Missouri Department of Social Services, DAB No. 3209 (2025)

DECISION

The Missouri Department of Social Services (MDSS) appeals a January 15, 2021 determination by the Centers for Medicare & Medicaid Services (CMS) to disallow $23,977,840 in federal financial participation (FFP).  The disallowance results from audits conducted for state fiscal years (SFYs) 2011, 2012, 2013, and 2014 and concerns pharmacy dispensing fees that Missouri’s Medicaid program and Children’s Health Insurance Program (CHIP) paid during those SFYs.  For reasons explained below, we uphold CMS’s disallowance in its entirety.

Legal Background

This case concerns funding for the Medicaid program, which CMS administers on behalf of the Department of Health and Human Services (HHS).  Title XIX of the Social Security Act (Act) authorizes federal grants to states for Medicaid, which furnishes medical assistance to individuals in specified eligibility categories.  Act §§ 1900, 1903; 42 C.F.R. § 430.0.1  The federal government and participating state governments jointly finance the program, and the states directly pay the individuals or entities that furnish covered services.  42 C.F.R. § 430.0. 

Also relevant to this case is the CHIP, which “is established by title XXI” of the Act “and authorizes federal grants to the states to provide child health assistance to uninsured, low-income children.”  Colo. Dep’t of Health Care Pol’y & Fin., DAB No. 2407, at 1 (2011).  Missouri’s CHIP “is a jointly funded state and federal program that provides health assistance to uninsured, low income children whose family income is above the State’s Medicaid income limits, but who cannot afford private health insurance.”  Julia M. v. Scott, 498 F. Supp. 2d 1245, 1246 (W.D. Mo. 2007).      

Each participating state operates its Medicaid program subject to federal requirements

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and the state’s CMS-approved state plan for medical assistance.  Act §§ 1902, 1903(a); 42 C.F.R. §§ 430.10-430.15.  The state plan is a comprehensive written statement of the nature and scope of the state’s Medicaid program and “contains all information necessary for CMS to determine whether the plan can be approved to serve as a basis for” FFP.  42 C.F.R. § 430.10.  A state plan must “[s]pecify a single State agency established or designated to administer or supervise the administration of the plan.”  Id. § 431.10(b)(1).  A state plan also must include the State Attorney General’s certification citing the legal authority for the single state agency to “[a]dminister or supervise the administration of the plan” and “[m]ake rules and regulations that it follows in administering the plan.”  Id. § 431.10(b)(2).  A state plan also must provide that the state agency administering the plan will maintain an accounting system and supporting fiscal records to assure that claims for FFP meet federal requirements.  Id. § 433.32(a).  The state agency also “must maintain documentation of payment rates and make it available to HHS upon request” for both Medicaid and the CHIP.  Id. §§ 447.203(a), 457.238.

After approving a state plan, CMS awards the state quarterly grants to cover the federal share of Medicaid expenditures.  42 C.F.R. § 430.30(a)(1).  The state then must timely submit a Quarterly Medicaid Statement of Expenditures (QSE), which is the “accounting of actual recorded expenditures” that a state considers entitled to FFP.  Id. § 430.30(c).

A state must submit a state plan amendment (SPA) for CMS approval whenever necessary to reflect changes in federal law or “[m]aterial changes in State law, organization, or policy, or in the State’s operation of the Medicaid program.”  42 C.F.R. § 430.12(c)(1).  A state’s prompt submission of SPAs is “necessary,” in part, “[s]o that CMS can determine whether the plan continues to meet the requirements for approval.” Id. § 430.12(c)(2)(i).

The Single Audit Act subjects a state that receives federal Medicaid funding to a so-called “single audit” of the state’s financial statements and federal awards.  31 U.S.C. §§ 7501(a)(18), 7502.  The Office of Management and Budget (OMB) issues policy circulars to federal agencies to promote governmental efficiency and uniformity.  5 C.F.R. § 1310.1.  One such guideline, OMB Circular A-133, addressed “Audits of States, Local Governments, and Non-Profit Organizations.”  In 2013, OMB codified Circular A-133 and other guidance at 2 C.F.R. Part 200, and in 2014, HHS codified 2 C.F.R. Part 200 (with HHS-specific amendments) in 45 C.F.R. Part 75.  See 78 Fed. Reg. 78,590 (Dec. 26, 2013); 79 Fed. Reg. 75,871, 75,875-876, 75,889 (Dec. 19, 2014).

Case Background

1. The pharmacy dispensing fee

It is undisputed that Missouri’s State Plan “provides that the reimbursement for outpatient prescription drugs consists of two components:  (1) ingredient costs, and (2) a

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professional dispensing fee.”  MDSS Br. at 2.  For years, the State Plan defined the professional dispensing fee as the “applicable fee at the time the prescription is being filled.”  MDSS Ex. 3, at 1; see, e.g., MDSS Ex. 1 (SPA 00-11, effective May 1, 2000), at 2; MDSS Ex. 2 (SPA 01-45, effective October 1, 2001). 

In the past four decades, MDSS has increased the professional dispensing fee several times.  It rose from $2.75 to $3.00 in March of 1988, to $3.10 as of July 1, 1989, and to $3.15 as of July 1, 1990.  MDSS Ex. 3, at 2.  The fee increased again in 1991, due to a judicially approved Settlement Agreement in Missouri Pharmaceutical Association v. Stangler, No. 91-4110-CV-C-5 (W.D. Mo.), in which MDSS agreed to “amend [the] Medicaid State [P]lan to . . . increase the Medicaid pharmacy dispensing fee to $4.09 per prescription.”  MDSS Ex. 5, at 5; see also CMS Ex. 1; MDSS Ex. 3, at 2.  In 2002, MDSS implemented a combined dispensing fee of $8.04 (the sum of a $4.09 “base” dispensing fee and a $3.95 “enhanced” dispensing fee).  MDSS Ex. 3, at 2.  In 2007, MDSS raised the combined dispensing fee to $9.66 (the sum of a $4.84 “base” dispensing fee plus a $4.82 “enhanced” dispensing fee).  MDSS Ex. 3, at 2; MDSS Ex. 8, at 3, 11. 

State regulatory amendments accompanied some, but not all, of the dispensing fee increases.  When MDSS increased the fee to $3.00 in 1988, MDSS “published the fee in state regulation at 13 CSR 70-20.060.”  MDSS Ex. 3, at 2; see also MDSS Ex. 13, at 8 (Mo. Code Regs. Ann. tit. 13, § 70-20.060 (2009)).  However, MDSS did not amend state regulations to reflect subsequent fee increases in 1989, 1990, 1991, 2002, or 2007.  MDSS Ex. 3, at 2.  In 2014, MDSS updated its regulations to reflect the increased base dispensing fee of $4.84, but not the increased “enhanced” or “combined” dispensing fee.  MDSS Ex. 3, at 2; MDSS Ex. 12, at 8.

2. The audits

The Missouri State Auditor’s first relevant audit report, issued in March 2012 for SFY 2011 (ended June 30, 2011), questioned $6,909,934 in pharmacy dispensing fee costs.  MDSS Ex. 7, at 1, 96.  The State Auditor reported that MDSS “periodically changed the rate paid [to] pharmacies for dispensing prescription drugs under” Medicaid and the CHIP, but MDSS did not update “the state regulation authorizing these dispensing fees” since 1988.  Id. at 96-97.  The State Auditor also reported that MDSS increased the dispensing fee to $4.09 in 1991 as required “as part of a settlement agreement,” yet “neither the State Plan nor the [state regulations] were updated to reflect this amount.”  Id. at 97.  The costs the State Auditor questioned represented the “federal share” of the difference between the total dispensing fees that MDSS paid at the $4.84 rate and the total dispensing fees that MDSS would have paid at the $4.09 rate.  Id. at 98.  The audit report explained that 42 C.F.R. § 431.10(b)(2) “requires the state to establish the legal authority for the Medicaid agency to administer the Medicaid State Plan, including making rules and regulations to follow in administering the plan.”  Id. at 97.  Thus, MDSS’s “failure to update the related regulations when fee structures are changed” made

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MDSS “noncompliant with its own regulations in administering the Medicaid State Plan.”  Id.  The State Auditor also found MDSS did “not have adequate documentation to support the determination of the current dispensing fee structure.”  Id.  The State Auditor recommended that MDSS ensure that state regulations related to administration of Medicaid and CHIP are updated and that MDSS resolve questioned costs with CMS.  Id. at 98.  MDSS disagreed with the audit findings but prepared a Corrective Action Plan stating that MDSS would work with CMS to “resolve any questioned costs” and would “consider amending the pertinent State regulation.”  CMS Ex. 2.

The State Auditor’s report for SFY 2012 made similar findings and recommendations and questioned $6,319,991 in FFP for pharmacy dispensing fees.  See MDSS Ex. 10, at 92-94.  Again, the State Auditor found that MDSS had “periodically changed the rate paid [to] pharmacies for dispensing prescription drugs” under the Medicaid and CHIP programs without updating the state authorizing regulation “since 1988,” and MDSS did “not have adequate documentation to support the determination of the current dispensing fee structure.”  Id. at 93.  The State Auditor noted that MDSS “stated steps are being taken to update state regulations in response to our recommendation; however, [MDSS] personnel would not provide documentation to support this statement.”  Id. at 94.  MDSS again disagreed with the audit findings and disputed the need for corrective action, but prepared a Corrective Action Plan representing that MDSS would work with CMS “to resolve any questioned costs” and was “in the process of amending the pertinent State regulation.”  CMS Ex. 3. 

The State Auditor’s report for SFY 2013 largely repeated the findings of the two prior reports and questioned $6,102,152 in FFP for pharmacy dispensing fees.  MDSS Ex. 14, at 82-83.  MDSS again disagreed with the audit findings, but MDSS’s Corrective Action Plan stated that a “proposed rule was published on November 1, 2013, Volume 38 No. 21 page 1768 for the regulatory changes necessary to reflect the current pharmacy dispensing fee.”  CMS Ex. 4.

The State Auditor’s report for SFY 2014 questioned $4,645,763 in FFP for pharmacy dispensing fees paid from July 1, 2013, through March 30, 2014, before the update to the state regulations.  MDSS Ex. 18, at 68-69.  The report found that “the state regulation authorizing these dispensing fees had not been updated since 1988” until the new regulation, “effective March 30, 2014, updated the base dispensing fee to $4.84, the current fee paid.”  Id. at 68; see MDSS Ex. 12, at 8.  The State Auditor observed that “[s]imilar findings were included in our three prior audit reports” and recommended that MDSS “resolve questioned costs with” CMS “and ensure any future increases in payment rates are included in state regulations.”  MDSS Ex. 18, at 69.  MDSS again disagreed with the audit finding.  Id.

HHS notified MDSS that each state audit report for SFYs 2011 through 2014 “met Federal audit requirements.”  MDSS Ex. 9, at 1 (2012 letter concerning SFY 2011 audit);

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MDSS Ex. 11, at 1 (2013 letter concerning SFY 2012 audit); MDSS Ex. 15, at 1 (2014 letter concerning SFY 2013 audit); MDSS Ex. 19, at 1 (2016 letter concerning SFY 2014 audit). 

3. CMS disallowance

CMS issued two demand letters to MDSS.  MDSS Exs. 16, 19.  On September 16, 2014, CMS concurred with the State Auditor’s findings and recommendations for SFYs 2011, 2012, and 2013 and asked the state to refund $19,332,077 in FFP for excess pharmacy dispensing fees paid in those three SFYs.  MDSS Ex. 16.  On October 1, 2014, MDSS replied that there was “no legal basis for a federal disallowance based solely on the alleged noncompliance with state rules at issue here.”  MDSS Ex. 17, at 1.  On January 14, 2016, CMS concurred with the State Auditor’s findings and recommendations for the SFY 2014 audit and requested an additional repayment of $4,645,763 in FFP for SFY 2014.  MDSS Ex. 19.  MDSS did not reply.  MDSS Ex. 20, at 2.

In 2017, MDSS sought to amend its State Plan to put into place a new methodology for both pharmacy ingredient costs and dispensing fees, and “numerous discussions over several years with CMS regarding the proposed changes” ensued.  MDSS Ex. 3, at 3.

On January 15, 2021, CMS issued a notice of disallowance.  MDSS Ex. 20.  The notice stated that, per 42 C.F.R. § 430.42, CMS was disallowing $23,977,840 in claimed FFP, which “represents pharmacy dispensing fees claimed” by MDSS for the Medicaid and CHIP programs “in excess of the allowable amount” during SFYs 2011, 2012, 2013, and 2014.  MDSS Ex. 20, at 1.  CMS recapitulated the State Auditor’s findings that MDSS periodically changed the pharmacy dispensing fee in the Medicaid and CHIP programs without updating the pertinent state regulation, without submitting relevant amendments to the approved state plan, and without adequate documentation to support the dispensing fee structure.  Id.  CMS stated that “[t]he pharmacy dispensing fees paid in SFYs 2011 through SFY 2014, as reported in the single state audits for the respective state fiscal years, were not made in accordance with the approved state plan,” so “the excess amounts were not allowable.”  Id. at 2. 

On February 1, 2021, CMS approved a State Plan Amendment that removed the “applicable fee” language and adopted a professional dispensing fee of $12.22 for in-state pharmacies.  MDSS Ex. 3, at 3-4.

4. MDSS’s appeal to the Board

MDSS timely appealed the disallowance to the Board on March 16, 2021.  MDSS Ex. 21.  MDSS filed a brief (MDSS Br.) and 28 exhibits (MDSS Exs. 1-28).  CMS filed a response brief (CMS Br.) and five exhibits (CMS Exs. 1-5).  MDSS filed its reply brief (MDSS Reply) on July 2, 2021, and the record now is closed.

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MDSS argues that the Board should reverse or at least reduce the disallowance.  MDSS Br. at 2, 16-17; MDSS Reply at 1.  MDSS asserts that “CMS’s position makes little sense, and is without support” and “unreasonable.”  MDSS Br. at 1; MDSS Reply at 1.  MDSS argues that the “broad language” of the State Plan did not require an amendment for each dispensing fee increase and did not require the “applicable fee” to be “established in state regulation.”  MDSS Br. at 1.  MDSS asserts that the state’s “own consistent and longstanding interpretation of its own state plan that it had the authority to adjust the applicable fee without amending state regulation was reasonable and is thus entitled to deference.”  Id. at 2; see also MDSS Reply at 2.  MDSS complains that “CMS’s substantial delay in acting on the State Auditor’s initial findings” was contrary to regulation and MDSS “was clearly prejudiced by CMS’s lackadaisical action.”  MDSS Br. at 2; MDSS Reply at 5.  MDSS also contends that “the disallowance should be remanded to remove any expenditures related to Title XXI,” meaning the CHIP.  MDSS Br. at 17 n.4; see also id. at 5 n.1.

CMS counters that because “MDSS’s interpretation of the state plan provision is not entitled to deference and is otherwise unreasonable, the disallowance should be affirmed.”  CMS Br. at 15.  CMS argues that “MDSS’s claim to deference is unwarranted because it lacks any contemporary documentary evidence, it did not have a consistent administrative practice,” and MDSS’s interpretation “is ultimately unreasonable.”  Id. at 7.  CMS asserts that the 1991 Settlement Agreement, which the Director of MDSS and Commissioner of the Missouri Office of Administration executed on behalf of their respective agencies, set forth the official, reasonable interpretation of the dispensing fee until MDSS next amended its regulation.  Id. at 5, 7-10; see MDSS Ex. 5, at 4, 7.  CMS claims that MDSS failed to support its arguments with relevant case law.  CMS Br. at 10-12.  CMS contends that no statute forecloses CMS’s right to recover the disallowance based on the passage of time, and the facts of this case do not establish undue prejudice to MDSS.  Id. at 12-14.  Finally, CMS notes that MDSS’s argument concerning CHIP costs “probably does not deserve a response” due to inadequate briefing, but “if MDSS is going to request relief, it should have produced in its evidence a breakdown of the CHIP costs it thought should not have been subject to the disallowance.”  CMS Br. at 15 n.16. 

Standard of Review

“We review de novo an agency’s decision to disallow costs charged to federal awards.”  Tex. Health & Hum. Servs. Comm’n, DAB No. 3066, at 7 (2022), recons. denied, DAB Ruling No. 2024-1 (Oct. 27, 2023).  When reviewing a disallowance, the Board is “bound by all applicable laws and regulations.”  45 C.F.R. § 16.14. 

Analysis

“In this proceeding, CMS has the initial burden to provide sufficient detail about the basis

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for its disallowance determination to enable the grantee to respond.”  Mass. Exec. Off. of Health & Hum. Servs., DAB No. 2218, at 11 (2008), aff’d, 701 F. Supp. 2d 182 (D. Mass. 2010); accord Cal. Dep’t of Health Care Servs., DAB No. 3099, at 11 (2023).

“If the federal agency carries this minimal burden, the grantee must establish the allowability of the expenditures in dispute.”  Mass., DAB No. 2218, at 11; accord Ariz. Health Care Cost Containment Sys., DAB No. 2824, at 2 (2017), aff’d, No. CV-17-04462, 2020 WL 805235 (D. Ariz. Feb. 18, 2020).  “[T]he Board has long held that states have the burden to document the allowability of the costs for which they claim federal funding.”  Mo. Dep’t of Soc. Servs., DAB No. 2589, at 7 (2014) (citing decisions).  “Furthermore, where, as here, the disallowance is based on audit results, the state agency must show that those findings are not justified.”  Ariz., DAB No. 2824, at 8.

After thoroughly reviewing the record, the parties’ arguments, and relevant authorities, the Board holds that CMS has met its burden and Missouri has not.

1. CMS met its initial burden to articulate the basis for the disallowance.

The January 15, 2021 disallowance notice satisfies the content requirements of 42 C.F.R. § 430.42 and meets CMS’s initial burden of providing sufficient detail about the basis for the disallowance to enable MDSS to respond.  As required, CMS informed MDSS of:  when “the State’s claim for FFP was made” (on the QSEs submitted for SFYs 2011-2014), when “the expenditures in question were made” (in SFYs 2011 through 2014) and the “amount of FFP claimed . . . and disallowed” ($23,977,840).  42 C.F.R. § 430.42(a)(1)-(4); MDSS Ex. 20, at 1.  CMS explained “the manner in which these amounts were computed” (by the State Auditor, itemized for each SFY).  42 C.F.R. § 430.42(a)(4); see MDSS Ex. 20, at 2.  CMS included factual findings supporting the disallowance determination, including the terms of the 1991 Settlement Agreement and the lack of:  relevant state regulatory updates from 1988 until 2014, relevant plan amendments, and adequate supporting documentation.  See 42 C.F.R. § 430.42(a)(5); MDSS Ex. 20, at 1.  CMS also provided “[p]ertinent citations to the law” supporting the disallowance (including Section 1903(a) of the Act and 42 C.F.R. §§ 430.10 and 430.12).  42 C.F.R. § 430.42(a)(6); MDSS Ex. 20, at 1. 

CMS also sufficiently explained to MDSS, years before the 2021 disallowance, why the disputed claims were not allowable.  CMS’s initial 2014 demand letter explained that “the dispensing fees paid during [SFYs 2011-2013] were greater than the fees established in state regulation 13 CSR 70-20.060(1),” and “[d]ispensing fees paid in excess of the amount authorized in state regulations were not authorized and therefore not allowable for FFP.”  MDSS Ex. 16, at 1-2.  CMS’s second demand letter, in 2016, stated that MDSS had been paying a dispensing fee amount “greater than the dispensing fee amount as provided in state regulation 13 CSR 70-20.060(1) and the dispensing fee amount provided in the 1991 settlement agreement.”  MDSS Ex. 19, at 1.  Thus, until MDSS

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amended its regulation effective March 30, 2014, the fees paid were “greater than the applicable fee at the time the prescriptions were filled and therefore, were not paid in accordance with the approved state plan.”  Id.  CMS’s statements were consistent with long-standing law.  “The federal share of payments made at a rate higher than authorized in the approved state plan is considered an overpayment subject to recovery by CMS.”  N.H. Dep’t of Health & Hum. Servs., DAB No. 1862, at 3 (2003); see also Cal. Dep’t of Health Servs., DAB No. 1007, at 4 (1989) (“[W]here the State pays . . . at a rate that is higher than that authorized by the State plan, the federal share of the excess amount is an overpayment that is properly disallowed by the Agency”) (citing cases). 

We conclude that CMS met its burden of sufficiently stating the basis for the disallowance to enable MDSS to respond.

2. MDSS has not established the allowability of the disputed expenditures.

“A State’s expenditures are eligible for federal Medicaid reimbursement only if they are made in accordance with the state plan.”  Me. Dep’t of Health & Hum. Servs., DAB No. 2292, at 10 (2009) (citing Act § 1903(a)), aff’d, 766 F. Supp. 2d 288 (D. Me. 2011); see also La. Dep’t of Health & Hosps., DAB No. 1542, at 23 (1995) (“It is well-established that states may seek reimbursement only for rates determined in accordance with the state plan that is in effect.”), aff’d, No. 95-1942 (M.D. La. Dec. 18, 1997).   

MDSS seeks reversal of CMS’s disallowance of increased pharmacy dispensing fees by arguing for deference to the state’s “reasonable” interpretation of its State Plan.  MDSS Br. at 2; MDSS Reply at 2.  MDSS claims it consistently interpreted the “applicable fee” language as permitting MDSS “to make adjustments to its fees without amending the state plan” and “without amending state regulations, which are neither referenced nor incorporated in the state plan provision.”  MDSS Br. at 11.  MDSS argues that the approved State Plan did not specify “any dollar amount” for the fee, require its codification in regulation, or otherwise limit what the fee could be.  Id. at 1.  MDSS claims the “applicable fee” for each SFY is reflected “not in state regulation but in the budget documents submitted to the Missouri General Assembly and approved through the appropriations process.”  Id. at 12 (citing MDSS Exs. 22-25 as documents MDSS “submitted . . . to the General Assembly” in SFYs 2011 through 2014); see also MDSS Br. at 13 (stating the “applicable fee” was “reflected in state budget documents and approved by the General Assembly” from year to year).  MDSS argues that its interpretation is the type of reasonable reimbursement methodology decision to which the Board generally defers.  MDSS Br. at 10-11.

CMS disagrees with any claim that “CMS must pay FFP for whatever fee the Missouri legislature ultimately approved” and challenges “the inadequacy and inconsistency of MDSS’s position.”  CMS Br. at 1-2, 12.   CMS disputes MDSS’s claim of a consistent and reasonable interpretation of the State Plan, arguing that the record shows “no hint of

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consistency in how [MDSS] set, interpreted, or treated the fee under state law.”  Id.  at 5-6.  CMS argues that the official interpretation of the State Plan’s “applicable fee” language necessarily was either an adopted state regulation or the 1991 Settlement Agreement, “signed by the relevant state authorities,” wherein Missouri agreed to amend the State Plan to increase the dispensing fee to $4.09.  Id. at 8-9. 

We interpret a state plan according to established principles.  The Board first considers the plan language itself, and if that language is clear, it controls.  Md. Dep’t of Health, DAB No. 3153, at 16 (2024); N.J. Dep’t of Hum. Res., DAB No. 2107, at 6 (2007).  If the plan provision is ambiguous, we consider whether the state’s interpretation is reasonable in light of Medicaid program requirements and whether it gives reasonable effect to the plan language as a whole.  Md., DAB No. 3153, at 16-17; N.H., DAB No. 1862, at 16; S.D. Dep’t of Soc. Servs., DAB No. 934, at 4 (1988).  The Board also considers whether contemporaneous documentation and consistent administrative practice support the state’s interpretation.  Md., DAB No. 3153, at 16-17; Va. Dep’t of Med. Assistance Servs., DAB No. 2727, at 12 (2016), aff’d, No. 16-2008, 2018 WL 4705792 (D.D.C. Sept. 30, 2018), aff’d, 967 F.3d 853 (D.C. Cir. 2020).  By applying those standards to the record evidence in this case, we conclude that CMS’s interpretation of the state plan is reasonable and MDSS’s interpretation is not.

1. The “applicable fee” language in the State Plan is ambiguous.

CMS argues that the pertinent State Plan language – “applicable fee at the time the prescription is being filled” – is ambiguous; MDSS does not disagree, and we conclude the language is ambiguous.  See CMS Br. at 4; MDSS Br. at 10-11 & n.3.  The key ambiguity rests in the undefined term “applicable fee.”  An undefined term in a state plan “on its face is ambiguous” when, as here, “the reader automatically questions” the provision’s meaning and how to apply it.  See S.D., DAB No. 934, at 7.  As MDSS acknowledges, “[t]he plan refers simply to the ‘applicable fee,’ without further specification as to how the fee is to be set or where the fee is to be published.”  MDSS Reply at 1. 

2. We do not defer to MDSS’s interpretation of the State Plan because it is not reasonable in light of program requirements and does not give reasonable effect to the plan language as a whole.

MDSS argues that it reasonably interpreted the State Plan as conferring on the state “the authority to adjust the applicable fee without amending state regulation” and “without amending the state plan.”  MDSS Br. at 2, 11; MDSS Reply at 2.  MDSS argues that its interpretation of the State Plan’s “applicable fee” provision “is in line with decisions from the Board affirming that similarly ‘open-ended’ language gives a State the ability to make reimbursement adjustments without amending the plan or seeking CMS approval.”  MDSS Br. at 11.

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The primary flaw in MDSS’s position is that it is unreasonable in light of Medicaid program requirements concerning plan amendments.  Submission of a plan amendment is necessary whenever there are “[m]aterial changes in State law, organization, or policy, or in the State’s operation of the Medicaid program.”  42 C.F.R. § 430.12(c)(1)(ii).  “Prompt” submission is necessary “[s]o that CMS can determine whether the plan continues to meet the requirements for approval.”  Id. § 430.12(c)(2)(i).  “We have previously found that a change in a state’s reimbursement system is clearly the type of change in operation or policy envisioned by 42 C.F.R. § 430.12(c)(1)(ii).”  Colo. Dep’t of Soc. Servs., DAB No. 1369, at 6 (1992); see also Del. Dep’t of Health & Soc. Servs., DAB No. 1166, at 2 (1990) (“When the state makes a material change in its policies or operation, such as its reimbursement systems, it must promptly submit an amendment to its plan.”).  In particular, “a change in a reimbursement rate is a material change to the State plan.”  Colo., DAB No. 1369, at 5.  “Any change in a state’s rate impacts on federal funding,” and “[a] change which increases a previously established and approved rate provides a state with federal funding not envisioned by its state plan and thus not approved by [CMS].”  Id. at 6.  Thus, where a state has “claimed enhanced federal funding” for a category of expenditures “without having amended its Medicaid State plan to reflect the enhanced rate,” we have held that there was “a material change to [the] State plan.”  Id. at 1, 5.  For example, on facts comparable to those of this case, the Board upheld a disallowance resulting from a state’s increase of its “professional dispensing fee of $2.50 for prescription drugs provided to Medicaid beneficiaries, although the State plan provided for a fee of $2.25.”  S.D. Dep’t of Soc. Servs., DAB No. 198, at 1 (1981).2

MDSS’s interpretation also does not give reasonable effect to the plan language as a whole.  MDSS argues that the plan language allows adjustments to the dispensing fee “without amending the state plan” and “without amending state regulations,” but instead through “budget documents submitted to the Missouri General Assembly and approved through the appropriations process.”  MDSS Br. at 11-12.  MDSS, however, points to no language in the State Plan authorizing adjustments to reimbursement rates through such a process.  Moreover, the state plan must be a “comprehensive written statement” of a state Medicaid program’s “nature and scope” that “contains all information necessary for CMS to determine whether the plan can be approved to serve as a basis for” disbursing federal funds.  42 C.F.R. § 430.10.  Thus, allowing MDSS to set the “applicable fee” solely through the vagaries of state budgeting, rather than through published regulation (or

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equivalent official ratification) and a CMS-approved state plan amendment, would be inconsistent with these federal requirements.  “[A]llowing a state to unilaterally engage in ad hoc revisions to its Medicaid payment rate methodology violates the clear statutory mandate that the rates be part of a state plan approved by the Federal government.”  Colo., DAB No. 1369, at 7 (emphasis omitted).  CMS fairly characterizes MDSS’s position as a claim that “CMS must pay FFP for whatever fee the Missouri legislature ultimately approved,” CMS Br. at 2, and the alarming implications for the federal fisc are obvious.  “To allow a state unilaterally to engage in ad hoc revision of the rate setting methodology set forth in its own Medicaid plan would seriously undermine the desired Federal supervisory role regarding Federal funding.”  Cal., DAB No. 1007, at 6 (internal emphasis, quotation marks, brackets, and citations omitted); accord Cal. Dep’t of Health Servs., DAB No. 1028, at 5-6 (1989).

Furthermore, as CMS notes, “the Missouri legislature is not the single state entity responsible for administering the [Medicaid] program, so its legislative process is not a substitute for administrative action” by MDSS.  CMS Br. at 10 n.11.  Section 1902(a)(5) of the Act requires “a single State agency to administer or to supervise the administration of the plan,” and the single state agency must have legal authority to “[m]ake rules and regulations that it follows in administering the plan,” 42 C.F.R. § 431.10(b)(2) (emphasis added).  There is no dispute that MDSS “is the single state agency charged with administering the Missouri Medicaid program, which includes Missouri’s Medicaid prescription drug program.”  MDSS Ex. 3, at 1.  The Supreme Court of Missouri has recognized that “[t]he state’s plan is a document filed with the federal Medicaid agency, and set forth in state regulations, that describes how the various components of the state Medicaid program will be operated, including reimbursements.”  Mo. Health Care Ass’n v. Holden, 89 S.W.3d 504, 509 (Mo. 2002) (en banc) (emphasis added).3  The state’s highest court also has described the state’s budget process as “complex,” being “initiated by the Governor, enacted in appropriations bills by the General Assembly, and reviewed by the Governor after passage.”  Id. at 507, 512.  Inherent uncertainties attend the process, including the state governor’s constitutional power, “not subject to legislative override, to reduce expenditures when actual revenues are less than revenue estimates on which the budget was based.”  Id. at 506.  We cannot see this process, involving intricate interplay among the legislative, executive, and (sometimes) judicial branches of state government, as an acceptable equivalent or substitution for MDSS’s adoption of fee-setting regulations as the single state agency responsible for administering the State Plan.  Whether MDSS permissibly might set the pharmacy dispensing fee by proposing legislation for the General Assembly to ratify through adoption into the state’s statutory code (and also by submitting a corresponding proposed State Plan amendment to CMS) is a question this case does not present and we do not decide.

We reject MDSS’s assertion that CMS’s position is internally inconsistent.  MDSS

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charges that CMS contradicts itself by asserting that “the State was required to set forth the applicable fee in state regulation” yet also “that the relevant language for purposes of the disallowance is not state regulation, but rather the 1991 Settlement Agreement.”  MDSS Reply at 3.  We see no inconsistency in CMS’s position under the facts and circumstances of this case.  It is well-established that states “may not change their plans unilaterally.”  N.H., No. 1862, at 3; accord Colo. Dep’t of Health Care & Pol’y Fin., DAB No. 2057, at 2 (2006).  CMS reasonably maintains that the official interpretation of “applicable fee” for purposes of the State Plan could be either a published regulation or an officially executed and approved settlement agreement, but could not consist of ad hoc, unilateral MDSS budget requests to the state legislature.  See Va., DAB No. 2727, at 7 (“While a state has considerable flexibility in choosing standards, methods and payment rates under its state plan, the state is not free to implement ad hoc changes or unilaterally change the methodology set out in its state plan, once adopted and approved.”).  It is significant that “in April 1991, upon motion by Defendants,” including MDSS, the Secretary of HHS “was joined as a party defendant to said lawsuit” that produced the 1991 Settlement Agreement.  MDSS Ex. 5, at 5.  The parties stipulated that the Settlement Agreement “must be approved by the Secretary” of HHS, and accordingly the presiding court approved the Settlement Agreement “contingent upon its approval by” HHS and the Health Care Financing Administration, predecessor of CMS.  MDSS Ex. 5, at 2, 7 (¶ 11); see also Mo. Dep’t of Soc. Servs., DAB No. 3156, at 2 n.2 (2024) (“The former Health Care Financing Administration (HCFA) became CMS in 2001.”).  These facts show the 1991 Settlement Agreement did not increase the pharmacy dispensing fee (and thus materially change the state plan) through impermissible unilateral action by MDSS.

We also conclude that the cases on which MDSS relies do not support its position.  For example, MDSS cites Louisiana, DAB No. 1542, for the proposition that when a state plan does not specify a particular method for calculating payment rate amounts or adjustments, “any reasonable method should be acceptable.”  MDSS Br. at 10-11 (emphasis and internal quotation marks omitted).  However, such flexibility comes with an important condition:  “states have great leeway to design their payment methodology so long as they comply with federal requirements.”  La., DAB No. 1542, at 25 (emphasis added); see also La. Dep’t of Health & Hosps., DAB No. 2350, at 9 (2010) (discussing principle that, even when states have “flexibility in what state plan provisions to adopt, particularly with respect to reimbursement methodologies,” states nevertheless “may not change their plan methodologies without CMS approval”), aff’d, No. 11-76-BAJ-CN, 2013 WL 12109519 (M.D. La. Feb. 7, 2013), aff’d, 566 F. App’x 384 (5th Cir. 2014).  As discussed above, MDSS’s payment methodology for pharmacy dispensing fees from 1991 through 2014 did not meet the essential condition of compliance with federal requirements.  MDSS also cites to New York Department of Social Services, DAB No. 151 (1981), which seems superficially analogous as it dealt with a fee schedule “tied to the State’s budgetary process” and a payment rate “based generally upon the budget allotment.”  Id. at 3.  However, “the rate was then promulgated in duly published State

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regulations,” as MDSS’s pharmacy dispensing fee also should have been.  See id. 

The present case also is distinguishable from Missouri Department of Social Services, DAB No. 1412 (1993).  In that case, the Board reversed a disallowance of “$1,571,801 of Missouri’s claim for [FFP] in costs incurred for pharmacy services rendered from October 1, 1987 through November 30, 1988.”  Mo., DAB No. 1412, at 1.  MDSS contends that DAB No. 1412 supports the proposition that the “applicable fee” was not “set forth in the 1991 Settlement Agreement,” but instead was “reflected in state budget documents and approved by the General Assembly.”  MDSS Br. at 13.  CMS counters that DAB No. 1412 “was not about interpreting the pharmacy dispensing fee provision in the state plan,” which is an interpretive question “not addressed in DAB No. 1412.”  CMS Br. at 10-11.  We acknowledge that DAB No. 1412 made repeated references to the state legislature and state budgeting when summarizing the parties’ positions and evidence.  See, e.g., DAB No. 1412, at 4, 7, 8, 12, 15.  Yet the Board plainly stated that the question then pending was “not how to interpret specific language in the plan,” id. at 13, whereas the case now before us concerns exactly that.  The focal plan language in the present case – “applicable fee at the time the prescription is being filled” – received only one mention in DAB No. 1412, see id. at 13, and no interpretive analysis at all.  Therefore, DAB No. 1412, like other precedent on which MDSS relies, does not support MDSS’s position.  

3. We do not defer to MDSS’s State Plan interpretation because it is not supported by contemporaneous evidence and the record does not demonstrate a consistent administrative practice by MDSS.

MDSS claims a “consistent administrative practice” of making “adjustments to the dispensing fee without amending state regulations.”  MDSS Br. at 11.  In support of that claim, MDSS points to contemporaneous evidence in the form of “budget documents submitted to the Missouri General Assembly and approved through the appropriations process.”  Id. at 12 (citing MDSS Exs. 8, 10, 14, 17).

We do not find that MDSS’s documentation relating to the state budgeting process supports MDSS’s claim of a consistent administrative practice.  As an initial matter, MDSS’s evidence does not meet the standard that, when setting payment rates, a state “must also explain the methods used to determine the rates and retain the underlying data in its documentation.”  See La., DAB No. 1542, at 13 (citing 42 C.F.R. § 433.32).  MDSS submits a four-page “Program Description” for SFY 2011, which merely states that “[e]ffective July 1, 2007, Missouri pharmacies were given an enhanced dispensing fee of $4.82, for a total dispensing fee of $9.66,” and single-page exhibits for SFYs 2012, 2013, and 2014 that repeat that language.  MDSS Ex. 22, at 3; MDSS Exs. 23-25; see also MDSS Ex. 8, at 1, 11 (March 2, 2012 email from MDSS to State Auditor attaching undated “document used in the state budgeting process” containing same language). This evidence does not support MDSS’s assertion that “the applicable fee was established

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in the Department’s annual budget requests to the Missouri General Assembly.”  See MDSS Br. at 1.  Instead, these documents contain mere passing references to a $4.82 dispensing fee established years earlier (“[e]ffective July 1, 2007”) and contravening both the unamended 1988 state regulation and the 1991 Settlement Agreement.  MDSS Ex. 22, at 3; MDSS Exs. 23-25.  Nor do these documents “demonstrate the Missouri General Assembly’s approval of the $4.84 rate,” as MDSS claims.  See MDSS Br. at 6.  They seem instead to be one-way communications from MDSS to the state legislature that do not prove the extent to which the legislature eventually granted MDSS’s budget requests or expressed any “approval” of the stated dispensing fee amount, let alone CMS’s approval of the amount.  The record does not support the regularity of even the referenced 2007 dispensing fee, for the State Auditor made an unrebutted finding that MDSS based that fee “on a 2007 national survey of pharmacy companies” but “cannot demonstrate the amount used is reasonable for Missouri.”  MDSS Ex. 7, at 97 (citing 42 C.F.R. §§ 447.203 and 457.238); see also MDSS Ex. 8, at 4-7 (Executive Summary of National Study to Determine the Cost of Dispensing Prescriptions in Community Retail Pharmacies, January 2007).

The record shows that there was, in fact, no consistent administrative practice.  The state effected regulatory amendments for some dispensing fee increases, yet not others.  MDSS Ex. 3, at 2.  If, as MDSS claims, the state budgeting process consistently determined the “applicable fee,” then why did MDSS ever specify the fee amount by state regulation?  MDSS does not answer that question, or explain why, having codified the fee by state regulation in 1988, the state then changed course and did not codify the subsequently increased fees in 1989, 1990, 1991, 2002, and 2007.  We also see no administrative consistency between MDSS’s specific commitment in the 1991 Settlement Agreement to “amend its Medicaid State plan to” raise the dispensing fee to $4.09, and MDSS’s subsequent 1991 State Plan amendment (SPA 91-24) that left the ambiguous “applicable fee” language unchanged.  Compare MDSS Ex. 5, at 5 (¶ 4) with MDSS Ex. 6.  A state “could, consistent with a reasonable interpretation of its state plan,” revise its rate calculations “based on its evolving experience and collection of actual cost data,” particularly if the state “did so consistently in all its later rate calculations.”  W. Va. Dep’t of Health & Hum. Res., DAB No. 2536, at 15 (2013).  However, MDSS presents no persuasive evidence or argument that this is such a case.  We give “no deference” to a state interpretation, such as MDSS’s, that is inconsistent with the interpretation reflected in the state’s prior administrative practice.  See Colo., DAB No. 2057, at 10. 

3. MDSS establishes no error or prejudice in CMS’s decision to pursue a disallowance rather than a noncompliance action.

We also reject MDSS’s argument that, even if 42 C.F.R. § 431.10(b) required amendment of the state regulation to increase the pharmacy dispensing fee under the State Plan, “that shortcoming is appropriately addressed through a noncompliance action under Section 1904 of the [Act] and 42 C.F.R. § 457.204.”  See MDSS Reply at 3.  As an initial matter,

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section 457.204 falls within 42 C.F.R. Chapter IV, Subchapter D (concerning CHIPs); the Medicaid analogue, which MDSS has not invoked, is 42 C.F.R. § 430.35.  More importantly, section 1904 of the Act does not mandate that it provides the exclusive remedy for addressing a state’s noncompliance with its state plan.  “The Board has found that the Secretary’s compliance remedies and disallowance remedies are not mutually exclusive and serve different purposes.”  N.Y. State Dep’t of Soc. Servs., DAB No. 1246, at 5 (1991).  “The Secretary’s remedy in a compliance action is prospective, i.e., the withholding of all or part of a state’s future federal funding.”  Id.  “The Secretary’s remedy in a disallowance,” by contrast, “is retrospective and limited, i.e., the recovery of discrete sums which have previously been paid to a state in excess of the amount to which the state was entitled.”  Id.  Accordingly, when reviewing Medicaid disallowances, the Board repeatedly has rejected arguments comparable to the one MDSS raises here.  See, e.g., Pa. Dep’t of Hum. Servs., DAB No. 2710, at 27-29 (2016); Pa. Dep’t of Pub. Welfare, DAB No. 2653, at 17-18 (2015), recons. denied, DAB Ruling No. 2016-2 (Mar. 24, 2016), aff’d sub nom. Pa. Dep’t of Hum. Servs., 349 F. Supp. 3d 431 (M.D. Pa. 2018).

Even assuming (which we are not) that CMS could have brought a noncompliance action against MDSS, it suffered no apparent prejudice from CMS’s election to pursue a disallowance instead.  We have contrasted the limited remedy of a disallowance with the Secretary’s comparatively “sweeping powers” when pursuing compliance remedies:

In a compliance action, the Secretary is authorized to terminate all funding to the state in order to give it compelling incentive to bring its program back into compliance.  In keeping with the coercive nature of the remedy, the amount of money the Secretary may withhold is not necessarily related to the actual costs of the noncompliance at issue.  In contrast, a disallowance action provides a specific and focused remedy pursuant to which the federal government may disallow precisely identified amounts which were not spent in accordance with program requirements.

N.Y., DAB No. 1246, at 5.  MDSS shows no apparent harm from CMS’s pursuit of the narrower remedy.

4. MDSS has not shown impermissible delay by CMS in taking the disallowance.

MDSS next argues that it lacked timely and adequate notice of CMS’s contrary interpretation concerning the pharmacy dispensing fee.  MDSS argues that even if its “expenditures were not in accordance with its state plan, the disallowance should not include any expenditures incurred after September 30, 2012, in light of CMS’s prejudicial delay in acting on the first state audit.”  MDSS Br. at 14.  MDSS asserts that CMS’s management decision on the State Auditor’s finding was required within six months, both under OMB Circular A-133 and later (effective December 27, 2013) under 2 C.F.R. § 200.521(d).  MDSS Br. at 14-15; see also MDSS Ex. 26, at 5 (OMB Circular A-133

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excerpt).  Thus, MDSS claims, CMS “should have acted by September 30, 2012” – which is six months after the State Auditor issued its SFY 2011 report in March 2012 – but instead CMS made no “management decision” until January 15, 2021.  MDSS Br. at 15.  MDSS complains that “CMS’s dilatory response resulted in the State incurring additional expenditures that were ultimately disallowed, which could have been avoided had CMS acted promptly as it was required to do.”  Id.

MDSS’s timeliness argument is inconsistent with Board precedent.  “The Act and regulations impose no statute of limitations or other time limit on issuance of Medicaid disallowances as a matter of law.”  Cal., DAB No. 3099, at 24.  “No statute of limitations applies to the federal government except where Congress expressly provides otherwise,” and “it is also well settled that the federal government is not subject to the defense of laches in enforcing its rights.”  Md. Dep’t of Hum. Res., DAB No. 519, at 3, 4 (1984); see also Cal., DAB No. 1007, at 7 (stating that “the doctrine of laches does not apply” and CMS “is not limited by statute or regulations in the amount of time it may take in issuing a disallowance”).  Accordingly, the Board has rejected non-statutory and equitable arguments, including those based on OMB Circular A-133, that CMS’s failure to issue a management decision within six months of an audit report invalidates a disallowance.4  See, e.g., Mich. Dep’t of Health & Hum. Servs., Off. of Child Support, DAB No. 2868, at 7-8 (2018) (rejecting state’s argument for rescission of disallowance based on six-month provision in OMB Circular A-133). 

In any event, MDSS proves no prejudice from CMS’s alleged delay.  MDSS admits it received a letter from HHS “in May 2012, within the six-month action period” after the State Auditor’s March 2012 report on SFY 2011, but MDSS describes that letter as “only a ‘recommendation,’” not a final determination.  MDSS Br. at 15.  Yet the letter contained clear notice of a multi-million-dollar problem with the state’s pharmacy dispensing fees and recommended that “procedures be developed and implemented to ensure 1) pharmacy dispensing fees are administered in compliance with Federal regulations and 2) the questioned costs be determined and returned.”  MDSS Ex. 9, at 5.  The letter warned MDSS that, overall, due to “[t]he serious nature of weaknesses identified as findings,” there was “more than a relatively low level of risk associated with the State.”  Id. at 2.  Regardless of how MDSS characterizes the letter, it was an alarm bell that the state essentially disregarded for years, taking no effective corrective action until the adoption of an appropriately amended state regulation in 2014.  Further undercutting any claim of unfair prejudice and unjustifiable delay by CMS is MDSS’s admission that in 2017 it “sought to amend its state plan to put in place a new

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methodology” addressing pharmacy dispensing fees and “had numerous discussions over several years with CMS regarding the proposed changes.”  See MDSS Ex. 3, at 3. 

MDSS’s arguments concerning delay have “clearly misconstrued the burden” that the governing regulations place on a state participating in Medicaid.  See Cal., DAB No. 1007, at 9.  As the Board has explained:

It is the State, not [CMS], that has the primary responsibility to monitor the rates paid . . . to insure that the rates are consistent with the plan methodology.  The State is the administrator of its own program, making the payments . . . and implementing its plan on a day-to-day basis.  Once [CMS] approves the plan, it reasonably assumes that the State will be in full compliance with the terms.  While [CMS] staff in regional offices clearly have a role in assisting the states in reviewing amendments and giving advice to the states relating to proposed amendments, the State itself must initiate a change in its plan.

Id. (citations omitted).  MDSS, not CMS, is accountable for the consequences of any delay in initiating an amendment to the state plan terms.

We therefore reject MDSS’s claims of prejudicial delay by CMS, just as we have rejected comparable claims by other states.  See, e.g., Cal., DAB No. 3099, at 22-25 (rejecting claim that CMS prejudicially delayed issuing a disallowance for over a decade). 

5. MDSS has not established a factual or legal basis for recalculating the disallowance to exclude CHIP expenditures.

MDSS argues that the State Auditor questioned a sum that “appears to include amounts paid” by the state’s CHIP, but “[t]he audit does not specify what amounts are attributable to CHIP.”  MDSS Br. at 5 n.1 (citing MDSS Ex. 7, at 96-98).  MDSS asserts that CMS’s disallowance letter contained “no separate finding or explanation regarding CHIP expenditures or the CHIP state plan.”  Id. at 10.  MDSS contends, by a single footnote, that the disallowance letter does not “set forth any explanation for why those expenditures were not allowable, or why the State’s CHIP expenditures would be governed by a 1991 Settlement Agreement that predates the enactment of CHIP in 1997.”  Id. at 17 n.4.  “Thus,” MDSS asserts, “CMS has not met its initial burden for sustaining a disallowance of Title XXI funds” and “the disallowance should be remanded to remove any expenditures related to Title XXI.”  Id.

MDSS has not established any factual or legal basis for recalculating the disallowance to exclude CHIP expenditures.  “When a disallowance is supported by audit findings, the grantee has the burden of showing that the findings are legally or factually unjustified.”  Fla. Agency for Health Care Admin., DAB No. 2808, at 3 (2017).  “The Board need not

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address an issue when, as here, a party has had sufficient time, notice, and opportunity to present relevant evidence either to CMS or to the Board but has not done so.”  Cal., DAB No. 3099, at 27; see also Pa. Dep’t of Hum. Servs., DAB No. 2835, at 1 (2017), appeal voluntarily dismissed, No. 1:18-cv-00182 (M.D. Pa. Nov. 28, 2018).  MDSS has been on notice since at least CMS’s first demand letter, dated September 19, 2014, that “[t]he auditor combined the questioned costs attributable to Medicaid and CHIP into one amount in each audit report” and “[t]herefore, you will need to determine the amount of FFP to return for each program.”  MDSS Ex. 16, at 2 (emphasis added).  CMS repeated that notice in its second demand letter dated January 14, 2016.  MDSS Ex. 19, at 2.

After receiving ample notice, MDSS has cited only scant and inconclusive evidence concerning its CHIP expenditures.  That evidence consists entirely of two CMS letters and three pages of a State Auditor report, and none of that evidence establishes that any amount is not subject to disallowance.  MDSS Br. at 5 n.1, 8 and n.2, 9-10 (referencing, respectively, MDSS Ex. 7, at 96-98; MDSS Ex. 16; and MDSS Ex. 20).  As the cited audit report states, the CHIP is “administered by” MDSS.  MDSS Ex. 7, at 92, 95, 97-98.  It was MDSS that had both the means of quantifying, and the burden of proving, any claim of CHIP expenditures erroneously included in the disallowance, and MDSS has not met that burden.  See Me., DAB No. 2292, at 21 (“The State has the burden of persuasion concerning the allowability of its expenditures.  Ambiguous documentation is insufficient to meet that burden, especially when a party with that burden has access (as the State had) to evidence that might clarify the ambiguity but failed to present that evidence.”). 

Finally, the two cases that MDSS cites to support its CHIP-related claim stand for the undisputed proposition that CMS has the initial burden of articulating its rationale for a disallowance with sufficient clarity and detail to allow the State to defend itself.  MDSS Br. at 17 n.4 (citing Ariz., DAB No. 2824, and Me., DAB No. 2292).  As explained above, CMS met that burden.  “[O]nce CMS has explained the basis for a disallowance with sufficient clarity, the state agency bears the burden of substantiating that the FFP it claims is allowable” and “where, as here, the disallowance is based on audit results, the state agency must show that those findings are not justified.”  Ariz., DAB No. 2824, at 8. 

On the issue of CHIP payments, as on all other issues before us, MDSS has not met its burden.  The Board must sustain a disallowance where, as here, it is supported by the record evidence and consistent with applicable statutes and regulations.  See Me. Dep’t of Health & Hum. Servs., DAB No. 2931, at 4 (2019).

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Conclusion

We uphold CMS’s disallowance of FFP in the amount of $23,977,840.