CMS Issues Final Rule on the Use of Medicaid Waivers in Home and Community-Based Services Settings

January 29, 2014

On Jan. 16, 2014, the Centers for Medicare and Medicaid Services (CMS) issued a final rule amending Medicaid regulations on the definition of state plan home and community-based services (HCBS) under the Social Security Act (the Act) amended by the Patient Protection and Affordable Care Act. Section 1915(c) of the Act authorizes the Secretary of Health and Human Services to waive certain Medicaid requirements to allow states to address the needs of certain target groups of individuals who opt to receive long-term care in the home or community setting, rather than an institutional setting, by providing HCBS services. This final rule ends a nearly five-year comment process on important changes to the HCBS waiver program. Moreover, the final rule moves away from earlier definitions based on the description of the care setting and takes an outcome-based approach by focusing on the needs and goals of individuals, while efficiently managing Medicaid resources. Below is a summary of key provisions of the final rule:

  1. Definition of HCBS: The five-year commentary process led to a transformation of the definition of HCBS from using metrics such as location and geography of the care setting to the nature and quality of the individual’s experience in the care setting. For example, for a care setting to be considered an HCBS setting, it must ensure an individual’s right to privacy, personal choice for roommates and living conditions, and ability to undergo daily activities without restraint. Settings that do not meet these qualities or that shield individuals from the community will likely be considered institutional settings and not HCBS settings. States have one year to submit a transition plan to CMS explaining how they will bring their current waivers and state plans into compliance with the new definition. Part of the plan must address the procedure for incorporating public input into the plan development process. CMS will approve transition plans for up to five years depending on the level of compliance by a state.
  2. Individual-centered Planning: The final rule requires that service planning for participants in HCBS be focused on addressing the long-term needs of the participants and meeting individual goals and preferences. The individual receiving the HCBS services should direct the planning process, but may appoint representatives to take part in the planning, or even manage it. The plan must include meeting individual goals in money management, education, employment, health care, wellness and community participation. Furthermore, the plan should contain the services being provided and whether the individual prefers to self-direct them.
  3. Multiple Target Waivers: Before the final rule, a single HCBS waiver could serve only one of the three target groups: older adults/individuals with disabilities; individuals with developmental or intellectual disabilities; or individuals with mental illness. The new final rule allows a state to designate multiple target population groups for a single waiver. However, if a state elects to pursue a multiple waiver, it must provide CMS with assurances that it can adequately meet the needs of each target group’s individuals and that all individuals have equal access to care in the state.
  4. Timing and Amendment of Waivers: Waiver amendments with substantive changes may only be effective upon approval by CMS. Substantive changes may include changes in eligible population targets or a material alteration or reduction in particular services. These changes could have a substantial impact on individuals. Thus, CMS requires states to submit supporting information with waiver amendments involving substantial changes to show how the transition will have a minimum effect on those individuals impacted by the changes. Finally, states must provide the public with notice of waiver amendments and setting payment reductions, and provide the ability for the public to submit input on waiver amendments.
  5. Oversight of Waivers: The main purpose of the HCBS waiver process is to provide better health and wellness services to individuals. To enforce that purpose, the final rule provides the Secretary with authority to oversee state implementation of waivers. That authority includes the coordination of state efforts and termination power over a state’s waiver in the wake of noncompliance.

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