Payments for Vocational Rehabilitation Services

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Parts 404 and 416

RIN 0960-AD50

Payments for Vocational Rehabilitation Services

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

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

SUMMARY: We are amending our regulations on the vocational

rehabilitation (VR) payment programs under titles II and XVI of the

Social Security Act (the Act). These changes: (1) Expand access to the

use of private and public non-State VR providers when a State VR agency

declines to provide VR services to an individual whom we refer for

services; (2) explain that, in appropriate cases, we will pay for only

those VR services which have a causal relationship to an individual's

performance of substantial gainful activity (SGA) for a continuous

period of 9 months; and (3) prescribe the specific kinds of VR services

for which we will pay. The changes are intended to make VR services

more readily available to individuals under our VR payment programs and

to improve the administration and cost effectiveness of these programs.

EFFECTIVE DATES: These rules are effective March 15, 1994, except that

paragraphs (c)(2), (f)(1) and (f)(2) of Secs. 404.2104 and 416.2204

shall become effective on October 1, 1994 with respect to Social

Security beneficiaries or Supplemental Security Income (SSI) recipients

whom the Social Security Administration (SSA) refers to a State VR

agency on or after October 1, 1994, and Secs. 404.2121 and 416.2221

shall become effective on October 1, 1994.

FOR FURTHER INFORMATION CONTACT: Jack Schanberger, Legal Assistant, 3-

B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD 21235,

(410) 965-8471.

SUPPLEMENTARY INFORMATION: These final rules amend our regulations at

Secs. 404.2101 et seq. and Secs. 416.2201 et seq., which prescribe the

rules for the title II and title XVI VR payment programs under sections

222(d) and 1615(d) of the Act. The final rules take into consideration

the comments we received from interested individuals and public and

private organizations and groups on the proposed rules we published on

July 24, 1992 (57 FR 32926). These comments and the changes we have

made in the proposed rules are discussed below.

In general, sections 222(d) and 1615(d) of the Act authorize the

Secretary of Health and Human Services (the Secretary) to use the title

II trust funds and the title XVI general fund to pay a State for the

reasonable and necessary costs of VR services provided to a title II

social security beneficiary who is disabled or blind or to a title XVI

recipient who is disabled or blind, in three categories of cases.

Specifically, these sections permit payment for VR services furnished

to such beneficiaries or recipients in cases where: (1) The furnishing

of such services results in the individual's performance of SGA for a

continuous period of 9 months; (2) the individual is continuing to

receive benefits, despite his or her medical recovery, under section

225(b) or 1631(a)(6) of the Act because of his or her participation in

a VR program; or (3) the individual, without good cause, refused to

continue to accept VR services or failed to cooperate in such a manner

as to preclude his or her successful rehabilitation. Payment may be

made for the reasonable and necessary costs of VR services provided in

these cases as determined in accordance with criteria established by

the Commissioner of Social Security (the Commissioner).

Sections 222(d) and 1615(d) of the Act permit payment to a State

for VR services if the services are provided by a State VR agency,

i.e., an agency administering a State plan for VR services approved

under title I of the Rehabilitation Act of 1973, as amended. However,

in the case of a State which is unwilling to participate or does not

have such a plan for VR services, section 222(d)(2) of the Act

authorizes the Commissioner to enter into agreements or contracts with

alternative VR service providers (alternate participants) for the

purpose of providing VR services to disability beneficiaries under the

title II VR payment program under the same conditions that would apply

to a State VR agency. While section 1615(d) of the Act is silent with

regard to alternate participants, section 1633(a) of the Act provides

authority for using alternate participants under the title XVI VR

payment program inasmuch as the latter section gives the Secretary the

authority to make administrative and other arrangements under title XVI

in the same manner as they are made under title II. Moreover, the

legislative history of section 1615(d) indicates that Congress intended

the title XVI VR payment program to parallel the title II program. Our

title II and title XVI regulations, therefore, contain virtually

identical provisions for the title II and title XVI VR payment

programs.

When we first published final regulations to implement sections

222(d) and 1615(d) of the Act on February 10, 1983, at 48 FR 6286, we

indicated that we would reexamine the provisions of the regulations and

consider possible changes after we had gained experience administering

the title II and title XVI VR payment programs. Certain recommendations

contained in the March 1988 Report of the Disability Advisory Council

also suggested a need to consider new approaches to these programs to

increase the availability of VR services for disabled or blind

beneficiaries and recipients and to ensure that such beneficiaries and

recipients are provided with those services that are necessary to

achieve and maintain employment.

The basic purpose of the title II and title XVI VR payment programs

is twofold: (1) To make VR services more readily available to disabled

or blind Social Security beneficiaries and SSI recipients; and (2) to

achieve savings for the title II trust funds and the title XVI general

fund. To promote these objectives more effectively, we are amending our

existing regulations to provide for greater use of alternate

participants under the VR payment programs and to improve the

administration and cost effectiveness of the programs so as to ensure

that savings will accrue to the trust funds and the general fund.

None of the changes to the VR regulations is a major departure from

the current program. The changes are meant to address the most

significant criticisms of the SSA VR program. By expanding the

opportunity for private VR providers to participate in the program, we

are responding to the recommendations of the 1988 Disability Advisory

Council, and the dictates of Congress. By permitting payment to

providers for only services which have a causal connection to the

individual's completion of nine months of SGA, we are responding to

criticisms by the General Accounting Office and the Inspector General

of the Department of Health and Human Services. The Inspector General

stated in his most recent and thorough report on SSA's VR program, in

April 1990, ``SSA should strengthen the linkage between the SSA

vocational rehabilitation payment program and actions to * * *

rehabilitate SSA clients.''

Use of Alternate Participants

These final regulations revise Secs. 404.2104 and 416.2204 to

provide for the use of alternate participants in cases where a State VR

agency declines to provide VR services to a disabled or blind Social

Security beneficiary or SSI recipient whom we referred to the State VR

agency. These regulations provide that in such cases, the State will be

considered unwilling to participate through its VR agency with respect

to such individual.

When we first published regulations for the VR payment programs, we

provided in Secs. 404.2104 and 416.2204 that the option of

participating through their VR agencies would be offered first to the

States and that a State had to notify us within 60 days after

publication of the regulations whether it intended to participate

through its VR agency(ies). All States chose to participate.

Existing Secs. 404.2104 and 416.2204 also give a State the option

of not participating, including terminating participation, or limiting

the scope of its participation. If a State decides not to participate

or to limit participation, the existing regulations provide that we may

arrange for VR services through an alternate participant for disabled

or blind beneficiaries or recipients in the State or, where the State

has limited its participation, for those beneficiaries and recipients

not included within the scope of the State's participation. While we

are making certain technical changes to the rules concerning a State's

option not to participate or to limit participation, the existing

provisions relating to these options remain substantially the same

under the revised regulations. However, while existing Secs. 404.2104

and 416.2204 provide each State the option of declaring its intent to

participate with respect to the title II or title XVI VR payment

program as a whole, the revised Secs. 404.2104 and 416.2204 afford each

State the opportunity to participate through its VR agency(ies) with

respect to disabled title II beneficiaries in that State, or disabled

or blind title XVI recipients in that State, on a case-by-case basis,

unless the State has notified us in advance of its decision not to

participate or to limit participation.

Under the revised Secs. 404.2104 and 416.2204, unless the State has

exercised its option not to participate or to limit participation

through its VR agency(ies), we will provide the State the opportunity

to participate with respect to disabled or blind Social Security

beneficiaries or SSI recipients in the State by referring such

individuals first to the State VR agency(ies) for necessary VR

services. The revised regulations require the State to declare, through

the State VR agency, whether it is willing to participate with respect

to a beneficiary or recipient whom we referred to that VR agency. Under

the revised regulations, the State may participate with respect to such

an individual only if the State VR agency decides to accept the

individual as a client for VR services or to place the individual into

an extended evaluation process and notifies us of such decision in

writing within a prescribed time period.

In response to comments we received concerning the proposed rules,

we are defining the phrases ``accept the beneficiary as a client for VR

services'' and ``accept the recipient as a client for VR services,''

which are used in Secs. 404.2104 and 416.2204, respectively, to mean

that the State VR agency determines that the individual is eligible for

VR services and places the individual into an active caseload status

for development of an individualized written rehabilitation program. We

are defining these phrases in Secs. 404.2103 and 416.2203,

respectively, since these sections provide the definitions of terms

used in the VR payment regulations.

In addition, we recognize that there are occasions when a State VR

agency places an individual whom we referred to that agency into an

extended evaluation process prior to deciding whether the individual is

eligible for State VR services. Therefore, the revised Secs. 404.2104

and 416.2204 provide that the State VR agency must notify the

appropriate SSA Regional Commissioner of its decision either to accept

the individual as a client for VR services or to place the individual

into an extended evaluation process no later than the close of the

fourth month following the month in which we referred the individual to

the State VR agency. As we explain later in this preamble, we have

changed ``third month'' in the proposed rules to ``fourth month'' in

the final rules in response to comments we received concerning the

proposed regulations. If we do not receive a notice with respect to an

individual within the prescribed time period, we will consider the

State unwilling to participate with respect to the individual and may

arrange for VR services for the individual through an alternate

participant.

We are adding provisions to Secs. 404.2103 and 416.2203 to define

the phrases ``place the beneficiary into an extended evaluation

process'' and ``place the recipient into an extended evaluation

process'' to mean that the State VR agency determines that an extended

evaluation of the individual's VR potential is necessary to determine

whether the individual is eligible for VR services and places the

individual into an extended evaluation status.

In those cases where the State VR agency notifies the appropriate

SSA Regional Commissioner within the prescribed time period of a

decision to place the Social Security beneficiary or SSI recipient into

an extended evaluation process, the State VR agency also must notify

the appropriate SSA Regional Commissioner, at the conclusion of the

extended evaluation, of the State VR Agency's final decision whether or

not to accept the individual for further VR services. If following the

completion of the extended evaluation we receive a notice of a decision

by the State VR agency to accept the individual as a client for VR

services, the State may continue to participate with respect to such

individual. If we receive a notice of a decision by the State VR agency

not to accept the individual as a client for VR services, we may

arrange for VR services for such individual through an alternate

participant.

These provisions also apply with respect to the class(es) of

disabled or blind beneficiaries or recipients whom we refer to a State

VR agency in a case in which a State has decided to limit participation

of its VR agency(ies) to such class(es) of beneficiaries or recipients.

Minimum Qualifications for Alternate Participants

Because the revisions of Secs. 404.2104 and 416.2204 provide for

greater use of alternate participants under the title II and title XVI

VR payment programs, we are adding new Secs. 404.2106 and 416.2206 to

our regulations to specify certain minimum qualifications for alternate

participants, that is, any for-profit or not-for-profit agency,

organization, institution, or individual, other than a State VR agency.

Existing Secs. 404.2104(a) and 416.2204(a) provide that an alternate

participant must have a plan for VR services that is similar to a State

plan approved under title I of the Rehabilitation Act of 1973, as

amended. The final regulations do not change this basic requirement.

However, we clarify in Secs. 404.2106 and 416.2206 of these final rules

that the plans of alternate participants must provide, among other

things, that the provision of VR services to disabled or blind

beneficiaries or recipients will meet certain minimum standards. We

also explain in Secs. 404.2106 and 416.2206 that we will use as

alternate participants only those VR service providers that are

licensed, certified, accredited or registered, as appropriate, in the

State in which they provide VR services, and are not precluded from

Federal procurement or nonprocurement programs.

Payments to Alternate Participants

The existing regulations provide that we will pay alternate

participants for VR services furnished to beneficiaries or recipients

under the same terms and conditions that apply to State VR agencies.

These final rules do not change this requirement.

Requirements for Payment

The final rules amend Secs. 404.2108 and 416.2208 to specify the

information that the State VR agency or alternate participant must

provide in order to claim and receive payment under our VR payment

programs. The final rules provide that each claim for payment must be

submitted on a form prescribed by us and contain the following

information: A description of each service provided; a statement of

when the service was provided; and the cost of the service. In response

to comments we received on the proposed rules, we deleted the

requirement in the proposed rules that the claim also contain, as

appropriate, an explanation of how the service contributed to the

individual's performance of a continuous 9-month period of SGA, or an

explanation of how the service was reasonably expected to motivate or

assist the individual to perform such a continuous period of SGA.

Instead, we are including provisions in Secs. 404.2121 and 416.2221 of

the final rules to require the State VR agency or alternate participant

to provide this information as part of the validation review process.

The final rules also amend Secs. 404.2108 and 416.2208 to provide

that the State VR agency or alternate participant must maintain, and

provide as we may require, adequate documentation of all services and

costs for all disabled or blind beneficiaries or recipients with

respect to whom a State VR agency or alternate participant could

potentially request payment for services and costs under our VR payment

programs.

VR Services Contributing to a Continuous Period of SGA

The final regulations amend Secs. 404.2111 and 416.2211 which

provide the criteria for determining when VR services will be

considered to have contributed to a continuous period of 9 months of

SGA. We are amending Secs. 404.2111(a)(1) and 416.2211(a)(1) to provide

that any VR services which significantly motivated or assisted the

individual in returning to, or continuing in, SGA will be considered to

have contributed to the continuous 9-month period of SGA in the

situation where the individual does not recover medically and the

continuous 9-month period of SGA begins 1 year or less after VR

services end. We are deleting the words ``might have'' before the

phrase ``significantly motivated or assisted'' in the existing

regulations to strengthen the casual relationship between the VR

services and the continuous period of SGA.

Refusal of VR Services

We are amending Secs. 404.2113 and 416.2213 to include a timeframe

within which State VR agencies and alternate participants are to report

cases of VR refusal. These are cases in which an individual refuses to

continue to accept VR services or fails to cooperate in such a manner

as to preclude his or her successful rehabilitation.

Services for Which Payment May Be Made

Under section 222(d)(5) of the Act, the Secretary may limit the

type, scope, or amount of VR services that are subject to payment in

accordance with regulations designed to achieve the purpose of section

222(d). In general, Secs. 404.2114 and 416.2214 of the existing

regulations permit payment for evaluation services and all services

provided by a State VR agency under an Individualized Written

Rehabilitation Program (IWRP) or by an alternate participant under a

similar document.

Consistent with section 222(d)(5) of the Act, we are revising

Secs. 404.2114 and 416.2214 to describe the specific kinds of VR

services for which payment may be made in all three categories of cases

under the VR payment programs. Under the final rules, VR services for

which payment may be made include only those services described in

Secs. 404.2114(b) and 416.2214(b). In addition, these services are

subject to payment only if: (1) The services are necessary to determine

an individual's eligibility for VR services or the nature and scope of

the services to be provided; or (2) the services are provided under an

IWRP, or under a similar document in the case of an alternate

participant, and could reasonably be expected to motivate or assist the

individual in returning to, or continuing in, SGA.

In response to comments we received on the proposed rules, we are

clarifying Secs. 404.2114(a)(1) and 416.2214(a)(1) to indicate that VR

services for which payment may be made include diagnostic or other

evaluation services which are provided after an individual has been

determined to be eligible for VR services and prior to the

implementation of an IWRP (or similar document in the case of an

alternate participant) and which are necessary to determine the nature

and scope of the VR services to be provided to the individual.

Additionally, we are clarifying Secs. 404.2114 (b)(3) and (b)(12)

and 416.2214 (b)(3) and (b)(12) to indicate that the employment

referred to in these sections may be at or above the SGA level. The

individual's employment is not restricted to the minimum SGA threshold.

Also, in these final rules, we have modified some of the descriptions

of the VR services in Secs. 404.2114(b) and 416.2214(b) to reflect

changes which the Rehabilitation Act Amendments of 1992 made to the

list of VR services covered under the Rehabilitation Act of 1973.

Cost Containment

We are amending Secs. 404.2117 and 416.2217 to require, rather than

to expect, State VR agencies and alternate participants to seek payment

or services from other sources in accordance with the ``similar

benefit'' provisions under 34 CFR part 361. The final rules also

provide that the cost incurred for VR services must comply with the

cost-containment policies of the State VR agency or, in the case of an

alternate participant, with similar written policies established under

a negotiated plan in accordance with a written agreement or contract

between us and the alternate participant. These cost-containment

policies must provide guidelines to ensure the lowest reasonable cost

for VR services while allowing flexibility to provide for an

individual's needs. With reference to the cost-containment policies of

the State VR agencies, the phrase ``established under 34 CFR part 361''

which appeared in proposed Secs. 404.2117(c)(1) and 416.2217(c)(1) has

been deleted in the final rules since the regulations in 34 CFR part

361 do not themselves explicitly mandate the establishment of specific

``cost-containment'' policies.

Under these final rules, a State VR agency or alternate participant

is required to maintain and use these cost-containment policies to

govern the costs incurred for all VR services for which payment will be

requested under the VR payment programs. In response to comments, the

requirement in the proposed rules that the State VR agency or alternate

participant send to us on a yearly basis a written summary of the

written cost-containment policies has been deleted. Instead, these

final rules require that, before the end of the first calendar quarter

of each year, the State VR agency must send to us a written

certification that approved cost-containment policies are in effect and

are adhered to in procuring and providing goods and services for which

the State VR agency requests payment under our VR payment programs. The

rules further specify who may sign such certification. In addition, the

final rules require that State VR agencies must specify the basis upon

which such certification is made, e.g., a recent audit by an authorized

State, Federal or private auditor, or other independent compliance

review, and the date of such audit or compliance review. In the case of

an alternate participant, these certification requirements shall be

incorporated into the negotiated agreement or contract. The final rules

also provide that we may request a copy(ies) of the specific written

cost-containment policies of a State VR agency or alternate participant

if we determine that such additional information is necessary to ensure

compliance with the requirements of our VR payment programs.

Validation Reviews

We are revising Secs. 404.2121 and 416.2221. The existing rules

provide for postpayment reviews of claims submitted by State VR

agencies or alternate participants for payment under our regulations.

Under the revised rules, we will institute a validation review of a

sample of claims filed by each State VR agency or alternate

participant. Some validation reviews will be conducted prior to payment

and some will be conducted after payment is made.

For each claim selected for review, the State VR agency or

alternate participant must submit records of the VR services and costs

for which payment has been requested or made to show that the services

and costs meet the requirements for payment. Also, we have modified the

proposed rules by providing in these final rules that for claims for

payment in cases described in Secs. 404.2101(a) and 416.2201(a), a

clear explanation or existing documentation that demonstrates how the

service contributed to the individual's performance of a continuous 9-

month period of SGA must be provided as part of the validation review

documentation. Similarly, for claims for payment in cases described in

Sec. 404.2101 (b) or (c), or Sec. 416.2201 (b) or (c), a clear

explanation or existing documentation which demonstrates how the

service was reasonably expected to motivate or assist the individual to

return to, or continue in, SGA must be provided. We are making these

changes in the final rules in response to comments we received on the

proposed rules from commenters who expressed strong objections about

the reporting burden related to the requirements of proposed

Secs. 404.2108(b)(4) and 416.2208(b)(4). These sections of the proposed

rules would have required that each claim for payment that is filed

with us include a clear explanation of how the service contributed to

the individual's performance of a continuous 9-month period of SGA, or

how the service was reasonably expected to motivate or assist the

individual to perform SGA, as appropriate. Rather than require this

information for each claim that is filed, we are including in

Secs. 404.2121 and 416.2221 of the final rules requirements that this

information or appropriate supporting documentation be provided as part

of the validation review process. We are including these requirements

as a substitute for the requirements in proposed Secs. 404.2108(b)(4)

and 416.2208(b)(4) which we are deleting in these final rules.

The purposes of these validation reviews are to ensure that the VR

services and costs meet the requirements for payment under our

regulations, to assess the validity of our documentation requirements,

and to assess the need for additional validation reviews or additional

documentation requirements for any State VR agency or alternate

participant to ensure compliance with the requirements under our

regulations.

In any validation review, we will determine the amount of payment

and will notify the State VR agency or alternate participant of our

determination. In any postpayment validation review, if we find that we

have paid more or less than the correct amount, we will determine that

there is an overpayment or underpayment and will notify the State VR

agency or alternate participant that we will make the appropriate

adjustment. In any case, if a State agency or alternate participant

disagrees with our determination, it may appeal our determination.

These regulations do not change the existing rules set out in

Secs. 404.2127 and 416.2227 for appealing determinations or resolving

disputes under the VR payment programs.

Other Changes

We are also making certain changes to Secs. 404.2102 and 416.2202,

404.2108 and 416.2208, and 404.2109 and 416.2209 to conform to the

changes to the other sections of the regulations discussed above.

Comments Received Following Publication of the Notice of Proposed

Rulemaking

We published proposed rules on payments for VR services as a notice

of proposed rulemaking in the Federal Register on July 24, 1992 (57 FR

32926). We also mailed copies of the proposed rules to State VR

agencies. We invited comments on the proposed rules and gave interested

parties 60 days within which to submit comments. The comment period

closed on September 22, 1992.

We received 45 letters with comments. These included comments from

State VR agencies, private VR agencies, national organizations and

other organizations active in the field of VR. Portions of some letters

dealt with operational or administrative issues outside the scope of

the proposed rules, or discussed provisions of the regulations that

were not being altered by the proposed regulations. Because these

matters are beyond the scope of the proposed rules, they are not

addressed here.

For ease of comprehension and perspective, we have grouped the

comments according to the issues raised. The comments and our responses

are presented in the sequence of the regulations.

Use of Alternate Participants--Secs. 404.2104 and 416.2204

Comment: Many commenters indicated that the proposed timeframe for

a State VR agency to notify us of its decision to accept an SSA-

referred beneficiary or recipient as a client for VR services was too

short. The proposed rules required a State VR agency to notify us no

later than the close of the third month following the month of

referral. Some of these commenters further indicated that the timeframe

for providing notification was too restrictive, particularly if the

referred individual required an extended evaluation prior to the State

VR agency deciding whether or not it could serve the individual's VR

needs.

Response: In consideration of the commenters' concerns about the

length of the proposed timeframe, we are extending the timeframe for

the State VR agency to notify us about its decision to accept an SSA-

referred beneficiary or recipient as a client for VR services. The

revised timeframe allows the State VR agency to notify us by the close

of the fourth month following the month of referral. This revised

timeframe considers:

--An increase in the time for State VR agencies to notify SSA as

suggested by many commenters;

--That a longer interval could cause the referred individual's

rehabilitation potential to deteriorate before re-referral to an

alternate participant occurs, thereby causing a potential

rehabilitation opportunity to slip away;

--That possible backlogs in the State VR agencies can delay the time it

takes for an SSA-referred beneficiary or recipient to be contacted

about the State's available VR services; and

--The requirement of the Rehabilitation Act Amendments of 1992 that a

State VR agency generally must make a determination of whether an

individual is eligible for VR services within 60 days after the

individual makes application for services.

We believe that the revised timeframe will permit adequate time, in

most cases, for a State VR agency to arrive at a decision and to notify

us of its acceptance of an SSA-referred beneficiary or recipient for

State VR services.

We recognize that some disabled or blind beneficiaries or

recipients whom we refer to the State VR agency may require a period of

extended evaluation prior to the State VR agency deciding whether the

individual is eligible for State VR services. Therefore, we are making

changes in the final rules to provide that if the State VR agency

decides that an extended evaluation is needed, then the State VR agency

will notify us no later than the close of the fourth month following

the month of referral, that the individual has been placed into an

extended evaluation process. The final rules also require the State VR

agency to notify us of the individual's ``accepted'' or ``not

accepted'' status following the conclusion of the extended evaluation.

This second notification, in extended evaluation situations, will

permit us to make an informed decision concerning possible re-referral

of the individual to an alternate participant in those cases where the

State VR agency has decided not to provide VR services beyond the

extended evaluation to an SSA-referred beneficiary or recipient.

Comment: Several commenters requested that we define the term

``accepted.'' Another commenter inquired as to what will constitute a

notification of acceptance.

Response: In these final rules, we are defining the phrases

``accept the beneficiary as a client for VR services'' and ``accept the

recipient as a client for VR services'' in Secs. 404.2103 and 416.2203,

respectively, to mean that the State VR agency determines that the

individual is eligible for VR services and places the individual into

an active caseload status for development of an IWRP. In addition, the

final rules provide that the State VR agencies also notify us of those

SSA referred beneficiaries or recipients whom the State VR agencies

place into an extended evaluation process prior to determining whether

such individuals are eligible for VR services.

In regard to how State notifications to us will be structured, we

will issue procedural instructions outlining the form and content of

State notifications. To the extent allowable, flexibility in reporting

formats will be taken into consideration, e.g., electronic

notification.

Comment: Several commenters indicated that the requirement to have

the State VR agencies notify us concerning which of the beneficiaries

and recipients whom we referred to the State VR agency are being

accepted for State VR services will present an administrative burden to

the States. Another commenter expressed concern that the reporting

provision will have an adverse impact upon the resources of the State

Disability Determination Services (DDS).

Response: The proposed rules recognized that an additional

reporting burden is associated with this regulatory change. However, in

order to expand rehabilitation opportunities for disabled or blind

beneficiaries and recipients, it is necessary for us to know which of

the individuals whom we referred to the State VR agency are accepted

for VR services so that we may consider those not accepted for possible

re-referral to an alternate participant.

In order to minimize the State's reporting burden, we are asking

for notification of acceptances (instead of the more voluminous number

of nonacceptances) of beneficiaries and recipients whom we referred to

the State VR agency, i.e., individuals who are determined to be

entitled to Social Security disability benefits or eligible for SSI

disability or blindness benefits (not those individuals whose claims

for benefits are denied). We believe that we have limited the referral

reporting burden on the State VR agencies while still achieving a

sufficient level of information to permit us to consider those disabled

or blind beneficiaries who are eligible for a possible re-referral to

an alternate provider for services.

We do not anticipate an adverse impact upon the resources of the

State DDS as this regulation does not prescribe changing the referral

process between the State's DDS and VR agency, nor does it entail

changing the existing process the DDS uses to report to SSA on these

referrals.

Comment: Some commenters asked whether we planned to limit payments

to State VR agencies under our VR payment programs to those cases

involving a beneficiary or recipient whom we referred to the State VR

agency.

Response: It is not our intention to limit payments to State VR

agencies under the VR payment programs to only those cases in which the

beneficiary or recipient was referred to the State VR agency by SSA.

Consistent with our past practices, we will continue to pay claims

filed by State VR agencies for payment of the costs of VR services

provided to a disabled or blind Social Security beneficiary or SSI

recipient in accordance with the requirements of our regulations,

regardless of the means by which the beneficiary or recipient came to

the attention of the State VR agency.

Comment: One commenter stated that the use of alternate

participants should be limited to those instances where a State VR

agency is not cooperating with us. Another commenter thought that State

VR agencies have the sole responsibility of providing services to those

who are disabled. In addition, one commenter stated that the services

available from an alternate participant should be referred to as ``VR

like'' services or as ``similar to'' VR services to acknowledge that

only State designated units are authorized to provide VR services under

the program carried out under title I of the Rehabilitation Act of

1973, as amended.

Response: Under sections 222(a) and 1615(a) of the Act, disabled or

blind Social Security beneficiaries and SSI recipients are to be

referred for VR services to the State agency administering a State plan

for VR services approved under title I of the Rehabilitation Act of

1973, as amended. Sections 222(d) and 1615(d) of the Act authorize

payment to the State for the costs of VR services provided to such

beneficiaries or recipients in certain categories of cases. However,

with respect to Social Security beneficiaries, section 222(d)(2) of the

Act provides that if a State is unwilling to participate or does not

have an approved State plan for VR services, the Commissioner is

authorized to provide such services by agreement or contract with

alternative VR service providers under the same conditions that would

apply to a State VR agency. Section 1633(a) provides authority for

making similar arrangements for VR services with respect to SSI

recipients. In order to make VR services more readily available to

beneficiaries and recipients, these final rules provide that a State

will be considered unwilling to participate with respect to an

individual whom we referred to the State VR agency if that agency

declines to provide VR services to that individual.

There is nothing in section 222(d)(2) of the Act to suggest a

distinction between the kind of services that are available from a

State VR agency and the services that would be provided by an alternate

participant. Consequently, for the purpose of our regulations regarding

the use of alternate participants, we do not believe that there is any

need to create a distinction in the nomenclature used to identify the

services available from the State VR agency and those provided by an

alternate participant. Additionally, Secs. 404.2103 and 416.2203

already define the terms ``alternate participants'' and ``Vocational

Rehabilitation services.'' In neither instance is a distinction made to

differentiate the services available from a State VR agency and those

that would be provided by an alternate participant. These final rules

do not amend those definitions.

Comment: Some commenters expressed concern that the practice of

making the first referral of the beneficiary or recipient to the State

VR agency will permit such agencies to select those referrals with the

best rehabilitation potential, thereby leaving the alternate

participants to serve the most difficult cases having a lesser

probability of rehabilitation success and provider payment. Another

commenter indicated that we should provide a mixture of cases in the

referrals made to VR service providers in order to balance the levels

of disability severity contained in the caseloads referred to each

provider.

Response: Sections 222(a) and 1615(a) of the Act require us to

refer disabled or blind Social Security beneficiaries and SSI

recipients for VR services to the State agency administering a State

plan for VR services approved under title I of the Rehabilitation Act

of 1973, as amended. Section 222(d)(2) of the Act provides that it is

only in the event that the State is unwilling to participate or does

not have an approved State plan that we may arrange for such services

through an agreement or contract with an alternative VR service

provider. Therefore, the law directs SSA to follow a prescribed order

in determining where to refer individuals for VR services.

In addition, the Federal regulations governing the State plan for

VR services (34 CFR 361.36) provide that the ``* * * plan must assure

that those individuals with the most severe handicaps are selected for

service before other individuals with handicaps.'' Thus, the State VR

agencies are required to select those individuals with the most severe

impairments for VR services before selecting other individuals.

We also believe that a sufficiently large pool of disabled or blind

beneficiaries and recipients exists so that both the State VR agencies

and the alternate participants will have the opportunity to offer VR

services to a diverse cross section of these beneficiaries and

recipients.

Comment: One commenter asked whether a State VR agency could be

reimbursed for services provided to a beneficiary or recipient whom SSA

had referred previously to an alternate participant.

Response: A State VR agency which provides VR services to a

beneficiary or recipient who becomes its client after having been

referred to an alternate participant may be paid for such services if

the services and costs meet the requirements for payment under our

regulations, including the requirements in Secs. 404.2108-404.2117 for

cases involving Social Security beneficiaries or Secs. 416.2208-

416.2217 for cases involving SSI recipients. Among other things, the

services must have been provided during the period specified in

Secs. 404.2115 or 416.2215, as appropriate. Also, Secs. 404.2117(d) and

416.2217(d) provide that the total payment for the costs of services

provided to an individual in each case, including any prior payments

made under our VR payment programs, must not be so high as to preclude

a ``net savings'' to the title II trust funds or the title XVI general

fund, as the case may be. In addition, Secs. 404.2117(f) and

416.2217(f) provide that payment will not be made more than once for

the same VR service or cost.

While a State VR agency or alternate participant which provided

only evaluation services to a beneficiary or recipient may be paid for

such services in certain, limited circumstances described in

Secs. 404.2111, 404.2113, 416.2211 and 416.2213, the regulations

generally permit payment only to a State VR agency which provided

services under an IWRP, or to an alternate participant which provided

services under a similar document, as provided under

Secs. 404.2114(a)(2) and 416.2214(a)(2). Thus, with few exceptions, we

would pay only a State VR agency or alternate participant which

developed an IWRP, or similar document in the case of an alternate

participant, with the individual and coordinated the services. At any

given time, only one VR service provider would be providing services to

the individual under an IWRP or similar document. We will not pay more

than one provider for the costs of the same services provided during

the period specified in Secs. 404.2115 or 416.2215.

Comment: One commenter stated that regional staff of the

Rehabilitation Services Administration (RSA) should approve the plan

for VR services developed by an alternate participant to assure that

the requirements for a State plan under title I of the Rehabilitation

Act of 1973, as amended, have been included in the alternate

participant's plan.

Response: While Secs. 404.2104(a) and 416.2204(a) provide that an

alternate participant must have a plan for VR services similar to an

approved State plan, the details of the plan of an alternate

participant will be developed under the terms of the negotiated

agreement or contract between us and the alternate participant. The

agreement or contract will include procedures for the review and

approval of such plan. However, we do not believe that it is necessary

to include such procedures in the regulations.

Comment: A commenter stated that our plan to expand the use of

alternate participants suggested that there are problems with State VR

agencies in providing VR services to individuals with disabilities.

Response: Our desire to increase the availability of sources of VR

services for disabled or blind beneficiaries and recipients is not

intended to question the quality of work performed by the State VR

agencies, but rather to address a mutual goal shared with the States,

i.e., that all those desiring VR services shall have the opportunity to

receive them.

SSA's interest is in arranging for the maximum number of disabled

or blind beneficiaries and recipients to have access to the

availability of rehabilitation and employment opportunities which can

assist them in achieving and sustaining employment at or above the SGA

threshold. We believe a sufficiently large pool of disabled or blind

beneficiaries and recipients exists so that both the State VR agencies

and alternate participants have ample opportunity to serve such

beneficiaries and recipients. For this reason, we believe that an

increased number of disabled or blind beneficiaries and recipients

could achieve and sustain rehabilitation and employment opportunities

if an increased number of VR provider sources are available to serve

the needs of such beneficiaries and recipients.

Basic Qualifications for Alternate Participants--Secs. 404.2106 and

416.2206

Comment: Three commenters questioned the adequacy of the

qualifications for alternate participants in Secs. 404.2106 and

416.2206 and recommended that we include a specific provision in the

regulations providing for ongoing monitoring of alternate participants.

The commenters believed that the provisions requiring that alternate

participants be licensed, certified, accredited, or registered would be

inadequate without providing for ongoing monitoring of the services

provided. They also believed that periodic accreditation or

certification, e.g., every three years, would not be an adequate

substitute for ongoing monitoring of such participants. One commenter

asked for a definition of the term ``qualified personnel'' as used in

proposed Secs. 404.2106(b)(2) and 416.2206(b)(2), which provide that

the plans of alternate participants must provide that only qualified

personnel will be used to furnish VR services. One commenter asked how

and on what basis alternate participants would provide services.

Another commenter suggested that we require IWRPs from alternate

participants to document the relationship of the services provided to

the performance by an individual of a continuous 9-month period of SGA

in appropriate cases.

Response: We did not adopt the recommendation to include a specific

provision in the regulations to provide for ongoing monitoring of the

services of alternate participants. Rather, the negotiated agreement or

contract which we enter into with an alternate participant will include

procedures for monitoring such services. In addition, we will monitor

the services provided by alternate participants by conducting

validation reviews under Secs. 404.2121 and 416.2221 of the claims for

payment that are filed by such participants.

We do not believe it is necessary to expand the requirements of

Secs. 404.2106 and 416.2206 since these sections are intended to state

only the basic qualifications for alternate participants. Under

Secs. 404.2106 and 416.2206, we will select as alternate participants

only those VR service providers that are licensed, certified,

accredited, or registered, as appropriate, to provide VR services in

the State in which they operate. In addition, Secs. 404.2104(a),

404.2106(a)(1)(ii), 416.2204(a), and 416.2206(a)(1)(ii) provide that to

be an alternate participant, a VR service provider must have a plan for

VR services that is similar to a State plan for VR services approved

under title I of the Rehabilitation Act of 1973, as amended. Sections

404.2106(a)(1)(ii) and 416.2206(a)(1)(ii) also state that this plan

shall govern the provision of VR services to individuals. While the

plan of an alternate participant for providing VR services to

individuals will include provisions similar to those of an approved

State plan, the details of the plan will be developed under the

negotiated agreement between us and the alternate participant. We state

in Secs. 404.2106(b) and 416.2206(b), however, that the plan of an

alternate participant must provide that the provision of VR services to

individuals will meet certain minimum standards, including the

requirement that only qualified personnel and facilities will be used

to furnish such services. Specific criteria relating to this and other

requirements for providing services will be prescribed in the plan for

VR services in accordance with the terms of the negotiated agreement or

contract.

The VR services furnished to an individual by an alternate

participant will be provided under a document similar to the IWRP used

by State VR agencies. With respect to validation reviews under

Secs. 404.2121 and 416.2221, the documentation requirements for claims

for payment in cases in which the individual completes a continuous 9-

month period of SGA are the same for both State VR agencies and

alternate participants.

Comment: Four commenters stated that proposed Secs. 404.2106 and

416.2206 concerning the basic qualifications for alternate participants

would not ensure the protection of client rights to the same extent

provided in the Rehabilitation Act of 1973, as amended, and required in

State plans. They recommended that the plans of alternate participants

include specific provisions to protect consumer rights, including

procedural safeguards and the right to a review of decisions by the

provider affecting the individual. One commenter indicated that clients

of State VR agencies are protected because State plans are required to

undergo public hearings and States are required to provide procedural

safeguards and advise clients of their rights. Another commenter

expressed the view that the rights of client participation provided by

an alternate participant should be equal to the rights that are

required to be provided by State VR agencies, including providing for

participation by the client in the development of an IWRP and providing

procedural safeguards and the right to appeal decisions affecting the

individual.

Response: We agree with the comments regarding the need to protect

client rights when we make arrangements for VR services for

beneficiaries or recipients through alternate participants. The

regulations provide that an alternate participant must have a plan for

VR services that is similar to a State plan approved under title I of

the Rehabilitation Act of 1973, as amended. We will include provisions

in the negotiated agreement or contract with each alternate participant

to ensure that the plan of the alternate participant includes

provisions to protect client rights.

Comment: Two commenters questioned whether there were sufficient

incentives for private or public non-State VR service providers to meet

the requirements that an alternate participant have a plan similar to

the State plan governing the provision of VR services to individuals

and that such plan include certain minimum standards for the provision

of services. They also questioned whether there are interested private

or public non-State VR service providers that would be able to meet

these requirements of the regulations.

Response: The regulations require that an alternate participant

have a plan for providing services to individuals that is similar to a

State plan approved under title I of the Rehabilitation Act of 1973, as

amended. We will solicit expressions of interest in serving as

alternate participants from qualified private or public non-State VR

service providers, and will negotiate agreements or contracts with

those VR service providers that are interested in providing services to

disabled or blind beneficiaries or recipients under the conditions

prescribed in the regulations.

Comment: One non-State VR provider indicated that most providers

are subject to national accreditation for services rendered and asked

what outside quality control indicators exist for State VR agencies.

Response: A State plan for providing VR services must comply with

the requirements of the Rehabilitation Act of 1973, as amended, and RSA

regulations. In addition, the 1992 amendments to the Rehabilitation Act

of 1973 require RSA to develop and publish performance standards and

indicators for State VR programs. These regulations are in the process

of development at this writing.

Requirements for Payment--Secs. 404.2108 and 416.2208

Comment: One commenter believed it was unnecessary to require in

each claim for payment the information specified in Secs. 404.2108(b)

(1), (2) and (3) and 416.2208(b) (1), (2) and (3), i.e., a description

of each service, when the service was provided, and the cost of the

service. Two commenters objected to providing this information on a

form prescribed by us.

Response: We believe that SSA should know what it pays for and,

therefore, that it is not unreasonable to require that every claim for

payment must include such basic information as a description of each

service provided, when the service was provided, and the cost of the

service. By specifying that the claim for payment containing this

information be in a form prescribed by us, we did not intend to

preclude a provider from requesting our approval to use reasonable

facsimiles of our claim form, such as those generated by a provider's

automated system.

Comment: Many commenters objected to the documentation requirements

set forth in Secs. 404.2108(b)(4) (i) and (ii) and 416.2208(b)(4) (i)

and (ii), i.e., an explanation of how the service contributed to the

individual's performance of a continuous 9-month period of SGA, or how

the service was reasonably expected to motivate or assist the

individual to perform such a continuous period of SGA, as appropriate.

The commenters believed that providing this documentation for all

claims would be burdensome and time-consuming, and would emphasize

reporting rather than program improvements. These requirements were

also viewed by a few commenters as a disincentive to serving

beneficiaries or seeking payment from SSA. Several other commenters

thought that these requirements questioned the integrity of

rehabilitation counselors and could lead to second guessing of their

decisions. Most of these commenters suggested that we delete paragraphs

(b)(4) (i) and (ii) from these sections. A few suggested that if these

requirements are retained in the final rules, we should require this

documentation for some but not all claims for VR payment. For example,

one commenter suggested that documentation be required for claims for

payment in cases involving the completion of a continuous 9-month

period of SGA only where the link between the services provided and the

accomplishment of 9 continuous months of SGA was not routine or

apparent. Some commenters did not request that we delete paragraphs

(b)(4)(i) and (ii), but did recommend that we accept existing

documentation in lieu of requiring providers to record information on a

prescribed form.

Response: Under the Act and our existing regulations, payment may

be made for services furnished to disabled or blind Social Security

beneficiaries or SSI recipients in three categories of cases. In cases

described in Secs. 404.2101(a) and 416.2201(a), payment may be made

only for services which contributed to the individual's performance of

a continuous 9-month period of SGA. We continue to believe that there

are sound reasons for requiring that documentation establishing this

causal relationship be available for all claims for payment in these

cases. We also believe that documentation showing how the VR services

could reasonably be expected to motivate or assist the individual to

perform SGA must be available for all claims for payment in cases

described in Secs. 404.2101 (b) and (c) and 416.2201 (b) and (c).

However, we agree that these requirements could be accomplished in a

less burdensome manner. Therefore, we will not require that such

documentation be included for each claim submitted for payment and have

deleted Secs. 404.2108(b)(4)(i) and (ii) and 416.2208(b)(4)(i) and (ii)

in the final rules. Instead, such documentation must now be submitted

only for those claims selected for validation review. This option was

recommended by a number of commenters and is reflected in

Secs. 404.2121 and 416.2221 of these final rules. Additionally, in

revising these sections to require this information in the validation

review process, we have adopted the recommendation to accept existing

documentation, such as pertinent parts of the IWRP, as sufficient for

compliance with these requirements.

Comment: A few commenters, in commenting on proposed Secs. 404.2108

and 416.2208, raised questions concerning how we will make VR payments

to alternate providers. Specifically, questions were raised concerning

whether private providers would be able to wait until 9 months of SGA

had been achieved before receiving payment, and whether we will advance

funds to private providers.

Response: Alternate providers are subject to the same payment

provisions as the State VR agencies.

VR Services Contributing to a Continuous Period of SGA-- Secs. 404.2111

and 416.2211

Comment: We received comments relating to Secs. 404.2111 and

416.2211 from nine commenters. Only two commenters acknowledged the

changes we had proposed to make in these sections of the existing

rules, and no commenter objected to the proposed changes. Instead, most

commenters raised questions or sought clarification relating to

provisions that were unchanged by the proposed rules. Although

unrelated to the changes in the proposed rules, suggestions were made

by two commenters that we should specifically state in the final rules

that supported employment should be considered transitional work

activity.

Response: Since no commenters objected to our proposed deletion of

the words ``might have'' before the phrase ``significantly motivated or

assisted,'' or to the other changes we proposed to Secs. 404.2111 and

416.2211, these sections are unchanged from the proposed rules.

We did not adopt the recommendation to amend Secs. 404.2111 and

416.2211 to provide that supported employment will be considered

transitional work activity under these sections. Supported employment

will qualify as transitional work activity only if it meets the

definition of transitional work activity already included in

Secs. 404.2111(a)(2)(i) and 416.2211(a)(2)(i), i.e., employment or

self-employment which gradually evolved, with or without periodic

interruption, into SGA. To unequivocally include supported employment

in these sections might lead to the erroneous conclusion that supported

employment should always be viewed as transitional employment, whether

it does or does not meet this definition.

Refusal of VR Services--Secs. 404.2113 and 416.2213

Comment: Six commenters questioned the requirement in proposed

Secs. 404.2113 and 416.2213 for reporting VR refusals within 60 days

after the State VR agency or alternate participant makes a preliminary

finding that an individual refuses to continue to accept VR services or

fails to cooperate in a VR program. One commenter indicated that

reporting refusals within a timeframe would create an additional

administrative burden for State VR agencies. Three commenters

recommended that this deadline for reporting refusals be deleted to

allow the State VR agencies the latitude they currently have in

reporting VR refusals to SSA. Another commenter indicated that many

times individuals who initially refuse services will change their

minds. The commenter believed that in such cases, reporting their

refusal too early might undermine the rehabilitation process instead of

helping. One commenter suggested that the 60-day reporting requirement

be waived in cases where the State VR agency can provide good cause

justification for not reporting a refusal within the timeframe.

Response: We did not adopt the recommendation to delete this

provision. The purpose of the 60-day reporting requirement is to

encourage disabled or blind beneficiaries and recipients to participate

in VR services by providing for stricter enforcement of the VR refusal

provisions of the law. We believe that providing procedures in the

regulations to strengthen such enforcement will encourage participation

of beneficiaries and recipients in VR programs. The requirement for

reporting refusals within 60 days does not change the latitude State VR

agencies currently have in determining whether a person can benefit

from VR services and in working with a person to encourage him or her

to participate or continue participation in a VR program; it only

requires that they report within 60 days after making a finding of VR

refusal. It also should not create an additional administrative burden

on State or other VR service providers because it does not change how

refusals are currently reported or the procedures for processing

refusal cases.

We do not believe that the reporting of a refusal will undermine

the rehabilitation process in cases of individuals who have initially

refused VR services. Instead, it should provide an incentive for such a

person to decide to participate in services rather than to delay such

participation and risk losing benefits. We did not provide a waiver of

this reporting requirement in cases where a provider can establish good

cause justification for not reporting a refusal within the timeframe.

Once a provider has completed its evaluation and determined that a

refusal situation exists, it should not be necessary to delay the

reporting of the refusal beyond 60 days.

Comment: One advocacy group wanted to know how a reported refusal

situation affects payment to a provider. It wanted to know whether a

provider would be paid in situations where a client drops out of a

program after several months but is provided assistance that is

designed to improve the client's quality of life.

Response: Under the Act and our existing regulations, State VR

agencies and alternate participants may be paid for the costs of VR

services furnished to disabled or blind beneficiaries or recipients in

three categories of cases. One of the categories of cases is where the

individual, without good cause, refuses to continue to accept VR

services or fails to cooperate in such a manner as to preclude the

individual's successful rehabilitation. Our existing regulations

provide for payments to providers for the costs of VR services provided

to beneficiaries/recipients in refusal situations only when the

individual has at least applied for services and his or her benefits

have been suspended because SSA has determined that the refusal to

participate or continue in the VR program is without good cause.

Comment: Two commenters suggested that we should place more of an

emphasis on encouraging beneficiaries to participate in VR services

rather than on the reporting of refusals. One commenter recommended

that the final regulations should require State VR agencies and

alternate participants to make substantial efforts to encourage

individuals to participate in VR services prior to their reporting a

refusal. Another commenter indicated that stricter enforcement of the

VR refusal provisions would not motivate more people to continue in a

VR program unless SSA becomes more involved earlier in the VR process

and directly informs beneficiaries of the importance of working with VR

agencies.

Response: Our current operating instructions on processing VR

refusal cases include procedures which emphasize the importance of

encouraging participation of beneficiaries and recipients in VR

programs. These procedures require State VR agencies and alternate

participants to report refusals only after they have made substantial

efforts to encourage disabled or blind individuals to participate in VR

services and to resolve problems preventing participation prior to

reporting a refusal. We are currently working to improve the procedures

we follow when referring beneficiaries and recipients for VR services

and to provide more information to beneficiaries and recipients

regarding rehabilitation and employment opportunities and the

importance of working with VR service providers.

Comment: Two commenters suggested that SSA should place more

emphasis on enforcing the VR refusal sanctions rather than on the

reporting of VR refusal cases. One State VR agency stated that it

reports few refusal cases because few beneficiaries or recipients have

sanctions imposed against their benefits because of VR refusal. The

agency recommended that the process of enforcing VR cooperation be

improved to make the reporting provision viable.

Response: We do not believe that a change to the regulation is

necessary to enhance our enforcement of the VR refusal sanctions. Our

current operating instructions for processing refusal cases, which were

issued in December 1991, emphasize enforcement of the refusal sanctions

and provide specific instructions for suspending benefits in cases

where we have determined that good cause does not exist for refusing to

participate in VR services.

Comment: Several commenters expressed concern about whether a VR

provider would be able to distinguish between the effects of a

psychiatric impairment in refusing VR services and an actual refusal.

The commenters recommended that SSA obtain a thorough psychiatric

evaluation or new report from the treating psychiatrist prior to any

actions based on the person's motivation to participate in VR services.

Two commenters noted that people with psychiatric disabilities who

refuse VR services or fail to cooperate may too easily be considered

unwilling to cooperate, even though such unwillingness may be due to

their illness rather than to a non-valid reason. They were concerned

that our proposed regulations would permit such people to be removed

from the rolls because of refusal to cooperate when the refusal is due

to the person's illness. Another commenter recommended that the

definition of VR refusal be more specific regarding mental retardation,

mental illness, and other psychological disorders.

Response: We did not make any changes to Secs. 404.2113 and

416.2213 in response to these comments. Sections 404.422 and 416.1715

of our existing regulations provide that deductions will not be imposed

against an individual's Social Security benefits, and an individual's

SSI benefits will not be suspended, on account of a refusal of VR

services if we find that the individual has good cause for refusing

such services. Section 416.1715(b) of our SSI regulations lists

examples of good cause, including being physically or mentally unable

to participate in the services that are offered. We use the same

criteria for Social Security cases. Consequently, a person's

psychiatric and/or medical condition must be evaluated and taken into

account in determining whether good cause for refusing VR services

exists and prior to any determination that deductions will be imposed

against Social Security benefits or that SSI benefits will be

suspended. In addition, we published final rules in the Federal

Register on January 12, 1994 (59 FR 1629) to amend Secs. 404.422 and

416.1715 to provide that we will take into account any physical,

mental, educational, or linguistic limitations of an individual in

determining whether the individual has good cause for refusing VR

services.

Services for Which Payment May Be Made--Secs. 404.2114 and 416.2214

Comment: In commenting on proposed Secs. 404.2114 and 416.2214,

many commenters expressed the belief that there is no need to list the

specific services for which payment may be made since such services are

already identified in the Rehabilitation Act of 1973, as amended, and

in the RSA regulations. Commenters were concerned that SSA's listing of

such services would create confusion with those already identified in

the Rehabilitation Act of 1973, as amended, and in the implementing

regulations promulgated by RSA, and could create a double standard

between Social Security beneficiaries or SSI recipients and other

vocational rehabilitation clients. A few commenters expressed concern

that the list was intended to permit more VR payment denials.

Response: Our intent in listing specific services in these sections

was to further clarify the services for which payment may be made under

our programs and to provide a reference under SSA's regulations for use

with potential alternate providers. With some modifications to take

account of the Rehabilitation Act Amendments of 1992, discussed below,

the services listed in these final rules are essentially the same as

those currently described in the RSA regulations. There are minor

differences in our final regulations, relating primarily to the issue

of the individual's attainment of employment at or above the SGA level,

which is the basic objective of our VR payment programs. Our final

regulations, therefore, do not precisely mirror the descriptions of VR

services contained in the RSA regulations or in the Rehabilitation Act

Amendments of 1992.

It is not our intent, in making this change in our rules, to

introduce conflicts between the handling of cases of Social Security

beneficiaries or SSI recipients and the cases of other vocational

rehabilitation clients, nor do we intend, by including this list in our

rules, to permit more denials of payments to providers of such

services. We believe that the list of services is as extensive as that

provided in the RSA regulations or in the Rehabilitation Act Amendments

of 1992. Moreover, it provides a general category of VR services in

Secs. 404.2114(b)(15) and 416.2214(b)(15), for ``Other goods and

services that can reasonably be expected to motivate or assist the

individual in returning to, or continuing in, SGA.'' In these final

regulations, we have modified some of the descriptions of the VR

services in Secs. 404.2114(b) and 416.2214(b) to reflect changes which

the Rehabilitation Act Amendments of 1992 made to the list of VR

services covered under the Rehabilitation Act of 1973. As the need

arises, we will consider making further changes to Secs. 404.2114(b)

and 416.2214(b), as may be necessary and appropriate, to reflect other

relevant changes that may be made in the law or in RSA regulations to

ensure that the list of VR services in these sections of our

regulations is up-to-date.

Comment: A few commenters expressed concern that the references to

``SGA'' and ``the SGA level'' contained in proposed Secs. 404.2114 and

416.2214 could be read to permit the exclusion of payment of those

expenses aimed at achieving employment at a level higher than the SGA

threshold. One commenter specifically recommended that the reference to

SGA be revised to state, ``at or above SGA level.''

Response: It was not our intent to exclude payment for services

aimed at employment above the SGA threshold. However, we recognize that

the phrase ``at the SGA level'' in paragraphs (b)(3) and (b)(12) of

proposed Secs. 404.2114 and 416.2214 could be misleading. Therefore, we

have revised these paragraphs in the final rules to state ``at or above

the SGA level,'' to prevent any misunderstandings in this regard.

Comment: One commenter requested further clarification as to what

costs for diagnostic services would be paid, believing that the

proposed rules appeared to limit these costs to determining eligibility

for vocational rehabilitation services. This commenter believed that

the proposed rules would exclude payment for certain diagnostic

services provided later in the rehabilitation process, such as

preparing the rehabilitation plan and determining appropriate

rehabilitation goals. Another commenter thought that the proposed rules

would preclude payment for the cost of vocational evaluation and

disagreed with the rules for this reason. This commenter stated that

vocational evaluation is often necessary to determine an individual's

eligibility to receive services, and provides a template for developing

the IWRP.

Response: It was not our intent to preclude payment for diagnostic

or other evaluation services, including vocational evaluations, which

are necessary to assist an individual and a VR counselor in preparing

an IWRP or in determining an appropriate vocational goal. Such services

are covered under Secs. 404.2114(b)(1) and 416.2214(b)(1). We

recognize, however, that Secs. 404.2114(a) and 416.2214(a) of the

proposed rules could be read to preclude payment for the costs of

diagnostic or other evaluation services which are provided after an

individual has been determined to be eligible for VR services and prior

to the implementation of an IWRP (or similar document in the case of an

alternate participant). Therefore, to address the concerns raised by

the commenters and avoid any misunderstanding regarding our intent, we

are adding the phrase ``or the nature and scope of the services to be

provided'' to Secs. 404.2114(a)(1) and 416.2214(a)(1) to clarify that

payment may be made for diagnostic or other evaluation services which

are provided between these two stages of the rehabilitation process and

which are necessary to determine the nature and scope of the services

to be provided to the individual.

Comment: Three commenters believed that there was no need to

include provisions for seeking grant assistance for educational

services under Secs. 404.2114(b)(4) and 416.2214(b)(4) since similar

provisions are already mandated by the Rehabilitation Act of 1973, as

amended.

Response: While we acknowledge that such ``similar benefit''

provisions are already mandated under the Rehabilitation Act of 1973,

as amended, and the RSA regulations, we are including the requirement

for seeking grant assistance from other sources for the costs of

training or training services in institutions of higher education in

our final regulations to ensure compliance with this requirement by

alternate participants. The requirements of the Federal/State

rehabilitation program administered by RSA under title I of the

Rehabilitation Act of 1973, as amended, apply to State VR agencies.

With the expanded use of private or public non-State VR service

providers as alternate participants under our VR payment programs, we

believe it is necessary to include in our regulations certain

requirements for payment of services and cost under our programs, even

if such requirements when applied to State VR agencies are duplicative

of the requirements under the Rehabilitation Act of 1973, as amended,

and RSA regulations.

Comment: One State VR agency raised a question about the

qualifications of the SSA personnel who will determine whether the

services provided could reasonably be expected to motivate or assist

the individual in returning to, or continuing in, SGA as expressed in

Secs. 404.2114(a)(2) and 416.2214(a)(2). The commenter believed that

since a counselor has specialized training and experience, and has

extensive client information, SSA personnel who will determine this

issue should have equal qualifications in order to make appropriate

decisions and ensure that the review process does not unnecessarily

delay the VR payment process.

Response: We appreciate the need for SSA to ensure that qualified

personnel are involved in the review process. It is not our intent

under these regulations to attempt to ``second guess'' the decisions

made by the VR counselor so long as the VR services involved could

reasonably have been expected to motivate or assist the individual in

progressing toward the goal of performing SGA. We will ensure that the

reviewers are trained and qualified to perform such a review.

Cost Containment--Secs. 404.2117 and 416.2217

Comment: A few commenters stated that our ``requirement'' (rather

than our expectation) that they seek similar benefits when providing

services to beneficiaries or recipients is duplicative of an RSA

requirement. They viewed this duplication as unnecessary or as imposing

an additional reporting burden.

Response: It was our intent to establish consistency with the RSA

regulations in 34 CFR part 361. We see no additional reporting

requirement and regard this as a change for reasons of consistency

only.

Comment: The requirement in proposed Secs. 404.2117(c)(2) and

416.2217(c)(2) that State VR agencies and alternate participants submit

to SSA on a yearly basis a summary of their cost-containment policies

drew strong criticism from a number of State VR agencies. It was

described as duplicative of RSA reporting requirements and

administratively burdensome. One commenter believed that the

requirement in these sections represented gross over-regulation;

another believed that it would result in nonessential documentation.

Commenters who did not recommend deleting this requirement

suggested that the timeframe for submitting cost-containment policies

be changed from annually to every 3 years. This would make SSA's

reporting requirements consistent with the timeframe States must use

when submitting plans to RSA.

Response: In proposing the requirement in paragraph (c)(2) of

Secs. 404.2117 and 416.2217, it was our intent to have some written

assurance that providers of rehabilitation services would have cost-

containment policies in effect and to ensure that these policies were

adhered to when providing or procuring goods and services for which

payment would be requested from SSA. In consideration of the comments

we received and our own reevaluation of the requirement set forth in

the proposed rules, we have made substantial changes to paragraph

(c)(2) in the final rules.

The final rules require that State VR agencies submit to SSA, by

the end of the first quarter of each calendar year, a certification

that approved cost-containment policies are in effect and are adhered

to in procuring and providing goods and services for which the State VR

agency requests payment under our regulations. Such certification must

be signed by the State's chief financial official or the head of the VR

agency. Additionally, such certification must specify the basis upon

which it is made, e.g., a recent audit by an authorized State, Federal

or private auditor, or other independent compliance review, and the

date of such audit or compliance review. In the case of an alternate

participant, these certification requirements will be incorporated into

the negotiated agreement or contract. We also provide in the final

rules that we may request copies of a provider's specific written cost-

containment policies if we determine that such additional information

is necessary to ensure compliance with the requirements of our

regulations, and that the provider shall submit copies of these

policies when requested. We believe that these certification

requirements set forth in the final rules will minimize any

administrative burden that might have resulted from annual submissions

of summaries of cost-containment policies to SSA, while still assuring

that such policies are in effect and in use.

Comment: Several private providers commented that alternate

participants would need additional guidance on what constitutes a cost-

containment plan for SSA purposes.

Response: We agree that alternate participants will need such

guidance but believe that it would be inappropriate to include such

guidance in these regulations. Instead, we will provide specific

guidance when we develop contractual agreements with potential

alternate participants who express an interest in serving disabled or

blind beneficiaries and recipients.

Validation Reviews--Secs. 404.2121 and 416.2221

Comment: Thirteen State VR agencies, as well as the Council of

State Administrators of Vocational Rehabilitation and RSA, commented on

proposed Secs. 404.2121 and 416.2221. Most commenters identified two

major areas of concern about the proposal permitting prepayment or

postpayment validation review of claims for payment for VR services.

First, many commenters questioned the need for prepayment reviews since

a process for postpayment review of State VR agency claims has been in

place for a substantial period of time and, in their experience, has

proven to be an effective and viable approach. These commenters

expressed the view that prepayment reviews would unnecessarily delay

payments and would constitute increased paperwork and administrative

costs for the State VR agencies.

Second, many commenters were concerned that the proposed rules

would give SSA extremely broad discretionary authority to conduct an

unspecified number of reviews on a prepayment or postpayment basis,

without providing any guidelines regarding the frequency of such

reviews or permitting any negotiation or appeal procedures for the

State VR agencies with respect to the initiation of such reviews. Some

commenters suggested revising these proposed sections to specify the

frequency and timing of the validation reviews and to allow an appeal

by the State VR agency prior to our initiating an increase in

validation reviews. Also, some commenters suggested that the expanded

use of validation reviews be limited to situations where evidence

already pointed to inaccurate or noncompliant claims.

Response: In proposing the revisions to Secs. 404.2121 and

416.2221, it was not our intention to set review standards which would

be arbitrarily burdensome or time-consuming, or which would needlessly

delay the VR payment process. We envisioned the proposed validation

reviews as a mechanism to ensure a cost-effective payment program which

would be supported by sufficient documentation to provide for

reasonable accountability and sound business practices.

To maintain appropriate accountability and oversight of this

growing program, we intend to conduct some validation reviews on a

prepayment basis and some on a postpayment basis for all VR providers,

i.e., State VR agencies and alternate participants. We intentionally

did not specify in the proposed rules particular guidelines for the

implementation of these prepayment and postpayment reviews. We intended

to allow some discretion under these sections in order to permit

flexibility for implementing reviews for both State VR agencies and

alternate participants; ensure compliance with the provisions for

payment; and reinforce our goal of conducting quality, comprehensive

validation reviews. We are aware that sample sizes will have to be

determined based upon the availability of resources, workload levels,

and the volume and accuracy of claims being presented by individual

States and alternate participants. While it is not our intention to

unnecessarily impede or delay the process for paying claims, we must

have the discretion and flexibility to determine the volume of claims

selected for prepayment and postpayment reviews. For these reasons, we

have not made changes in response to the above comments.

Comment: One State VR agency interpreted the documentation

requirements under the validation review process as meaning that SSA

would only accept original documents as acceptable proof of costs and

services provided. The agency stated that this requirement was

unreasonable and would present unnecessary burdens to the State VR

agencies to attempt to maintain and provide such original

documentation, particularly since many rehabilitation cases require

more time to complete than record retention guidelines call for. It

recommended that our documentation and retention requirements comply

with the Federal Grants Management Handbook criteria.

Response: We believe the commenter may have misinterpreted

Secs. 404.2121(a) and 416.2221(a) in regard to acceptable proofs of

costs for services provided. We stated in these proposed sections that

copies of records of the services and costs would be sufficient

documentation, and that we reserved the right to examine any records

relating to services and costs. We did not intend to require that only

original documents would be acceptable as proofs of costs under these

sections. Also, under Secs. 404.2108(f) and 416.2208(f), a requirement

for participation in SSA's VR payment program is that the State VR

agency or alternate participant must maintain, and provide as we may

require (i.e., for validation reviews), adequate documentation of all

services or costs, regardless of other record retention requirements

governing such VR agencies or alternate participants.

Comment: One State VR agency recommended that onsite reviews be

considered for conducting the validation review process in order to

expedite the process and resolve any payment problems, as well as to

permit the reviewers to gain a better understanding of the

rehabilitation program's impact on individual clients.

Response: We appreciate this recommendation and will consider

onsite reviews as a possible option for some validation review

activities to the extent that resources will permit.

Comment: One commenter recommended that Secs. 404.2121 and 416.2221

include a time requirement under which SSA must provide the State VR

agency a report of the validation review findings. The commenter

recommended that a State VR agency be notified of the validation review

determination within 45 days after the review was completed. The

commenter believed that timely feedback to the State VR agencies would

permit corrective actions to be initiated as quickly as possible.

Response: We are not including in these regulations a specific

timeframe for notifying the State VR agency or alternate participant of

validation review determinations. However, we believe that notifying

the VR provider of our determination within 45 days of the completion

of a validation review is reasonable, and we expect to provide such

notification sooner than 45 days.

Other Comments

Comment: As we requested in the NPRM, most of the commenters

provided their views on the feasibility of SSA establishing an

experience-based fee schedule mechanism as a means for achieving a

simplified payment process which would also ensure a fair

representation of actual costs incurred by State VR agencies and

alternate participants. Almost all of these commenters were opposed to

this initiative. A number of reasons for this position were presented,

including the view that such a fee schedule could act as an inhibiting

factor to the State VR agencies' achievement of their goal of being

able to provide individualized rehabilitation services which would be

most likely to benefit a given client. Most commenters expressed the

belief that an experience-based fee schedule would not be able to

fairly represent the costs incurred by the various State agencies

because these costs can vary considerably from State to State and

region to region. Many commenters also argued that there is no need for

SSA to establish a fee schedule because individual States are required

to have fee schedules which are based on local conditions and provider/

consumer negotiations. Many commenters believed that imposing a fee

schedule would not improve the payment process and recommended instead

that the current process be continued.

Response: Given the overwhelmingly negative response we received to

this question, we will not establish an experience-based fee schedule

at this time.

Comment: One commenter recommended that the references to

individuals with certain disabilities or impairments be made consistent

with the terms used in the Americans with Disabilities Act and the

Rehabilitation Reauthorization Act.

Response: We have not adopted this recommendation. Because of the

special meanings of terms used in the Social Security and SSI programs,

we must ensure that the references we make to blind or disabled

beneficiaries and recipients in these rules remain consistent with the

applicable provisions of the Social Security Act and the other Social

Security and SSI regulations we have issued pursuant to this Act.

Comment: Many commenters expressed general displeasure with the

proposed regulatory changes in total, believing them to represent undue

interference and bureaucratic overcontrol in the work of the State VR

agencies. They stated that the proposed changes would constitute

serious administrative burdens, and would act as a disincentive to

State participation. Some of the State VR agencies believed these

proposed changes were intentionally adversarial to them and represented

an attempt on the part of SSA to unduly restrict VR payments.

Response: Our intention was not to restrict VR payments, institute

interference or overcontrol, or to be adversarial in nature. In reply

to these comments, we can only reiterate that we proposed and are now

making regulatory changes to improve the administration and cost-

effectiveness of the SSA VR payment program, to ensure that the

services we pay for bear a reasonable relationship to our goal of

returning individuals to substantial gainful work activity, and to make

VR services more readily available to disabled or blind beneficiaries

and recipients.

Our VR payment program has expanded over the last 10 years and is

rapidly approaching a $100 million program. It is understandable that a

program of such size would come under closer scrutiny and would require

assurances of proper administration. A minimal element for ensuring

proper administration is to know what SSA is paying for; hence, we

proposed and are now issuing additional requirements for submitting a

claim. In addition, for us to expand our referral mechanism to include

alternate participants, we need to know the outcome of the referrals we

send to the State VR agencies.

As a result of the comments which discussed additional

administrative burdens under the proposed rules, we have made certain

revisions, which are discussed in the individual sections above, to

lessen the impact of these regulatory changes.

Regulatory Procedures

Executive Order 12291

The Secretary has determined that these are not major rules under

Executive Order 12291. We expect that these regulations would be at

least cost-neutral over time. While it is not yet possible to present

realistic estimates, the expectation is that the program savings from

the additional successful rehabilitations and resultant benefit

terminations would exceed any additional administrative costs,

including the cost of providing VR evaluations and services.

Nevertheless, it is clear that the potential exists for VR payment

costs to increase, even if they are later offset by benefit savings. If

the current workload of claims for successful rehabilitations were to

increase, the annual cost in VR program payments would be an additional

$5.8 million for each 1000 claims submitted. In its 1988 report, the

Disability Advisory Council estimated that the trust funds save at

least $4 for each $1 spent. Using that as a basis, savings to the trust

funds could increase by $23.2 million for each additional 1000 claims.

Because these regulations do not meet any of the threshold criteria

for a major rule, a regulatory impact analysis is not required.

Paperwork Reduction Act

These rules contain information collection requirements. The

requirements in Sec. 404.2108 (b) and (f) and in Sec. 416.2208 (b) and

(f), which deal with claims for reimbursement for vocational

rehabilitation (VR) services, already have partial clearance by the

Office of Management and Budget (OMB) under OMB No. 0960-0310 (form

SSA-199; State Vocational Rehabilitation Agency Claim). However, these

sections expand the requirements of the previous regulations to provide

for the collection of additional information. Also, the changes to

Secs. 404.2104, 404.2117, 404.2121, 416.2204, 416.2217 and 416.2221

contain new reporting requirements.

As required by section 2(a) of the Paperwork Reduction Act of 1980,

44 U.S.C. 3504(h), we submitted a copy of the proposed rules to OMB for

its review of these information collection requirements. Other

organizations and individuals that wanted to submit comments on these

information collection requirements were asked to direct them to the

Social Security Administration, Attn: Reports Clearance Officer, 1-A-21

Operations Building, 6401 Security Boulevard, Baltimore, MD 21235, and

to the Office of Information and Regulatory Affairs, OMB, New Executive

Office Building, Room 3208, Washington, DC 20503, ATTENTION: Desk

Officer for HHS.

Public reporting burden for these collections of information is

estimated as follows according to the section of the rule:

Secs. 404.2104 and 416.2204--80 minutes per response times 960

responses yearly = 1,280 hours; Secs. 404.2108 and 416.2208--15 minutes

per response times 12,000 responses yearly = 3,525 hours. (Note: The

burden shown here is in addition to that already approved by OMB);

Secs. 404.2113 and 416.2213--No additional burden; Secs. 404.2117 and

416.2217--4 hours per response for the first year times 80 responses =

320 hours; thereafter, responses are estimated to take 1 hour, so the

burden is estimated to be 80 hours in subsequent years; and

Secs. 404.2121 and 416.2221--70 minutes per response times 1,500

responses annually = 1,750 hours. (Note: The burden shown here is in

addition to that already approved by OMB.)

Regulatory Flexibility Act

We certify that these regulations will not have a significant

economic impact on a substantial number of small entities. Therefore, a

regulatory flexibility analysis as provided in Public Law 96-354, the

Regulatory Flexibility Act of 1980, is not required.

These regulations apply to States and certain alternate providers

of VR services which are willing to provide services to disabled or

blind beneficiaries or recipients under our VR payment programs under

the conditions specified in the regulations. While the changes to the

regulations permit us to make greater use of alternate participants

under these programs, the regulations do not impose any significant

economic burdens on these alternate VR service providers which may be

small entities. Under the Act, we may arrange for VR services for

beneficiaries or recipients by agreement or contract with alternate VR

service providers where the State is unwilling to participate or does

not have an appropriate plan for VR services. The Act requires that the

provision of VR services by alternate participants, and the payment to

alternate participants for such services, shall be subject to the same

conditions that would apply to the States. Our existing regulations

provide that an alternate participant must have a plan for VR services

that is similar to an appropriate State plan. These amended regulations

do not change this requirement but clarify that the plans of alternate

participants, like a State plan for VR services, must ensure, among

other things, that the provision of VR services will meet certain

minimum standards. These regulations also clarify that we will not

enter into a written agreement or contract with a private or other non-

State VR provider to serve as an alternate participant unless such

provider meets certain basic qualifications. The regulations do not

require private or other non-State VR providers to participate in the

VR payment programs. Rather, the regulations increase the opportunity

for these providers to participate in these programs if they wish to do

so.

(Catalog of Federal Domestic Assistance Programs Nos. 93.802, Social

Security-Disability Insurance; 93.807, Supplemental Security Income)

List of Subjects

20 CFR Part 404

Administrative Practice and Procedure, Blind, Disability benefits,

Old-Age, Survivors and Disability Insurance, Reporting and

recordkeeping requirements, Social Security.

20 CFR Part 416

Administrative Practice and Procedure, Aged, Blind, and Disability

benefits, Public assistance programs, Reporting and recordkeeping

requirements, Supplemental Security Income (SSI).

Dated: September 8, 1993.

Lawrence H. Thompson,

Principal Deputy Commissioner of Social Security.

Approved: November 29, 1993.

Donna E. Shalala,

Secretary of Health and Human Services.

For the reasons set out in the preamble, we are amending part 404,

subpart V, and part 416, subpart V, of chapter III of title 20, Code of

Federal Regulations, as set forth below.

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE

(1950- )

Subpart V--Payments for Vocational Rehabilitation Services

1. The authority citation for subpart V of part 404 continues to

read as follows:

Authority: Secs. 205(a), 222, and 1102 of the Social Security

Act; 42 U.S.C. 405(a), 422, and 1302.

2. Section 404.2102 is amended by revising paragraph (b), by

redesignating paragraphs (c) through (n) as paragraphs (d) through (o),

by adding a new paragraph (c), and by revising redesignated paragraphs

(e) and (l) to read as follows:

Sec. 404.2102 Purpose and scope.

* * * * *

(b) Section 404.2104 explains how State VR agencies or alternate

participants may participate in the payment program under this subpart.

(c) Section 404.2106 describes the basic qualifications for

alternate participants.

* * * * *

(e) Sections 404.2110 through 404.2111 describe when an individual

has completed a continuous period of SGA and when VR services will be

considered to have contributed to that period.

* * * * *

(l) Sections 404.2120 and 404.2121 describe the audits and the

prepayment and postpayment validation reviews we will conduct.

* * * * *

3. Section 404.2103 is amended by adding a new definition of

``Accept the beneficiary as a client for VR services'' immediately

before the definition of ``Act'' and adding a new definition of ``Place

the beneficiary into an extended evaluation process'' immediately

before the definition of ``Secretary'' to read as follows:

Sec. 404.2103 Definitions.

* * * * *

Accept the beneficiary as a client for VR services means that the

State VR agency determines that the individual is eligible for VR

services and places the individual into an active caseload status for

development of an individualized written rehabilitation program.

* * * * *

Place the beneficiary into an extended evaluation process means

that the State VR agency determines that an extended evaluation of the

individual's VR potential is necessary to determine whether the

individual is eligible for VR services and places the individual into

an extended evaluation status.

* * * * *

4. Section 404.2104 is revised to read as follows:

Sec. 404.2104 Participation by State VR agencies or alternate

participants.

(a) General. In order to participate in the payment program under

this subpart through its VR agency(ies), a State must have a plan which

meets the requirements of title I of the Rehabilitation Act of 1973, as

amended. An alternate participant must have a similar plan and

otherwise qualify under Sec. 404.2106.

(b) Participation by States. (1) The opportunity to participate

through its VR agency(ies) with respect to disability beneficiaries in

the State will be offered first to the State in accordance with

paragraph (c) of this section, unless the State has notified us in

advance under paragraph (e)(1) of this section of its decision not to

participate or to limit such participation.

(2) A State with one or more approved VR agencies may choose to

limit participation of those agencies to a certain class(es) of

disability beneficiaries. For example, a State with separate VR

agencies for the blind and disabled may choose to limit participation

to the VR agency for the blind. In such a case, we would give the

State, through its VR agency for the blind, the opportunity to

participate with respect to blind disability beneficiaries in the State

in accordance with paragraph (d) of this section. We would arrange for

VR services for non-blind disability beneficiaries in the State through

an alternate participant(s). A State that chooses to limit

participation of its VR agency(ies) must notify us in advance under

paragraph (e)(1) of this section of its decision to limit such

participation.

(3) If a State chooses to participate by using a State agency other

than a VR agency with a plan for VR services approved under title I of

the Rehabilitation Act of 1973, as amended, that State agency may

participate only as an alternate participant.

(c) Opportunity for participation through State VR agencies. (1)

Unless a State has decided not to participate or to limit

participation, we will give the State the opportunity to participate

through its VR agency(ies) with respect to disability beneficiaries in

the State by referring such beneficiaries first to the State VR

agency(ies) for necessary VR services. A State, through its VR

agency(ies), may participate with respect to any beneficiary so

referred by accepting the beneficiary as a client for VR services or

placing the beneficiary into an extended evaluation process and

notifying us under paragraph (c)(2) of this section of such acceptance

or placement.

(2)(i) In order for the State to participate with respect to a

disability beneficiary whom we referred to a State VR agency, the State

VR agency must notify the appropriate Regional Commissioner (SSA) in

writing or through electronic notification of its decision either to

accept the beneficiary as a client for VR services or to place the

beneficiary into an extended evaluation process. The notice must be

received by the appropriate Regional Commissioner (SSA) no later than

the close of the fourth month following the month in which we referred

the beneficiary to the State VR agency. If we do not receive such

notice with respect to a beneficiary whom we referred to the State VR

agency, we may arrange for VR services for that beneficiary through an

alternate participant.

(ii) In any case in which a State VR agency notifies the

appropriate Regional Commissioner (SSA) in writing within the stated

time period under paragraph (c)(2)(i) of this section of its decision

to place the beneficiary into an extended evaluation process, the State

VR agency also must notify that Regional Commissioner in writing upon

completion of the evaluation of its decision whether or not to accept

the beneficiary as a client for VR services. If we receive a notice of

a decision by the State VR agency to accept the beneficiary as a client

for VR services following the completion of the extended evaluation,

the State may continue to participate with respect to such beneficiary.

If we receive a notice of a decision by the State VR agency not to

accept the beneficiary as a client for VR services following the

completion of the extended evaluation, we may arrange for VR services

for that beneficiary through an alternate participant.

(d) Opportunity for limited participation through State VR

agencies. If a State has decided under paragraph (e)(1) of this section

to limit participation of its VR agency(ies) to a certain class(es) of

disability beneficiaries in the State, we will give the State the

opportunity to participate with respect to such class(es) of disability

beneficiaries by referring such beneficiaries first to the State VR

agency(ies) for necessary VR services. The State, through its VR

agency(ies), may participate with respect to any beneficiary so

referred by accepting the beneficiary as a client for VR services or

placing the beneficiary into an extended evaluation process and

notifying us under paragraph (c)(2) of this section of such acceptance

or placement.

(e) Decision of a State not to participate or to limit

participation. (1) A State may choose not to participate through its VR

agency(ies) with respect to any disability beneficiaries in the State,

or it may choose to limit participation of its VR agency(ies) to a

certain class(es) of disability beneficiaries in the State. A State

which decides not to participate or to limit participation must provide

advance written notice of that decision to the appropriate Regional

Commissioner (SSA). Unless a State specifies a later month, a decision

not to participate or to limit participation will be effective

beginning with the third month following the month in which the notice

of the decision is received by the appropriate Regional Commissioner

(SSA). The notice of the State decision must be submitted by an

official authorized to act for the State for this purpose. A State must

provide to the appropriate Regional Commissioner (SSA) an opinion from

the State's Attorney General verifying the authority of the official

who sent the notice to act for the State. This opinion will not be

necessary if the notice is signed by the Governor of the State.

(2)(i) If a State has decided not to participate through its VR

agency(ies), we may arrange for VR services through an alternate

participant(s) for disability beneficiaries in the State.

(ii) If a State has decided to limit participation of its VR

agency(ies) to a certain class(es) of disability beneficiaries, we may

arrange for VR services through an alternate participant(s) for the

class(es) of disability beneficiaries in the State excluded from the

scope of the State's participation.

(3) A State which has decided not to participate or to limit

participation may participate later through its VR agency(ies) in

accordance with paragraph (c) of this section, provided that such

participation will not conflict with any previous commitment which we

may have made to an alternate participant(s) under paragraph (e)(2) of

this section. A State which decides to resume participation under

paragraph (c) of this section must provide advance written notice of

that decision to the appropriate Regional Commissioner (SSA). Unless a

commitment to an alternate participant(s) requires otherwise, a

decision of a State to resume participation under paragraph (c) of this

section will be effective beginning with the third month following the

month in which the notice of the decision is received by the

appropriate Regional Commissioner (SSA) or, if later, with a month

specified by the State. The notice of the State decision must be

submitted by an official authorized to act for the State as explained

in paragraph (e)(1) of this section.

(f) Use of alternate participants. The Commissioner, by written

agreement or contract, may arrange for VR services through an alternate

participant(s) for any disability beneficiary in the State with respect

to whom the State is unwilling to participate through its VR

agency(ies). In such a case, we may refer the beneficiary to such

alternate participant for necessary VR services. The Commissioner will

find that a State is unwilling to participate with respect to any of

the following disability beneficiaries in that State:

(1) A disability beneficiary whom we referred to a State VR agency

under paragraph (c) or (d) of this section if we do not receive a

notice within the stated time period under paragraph (c)(2)(i) of this

section of a decision by the VR agency either to accept the beneficiary

as a client for VR services or to place the beneficiary into an

extended evaluation process;

(2) A disability beneficiary with respect to whom we receive a

notice under paragraph (c)(2)(ii) of this section of a decision by the

VR agency not to accept the beneficiary as a client for VR services

following the completion of the extended evaluation;

(3) The class(es) of disability beneficiaries excluded from the

scope of the State's participation if the State has decided to limit

participation of its VR agency(ies); and

(4) All disability beneficiaries in the State if the State has

decided not to participate through its VR agency(ies).

5. A new Sec. 404.2106 is added to read as follows:

Sec. 404.2106 Basic qualifications for alternate participants.

(a) General. We may arrange for VR services through an alternate

participant by written agreement or contract as explained in

Sec. 404.2104(f). An alternate participant may be a public or private

agency, organization, institution or individual (that is, any entity

whether for-profit or not-for-profit), other than a State VR agency.

(1) An alternate participant must--

(i) Be licensed, certified, accredited, or registered, as

appropriate, to provide VR services in the State in which it provides

services; and

(ii) Under the terms of the written contract or agreement, have a

plan similar to the State plan described in Sec. 404.2104(a) which

shall govern the provision of VR services to individuals.

(2) We will not use as an alternate participant any agency,

organization, institution, or individual--

(i) Whose license, accreditation, certification, or registration is

suspended or revoked for reasons concerning professional competence or

conduct or financial integrity;

(ii) Who has surrendered such license, accreditation,

certification, or registration pending a final determination of a

formal disciplinary proceeding; or

(iii) Who is precluded from Federal procurement or nonprocurement

programs.

(b) Standards for the provision of VR services. An alternate

participant's plan must provide, among other things, that the provision

of VR services to individuals will meet certain minimum standards,

including, but not limited to, the following:

(1) All medical and related health services furnished will be

prescribed by, or provided under the formal supervision of, persons

licensed to prescribe or supervise the provision of these services in

the State;

(2) Only qualified personnel and rehabilitation facilities will be

used to furnish VR services; and

(3) No personnel or rehabilitation facility described in paragraph

(a)(2) (i), (ii), or (iii) of this section will be used to provide VR

services.

6. Section 404.2108 is amended by redesignating paragraphs (b)

through (f) as (c) through (g), by adding a new paragraph (b), and by

revising redesignated paragraphs (d) and (f) to read as follows:

Sec. 404.2108 Requirements for payment.

* * * * *

(b) The claim for payment must be in a form prescribed by us and

contain the following information:

(1) A description of each service provided;

(2) When the service was provided; and

(3) The cost of the service;

* * * * *

(d) The VR services for which payment is being requested must have

been provided under a State plan for VR services approved under title I

of the Rehabilitation Act of 1973, as amended, or, in the case of an

alternate participant, under a negotiated plan, and must be services

that are described in Sec. 404.2114;

* * * * *

(f) The State VR agency or alternate participant must maintain, and

provide as we may require, adequate documentation of all services and

costs for all disability beneficiaries with respect to whom a State VR

agency or alternate participant could potentially request payment for

services and costs under this subpart; and

* * * * *

7. Section 404.2109 is amended by revising paragraph (c), by

removing the word ``and'' at the end of paragraph (f), by redesignating

paragraph (g) as paragraph (h), and by adding a new paragraph (g) to

read as follows:

Sec. 404.2109 Responsibility for making payment decisions.

* * * * *

(c) Whether an individual, without good cause, refused to continue

to accept VR services or failed to cooperate in a VR program for a

month(s) after October 1984, and whether deductions should be imposed

against the individual's disability benefits;

* * * * *

(g) Whether a VR service is a service described in Sec. 404.2114;

and

* * * * *

8. Section 404.2111 is amended by revising the introductory text by

revising paragraphs (a)(1) and (a)(2), and by revising the introductory

text of paragraph (b)(1) to read as follows:

Sec. 404.2111 Criteria for determining when VR services will be

considered to have contributed to a continuous period of 9 months.

The State VR agency or alternate participant may be paid for VR

services if such services contribute to the individual's performance of

a continuous 9-month period of SGA. The following criteria apply to

individuals who received more than just evaluation services. If a State

VR agency or alternate participant claims payment for services to an

individual who received only evaluation services, it must establish

that the individual's continuous period or medical recovery (if medical

recovery occurred before completion of a continuous period) would not

have occurred without the services provided. In applying the criteria

below, we will consider services described in Sec. 404.2114 that were

initiated, coordinated or provided, including services before October

1, 1981.

(a) * * *

(1) One year or less. Any VR services which significantly motivated

or assisted the individual in returning to, or continuing in, SGA will

be considered to have contributed to the continuous period.

(2) More than one year. (i) If the continuous period was preceded

by transitional work activity (employment or self-employment which

gradually evolved, with or without periodic interruption, into SGA),

and that work activity began less than a year after VR services ended,

any VR services which significantly motivated or assisted the

individual in returning to, or continuing in, SGA will be considered to

have contributed to the continuous period.

(ii) If the continuous period was not preceded by transitional work

activity that began less than a year after VR services ended, VR

services will be considered to have contributed to the continuous

period only if it is reasonable to conclude that the work activity

which constitutes a continuous period could not have occurred without

the VR services (e.g., training).

(b) Continuous period with medical recovery occurring before

completion. (1) If an individual medically recovers before a continuous

period has been completed, VR services under paragraph (a) of this

section will not be payable unless some VR services contributed to the

medical recovery. VR services will be considered to have contributed to

the medical recovery if--

* * * * *

9. Section 404.2113 is revised to read as follows:

Sec. 404.2113 Payment for VR services in a case of VR refusal.

(a) For purposes of this section, VR refusal means an individual's

refusal to continue to accept VR services or failure to cooperate in

such a manner as to preclude the individual's successful

rehabilitation.

(b) No later than the 60th day after the State VR agency or

alternate participant makes a preliminary finding that an individual

refuses to continue to accept VR services or fails to cooperate in a VR

program, the State VR agency or alternate participant shall report to

the appropriate Regional Commissioner (SSA) in writing such

individual's VR refusal so that we may make the determination described

in Sec. 404.2109(c).

(c) Payment can be made to a State VR agency or alternate

participant for the costs of VR services provided to an individual who,

after filing an application with the State VR agency or alternate

participant for rehabilitation services, without good cause, refuses to

continue to accept VR services or fails to cooperate in such a manner

as to preclude the individual's successful rehabilitation. A State VR

agency or alternate participant may be paid, subject to the provisions

of this subpart, for the costs of VR services provided to an individual

if deductions have been imposed against the individual's monthly

disability benefits for a month or months after October 1984 because of

VR refusal.

10. Section 404.2114 is revised to read as follows:

Sec. 404.2114 Services for which payment may be made.

(a) General. Payment may be made for VR services provided by a

State VR agency in accordance with title I of the Rehabilitation Act of

1973, as amended, or by an alternate participant under a negotiated

plan, subject to the limitations and conditions in this subpart. VR

services for which payment may be made under this subpart include only

those services described in paragraph (b) of this section which are--

(1) Necessary to determine an individual's eligibility for VR

services or the nature and scope of the services to be provided; or

(2) Provided by a State VR agency under an IWRP, or by an alternate

participant under a similar document, but only if the services could

reasonably be expected to motivate or assist the individual in

returning to, or continuing in, SGA.

(b) Specific services. Payment may be made under this subpart only

for the following VR services:

(1) An assessment for determining an individual's eligibility for

VR services and vocational rehabilitation needs by qualified personnel,

including, if appropriate, an assessment by personnel skilled in

rehabilitation technology, and which includes determining--

(i) The nature and extent of the physical or mental impairment(s)

and the resultant impact on the individual's employability;

(ii) The likelihood that an individual will benefit from vocational

rehabilitation services in terms of employability; and

(iii) An employment goal consistent with the capacities of the

individual and employment opportunities;

(2) Counseling and guidance, including personal adjustment

counseling, and those referrals and other services necessary to help an

individual secure needed services from other agencies;

(3) Physical and mental restoration services necessary to correct

or substantially modify a physical or mental condition which is stable

or slowly progressive and which constitutes an impediment to suitable

employment at or above the SGA level;

(4) Vocational and other training services, including personal and

vocational adjustment, books, tools, and other training materials,

except that training or training services in institutions of higher

education will be covered under this section only if maximum efforts

have been made by the State VR agency or alternate participant to

secure grant assistance in whole or in part from other sources;

(5) Maintenance expenses that are extra living expenses over and

above the individual's normal living expenses and that are incurred

solely because of and while the individual is participating in the VR

program and that are necessary in order for the individual to benefit

from other necessary VR services;

(6) Travel and related expenses necessary to transport an

individual for purpose of enabling the individual's participation in

other necessary VR services;

(7) Services to family members of a disabled individual only if

necessary to the successful vocational rehabilitation of that

individual;

(8) Interpreter services and note-taking services for an individual

who is deaf and tactile interpreting for an individual who is deaf and

blind;

(9) Reader services, rehabilitation teaching services, note-taking

services, and orientation and mobility services for an individual who

is blind;

(10) Telecommunications, sensory, and other technological aids and

devices;

(11) Work-related placement services to secure suitable employment;

(12) Post-employment services necessary to maintain, regain or

advance into suitable employment at or above the SGA level;

(13) Occupational licenses, tools, equipment, initial stocks, and

supplies;

(14) Rehabilitation technology services; and

(15) Other goods and services that can reasonably be expected to

motivate or assist the individual in returning to, or continuing in,

SGA.

11. Section 404.2117 is amended by revising the introductory text

and by revising paragraphs (b) and (c) to read as follows:

Sec. 404.2117 What costs will be paid.

In accordance with section 222(d) of the Social Security Act, the

Secretary will pay the State VR agency or alternate participant for the

VR services described in Sec. 404.2114 which were provided during the

period described in Sec. 404.2115 and which meet the criteria in

Sec. 404.2111, Sec. 404.2112, or Sec. 404.2113, but subject to the

following limitations:

* * * * *

(b) The cost must not have been paid or be payable from some other

source. For this purpose, State VR agencies or alternate participants

will be required to seek payment or services from other sources in

accordance with the ``similar benefit'' provisions under 34 CFR part

361, including making maximum efforts to secure grant assistance in

whole or part from other sources for training or training services in

institutions of higher education. Alternate participants will not be

required to consider State VR services a similar benefit.

(c)(1) The cost must be reasonable and necessary, in that it

complies with the written cost-containment policies of the State VR

agency or, in the case of an alternate participant, it complies with

similar written policies established under a negotiated plan. A cost

which complies with these policies will be considered necessary only if

the cost is for a VR service described in Sec. 404.2114. The State VR

agency or alternate participant must maintain and use these cost-

containment policies, including any reasonable and appropriate fee

schedules, to govern the costs incurred for all VR services, including

the rates of payment for all purchased services, for which payment will

be requested under this subpart. For the purpose of this subpart, the

written cost-containment policies must provide guidelines designed to

ensure--

(i) The lowest reasonable cost for such services; and

(ii) Sufficient flexibility so as to allow for an individual's

needs.

(2) The State VR agency shall submit to us before the end of the

first calendar quarter of each year a written statement certifying that

cost-containment policies are in effect and are adhered to in procuring

and providing goods and services for which the State VR agency requests

payment under this subpart. Such certification must be signed by the

State's chief financial official or the head of the VR agency. Each

certification must specify the basis upon which it is made, e.g., a

recent audit by an authorized State, Federal or private auditor (or

other independent compliance review) and the date of such audit (or

compliance review). In the case of an alternate participant, these

certification requirements shall be incorporated into the negotiated

agreement or contract. We may request the State VR agency or alternate

participant to submit to us a copy(ies) of its specific written cost-

containment policies and procedures (e.g., any guidelines and fee

schedules for a given year) if we determine that such additional

information is necessary to ensure compliance with the requirements of

this subpart. The State VR agency or alternate participant shall

provide such information when requested by us.

* * * * *

12. Section 404.2121 is revised to read as follows:

Sec. 404.2121 Validation reviews.

(a) General. We will conduct a validation review of a sample of the

claims for payment filed by each State VR agency or alternate

participant. We will conduct some of these reviews on a prepayment

basis and some on a postpayment basis. We may review a specific claim,

a sample of the claims, or all the claims filed by any State VR agency

or alternate participant, if we determine that such review is necessary

to ensure compliance with the requirements of this subpart. For each

claim selected for review, the State VR agency or alternate participant

must submit such records of the VR services and costs for which payment

has been requested or made under this subpart, or copies of such

records, as we may require to ensure that the services and costs meet

the requirements for payment. For claims for cases described in

Sec. 404.2101(a), a clear explanation or existing documentation which

demonstrates how the service contributed to the individual's

performance of a continuous 9-month period of SGA must be provided. For

claims for cases described in Sec. 404.2101(b) or (c), a clear

explanation or existing documentation which demonstrates how the

service was reasonably expected to motivate or assist the individual to

return to or continue in SGA must be provided. If we find in any

prepayment validation review, that the scope or content of the

information is inadequate, we will request additional information and

will withhold payment until adequate information has been provided. The

State VR agency or alternate participant shall permit us (including

duly authorized representatives) access to, and the right to examine,

any records relating to such services and costs. Any review performed

under this section will not be considered an audit for purposes of this

subpart.

(b) Purpose. The primary purpose of these reviews is--

(1) To ensure that the VR services and costs meet the requirements

for payment under this subpart;

(2) To assess the validity of our documentation requirements; and

(3) To assess the need for additional validation reviews or

additional documentation requirements for any State VR agency or

alternate participant to ensure compliance with the requirements under

this subpart.

(c) Determinations. In any validation review, we will determine

whether the VR services and costs meet the requirements for payment and

determine the amount of payment. We will notify in writing the State VR

agency or alternate participant of our determination. If we find in any

postpayment validation review that more or less than the correct amount

of payment was made for a claim, we will determine that an overpayment

or underpayment has occurred and will notify the State VR agency or

alternate participant that we will make the appropriate adjustment.

(d) Appeals. If the State VR agency or alternate participant

disagrees with our determination under this section, it may appeal that

determination in accordance with 404.2127. For purposes of this

section, an appeal must be filed within 60 days after receiving the

notice of our determination.

PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND

DISABLED

Subpart V--Payments for Vocational Rehabilitation Services

1. The authority citation for subpart V of part 416 continues to

read as follows:

Authority: Secs. 1102, 1615, and 1631(d)(1) and (e) of the

Social Security Act; 42 U.S.C. 1302, 1382d, and 1383(d)(1) and (e);

sec. 2344 of Pub. L. 97-35, 95 Stat. 867.

2. Section 416.2202 is amended by revising paragraph (b), by

redesignating paragraphs (c) through (n) as paragraphs (d) through (o),

by adding a new paragraph (c), and by revising redesignated paragraphs

(e) and (l) to read as follows:

Sec. 416.2202 Purpose and scope.

* * * * *

(b) Section 416.2204 explains how State VR agencies or alternate

participants may participate in the payment program under this subpart.

(c) Section 416.2206 describes the basic qualifications for

alternate participants.

* * * * *

(e) Sections 416.2210 through 416.2211 describe when an individual

has completed a continuous period of SGA and when VR services will be

considered to have contributed to that period.

* * * * *

(l) Sections 416.2220 and 416.2221 describe the audits and the

prepayment and postpayment validation reviews we will conduct.

* * * * *

3. Section 416.2203 is amended by adding a new definition of

``Accept the recipient as a client for VR services'' immediately before

the definition of ``Act'' and adding a new definition of ``Place the

recipient into an extended evaluation process'' immediately before the

definition of ``Secretary'' to read as follows:

Sec. 416.2203 Definitions.

* * * * *

Accept the recipient as a client for VR services means that the

State VR agency determines that the individual is eligible for VR

services and places the individual into an active caseload status for

development of an individualized written rehabilitation program.

* * * * *

Place the recipient into an extended evaluation process means that

the State VR agency determines that an extended evaluation of the

individual's VR potential is necessary to determine whether the

individual is eligible for VR services and places the individual into

an extended evaluation status.

* * * * *

4. Section 416.2204 is revised to read as follows:

Sec. 416.2204 Participation by State VR agencies or alternate

participants.

(a) General. In order to participate in the payment program under

this subpart through its VR agency(ies), a State must have a plan which

meets the requirements of title I of the Rehabilitation Act of 1973, as

amended. An alternate participant must have a similar plan and

otherwise qualify under Sec. 416.2206.

(b) Participation by States. (1) The opportunity to participate

through its VR agency(ies) with respect to disabled or blind recipients

in the State will be offered first to the State in accordance with

paragraph (c) of this section, unless the State has notified us in

advance under paragraph (e)(1) of this section of its decision not to

participate or to limit such participation.

(2) A State with one or more approved VR agencies may choose to

limit participation of those agencies to a certain class(es) of

disabled or blind recipients. For example, a State with separate VR

agencies for the blind and disabled may choose to limit participation

to the VR agency for the blind. In such a case, we would give the

State, through its VR agency for the blind, the opportunity to

participate with respect to blind recipients in the State in accordance

with paragraph (d) of this section. We would arrange for VR services

for disabled recipients in the State through an alternate

participant(s). A State that chooses to limit participation of its VR

agency(ies) must notify us in advance under paragraph (e)(1) of this

section of its decision to limit such participation.

(3) If a State chooses to participate by using a State agency other

than a VR agency with a plan for VR services approved under title I of

the Rehabilitation Act of 1973, as amended, that State agency may

participate only as an alternate participant.

(c) Opportunity for participation through State VR agencies. (1)

Unless a State has decided not to participate or to limit

participation, we will give the State the opportunity to participate

through its VR agency(ies) with respect to disabled or blind recipients

in the State by referring such recipients first to the State VR

agency(ies) for necessary VR services. A State, through its VR

agency(ies), may participate with respect to any recipient so referred

by accepting the recipient as a client for VR services or placing the

recipient into an extended evaluation process and notifying us under

paragraph (c)(2) of this section of such acceptance or placement.

(2)(i) In order for the State to participate with respect to a

disabled or blind recipient whom we referred to a State VR agency, the

State VR agency must notify the appropriate Regional Commissioner (SSA)

in writing or through electronic notification of its decision either to

accept the recipient as a client for VR services or to place the

recipient into an extended evaluation process. The notice must be

received by the appropriate Regional Commissioner (SSA) no later than

the close of the fourth month following the month in which we referred

the recipient to the State VR agency. If we do not receive such notice

with respect to a recipient whom we referred to the State VR agency, we

may arrange for VR services for that recipient through an alternate

participant.

(ii) In any case in which a State VR agency notifies the

appropriate Regional Commissioner (SSA) in writing within the stated

time period under paragraph (c)(2)(i) of this section of its decision

to place the recipient into an extended evaluation process, the State

VR agency also must notify that Regional Commissioner in writing upon

completion of the evaluation of its decision whether or not to accept

the recipient as a client for VR services. If we receive a notice of a

decision by the State VR agency to accept the recipient as a client for

VR services following the completion of the extended evaluation, the

State may continue to participate with respect to such recipient. If we

receive a notice of a decision by the State VR agency not to accept the

recipient as a client for VR services following the completion of the

extended evaluation, we may arrange for VR services for that recipient

through an alternate participant.

(d) Opportunity for limited participation through State VR

agencies. If a State has decided under paragraph (e)(1) of this section

to limit participation of its VR agency(ies) to a certain class(es) of

disabled or blind recipients in the State, we will give the State the

opportunity to participate with respect to such class(es) of disabled

or blind recipients by referring such recipients first to the State VR

agency(ies) for necessary VR services. The State, through its VR

agency(ies), may participate with respect to any recipient so referred

by accepting the recipient as a client for VR services or placing the

recipient into an extended evaluation process and notifying us under

paragraph (c)(2) of this section of such acceptance or placement.

(e) Decision of a State not to participate or to limit

participation. (1) A State may choose not to participate through its VR

agency(ies) with respect to any disabled or blind recipients in the

State, or it may choose to limit participation of its VR agency(ies) to

a certain class(es) of disabled or blind recipients in the State. A

State which decides not to participate or to limit participation must

provide advance written notice of that decision to the appropriate

Regional Commissioner (SSA). Unless a State specifies a later month, a

decision not to participate or to limit participation will be effective

beginning with the third month following the month in which the notice

of the decision is received by the appropriate Regional Commissioner

(SSA). The notice of the State decision must be submitted by an

official authorized to act for the State for this purpose. A State must

provide to the appropriate Regional Commissioner (SSA) an opinion from

the State's Attorney General, verifying the authority of the official

who sent the notice to act for the State. This opinion will not be

necessary if the notice is signed by the Governor of the State.

(2)(i) If a State has decided not to participate through its VR

agency(ies), we may arrange for VR services through an alternate

participant(s) for disabled or blind recipients in the State.

(ii) If a State has decided to limit participation of its VR

agency(ies) to a certain class(es) of disabled or blind recipients, we

may arrange for VR services through an alternate participant(s) for the

class(es) of disabled or blind recipients in the State excluded from

the scope of the State's participation.

(3) A State which has decided not to participate or to limit

participation may participate later through its VR agency(ies) in

accordance with paragraph (c) of this section, provided that such

participation will not conflict with any previous commitment which we

may have made to an alternate participant(s) under paragraph (e)(2) of

this section. A State which decides to resume participation under

paragraph (c) of this section must provide advance written notice of

that decision to the appropriate Regional Commissioner (SSA). Unless a

commitment to an alternate participant(s) requires otherwise, a

decision of a State to resume participation under paragraph (c) of this

section will be effective beginning with the third month following the

month in which the notice of the decision is received by the

appropriate Regional Commissioner (SSA) or, if later, with a month

specified by the State. The notice of the State decision must be

submitted by an official authorized to act for the State as explained

in paragraph (e)(1) of this section.

(f) Use of alternate participants. The Commissioner, by written

agreement or contract, may arrange for VR services through an alternate

participant(s) for any disabled or blind recipient in the State with

respect to whom the State is unwilling to participate through its VR

agency(ies). In such a case, we may refer the recipient to such

alternate participant for necessary VR services. The Commissioner will

find that a State is unwilling to participate with respect to any of

the following disabled or blind recipients in that State:

(1) A disabled or blind recipient whom we referred to a State VR

agency under paragraph (c) or (d) of this section if we do not receive

a notice within the stated time period under paragraph (c)(2)(i) of

this section of a decision by the VR agency either to accept the

recipient as a client for VR services or to place the recipient into an

extended evaluation process;

(2) A disabled or blind recipient with respect to whom we receive a

notice under paragraph (c)(2)(ii) of this section of a decision by the

VR agency not to accept the recipient as a client for VR services

following the completion of the extended evaluation;

(3) The class(es) of disabled or blind recipients excluded from the

scope of the State's participation if the State has decided to limit

participation of its VR agency(ies); and

(4) All disabled or blind recipients in the State if the State has

decided not to participate through its VR agency(ies).

5. A new Sec. 416.2206 is added to read as follows:

Sec. 416.2206 Basic qualifications for alternate participants.

(a) General. We may arrange for VR services through an alternate

participant by written agreement or contract as explained in

Sec. 416.2204(f). An alternate participant may be a public or private

agency, organization, institution or individual (that is, any entity

whether for-profit or not-for-profit), other than a State VR agency.

(1) An alternate participant must--

(i) Be licensed, certified, accredited, or registered, as

appropriate, to provide VR services in the State in which it provides

services; and

(ii) Under the terms of the written contract or agreement, have a

plan similar to the State plan described in Sec. 416.2204(a) which

shall govern the provision of VR services to individuals.

(2) We will not use as an alternate participant any agency,

organization, institution, or individual--

(i) Whose license, accreditation, certification, or registration is

suspended or revoked for reasons concerning professional competence or

conduct or financial integrity;

(ii) Who has surrendered such license, accreditation,

certification, or registration pending a final determination of a

formal disciplinary proceeding; or

(iii) Who is precluded from Federal procurement or nonprocurement

programs.

(b) Standards for the provision of VR services. An alternate

participant's plan must provide, among other things, that the provision

of VR services to individuals will meet certain minimum standards,

including, but not limited to, the following:

(1) All medical and related health services furnished will be

prescribed by, or provided under the formal supervision of, persons

licensed to prescribe or supervise the provision of these services in

the State;

(2) Only qualified personnel and rehabilitation facilities will be

used to furnish VR services; and

(3) No personnel or rehabilitation facility described in paragraph

(a)(2)(i), (ii), or (iii) of this section will be used to provide VR

services.

6. Section 416.2208 is amended by redesignating paragraphs (b)

through (f) as (c) through (g), by adding a new paragraph (b), and by

revising redesignated paragraphs (d) and (f) to read as follows:

Sec. 416.2208 Requirements for payment.

* * * * *

(b) The claim for payment must be in a form prescribed by us and

contain the following information:

(1) A description of each service provided;

(2) When the service was provided; and

(3) The cost of the service;

* * * * *

(d) The VR services for which payment is being requested must have

been provided under a State plan for VR services approved under title I

of the Rehabilitation Act of 1973, as amended, or, in the case of an

alternate participant, under a negotiated plan, and must be services

that are described in Sec. 416.2214;

* * * * *

(f) The State VR agency or alternate participant must maintain, and

provide as we may require, adequate documentation of all services and

costs for all disabled or blind recipients with respect to whom a State

VR agency or alternate participant could potentially request payment

for services and costs under this subpart; and

* * * * *

7. Section 416.2209 is amended by revising paragraph (c), by

removing the word ``and'' at the end of paragraph (f), by redesignating

paragraph (g) as paragraph (h), and by adding a new paragraph (g) to

read as follows:

Sec. 416.2209 Responsibility for making payment decisions.

* * * * *

(c) Whether an individual, without good cause, refused to continue

to accept VR services or failed to cooperate in a VR program for a

month(s) after October 1984, and whether an individual's disability or

blindness payment should be suspended;

* * * * *

(g) Whether a VR service is a service described in Sec. 416.2214;

and

* * * * *

8. Section 416.2211 is amended by revising the introductory text,

by revising paragraphs (a)(1) and (a)(2), and by revising the

introductory text of paragraph (b)(1) to read as follows:

Sec. 416.2211 Criteria for determining when VR services will be

considered to have contributed to a continuous period of 9 months.

The State VR agency or alternate participant may be paid for VR

services if such services contribute to the individual's performance of

a continuous 9-month period of SGA. The following criteria apply to

individuals who received more than just evaluation services. If a State

VR agency or alternate participant claims payment for services to an

individual who received only evaluation services, it must establish

that the individual's continuous period or medical recovery (if medical

recovery occurred before completion of a continuous period) would not

have occurred without the services provided. In applying the criteria

below, we will consider services described in Sec. 416.2214 that were

initiated, coordinated or provided, including services before October

1, 1981.

(a) * * *

(1) One year or less. Any VR services which significantly motivated

or assisted the individual in returning to, or continuing in, SGA will

be considered to have contributed to the continuous period.

(2) More than one year. (i) If the continuous period was preceded

by transitional work activity (employment or self-employment which

gradually evolved, with or without periodic interruption, into SGA),

and that work activity began less than a year after VR services ended,

any VR services which significantly motivated or assisted the

individual in returning to, or continuing in, SGA will be considered to

have contributed to the continuous period.

(ii) If the continuous period was not preceded by transitional work

activity that began less than a year after VR services ended, VR

services will be considered to have contributed to the continuous

period only if it is reasonable to conclude that the work activity

which constitutes a continuous period could not have occurred without

the VR services (e.g., training).

(b) Continuous period with medical recovery occurring before

completion. (1) If an individual medically recovers before a continuous

period has been completed, VR services under paragraph (a) of this

section will not be payable unless some VR services contributed to the

medical recovery. VR services will be considered to have contributed to

the medical recovery if--

* * * * *

9. Section 416.2213 is revised to read as follows:

Sec. 416.2213 Payment for VR services in a case of VR refusal.

(a) For purposes of this section, VR refusal means an individual's

refusal to continue to accept VR services or failure to cooperate in

such a manner as to preclude the individual's successful

rehabilitation.

(b) No later than the 60th day after the State VR agency or

alternate participant makes a preliminary finding that an individual

refuses to continue to accept VR services or fails to cooperate in a VR

program, the State VR agency or alternate participant shall report to

the appropriate Regional Commissioner (SSA) in writing such

individual's VR refusal so that we may make the determination described

in Sec. 416.2209(c).

(c) Payment can be made to a State VR agency or alternate

participant for the costs of VR services provided to an individual who,

after filing an application with the State VR agency or alternate

participant for rehabilitation services, without good cause, refuses to

continue to accept VR services or fails to cooperate in such a manner

as to preclude the individual's successful rehabilitation. A State VR

agency or alternate participant may be paid, subject to the provisions

of this subpart, for the costs of VR services provided to an individual

if the individual's monthly disability or blindness payment has been

suspended or terminated for a month or months after October 1984

because of VR refusal.

10. Section 416.2214 is revised to read as follows:

Sec. 416.2214 Services for which payment may be made.

(a) General. Payment may be made for VR services provided by a

State VR agency in accordance with title I of the Rehabilitation Act of

1973, as amended, or by an alternate participant under a negotiated

plan, subject to the limitations and conditions in this subpart. VR

services for which payment may be made under this subpart include only

those services described in paragraph (b) of this section which are--

(1) Necessary to determine an individual's eligibility for VR

services or the nature and scope of the services to be provided; or

(2) Provided by a State VR agency under an IWRP, or by an alternate

participant under a similar document, but only if the services could

reasonably be expected to motivate or assist the individual in

returning to, or continuing in, SGA.

(b) Specific services. Payment may be made under this subpart only

for the following VR services:

(1) An assessment for determining an individual's eligibility for

VR services and vocational rehabilitation needs by qualified personnel,

including, if appropriate, an assessment by personnel skilled in

rehabilitation technology, and which includes determining--

(i) The nature and extent of the physical or mental impairment(s)

and the resultant impact on the individual's employability;

(ii) The likelihood that an individual will benefit from vocational

rehabilitation services in terms of employability; and

(iii) An employment goal consistent with the capacities of the

individual and employment opportunities;

(2) Counseling and guidance, including personal adjustment

counseling, and those referrals and other services necessary to help an

individual secure needed services from other agencies;

(3) Physical and mental restoration services necessary to correct

or substantially modify a physical or mental condition which is stable

or slowly progressive and which constitutes an impediment to suitable

employment at or above the SGA level;

(4) Vocational and other training services, including personal and

vocational adjustment, books, tools, and other training materials,

except that training or training services in institutions of higher

education will be covered under this section only if maximum efforts

have been made by the State VR agency or alternate participant to

secure grant assistance in whole or in part from other sources;

(5) Maintenance expenses that are extra living expenses over and

above the individual's normal living expenses and that are incurred

solely because of and while the individual is participating in the VR

program and that are necessary in order for the individual to benefit

from other necessary VR services;

(6) Travel and related expenses necessary to transport an

individual for purpose of enabling the individual's participation in

other necessary VR services;

(7) Services to family members of a disabled or blind individual

only if necessary to the successful vocational rehabilitation of that

individual;

(8) Interpreter services and note-taking services for an individual

who is deaf and tactile interpreting for an individual who is deaf and

blind;

(9) Reader services, rehabilitation teaching services, note-taking

services, and orientation and mobility services for an individual who

is blind;

(10) Telecommunications, sensory, and other technological aids and

devices;

(11) Work-related placement services to secure suitable employment;

(12) Post-employment services necessary to maintain, regain or

advance into suitable employment at or above the SGA level;

(13) Occupational licenses, tools, equipment, initial stocks, and

supplies;

(14) Rehabilitation technology services; and

(15) Other goods and services that can reasonably be expected to

motivate or assist the individual in returning to, or continuing in,

SGA.

11. Section 416.2217 is amended by revising the introductory text

and by revising paragraphs (b) and (c) to read as follows:

Sec. 416.2217 What costs will be paid.

In accordance with section 1615(d) of the Social Security Act, the

Secretary will pay the State VR agency or alternate participant for the

VR services described in Sec. 416.2214 which were provided during the

period described in Sec. 416.2215 and which meet the criteria in

Sec. 416.2211, Sec. 416.2212, or Sec. 416.2213, but subject to the

following limitations:

* * * * *

(b) The cost must not have been paid or be payable from some other

source. For this purpose, State VR agencies or alternate participants

will be required to seek payment or services from other sources in

accordance with the ``similar benefit'' provisions under 34 CFR part

361, including making maximum efforts to secure grant assistance in

whole or part from other sources for training or training services in

institutions of higher education. Alternate participants will not be

required to consider State VR services a similar benefit.

(c)(1) The cost must be reasonable and necessary, in that it

complies with the written cost-containment policies of the State VR

agency or, in the case of an alternate participant, it complies with

similar written policies established under a negotiated plan. A cost

which complies with these policies will be considered necessary only if

the cost is for a VR service described in Sec. 416.2214. The State VR

agency or alternate participant must maintain and use these cost-

containment policies, including any reasonable and appropriate fee

schedules, to govern the costs incurred for all VR services, including

the rates of payment for all purchased services, for which payment will

be requested under this subpart. For the purpose of this subpart, the

written cost-containment policies must provide guidelines designed to

ensure--

(i) The lowest reasonable cost for such services; and

(ii) Sufficient flexibility so as to allow for an individual's

needs.

(2) The State VR agency shall submit to us before the end of the

first calendar quarter of each year a written statement certifying that

cost-containment policies are in effect and are adhered to in procuring

and providing goods and services for which the State VR agency requests

payment under this subpart. Such certification must be signed by the

State's chief financial official or the head of the VR agency. Each

certification must specify the basis upon which it is made, e.g., a

recent audit by an authorized State, Federal or private auditor (or

other independent compliance review) and the date of such audit (or

compliance review). In the case of an alternate participant, these

certification requirements shall be incorporated into the negotiated

agreement or contract. We may request the State VR agency or alternate

participant to submit to us a copy(ies) of its specific written cost-

containment policies and procedures (e.g., any guidelines and fee

schedules for a given year), if we determine that such additional

information is necessary to ensure compliance with the requirements of

this subpart. The State VR agency or alternate participant shall

provide such information when requested by us.

* * * * *

12. Section 416.2221 is revised to read as follows:

Sec. 416.2221 Validation reviews.

(a) General. We will conduct a validation review of a sample of the

claims for payment filed by each State VR agency or alternate

participant. We will conduct some of these reviews on a prepayment

basis and some on a postpayment basis. We may review a specific claim,

a sample of the claims, or all the claims filed by any State VR agency

or alternate participant, if we determine that such review is necessary

to ensure compliance with the requirements of this subpart. For each

claim selected for review, the State VR agency or alternate participant

must submit such records of the VR services and costs for which payment

has been requested or made under this subpart, or copies of such

records, as we may require to ensure that the services and costs meet

the requirements for payment. For claims for cases described in

Sec. 416.2201(a), a clear explanation or existing documentation which

demonstrates how the service contributed to the individual's

performance of a continuous 9-month period of SGA must be provided. For

claims for cases described in Sec. 416.2201(b) or (c), a clear

explanation or existing documentation which demonstrates how the

service was reasonably expected to motivate or assist the individual to

return to or continue in SGA must be provided. If we find in any

prepayment validation review that the scope or content of the

information is inadequate, we will request additional information and

will withhold payment until adequate information has been provided. The

State VR agency or alternate participant shall permit us (including

duly authorized representatives) access to, and the right to examine,

any records relating to such services and costs. Any review performed

under this section will not be considered an audit for purposes of this

subpart.

(b) Purpose. The primary purpose of these reviews is--

(1) To ensure that the VR services and costs meet the requirements

for payment under this subpart;

(2) To assess the validity of our documentation requirements; and

(3) To assess the need for additional validation reviews or

additional documentation requirements for any State VR agency or

alternate participant to ensure compliance with the requirements under

this subpart.

(c) Determinations. In any validation review, we will determine

whether the VR services and costs meet the requirements for payment and

determine the amount of payment. We will notify in writing the State VR

agency or alternate participant of our determination. If we find in any

postpayment validation review that more or less than the correct amount

of payment was made for a claim, we will determine that an overpayment

or underpayment has occurred and will notify the State VR agency or

alternate participant that we will make the appropriate adjustment.

(d) Appeals. If the State VR agency or alternate participant

disagrees with our determination under this section, it may appeal that

determination in accordance with Sec. 416.2227. For purposes of this

section, an appeal must be filed within 60 days after receiving the

notice of our determination.

[FR Doc. 94-5849 Filed 3-14-94; 8:45 am]

BILLING CODE 4190-29-P