New York State Department of Social Services, DAB No. 628 (1985)

GAB Decision 628

March 19, 1985

Ballard, Judith A.; Teitz, Alexander G. Settle, Norval D. (John)


The New York State Department of Social Services (State) appealed two
decisions of the Health Care Financing Administration (HCFA or Agency)
disallowing claims for sums which the State sought to retain, on behalf
of itself and certain county social services agencies, from third party
liability collections. HCFA disallowed $11,881,983 in Docket No.
84-228, and $1,032,130 in Docket No. 85-25. Except for one issue found
only in Docket No. 84-228, both cases raised identical issues, the
differences otherwise being only the time periods and sums covered by
the disallowances. The cases were consolidated for our review. Both
parties organized their arguments around five issues related to the
disallowance bases, and we have followed this organization below. Some
parts of New York's claim were covered by more than one disallowance
basis, so that the amounts shown for each of the five issues add up to
more than the total disallowances. For the reasons stated below, we
uphold the disallowance related to four of the five issues. We uphold
the fifth provisionally, subject to the right of the State to present
certain evidence, as discussed below, which might reduce the
disallowance taken for "computational errors." General background:
third party collection efforts. Since 1967, section 1902( a) (25) of the
Social Security Act has required a State Plan for medical assistance
under Medicaid to provide that an administering agency will take all
reasonable measures to determine the liability of third parties for
medical costs. The administering agency must treat this liability as a
resource based on which the agency will seek reimbursement from the
liable third party. In 1977, Congress added two new provisions related
to third party liability. The provisions are separated in the Social
Security Act, but appeared together as two paragraphs of section 11 of
the amending statute (Pub. L. 95-142). Section 11(a) added section
1903(p) to the Act, and 11(b) added section 1912.(2) Section 1912
provides that a State plan for medical assistance may require
individuals to assign rights to support and medical care to the State as
a condition of eligibility for aid; that the plan may provide for
cooperative arrangements with other agencies for enforcement and
collection; and that the State and HCFA have a right to reimbursement
from sums collected. Section 1903(p) says a "political subdivision of a
State" which implements a cooperative agreement under section 1912 is
entitled to fifteen percent of amounts collected, to be shared among the
agencies that assisted in the collection effort. This incentive
provision is at the heart of the dispute here. HCFA has regulations
implementing these provisions, found at 42 CFR Part 433, Subpart D. The
State disputed HCFA's interpretation of the provisions of law and
regulations here, and we provide more detail on particular provisions in
the discussion below. I.Whether the State may claim incentive payments
for its own collection efforts on behalf of counties. HCFA disallowed
$6,365,549 in Docket No. 84-228 and $661,375 in Docket No. 85-25 on the
grounds that these sums represented incentive amounts claimed for
collections made by the State itself, which HCFA determined was
impermissible. New York did not deny that the amounts in question
related to collections by the State. New York argued, however, that it
made the collections on behalf of county social service departments, and
credited the sums collected to those local agencies. Appellant's Brief,
p. 5; Appellant's Reply Brief, p. 2. New York submitted examples of a
form agreement by which commissioners of the county departments
designated the State as "the local district's agent for certain of these
third party resourcee recoveries, while certain of these recoveries have
been or may be, accomplished directly by the local district."
Appellant's Reply Brief, Exhibit 1. We conclude that HCFA's reading of
the Act is compelled by the plain wording of the Act, as well as its
underlying purposes, and we therefore uphold this portion of the
disallowance. The following are our reasons. We believe the State has
misconstrued the meaning of the incentive provision. The incentive
provision is specific and narrow. Under the broader mandate of section
1902 (a) (25) of the Act, both the State and local agencies have an
affirmative duty to take all reasonable measures to establish third
party liability and seek(3) reimbursement. This general duty predated
the incentive provisions of section 1903(p) by a decade. While section
1902(a) (25) contains a general requirement for enforcement and
collection efforts, section 1903(p) authorizes an incentive payment for
only a portion of the spectrum of potential enforcement and collection
actions. Section 1903 (p) (1) states as follows (emphasis added):

When a political subdivision of a State makes, for the State of which
it is a political subdivision, or one State makes, for another State,
the enforcement and collection of rights of support or payment assigned
under section 1912, pursuant to a cooperative arrangement under such
section (either within or outside of such State), there shall be paid to
such political subdivision or such other State from amounts which would
otherwise represent the Federal share of payments for medical assistance
provided to the eligible individuals on whose behalf such enforcement
and collection was made, an amount equal to 15 percent of any amount
collected which is attributable to such rights of support or payment.
Had Congress chosen to do so, it could easily have written a short,
simple provision authorizing an incentive payment from all collections.
Instead, Congress passed the provision quoted above, which specifically
authorizes incentive payments only for a political subdivision of a
state which takes enforcement and collection action, and for a state
when acting for another state, under a specified kind of cooperative
agreement. The incentives obviously reflect jurisdictional and
practical limitations on state Medicaid agencies' abilities to pursue
debtors across state lines and to motivate local agencies. The State's
response to the foregoing was that the State had been delegated the
local agencies' responsibilities, so that the State was acting for the
local agencies in doing what they otherwise would do (and for which they
otherwise would receive an incentive payment). But this approach does
not stand up to analysis. If the local agency has done no more than
delegate its responsibilities to the State, then for what is an
incentive provided? The local agency would be getting a windfall, and
the statute cannot reasonably be construed to provide windfalls from
Medicaid funds. Under the clear wording of the statute, the State
cannot (and acknowledged that it does not) keep the incentive payment
itself; it pays it to the local agencies. But the clear wording of
section 1903(p) also limits incentive payments to only the local agency
that "makes, for the State . . . the enforcement and collection of
rights of support(4) or payment . . . ." The obvious central thread of
section 1903(p) -- encouraging enforcement and collection activity
outside the State agency itself -- is not involved in New York's
situation, because the record does not show that the local agencies have
done anything more than sign a very general delegation to the State. /1/
The nature of the incentive provision clearly anticipates more than a
facade behind which the State exercises its previously-established
enforcement and collection responsibilities while it gives its local
agencies what may amount to a gift of several million dollars. /2/


It is also important to note the context within which Congress specified
an incentive payment opportunity would arise. Section 1903( p) (1) says
the payment relates to enforcement and collection "under section 1912,
pursuant to a cooperative arrangement under such section. . . ."
(emphasis added). Section 1912(a), in pertinent part, states as
follows:

For the purpose of assisting in the collection of medical support
payments and other payments for medical care owed to recipients of
medical assistance under the State plan approved under this title, a
State plan for medical assistance may --

(* * *

(2) provide for entering into cooperative arrangements (including
financial arrangements), with any appropriate(5) agency of any State
(including, with respect to the enforcement and collection of rights of
payment for medical care by or through a parent, with a State's agency
established or designated under section 454(3)(i.e., the State's child
and spousal support agency))and with appropriate courts and law
enforcement officials, to assist the agency or agencies administering
the State plan with respect to (A) the enforcement and collection of
rights to support or payment assigned under this section and (B) any
other matters of common concern. Section 1912 shows us two things
relevant at this point. First, it contains further evidence that the
incentive payment was meant to encourage local agencies "to assist the
agency or agencies administering the State plan," not vice versa.
Second, it indicates the kinds of agencies Congress intended the State
agency to contract with at the sub-State level (and therefore to be
eligible for the incentive payment under the language of section 1903(
p)): "appropriate courts and law enforcement officials." The State's
evidence of the existence of the required cooperative agreements
consists of examples of a form agreement between local Social Services
Districts and the New York State Department of Social Services.
Appellant's Reply Brief, Exhibit 1. There is no evidence, and not even
any argument, that these general Medicaid agencies are the kind of
enforcement or collection agencies contemplated in the statute. HCFA's
implementing regulations make this requirement clear, stating that
cooperative agreements "may be with the State title IV-D agency, any
other State agency, courts, law-enforcement officials, and other
states." 42 CFR 433.151. /3/

(6) Furthermore, the State's model "cooperative agreement" itself does
not meet applicable requirements. Aside from its own generality, it
clearly contemplates other more specific agreements to implement it.
Here is the entire body of the agreement:

Pursuant to section 11 of the Medicare-Medicaid Anti-Fraud and Abuse
Amendments of 1977 (Public Law 95-142) and subpart D of part 433 of
title 42 of the Code of Federal Regulations, the below-indicated local
Social Services District hereby confirms that it has and shall continue
to pursue and enforce third party medical support obligations and
payments for Medical Assistance recipients so as to qualify for receipt
of the 15% incentive provided for by such authorities. In this regard,
the New York State Department of Social Services has acted and may
continue to act as the local district's agent for certain of these third
part resource recoveries, while certain of these recoveries have been or
may be, accomplished directly by the local district. The requirements
contained within the Code of Federal Regulations for cooperative
agreements for third party collections have been and shall be
established by mutual agreement which may be varied from time to time.
(emphasis added). While the model agreement mentions cooperative
agreements which "have been" established, none were submitted by the
State; in direct response to HCFA's specific challenge on the lack of
proper cooperative agreements, the State offeredonly the quoted document
(which it said was widely used). Appellant's Reply Brief, pp. 2-3. 42
CFR 433.151 and 433.152 contain specific requirements for the content of
cooperative agreements which require more specific detail than the
State's example contains, e.g., terms for referral of cases, priorities
for collection activities, and details about collection and
distribution. Furthermore, in the "agreements" presented -- and
therefore in all the agreements using the model presented -- there is no
specification of any collection or enforcement entity other than the
local social services district. Thus, for all the foregoing reasons,
even if the relationship and mutual functions of the State and a county
agency were otherwise sufficient to justify payment of the incentive,
the claim still would be faulty for lack of an agreement meeting the
requirements of the regulations. One of the State's arguments
essentially was that counties formerly disbursed medical assistance
directly, but that under a State statute enacted in 1976 as part of the
State's implementation of the Medicaid Management Information System,
the State is now the disbursing official on behalf of county agencies,
and, similarly, is a mere agent of the county agencies in collection.
Although(7) the argument was offered primarily as part of the theme
rebutting the idea that the State benefitted from the incentive
payments, it also appeared to suggest the idea that it was unfair to
refuse the incentives in a system which was mandated by State law to
assure greater efficiency in managing Medicaid, "consistent with Federal
Law." Appellant's Brief, pp. 4, 5; see also, Appellant's Reply Brief,
p. 2. We do not agree. A more efficient Medicaid management system has
its own benefits, presumably including potentially substantial savings;
as we have already discussed, the incentive provisions of section
1903(p) were offered for the narrow purpose of giving the State a means
of motivating agencies it did not control to pursue debts offsetting
Medicaid expenditures. If the State's practice was to rely less on the
latter in the name of efficiency, then to that extent the need for the
incentive as Congress envisioned it, ceased. Furthermore, the terms of
the model cooperative agreement specify that county agencies actually
would continue some enforcement and collection efforts themselves
(although there is no evidence in the record about what they did). The
State also cited a prior Board decision as support for the proposition
that the incentive should be paid because New York's actions generally
were directed to enforcement and collection as contemplated by the Act.
Appellant's Reply Brief, p. 3. Board Decision No. 274, March 31, 1982,
also a New York case, upheld a disallowance of a claim for incentive
funding because the State plan did not, during the period in question
there, specify the assignment and cooperative arrangement provisions
required by section 1912 of the Act; the Board concluded that plan
implementation was a precondition to any eligibility for 1903(p)
incentive payments. The Board observed there that "(b)ut for the
absence of necessary State plan provisions, the record does not indicate
that the Agency would have refused the incentive . . ." and suggested
that HCFA consider whether some retroactive relief was available. Board
Decision No. 274, p. 6. Decision 274 simply did not deal with the issue
presented here. Unlike Decision 274, where we never reached the issue,
here we have concluded that, regardless of what the State plan might
have provided, the Act never authorized incentive payments for the
State's own enforcement and collection efforts on behalf of counties in
the first place. /4/

(8) II. Whether the claims represented permissible enforcement or
collection actions. In Docket No. 84-228, of the $6,365,549 disallowed
because it represented the State's own collection effort, $3,912,477
also was disallowed because HCFA found the claims did not represent
enforcement or collection activity within the meaning of section 1903(
p). $514,179 was similarly disallowed in Docket No. 85-25. $4,857,538
in claims for collections by Local County Departments of Social Services
(LCDSS or local agencies) was disallowed on the same basis in 84-228,
and $356,263 in 85-25. The costs claimed fell into ten categories of
recoveries, which are virtually identical for both cases. These ten
categories are briefly labeled in the two one-page Attachments to the
Disallowance Letters; for example, $2,509,577 was claimed and
disallowed in Docket No. 84-228 under one category described (in total)
as "Extraordinary income of SNF clients - Offset to cost of care." The
parties added little more detail in their briefs, discussing the ten
categories only briefly as examples; e.g., HCFA specifically discusses
the "extraordinary income" in one sentence which says the income "could
come from any source, not necessarily a third party who has an
obligation to pay . . . ." Respondent's Brief, p. 13. Below, we discuss
the general issues raised by the parties concerning this part of the
disallowance and we generally affirm the HCFA determination. Had the
issue before us in this part of the decision represented the only basis
for the disallowance, we might well have found that fairness required
further development of the record, because the sparsity of information
about the ten categories of recoveries might hide some claims allowable
under our determination here. However, given that all parts of the
disallowance here are also covered by other upheld HCFA determinations
/5,/, and that our determination here generally upholds the HCFA
position, further development of the record is unnecessary.

(9) Section 1903(p)(1) provides for an incentive payment for "the
enforcement and collection of rights of support or payment assigned
under section 1912, pursuant to a cooperative arrangement under such
section. . . ." The amount is "15 percent of any amount collected which
is attributable to such rights of support or payment." Section 1912 says
in part:

(a) for the purpose of assisting in the collection of medical support
payments and other payments for medical care owed to recipients of
medical assistance under the State plan approved under this title, a
State plan for medical assistance may --

(1) (require Medicaid recipients to assign rights or support or
medical care by others to the State, and cooperate in establishing
paternity and support rights); and

(2) provide for entering into cooperative arrangements . . .
(including, with respect to the enforcement and collection of rights of
payment for medical care by or through a parent, with (the support
enforcement agency) and with appropriate courts and law enforcement
officials, to assist the agency or agencies administering the State plan
with respect to (A) the enforcement and collection of rights to support
or payment assigned under this section and (B) any other matters of
common concern. To reduce the dispute here to manageable proportions,
let us first restate, in simple terms, the way sections 1902(a)(25),
1903(p) and 1912 work together: The State must try to discover if a
third party is liable for the medical assistance Medicaid paid, and seek
reimbursement. In addition, the State may require a person to assign to
the State his or her rights to support and third-party medical payments
(so he or she can be eligible for Medicaid). If there is an assignment,
the State can "contract" with the title IV-D agency, out-of-State
agencies, or sub-state agencies-- the latter typically courts or law
enforcement agencies--to pursue and collect on the assigned rights. All
three provisions are concerned with reimbursing Medicaid when a person
has other resources available; but each deals with the problem
differently: 1902(a)(25) is a general command to the State to always
seek recovery based on third-party liability; 1912 says the State(10)
may, if it chooses, establish a kind of subrogation as a condition of a
person's Medicaid eligibility; and 1903(p)(1) says the State can use
some Medicaid funds to lure agencies outside itself into helping active
pursuit of the State's subrogated rights under 1912. A key element in
the 1903(p)-1912 incentive payment scheme concerns the direct pursuit of
assigned individual rights to support and payment for medical care.
Thus, we conclude as a threshold matter that it is in error for the
State to argue that merely securing additional third-party resources
should be sufficient to qualify for the incentive payment. Appellant's
Brief, p. 6. For example, it is questionable whether an incentive
payment should be available for "Cyclical audits of SNF," "extraordinary
income of SNF clients," "recoveries from estates of clients," "refunds
of overpayments," "refunds from relatives," and "voluntary refunds."
These may involve resources which the State arguably should pursue (for
its own benefit as well as HCFA's); but none appear, at least from the
very brief label, to fit the Act's narrower criteria for the kind of
collections for which incentive payments are available. A state may not
merely claim fifteen percent of all its third-party collections;
Congress offered an incentive only for certain qualifying collections,
and the State is obligated to prove it meets the criteria for any
incentive money claimed. On the other hand, recoveries by a local
district attributable to "Identified Third party insurance coverage
after MA payment" might possibly include recoveries specific to
individuals whose rights have been assigned to the State and which
related to medical insurance coverage available to pay expenses which
Medicaid paid. This brings us to HCFA's main arguments on this issue:
that 1903(p) incentives are not available for activities which the State
or its localities already were required to engage in under section
1902(a)(25); and that "enforcement and collection" means more than just
"collection." Respondent's Brief, pp. 10, 11. We agree in principle
with HCFA, with certain caveats noted below. It is clear that Congress
found that HCFA needed authority in addition to section 1902( a)(25) of
the Act if HCFA was to effectively reach third-party resources, and that
the authorities in sections 1912 and 1903(p) expanded a state Medicaid
agency's reach both programmatically (in the sense that Congress
emphasized access to the child support enforcement process under Title
IV-D) and functionally (in the sense that the provisions extended a
state's reach through agencies such as courts and law enforcement
officials which a state Medicaid agency might not otherwise control).
We therefore agree with HCFA that Congress did not intend to relinquish
fifteen percent of Medicaid recoveries for mere business(11) as usual.
Pub. L. 95-142 was not a windfall: it was meant to produce greater
collections. /6/

Concerning the "enforcement/collection" argument, HCFA argued:

if "enforcement and collection" means anything, it certainly means
something other than just collection. Enforcement, even applying the
everyday connotation of the term, entails affirmative action steps . .
. enforcement must surely mean more than just sending a letter to an
insurance company asking that payment be made . . . Enforcement entails
forceful actions . . . . Respondent's Brief, pp. 11-12. New York
responded that HCFA's argument merely begged the question of what
"enforcement" was, and that the HCFA position was neither articulated in
any regulation nor supported by the Act. Focusing on the statute again,
we observe the following. Section 1912(a)(1)(A) provides for assignment
by a Medicaid-eligible person of rights to support and to payment for
medical care "from any third party." Section 1912(a)(2)(A) provides for
arrangements with appropriate agencies (including courts and law
enforcement officials) to help with "the enforcement and collection of
rights to support or payment assigned under this section. . . ."
Section 1912(a) states that the section is included in the law "for the
purpose of assisting in the collection of medical support payments and
other payments for medical care owed to recipients of medical assistance
. . . ." The incentive payments under section 1903( p)(1) relate to
"enforcement and collection of rights of support or payment assigned
under section 1912."(12) Similar to what we have already stated in a
slightly different context, some claim elements may be eliminated
without reaching the "enforcement" issue. While Congress stated that it
enacted these provisions to enhance collections, Congress also focused
its legislation on only a part of potential collection activity.
Congress called for individual assignments of rights to support and
payment for medical care from third parties, and offered incentive
payments for "enforcement and collection" of only such rights. Thus,
New York may not claim incentive payments for collections which do not
involve these elements; such collections may be fine things, may
coincidently fit with Congress' general desire for reimbursement and may
meet the needs of section 1902(a)(25), but they do not meet the criteria
that Congress established to justify incentive payments. But after
applying the statute as discussed above, there still may remain costs to
which HCFA's "enforcement" argument applies. For example, among the
categories of recoveries are those which resulted from "A & QC Screening
for MA recipients with Blue Cross Coverage," "Identified Third party
insurance coverage after MA payment," and "Refunds from Auto, Workman's
Comp Judgments." If we may assume for argument's sake that some of these
recoveries involved Medicaid recipients who had given their assignment
of rights to the State, and that the recovered funds represented a right
of the recipient to support or payment for medical care, there remains
HCFA's question whether there was "enforcement" in addition to
"collection," sufficient to justify an incentive payment. We conclude
that the relatively narrow scope of sections 1912 and 1903(p) require
one to agree in principle that incentive payments are available only for
activities which involve something in the way of affirmative enforcement
efforts, not mere passive collections which the State would have been
obligated to pursue anyway under section 1902(a)(25). We arrive at this
point mindful of the fact that HCFA has issued no regulation or
guideline on the matter, and that there may well be cases in a gray area
where it is impossible to determine whether the degree of effort is
sufficient without being arbitrary (in such cases, HCFA presumably would
keep in mind that the overall purpose of the provisions is, after all,
to foster collections). Short of that perilous gray area, however, we
think the statutory structure itself requires agreement with the
position that the special incentive program was not designed merely to
automatically funnel fifteen percent of all collections into local
social service agencies. As we have already noted several times,
sections 1912 and 1903(p) clearly deal only with a portion of the
potential range of recovery(13) activities. Congress also specifically
used the term "enforcement and collection" several times in 1912 and in
1903(p). Congress could have used the word "collection" by itself, but
did not. "Enforcement" means "compulsion," "forceable urging or
argument," or "the compelling of the fulfillment (as of a law or
order)." The root word "enforce" means "to give force to," "to urge with
energy," "constrain, compel," and "to put in force; cause to take
effect; (or) give effect to esp. with vigor. . . ." Webster's Third New
International Dictionary (unabridged), p. 751. The use of the word
suggests that Congress had in mind the extra effort like that involved
in the typical circumstances of obtaining a court order for support and
enforcing it through courts and with law enforcement officers. HCFA
notes legislative history accompanying passage of Pub. L. 95-142 that
uses as an example of what Congress was trying to reach, collecting from
absent parents who have failed to support their families. Respondent's
Brief, p. 11. While, as we have said, the Act does not show that
Congress intended to reward only these "new" efforts as such, we agree
with HCFA that Congress clearly intended that more be done than the
minimum that might be done under section 1902(a)(25), and that Congress
underlined the extra effort required for incentive payments both in
specifying the institutional structure it thought appropriate and in
specifying a requirement for affirmative enforcement action to effect
rights to third-party collections. /7/

New York also argued that to uphold the disallowance here would "thwart
the Congressional mandate of making Medicaid the payor of last resort."
Appellant's Brief, p. 7. Section 1902(a)(25) may make Medicaid the
"payor of last resort," but, as we have explained, that is only
indirectly related to the incentive payments provision, which reaches
only part of collection activities. (14)$%For the foregoing reasons, we
agree in principle with HCFA's position on Issue II (although we note
potential caveats on page 12 and in footnotes 6 and 7). Based on this,
and because the amounts involved in Issue II have been upheld on other
bases, we affirm this part of the disallowance. III. Whether a part of
the claim was properly disallowed as based on Medicare recoveries. HCFA
disallowed $1,702,756 of the State's claim in Docket No. 84-228 because
HCFA found the incentive payments were claimed based on recoveries of
Medicare, rather than Medicaid, funds. HCFA disallowed $99,168 in
Docket No. 85-25 on the same basis. HCFA also found the same defect in
the claim on behalf of the local agencies in 84-228, to the extent of
$445,927, and in 85-25, in the amount of $14,195. HCFA's regulations on
third party liability include a provision which states "(a)ssignment of
rights to benefits may not include assignment of rights to Medicare
benefits." 42 CFR 433.146(b). This provision concerns the
assignment-of-rights provision of section 1912 of the Act, which is a
predicate for incentive payments under section 1903(p). The State
argued that this provision was contrary to the intent of Congress.
Appellant's Brief, pp. 7-8; Appellant's Reply Brief, pp. 5-6. HCFA
argued that the regulation had a rational foundation explained in its
preamble. Respondent's Brief, pp. 17-19. The regulation precludes the
claim; there is no issue of interpretation. The regulation is
long-standing and has a reasonable basis, whether or not one accepts the
regulation as the only permissible interpretation of the Act. New York
would have us approve robbing Peter to pay Paul. Even if treating
Medicare funds as a third-party resource for Medicaid was reasonable, as
New York argues, there still would be the additional question of whether
it is reasonable to say Congress wanted the Medicaid program to spend
fifteen percent of sums recovered from Medicare for collection efforts.
In any event, this Board is specifically bound by the Department's
regulations. 45 CFR 16.14. IV. Computational errors. HCFA disallowed
$289,584 in Docket No. 84-228 and $48,325 in Docket No. 85-25 (total:
$337,909) for two types of so-called "computational" errors: one where
the incentive payment was calculated on collections which were federally
non-participating, and the other where claims for local agencies'
collections represented the full amount of the collection rather(15)
than fifteen percent of it. New York did not contest the substantive
unallowability of such incentive claims, but instead argued that it did
not possess enough information about how the amounts were determined.
Appellant's Brief, pp. 8-9; Appellant's Reply Brief, pp. 6-7. HCFA
responded that it had provided details of this kind to New York's Bureau
of Local Financial Operations. The available information included the
worksheets showing the errors. Respondent's Brief, p. 20. HCFA
submitted information to the Board and New York providing more detail on
the errors, and examples of worksheets showing the errors. Id.,
Exhibits 3-6. HCFA stated that "the existence of these errors is a
purely factual issue which can easily be verified by appellant's
inspection of the documentation." Id., p. 20. In its reply brief, New
York appeared to ignore this proffer of the details by HCFA, merely
mentioning that the examples of work sheets in the file--which HCFA
clearly submitted only as examples--were insufficient to adequately
inform appellant. Appellant's Reply Brief, p. 6. Appellant argued that
"if respondent's brief is the only written notice" of some of the errors
involved, "the State has not received adequate notice of the alleged
errors." Id. We would probably agree if the State was correct, but HCFA
has offered voluminous and detailed worksheet documentation, to be
provided in Albany. The State cannot refuse to look at this information
and then claim lack of notice. The State also said it had found errors
before the disallowance and had submitted decreasing adjustments not
reflected here. Id., p. 7. The State said State and HCFA personnel had
agreed to meet to discuss this. Id. It is clear that HCFA had an
obligation to inform the State adequately about the errors it found, but
the record here indicates that HCFA has been and is willing to do so in
detail. The State has a duty to cooperate by looking at the records
HCFA will produce in Albany. We therefore conclude that if the State is
to avoid summary upholding of the disallowance, the State must
immediately examine HCFA's evidence and, if the State disagrees with any
of the determinations, promptly advise the Board and HCFA of the
specific details of such disagreement. We will provide forty-five days
from the date New York's counsel receives this decision for the State to
return to the Board with any disagreement; if the State does not
return, the disallowance for computational errors is upheld to the
extent not already(16) reflected in relevant decreasing adjustments
submitted by the State as described in the Reply Brief. /8/

V. Claims for collections made prior to the effective date of the State
plan amendment. In Docket No. 84-228, $673,701 was disallowed because it
represented collections made prior to the effective date of the New York
State Plan Amendment implementing sections 1912 and 1903(p). There was
no such disallowance in Docket No. 85-25. In Board Decision No. 274,
also involving New York State, the Board upheld a disallowance of an
incentive payment from funds collected prior to the effective date of
the plan amendment. In its initial brief here, New York argued that the
case should be distinguished because, while the periods which the
recoveries involved were pre-plan, actual recovery did not occur until
after the plan. Appellant's Brief, pp. 9-10. HCFA answered that this
was simply incorrect, and that available documentation showed that the
actual collections pre-dated the effective date of the plan.
Respondent's Brief, pp. 21-22, and Exhibits 7 and 8. In its reply
brief, the State said, "If, as respondent contends, the amounts
disallowed on this ground were in fact claimed and recovered prior to
the April 1, 1980 New York State Plan Amendment, appellant concedes that
they would fall within the holding of Grant Appeals Board Decision No.
274." Appellant's Reply Brief, p. 7. Appellant then conclusorily stated
its disagreement with the prior decision. Id. Appellant has provided no
rebuttal whatsoever of HCFA's argument from its exhibits that the
collections pre-dated the plan, and our review of that evidence does not
reveal any basis for disagreeing with HCFA. Therefore, we uphold this
part of the disallowance on the bases stated in Board Decision No. 274,
which we incorporate here.(17) CONCLUSION Based on the foregoing
analyses, we uphold the disallowance for four of the five issues. For
Issue IV, we uphold the disallowance provisionally, subject to an
opportunity for the State to present certain further evidence and
argument as discussed under that issue. /1/ HCFA relied on legislative
history of section 1903(p) which buttresses the position that
the incentive provision was aimed at "localities securing collections on
behalf of the State. . . ." See Respondent's Brief, p. 7. HCFA also
points out that in the Aid to Families with Dependent Children program,
Congress provided an incentive similar to section 1903(p), but also
specified the availability of an incentive for a state's collections on
its own behalf. Id., p. 6; 42 U.S.C. Sec. 658(a). /2/ The
State included a short and conclusory sentence in its first brief to the
effect that local agencies "had aggressively pursued" collections.
Appellant's Brief, p. 5. The State offered no evidence to support this
brief allegation, and made no further mention of it in its reply brief,
thus leaving unchallenged HCFA's assertion that its examination of the
claims showed that identification and collection was performed by the
State. Respondent's Brief, p. 8, footnote. /3/ Section 1912(a)
(2) of the Act and section 433.151 of the regulations specify the
parties to the cooperative agreement, but section 1903(p) (1) of the Act
says payment can be made to "a political subdivision of a State," which,
at first glance, seems anomalous. However, both the Act (in section
1903(p) (2)) and regulations (in section 433.153) contemplate a process
of dividing the incentive payment among those who assisted in the
collection. Thus, it would be appropriate for a local social services
agency to receive an incentive payment which is then divided with courts
and law enforcement officials. This structure further emphasizes the
need for a more specific cooperative agreement than the one offered by
the State. /4/ There is no evidence in the record that the State
plan provided for the arrangement under discussion here. HCFA said the
plan did provide generally for cooperative agreements "with 'the State
title IV-D agency, any other state agency, courts, law enforcement
officials and other states. . . .'" Respondent's Brief, p. 15, and
Exhibit 1. HCFA noted that there was a cooperative agreement with the
State's IV-D agency but that the claims disallowed here were not related
to that agreement. Id., and Exhibit 2. /5/ $3,912,477 in Docket
No. 84-228 (and $514,179 in 85-25) of the sums involved here in Issue II
was also fully covered by our decision on Issue I, as these were claims
by the State for its activities on behalf of the LCDSS. With one
possible exception, noted under Issue IV, all the claims on behalf of
LCDSS are covered by our determination under Issue I on the
insufficiency of cooperative agreements, conclusions which are equally
applicable here (in fact, more so, because the State's model agreement
does not govern the relationships between LCDSS and other sub-state
entities). Other claims are covered in our determinations on Issues
III, IV and V below. /6/ This is not to say that Congress must have
intended incentive payments to be available only for "new"
efforts per se. HCFA has published no regulation or guideline
specifying such a requirement. While it is true that Congress had in
mind generally improving collections and specifically enhancing
collection efforts in the child support area, section 1912(a)(1)(A) also
contains additional general language about states acquiring rights to
"payment for medical care from any third party." Section 1912 appears to
have given states new organizational access to, and tools to use in,
"old" areas which the State might have pursued, but less efficiently and
effectively, prior to passage of Pub. L. 95-142. Thus, if something the
State agency previously could pursue under 1902(a)(25) by other
agencies, 1903(p) apparently gave the State a new incentive tool to use.
/7/ However, we would question HCFA's dismissal of "just sending a
letter to an insurance company asking that payment be made" as
insufficient "enforcement." Respondent's Brief, p. 12. If a local
agency otherwise properly implemented sections 1912 and 1903(p) to
pursue a Medicaid recipient's assigned right to medical payments,
identified a potential third-party payor, and successfully took
affirmative action to recover the payment by a demand letter, it does
not seem reasonable to say that the recovery is ineligible for incentive
treatment--at least in the absence of published regulations or guidance
saying so. On the face of the statute, this would seem to be a
reasonable enforcement action. The statute appears to allow more than
court-ordered recoveries to be eligible. /8/ In its
disallowance, HCFA also said these claims did not "generally" reflect
appropriate enforcement or collection activity (the matter discussed
under Issue II above). However, the record before us contains no
evidence concerning the bases for this determination in relation to the
particular costs involved in Issue IV. To give the State the benefit of
the doubt, we decided to provide the opportunity for further review
notwithstanding the additional basis for the disallowance; if the
State's claims in fact are covered by our adverse determinations under
Issue II or others, we urge the State to so concede and eliminate the
need for its own further effort in this forum.

JUNE 06, 1985