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CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT: North Dakota Department of Human Services

DATE: October 30, 2002

          
 

Docket No. A-01-95
Decision No. 1854
DECISION
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DECISION

The North Dakota Department of Human Services (North Dakota) appealed a determination of the Centers for Medicare & Medicaid Services (CMS) (1) disallowing $350,020 in federal financial participation (FFP) in Medicaid expenditures made during the period from October 1, 1998 through September 30, 2000. The disallowed expenditures reflected payments to health care providers that were claimed at an enhanced 100% rate of federal reimbursement instead of the State's normal federal medical assistance percentage (FMAP). The enhanced rate is available only for services received through Indian Health Service (IHS) facilities. North Dakota did not claim that the providers were IHS facilities, but relied on the fact that the services were provided to Native Americans who lived on or near reservations, who had sought services at IHS, and who were then referred by IHS to a provider participating in the contract care program administered by IHS. North Dakota argued that CMS policy guidance and payment practices led it to understand that these services were considered to be "received through an IHS facility" and therefore payments to the non-IHS provider were reimbursable at 100% FMAP. We reject North Dakota's position for the following reasons:

  • North Dakota's interpretation conflicted with longstanding CMS policy and practice.

  • North Dakota had actual notice of CMS policy that the enhanced rate was not available for payments to non-IHS providers, as evidenced by North Dakota's own longstanding objection to it.


  • When CMS expanded the definition of "IHS facility" to include certain tribally-operated facilities, CMS did not alter the policy of providing 100% FMAP only for payments made to IHS facilities.


  • CMS's policy reflects congressional intent to continue full federal funding of IHS facilities, while maintaining shared federal-state responsibility for other health care costs of Native American citizens.

  • CMS's communications and guidance since 1976 were consistent with the interpretation of its policy to preclude 100% FMAP for payments to non-IHS facilities that bill Medicaid for services to Medicaid-eligible Native Americans referred by IHS under the IHS contract care program.


  • Since CMS's policy has been the same for more than 20 years, the claim that the disallowance retroactively applied a novel policy is unfounded.

We therefore uphold the disallowance, as explained more fully below.

Legal Background

The Board has addressed the provisions at issue here in some detail in two prior decisions: Arizona Health Care Cost Containment, DAB No. 1779 (2001) (Arizona); and South Dakota Department of Social Services, DAB No. 1847 (2002) (South Dakota). We incorporate those discussions as if set out in this decision, and here present only a brief overview of the legal context of the dispute. The core of the dispute arises under section 1905(b) of the Social Security Act (Act), which was added by the Indian Health Care Improvement Act (IHCIA), Title IV, Public Law No. 94-437 (1976), and which states, in relevant part:

[T]he Federal medical assistance percentage shall be 100 per centum with respect to amounts expended as medical assistance for services which are received through an Indian Health Service facility whether operated by the Indian Health Service or a tribe or tribal organization . . . .

(Emphasis added.) Prior to the IHCIA, eligible Native Americans were entitled to Medicaid benefits on the same basis as other state citizens, but many Native Americans lived in remote locations with few community services except those provided by IHS facilities. Medicaid provided no payment to the IHS for services which Native Americans received at IHS facilities, with the effect that many Native Americans obtained no benefit from Medicaid despite their eligibility. The IHCIA permitted Medicaid payments to flow to IHS facilities to supplement (and not replace) direct appropriations so as to provide better health care resources to many Native Americans.

The Indian Self-Determination and Education Assistance Act, Public Law No. 93-638, provided for certain tribal health care facilities (known as 638 facilities) operated under lease agreements with IHS to be treated as IHS facilities. Section 150(l) of the Indian Self-Determination Act Amendments of 1994, Public Law No. 103-413, then required that the Secretary (through IHS) lease tribal facilities on request. In December 1996, CMS and IHS executed a Memorandum of Agreement to avoid the administrative necessity of executing multiple lease agreements by making the 100% rate directly available to facilities owned by tribes or tribal organizations that would have qualified as IHS facilities had the mandatory leases been issued. North Dakota Ex. 1, Att. 1-3 (1996 MOA).

The MOA set out as joint policy of IHS and HHS that Native Americans "are entitled to equal access to state, local, and Federal programs to which other citizens are entitled." 1996 MOA at 1. Hence, under an approved state medical assistance plan, "the state Medicaid agency is responsible for meeting the cost of services provided therein for all individuals, regardless of race or national origin, who apply and are found eligible." Id. At the same time, the 1996 MOA recognized a unique "government-to-government relationship" between the United States and the tribes which "consists of IHS-owned and operated health care facilities." Id.

The MOA noted that, prior to July 11, 1996, CMS had interpreted the term "IHS facility" in section 1905(b) of the Act to provide for 100% FMAP "only for payments made by the state for services rendered through an IHS-owned or leased facility," thus excluding those 638 facilities not owned or leased by IHS. Id. at 1. After the MOA, all 638 facilities were treated as IHS facilities and state payments for Medicaid-eligible services received through those facilities would be reimbursed with 100% federal funds. The MOA also stated that all facilities not included on an IHS list of 638 facilities would "continue to be reimbursed" at the regular FMAP rate.

In addition to providing care directly through IHS facilities, IHS also seeks to assist eligible Native Americans in accessing non-IHS resources. To this end, IHS operates a program permitting referrals to private providers providing health care services to Native Americans at negotiated payment rates which may not exceed Medicare allowable rates where applicable. See 51 Fed. Reg. 23,540 (June 30, 1986). Under the contract care program regulations, at 42 C.F.R. Part 36, the IHS may pay for contract care services in certain cases but only within the limits of IHS funding and priorities. See IHS Circular 91-7 (June 13, 1991). Contract care is a payor of last resort, and will pay for care only when all other sources, including Medicaid, for which the patient is eligible are unavailable. 42 C.F.R. § 36.61. IHS funding for any payments it makes under the contract care program is limited and distinct from the general funding for IHS to operate its own facilities. See, e.g., IHS Manual, Ch. 3, §§ 2-3.4 and 2-3.7. The payments involved here were made by North Dakota's Medicaid program to private providers in this contract care program.

In May 1997, an inquiry from the State of Arizona triggered the issuance of a memorandum from the Acting Director of the Medicaid Bureau to Region IX. North Dakota Ex. 1, Att. 1-2 (May 1997 Memorandum). The immediate question asked by Arizona about the availability of 100% FMAP for non-emergency transportation services was answered in the negative, since non-emergency transportation "is not considered to be an IHS (638) facility service and therefore does not qualify" for 100% funding. The May 1997 Memorandum continued as follows:

Our position on this issue is that in order for IHS services to qualify for 100% FMAP, the service must be (1) provided by IHS, or a contractual agent of an IHS or tribal facility; (2) considered as a 'facility service'; that is, a service that would be within the proper scope of services which can be claimed by that facility; and (3) claimed by the IHS facility as a service of that facility. Those services are referred to in regulation at 42 C.F.R. 440.10 ("Inpatient hospital services") and 42 C.F.R. 440.20 ("Outpatient hospital services and rural health facility services").

Id. at 2. The May 1997 Memorandum then stated that most 100% FMAP rate services would be provided on-site in an IHS facility but that-

[r]eferred services, provided through a contractual arrangement, can also be considered provided 'through an IHS facility' and reimbursed at the 100% FMAP rate as long as these are services that could be provided as a facility service, as referenced by regulation above. Any other type of services, such as non-emergency transportation, are not considered to be 'facility services', and therefore should be reimbursed [only at the normal FMAP].

Id. (2)

Factual Background

For many years, North Dakota sought 100% FMAP only for payments it made to IHS facilities (or 638 facilities considered as IHS facilities for these purposes). In October 1998, North Dakota began submitting broader claims for 100% FMAP for periods beginning from July 11, 1996 and continuing through September 2000. CMS Br. at 12; North Dakota Br. at 7. The disallowances here reflect the difference between the reimbursement at the 100% rate and reimbursement at North Dakota's regular FMAP.

North Dakota stated that the disallowed claims involved "health care services provided by a non-IHS provider under contract to the Secretary of Health and Human Services ("Secretary") to Native Americans who lived on or near reservations, who were eligible for services at an IHS facility, who had sought services at IHS and were then referred to the non-IHS contract provider." North Dakota Br. at 1-2.

Issues

Unlike South Dakota, North Dakota did not dispute that CMS had, since 1976, interpreted the phrase "received through an IHS facility" to mean that only services offered by and claimed by an IHS facility were eligible for the enhanced rate. (3) However, North Dakota asserted that the 1996 MOA signaled a new approach by CMS "to and understanding of the federal responsibility for Indian health care," in that CMS "had finally abolished its long-standing policy that services must be provided at an IHS owned or operated facility to be eligible" for 100% FMAP. According to North Dakota, CMS's prior policy had been erroneous and had never been officially applied outside the area of 638 facilities. North Dakota reasoned that the policy as to contract care services at non-IHS providers was not finalized until the disallowances were issued that were upheld in the Arizona case, and that the application of that policy to North Dakota is improperly retroactive.

ANALYSIS
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1. It is undisputed that CMS had a longstanding interpretation prior to 1997 that 100% FMAP was available only for services offered and billed by IHS facilities.

North Dakota acknowledged throughout its briefing that it was well aware of CMS's interpretation that only payments to IHS facilities for services provided through those facilities qualified for 100% federal reimbursement. See, e.g., North Dakota Br. at 3. North Dakota presented evidence that it had long disagreed with this interpretation and made repeated inquiries to CMS seeking a different interpretation, but this evidence reinforces the clarity with which North Dakota long understood that its position was unacceptable to CMS.

North Dakota articulated its position as follows:

North Dakota's interpretation of the language in the 1997 Memorandum was supported by North Dakota's own belief that health care services provided to Indians living on or near the reservation were a responsibility of the federal government. It was North Dakota's view during the 1980's when HCFA began interpreting some of the new law passed during the 1970's to improve health care for Native Americans, that HCFA had very little understanding of the federal relationship to Indians living on or near the reservation. Zentner Aff., [North Dakota Ex. 1], ¶ 10. In the early 1980's, when HCFA advised North Dakota that only Medicaid payments made directly to an IHS facility would be covered by 100% FFP, Thor Tangedahl, then-Executive Director, North Dakota Department of Human Services, strongly disagreed with HCFA's interpretation. Zentner Aff., ¶ 11. This interpretation from HCFA was in the context of 638 facilities. Id. North Dakota then questioned HCFA about services provided at a non-IHS contract provider under 42 U.S.C. § 2001(b) when the services had been requested by an IHS provider, but received little satisfaction. [North Dakota Exs. 11-14.]

North Dakota Br. at 6-7. Clearly, North Dakota understood that its interpretation was in conflict with that of CMS, even while continuing to prefer its own interpretation over that of CMS. Thus, even were we persuaded that North Dakota's interpretation offered a reasonable alternative view of the statutory authority, there can be no question in this case that North Dakota had actual notice of CMS's policy interpretation. Further, North Dakota recognized in its briefing that this Board has already concluded that CMS's interpretation is a reasonable one in accord with the statutory language, context, and legislative history. See Arizona passim.

North Dakota would have been especially hard-pressed to deny that it was long aware of CMS's interpretation of the statute. In August 1982, North Dakota queried CMS about whether 100% FMAP was available for services provided and billed by a clinic near a reservation which was a tribally owned and operated 638 facility. North Dakota Ex. 1, Att. 1-4. North Dakota argued that the clinic was "an extension of the reservation and by law the IHS must provide services" to Indians living in that area. North Dakota Ex. 1, Att. 1-4. CMS replied on September 13, 1982 that "the Trenton-Williston Clinic is not an IHS facility and as such does not fall under the purview" of the 100% FMAP provision. North Dakota Ex. 1, Att. 1-5. The distinction between the clinic and the nearby IHS service unit is that "one is owned by the IHS and the other is not." Id. This letter clearly informed North Dakota that the focus was on whether the payments were made to a facility of the IHS that provided the services, not on whether there was a contract between the facility and the IHS. (4) In fact, the current Director of North Dakota's Medicaid Program, David Zentner, flatly declared that in 1982, CMS advised North Dakota "that only Medicaid payments made directly to an IHS facility by the State Medicaid Program would be covered by 100% FFP." North Dakota Ex. 1, at ¶ 11. He further acknowledged that this understanding was shared by the Director serving in 1982, Thor Tangedahl, who "strongly disagreed" with CMS's interpretation. Id.

Nevertheless, North Dakota contended that the issuance of the 1996 MOA represented a reversal of CMS policy not only expanding 100% FMAP to all 638 facilities but implicitly accepting an obligation to fully federally fund health care for Native Americans living on or near reservations even when such care is provided by and billed by non-IHS facilities. North Dakota thus portrayed the situation of referrals by the IHS to non-IHS providers who had rate agreements with the IHS as having been left unaddressed by the pre-existing CMS policy and as having been finally brought into the scope of 100% FMAP by the 1996 MOA. We address this argument next.

2. The 1996 MOA expanded the meaning of "IHS facility" to encompass 638 facilities without actual IHS lease agreements, but neither that or the May 1997 Memorandum altered pre-existing policy on payments to non-IHS facilities.

North Dakota argued that CMS's policy "had only been applied in the context of 638 facilities" and not in relation to contract care services. On this basis, North Dakota asserted that -

HCFA's policy was formulated at the time HCFA learned that Arizona was claiming 100 percent FFP for those services and the policy was "announced" merely through the disallowance letters. HCFA has never formally issued a policy on the FFP match in this specific context.

North Dakota Br. at 7-8. To arrive at this formulation, North Dakota portrayed the 1996 MOA as CMS's belated arrival at an understanding that payments to all facilities providing health care to Native Americans living on or near reservations should be fully federally funded. The effect would be, according to North Dakota's reasoning, that the prior interpretation denying 100% federal funding for payments to 638 facilities (and supposed prior silence as to contract care facilities) was set aside by a new policy. Thus, North Dakota considered that the disallowances in this and other recent cases constituted an unannounced change from the new policy announced in the 1996 MOA and the May 1997 Memorandum. This argument is untenable.

North Dakota's own exhibits, as discussed below, make plain that a broad policy against 100% FMAP for payments made to non-IHS facilities had been in place and communicated for many years. North Dakota offered no evidence that any state submitted or CMS knowingly paid any claims for 100% FMAP inconsistent with this policy.

Furthermore, as we recounted in South Dakota, the 1996 MOA was distributed to all states with an accompanying cover letter, dated January 3, 1997. South Dakota at 11. North Dakota did not include the cover letter with the 1996 MOA in its exhibit, but did not deny that it received the general mailing to state Medicaid directors. The cover letter stated that IHS would provide a list of "its 638 facilities," and further advised states that "facilities providing Medicaid services that are not on this list . . . will continue to be reimbursed by [CMS] at your State's traditional FMAP rate." South Dakota at 11-12, citing Record Ex. 33, at 1681. Finally, the cover letter advised states to raise any questions with their assigned Regional Office representatives, a step which neither North Dakota or South Dakota claimed to have taken after receipt of the 1996 MOA.

To summarize, CMS twice revised its understanding of the scope of the term "IHS facility," but at no time intimated that state payments to providers that did not qualify as IHS facilities would be reimbursed at 100% FMAP. First, as noted above, CMS deferred to IHS in accepting either IHS ownership or lease as sufficient to establish status as an IHS facility. In 1996, in light of the new federal law mandating issuances of IHS leases to tribally owned and operated facilities on request, CMS determined to simply treat all 638 facilities consistently as "IHS facilities" without requiring pro forma leasing. 1996 MOA. The special case of all 638 facilities having effectively become IHS facilities hardly demonstrates that the core policy had changed as to non-IHS facilities. Having made it clear that 100% FMAP was available only for services offered and billed by IHS facilities, CMS had no reason to identify individual categories of facilities which were not IHS facilities, such as non-IHS providers that agreed to participate in the contract care negotiated rate program. North Dakota thus had no basis to believe that contract care facilities constituted an exception to the general rule that non-IHS facilities are ineligible for the 100% FMAP rate, even absent a direct statement by CMS about those particular non-IHS facilities.

In any case, North Dakota failed to explain what it meant by the assertion that CMS "applied" its longstanding policy only in the context of 638 facilities but not in the context of contract care providers. CMS has consistently denied that it knowingly paid any claims at 100% FMAP for payments by a state to any non-IHS facilities. North Dakota has not offered any contrary evidence or even suggested that CMS treated claims for services provided by non-IHS providers participating in the contract care system any differently from those of any other providers that are not IHS facilities. (5)

We conclude that CMS policy interpreting "through an IHS facility" to refer only to payments made to an IHS facility for services offered by the facility (whether by its own staff or under arrangement), and hence to bar eligibility for the 100% FMAP for payments to non-IHS facilities with rate agreements with IHS under the contract care program, was not altered by the 1976 MOA. This interpretation is consistent with case law and governing statutes, and has been in place since 1976 and through the present, as discussed further below.

3. The law governing the relationship between Indian tribes and the federal government does not compel 100% FMAP for North Dakota's claims.

A. Case law

North Dakota's claim that distinguishing providers participating in contract care from other non-IHS facilities is demanded by the special federal relationship to Indian health care is unsupported. North Dakota Br. at 8-15. North Dakota cited numerous court cases for the propositions that the tribes are independent political entities which retain sovereign powers and immunities, that Congress has exclusive and plenary powers to carry out federal treaty obligations to the tribes, and that the federal government has thereunder accepted a special, fiduciary relationship with Native American peoples. Id., and cases cited therein. While true, these propositions do not help North Dakota here. None of the cited cases establishes that states have no responsibilities to their Native American citizens or may discriminate against them in providing and financing Medicaid services. Moreover, while the cases establish that Native Americans remaining on or near reservations have a greater claim on federal trust responsibilities than those who do not, this does not imply that Native Americans living on or near reservations have a lesser claim to state programs than other citizens.

North Dakota quoted selectively from Justice Stevens's dissent in Rice v. Cavetano, 528 U.S. 495, 529-30 (2000), to the effect that "Indian Tribes are wards of the nation" and are "communities dependent on the United States" over which the Congress has "plenary power." North Dakota Br. at 8, 10. North Dakota ignored, however, the majority holding and its basis. The majority opinion of the Supreme Court struck down Hawaii's rule limiting to native Hawaiians the right to vote for trustees for the Office of Hawaiian Affairs (OHA) as violative of constitutional voting rights. After a lengthy survey of the unique history of Hawaii's peoples, the Court explained that decisions permitting "differential treatment of certain members of Indian tribes" based on tribal retention of certain self-governance rights, even if applicable to the Hawaiian situation, would not extend to delegating to the states authority to create a discriminatory voting scheme. Id. at 518-519. The Court distinguished favoring tribal members' employment in the federal Bureau of Indian Affairs and restricted voting in tribal elections as follows:

If a non-Indian lacks a right to vote in tribal elections, it is for the reason that such elections are the internal affair of a quasi sovereign. The OHA elections, by contrast, are the affair of the State of Hawaii. OHA is a state agency, established by the State Constitution, responsible for the administration of state laws and obligations.

Id. at 520. The Court articulated the rationale underlying the conclusion that a special federal trust relationship with native peoples cannot undergird state discrimination, as follows:

When the culture and way of life of a people are all but engulfed by a history beyond their control, their sense of loss may extend down through generations; and their dismay may be shared by many members of the larger community. As the State of Hawaii attempts to address these realities, it must, as always, seek the political consensus that begins with a sense of shared purpose. One of the necessary beginning points is this principle: The Constitution of the United States, too, has become the heritage of all the citizens of Hawaii.

Id. at 524.

North Dakota also referenced a series of Supreme Court cases defining the special protection owed by the federal government to Native American peoples and the fiduciary trust relationship imposed on the federal government in regard to Indian land. North Dakota Br. at 8-10. These decisions offer no support to North Dakota. The canon requiring that statutes benefitting Native Americans be construed liberally in their favor is as inapposite to the federal/state dispute here, as we explained in Arizona:

The present case . . . presents no issue of statutory construction in which Indian interests lie all on one side of the argument. The question here is not whether these services are eligible for full Medicaid funding, but only how the responsibility for the costs of the services should be divided between the state and federal governments. As the Ninth Circuit found in McNabb v. Bowen, 829 F.2d 787 (9th Cir. 1987), responsibility for health care services to Native Americans is not exclusively federal and IHS's role includes aiding Native Americans to take advantage of state and local programs. Id. at 794-95.

Arizona at 7.

In its reply brief, North Dakota directly stated that its argument "does not concern health care coverage for the Native Americans living on or near the reservations," which it bluntly described as "the responsibility of the Federal Government," but rather treats "a State's right's issue, not an individual Native American issue." North Dakota Reply Br. at 2. North Dakota reiterated as its position dating from before the Medicaid program that state responsibility for Native American health care extended only to "those Indians living in urban and other off-reservations areas and those who voluntarily seek health care outside of the reservation." Id. at 3. North Dakota contended that the McNabb court intended to refer only to such situations. Id. at 3-4. This position is not supported on a careful reading of McNabb, which holds the contrary of what North Dakota represents as the court's conclusion.

North Dakota described McNabb as establishing that IHS could not properly issue a regulation imposing an alternate resource rule, to the effect that it was payor of last resort, on a county that had the same rule. North Dakota Reply Br. at 3. North Dakota quoted the statement by the Court that "[w]e must reject administrative regulations which are inconsistent with the statutory mandate or that frustrate the policies which Congress sought to implement." Id., quoting McNabb, 829 F.2d at 791. North Dakota also quoted the court's reference to the IHCIA's declaration of the nation's "special responsibilities and legal obligation" to Native Americans. North Dakota Reply Br. at 3, quoting McNabb, 829 F.2d at 792. North Dakota failed to quote the remainder of the Court's analysis of the IHCIA, which led the Court to uphold the IHS's alternate resource rule as consistent with statutory intent, as follows:

While there are numerous declarations that federal responsibility for Indian health care is "primary," Congress and the Department of Health, Education, and Welfare (HEW) did not view federal responsibility as exclusive and preemptive of state responsibility. This congressional vision of shared responsibility was enunciated in the statement of the objectives of IHCIA set forth in the 1976 House Report: "To assist urban Indians both to gain access to those community health resources available to them as citizens and to provide primary health care services where those resources are inadequate or inaccessible." H. Rep. No. 94-1026, 94th Cong., 2d Sess. 18, reprinted in 1976 U.S. Code Cong. & Admin. News (USCAN) 2652, 2657 (emphasis added). Congress did not view the federal government as the exclusive provider of Indian health care benefits.

McNabb, 829 F.2d at 792 (emphasis in original). Thus, the distinction made was that the federal government took a primary role only where non-federal resources were absent or inaccessible. The court thus held that the IHS rule was valid (although the court required IHS to take an advocacy role on behalf of the Indian child involved in pressing to recover payment from the county which was denying it, rather than simply abandoning the child's care because county resources were theoretically or legally available but not accessible in fact). McNabb, 829 F.2d at 794-95.

A similar analysis supports CMS's treatment of the IHS contract care program. That program provides for IHS to cover costs of treatment at non-IHS providers only as a residual payor when all other sources, including Medicaid, have been exhausted, and then only where IHS funding permits. IHS acts as advocate in this program to provide increased access at reduced cost to non-IHS resources for Native Americans in IHS service areas. For North Dakota to deny its own obligation to participate in the costs of providing these non-IHS resources simply based on the fact that Native Americans access them with the aid of IHS would turn the court's rationale on its head. (6)

We also find misplaced North Dakota's reliance on McNabb to suggest that only through a regulation may CMS "impose a federal responsibility - health care of Indians living on the reservation - on the states." North Dakota Reply Br. at 4. Medicaid is a grant program, under which Congress provides funds to states to provide medical assistance to eligible individuals, subject to specified conditions. In undertaking a Medicaid program, North Dakota had notice that 100% FMAP was not available for all services to Native Americans who meet Medicaid eligibility requirements, but only for those "received through an IHS facility." Further, North Dakota had actual notice of the CMS policy that this means that the services must be services offered by and billed by the IHS facility. This policy interprets the statutory language regarding availability of federal funds. It does not "impose" any new responsibility on North Dakota.

B. Statutory language and congressional intent

North Dakota also turned to various congressional pronouncements in search of support for the premise that all health care to Native Americans living on or near reservations ought to be the sole responsibility of the federal government. North Dakota Br. at 9-14. The Board rejected similar arguments in the past, pointing out that congressional concern in establishing the 100% FMAP rate for Medicaid payments to the then newly-eligible IHS facilities was to avoid shifting to the states a portion of costs previously borne entirely by the federal government. Arizona at 14. Payments by states to non-IHS providers for Native American health care had never been an exclusively federal burden. Id. Therefore, the rationale for providing 100% reimbursement for payments to IHS facilities does not apply to payments to contract care program participants. (7)

North Dakota particularly emphasized language from a 1973 Senate Finance Committee report on proposed amendments to the Social Security Act which would increase the federal matching rate to 100% "with respect to services provided individuals who at any time during the year preceding the month in which the services were received were eligible for services under the Indian Health Services Program and resided on or adjacent to a Federal Indian Reservation." North Dakota Br. at 10-11, quoting S. Rep. 93-553, Social Security Amendments of 1973, at 60 (1973). While this legislative history might have supported the scheme North Dakota favors in its briefing (specifically, that full federal funding follows Native Americans living on or near reservations regardless of where they seek treatment), this amendment was rejected. Congress thus expressly chose not to adopt this approach. The Health Maintenance Organization Act of 1973, which did pass the same year, does not provide for 100% federal funding but rather authorizes the IHS contract care program that we have described above. This program creates no entitlement to IHS funding for private health care services. To the extent the cited legislative history has any relevance to interpreting the phrase "through an Indian Health Service facility" in section 1905(b), it militates against reading into the final legislative action a plan to underwrite all health care services provided by non-federal providers to reservation-based Native Americans. As the Board pointed out in regard to unadopted 1973 provisions, "Congress knew how to provide the 100% FMAP rate for all services to Native Americans if that was its intent." Arizona at 12. Hence, when in 1976, Congress passed the IHCIA, which plainly did not do so, the choice to limit the 100% FMAP to payments for services provided "through an IHS facility" must be taken as intentional and given meaningful effect.

North Dakota also contended that CMS misread section 402 of the IHCIA, which extended eligibility to receive Medicaid payments to IHS facilities "whether operated by such Service or by an Indian tribe or tribal organization," which North Dakota read as covering all health care facilities serving tribes. North Dakota Br. at 18, quoting Pub. L. No. 94-436, § 402 (Sept. 30, 1976). Thus, North Dakota characterized the effect of CMS's interpretation as follows:

[CMS], without direction from Congress, chose to look narrowly at the term "[a] facility of the Indian Health Services" and determined that the facility must be IHS owned to be eligible for the 100 percent FFP [federal financial participation]. Somewhere along the line, [CMS] did what Congress had never considered or authorized - it shifted the Federal trust responsibility for these Indians' health care to the states.

North Dakota Br. at 18.

The central problem with this suggestion is that North Dakota itself misreads section 402. Congress did provide for tribes to operate IHS-owned facilities, as North Dakota recognized. In that context, section 402 merely made clear that the new eligibility to claim Medicaid reimbursement granted by the IHCIA extended to those IHS facilities even when operated by tribes or tribal organizations. It did not address facilities not belonging to the IHS at all. The legislative history makes this intent plain. The House Report on the IHCIA states that the purpose of section 402, which dealt with Medicaid, is "the same as for section 401," which used the same language in relation to Medicare. See H. Rep. No. 94-1026, at 106 (1976), in CMS Ex. 1. (House Report). That purpose was spelled out in the House Report, as follows:

The purpose of this section [401] is to remove a current prohibition against Medicare reimbursement for services performed in IHS facilities. By removing this limitation, the IHS will be able to service Medicare Indian patients who previously had only been able to use their benefits in hospitals far removed from the reservation.

Id. (emphasis added). Clearly, sections 401 and 402 did not deal with services performed in non-IHS facilities, any more than did the later language providing for an enhanced FMAP rate for payments to 638 facilities. The prohibitions being removed kept IHS facilities from billing Medicaid and Medicare, and did not apply to non-IHS facilities. The overall thrust of the legislative history, as we discussed further in Arizona, was to remedy the situation that Native Americans, who had the same entitlement to Medicaid as other citizens, were benefitting much less because few non-IHS facilities were geographically available to the many Native Americans living on remote reservations and the facilities that were located there belonged to the IHS and as such did not qualify for Medicaid payments. See generally, Arizona at 9-12; House Report at 107-08. We find no support for North Dakota's position that the IHCIA undertook to fully federally fund all Medicaid services for which Native Americans had always been entitled. Instead, the intended effect of the IHCIA was to permit Native Americans to "steer" some Medicaid (and Medicare) funds to the facilities to which they were able to get, and to assure that this new stream of funding did not replace direct appropriations to IHS but rather served to improve the quality of the IHS facilities and services. In so doing, Congress avoided shifting the costs of operating IHS facilities to the states by making the 100% FMAP rate available for the IHS facility services. Nothing in the legislative history of the IHCIA indicates that Congress also intended to relieve states of their pre-existing responsibility to share in the costs of services offered by non-IHS Medicaid providers to needy state citizens, including Native Americans.

C. CMS policy statements

In light of this understanding of the legislative purposes, the examples of CMS policy statements since 1976 cited by North Dakota portray not a blind failure to adapt to congressional intent but rather a consistent response to statutory mandate. The changes in policy reflect a pragmatic fine-tuning as new laws placed greater emphasis on encouraging tribal operation of IHS facilities. Tellingly, in the nearly 30 years that CMS has interpreted the IHCIA to limit 100% federal funding to payments made to IHS facilities, Congress has never acted to overturn that interpretation. Such action might reasonably have been expected had Congress seen CMS as unilaterally and erroneously undermining the federal-tribal relationship, as North Dakota alleged. (8)

In addition to North Dakota's own 1982 correspondence with CMS discussed above, which North Dakota dealt with simply by calling CMS's reasoning illogical, North Dakota discussed a number of statements by CMS (or its predecessors), and interactions with CMS staff over the years, as demonstrating CMS's purported persistent error. North Dakota Br. at 17, 20-28, and exhibits cited therein. Collectively, these statements simply reinforce the admitted fact that CMS's policy against paying 100% FMAP for services not provided by IHS facilities was longstanding and well-known. To the extent that North Dakota also referenced these statements and interactions to buttress its claim that some ambiguity persisted about the application of this policy to non-IHS participants in contract care, we discuss them further in the next section.

4. CMS policy issuances did not suggest that services provided by non-IHS providers in the contract care program qualified for 100% FMAP.

North Dakota argued that prior to the May 1997 Memorandum, CMS had been "sending out conflicting signals" about payments to non-IHS facilities receiving referrals under the contract care program. North Dakota Br. at 20. To support this premise, North Dakota cited three documents it obtained during the discovery process in this case: North Dakota Exhibits 5, 6, and 7. None of these exhibits establishes North Dakota's claim.

A. 1976 SRS memorandum

In November 1976, shortly after passage of the IHCIA, the then-responsible agency, the Social and Rehabilitation Service (SRS), issued a summary of its implications for the SRS Regional Commissioners. The memorandum explains that the IHCIA -

provides for reimbursement of an IHS facility for medical assistance available under a Medicaid plan . . . .  It establishes 100 percent Federal matching for such expenditures, which are to revert to the Secretary to make necessary improvements in these facilities.

North Dakota Ex. 5, at 1 (emphasis added).

Plainly, from the beginning, the IHCIA was understood as providing for payments to IHS facilities which would thereby benefit from the new funding stream. Obviously, funds paid to non-IHS facilities would not "revert to the Secretary" or be used to make improvements in IHS facilities.

The SRS also emphasized that there could be no objection to IHS educating and encouraging Indians to apply for Medicaid benefits and that Indians "have free choice of and equal access to both programs and under Medicaid they have the additional guarantee of freedom of choice of qualified provider." Id. at 3. The memorandum ends with a statement that the relevant agencies "are continuing to consider the implications of the Act and to develop plans for its implementation" and will "transmit relevant information to the State when some further decisions have been made." Id. Contrary to North Dakota's implications, the memorandum itself had already made a clear statement of what facilities were to be included in the enhanced rate. The stated intention to continue consideration, implementation and communication does not make that statement tentative or uncertain.

B. 1981 program policy memorandum

Next, North Dakota cited a program policy memorandum, dated November 30, 1981 and directed to all Regions, regarding who is the "first dollar payor in cases where Indians receive services outside [IHS] facilities." North Dakota Ex. 6, at 1. Far from bolstering North Dakota's position, this document firmly indicates that Medicaid, not IHS, has always been the first dollar payor for Indians receiving services outside IHS facilities, as made clear in the following excerpts:

As State citizens, Indians are constitutionally entitled to State privileges and services in the same manner as any other State citizen. As Indians, they also are afforded the privilege of tribal membership and can seek medical care from [IHS] facilities. As a result of their unique position, Indians have freedom of choice which extends not only to providers, but also the system from which they elect to obtain their health care. The [IHS] is an available medical resource to Indians to utilize IHS services exclusively and, therefore, cannot seek reimbursement from the program since it provides medical services on a direct, in-kind basis . . . [Under the Supremacy Clause of the Constitution,] the [IHS] claim (totally Federal) prevails over the Medicaid claims (joint Federal/State) and Medicaid pays first.

In the case where an Indian receives services outside IHS facilities, reimbursement will be paid in the same manner as it is paid for any other Medicaid recipient. . . .

To clarify the relationship between Medicaid and the [IHS], regulations at 42 C.F.R. § 36.25(f) clearly set forth the residual nature of the IHS program (it is more residual than Medicaid which itself is normally payor of last resort.) This relationship between Medicaid and the IHS, where Medicaid is first dollar payor, was recognized by Congress when it enacted Section 1911 of the Social Security Act. It has long been the Department's position that Medicaid is the first dollar payor in cases of IHS serviced Indians and there is no consideration to change this policy presented.

North Dakota Ex. 6, at 1-2. North Dakota suggested that this policy addressed only an Indian's freedom of choice but not the situation where the Indian reached the non-IHS facility after an IHS referral, but the statement makes no such exception. See North Dakota at 21. North Dakota also suggested that the statement did not expressly state the reimbursement rate for "IHS serviced Indians" and that the rate was 100% FMAP. Id. This is mistaken. The statement is clear that payments made on behalf of "IHS serviced Indians" (that is, even those who use the IHS primarily) who choose to receive any services from a non-IHS provider are to be reimbursed in the same way as services by those facilities to non-Indians. The regulations cited in the statement are those for the contract care program, so it is clear that payments to non-IHS facilities participating in the contract care program were included among those to be reimbursed by Medicaid in the normal manner, not under the special IHS 100% FMAP.

These regulations made explicit that IHS payment for services received through contract care facilities is not authorized when "alternative resources" are available. 42 C.F.R. § 36.23(f). Such resources expressly include Medicaid benefits "for which the individual may be eligible." 42 C.F.R. § 36.21(a). Hence, as North Dakota acknowledged, contract care providers were required to bill Medicaid for services which they provided to Native Americans qualified for Medicaid, even if they received primary care from IHS. North Dakota Br. at 23; North Dakota Ex. 1, at ¶ 13.

C. 1981 letter to Region VIII

North Dakota also quoted selectively from a January 1981 letter from the CMS Office of Coverage Policy to the Region VIII Administrator, citing a statement that the "definition [of IHS facility] does not limit the meaning of IHS facilities to the inclusions listed, but incorporates all IHS facilities operated by the Indian Health Service, Indian tribes or tribal organizations, which meet the conditions and requirements for participation in the Medicaid program." North Dakota Br. at 24, quoting North Dakota Ex. 8. North Dakota assumed that this letter somehow sketched a broader definition than that applied by CMS. That assumption is not warranted.

To begin with, the language quoted in itself lends no support to North Dakota's position but merely incorporates the long-standing (even then) interpretation of IHS facility to include facilities owned by IHS but operated by tribes or tribal organizations. Furthermore, the question to which the letter responds is stated to be "whether IHS health centers and health stations . . . are reimbursed" at 100% FMAP, in light of the statute stating that an IHS facility is "a facility of the Indian Health Service (including a hospital, intermediate care facility or skilled nursing facility)." North Dakota Ex. 8. The letter affirms that IHS health centers and stations are eligible because the parenthetical in the statute is not an exclusive listing of the eligible types of IHS facilities. (9)

D. 1994-95 CMS-North Dakota correspondence

North Dakota next turned to an exchange of correspondence between its Director and CMS officials in 1994 and 1995. North Dakota Br. at 24-27. A 1994 "Regional Identical Letter" signed by Gary Wilks, Associate Regional Administrator, was issued to all state Medical Directors responding to questions raised about the "interrelationship" of IHS and CMS policies, including "What is meant by IHS facility?" and "When can a State claim 100% match?" North Dakota Ex. 10, at 1-2. (10) The explanations in the letter offered were once again consistent with the position CMS has taken throughout in regard to non-IHS facilities. Thus, an IHS facility is described as "an entity that is either owned or leased" by IHS, of which IHS "keeps a specific listing" and which included some facilities which, "although owned by IHS, may be operated by a tribe or tribal organization." Id. at 1. The letter states that -

[i]t is clear that only a "facility of the [IHS]" is eligible to receive Medicaid reimbursement [under Section 1911 of the Act]. . . . [I]t is equally clear that section 1911 of the Act provides no authority for Medicaid reimbursement for facilities of Indian tribes or tribal organizations, rather than IHS facilities. The statute does not refer to "an Indian health facility;" rather, Congress specifically chose wording requiring that the facility be a facility of the "Indian Health Service." Thus, while the term "Indian health facility" could be interpreted broadly to include any health facility that provides services to Indians, the inclusion of the term "Indian Health Services" by the Congress indicates that Congress meant that only IHS facilities were to benefit from the 100 percent FFP provisions.

Id. at 1-2. We find this reasoning persuasive still.

In discussing when states can claim the 100% FMAP, the letter states that the rate of reimbursement is "contingent upon the ownership of the facility providing the service." Id. at 2. The letter then explains, in terms very reminiscent of those in the May 1997 Memorandum which North Dakota sought to characterize as a dramatic reversal of pre-1997 CMS policy, that if "the operating body of the IHS-owned or leased facility . . . enters into contracts to achieve the performance of services offered by the facility, the services may be considered to have been provided through the facility and therefore qualify for the 100 percent rate." Id.

North Dakota responded to this letter with a further inquiry, dated March 17, 1994, asking about precisely what is at issue here:

We are concerned about what our responsibility for payment is when a recipient utilizes the IHS either because it was selected as the PCP [primary care physician], the recipient is not required to select a PCP or a recipient who has selected another PCP chooses to use the IHS and the IHS subsequently refers the recipient for medical services outside the IHS. If the referral is made by IHS does the [North Dakota] Department have any responsibility to pay for the services through the regular FMAP process? Since the services were requested by the IHS, would it be permissible for the IHS to bill the Department and receive 100 percent FFP for those services that were referred to outside medical providers? It is our belief that since the IHS is involved in directing the care of these individuals that the payment for these outside services rests with the IHS and not the Department of Human Services through the regular FMAP process.

North Dakota Ex. 11, at 1-2 (emphasis added).

In a letter dated April 1, 1994, Mr. Wilks communicated this inquiry to the Central Office along with his analysis that "the 100 percent match is only available to IHS facilities and facilities contracting with the IHS. Therefore, if the IHS and the non-IHS facility has [sic] a contract in place, then IHS could bill for the services provided in the non-IHS facility and receive 100 percent FFP." North Dakota Ex. 12. Mr. Wilks stated that North Dakota had disagreed with this approach of permitting 100% FMAP only for IHS facilities billing for services provided by IHS facilities through contracts with other providers because it was "cumbersome." Id. He asked Central Office to inform him whether there was "any flexibility" in applying the policy. Id.

North Dakota raised the same questions during an onsite visit that month and received a written response from Chuck Crosley, Chief of the Program Operations Branch of the Regional Office, dated July 8, 1994. North Dakota Ex. 13. The letter from CMS stated as follows:

Yes, the Medicaid Agency is required to pay qualified providers for medically necessary, Medicaid-covered services provided to Medicaid eligibles.

Native Americans are both Indians and citizens. As State citizens, Native Americans are constitutionally entitled to State privileges and services in the same manner as any other State citizens. . . .

The IHS is both a Medicaid provider (42 C.F.R. 431.110) and an available medical resource to Indians, however, IHS is NOT considered a liable third party. The State cannot require Native Americans to use IHS services exclusively, and, therefore, cannot seek reimbursement from the IHS program for Medicaid covered services.

Since, in this case, the provider of services is not an IHS facility, the State would be reimbursed at the regular FMAP rate, rather than at the 100% match described in section 1905(b) of the Social Security Act. . . . According to regulations at 42 C.F.R. 36.61, IHS is the payor of last resort; that is, IHS is more residual than Medicaid.

North Dakota Ex. 13, at 1-2 (emphasis added). North Dakota discounted this guidance and focused instead on the conclusion of the letter which indicated that the Regional Office was continuing to research the issues raised by North Dakota regarding IHS referrals and would provide further response in writing after their resolution. North Dakota Br. at 26. North Dakota's reliance on the conclusion is misplaced, however. The unanswered question was in effect whether the IHS facility could bill North Dakota for the referred services, thus making the 100% match available. North Dakota has not alleged that the disallowed amounts at issue here were billed by an IHS facility. Rather, the amounts were identified as being for payments to non-IHS facilities.

North Dakota also cited a letter from a similar official in Region VIII to the State of Montana which stated that 100% match was not available for services in a facility not owned or leased by the IHS but contracting with an IHS facility because "the IHS facility must be the entity that bills for the services provided." North Dakota Ex. 14. Again, North Dakota gave short shrift to the clear substantive guidance in the letter and emphasized instead the statement that there had been "much discussion" in CMS nationally about "whether the 100% match could be extended to the 93-638 facilities and the interpretation of 'through an IHS facility.'" Id.; North Dakota Br. at 26-27.

The latter communication evidences that the discussions within CMS related to the issue of extending the status of "IHS facility" to 638 facilities, which North Dakota has stressed are not the facilities that received the payments before us. As discussed above, the status of 638 facilities was resolved by the 1996 MOA. North Dakota did not demonstrate any uncertainty at CMS about the policy that payments to non-IHS providers for services provided to Native Americans are reimbursed at the state's regular FMAP, although it has certainly shown its own history of dissenting from the CMS policy. Even if CMS employees had indicated that ongoing consideration was being given to North Dakota's position, that would hardly constitute silence on the part of CMS as to the FMAP rate for payments to non-IHS facilities. As the various communications quoted above make clear, North Dakota had abundant notice of the standing policy whatever its hopes for changes to that policy.

E. Communications after May 1997 Memorandum

North Dakota referred to the presence of one of its staff persons, Dennis Wetzel, at a meeting held by South Dakota Medicaid staff with Aberdeen Area IHS staff on November 19, 1997. North Dakota Br. at 5. Mr. Wetzel declared that he followed up with the IHS staff to obtain a list of contract care providers in North and South Dakota. North Dakota Ex. 3, at ¶¶ 3-4. North Dakota did not make clear what import it wished the Board to give to these events although Mr. Wetzel asserted that "IHS agreed with South Dakota's interpretation of the availability of 100% FMAP." Id. at ¶ 3. (11) In our South Dakota decision, the Board discussed in depth the cooperation of IHS Aberdeen staff in South Dakota's initiative to identify contract care claims in detail and found that cooperation immaterial to determining the governing CMS policy or the proper interpretation of the May 1997 Memorandum. South Dakota at 17-19. This conclusion is even more compelling here, where the only cooperation alleged by IHS staff is forwarding to North Dakota a list of contract care facilities.

North Dakota next turned to 1999 e-mails between CMS Central Office and Region IX regarding Arizona's first claims for 100% FMAP for payments to non-IHS contract care facilities. (12) North Dakota Br. at 27; North Dakota Ex. 15. North Dakota argued that this correspondence showed a continuing "lack of policy direction regarding the Medicaid reimbursement match for contract services." North Dakota Br. at 27. North Dakota pointed to a statement from Ken Adams of Region IX that he wished "we had something in writing on this specific topic." North Dakota Ex. 15. He also reported comments by a Central Office staff person, Wanetah Pinder, that the Office of General Counsel had not responded in over a year to an inquiry from Region IX and "Arizona just got tired of waiting" and proceeded to submit the non-IHS payment claims for 100% FMAP. (13) Arizona made the same complaint as North Dakota had earlier that the requirement that only payments made to IHS facilities be claimed at 100% was "an unnecessary administrative burden." Id.

At most, this exhibit may show that Central Office was relatively dilatory in responding to one of the repeated efforts by a state to seek a change in the policy, and perhaps also a continued willingness by CMS to listen to state concerns about the policy. It cannot establish that CMS "was still attempting to develop a policy" which was never issued prior to the series of disallowances first addressed in Arizona. Cf. North Dakota Br. at 28-29. Openness to further thought and input is not tantamount to lack of an existing policy.

Finally, North Dakota alluded to discussions attended by several of its staff with two Region VIII CMS employees, Eva Lopez and DelRay Schieffer, who conducted an on-site review of North Dakota's Medicaid program on September 26-30, 1999, as supporting North Dakota's belief that its claims here qualified for 100% FMAP. North Dakota Br. at 5-6; see also North Dakota Exs. 1, at ¶ 9 (Zentner Affidavit); 2, at ¶¶ 6-8 (Wolf Affidavit); 4, at 9-12 and Atts. 4-2 and 4-3 (Erhardt Affidavit); and 3, at ¶¶ 5-8 (Wetzel Affidavit). North Dakota contended that DelRay Schieffer believed that IHS referrals to a provider with a contract with IHS qualified for 100% FMAP, while Eva Lopez thought it possible that any IHS referral would qualify even without a contract. North Dakota Br. at 6. We do not find this characterization accurate on the record and, in any case, would not consider the tentative statements of two lower-level Regional staff to form a reasonable basis for North Dakota to believe that CMS's longstanding and written policy guidance had been reversed. (14)

CMS submitted a declaration from Ms. Lopez in which she described her recollection of the visit. CMS Ex. 6, at ¶¶ 4-8. She stated that David Zentner showed her the May 1997 Memorandum, with the sentence on referred services though contractual arrangement highlighted and asked her if "this language could be interpreted to permit reimbursement at the 100 percent FMAP rate for services provided in a non-IHS facility upon referral from IHS and under contract with IHS." Id. at ¶¶ 6-7. She stated that she agreed that such a interpretation might be possible, but also that she "stressed that any interpretation [of the May 1997 Memorandum] must also consider the impact of the applicable rules and regulations." Id. at ¶ 7. Her contemporaneous trip report gave the following account:

Our major area of review was the [IHS] area. Through discussions with Dave Zentner and Dennis Wetzel, we concluded that IHS referrals are only paid at the 100% level if the service is provided at an IHS contract facility. If the service is not provided by an IHS contractor, the service is paid at the Medicaid level of payment. Even if the recipient has been referred to a non-IHS provider by an IHS contractor, the payment is still at the Medicaid level of reimbursement. After review of back-up documentation on IHS/HCFA regulations, Eva felt that the method of payment should be at the 100% level when an IHS facility refers patients to non-IHS provider. Del Ray felt that the referred providers did not meet the IHS regulations. This area will be investigated for proper procedure.

North Dakota Ex. 2, Att. 2-3 at 1.

This same visit and report were discussed in South Dakota, where the Board found that Ms. Lopez's notes were less than a clear endorsement of the sort of broader scope North Dakota now seeks, since the phrase "an IHS contractor" can reasonably be read to refer to an IHS facility providing a service by "contractual arrangement." South Dakota at 22-23. A narrow reading would be consistent with the language in the May 1997 Memorandum discussed in footnote 2 above, concerning IHS facility services provided under arrangement with a contractual agent for which the IHS facility itself bills. An IHS contractor in that sense would not include a non-IHS provider participating in the contract care program and accepting a patient referral for which it then bills Medicaid for the services it has provided. Whatever confusion Ms. Lopez may have had, or State officials may have read into her statements, can hardly serve to override CMS policy of which North Dakota had ample notice, as we have set out.

5. The disallowances here are not improperly retroactive.

Finally, North Dakota offered the same argument pressed by South Dakota, that CMS first articulated its policy in the disallowance letters sent to several states after North Dakota's payments at issue here and is therefore improperly applying it retroactively. North Dakota Br. at 29-30. Both states relied on Hawaii Dept. of Social Services and Housing, DAB No. 779 (1986), to argue that CMS is not permitted to articulate a policy in a deferral or disallowance letter and then apply it retroactively to recover payments made to a state based on that state's contrary, but reasonable, interpretation of the law.

The internal coherence of North Dakota's argument on this point is weakened by its admission that CMS's policy long barred 100% FMAP for payments to non-IHS providers. North Dakota asserted, as discussed above, that CMS underwent a series of epiphanies in which it awoke first to an obligation to fully federally fund 638 facilities (via the 1996 MOA) and then to a similar obligation with regard to contract care facilities (via the May 1997 Memorandum). North Dakota Br. at 15. North Dakota, having read the May 1997 Memorandum as authorizing the kind of claims at issue here, viewed the disallowances as a reversion to a prior, poorly-articulated policy. For the reasons discussed fully in the preceding section, we find no merit to this characterization of events. Hence, the issue of whether a policy may be announced in a disallowance is not presented here.

Conclusion

For the reasons explained above, we uphold the disallowance in full.

JUDGE
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Donald F. Garrett

Marc R. Hillson

Judith A. Ballard
Presiding Board Member

FOOTNOTES
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1. The Health Care Financing Administration (HCFA) has been renamed the Centers for Medicare & Medicaid Services (CMS). See 66 Fed. Reg. 35,437 (July 5, 2001). Since "HCFA" was used to refer to the agency at the time that many of the actions at issue here were taken, some references from documents use the old acronym.

2. In its prior decisions in Arizona and South Dakota, the Board analyzed the paragraph on "referred services" in considerable detail. South Dakota at 7-8, 13-15; Arizona at 19-21. In essence, the Board concluded that the phrase "referred services, provided through a contractual arrangement" relates to the Medicare concept of "under arrangement," by which a facility may use a contractual agent to perform services which it offers (and bills for). Thus, the contrast is between on-site IHS facility services and IHS facility services provided through an off-site agent. The Board rejected attempts to read into the (perhaps inartful) phrasing an intention to reverse years of policy and practice to expand 100% FMAP to payments to private providers unrelated to IHS simply based on a referral.

3. A factual distinction appears to exist as well in regard to the scope of services being claimed by the two states. Unlike South Dakota, North Dakota did not assert that the payments at issue were made only to non-IHS facilities that had contracts with specific IHS facilities under arrangements with which they received individual referrals. See North Dakota Br. at 1. North Dakota's arguments rested on the premise that Medicaid payments to any provider participating in the contract care program for services provided to Native Americans eligible for IHS services could be claimed at 100% FMAP.

4. The specific opinion of the Office of General Counsel (OGC) communicated through this letter was altered the next year when the OGC learned that the IHS considered as IHS facilities both those which it owned and those which it leased. North Dakota Ex. 9. Hence, OGC expanded its definition of IHS facilities to include both categories and sent lists of all such facilities to the CMS Regional Office to use in determining what payments were eligible for 100% FMAP. Id. The emphasis remained on payments made to IHS facilities, rather than payments to non-IHS facilities which received referrals from or contracted with IHS to provide care to Medicaid-eligible Native Americans. North Dakota understood this since it agreed that at least from 1976 to 1996, CMS interpreted the law to provide "that only Medicaid payments made to IHS-owned facilities could be reimbursed at the 100 percent match." North Dakota Br. at 3.

5. This consistent treatment extended to 638 facilities that were not owned or leased by the IHS, until the decision to treat them as IHS facilities in response to the change in federal law already discussed.

6. The Ninth Circuit has articulated its position further in an unpublished opinion in which it addressed claims in the nature of states' rights arguments put forward by Arizona. Arizona asserted that its legislative leaders had been assured by CMS that after Arizona chose to participate in Medicaid, "IHS would remain the primary health care provider on the reservations, and that [Arizona's Medicaid agency] would be merely a conduit to pass funds" from CMS to IHS. Arizona v. United States, 857 F.2d 1479, at 2 (9th Cir. 1988) (unpublished decision; table at cite, text in WESTLAW, NO. 87-2523) . Arizona objected to the refusal of IHS to pay for services to Indians on reservations received from non-IHS providers and its direction to Indians on reservations who were otherwise eligible for Medicaid to apply for benefits. The court reiterated its conclusion in McNabb that the IHS alternate resource rule was valid and its inclusion of state and local programs as resources to which the federal program was residual was consistent with congressional intent and with the trust doctrine. Id. at 4-5. The court went on to expressly reject as unfounded the attempt to "distinguish between urban and on or near reservation Indians." Id. at 5. We find North Dakota's parallel attempt here equally ill-considered.

7. By contrast, 683 facilities operated by tribes but leased by IHS were receiving full federal funding prior to the 1996 MOA. Hence, once new legislation mandated granting IHS leases upon request, the rationale applied to providing 100% funding for payments to such facilities without the formality of leaseback arrangements.

8. Certainly, no rebuke of this kind can be read into section 210 of the Indian Self-Determination and Education Act, Public Law No. 100-472 (1988). The provision emphasized by North Dakota simply states that "[n]othing in this Act shall be construed as . . . authorizing or requiring the termination of any existing trust responsibility of the United States with respect to Indian People." See North Dakota Br. at 18. The language plainly speaks to the intended effect of the 1988 Act and implies no disapproval or repudiation of CMS's already well-established interpretation of the 1976 IHCIA.

9. North Dakota suggested that CMS acted in some way inconsistent with this letter when in February 1993 it advised that 100% FMAP covers services from facilities "either owned or leased by IHS," because that statement "appears to leave out tribally owned or operated facilities" unlike the 1981 letter. North Dakota Br. at 24. The short answer is that the 1981 letter never included tribal facilities not either leased or owned by IHS.

10. The same 1994 "Regional Identical Letter" is addressed in both Arizona at 18-19, and South Dakota at 8-11, where slightly different arguments were raised but the Board ultimately reached the same conclusion about the import of the letter.

11. Mr. Wetzel also stated that a copy of his notes of the meeting form Attachment D-1 to his declaration, but no such attachment appears in the record exhibit. In light of our conclusions in South Dakota, Mr. Wetzel's notes, even assuming they fully support his account, would have no significance.

12. The discussion and e-mails in this section of North Dakota's argument belie its assertions elsewhere that the claims involved in Arizona were distinguishable from North Dakota's on the basis that Arizona's involved 638 facilities rather than contract care participants.

13. North Dakota failed to mention that Mr. Adams of Region IX also reported that "[a]ccording to Wanetah since these contractors are not IHS or tribal facilities the FFP match for services would only be eligible at the normal FMAP rate." Id.

14. During the same month, Eva Lopez participated in a site visit to South Dakota. The Board has found that the Regional Office learned only days earlier of the newly expansive claiming of 100% FMAP by that state. South Dakota at 22; see also CMS Ex. 6, at ¶ 9.

CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES