Understanding Medicaid Home and Community Services: A Primer, 2010 Edition. Other Optional State Plan Home and Community Services


When Medicaid was enacted, states were given the option of covering a wide range of services, several of which can be provided in home and/or community settings. They include rehabilitation services, private duty nursing, physical and occupational therapy, and transportation services. In 2000, every state provided at least one optional service.

The Rehabilitation option, in particular, offers states the means to provide a range of supportive services to people in home and community settings. Medicaid defines rehabilitation services as any medical or remedial services recommended by a physician or other licensed practitioner of the healing arts for maximum reduction of physical or mental disability, and restoration of a recipient to his or her best possible functional level.39 Rehabilitation services can be provided to people with either physical or mental disabilities.

The Rehabilitation option is a very flexible benefit, because services may be furnished either in the person’s residence or elsewhere in the community. Many states cover psychosocial rehabilitation services, which--when combined with personal care and targeted case management services--can meet a wide range of service and support needs for persons who have a serious mental illness. In 2005, 46 states used the Rehabilitation option to provide services for persons with a serious mental illness; 33 states used the Rehabilitation option to provide other services.40

Optional Institutional Services

The 1971 addition of the option to cover services provided by intermediate care nursing facilities, called intermediate care facilities (ICFs), and ICFs/ID, moved the Medicaid program into financing additional nursing home care and institutional services for the ID/DD population. States adding optional institutional coverage of ICFs/ID could receive Federal matching funds to help finance services for persons with developmental disabilities, which had previously been supportable only with state funds.

Likewise, states adding optional coverage of ICFs could receive Federal matching funds to help finance a non-skilled level of nursing care (which had previously been supportable only with state funds). Over the next few years, every state and the District of Columbia chose to cover ICFs and ICFs/ID in their State Plan.

The option to cover nursing ICFs and ICF/IDs assumed greater importance after 1981, when the waiver authority was created. This was because §1915(c) waiver services can be provided only insofar as they provide an alternative to institutional care.41 (In 1987, Congress abolished the distinction between SNFs and ICFs. Nursing facilities were mandated to provide both a skilled and intermediate level of care.)

The Rehabilitation option is not generally used to furnish long-term care to individuals with disabilities or chronic health conditions other than mental illness. During the 1970s and 1980s, a few states secured approval to cover daytime services for persons with developmental disabilities under either the Clinic or the Rehabilitation option. However, CMS ultimately ruled that the services being furnished were habilitative rather than rehabilitative and consequently could not be covered under either option by additional states. The main basis for the ruling was that habilitative services could only be furnished to residents of ICFs/ID under the Medicaid State Plan or through an HCBS waiver program for individuals otherwise eligible for ICF/ID services. States with existing programs serving individuals with intellectual disabilities and other developmental disabilities were grandfathered under the Omnibus Reconciliation Act (OBRA) of 1989.

A few states have maintained their State Plan coverage of these services; others have terminated them in favor of offering similar services through an HCBS waiver program.42 With the creation of the new HCBS State Plan option under the §1915(i) authority, states may now cover habilitation as a home and community-based service under the State Plan.

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