GAB Decision 338
June 30, 1982 Vermont Agency of Human Services; Docket No. 81-128-VT-HC
Settle,Norval; Teitz,Alexander Ford, Cecilia
Introduction
Vermont (State of Appellant) appealed the disallowance by the Health
Care Financing Administration (Agency) of $472,925 claimed under Title
XIX of the Social Security Act (Medicaid) for expenditures incurred
prior to September 30, 1978. The Agency reduced the State's
supplemental Grant Award for the period July 1, 1981 through September
30, 1981 by this amount on grounds that no fiscal year 1981 (FY 81)
funds were available for the payment of pre-September 30, 1978 claims
which were not filed within one year of the date of expenditure. /1/
The parties dispute whether an overpayment to the State from FY 80
and 81 funds can be used to offset this claim; the Board concludes that
it cannot.
This decision is based on the written record which includes the
parties' briefs. Although appellant had the opportunity to also file a
reply brief, it dod not do so. Rather, appellant requested that the
Board proceed to decide the case on the record before it.
(2) The State's Argument that the Claimed Funds Should be Offset
Against an Overpayment
The disputed expenditures were included in a revised Quarterly
Statement of Expenditures for the quarter ended March 31, 1979. The
record indicated that the revised expenditure statement was submitted to
the Agency by letter dated September 14, 1979. /2/ (Attached to
Application for Review) The State admitted that all the expenditures
were incurred prior to September 30, 1978 and that "all or virtually
all" of the $472,925 was not claimed within one year of the date of
expenditure. In addition, the State conceded that the unavailability of
funds is a legitimate grounds for a disallowance. (Appellant's Brief
(App. Brief), pp.2-3) The State, nevertheless, argued that the entire
$472,925 should not have been disallowed because the State owed the
federal government $397,257 and that amount could be setoff against the
$472,925 which the federal government would have paid the State but for
the unavailability of funds due to restrictions in the appropriations
acts.
The State also argued that this is a legally valid claim since the
substantive law at Sec.306 of the Adoption Assistance and Child Welfare
Act of 1980, 42 USC 1320b-2, authorized payment of FFP for pre-October
1, 1979 expenditures claimed by January 1, 1981 (deadline extended by
Secretary to May 15, 1981, 46 Fed. Reg. 3528). /3/
Discussion
The State's position regarding setoff was that courts have recognized
it as a remedy when two parties owe money to each other and that it may
be used against the federal government. (See App. Brief, p.2) The State
asked the Board to use setoff here, thereby reducing the disallowance to
$93,668.
The Agency's position was that setoff is a mode of payment and,
therefore, the restrictions in the appropriations laws applied since
Congress did not provide that certain modes of payment (3) would be
permitted whereas others would not. The Agency noted further that the
relevant language clearly stated "no payments shall be made . . ."
(H.
R. 4389), and a well settled cannon of interpretation is that "clear and
unambiguous language will be held to mean what it expresses." (See
Volume A, Section 46.01 of Sutherland, Statutory Construction)
The overpayments which the State seeks to setoff occurred during the
period July 1, 1980 to June 30, 1981. /4/ (See App. Brief, pp.2-3) The
appropriations for FY 80 and 81, when the overpayment occurred, cannot
be used for claims for expenditures made by the State prior to September
30, 1978 which were not claimed within one year of expenditure. The
question then is whether these funds can be used to offset a claim for
which they could not be used directly.
Vermont simply argues that setoff is appropriate where two parties
are indebted to each other and that setoff is available against the
United States. General principles for offsetting debts do not provide a
basis for distinguishing setoff from direct payment out of these
appropriations and do not persuade us that the funds which the State
wants to use to setoff its claims can in fact be used for this purpose.
Under longstanding federal law, appropriated funds can only be spent for
purposes specified in the law of Congress appropriating the funds,
regardless of whether this is a narrower purpose than envisioned in the
substantive legislation. (See discussions in Illinois Department of
Public Aid, Decision No. 260, February 26, 1982; Tennessee Department
of Public Health, Decision No. 286, April 30, 1982.) Accordingly, the
Board must reject the setoff remedy as contravening the clear
specification of the law. The Board concludes that the appropriated
funds for FY 80 and FY 81 are not available by offset to cover
expenditures made prior to September 30, 1978 which were not claimed
within one year of the date of expenditure. /5/
(4) Availability of FY 82 Appropriations
The Agency noted that the continuing resolutions for FY 82 passed on
December 15, 1981 (P.L. 97-92) and March 31, 1982 (P.L. 97-161)
incorporated a section of the Agency's appropriations act for FY 82
which provided in part that:
no payment shall be made from this or any other appropriation to
reimburse State or local expenditures made prior to October 1, 1978, .
. . unless a request for reimbursement had been officially transmitted
to the Federal Government by the State within one year after the fiscal
year in which the expenditure occurred.
H.R. 4560, 97th Cong., 1st Sess. 38 (1981) (House passed version);
H.R. 4560, 97th Cong., 1st Sess. 45-46 (1981) (version deemed to pass
Senate)
The language of the FY 82 restriction is more liberal than the FY 80
and 81 restrictions in that it speaks in terms of one year from the end
of the fiscal year rather than one year from the date the expenditure
occurred. If the Vermont claim was in fact filed during FY 79, then to
the extent that FY 82 funds are available under P.L. 97-92 and 97-161,
they could be used to pay any FY 78 expenditures claimed. Should the
State wish to pursue this, it should proceed as indicated in footnote 5,
below.
(5) Conclusion
The Board finds that FY 80 and 81 funds are not available by offset
to cover expenditures made more than one year prior to the State's
claim. Accordingly, the disallowance is sustained except for the amount
of any reduction agreed to by the parties. /6/ The State may file a new
appeal with the Board if the Agency and the State cannot agree on the
amount of any reduction claimed by the State.
(6) I concur in the result upholding the disallowance. I do so,
despite the unfairness to the State, since I feel that such a ruling is
compelled by the specific language of the 1982 appropriations act. The
Board has no alternative since Congress espressly overrode section 306
of the Adoption Assistance and Child Welfare Act of 1980 and said that
"no payment shall be made from this or any other appropriation" (Pub.
L. 97-92, Pub. L. 97-161, continuing resolutions incorporating section
of FY 82 appropriations act).
I also join in the reasoning of the other members of the panel in
ruling against the attempt of the State to avoid a statutory bar of
payment by the use of setoff. If Congress has forbidden the use of
funds from a particular appropriation (or as in the 1982 act, from any
appropriation) unless a claim is filed within a prescribed time
limitation, then calling it a setoff cannot get around the statute. If
it cannot be paid, it does not matter whether payment is claimed under a
direct grant or by setting off the amount against an overpayment.
I do not agree with the panel members' conclusion that the
appropriated funds for FY 80 and FY 81 are not available to cover
expenditures made prior to September 30, 1978 which were not claimed
within one year of expenditure. Under my view that the FY 82
appropriations act controls, any consideration of FY 80 and 81
appropriations may be unnecessary, but I cannot agree with the panel's
reasoning.
Date of the Claim
The Agency bypasses the question of when the claim was filed. It
deals at length with the background of the 1980, 1981, and 1982
legislation on limitation of claims but does not even consider the
possibility that the claim was filed in 1979.It states on p. 1 of its
brief that the appeal of the State contested denial of reimbursement
"claimed in FY 1981" for Medicaid expenditures incurred prior to 1978.
The majority of the panel considers the record on this point:
. . . The record indicated that the revised expenditure statement was
submitted to the Agency by letter dated September 14, 1979. . . . (p.
2)
However, in n.5 the panel states:
. . . the parties did not address the question of when a claim for
these expenditures was considered filed and the record is insufficient
for us to decide this. . . .
(7) I see no reason why the Board cannot find that the claim was
considered filed on September 14, 1979, or within a few days thereafter,
or in any event before the end of FY 79 on September 30, 1979. There is
no contention by the Agency that the proper form was not used, or that
the claim was not properly submitted. Even if it was not "claimed"
when
mailed, it was certainly "claimed" when received.
It makes a substantial difference, because if the claim was filed in
FY 79, it may be payable for two separate reasons. As the majority
points out in n.5, there never was any restriction on FY 79 funds (aside
from the possible limitation in FY 82 on payment from "any other
appropriation"). In addition the FY 82 restriction would still allow
payment of expenditures made during FY 78 as the majority explains on p.
4. /*/
The FY 80 and 81 Restrictions
The panel concludes that the appropriations for FY 80 and FY 81
cannot be used for claims for expenditures made by the State prior to
September 30, 1978 which were not claimed within one year of
expenditure. (p. 3) In my opinion the language of section 306 overrides
the limitations presumably placed on FY 80 and 81 funds by the language
of the continuing resolutions.
I realize that there are vast differences between an authorization
act and an appropriation act. Of course an authorization alone for a
program without funds appropriated to implement it is meaningless, but
we have an entirely different situation here. Section 306 is not an
authorization, although it is referred to as "substantive" law. It
is a
limitation on filing and paying claims, with an important proviso. It
set up a two-year limitation on the filing of any future expenditure
claims by the states. But it did not retroactively cut off claims for
expenditures made prior to October 1, 1979. For those pre-79 claims
filed before enactment of section 306 (June 17, 1980) there was no
limitation; this would cover the claims here.
The important proviso in this section 306 was (c), which stated that:
(8) Notwithstanding any other provision of law, there shall be no
time limit for the filing or payment of such claims except as provided
in this section unless such other provision of law, in imposing such a
time limitation, specifically exempts such filing or payment from the
provision of this section. (Emphasis supplied)
The Agency's basis for not paying the State's claims is that the
continuing resolutions appropriating funds for FY 80 and 81 incorporated
by reference a provision of H.R. 4389, which never became law. This
provision limited payment for State expenditures made prior to September
30, 1978 to those for which a claim had been filed within one year of
the expenditure.
I do not believe that such a limitation overrides section 306. The
language of 306 is clear that, "notwithstanding any other provision of
law," there shall be no other time limits for filing claims, unless some
other limitation provision is put into a law which "specifically exempts
such filing or payment from the provisions of this section." What
Congress is saying to the states is fourfold:
(1) You will generally get two years to file claims and be paid for
expenditures after you make them;
(2) on old claims (pre-October 1979) which were not filed before June
17, 1980 you will get until January 1, 1981 to file claims and be paid;
(3) on pre-October 1979 claims which were filed before June 17, 1980
there is no limitation; and
(4) we won't change this law on you unless we pass another law which
specifically says it is changing the time limits in this law.
It is undisputed that the continuing resolutions for FY 80 and 81 did
not specifically refer to section 306. Therefore I do not see how they
could supersede its provisions. Calling section 306 a "substantive
law", which could not control a subsequent appropriations act, seems to
me to be a misreading of the Congressional intent. Section 306 had the
language it did so that it would not be casually overridden by any other
provision that came along on time limits. Only if Congress specifically
stated that they intended to supersede the provisions of section 306 was
any other provision to be effective.
I do not agree with the Agency that this case is governed by the
principles of State of Connecticut v. Schweiker, D.D.C., CA-81-2337, (9)
September 30, 1981 appeal pending. That case involves the limitation on
FY 81 funds placed by the continuing resolutions passed after section
306 became law on June 17, 1980. But the apparent limitations on FY 80
funds were placed by resolutions passed before section 306 went into
effect. Even if we should recognize that a later appropriation
resolution can override section 306, I am unable to see how a prior
appropriation resulotion could do this.
It is my opinion that there was no restriction preventing the payment
of these claims during FY 80. It is true that there were two continuing
resolutions passed during the first part of FY 80 which referred to H.R.
4389. They did not make the FY 80 appropriations subject to the
limitation provisions in H.R. 4389, while the continuing resolutions for
1981 purported to do so in specific language. Thus, the continuing
resolution enacted October 12, 1979 (Pub. L. 96-86), referred in section
101 (j) to appropriating amount necessary "at a rate of operations, and
to the extent and manner provided for" in H.R. 4389. The same language
appeared in the later continuing resolution of November 20, 1979 (Pub.
L. 96-123).
This is entirely different from the continuing resolutions for FY 81,
which specifically referred to the "conditions" in H.R. 4389. In Pub.
L. 96-369, the continuing resolution of October 1, 1980, the language is
for continuing appropriations:
. . . under the authority and conditions provided in applicable
appropriation Acts for the fiscal year 1980. . . .
Similar language appears in Pub. L. 96-536, extending funding to June
5, 1981 and in Pub. L. 97-12, extending funding to the end of FY 81.
It therefore appears that there were no limitations at all on states
filing retroactive claims until the passage of section 306. The Court
in Connecticut v. Schweiker, supra, certainly thought so:
. . . Until 1980, there were no time limits for filing reimbursement
claims. Congress set out to deal with the problem of delayed
reimbursement claims and eneacted the following provision: (setting out
sec. 306(b) and (c))
Memorandum Opinion, p. 2
There was no limitation on filing and paying such claims from June
17, 1980 through September 30, 1980, except for section 306, which
clearly permitted paying them. Even if the continuing
(10) resolutions during FY 80 should be considered as adopting the
limitation language of H.R. 4389, they would be invalidated by the later
language of section 306. The basis for the decision in Connecticut is
that the later continuing resolutions for FY 81 overrode the limitation
provisions of section 306. It would hardly be contended seriously that
the prior FY 80 resolutions, even if they incorporated a limitation,
were not overridden by the subsequent passage of section 306.
This Department of Health and Human Services clearly realized this,
for on January 15, 1981 it issued a final rule (46 Fed. Reg. 3527) which
stated it was implementing section 306. This made no reference whatever
to the continuing resolutions for FY 80 and FY 81 funds. It was not
until April 24, 1981 that the Department considered the effect of those
continuing resolutions, in a proposed rule to "clarify" the January
15
regulations (46 Fed. Reg. 23273). This rule was published in final form
on September 17, 1981 (46 Fed. Reg. 43134).
The significant part of this rule is that it "clarified" the January
15 rule because the Department believed that:
. . . any restiriction on the payment of claims which is enacted by
Congress after it enacted section 306 of Pub. L. 96-272 limits our
ability to make FFP available with respect to otherwise allowable State
expenditures. (46 Fed. Reg. 46135) (Emphasis supplied)
No contention is even made, in "clarifying" the January 15 rule
on
section 306, that restrictions on the payment of claims enacted by
Congress before the enactment of section 306 would be a valid limitation
on the payment of claims.
Therefore I believe that there was in any event no valid limitation
on the payment of appellant's claims out of FY 80 funds, once section
306 became law, at least until the 1982 appropriations act was
incorporated into the FY 82 continuing resolutions. Similarly, there
was no limitation on paying the claim out of FY 81 funds, since the 81
continuing resolutions did not in my opinion override section 306.
Equitable Considerations
I do feel it appropriate to mention the manifest injustice to a
state. It seems similar to the case of a person who is injured by the
negligence of another in a jurisdiction that has no statute of
limitations on a claim for such injury. Then the jurisdiction passes a
statute generally limiting actions for such an injury to two years, but
says there is no limitation for actions already
(11) begun. After one year has passed a new law is enacted which now
provides for a one-year limitation and purports to be retroactive, even
as to actions already filed. It is little consolation to tell the
injured person that he has a valid claim under "substantive law",
and
only his remedy has been taken away from him.
So, in situations such as this, the states operated on a general
recognition that there was no time limit on filing old claims. Of
course this needed to be changed, so the Agency could know that it was
not subject to unlimited claims for endless past years. Connecticut v.
Schweiker, supra, points out that one state there had a claim going back
to 1953. Leaving aside the possibility of a valid defense of laches,
there should be a limit. But it should not be put in place, relied on,
and then changed retroactively.
Alexander G. Teitz /1/ Federal funding of the Medicaid program for FY
81 is governed by the first and second joint resolutions for FY
81 (Pub. L. 96-369 and Pub. L. 96-536) and the Supplemental
Appropriations and Recission Act for 1981 (Pub. L. 97-12). Funds made
available by these laws are subject to the conditions in the applicable
appropriations acts for FY 80. The continuing resolutions for FY 80
(Pub. L. 96-86 and Pub. L. 96-123) appropriated funds "to the extent and
in the manner" provided for by H.R. 4389. Although H.R. 4389 was never
enacted into law, it was incorporated into the appropriations laws for
FY 80 and 81; it precluded the use of Medicaid funds to reimburse a
state's claim for any expenditure incurred prior to September 30, 1978,
unless the claim was filed within one year of the expenditure. /2/ The
Agency characterized the claims as FY 81 claims. (Brief of Respondent
In Support of Its Motion to Dismiss and In Response to the Appeal by
Vermont, April 20, 1982, p. 1) The record does not show the basis for
this characterization. /3/ The Agency does not assert that
Vermont's claim is not a substantively valid claim. However, the United
States District Court for the District of Columbia recently concluded
that FY 81 funds were not available to pay claims which were
substantively valid under 42 USC 1320b-2. State of Connecticut et al v.
Schweiker, decision filed September 30, 1981, Civil Action No. 81-2237,
appeal pending. /4/ The period July 1, 1980 through September
30, 1980 falls within FY 80 rather than FY 81. As is explained above in
footnote 1, however, the appropriation laws in effect for both FY 80 and
FY 81 incorporated the restriction in H.R. 4389 regarding pre-September
30, 1978 expenditures. /5/ The State admitted that "all or
virtually all" of the amount in dispute was not claimed within one year
of expenditure. In addition, the parties did not address the question
of when a claim for these expenditures was considered filed and the
record is insufficient for us to decide this. Nevertheless, if the
parties agree that a portion of the expenditures were claimed within one
year of the date of the expenditure, then FY 80 and 81 funds (if any
remain available) could be used to pay that portion of the State's
claim. Also, we are aware of no restriction on FY 79 funds (aside from
the restriction placed in FY 82 on "any appropriation"). If this claim
was actually filed during FY 79, it is unclear why payment was not made
from that year's funds. Should the State choose to pursue this matter,
it should submit information to the Agency within 30 days of the receipt
of this decision stating its basis for concluding that its claim was
filed before October 1, 1979 and showing when it made any contested
expenditures which it asserts should be included in reduction of the
amount disallowed. The State may return to the Board if it disagrees
with the Agency determination of the amount of any reduction.
/6/ The Agency responded to the State's appeal by filing a motion to
dismiss the appeal on grounds that the State had failed to state a claim
for which relief could be granted. Rather than ruling on the motion,
the Board has rendered this decision which concludes that the relief
requested by the State -- setoff -- cannot be granted. //* The
Agency in its brief (p. 14) summarized the 1982 act as prohibiting
payments from any appropriation for pre-October 1978 claims "unless the
claims were filed within one year of the expenditure." However, the
exact language on the next page of the brief shows it is one year after
the fiscal year of expenditure.
OCTOBER 22, 1983