Florida Department of Health and Rehabilitative Services, DAB No. 1096 (1989)

DEPARTMENTAL APPEALS BOARD

Department of Health and Human Services

SUBJECT: Florida Department DATE: September 8, 1989 of Health and
Rehabilitative Services Docket No. 89-31
Decision No. 1096

DECISION

The Florida Department of Health and Rehabilitative Services (Florida)
appealed a determination by the Health Care Financing Administration
(HCFA) to disallow $1,196,814 of federal financial participation (FFP)
claimed under Title XIX (Medicaid) of the Social Security Act (Act) for
home and community-based care (HCBC) services provided from April 1,
1986 through June 30, 1988. Under the Act, FFP was available for HCBC
services provided under a "waiver" of usual limitations on Medicaid
services. The dispute here involves two waivers limited to services
provided to a specified number of individuals (the waiver population).
The disallowed claims were for services provided to individuals Florida
had identified as generally eligible both for medical assistance and for
one of the two waiver programs. HCFA disallowed the claims because it
found that either: 1) services were provided to individuals whom Florida
only later identified as within the waiver population for the time
period the service was provided; or 2) services were provided to
individuals not identified as within the waiver population for that time
period.

We reverse the disallowance in part and uphold it in part. As we
discuss below, we find that neither the regulation nor HCFA policy
requires that Florida identify that an individual is within the waiver
program population (which HCFA termed "admitting" the individual into
the waiver) before services, eventually claimed under the waiver, are
provided, and that such a policy is not mandated by statute. Thus, we
reverse the disallowance on this issue. Since Florida did not contest
HCFA's findings that Florida had erroneously claimed some services to
individuals who were not, in fact, in the waiver populations during the
periods the services were furnished, we uphold the disallowance in
principle on this issue. We require Florida to calculate these
erroneous claims and make the appropriate adjustments, if it has not
already done so.

Statutory Background

Title XIX of the Act provides federal funding for "medical assistance"
provided to needy individuals under an approved state plan. Section
1903(a) of the Act. The term "medical assistance," as defined in
section 1905(a) of the Act, generally includes long-term care services
provided in institutions, but provides little coverage of long-term care
services in non-institutional settings.

In 1981, Congress added section 1915(c) to the Act, which authorized the
Secretary of HHS "by waiver" to permit a state plan to include as
medical assistance "part or all of the cost of home or community-based
services . . . to individuals with respect to whom there has been a
determination that but for the provision of such services the
individuals would require the level of care provided in a [nursing
facility] . . . ." Section 2176 of the Omnibus Budget Reconciliation
Act of 1981, Pub. L. 97-35. In 1986, Congress amended this language to
cover individuals who would otherwise require the level of care provided
in a hospital as well as in a nursing facility. Pub. L. 99-509, section
9411(a)(1)(A). Examples of services which could be included in a home
and community based care (HCBC) waiver include: case management
services, homemaker services, home health aide services, personal care
services, adult day health services, habilitation services, and respite
care. Section 1915(c)(4)(B).

The object of the waiver authority is to provide a less costly
alternative to institutional services. HCFA has interpreted its waiver
authority to permit it to place a ceiling on the number of individuals
who may be included in a waiver program, based on the estimated number
of individuals for whom HCBC services would be cost effective and for
whom institutional alternatives exist. See 42 C.F.R. 441.300 et seq.
In 1986, however, Congress specifically provided that, when the approved
waiver specifies a precise number limit on the number of individuals, a
state may substitute additional individuals for those who die or become
ineligible for services. Section 1915(c)(9).

Discussion

This case involves Florida's HCBC waiver programs for 1) aged and
disabled clients and for 2) developmentally disabled clients. The two
waiver programs were each approved with precise number limits on the
waiver populations, based on the State's ability to provide
institutional beds to care for waiver-eligible individuals. HCFA Brief,
p. 3; see 42 C.F.R. 441.303(f); cf. Preamble, 50 Fed. Reg. 10013, 10018
(March 13, 1985) (institutional bed capacity is a key element in
measuring need for and cost-effectiveness of proposed HCBC waiver
programs).

Florida provided HCBC services to a larger number of Medicaid eligible
(and waiver-eligible) individuals in these two categories than the
limited number of slots in the approved waiver program. There is no
dispute that Florida provided HCBC services to individuals who met
waiver eligibility guidelines, regardless of whether Florida would later
identify each individual as within the limited waiver population.
Florida claimed FFP, however, only in services provided to individuals
whom it identified as within a limited waiver population (although, as
we discuss below in part B, the State apparently claimed in error for
services to some individuals provided in years for which they were not
in the waiver population). Florida itself paid from non-federal funds
for HCBC services to the remaining individuals (who were both Medicaid
eligible and also eligible for inclusion in the waiver program), who
could not be served within the numerical limitations on the waiver
population.

HCFA did not contest that the claims were for services to individuals
who were both Medicaid eligible and met the waiver guidelines (apart
from numerical limitations). Below, we discuss first HCFA's
disallowance of claims for services provided to waiver-eligible
individuals who had not been identified as within the limited waiver
population at the time the service was provided, but were later
identified as within the waiver population for that time period. Then
we discuss HCFA's disallowance of claims for services provided to
individuals not within the waiver population for the period when the
service was provided (and not later identified as such).

A. Identification of the waiver population

During the period at issue, Florida identified at various times
throughout the waiver year those HCBC clients who would be within the
waiver population for that year. According to HCFA's review,
approximately 75 percent of the waiver population was identified within
2.5 months after the waiver year began, and the remaining 25 percent was
added subsequently, during or after the waiver year. Florida Exhibits
(Exs.) 1 and 2; HCFA Supplemental Exs. A and B. Florida claimed FFP in
services provided throughout the year to those recipients, not just in
those services provided after the recipient was added to the waiver
program list.

HCFA argued that Florida had erred by claiming costs for services
provided "prior to a client's admission into the Waiver." HCFA Brief,
p. 6. HCFA used as the date of admission into the waiver the date a
client's name was added to the master client list maintained by
Florida's Office of Management Systems and Services. Florida Ex. 2, p.
7, HCFA Supplemental Ex. A, p. 6. HCFA's position was primarily based
on the premise that Florida's practice violated the requirement, at 42
C.F.R. 447.45(f)(1), that states must conduct--

prepayment claims review consisting of--

(i) Verification that the recipient was included in
the eligibility file and that the provider was
authorized to furnish the service at the time the
service was furnished . . . .

42 C.F.R. 447.45 (emphasis added).

HCFA asserted that this regulation required that Florida must determine,
before a provider could be authorized to furnish a service that would be
paid for under the federal waiver program, that the individual had been
"admitted to the waiver" by a determination that the individual was
within the limited waiver population. HCFA explained that if no slot
was available in the waiver program, or if it was unknown whether a slot
was available, then the provider could not be authorized to furnish a
service which would be paid for by the Medicaid program. HCFA alleged
that Florida held slots open so that it could select only the most
expensive clients (based on a retrospective review) for admission to the
waiver.

We find that 42 C.F.R. 447.45(f) simply does not support HCFA's position
because the quoted language does not preclude a retroactive
classification of an individual's status which occurs prior to the time
the Medicaid program is billed for a service. The regulation is titled
"timely claims payment," and the focus of the regulation as a whole is
to require states to pay provider claims in a timely manner and to
review these claims to minimize erroneous payments. See 42 C.F.R.
447.45(a); 44 Fed. Reg. 30341 (May 25, 1979). The plain language of the
regulation requires that a state must determine that the claimed service
was provided to an eligible individual before paying a provider's claim
with Medicaid funds, but does not require that the state must make such
a determination before the service itself was provided. Nor does the
regulation by its terms preclude a state from claiming FFP in services
it later determines were covered by the state Medicaid program, after it
paid the providers with state funds.

Furthermore, to read 42 C.F.R. 447.45(f) to preclude retroactive
classification of an individual's status would be inconsistent with the
application of the regulation to basic Medicaid eligibility. The
regulation applies to all claims, not just waiver claims, and must be
examined in the context of both waiver participation and general
Medicaid eligibility. The Medicaid regulations permit a state to
determine an individual to be Medicaid eligible and to claim FFP for
services provided prior to the time Medicaid eligibility was determined
(even prior to the time the individual filed a Medicaid application),
consistent with the state Medicaid plan. See 42 C.F.R. 435.914. In
that case, a state would comply with the requirements of 42 C.F.R.
447.45(f) by determining, prior to paying Medicaid funds for the
provider's claim (but possibly subsequent to paying the provider with
state funds), that the claim was for covered services provided to an
individual after the effective date of that individual's Medicaid
eligibility, and that the provider was authorized to provide the
service.

HCFA alleged that its application of 42 C.F.R. 447.45(f) was required to
give meaning to the statutory provision at section 1915(c)(9) of the
Act. That section provides that when a waiver program contains a limit
on the number of individuals served, a state may substitute additional
individuals to replace those who die or become ineligible. HCFA argued
that this provision would be meaningless if a state could wait until the
end of the waiver year to select individuals within the waiver program
population because the state could then select only high cost
individuals who were alive and eligible throughout the waiver year.
HCFA Brief, pp. 8-9.

We see no connection between the regulation and the statutory
substitution provision; to the contrary, we find that Florida's actions
were consistent with the intent of the substitution provision. The
substitution provision was part of a Congressional effort to eliminate
administrative restrictions in excess of minimal cost-effectiveness
criteria and to enable states to provide Medicaid waiver services to the
maximum number of individuals for whom it would be cost-effective. See
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Pub. L.
99-272, section 9502. The provision enables a state to include an
individual (who would otherwise be cared for in an institutional
setting) in the waiver population and then, when this individual dies or
becomes ineligible, substitute another individual for the remaining
time. This option would be available whether or not a state selects the
waiver population retrospectively. (While a state could select only
individuals who were alive and eligible throughout the waiver year, it
need not.) Substitution for dead or ineligible waiver participants
would thus, in all likelihood, expand the number of individuals within
the waiver population regardless of when the population is selected.
This is consistent with the intent of the substitution provision. See
H.R. Conf. Rep. No. 453, 99th Cong., 1st Sess. (1985).

In sum, we find that 42 C.F.R. 447.45(f) concerns what a state must do
in the payment of provider claims to assure prompt payments while
minimizing erroneous payments. This regulation was implemented as part
of HCFA's fraud and abuse prevention efforts and does not prohibit a
state from determining that a cost properly paid with non-federal funds
falls within the Medicaid program. See section 1902(a)(37) of the Act.
In this circumstance, the regulation requires that states verify, before
claiming a payment to a provider under the Medicaid program (not before
the service itself was furnished), that recipients were eligible and the
services were covered. In this case, we find that Florida met the
requirements of 42 C.F.R. 447.45(f) because, prior to billing the
Medicaid program for the services, Florida had determined: 1) that the
HCBC services had been furnished by authorized providers to individuals
eligible to receive HCBC services, and 2) that the effective date from
which the individuals were included within the waiver population was
before the services were provided.

In the review reports, HCFA also cited 42 C.F.R. 440.180 as support for
the proposition that states must identify individuals as waiver
recipients before providing any covered waiver services. Florida Ex.
2, p. 8; HCFA Supplemental Ex. A, p. 7. This regulation defines the
HCBC services as services "furnished under a waiver" granted under the
federal provisions. The reviewers apparently read this to stand for
the proposition that the services must be identified as federal waiver
services at the time furnished. The wording of the regulation, however,
does not address this issue and does not preclude a state from
retroactively identifying services as having been furnished under a
waiver. The purpose of the phrase instead appears to be to ensure that
the services are within the scope of an approved waiver, as these
services were.

With respect to HCFA's assertion that Florida's practice permitted
Florida to include in the waiver population the most expensive clients,
we do not find any prohibition on this practice in statute, regulation,
or policy statement as long as the services met general
cost-effectiveness criteria contained in the statute and regulations.
While these authorities provide a basis for limitations on the number of
clients served under the waiver, and set overall cost boundaries, they
do not address the selection process and do not preclude retroactive
selection of waiver participants during or after the waiver year, as
long as the applicable criteria are met. In fact, as we discussed
above, in 1985 Congress lifted many administrative limitations which
were more restrictive than the statutory cost-effectiveness standards.
See COBRA, section 9502, supra.

While there may be policy reasons which would support a requirement that
states identify waiver recipients before any waiver services are
provided, no such requirement is reflected in statute or regulation, and
HCFA presented no evidence of any published HCFA policy statement
imposing such a requirement. Thus, we reverse the disallowance on this
issue.

B. Erroneous claims for individuals not within the waiver
population

The HCFA reviews found some claims, which were apparently caused by a
faulty edit in Florida's computer program, for individuals not within
the waiver population for a particular waiver year. Florida Ex. 1 and
Ex. 2, p. 10; HCFA Supplemental Ex. A, p. 9, and Ex. B. In commenting
on HCFA's review of the aged and disabled waiver, Florida did not
contest that such claims were erroneous and indicated that it would make
the appropriate adjustments on its quarterly expenditure reports.
Florida Ex. 5, p. 4 (responses to HCFA recommendations 3 and 4). While
it did not address these claims specifically in commenting on HCFA's
review of the developmentally disabled waiver, Florida did not contest
HCFA's findings of erroneous claims for individuals not within the
waiver population for the particular waiver year. Florida Ex. 6.

We return this issue to the parties for calculation of the amount of the
erroneous claims. If it has not already done so, Florida should
determine the amount and make the appropriate adjustments. Florida
should also submit sufficient data to explain its adjustment.

Conclusion

For the reasons discussed above, we reverse the disallowance in part
because we find no basis to require Florida to identify individuals as
within the waiver population before providing covered waiver services.
We require Florida to calculate claims for services to individuals not
within the waiver population, which Florida did not contest were
erroneous, and to make the appropriate adjustments.


Judith A. Ballard


Alexander G. Teitz


Cecilia Sparks Ford Presiding Board