Nationally, estimated Medicaid rehabilitation expenditures have increased. In FY1999, total state and federal rehabilitation expenditures reported by states to MSIS were approximately $3.6 billion. Between FY1999 and FY2005, federal and state Medicaid rehabilitation expenditures increased by 76.7%. This letter reiterated regulatory guidance that rehabilitation services were intended to be "medical and remedial in nature for the maximum reduction of physical or mental disability and restoration of a recipient to his best possible functional level." Rehabilitation Services Proposed Rule

In August 2007, CMS issued a proposed rehabilitation services rule to more clearly define the scope of the rehabilitation benefit for states. CMS officials testified that the changes embodied in the proposed new rule were intended to clearly define allowable services that may be claimed as rehabilitative services under Medicaid. CMS estimated that the proposed rule would reduce federal Medicaid spending by approximately $180 million in FY2008 and $2.24 billion for the period FY2008-FY2012. Legislative and Other Proposals

The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173 ) imposed a moratorium until June 30, 2008, on implementation of the rehabilitation proposed rule and other Medicaid program changes. 5613 ) was introduced, which would extend until April 1, 2009, moratoria on regulations affecting Medicaid, including rehabilitation services. On May 22, 2008, the Senate passed the Supplemental Appropriations Act of 2008 ( H.R. 2642 ), which contained a moratorium until April 1, 2009, on implementation of the rehabilitation regulation. 2642 was amended by the House and passed on June 19, 2008. The House amendments included moratoria for six Medicaid regulations, including rehabilitation services. On June 26, 2008, the Senate passed H.R. 2642 without changes to the House legislation, so that implementation of six Medicaid regulations, including rehabilitation services, would be delayed until April 1, 2009. H.R. The President signed P.L. 110-252 into law on June 30, 2008. Earlier, on June 4 and 5, 2008, the Senate and House, respectively, adopted the final version of the budget resolution ( H.Rept. 110-659 accompanying S.Con.Res. 70 ). Among other provisions, the conference agreement establishes a number of deficit-neutral reserve funds and a sense of the Senate provision that would delay Medicaid administrative regulations, including Medicaid rehabilitation services.
Medicaid rehabilitation includes a full range of treatments that licensed health practitioners may recommend to reduce physical or mental disability or restore eligible beneficiaries to their best possible functional levels. Over the last seven years of available data (1999-2005), reported Medicaid expenditures for rehabilitation increased from $3.6 billion to $6.4 billion, an increase of 77%. In comparison, over the same period, total Medicaid spending increased from approximately $147.4 billion (FY1999) to $275.6 billion (FY2005), an 87% increase.
Both the executive and legislative branches have addressed Medicaid rehabilitation services. For instance, in recent annual budget submissions, the Bush Administration proposed administrative changes to reduce Medicaid rehabilitation expenditures. Congressional and executive branch oversight organizations have documented inconsistent policy guidance and states' practices for claiming federal matching funds that failed to comply with Medicaid rules. The Centers for Medicare and Medicaid Services (CMS) issued a proposed rule on August 13, 2007, for Medicaid rehabilitation services. The proposed rule was intended to more clearly define for states the scope of the rehabilitation benefit and identify services that can be claimed as rehabilitation under Medicaid. CMS estimated that the proposed changes would reduce federal Medicaid expenditures by approximately $180 million in FY2008 and $2.2 billion between FY2008 and FY2012.
The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173) imposed a moratorium until June 30, 2008, on implementation of the rehabilitation proposed rule. On May 22, 2008, the Senate passed the Supplemental Appropriations Act of 2008 (H.R. 2642), which contained a moratorium until April 1, 2009, on implementation of the rehabilitation regulations. H.R. 2642 was amended by the House and passed on June 19, 2008. The House amendments included moratoria until April 1, 2009, for six Medicaid regulations, including rehabilitation services. On June 26, 2008, the Senate passed H.R. 2642 without changes to the House legislation, so that implementation of six Medicaid regulations, including rehabilitation services, would be delayed until April 1, 2009. The President signed P.L. 110-252 into law on June 30, 2008.
Earlier, on June 4 and 5, 2008, the Senate and House, respectively, adopted the final version of the budget resolution (H.Rept. 110-659 accompanying S.Con.Res. 70). The conference agreement established budget-neutral reserve funds that could be used to impose moratoria on Medicaid rules and administrative actions and also includes a sense of the Senate provision on delaying Medicaid administrative regulations including rehabilitation services.
This report describes Medicaid rehabilitation services, discusses major provisions of the Medicaid rehabilitation regulation, and provides various perspectives on the rehabilitation proposed rule. This report will be updated with legislative and regulatory activity.