The final rules (CMS-2249-F) on Medicaid Home and Community-Based Services (HCBS), released by CMS on Jan. 10, aim to give states more flexibility on how they are able to use federal Medicaid funds to pay for HCBS to better meet the needs of Medicaid enrollees and sets a transition period for states to develop compliant programs offering beneficiaries full access to advantages of community life and health services in integrated settings. The rule became effective on March 17.

The new rules are:

  • CMS 2249-F – 1915(i) State Plan Home and Community-Based Services and Setting Requirements for 1915(k) Community First Choice
  • CMS 2296-F – 1915(c) Home and Community-Based Services Waivers 


The final rules give states the option to combine coverage for multiple target populations in one waiver under 1915(c) to facilitate use of waiver design that focuses on individuals’ functional needs. Prior to the final rules, states had to limit waiver services to a group of individuals, e.g. elders and/or persons with disabilities, persons with intellectual or developmental disabilities, or persons with mental illness.

Impact on PACE

The HCBS rule applies to 1915 waiver programs. As PACE is authorized as a state plan option, under section 1934, these changes do not apply to PACE directly. CMS did confirm to NPA that the new HCBS rule does not apply to PACE, since PACE is a state plan service and not a waiver, and that CMS staff will reinforce this point in future calls with the states as well as possibly issue a QA or guidance document on the matter.

Options Counseling

It is important to note that states will be increasing their enrollment in competitive HCBS programs. Potential HCBS enrollees will need to be counseled on their options for care within the state and go through the same eligibility determination process as PACE enrollees. This will add additional strain to these systems in your state. It is important that these functions are adequately trained and funded so eligible individuals are able to qualify and be placed in a service of their choice in a timely manner.

The planning process and resulting Individual Service Plan must assist an individual in achieving personally defined outcomes in the most integrated community setting, ensure delivery of services in a manner that reflects personal preferences and choices, and contribute to the assurance of their health and welfare.

Definition of Community-Based Setting

CMS is defining home and community-based settings with a more outcome-oriented definition rather than the size of the facility or number of residents.

Qualities of a Home and Community-Based Setting

  • integrated in and supportive of full access of the individual to the greater community;
  • selected by the individual from among setting options including non-disability-specific settings, and an option for a private unit in a residential setting;
  • capable of ensuring an individual's rights of privacy, dignity and respect, and freedom from coercion and restraint;
  • able to optimize but not regiment individual initiative, autonomy and independence in making life choices, including but not limited to daily activities, physical environment, and with whom to interact; and
  • facilitative of individual choice regarding services and supports and who provides them.


Provider-owned or controlled settings must meet the additional conditions:

  • The individual has a lease or other legally enforceable agreement providing similar protections.
  • The individual has privacy in his or her unit, including lockable doors, choice of roommates, and freedom to furnish or decorate the unit.
  • The individual controls his or her own schedule, including access to food at any time.
  • The individual can have visitors at any time.
  • The setting is physically accessible.


Settings Inappropriate for HCBS

For 1915(c) home and community-based waivers and 1915(i) state plan home and community-based services, settings that are not home and community-based defined at §441.301(c)(5) and §441.710(a)(2), respectively, are as follows:

  • a nursing facility;
  • an institution for mental diseases;
  • an intermediate care facility for individuals with intellectual disabilities;
  • a hospital; or
  • any other locations that have qualities of an institutional setting, as determined by the secretary.


Other sources of Medicaid funding may be available for services provided in these institutional settings.

Settings Presumed to Have the Qualities of an Institution

Other settings that do not meet the threshold for a Medicaid HCBS and are presumed to have institutional qualities include:

  • any setting located in a building that is also a publicly or privately operated facility providing inpatient institutional treatment;
  • any setting located in a building on the grounds of or immediately adjacent to a public institution; or
  • any other setting that has the effect of isolating individuals receiving Medicaid HCBS from the broader community of individuals not receiving Medicaid HCBS.


For states that may seek to include such settings in Medicaid HCBS programs, CMS will make an ad hoc determination, applying a standard of heightened scrutiny based on information presented by the state demonstrating that the setting is in fact home and community-based and does not have the qualities of an institution.

The preamble indicates that CMS will issue future guidance describing the process for the review of settings subject to heightened scrutiny through either the transition plan process (for settings already in state HCBS programs) or the HCBS waiver-review processes (for settings that states seek to add to their HCBS programs).

State Transition Plans

The final rule includes a transitional process for states to ensure their waivers and state plans meet the HCBS settings requirements. The transition plan (ensuring compliance with the final rules) for all waiver renewals, waiver amendments and State Plan amendments will be required by March 16, 2015, or within 120 days of first submission of waiver renewal, waiver amendment or State Plan amendment after March 17, 2014. All waiver renewals, waiver amendments and State Plan amendments submitted on or after March 17 must include a transition plan and receive stakeholder input. While CMS approved waiver renewals, waiver amendments and State Plan amendments with a retroactive start date prior to the final rule, these now must take effect on or after the date of CMS approval.

CMS will afford states a maximum of one year to submit a transition plan for compliance with the HCBS requirements of the final rule. CMS may approve transition plans for a period of up to five years, as supported by the individual circumstances of the states, to ensure full compliance.

CMS is currently developing additional information for states with regard to non-residential settings for HCBS participants. In the comments accompanying the regulations, sub-regulatory guidance was referenced in several areas: adult day and prevocational services, the process of operationalizing person-centered planning, and issues associated with a client’s right to refuse.

More information about the final regulation is available at A mailbox to ask additional questions can be accessed at

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