Directed Personal Assistance Services Program State Plan Option (Cash and Counseling), 3546-3566 [08-115]

Agencies

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

[Federal Register Volume 73, Number 13 (Friday, January 18, 2008)]
[Proposed Rules]
[Pages 3546-3566]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-115]



[[Page 3545]]

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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 441



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

Federal Register / Vol. 73, No. 13 / Friday, January 18, 2008 / 
Proposed Rules

[[Page 3546]]


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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.

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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 https://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: https://
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

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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

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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 t