The Department of Veterans Affairs (VA) proposes to reorganize, update (based on revisions to statutory authority), and clarify its regulations that govern paying per diem to State homes providing nursing home and adult day health care to eligible veterans. The reorganization will improve consistency and clarity throughout these State home programs. We propose to revise the regulations applicable to adult day health care programs of care so that States may establish diverse programs that better meet participants' needs for socialization and maximize their independence. Currently, we require States to operate these programs exclusively using a medical supervision model. We expect that these liberalizing changes will result in an increase in the number of States that have adult day health care programs. We also propose to establish new regulations governing the payment of per diem to State homes providing domiciliary care to eligible veterans, because the current regulations are inadequate. Moreover, we propose to eliminate the regulations governing per diem for State home hospitals because there are no longer any State home hospitals. In general, this rulemaking is consistent with current regulations and policies, and we do not expect that these proposed rules would have a negative impact on State homes; rather, we believe that these proposed regulations will clarify current law and policy, which should improve and simplify the payment of per diem to State homes, and encourage participation in these programs.