You ask for a written response to clarify the policies and procedures States can use in applying waiver funds for expenses of a live-in personal caregiver under a Medicaid home and community-based services waiver (HCBW) towards a portion of a recipient's lease or mortgage payment and food costs. You state that Mr. Wardwell and Mrs. Duckett of my staff discussed the issue with you on October 4, 1994 and stated that the provision in the statute and Federal regulations would allow States to use Medicaid funds to pay for rent and food expenses attributable to an unrelated live-in personal caregiver under a HCBW. You also believe they stated that these funds could be applied towards the waiver recipient's lease or mortgage payment. Your understanding from this meeting is that a portion of up to 50 percent of the rent and food costs attributable to the live-in personal caregiver can be applied to the mortgage payment, rent, or food costs of the waiver recipient. You ask two specific questions:

1. What guidelines will HCFA provide to States seeking authorization under a HCBW to use Medicaid waiver funds to pay for the expenses of an unrelated live-in personal caregivers providing services to a waiver recipient in the recipient's home and applying those payments towards the waiver recipients lease or mortgage payments?

2. What procedures will States need to follow to amend an approved HCBW program to implement the provision of section 441.310(a)(2)(ii) of Federal regulations to obtain Federal financial participation for the rent and food expenses of unrelated live-in personal caregivers and apply these payments to the mortgage, rent or food costs of a waiver recipient?

As you know, section 4741(a) of Public law 101-508 (OBRA 90) amended section 1915(c) (1) of the Social Security Act (the Act) by adding at the end, ''For purposes of this section, the term "room and board" shall not include an amount established under a method determined by the State to reflect a portion of the costs of rent and food attributable to an unrelated personal caregiver who is residing in the same household with an individual who, but for the assistance of such caregiver, would require admission to a hospital, nursing facility (NF), or intermediate care facility for the mentally retarded (ICF/MR).'t (Emphasis added.) In effect, this section of OBRA 90 overrides the room and board exclusion found at section 1915(c)(1) of the Act in those cases where States include unrelated live-in personal caregivers as providers of an approved waiver service and choose ~o include as part of the waiver service payment for the caregiver's rent and food expenses when the caregiver lives in the waiver recipients home.

In response to your first question, we have provided guidance to States on this legislative provision in our State Medicaid Manual, section 4442.3, page 4-450 under item number 12. This section states:

1. Room and board may now include an amount established under a method determined by the State to reflect a portion of costs of rent and food attributable to an unrelated personal caregiver who is residing in the same household with an individual who, but for the assistance of such caregiver would require admission to a hospital, NF or ICF/MR.

2. Unrelated is defined as someone who is unrelated by blood or marriage to any degree.

3. A caregiver is someone who is providing a covered waiver service as defined in the waiver package.

4. Estimates of the costs of services provided must differentiate between service costs and room and board costs of the caregiver. (As indicated in section 4442.8.A.1.a of the State Medicaid Manual, these estimates must be reasonably estimated and documented by the agency.)

5. FFP for live-in caregivers is not available in situations in which the recipient lives in the caregiver's home or a residence owned or leased by the provider of Medicaid services.

This manual section will be revised to reflect language in the preamble to our final rule of July 25, 1994 (page 37710, no. 6) which states, "the method of apportioning the costs of rent and food is determined by the State, subject to review and approval by HCFA." The manual section will also be revised to reflect the language on page 37711 that we have interpreted language in the statute that rent and food costs attributable to the live-in caregiver may now be included in the State's estimates of cost neutrality to include situations in which the live-in caregiver resides in the recipient's home and the recipient would incur additional costs for such a caregiver. Thus, the State determines what portion of the cost of rent or mortgage is attributable to the unrelated personal caregiver (that is, what additional' costs are incurred by the recipient). These costs must be reasonably estimated and the State must also document how they were determined.

In response to your second question, States would be required to submit an amendment to their currently operating HCBWs as they would submit for other changes in their waiver program. Instructions for amending HCBWs are contained in section 4445, page 4-484 of the State Medicaid Manual mentioned above. The amendment request would indicate what waiver service would be provided by an unrelated live-in personal caregiver, include in the computation of factor D of the cost-neutrality formula the cost of the rent and food attributable to the unrelated live-in personal caregiver, document how these additional costs were derived, and make changes required in the cost-neutrality formula estimates.

There is a remaining issue concerning now Medicaid payment should be made for the additional costs for rent and food attributable to the live-in caregiver in light of Medicaid rules at section 1902(a)(32) of the Act which require direct payment to providers. There is also a related issue whether these payments would be considered income for the recipient if they are applied to the recipients mortgage, rent or lease payment. We have requested advice from our legal counsel on these issues. When we receive their reply we will respond to you further.

If you have additional questions, please feel free to contact Mary Jean Duckett of my staff on (410) 966-5640.

Sincerely yours,

Sally K. Richardson

Director

Medicaid Bureau