DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State Department of Social Services
Docket No. 88-108
Decision No. 966
DATE: July 14, 1988
DECISION
The New York State Department of Social Services (State) appealed
the
disallowance by the Health Care Financing Administration (HCFA)
of
$79,653 in federal financial participation claimed under title
XIX
(Medicaid) of the Social Security Act (Act). The $79,653 was
claimed on
the State's quarterly statement of expenditures for the quarter
ended
December 1987. HCFA determined that the State had earned interest
in
this amount on federal Medicaid funds which the State either
withheld
from providers or collected from providers, third party health
insurers,
or windfall activities. HCFA found that the interest earned
by the
State was an applicable credit under Office of Management and
Budget
Circular A-87, Attachment A, (C)(1)(g) (which is made applicable to
the
Medicaid program by 45 C.F.R. 74.141). Since the State did
not reduce
its claim by the amount of the interest, HCFA concluded, there was
an
overpayment pursuant to section 1903(d)(2) of the Act.
The Board sustained similar disallowances in New York State Dept.
of
Social Services, DGAB No. 588 (1984) and in New York State Dept.
of
Social Services, DGAB No. 721 (1986), finding that the interest did
in
fact represent an applicable credit, and that the failure to credit
the
amount to HCFA gave rise to an overpayment which was
properly
disallowed. In addition, the Board concluded that the Medicaid
funds on
which interest was earned were not held "pending disbursement," so
that
the exception in the Intergovernmental Cooperation Act allowing
states
to retain interest on federal funds "pending disbursement" did
not
apply. In DGAB No. 721, the Board also distinguished a federal
district
court opinion which the State argued required reversal of DGAB No.
588.
In Perales v. U.S., 598 F. Supp. 19 (S.D. N.Y. 1984), aff'd, 751 F.2d
95
(2d Cir. 1984), the court found that the Department of
Agriculture's
Food and Nutrition Service (FNS) had no authority to impose
interest on
a debt for improperly issued food stamps owed to FNS by the State
agency
administering the Food Stamp Program. The Board stated that
the
question in DGAB No. 721 was not whether the federal agency could
assess
interest on a debt owed by the State, as in Perales, but whether
the
State owed a debt in the amount of the interest because the State
did
not reduce its reported expenditures to account for the interest as
an
applicable credit.
In its notice of appeal here, the State asserted that "[t]here are
no
material issues of fact or law which can distinguish the instant
case
from those presented in . . . DGAB Decision Nos. 588 and 721."
Letter
from Emil to Kaufman dated June 16, 1988, p. 2. The State
therefore
requested a summary decision upholding the disallowance based on
these
decisions. HCFA did not object to the issuance of such a
summary
decision.
Conclusion
Accordingly, based on the analysis in DGAB Nos. 588 and 721, which
we
incorporate by reference, we sustain the disallowance here in the
amount
of $79,653.
________________________ Donald
F.
Garrett
________________________
Alexander
G. Teitz
________________________ Judith
A.
Ballard Presiding Board Member