GAB Decision 673
July 19, 1985
New York State Department of Social Services;
Docket No. 85-97
Ballard, Judith A.; Teitz, Alexander G. Settle, Norval D. (John)
DECISION
Background.
In Decision No. 628, March 19, 1985, the Board resolved four of five
issues related to two disallowances by the Health Care Financing
Administration (HCFA) of claims for sums which New York sought to retain
from third party liability collections pursuant to sections 1903(p) and
1912 of the Social Security Act. The Board upheld HCFA on the remaining
issue provisionally, subject to an opportunity for New York to further
rebut the part of the disallowances taken for "computational errors."
The total amount in dispute related to this issue was $337,909.
Decision No. 628, pp. 14-17.
In response, New York conceded $47,946, and presented further material
in support of the claim that the rest of the disallowances for
"computational errors" should be allowed. New York's submission of
May
31, 1985. HCFA, after reviewing New York's submission, agreed that the
disallowance should be reduced by $242,376 (reflecting decreasing
adjustments already submitted by New York), but argued that the
remaining amount was correctly disallowed. HCFA's submission of July 8,
1985. New York chose not to reply further. Board's letter of July 17,
1985.
Thus, of the original $337,909 originally disallowed for "computational
errors," $290,322 (i.e., $47,946 conceded by New York and $242,376
conceded by HCFA) is no longer in dispute. $47,587 remains in dispute.
For the reasons discussed below, we uphold HCFA's disallowance of the
$47,587 remaining in dispute.
(2) Discussion.
I. "Federally non-participating" collections.
A basis for HCFA's position that there were "computational errors"
involved in New York's claims which remain in dispute was that New York
had included a claim for incentive payments based on funds recovered
under state programs or activities funded entirely by non-federal
dollars. HCFA's submission of July 8, 1985, p. 2; see also, in Docket
No. 84-228, Disallowance Letter, p. 3. It is not entirely clear what
sort of state programs were involved, but HCFA stated (and New York did
not dispute) that "the term 'federally non-participating' refers to a
State medical assistance program which is funded entirely by State
dollars and which is wholly separate from the 50% federally funded
Medicaid program." HCFA's submission of July 8, 1985, p. 2.
HCFA apparently classified this claim as a "computational error,"
rather
than separately elucidating a substantive basis for rejecting the claim,
because HCFA considered it unlikely that the amounts could have
reasonably been claimed other than in error; e.g., HCFA argued that "it
simply defies logic" to think that HCFA would pay an incentive from
Medicaid for the collection of non-Medicaid funds. Id., p. 3. /2/
Originally, New York did not present any substantive argument to the
Board that the State had a right to claim incentive funds under Medicaid
based on a percentage of non-federal collections; New York's argument
was solely related to what it felt was a lack of information necessary
to determine whether amounts in question were correctly calculated.
See, in Docket No. 84-228, New York's Brief, pp. 8-9; HCFA's Brief, pp.
19-20; New York's Reply Brief, p. 6. Stated another way, New York did
not originally respond to HCFA's briefly-stated assumption that this
kind of claim was substantively unallowable. Now, however, New York
argues as follows:
The argument that the amount must be rejected because the incentive
was claimed on collections which are Federally non-participating is
erroneous. This disagreement is based on two points. First, the
Federal regulation (42 CFR 433.153(b)) mandating this disbursement
states that "(t)he (3) incentive payment must equal 15 percent of the
amount collected" (emphasis added). No distinction is made as to
whether that amount must be participating or non-participating, and no
other authority dictating one way or another can be found. Secondly,
without additional information as to what these amounts represent, if it
were true that the incentive can only be claimed on collections which
are Federally participating, then absent this additional information the
State would maintain that the claims were made on correctly categorized
collections.
New York's submission of May 31, 1985, p. 2.
New York's second point is discussed separately below. First, we deal
with the issue of whether a state should receive an incentive payment
under Medicaid based on collections of non-Medicaid funds.
The incentive payment scheme enacted by Congress, when read as a whole,
makes it clear how incentive payments were meant to be determined.
Section 1912 states in pertinent 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 (i.e.,
the Medicaid plan), a State plan for Medical assistance shall -
(1) provide that, as a condition of eligibility for medical
assistance under the State plan to an individual who has the legal
capacity to execute an assignment for himself, the individual is
required -
(A) to assign the State (rights to medical care and payments);
(B) to cooperate with the State (in establishing paternity and
obtaining medical support); and
(2) provide for entering into cooperative arrangements . . . 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.
(b) Such part of any amount collected by the State under an
assignment made under the provisions of this section shall be retained
by the State as is necessary to (4) reimburse it for medical assistance
payments made on behalf of an individual with respect to whom such
assignment was executed (with appropriate reimbursement of the Federal
Government to the extent of its participation in the financing of such
medical assistance), and the remainder of such amount collected shall be
paid to such individual. (emphasis added)
Section 1903(p) operates in conjunction with section 1912. Section
1903(p)(1) states:
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.
(emphasis added)
Thus, the statute established that the pool of funds to which the
incentive payment percentage is applied may include only those amounts
collected under assignments pursuant to the State's Medicaid plan, and
the incentive payment is drawn only from the amounts representing the
federal share of Medicaid payments. The purpose of the scheme is
explicitly to help recoup federal medical payments under the State's
federally-funded Medicaid program. For further development of this
point based on legislative history, see HCFA's submission of July 8,
1985, pp. 2-3. As we discussed at some length in Decision No. 628, the
incentive provisions are rather narrow provisions, hedged with
conditions limiting incentive payments to a narrow portion of the range
of potential collections. The statute simply does not authorize a state
to charge Medicaid for fifteen percent of an unrestricted base pool of
collections, and the only fund available for paying incentive payments
is one which, by law, is derived from the federal share of collections
for which the incentive was provided; the statute cannot reasonably be
read to authorize a payment from this fund as an incentive for any
collection which does not specifically relate to the federally-funded
Medicaid program. The HCFA submission, to which New York chose not to
reply, stated:
If a political subdivision recovers support that would be payable to
a Medicaid beneficiary, the federal government (5) receives back the
federal share of state Medicaid expenditures made for that beneficiary
(less the 15% incentive). However, if a political subdivision recovers
support that would be payable to a beneficiary of a non-federally
participating medical assistance program, the federal government
receives no funds as a result of such recovery. It is ludicrous to
suggest that the federal government make an incentive payment for
certain recoveries when it will realize no savings when such recoveries
are made.
Id., p. 3.
The regulatory provision cited by New York (42 CFR 433.153(b)) provided
no substantial support for the State's position. It was read out of
context. Subpart D of Part 433 of Title 42, where the quoted provision
is found, implemented the requirements of sections 1903(p) and 1912 of
the Act generally as we have stated them above, and the lead-in
provision on incentive payments (section 433.151) clearly relates these
payments to the Medicaid plan and program.
On the basis of the record here, we must reject New York's position that
it may claim incentive payments for collections related solely to
state-funded programs. /3/
II. New York's need for "additional information."
As we noted above, New York made an alternative argument that "if it
were true that the incentive can only be claimed on collections which
are Federally participating" New York lacked sufficient information to
know "what these amounts represent" (referring apparently to the amounts
claimed and disallowed here), and "absent this additional information
the State would maintain that the claims were made on correctly
categorized collections." New York's submission of May 31, 1985, p. 2.
New York said that HCFA "has the burden to demonstrate that the claims
are one type or another, and this burden has not been met." Id.
(6) In our earlier decision, we discussed New York's claim there that
the State needed more information about the nature of the "computational
errors" portion of the disallowance. pp. 14-16. Although we noted that
the information apparently was available to the State, and that the
State had a duty to examine the information to clarify its point of view
on its own claim, we nonetheless gave New York the benefit of doubt by
remanding the case for further development. p. 15.
The Board has frequently recognized the principle that the state
recipient of federal funding has a fundamental obligation to justify its
claim for federal funding. See, e.g., New York State Department of
Social Services, Decision No. 520, February 29, 1984, and cases cited
therein.
Here, the record indicates that New York has been fully informed about
the details of how its own claim resulted in the categorization of the
funds in question here as "federally non-participating." The calculation
of the disallowance was based on documentation provided by New York.
HCFA presented an affidavit of a HCFA official and numerous documents
detailing how the amount in dispute was determined based on New York's
submissions. HCFA's submission of July 8, 1985, p. 3; attached
affidavit; exhibits A through D. New York chose not to respond.
Therefore, the record cannot support anything other than upholding the
disallowance on this basis.
Conclusion.
Based on the foregoing analysis, and the analysis in Decision No. 628,
we uphold the disallowance of the $47,587 remaining in dispute before
this Board. /2/ New York also claimed, and HCFA disallowed, an
incentive payment under Medicaid for collection of Federal
Medicare funds. We held for HCFA on this, concluding that the practice
was questionable and, in any event, specifically precluded by HCFA
regulations. Decision No. 628, p. 14. /3/ HCFA also presented
frther evidence and argument in support of the position briefly advanced
in the earlier case that the amount in question here also was properly
disallowed as a collection made by New York itself rather than a
sub-state agency. Id., and attached affidavit. New York did not
respond to this argument. In Decision No. 628, the Board upheld the
portion of the disallowance based specifically on this flaw. See pp.
2-7.
OCTOBER 04, 1985