Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Appellate Division |
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IN THE CASE OF | |
Maine Department of Human Services Louisiana Department of Health and Hospitals Tennessee Department of Finance and Administration Illinois Department of Public Aid |
DATE: February 22, 2006 |
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Docket No. A-05-100
Ruling No. 2006-1 |
DECISION | |
RULING ON REQUEST The Center for Medicare & Medicaid Services (CMS) requested reconsideration of the Board's decision in Hawaii Dept. of Human Services, et al., DAB No. 1981 (2005). In that decision, the Board reversed determinations by CMS disallowing Medicaid claims from five States. CMS determined that each State had an impermissible provider tax program because the State made indirect payments to nursing homes (in the form of grants or tax credits to private pay residents) that held the nursing homes harmless from a tax on the nursing homes. The issues involved two separate hold harmless tests: the "positive correlation" test in section 1904(w)(4)(A) of the Social Security Act (Act) and the "guarantee" test in section 1904(w)(4)(C) of the Act. The major conclusions the Board reached, which are fully explained in our decision, were:
The decision also provided a detailed analysis of individual States' programs and why the hold harmless provisions, as interpreted in the regulatory provisions and preambles, do not apply to render the States' tax programs impermissible. CMS sought and received several extensions of time to file its brief in support of its reconsideration request, ultimately filing the brief on December 5, 2005. The States who were parties to the proceeding were given an opportunity to reply and submitted their brief on January 19, 2006. On January 26, 2006 the States submitted a supplemental statement discussing a [Page 3]recently issued Supreme Court decision, and CMS responded on February 1, 2006. The Board has authority to reconsider a decision if "a party promptly alleges a clear error of fact or law." 45 C.F.R. § 16.13. CMS does not identify any factual finding the Board made regarding the States' tax and grant programs that CMS alleges was erroneous. CMS does allege that the Board erred in stating that CMS had at one time said that some of the programs violated the "indirect guarantee" hold harmless provision. CMS audit reports cited in the decision directly support this statement, however. See, e.g., HA Exhibit (Ex.) 222, Att. at 14; ME Ex. 533, at 12. CMS also asserts that the Board mistakenly focused on CMS's arguments treating the nursing home residents as the taxpayers, whereas CMS's "primary" argument was based on the premise that the nursing homes were the taxpayers. CMS Reconsideration Brief (Recon. Br.) at 13. The Board's decision, however, addressed the argument that the residents were the taxpayers only briefly, pointing out that the disallowances were based on the premise that the nursing homes were the taxpayers. DAB No. 1981, at 27-28. In any event, correcting any mistake about which CMS argument was "primary" would not change the result. Thus, we conclude that CMS has not alleged any clear error of fact that would cause us to reconsider our decision. CMS also does not identify any respect in which a legal conclusion reached by the Board in its decision is inconsistent with the wording of any governing statute or regulation, with the interpretation of a regulatory provision in the preamble to the regulation or other Federal Register publication, or even with any interpretation in a CMS official policy issuance. CMS argues, however, that the statute and regulations refer to any "direct or indirect payment" and the Board "disregarded CMS's regulatory interpretation of indirect payments." CMS Recon. Br. at 12. This argument is unfounded, for the following reasons:
Contrary to what CMS argues, moreover, the Board did not hold that a state law providing for an indirect payment could never constitute a direct guarantee. Instead, the Board found CMS's position inconsistent with the statute and regulations because it gave no effect to the plain meaning of the word "guarantee." CMS's request for reconsideration relies heavily on CMS's argument that the Board exceeded its authority because the Board must defer to all permissible CMS interpretations (even if they are merely "litigation positions"), and that the Board failed to give such deference. The regulations governing this proceeding provide that the "Board shall be bound by all applicable laws and regulations." 45 C.F.R. § 16.14. CMS's brief for the most part fails to identify what "interpretations" it means and what language CMS was allegedly "interpreting," probably because none of the interpretations CMS advanced here was in the regulations. Moreover, CMS appears to have abandoned the key positions on which it initially relied (for example, its position that "positively correlated" means "related" - a position inconsistent with the plain meaning of the term and with the preamble to the final rule). Additional flaws in CMS's allegations regarding deference include the following:
We also note that, while CMS recognizes in a footnote in its reconsideration request that the States raised issues about whether they had adequate and timely notice of interpretations CMS advanced in support of the disallowances, CMS fails to grasp the significance. CMS offers no evidence of any official policy issuance (from someone within CMS with policy-making authority) giving notice of those interpretations (much less giving timely notice). Notice issues raised here (but not in the decisions on deference CMS cites), include issues such as the effect of-
CMS's reconsideration request presumes that if we had found CMS's interpretations to be consistent with the regulations (which they were not) and deferred to them, CMS would have prevailed. Given the substantial notice questions, however, this presumption is not warranted. Thus, we conclude that CMS's arguments about deference do not provide a basis for reconsideration. CMS also raises some allegations regarding application of the law to the facts. First, CMS argues that since the Board recognized that a positive correlation (in the statistical sense) could automatically result from a state law provision, the Board should have upheld the disallowances on that basis. CMS does not, however, allege any error in the factual findings on which the Board relied as showing that there was not such an automatic correlation in any of the States' programs. Instead, CMS's assertion of an automatic correlation relies on CMS's position that the term "amount of the tax" means "the per unit tax rate" or the "per bed amount" - a position that is inconsistent with the regulation. (This faulty position also underlies CMS's arguments on the effect of an example in the preamble to the proposed rule.) Second, CMS argues that it is "not possible for any agency to craft its rules to address every possible permutation of regulated activity," and, therefore, "CMS fleshes out the applicability of the rules to various factual scenarios through interpretive guidelines and policy issuances." CMS Recon. Br. at 5. This is true and has been routinely recognized in Board decisions. What CMS does not mention, however, is that it was aware of the basic facts about these States' programs prior to issuing the final rule in 1992, yet failed over a period of many years to issue any "interpretive guidelines and policy issuances" on such programs, despite preamble statements (noted in the Board's decision) suggesting areas where such guidance was needed. Third, CMS argues that the Board erred in suggesting that the preamble example of how a state's grant program "might" violate [Page 10] the positive correlation test was not relevant since the example related to part of the positive correlation test on which CMS did not rely here. CMS says the Board was mistaken because only the second preamble example (involving hospitals) addressed the non-relevant part of the test - whether a non-Medicaid payment is positively correlated to the difference between the Medicaid payment and total tax cost. This argument is based on CMS's error, not ours. The preamble example addressing grants to nursing facility (NF) residents (which CMS quotes in a footnote on a different page from its argument) states that the following situation "might" violate the positive correlation test:
57 Fed. Reg. 55,118, 55,129 (emphasis added). Thus, as we indicated, the example suggests that the grants equate to the difference between the Medicaid payments and the total taxes, a reading that is consistent with the questions CMS first raised about some of the States' programs. See, e.g., HA Ex. 217, at 4; TN Ex. 16; IL Ex. 38, at 4. That reading merely recognizes that there are two parts to the positive correlation test in the statute and regulations and does not, as CMS argues, create a new test. CMS also errs by suggesting that the Board could "apply" the preamble example without regard to the statutory and regulatory wording. CMS similarly tries to fault the Board for dismissing CMS's reliance on a different preamble example (of an explicit guarantee). CMS claims that the "Board did not clearly explain why this example is not instructive here" but, rather, "merely offers what the Appellants argued, 'that their programs are distinguishable from the property tax credit program in the preamble example.'" CMS Recon. Br. at 34, citing DAB No. 1981, at 39. The example, however, is of a state law that "assures repayment of tax costs." 57 Fed. Reg. at 55,129. CMS's argument that the Board failed to explain why this example is inapposite ignores the second part of the Board's decision, which analyzes the facts about each State's grant or tax credit provision, fully explaining the Board's conclusion that no repayment of tax costs was "assured." [Page 11] Finally, CMS complains that, if it has to use "total tax cost" as one of the variables in a positive correlation analysis, this will result in "an unworkable administrative morass that would require CMS to track the tax burdens of every provider and the tax credits or grants received by residents of every provider." CMS Recon. Br. at 22. As the States argue, this complaint evidences a misunderstanding of the nature of a statistical positive correlation analysis and therefore overstates the potential burden on CMS. But, in any event, the choice to interpret the term "amount of the tax" as "total tax cost" was made in the regulations (by which the Board is bound), not in the Board's decision. That the Board explained how this regulatory choice gave effect to the statutory and regulatory history and intent (which CMS's position did not) does not mean that the Board was substituting its own test, rather than applying the regulation. In sum, as discussed more fully in our decision, the Board reversed the disallowances because, rather than interpreting and applying key terms in the statute and regulations, CMS was ignoring them. And, having ignored those terms, CMS had relied on evidence that was irrelevant to those terms. Accordingly, we deny the request for reconsideration. |
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JUDGE | |
Cecilia Sparks Ford Donald F. Garrett Judith
A. Ballard |
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FOOTNOTES | |
1. While CMS asserts that it "crafts the regulations," the Secretary has retained his authority to issue regulations. This enables the Secretary to obtain input from other parts of the Department, with expertise in areas such as healthcare, grants management, administrative law, and intergovernmental relations, as well as relying on CMS's expertise in administering the Medicaid program. 2. In their supplemental submission, the States point out that the recent Supreme Court decision in Gonzales v. Oregon, No. 04-623 (Jan. 17, 2006), distinguishes language that merely paraphrases a statute (for which no deference is due) from language that results from an agency exercising its authority and expertise to develop a legislative rule. Much of the language at issue here is paraphrased or adopted verbatim from the statute (which resulted from an agreement between the Secretary and states), and the regulatory language that differs from the statute was developed after consultation with the states, as required by the statute, not by CMS alone. The Board noted this in its decision, as one of many factors it considered. 3. While it is possible that some CMS officials persisted in the view that all grants to nursing home residents automatically give rise to a hold harmless situation, this position was directly overridden in the preambles to the interim final and final rules. Those preambles made clear that whether a hold harmless is created depends on how the program is structured. Moreover, the fact that there were substantial delays between CMS's actions regarding the States' programs suggests uncertainty even about this position, as does the fact that CMS at times cited one or another part of the positive correlation test and other times cited one or another part of the guarantee test. Indeed, some statements by CMS officials over the years suggest that the questions were based primarily on concerns about the federal fisc, rather than on the regulatory language. The Board's decision questioned whether those underlying concerns were warranted, given the Secretary's policy reflected in the regulatory indirect guarantee test. CMS's reconsideration brief takes the Board's discussion of these concerns completely out of context, asserting that the Board was improperly creating a policy to treat the indirect guarantee test as a "safe harbor." The Board created no such policy, however, merely questioning whether the assumptions underlying CMS's arguments were consistent with the regulatory policy the Secretary adopted. 4. Indeed, as part of the Department, the Board always carefully analyzes the interpretations relied on by the agency party to defer where appropriate. See Alaska Dept. of Health and Social Services, DAB No. 1919, at 14-17 (2004). 5. CMS misplaces its reliance on a Secretarial decision that involved an appeal pursuant to an agreement between New York and the Secretary. New York State Dept. of Social Services, DAB No. 1429 (1994), 1994 WL 110219 (HHS). That case was not heard under the delegated authority at issue here. Moreover, the interpretation involved had been timely promulgated in the Social Security Administration's manual system for disseminating official policy and was found to be reasonable. 6. CMS cites the Board's original regulations promulgated in 1973, arguing that the principles in those regulations did not change with the modifications made in 1981. CMS Recon. Br. at 6, and n.3. This is not entirely accurate, but we agree that, under the modifications, the Board's decision is "the final administrative decision in the matter" before us and that the Board has no policy-making authority. We disagree, however, with CMS's suggestion that the Board may not properly resolve legal disputes and with CMS's suggestion that the Board improperly substituted its policy judgment for that of "the Secretary's delegatee" when applying the regulations here. | |