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CMS Issues New Guidance on its Settings Rule




In 2014, the federal Centers for Medicare and Medicaid Services (CMS) issued a new rule, called the Settings Rule, which defines the types of residential and vocational settings that are eligible for Medicaid funding as a home and community based setting (referred to as “waiver funding”).


While the Rule was well intended, it has a number of flaws. It does not adequately respect individual choice. It uses an artificial and monolithic definition of “community.” It discriminates against larger settings and those that are designed to serve individuals with disabilities.

These flaws were exacerbated by guidance issued by CMS which stated that certain types of larger, disability-specific settings are presumed to isolate the individuals they serve and must be subject to “heightened scrutiny.” This put the funding of these settings in serious jeopardy much to the dismay of those who have chosen these settings as their homes. Among the settings subject to heightened scrutiny under the CMS guidance were campus settings, farmsteads, disability-specific settings, and intentional communities. CMS failed to recognize that many individuals with disabilities find that these settings best meet their needs and are not isolating.


Over the last two years, Together for Choice met with CMS on several occasions, asking that it revise the Settings Rule and change its guidance so that the Rule no longer discriminated against campus settings, farmsteads, disability-specific settings, and intentional communities. We also urged CMS to make a number of other changes to the Rule in order to honor individual choice and expand residential and vocational options for individuals with intellectual and developmental disabilities.


Finally, on March 22, 2019, CMS issued new guidance. Most significantly, the new guidance revokes its earlier guidance described above which presumes that campus and other settings isolate the men and women they serve, and these settings are no longer automatically subject to heightened scrutiny. This is a very positive step. The new guidance replaces the presumption of isolation with three factors that states should consider in determining whether a setting is isolating.


These three factors are:

  1. Due to the design or model of service provision in the setting, individuals have limited, if any, opportunities for interaction in and with the broader community, including with individuals not receiving Medicaid-funded HCBS;

  2. The setting restricts beneficiary choice to receive services or to engage in activities outside of the setting; or

  3. The setting is physically located separate and apart from the broader community and does not facilitate beneficiary opportunity to access the broader community and participate in community services, consistent with a beneficiary’s person-centered service plan. (Centers for Medicare and Medicaid Services, 2019)


A setting that meets any of these three factors is considered isolating and thus subject to heightened scrutiny. In its explanation of the new guidance, CMS made it clear that the key is whether the individuals served by the setting are provided with the access to the community that they desire, as documented in their personal plan. If a setting is meeting the goals of the personal plans of the people it serves, it should not be viewed as isolating. This puts personal choice front and center where it belongs. CMS has also made it clear that it now understands that “community has no single definition, and a range of models and service options should be available” to offer home- and community-based services.


While CMS did not make all of the changes to the Settings Rule that TFC requested, the new guidance is a step forward toward respecting choice and expanding options. We would have preferred a change in the Rule rather than new guidance because a Rule has greater permanence; a future administration can revoke this new guidance and reinstate the old guidance. For these reasons, TFC will continue to push for legislative changes to the Medicaid statute to ensure that CMS honors individual choice and recognizes a broad array of options to meet the needs of individuals with disabilities.


You may read the new guidance here.



Scott M. Mendel

Chairman, TFC

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2019 by Together For Choice Inc.

Together For Choice

6050 S. Buffalo Drive

Las Vegas, NV 89113-2154