Final Medicaid Regulations Governing Coverage of Habilitative Services Released


The Centers for Medicare & Medicaid Services (CMS) issued lengthy final regulations to implement a variety of provisions of the Affordable Care Act (ACA) on July 5, 2013. Most of those regulations do not directly impact occupational therapy. However, there is one key element that does significantly impact the profession, and that is the manner by which habilitative services’ coverage will be determined for the Medicaid expansion population (see pages 199-217 and 537-538 for the most relevant portions).

The ACA requires that essential health benefits (EHBs) be covered services for newly eligible Medicaid beneficiaries in states that elect to implement the optional expansion of Medicaid eligibility. Approximately half the states are expected to expand Medicaid eligibility, and the majority of new beneficiaries are expected to be adults. The EHBs are broad categories of benefits specified in the text of the ACA. One of those categories is “rehabilitative and habilitative services and devices.” These new final regulations require that states select a “benchmark plan” from among several options to serve as the model for the plans offered to newly eligible Medicaid beneficiaries. These new Medicaid benefit packages will be called “alternative benefit plans.” Because the benchmark plans, which are existing plans, do not always cover all the EHBs, states will have to supplement their benefit packages accordingly. It is expected that habilitative services are a category of benefits that states will have to add to their alternative benefit plans through a process of supplementation. That process is also described in these new final regulations.

In essence, CMS has delegated to states the authority to define coverage requirements for habilitative services with little additional direction. AOTA had commented on the proposed version of these Medicaid regulations in February 2013. While CMS did not adopt the national minimum standards for coverage of habilitative services that AOTA had requested, CMS did agree in the preamble of these final regulations with many of the positions AOTA had taken. For example, CMS acknowledged that rehabilitative services should be covered separately from, and in addition to, habilitative services; there should be no age limits on coverage of habilitative services; and maintenance of function should be a component of habilitative services’ coverage. Those acknowledgements, while not having the force of law, can be used to advocate for strong standards as states develop their own requirements. CMS also indicated that the approach taken in these regulations may be revisited in the coming years. As with other aspects of the ACA, the initial requirements established to implement the law may be transitional in nature.

The preamble of these final regulations also suggested one possible definition for habilitative services that states may wish to adopt, which was developed by the National Association of Insurance Commissioners. It states that habilitative services include “services and devices provided for a person to prevent deterioration or attain or maintain a skill or function never learned or acquired due to a disabling condition.” This definition is similar to one that AOTA has supported in the past. Because states must define habilitative services, this creates a new advocacy opportunity for AOTA and state occupational therapy associations to work for comprehensive coverage of occupational therapy services as part of the Medicaid habilitation benefit. AOTA collaborated with state associations on a similar effort related to EHB requirements for the private insurance market, and in virtually every case, some coverage of occupational therapy is included in every state’s habilitative services’ benefit for private health plans subject to the EHB requirements.

AOTA will continue to review these regulations and partner with state occupational therapy associations to promote the interests of the profession.