CMS Issues New Guidance about Final Settings Rule

On March 22, 2019, the Centers for Medicare and Medicaid Services (CMS) announced updated sub-regulatory guidance, issued as a set of frequently asked questions (FAQs), that streamlined and clarified the “heightened scrutiny” process, which allows states to provide evidence to CMS demonstrating that certain settings meet the federal HCBS criteria so that they can maintain access to Medicaid funding.

“Even well-intentioned policies from Washington often lack the flexibility needed to work for every state, community, setting, or family,” said CMS Administrator Seema Verma. “The implementing guidance issued under the prior administration was simply too prescriptive and unfairly singled out certain settings, causing unnecessary anxiety for many beneficiaries, families and providers. We believe our revised guidance strikes the appropriate balance to protect individual choice while maintaining the integrity of home and community-based funding.”

LTO Ventures worked with its advocacy partners including Together for Choice for 5 years to communicate our concerns about the original guidance and to seek a rollback to a more reasonable standard. We are pleased with some of the major changes incorporated into this new guidance, but serious concerns remain whether you are planning a setting that will utilize Medicaid waiver-funded supports, or you plan to be private pay. Below we summarize the good news and the bad news. Contact Mark Olson at LTO Ventures for a more detailed discussion about the new guidance.

The Good News

  • The new guidance streamlined and better defined the criteria for presuming settings that isolate HCBS beneficiaries from the broader community and therefore must undergo “heightened scrutiny.” These changes should reduce much of the uncertainty for states, providers, and families about the characteristics of a particular setting.

  • The new guidance removed specific examples of settings that would be automatically identified as presumptively institutional due to isolation, including farmsteads and ranches, gated communities, and intentional communities. CMS specifically stated that a setting may overcome the presumption that it is not compliant if it offers “a broad range of services and supports, programming, and multiple daily activities to facilitate access to the broader community that allows for each individual to be able to select from an array of individual and/or group options and control his or her own schedule.”

  • Clarified that private residences where individuals received Medicaid funded services are assumed to comply with the regulatory criteria. CMS stated: “Individual, privately-owned homes (privately-owned or rented homes and apartments in which the individual receiving Medicaid-funded HCBS lives independently or with family members, friends, or roommates) are presumed to be in compliance with the regulatory criteria of a home and community-based setting.”

The Ongoing Concerns About Heightened Scrutiny

  1. CMS stated that one factor it will use to determine if a setting is isolating is whether “The setting is physically located separate and apart from the broader community.” We are concerned that the ambiguity of this phrase may be problematic. Does a wall around a setting count as separation? How far from the broader community is considered apart? A block? A mile? And what is the threshold of people needed to constitute a broader community?

  2. In addition to the above, CMS asserts “States may identify additional factors beyond those included above.” Is there a point at which CMS might think that some states have gone too far? How can a developer fund and build with the uncertainty of such a moving target?

  3. “CMS reserves the right to review any setting…if the state receives significant public comment disagreeing with the states’ assessment [that a setting is not isolating].” How many is “significant” to CMS and could an extremist advocacy group “load up” on a setting out of spite.

  4. In FAQ #13, CMS relaxed its requirement regarding residential setting compliance if the resident is not receiving residential HCBS, but then turned around and gave it to the states: “However, a state may decide to require beneficiaries receiving Medicaid-funded non-residential HCBS to live in settings that meet the federal home and community-based settings criteria, even if the individual does not receive HCBS in the setting.” Where any state implements this, it will be an egregious abuse of power that denies housing choice, and possibly prevents adults with disabilities from accessing funding for employment supports.

  5. MISSING FROM CMS FAQS: One of the biggest barriers to new construction of settings that might seek to be HCBS eligible is pre-determination of compliance. Investors are reluctant to fund projects now without greater certainty. There is no mention of a process or mechanism to earn even a preliminary or conditional determination of compliance.