CDCAN REPORT #155-2011: Department of Developmental Services to issue emergency regulations on respite, day care and transportation

• Department of Developmental Services to Issue Emergency Regulations
• Impacts "Vouchered Services" For Respite, Day Care & Transportation
• Will Require A "Financial Management Service" To Handle Accounting Tasks
• No Reduction in Funding or Services Says Department

Brown Administration Says New Federal Directive Now Requires the States To Implement This New Requirement For "Vouchered Services" or "Participant-Directed Services" Under Federal Medicaid Home and Community-Based Services Waivers

SACRAMENTO, CALIF (CDCAN)  [Last updated 07/28/2011  08:45 AM] - The Department of Developmental Services announced today that it will issue emergency State regulations, to be effective October 1, 2011,  that will require persons with developmental disabilities and their families who receive vouchers to pay for certain regional center funded services matched by federal Medicaid funds,  to have a "financial management service" or "FMS" handle the accounting tasks such as payroll taxes, withholding and other taxes, expenditure reports,  and actual payment to the person or vendor providing the "vouchered service". Currently persons with developmental disabilities and their families eligible for these "vouchered" services are responsible for these accounting tasks, with an option - but not a requirement - of hiring a "financial management service" to handle those functions.

The Department of Developmental Services is the state agency that oversees statewide regional center coordinated and funded  community-based services for over 240,000 children and adults with developmental disabilities and also several thousands of "at risk" infants eligible for early intervention. The department also operates directly with state staff four state major health facilities known as "developmental centers" and one smaller facility where 1,894 (as of June 29, 2011) people with developmental disabilities reside.  One of the four centers - Lanterman Developmental Center in Pomona, is slated for closure.

Who This Impacts

• The Department of Developmental Services said that about 16,000 people would be impacted - the exact number varies from year to year depending on how many individual vouchers are issued by a regional center.
• The Department said today that no person or family will see a reduction in their services or funding as a result of this new specific requirement.
• The three "vouchered services" are impacted under the Department of Developmental Services are those that receive federal matching funds under the State's home and community based Medicaid waiver that falls under the federal government's definition of "participant-directed services":  respite, transportation and day care.
• Non-vouchered services and also other services not matched or covered by the federal home and community-based Medicaid waiver are not impacted by this new requirement.
• Also impacted or those persons or organizations who actually provide the "vouchered services" - who, after the October 1, 2011 effective date - will receive their payments directly from the "vouchered services" participant's "financial management service" instead of receiving it directly from the participant.
• Others impacted by this new requirement and change are the 21 non-profit regional centers who will have to make changes on how they administer their "vouchered services" for persons with developmental disabilities (or their families) in their service area; and persons or organizations who could potentially serve as a "financial management service".

Why State Is Moving Forward With Emergency State Regulations

• The Department of Developmental Services said that the federal Centers on Medicare and Medicaid Services (CMS) under the US Department of Health and Human Services - the federal agency that oversees the Medicare and Medicaid programs - has issued directives that make it clear that the states must require all persons in "vouchered" services (also known as "participant directed services") who also receive  matching federal Medicaid funding (called "Medi-Cal" in California) to hire a "financial management service" to handle accounting tasks - including the actual payments made to the person or organization providing the "vouchered: service".
• The federal government indicated to the states that the requirement would need to implemented this year, though it was not clear whether the requirement was implemented to combat fraud or for other reasons.
• In May 2011 the Brown Administration included, as part of the Governor's 2011-2012 State Budget revisions, additional funding  of  about $882,000 in State general funds (or about $1,763,200 total funding with federal matching funds) to pay for what was then thought to be an option - and not a requirement - for persons receiving "vouchered services" to hire a "financial management service".  That additional appropriation was approved as part of the 2011-2012 State Budget as passed by the Legislature and signed into law by Governor Brown in late June.
• The additional funding amount was calculated based on the assumption that during the 2011-2012 State Budget year, 18,560 vouchers will be used by persons with developmental disabilities (or their families) for day care, respite and transportation services at a flat fixed rate of $95 per month.

What This News Means

• A change in State law - through emergency regulations - will require due to a directive from the federal government - that all persons receiving "vouchered services" (or "participant-directed services") under the home and community-based services Medicaid waiver must use a "financial management service" (or "FMS") to handle the accounting tasks including making the actual payments (reimbursement) for the vouchered services provided by a person or organization.
• No person or family will see a reduction in funding or service as a result of this specific new requirement, according to the Department of Developmental Services.
• Persons with developmental disabilities (or their families) impacted should receive a written "Notice of Action" or some similar document from either the State or regional center when the emergency state regulations are adopted - sometime in the next four to five weeks or so.
• This change only impacts those persons with developmental disabilities (or their families) who receive "vouchered services" under respite, transportation or day care that also receive federal matching funds under the home and community-based Medicaid Waiver.  There are some exceptions to this including those families that have established  with a  respite or other agency to help assist them with the accounting tasks of their "vouchered services".
• The new requirement will open up business opportunities for individuals or organizations (including existing regional center funded providers) to also provide  "financial management services"   Information on requirements to be a "financial management service" vendor will be in the emergency regulations.
• A "financial management service" will be responsible for "vouchered service" accounting functions such as processing payroll (for persons or organizations actually performing the "vouchered service"), withholding federal, State, and local taxes, performing fiscal accounting and producing expenditure reports for the participant or family and State agencies.
• It is not clear yet what impact this new requirement will have on the 21 non-profit regional centers in their responsibilities of overseeing in their individual areas, the "vouchered services".  or if the additional State general funding approved as part of the 2011-2012 State Budget in June covered any additional administrative costs for the regional centers to implement this new requirement.
• It is not clear yet what happens to those persons with developmental disabilities (or their families) who may not have a "financial management service" by the October 1, 2011 effective date in terms of their "vouchered services" - though presumably payments from regional centers to those individuals (or families) would stop.
• It is not clear if or how this new requirement from the federal government will impact other services or programs under other Medicaid home and community-based services waivers.

Next Steps

• The Department of Developmental Services said it is about 2 weeks away from submitting their proposed emergency state regulations to the State's Office of Administrative Law (OAL) - the state agency responsible for overseeing the process of issuing and approving state regulations.  Those emergency regulations will revise state regulations under Title 17 to include the new "financial services management" ("FMS")  requirements and to establish a rate methodology for the "FMS"
• State law is different for "emergency regulations" requiring a much shorter time period for public comment before the regulations are approved (or adopted).  A state agency can issue emergency regulations if authorized by the Legislature or if the regulations are needed to protect the health and safety of Californians.
• Under the State's emergency regulatory process, the Office of Administrative Law, after it receives and reviews the proposed emergency regulation, will then issue it for a five day public comment period, and normally adopts or approves it immediately after that deadline.  The emergency regulations become effective immediately after it is approved or adopted.
• The Department of Developmental Services - given the time frame - will not be able to send out draft versions of its proposed emergency regulations before it submits it to the Office of Administrative Law.
• CDCAN will issue a report with the proposed Emergency Regulations when the Office of Administrative Law releases it for public comment.