Medicaid Program; Coverage of Personal Care Services

SUMMARY: This final rule specifies the revised requirements for

Medicaid coverage of personal care services furnished in a home or

other location as an optional benefit, effective for services furnished

on or after October 1, 1994. In particular, this final rule specifies

that personal care services may be furnished in a home or other

location by any individual who is qualified to do so. This rule

conforms the Medicaid regulations to the provisions of section

13601(a)(5) of the Omnibus Budget Reconciliation Act of 1993, which

added section 1905(a)(24) to the Social Security Act. Additionally, we

are making two minor changes to the Medicaid regulations concerning

home health services.

EFFECTIVE DATE: November 10, 1977.

FOR FURTHER INFORMATION CONTACT: Terese Klitenic, (410) 786-5942.

SUPPLEMENTARY INFORMATION:

I. Background

Under section 1902(a)(10) of the Social Security Act (the Act),

States with Medicaid programs must provide certain basic services to

Medicaid recipients. Section 1905(a) of the Act defines the required

and optional services that are provided as medical assistance. Before

the enactment of the Omnibus Budget Reconciliation Act of 1990 (OBRA

'90, Public Law 101-508), a State had the option to elect to cover

personal care services under its Medicaid State plan. Although not

specifically mentioned in section 1905(a) of the Act, personal care

services could be covered under section 1905(a)(22) of the Act

(redesignated as section 1905(a)(25) of the Act on November 5, 1990),

under which a State may furnish any additional services specified by

the Secretary and recognized under State law. In regulations at 42 CFR

440.170(f), the Secretary specified that personal care services may be

covered.

Section 4721 of OBRA '90 amended section 1905(a)(7) of the Act to

include personal care services as part of the home health services

benefit and to impose certain conditions on the provision of personal

care services, effective for services furnished on or after October 1,

1994. This amendment would have had a significant effect since, under

section 1902(a)(10)(D) of the Act, home health services are a mandatory

benefit for all Medicaid recipients eligible for nursing facility

services under the State plan. Thus, had section 1905(a)(7) of the Act

not been further amended (as discussed below) before the effective date

of section 4721 of OBRA '90, personal care services would have become a

mandatory benefit for all recipients eligible for nursing facility

services, effective October 1, 1994.

Before the provisions of OBRA '90 became effective, the Omnibus

Budget Reconciliation Act of 1993 (OBRA '93, Public Law 103-66) was

enacted on August 10, 1993. Section 13601(a)(1) of OBRA '93 amended

section 1905(a)(7) of the Act to remove personal care services from the

definition of home health services. Additionally, section 13601(a)(5)

of OBRA '93 added a new paragraph (24) to section 1905(a) of the Act,

to include payment for personal care services under the definition of

medical assistance. Under section 1905(a)(24) of the Act, personal care

services furnished to an individual who is not an inpatient or resident

of a hospital, nursing facility, intermediate care facility for persons

with mental retardation (ICF/MR), or institution for mental disease is

an optional benefit for which States may provide medical assistance

payments. The statute specifies that personal care services must be:

(1) Authorized for an individual by a physician in accordance with a

plan of treatment or (at the option of the State) otherwise authorized

for the individual in accordance with a service plan approved by the

State; (2) provided by an individual who is qualified to provide such

services and who is not a member of the individual's family; and (3)

furnished in a home or other location. This amendment was effective

October 1, 1994. Therefore, as a result of the legislative changes made

by OBRA '93, personal care services continue to be an optional State

plan benefit, and are now authorized under section 1905(a)(24) of the

Act, effective for services furnished on or after October 1, 1994.

II. Issuance of the Proposed Rule

A. Personal Care Services in a Home or Other Location (Sec. 440.167)

On March 8, 1996, we published in the Federal Register a proposed

rule that specified that personal care services may be furnished in a

home or other location by any individual who is qualified to do so (61

FR 9405). Throughout the preamble to the proposed rule, we emphasized

our main goal in implementing the statutory provisions regarding

personal care services. Specifically, our objective was to provide

States maximum flexibility in tailoring their Medicaid programs to meet

the needs of recipients while also setting guidelines so that States

that choose to offer the personal care services benefit furnish quality

services in an effective manner.

In the preamble to the proposed rule, we stated that as

historically used in the Medicaid program, personal care services means

services related to a patient's physical requirements, such as

assistance with eating, bathing, dressing, personal hygiene, activities

of daily living, bladder and bowel requirements, and taking medications

(61 FR 9406). These services primarily involve ``hands on'' assistance

by a personal care attendant with a recipient's physical dependency

needs (as opposed to purely housekeeping services). We noted that

although personal care services may be similar to or overlap some

services furnished by home health aides, skilled services that may be

performed only by a health professional are not considered personal

care services. Alternatively, services that require a lower level of

skill such as personal care services may also be provided by home

health aides under the home health benefit. We did not propose to

include the above description of personal care services in the

regulations. The specific changes we proposed to the regulations are

set forth below:

The existing regulations at Sec. 440.170 specify that personal care

services in a recipient's home means services prescribed by a physician

in accordance with the recipient's plan of treatment, and furnished by

an individual who is (1) qualified to provide the services, (2)

supervised by a registered nurse, and (3) not a member of the

recipient's family. The existing regulations do not provide for

personal care services furnished in settings other than the recipient's

home. To conform the regulations to the provisions of section

1905(a)(24) of the Act, we proposed to add a new Sec. 440.167,

``Personal care services in a home or other location.'' We proposed

[[Page 47897]]

that personal care services are services furnished to an individual who

is not an inpatient or resident of a hospital, nursing facility,

intermediate care facility for persons with mental retardation, or

institution for mental disease, that are: (1) Authorized for the

individual by a physician in accordance with a plan of treatment or (at

the option of the State) otherwise authorized for the individual in

accordance with a service plan approved by the State; (2) provided by

an individual who is qualified to provide such services and who is not

a member of the individual's family; and (3) furnished in a home, and

if the State chooses, in another location.

Since section 1905(a)(24) of the Act does not require that the

services be supervised by a registered nurse, we proposed that we would

not require such supervision in new Sec. 440.167. In addition, we

proposed that States that elect to offer the personal care services

benefit must, at a minimum, cover personal care services provided in

the home, but also have the option to cover personal care services

provided in other locations. We set forth a detailed discussion of

alternatives that we considered in implementing the provision of OBRA

'93 that allows States to cover personal care services provided outside

the home (61 FR 9406).

We proposed to leave to the State's option the decision of whether

personal care services are to be authorized by a physician in

accordance with a plan of treatment, or otherwise authorized in

accordance with a service plan approved by the State. Similarly, we

proposed to permit States to determine, through development of provider

qualifications, which individuals are qualified to provide personal

care services (other than family members).

Section 1905(a)(24)(B) of the Act specifies that, for Medicaid

purposes, personal care services may not be furnished by a member of

the individual's family. To provide for more clarity and consistency in

this regard, we proposed to define family members under new

Sec. 440.167(b) as spouses of recipients and parents (or stepparents)

of minor recipients. Finally, since personal care services are now an

optional benefit under section 1905(a)(24) of the Act, we proposed to

remove existing Sec. 440.170(f), which provides for coverage of

personal care services in a recipient's home as part of any other

medical care or remedial care recognized under State law and specified

by the Secretary.

B. Proposed Changes Concerning Home Health Services (Sec. 440.70)

We proposed several changes to the regulations concerning home

health services. Specifically, we proposed to revise Sec. 440.70(b)(3)

to provide that the frequency of physician review of a recipient's need

for medical supplies, equipment, and appliances suitable for use in the

home under the home health benefit would be determined on a case-by-

case basis depending on the nature of the item prescribed (rather than

every 60 days, as provided for in the existing regulations). Absent

changes in a recipient's condition, we do not believe that a

recipient's need for medical equipment necessitates routine inclusion

in a plan of care reviewed every 60 days by a physician.

Additionally, existing Sec. 440.70(d) defines a home health agency

for purposes of Medicaid reimbursement as a public or private agency or

organization, or part of an agency or organization, that meets

requirements for participation in Medicare. We proposed to revise this

definition to indicate that in order to participate in Medicaid, the

agency must meet Medicare requirements for participation as well as any

additional standards the State may wish to apply that are not in

conflict with Federal requirements. Finally, we proposed a technical

change to Sec. 440.70(c) to remove an obsolete reference to subparts F

and G of part 442.

III. Discussion of Public Comments and Departmental Responses

We received 73 timely comments in response to the proposed rule. A

summary of these comments and our responses follow.

Comment: Many commenters disagreed with our proposal to eliminate

the requirement that personal care services be supervised by a

registered nurse. The commenters indicated that the registered nurse is

the only medical contact many (mostly elderly) beneficiaries have and

that the nurse is instrumental in identifying health needs that require

immediate attention by a health care professional.

Response: Section 1905(a)(24) of the Act, as added by OBRA ``93,

does not specify that personal care services must be supervised by a

registered nurse. Therefore, we proposed to remove the requirement from

the existing regulations. While we believe that it was clearly the

intent of Congress to eliminate this requirement from the statute, we

agree with the commenters that there may be situations in which

individuals providing personal care services need supervision. However,

while some individuals' conditions may dictate a need for nurse

supervision, many individuals receiving personal care services are

either capable of directing their own care or have needs that are not

based on a ``medical'' condition (for example, individuals with mental

retardation). Additionally, a stable, physically disabled beneficiary

without cognitive impairments may not need supervision of his or her

personal care attendant. In some cases, supervision of personal care

services by a registered nurse may be unnecessary, but the services of

a case manager may be appropriate to oversee the individual's needs. We

note that case management services could be reimbursed as either

administrative costs or, as applicable, targeted case management

services under Medicaid. Our revision to the regulations does not

prohibit the supervision of a registered nurse; rather, it allows

States to make the determination of when supervision of personal care

services is necessary and what type of professional is qualified to

supervise the personal care attendant. Therefore, we believe that the

need for supervision, whether by a registered nurse or another

individual, should be made on a case-by-case basis by the State.

Comment: A few commenters were concerned that we did not define

``qualified'' personal care providers. Others suggested that we require

States to establish criteria for determining provider qualifications.

In addition, several commenters recommended that, without the nursing

supervision requirement, we establish Federal quality assurance

standards or minimal standards of training or testing for personal care

providers.

Response: We are not establishing provider qualifications for

personal care services. Rather, in the interest of maintaining a high

level of flexibility in providing personal care services, we suggest

that States develop their own provider qualifications and establish

mechanisms for quality assurance. While we recognize the importance of

provider qualifications and quality assurance, we also firmly believe

in allowing States the greatest flexibility in designing their Medicaid

programs. There are several methods States may use to ensure that

recipients are receiving high quality personal care services. For

example, States may opt to screen personal care attendants before they

are employed and/or train them afterward or allow the recipient to be

the judge of quality through an initial screening. Alternatively,

States may require agency providers to train their

[[Page 47898]]

employees on the job. State level oversight of overall program

compliance standards, case level oversight, attendant training and

screening, and recipient complaint and grievance mechanisms are ways in

which States can influence the quality of their personal care programs.

In this way, States can best address the needs of their target

populations (for example, individuals with AIDS or with physical

disabilities) and set unique provider qualifications and quality

assurance mechanisms. We note that home health aides employed by home

health agencies may sometimes provide personal care services. Home

health aides that provide only personal care services under Medicaid

need only meet the qualifications set forth at Sec. 484.36(e) (and not

other qualifications for home health aide services).

Comment: Some commenters disagreed with our proposal that States

electing to offer personal care services must cover these services when

provided in the home and may also choose to cover personal care

services provided in other locations. The commenters believed that we

should require States to provide the services in locations outside the

home. One commenter stated that we should indicate that assisted living

facilities may be considered an individual's home. Other commenters

asked that we clarify the meaning of ``other locations.''

Response: In the proposed rule, we set forth a detailed discussion

of options we considered for implementing the provision of OBRA '93

that allows States to cover personal care services outside the home (61

FR 9406). We proposed that States electing the personal care services

benefit must provide the services in the home but may also choose to

provide personal care in locations outside the home. We stated that our

main goal in implementing the provision was to afford States maximum

flexibility in tailoring their Medicaid programs to meet the needs of

their recipients while also expanding the settings in which personal

care services may be provided.

We do not believe that adopting the commenters' suggestion that we

require States to provide the services in the home and in other

locations would be appropriate since section 1905(a)(24)(C) of the Act

refers to services ``furnished in a home or other location.'' We

believe that Congress clearly did not intend to impose such a mandate

on State Medicaid programs. Moreover, a policy such as the one

suggested by the commenters could work against the best interests of

recipients if States choose not to offer the personal care services

benefit at all because of the expense involved in covering the services

both inside and outside the home. In addition, the Medicaid program has

always given States latitude in establishing the criteria or conditions

under which optional services (such as personal care) may be covered,

as long as the services available are sufficient to achieve their

purpose. States have the flexibility to define optional services to

include less than the full array of services that could be covered

under the regulatory definitions, if they so choose. (In accordance

with section 1905(r)(5) of the Act, coverage of personal care services

outside the home is not optional with respect to those individuals who

are eligible for the Early and Periodic Screening, Diagnostic, and

Treatment (EPSDT) program. Personal care services outside the home are

mandatory for these individuals when medically necessary under the

EPSDT program.)

We note that an individual need not receive personal care services

inside the home to be eligible to receive them in another location.

Rather, as stated above, a State that opts to furnish personal care

services must provide them inside the home to recipients that need them

in that setting, but also has the option to provide them in other

locations. Thus, depending on whether the State also chooses to provide

personal care services outside the home, an individual recipient could

receive personal care services inside the home, outside the home or in

both locations. We believe that our policy is the most appropriate

interpretation of the statute, is in the best interest of recipients,

and gives States the discretion necessary to operate their programs in

an efficient manner.

With regard to the other issues raised by commenters, States may

consider an assisted living facility as an individual's home but we do

not believe we need to add this requirement to the regulations.

Additionally, ``other locations'' may be any location, as specified by

the State, except for the statutorily excluded locations set forth in

section 1905(a)(24) of the Act (hospital, nursing facility, or ICF/MR).

Comment: One commenter disagreed with our position that the EPSDT

provisions mandate coverage of personal care services outside the home

when medically necessary.

Response: As stated above, under section 1905(r)(5) of the Act, the

provision of medically necessary personal care services outside the

home is not an option but a mandate for individuals eligible under the

EPSDT program. The EPSDT benefit includes all medically necessary

services described in section 1905(a) of the Act, whether or not such

services are covered under the State's Medicaid plan. Therefore,

personal care services must be provided outside the home when medically

necessary to individuals under the EPSDT program.

Comment: Some commenters disagreed with our proposed definition of

personal care services and others believed that we should define the

services in regulation. The commenters recommended that we provide a

detailed description of the services that can be provided under the

personal care services benefit in the regulatory language. One

commenter indicated that personal care services should include those

that are delegated by a nurse or physician to an unlicensed personal

care provider. They also suggested that the definition be revised to

delete reference to physical tasks while referring to assistance with

both activities of daily living (ADLs) and instrumental activities of

daily living (IADLs), including assistance with cognitive tasks and

services to prevent an individual from harming himself. One commenter

suggested changing the name of the service from personal care services

to ``personal assistant services.'' One commenter asserted that

assistance with taking medications should not be included as a personal

care service.

Response: As stated in the proposed rule, in order to more easily

address changes that may occur in the definition and delivery of

personal care services and to allow greatest State flexibility, in the

near future we plan to publish in a State Medicaid Manual instruction a

definition that States may use. As suggested by the commenter, we plan

to define the services in terms of assistance with ADLs and IADLs.

Services such as those delegated by nurses or physicians to personal

care attendants may be provided so long as the delegation is in keeping

with State law or regulation and the services fit within the personal

care services benefit covered under a State's plan. Services such as

assistance with taking medications would be allowed if they are

permissible in States' Nurse Practice Acts, although States may need to

ensure proper training is provided when necessary. We will not change

the name of the service as suggested, as the regulations now are

consistent with the statutory language.

Comment: Some commenters were concerned about our proposed

definition of ``family member'' for purposes of individuals providing

personal care services. A few commenters suggested that we expand the

definition to preclude Medicaid

[[Page 47899]]

coverage of personal care services provided by children, grandchildren,

and legal guardians of recipients. Other commenters believed that

parents and spouses should be allowed to provide personal care

services. Another commenter recommended that stepparents be allowed to

provide personal care services in States where stepparents are not

legally responsible for the recipient. Finally, several commenters

disagreed with our proposal to allow States to further restrict family

members from providing services and indicated that States should be

required to limit excluded family members to spouses and parents.

Response: Section 1905(a)(24)(B) of the Act specifies that personal

care services may not be furnished by a member of the individual's

family. We proposed to define family members as spouses of recipients

and parents (or stepparents) of minor recipients. Additionally, we

proposed that States could further restrict which family members could

qualify as providers by extending the definition to apply to family

members other than spouses and parents.

To provide for more clarity and consistency, we have revised the

definition of family member at new Sec. 440.167(b) to provide that a

family member is a legally responsible relative. Thus, spouses of

recipients and parents of minor recipients (including stepparents who

are legally responsible for minor children) are included in the

definition of family member. This definition is identical to the

revised definition that applies to personal care services provided

under a home and community-based services waiver.

Congress clearly intended to preclude family members from providing

personal care services and we believe our revised definition is the

most reasonable interpretation of the term. Furthermore, we have always

maintained that spouses and parents are inherently responsible for

meeting the personal care needs of their family members, and,

therefore, it would not be appropriate to allow Medicaid reimbursement

for such services. If stepparents are not legally responsible for the

recipient in some States, they could provide personal care services

under our revised definition. However, because States can further

restrict which family members can qualify as providers by extending the

definition to apply to individuals other than those legally responsible

for the recipient, States could choose to exclude stepparents

regardless of their legal responsibility. In addition, by allowing

States to further define ``family members'' for purposes of personal

care services, States can tailor their programs to meet their

individual needs.

Comment: A few commenters indicated that the personal care services

benefit should be a mandatory service that States must provide under

their Medicaid programs. One commenter believed that the regulation

should specifically allow various methods of delivering personal care

services (for example, vouchers, individual providers, consumer-

directed agency models, or traditional agency models).

Response: The Medicaid program is a Federal-State program that

provides for mandatory services that States must provide and optional

services that States may choose to provide. Sections 1902(a)(10)(A) and

1905(a) of the Act define those services that are optional and those

that are mandatory. Under section 1905(a)(24) of the Act, personal care

services are an optional benefit that States may choose to provide to

their Medicaid populations. To mandate that States provide personal

care services would require legislative action by Congress. With regard

to methods for delivering personal care services, we believe in

allowing States the flexibility to determine the best method of

providing services and will not specify such methods in a regulation.

Comment: One commenter suggested that we retain the requirement for

physician plan of care authorization for personal care services. The

commenter believed that eliminating this requirement will lead to fraud

and excess spending.

Response: Section 1905(a)(24) of the Act provides that personal

care services must be authorized ``by a physician in accordance with a

plan of treatment or (at the option of the State) otherwise authorized

for the individual in accordance with a service plan approved by the

State.'' In accordance with this section of the Act, we proposed to

include this provision in new Sec. 440.167. We believe that the statute

clearly indicates Congress' intent to allow States the flexibility to

utilize alternative means of plan of care authorization. Further,

regarding the commenter's concern that the elimination of the

requirement for physician authorization will encourage fraud, we

believe that it is in the best interest of States to control spending

and to establish methods to prevent providers from engaging in

fraudulent activities. Our revisions do not preclude physician

authorization of personal care services. Rather, in accordance with the

statute, we are allowing States to determine the appropriate method for

plan of care authorization. Therefore, we will not continue to require

that the plan of care be authorized by a physician.

Comment: One commenter disagreed with our revision to the frequency

of review of an individual's plan of care for medical supplies,

equipment, and appliances suitable for use in the home under the home

health services benefit. The commenter was concerned that our proposal

might compromise quality of care and utilization control concerns.

Response: We proposed that Sec. 440.70(b)(3) be revised to provide

that physician review of a recipient's need for medical supplies,

equipment, and appliances suitable for use in the home under the home

health benefit would be required annually instead of every 60 days. The

frequency of review on other than an annual basis would be determined

by the State on a case-by-case basis depending on the nature of the

item prescribed. We have found that, in many cases, once a recipient's

need for medical supplies, equipment, and appliances is indicated by a

physician, that need is unlikely to change within 60 days. A

recipient's need for supplies or pieces of equipment that generally

tend to be used on a long-term basis would not be reviewed as

frequently as equipment that is usually used only temporarily. For

example, review of the need for a wheelchair need not be as frequent as

review of the need for an oxygen concentrator. In all cases, a

physician's order for the equipment would be required initially, and

frequency of further review of a recipient's continuing needs would

depend on the type of equipment prescribed. We believe that the

requirement for annual review of medical supplies and equipment

balances States flexibility in furnishing home health services with

providing an appropriate level of oversight. In addition, this may

allow a decrease in physicians' paperwork burden, time, and costs.

Comment: Two commenters disagreed with our proposal to revise the

definition of a home health agency for purposes of Medicaid

reimbursement to indicate that in order to participate in Medicaid, the

agency must meet Medicare requirements for participation as well as any

additional standards the State may wish to apply that are not in

conflict with Federal requirements.

Response: Under this provision a State would have the option of

imposing additional standards on home health agencies for participation

in Medicaid beyond the Medicare conditions of participation. Our

intention in revising the home health agency definition is to afford

States greater flexibility in

[[Page 47900]]

establishing Medicaid program requirements tailored to their own

specific needs. This will enable States to conform existing State and

Federal requirements but by no means mandates that additional

requirements be established.

Comment: One commenter indicated that our proposed revision to

Sec. 440.70(c) would erroneously preclude home health services from

being provided to ICF/MR residents regardless of whether those services

are not otherwise available.

Response: We proposed to make a technical revision to

Sec. 440.70(c) to remove an obsolete reference to subparts F and G of

part 442. We agree with the commenter that our proposed revision would

have the effect of precluding home health services from being made

available to ICF/MR residents even when the services are not otherwise

available. We have revised the language in Sec. 440.70(c) to correct

this error.

IV. Provisions of the Final Rule

We are adopting the proposed rule as final with some revisions.

Specifically:

We have revised Sec. 440.70(c) to provide that a

recipient's place of residence, for home health services, does not

include a hospital, nursing facility, or ICF/MR, except for home health

services in an ICF/MR that are not required to be provided by the

facility under subpart I of part 483. We also have reinstated the

example given.

We have revised the definition of family member at

proposed Sec. 440.167(b) to provide that a family member is a legally

responsible relative.

In the proposed rule, we failed to include language

currently located in existing Sec. 440.170(f) in new Sec. 440.167.

Specifically, the introductory text of existing Sec. 440.170(f) permits

States to define personal care services differently for purposes of a

section 1915(c) waiver. We have revised new Sec. 440.167 to include

this provision.

V. Impact Statement

A. Background

For proposed rules such as this, we generally prepare a regulatory

flexibility analysis that is consistent with the Regulatory Flexibility

Act (RFA) (5 U.S.C. 601 through 612), unless we certify that a final

rule will not have a significant economic impact on a substantial

number of small entities. For purposes of a RFA, States and individuals

are not considered small entities. However, providers are considered

small entities.

In addition, section 1102(b) of the Act requires us to prepare a

regulatory impact analysis for any final rule that may have a

significant impact on the operation of a substantial number of small

rural hospitals. Such an analysis must conform to the provisions of

section 604 of the RFA. For purposes of section 1102(b) of the Act, we

define a small rural hospital as a hospital that is located outside of

a Metropolitan Statistical Area and has fewer than 50 beds.

We are not preparing a rural impact statement since we have

determined, and we certify, that this final rule will not have a

significant impact on the operations of a substantial number of small

rural hospitals.

This final rule revises the Medicaid regulations to incorporate the

statutory requirements of section 1905(a)(24) of the Act concerning

personal care services. In accordance with the statute, we are

providing that the services must be: (1) Authorized for the individual

by a physician in accordance with a plan of treatment or (at the option

of the State) otherwise authorized for the individual in accordance

with a service plan approved by the State; (2) provided by an

individual who is qualified to provide the services and who is not a

member of the individual's family; and (3) furnished in a home or other

location.

In general, the provisions of this final rule are prescribed by

section 1905(a)(24) of the Act, as added by section 13601(a)(5) of

OBRA'93. The most significant change required under the statute is

that, as of October 1, 1994, the settings in which States may elect to

cover personal care services have been expanded to include locations

outside the home. We believe that this statutory provision will

increase Medicaid program expenditures regardless of whether or not we

promulgate this rule. The primary discretionary aspect of this rule is

the requirement that States electing to offer the personal care

services benefit must cover the services in the home and may choose to

cover them in any other location. As discussed in the proposed rule (61

FR 9406), we considered requiring States that elect to offer the

personal care services benefit to cover the services in both the home

and other locations. We also considered allowing States to cover the

services either in the home or in other locations. However, we believe

that the policy in this final rule is the most appropriate

interpretation of the statute and gives States the discretion necessary

to operate their programs in an efficient manner and in the best

interest of their recipients.

As noted above, the major provisions of this final rule are

required by the statute. Thus, costs associated with these regulations

are the result of legislation, and this rule, in and of itself, has

little or no independent effect or burden. However, to the extent that

a legislative provision being implemented through rulemaking may have a

significant effect on recipients or providers or may be viewed as

controversial, we believe that we should address any potential

concerns. In this instance, we believe it is desirable to inform the

public of our estimate of the substantial budgetary effect of these

statutory changes. The statutorily driven costs have been included in

the Medicaid budget baseline. In addition, we anticipate that a large

number of Medicaid recipients and providers, particularly home health

agencies, will be affected. The expansion of settings where personal

care services may be furnished represents an expansion of Medicaid

benefits that, if exercised by States, will likely have significant

effects, particularly on Medicaid recipients. Therefore, the following

discussion constitutes a voluntary regulatory flexibility analysis.

B. Impact of New Personal Care Services Provision

1. Overview

This analysis addresses a wide range of costs and benefits of this

rule. Whenever possible, we express impact quantitatively. In cases

where quantitative approaches are not feasible, we present our best

examination of determinable costs, benefits, and associated issues.

It is difficult to predict the economic impact of expanding the

settings where personal care services may be covered under Medicaid to

locations outside the home. We do not know the exact number and type of

personal care services furnished by individual States or how much these

services currently cost. Currently, approximately 32 States offer

coverage for personal care services, and we do not have cost data from

all of those States. States also differ in their definitions of

personal care services and rules concerning who may furnish them. Since

we do not have a full picture of the scope or cost of the different

services, it is difficult for us to quantify the impact these changes

will have. Other unknown factors regarding the future provision of

personal care services include which States now offering the personal

care services benefit will choose to cover services furnished outside

the home, how many additional States will opt to offer coverage, how

many Medicaid recipients will elect to use these

[[Page 47901]]

services in States in which the services have not been covered, and the

type and costs of these specific services. We believe that the majority

of those individuals who qualify for these services will elect to use

this benefit. Thus, although costs to States will rise as they begin to

pay for the additional services, there will be substantial benefits to

some providers and to Medicaid recipients as described in detail below.

2. Effects Upon Medicaid Recipients

Permitting States that elect to offer the personal care services

benefit the option of covering these services in locations outside the

home will have a positive effect on recipients. In States where

coverage has been provided only for personal care services in the home,

this final rule may expand the types of personal care services

available and/or the settings where recipients may receive these

services. Expansion of personal care services or settings could help

improve the quality of life for these recipients as well as for

recipients who have not been receiving personal care services. It also

could save money for some Medicaid recipients or their families since

they would no longer have to pay for these services. No data are

available on the number of recipients or family members who are

currently paying for these services. However, since only 32 States

currently pay for personal care services, we believe that a substantial

number of recipients who receive these services are paying for them out

of pocket.

3. Effects on Providers

By expanding the range of settings in which Medicaid will cover

personal care services, we anticipate that this final rule will

increase the demand for such services. We believe this effect will be

viewed as beneficial to providers of personal care services. If the

increase in demand for such services is sufficient, the number of

providers of personal care services may increase.

4. Effects on Medicaid Program Expenditures

This final rule implements the provisions of section 1905(a)(24) of

the Act by specifying that personal care services are an optional State

plan benefit under the Medicaid program. The rule allows States the

option to cover personal care services furnished in a home or other

location, effective for services furnished on or after October 1, 1994.

Table 1 below provides an estimate of the anticipated additional

Medicaid program expenditures associated with furnishing these services

outside the home, beginning on October 1, 1997. This estimate was made

using various assumptions about increases in utilization by current

recipients, adjusted for age, as well as assumptions about the induced

utilization that may result from the availability of these services. We

have assumed a utilization increase of 5 percent for the aged and 10

percent for the non-aged, and an overall induction factor of 10

percent. Given these assumptions, our estimate based on Federal budget

projections is shown in Table 1, which also provides a breakdown of

these costs. The first row of figures shows the Federal costs of

providing this optional State plan benefit. The second row shows the

Federal administrative costs associated with furnishing these services.

We estimate the following costs to the Medicaid program:

Table 1.--Personal Care Services Outside the Home

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

Federal medicaid cost estimate (in millions) \1\

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

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002

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

Services....................................... $185 $440 $545 $685 $855

Admin. Costs................................... 10 15 15 15 20

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

Total.................................... 195 455 560 700 875

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

\1\ Figures are rounded to the nearest $5 million.

5. Effects on States

As stated above, the coverage of personal care services is optional

except when such services are medically necessary to correct or

ameliorate medical problems found as a result of a screen under the

EPSDT program. Many States (approximately 18) currently do not cover

optional personal care services. In those States that do offer the

personal care services benefit, services furnished outside the home

previously could not be covered. Therefore, there may be a substantial

economic impact on States that decide to provide coverage for personal

care services furnished outside the home. The varying State definitions

of personal care services and rules concerning who may furnish them

make it difficult to estimate accurately the potential increases in

expenditures for those States that choose to expand coverage of

personal care services to include services furnished outside the home.

However, Table 2 includes estimated costs to States, which are based

upon the same data and assumptions used to formulate the Federal

expenditures shown in Table 1.

Table 2.--Personal Care Services Outside the Home

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

Federal medicaid cost estimate (in millions) \1\

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

FY 1998 FY 1999 FY 2000 FY 2001 FY 2002

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

Services....................................... $140 $330 $415 $515 $645

Admin. Costs................................... 5 10 10 20 20

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

Total.................................... 145 340 425 535 665

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

\1\ Figures are rounded to the nearest $5 million.

[[Page 47902]]

C. Conclusion

The provisions of this final rule are required by section

1905(a)(24) of the Act. We believe that the provisions of this rule

adding personal care services as an optional State plan benefit and

expanding the possible settings for covering personal care services to

locations outside the home will benefit providers, recipients, and

their families.

As shown above in Tables 1 and 2, the costs to the Federal

Government and States associated with paying for personal care services

furnished outside the home are substantial. There may be some minor

offsetting of costs if the number of admissions to nursing facilities

decreases as a result of these provisions, but we have no data to

determine the potential savings, if any. Regardless of any possible

savings, the economic impact of these provisions is attributable to the

statutory changes mandated by OBRA '93.

In accordance with the provisions of Executive Order 12866, this

final rule was reviewed by the Office of Management and Budget.

This final rule has been classified as a major rule subject to

congressional review. The effective date is November 10, 1997. If,

however, at the conclusion of the congressional review process the

effective date has been changed, HCFA will publish a document in the

Federal Register to establish the actual effective date or to issue a

notice of termination of the final rule action.

VI. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, agencies are required to

provide 60-day notice in the Federal Register and solicit public

comment before a collection of information requirement is submitted to

the Office of Management and Budget (OMB) for review and approval. In

order to fairly evaluate whether an information collection should be

approved, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995

requires that we solicit comment on the following issues:

Whether the information collection is necessary and useful

to carry out the proper functions of the agency;

The accuracy of the agency's estimate of the information

collection burden;

The quality, utility, and clarity of the information to be

collected; and

Recommendations to minimize the information collection

burden on the affected public, including automated collection

techniques.

Section Sec. 440.167 of this final rule contains requirements that

are subject to review by the Office of Management and Budget (OMB)

under the Paperwork Reduction Act of 1995. The rule requires States to

amend their State plans to specify whether they will cover personal

care services and in what locations they will provide the services.

Public reporting burden for this collection of information is estimated

to be 1 hour per State. A notice will be published in the Federal

Register when approval is obtained. Organizations and individuals

desiring to submit comments on the information collection and

recordkeeping requirements should mail them directly to the following:

Health Care Financing Administration, Office of Financial and Human

Resources, Management Planning and Analysis Staff, Room C2-26-17, 7500

Security Boulevard, Baltimore, Maryland 21255-1850.

Any comments submitted on the information collection requirements

must be received by these two offices on or before November 10, 1997,

to enable OMB to act promptly on HCFA's information collection approval

request.

List of Subjects in 42 CFR Part 440

Grant programs-health, Medicaid.

42 CFR part 440 is amended as set forth below:

PART 440--SERVICES: GENERAL PROVISIONS

1. The authority citation for part 440 continues to read as

follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C.

1302).

Subpart A--Definitions

2. In Sec. 440.70, the introductory text of paragraphs (a) and (b)

are republished and paragraphs (a)(2), (b)(3), (c), and (d) are revised

to read as follows:

Sec. 440.70 Home health services.

(a) ``Home health services'' means the services in paragraph (b) of

this section that are provided to a recipient--

(1) * * *

(2) On his or her physician's orders as part of a written plan of

care that the physician reviews every 60 days, except as specified in

paragraph (b)(3) of this section.

(b) Home health services include the following services and items.

* * *

(3) Medical supplies, equipment, and appliances suitable for use in

the home.

(i) A recipient's need for medical supplies, equipment, and

appliances must be reviewed by a physician annually.

(ii) Frequency of further physician review of a recipient's

continuing need for the items is determined on a case-by-case basis,

based on the nature of the item prescribed;

* * * * *

(c) A recipient's place of residence, for home health services,

does not include a hospital, nursing facility, or intermediate care

facility for the mentally retarded, except for home health services in

an intermediate care facility for the mentally retarded that are not

required to be provided by the facility under subpart I of part 483.

For example, a registered nurse may provide short-term care for a

recipient in an intermediate care facility for the mentally retarded

during an acute illness to avoid the recipient's transfer to a nursing

facility.

(d) ``Home health agency'' means a public or private agency or

organization, or part of an agency or organization that meets

requirements for participation in Medicare and any additional standards

legally promulgated by the State that are not in conflict with Federal

requirements.

* * * * *

3. A new Sec. 440.167 is added to read as follows:

Sec. 440.167 Personal care services.

Unless defined differently by a State agency for purposes of a

waiver granted under part 441, subpart G of this chapter--

(a) ``Personal care services'' means services furnished to an

individual who is not an inpatient or resident of a hospital, nursing

facility, intermediate care facility for the mentally retarded, or

institution for mental disease that are--

(1) Authorized for the individual by a physician in accordance with

a plan of treatment or (at the option of the State) otherwise

authorized for the individual in accordance with a service plan

approved by the State;

(2) Provided by an individual who is qualified to provide such

services and who is not a member of the individual's family; and

(3) Furnished in a home, and at the State's option, in another

location.

(b) For purposes of this section, ``family member'' means a legally

responsible relative.

Sec. 440.170, [Amended]

4. Sec. 440.170, paragraph (f) is removed and reserved.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical

Assistance Program.)

[[Page 47903]]

Dated: June 26, 1997.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

[FR Doc. 97-24266 Filed 9-10-97; 8:45 am]

BILLING CODE 4120-01-P