DAB Decision 55
May 14, 1979 California State Department of Health; Docket No.
78-69-CA-HC; Decision No. 55 Mason, Malcolm S.
SUMMARY
(The following summary is prepared on the responsibility of the
Executive Secretary of the Board as a convenience to the interested
public. It is not an official part of the decision and has not been
reviewed by the Chairman. Similar official summaries of earlier cases
appear in 45 CFR Part 16 Appendix.)
California requested reconsideration by the Board Chairman under 45 CFR
201.14, as amended March 6, 1978, of a determination by the
Administrator of the Health Care Financing Administration disallowing
federal financial participation (FFP) in the amount of $74,544 claimed
for services provided pursuant to Title XIX of the Social Security Act
(Medicaid). The disallowance was based on a State audit which found
that some claims for services rendered in January 1974 and paid in March
1974 involved beneficiaries not listed in the State's computer file of
January 1974 eligibles. Following the audit, the State made a search
for the records of beneficiaries in a sample of these claims, and made a
clear determination of eligibility or ineligibility for all but a few
claims in the sample for which records could not be located.
The Chairman upheld HCFA's position that both the claims clearly
identified as ineligible and the no-record claims should be treated as
ineligible rather than divided between eligibles and ineligibles in the
same proportion as those for which a direct eligibility determination
could be made, as the State contended, finding that federal statute and
regulations imposed on the State the ultimate burden of establishing and
documenting eligibility. The Chairman also found it probable that there
were factors tending to make it more likely that the no-record cases
involved non-eligibles.
The Chairman also rejected the State's argument that, although HEW had
not set any tolerance level for erroneous Medicaid payments, the State's
error rate was so low that a disallowance was inappropriate. HCFA
stated that if the State's error rate had been "so low as to approach
perfection," it might not have taken a disallowance. HCFA argued,
however, and the Chairman found that there was no showing that the State
performed as well with respect to the remaining payments made in 1974 or
that the sampling of payments made in March 1974 for services rendered
in January 1974 could be used to accurately estimate the error rate for
the remaining payments. In the absence of such a showing, the Chairman
found it proper to apply a presumption in favor of the agency's action,
which did not involve a question of fact determination or of statutory
interpretation, and sustained the disallowance in part, reducing the
amount disallowed, however, to reflect the fact that the State had not
claimed or received FFP in payments for medically indigent adults who
were eligible for State payments but not included in State's Title XIX
plan.
James D. Claytor and Elisabeth C. Brandt, Deputy Attorneys General,
California Department of Justice, for the California Department of
Health. Debbie Zuckerman, Legal Intern, and Eugene Tillman, Attorney,
HEW Office of General Counsel, Health Care Financing and Human Services
Division, for the Health Care Financing Administration.
CHAIRMAN'S DECISION
I. Procedural Background.
This case arises under Title XIX of the Social Security Act. Section
1116(d) of the Act entitles a State to receive upon request
reconsideration of a disallowance made under that title. This decision
is the final step in the reconsideration process provided in Section
201.14 of Title 45 of the Code of Federal Regulations. Charles W.
Goady, then Regional Commissioner, Social and Rehabilitation Service
(SRS), issued a disallowance determination on June 19, 1975, in the
amount of $1,176,150 for payments found to have been made by the State
of California during the month of March 1974 for services rendered
during January 1974 to persons then ineligible for MediCal, the State's
Medicaid program. Mr. Goady's determination was reviewed under the
reconsideration process and the disallowance was reduced to $74,544 by
the Administrator of the Health Care Financing Administration (HCFA) in
a determination issued June 26, 1978.
The State requested further reconsideration by the Chairman of the
Departmental Grant Appeals Board on July 24, 1978. Although the State
was entitled under 45 CFR 201.14(a), as amended March 6, 1978 (43 FR
9266), to exercise an option to have the matter considered by the Board
under 45 CFR Part 16, it expressly chose not to do so but to be governed
by the Section 201.14 procedure with the Chairman substituted for the
Administrator, SRS, in accordance with the transfer of functions of
March 6, 1978 (43 FR 9266-7).
Since the State had, prior to March 6, 1978, requested a conference with
the Administrator of SRS, it was entitled under the transfer of
functions to a conference with the Chairman and indicated that it
desired such a conference. Accordingly, by a Notice of Conference dated
November 28, 1978, I gave notice that such a conference would be held,
invited the parties to suggest agenda items for the conference, and
directed them to come prepared to discuss
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certain questions present in the case and also the correctness of the
preliminary analysis of facts and issues set forth in the Notice. The
conference was held on January IS, 1979. A transcript was made at the
State's expense in accordance with Section 201.14(d)(7) and is part of
the file. Both parties have been afforded an opportunity to review and
propose corrections to the transcript. At the conference the parties
were afforded an opportunity to discuss the questions that had been
placed on the agenda as well as others that arose for discussion in the
course of the conference and were invited and afforded an opportunity to
file post-conference submissions which have since been received.
II. Facts.
California, for the purposes of its own effort to upgrade its
performance, performed an audit of MediCal. It identified roughly
1,600,000 claims filed for services rendered in January 1974 which were
paid in March 1974. No claims for services rendered in January and paid
in January or February or April or later were considered and no claims
paid in March for services rendered in March or February or December or
earlier were considered. (Transcript, pp. 58-59.) In this survey of a
limited segment of claims, the State found, on an initial review, 84,537
claims (representing a total of $2,352,300) involving some 27,000
beneficiaries who were not listed in the State's computer file of
January 1974 Medi-Cal eligibles. Based on this survey by the State,
which was not required by federal regulation (Transcript, pp. 11-12),
and apparently not based on any specific sampling technique (cf.
Transcript, pp. 9-12, 57-58; cf. Reconsideration record, Tab 1, p.
61), the Regional Commissioner, SRS, disallowed federal financial
participation (FFP) in the amount of $1,176,150. (Reconsideration
record, Tab 2.)
The Regional Commissioner stated that an adjustment in the amount of the
disallowance could be made for paid claims for services rendered to
medically indigent adults eligible for Medi-Cal but not covered by the
Title XIX plan. According to the Regional Commissioner, such claims were
excluded from the paid claims for which the State originally claimed
FFP, but were included among the roughly 85,000 claims paid for
beneficiaries not appearing on the State's computer file of MediCal
eligibles. Since the State never claimed or received FFP for payments
involving medically indigent adults, it was not required to account to
HEW for errors in those payments. The Regional Commissioner left the
determination of the proper amount of the adjustment to the State. The
State later identified this amount as 8 percent of Medi-Cal service
costs, which it stated was based on an historical average.
(Reconsideration record, Tab 6.)
In the course of a reconsideration proceeding started before the SRS
Administrator and transferred to the Administrator of HCFA, the State
made further study of a sampling of the roughly 85,000 claims initially
not shown to be eligible. This sampling was taken by making a search of
every 85th claim
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among the almost 85,000, resulting in a sample of 994 claims. In this
sample, on further research, 931 were found to be eligible, 18 were
found to be ineligible, and 45 claims were for persons for whom records
were not found and who were thus not shown either to be clearly eligible
or clearly ineligible. The Administrator of HCFA, acting upon the
recommendation made by the Regional Commissioner, SRS, to the SRS
Administrator, reduced the amount of the disallowance to $74,544,
treating the 45 cases in which no records were found, as well as the 18
cases in which ineligibility was clearly shown, as having involved
payments to ineligibles. The Administrator's determination, without
explanation, made no adjustment for claims paid for medically indigent
adults.
III. Issues.
A. One issue in this case is whether the 45 cases should be treated as
ineligible as HCFA claims or as divided between eligibles and
ineligibles in the same proportion as those for whom a direct
eligibility determination could be made, that is to say eligible in the
ratio of 931 to 949 as the State contends.
If the 45 cases are treated as eligible in the ratio of 931 to 949, then
the number of ineligible cases in the sample of 994 would be 19 (rounded
off), and the amount of the disallowance, which is based on a projection
of the number of ineligible cases in the 994 sampled to the roughly
85,000 claims involving beneficiaries not in the State's computer file
of January 1974 eligibles, would be substantially reduced.
B. A second issue is whether the disallowance was appropriate in view
of the fact that the number of payments in the sample which involved
ineligibles, even counting as ineligible all of the no-record cases, was
small, and the error rate for the universe of 1,600,000 claims paid in
March 1974 for services rendered in January 1974 negligible.
If 19 of the 994 claims in the sample, or roughly 1.9 percent, are
treated as ineligible, then, assuming the sampled universe to be in the
same proportion, approximately 1.9 percent of the roughly 85,000 claims
initially found not supported by documentation of eligibility would
appear to be ineligible. It is to be noted that the 85,000 include all
the questionable cases, it being assumed that all the rest of the
1,600,000 claims, which were matched to individuals in the State's
computer file of Medi-Cal eligibles, are eligible, that is to say, 94.7
percent are initially shown to be eligible. Of the remaining 5.3
percent, roughly 98.1 percent are shown to be eligible, and the
ineligibles amount at most to 1.9 percent of 5.3 percent, or barely more
than one-tenth of one percent. On the other hand, assuming the
alternative least favorable to the State, the 45 cases for which records
have not been found will be treated as ineligible and in that case
instead of 19, there will be 63 ineligibles in the sample, and the
State's error rate
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for the 1,600,000 claims would then appear to be at most something like
6.3 percent of 5.3 percent, or three-tenths of a percent.
C. A third issue is what adjustment is to be made in the amount of the
disallowance, if there is to be a disallowance, for paid claims for
services rendered to medically indigent adults. There is no dispute
between the parties as to the propriety of such an adjustment, but
questions have been raised both as to the percentage of paid claims
involving beneficiaries in that category and as to the manner in which
that percentage is to be applied to the costs in question.
III. Discussion.
A. The State argues that the 45 beneficiaries for whom eligibility
records were not found should be treated as eligible in the same
proportion (931 out of 949) as those for whom a clear-cut eligibility
determination could be made, or roughly 44 eligible and 1 ineligible.
(Application for review, dated 7/24/78, p. 4; Letter to Board's
Executive Secretary, dated 1/23/79, pp. 9-Il; Transcript, pp. 21-22.)
This position is unacceptable.
Federal statute and regulations impose on the State the ultimate burden
of establishing and documenting eligibility. Section 1903(a) (1) of the
Social Security Act authorizes payment of the federal medical assistance
percentage of the total amount expended during each quarter under the
State plan. Regulations at 45 CFR 249.81 (now 42 CFR 449.81( a)),
provided for FFP, provided the beneficiary "was found eligible for
medical assistance for the month during which the medical care and
services were rendered..." Similarly, 45 CFR 206.10(a)(5) directs that
"... medical... services... shall be furnished promptly to eligible
individuals...." Furthermore, the State is required by regulation to
maintain the pertinent records for a period of three years or until the
resolution of any disputed audit findings. (45 CFR 74.20.)
At the conference, the representative of the State conceded that if
there were such a provision for records retention, the State could not
prevail because it has not produced all of the records for the claims in
question. (Transcript, p. 51.) The State argues that it is not worth the
cost of digging out and examining the records for the 45 cases if they
exist. (Application for review, dated 7/24/78, p. 2.) That of course is
a decision the State may make, but if it finds that a further search for
those records is not cost-effective, it must accept the disallowance,
which it has deemed to be the lesser cost. It is not permitted to claim
the benefits of valid documentation and simultaneously to argue that it
should not have to produce the records to support a conclusion of valid
documentation on the ground that that is an excessive cost.
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The State argues that an inference of validity in a ratio of roughly 44
to I can be drawn from the results of those cases for which a direct
eligibility determination could be made. That argument might be
persuasive provided there was no factor operating tending to make it
more likely that the no-record cases involved non-eligibles than that
the cases in which records were found involved non-eligibles. (Cf.
Transcript, p. 70.)
In fact, there are several obvious and familiar elements of distortion
which suggest not only in this case but in other similar cases that
no-record cases are more likely to be cases of ineligibility than record
cases. First, as noted above, it is the State's responsibility to keep
the records and supply them upon request. If it fails to do so or
chooses not to do so, some inference that the results if proved would be
likely to be adverse seems permissible. Second, there have been specific
instances of apparent frauds in the Medi-CaI program in which
eligibility workers had issued fraudulent identification cards to
friends and hidden the records. (Transcript, pp. 47-49.) While there
was no specific accusation or evidence that the failure to find records
in the present case was due to such fraud, it is clear that the
possibility of this kind of fraud makes more likely a result in which
invalid claims for ineligible beneficiaries are precisely the ones that
are not found. Compare a parallel problem in a sampling intended to
determine the average annual income of the alumni of a particular school
graduating in a particular year some 25 years ago. Is it more likely
that the alumni not reached by the survey or who do not respond are in
the wealthier or in the poorer segments of the class: for several
obvious reasons those not found, not reached, not responding, will be
more likely in the poorer segments. Huff, How to Lie with Statistics
(Norton and Company 1954), Chapter 1, The Sample with the Built-in Bias,
pages 11-26. For different but equally convincing reasons,
beneficiaries for whom records are not found are more likely to be
ineligible than those for whom records are found.
State of Georgia v. Califano, 446 F. Supp. 404 (N.D. Ga. 1977), is cited
by both sides in support of their views. (Notification of disallowance,
dated 6/26/78, p. 2; Letter to Board's Executive Secretary, dated
7/24/78, pp. 3-4; Letter to Board's Executive Secretary, dated 1/23/79,
pp. 7, 9, Il; Transcript, pp. 25-26.) That case does not assist the
State's arguments. The decision sustains the use by HEW of projections
from statistical samples in place of examination of each individual
claim in the relevant universe in order to determine Medicaid
overpayments, provided the State is permitted to challenge the
projection by presenting evidence of actual claims. In the present
case, both sides are agreed that it would be proper to utilize such
projections, so that the principal holding of the case is therefore not
relevant. The case is relevant, however, for its holding on the
subsidiary issue as to where the burden of presenting evidence lies.
State of Georgia v. Califano held, in a case involving the allowability
of deferred claims, that it was not an unreasonable burden for the State
to have to present evidence to challenge HEW's samples, for "the State
is ultimately charged with the
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duty of proving the allowability of deferred claims. 43 CFR 201.15(c)(
7)." 446 F.Supp. at 409. The same logic that requires that the State
carry the burden of proof regarding the allowability of deferred claims
appears to extend in principle to claims that are directly disallowed
without being preliminarily deferred.
B. The second principal issue in this case is whether the disallowance
is inappropriate given the low rate of payments to ineligibles for the
1,600,000 claims paid in March 1974 for services rendered in January
1974, as contended by the State. (Letter to Board's Executive
Secretary, dated 7/27/78, p. 4; Letter to Board's Executive Secretary,
dated 1/23/79, pp. 13-15; Transcript, pp. 22, 38-40.) This issue is
best understood if viewed in a larger context.
HEW has had to deal with a serious problem of erroneous public
assistance payments made by States and charged in part to the federal
government under the Aid to Families with Dependent Children program
(AFDC) and under the Medicaid program involved here. Although the
details are complicated, some of the facts may be stated without
distortion in a simplified form.
In an early effort to deal with the problem of erroneous payments in the
AFDC program, SRS set as a target a 3 percent error rate for payments to
ineligibles and a 5 percent error rate for overpayments to eligibles,
providing that States would be held accountable for errors in excess of
these targets. Error rates were to be determined based on a quality
control sample, the results of which would be projected to the universe
of all AFDC payments within each State for a given period. 45 CFR
205.41, 40 FR 32954 (August 5, 1975). This regulation was found to be
invalid by the United States District Court for the Northern District of
Georgia in Maryland v. Mathews, 415 F.Supp. 1206 (1976), on the ground
that an empirical basis for the setting of target rates had not been
established. The implications of the opinion appear to be that perfect
performance was not to be expected, that a tolerance level at some
reasonable minimum was appropriate, and that the proposed target rates
were defective because they had no empirical basis and were if anything
too low.
No regulation setting tolerance levels had been promulgated for the
Medicaid program up to that point. Regulations requiring States to
implement a quality control (QC) program to measure eligibility errors
were in effect for both AFDC and Medicaid prior to April 1973. (Cf.
Mashaw, Report in Support of Recommendation 73-3, Quality Assurance
Systems in the Adjudication of Claims of Entitlement to Benefits or
Compensation, 3 Rec. and Rep. of the Administrative Conference of the
United States 160, 184-186.) It is stated, however, in a Notice of
Proposed Rulemaking published on March 13, 1975, that HEW discontinued
the Medicaid QC program on April 6, 1973, on the ground that it was
"relatively unsophisticated in terms of providing statistically reliable
error and payment data...." 40 FR 11735 (March 13, 1975). A Medicaid QC
program based on the AFDC QC program was reinstituted effective July 1,
1975. 40 FR 27222 (June 27, 1975).
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After the decision in Mathews v. Maryland, the Department made empirical
studies and proposed new regulations (43 FR 29311 (July 7, 1978))
applicable to both the AFDC and Medicaid programs. The proposed new
regulations set as an ultimate goal an error rate of 4 percent for both
payments to ineligibles and overpayments to eligibles. The Department
received and considered over a long period of time comments on these
proposed regulations. Ultimately, final regulations were adopted for
each program which provide that, to avoid a disallowance, a State must
either not exceed the national weighted mean payment error rate
calculated for a prior specified base period or must meet a prescribed
rate of reduction in the percent of payments in error. 45 CFR 205.41
(AFDC) and 42 CFR 431.801 (Medicaid), 44 FR 12578, 12579, 12585 (March
7, 1979). The national mean for AFDC for the period July-December 1977
was 8.7 percent. 44 FR 12580 (March 7, 1979). The record does not show
the national mean for Medicaid, although the fact that the same goal of
4 percent was proposed for both programs may be an indication that it
was roughly comparable. (SRS in 1975 stated that the ineligibility rate
for Medicaid recipients might be significantly higher than for AFDC
recipients. 40 FR 11735 (March 13, 1975).) The 4 percent target error
rate was omitted from the final regulations, however, in response to
States' comments that it was too low. 44 FR 12581, 12588 (March 7,
1979).
During the period in question in this appeal, when there was no Medicaid
quality control program and no regulation setting tolerance levels for
FFP in erroneous Medicaid payments, SRS apparently applied a standard
under which all payments for services rendered to Medicaid ineligibles
which were identified would be subject to penalty with no tolerance
permitted (a system characterized by the State's representative as
"catch as catch can," Transcript, p. 59). Taken literally, this rule
violated the intention of Maryland v. Mathews where the court pointed
out that SRS itself had recognized, in promulgating the AFDC tolerance
levels, that perfect performance in the administration of a public
assistance program was not to be expected and should not be required.
415 F.Supp. 1206, 1212. (See, also, HCFA's later statement at 44 FR
12586 (March 7, 1979) that "it is not feasible for the States to
administer an absolutely error-free program.")
The fact that no tolerance level was expressly recognized, however, was
palliated by certain countervailing facts. SRS did not systematically
test all Medicaid payments or systematically sample them on a reasonable
sampling system, but took such information as it had regarding specific
paid claims and, without extrapolation to the entire universe of
Medicaid cases in a State, based disallowances only on the erroneous
payments actually identified. Since only a small segment of all
payments made by the State was examined and the disallowance was limited
to erroneous payments found in that segment, there was in effect a
built-in tolerance level in that the State had the benefit of all
payments not examined being treated as made without any error
whatsoever.
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This approach did not produce a rational control and was erratic in its
effect, although on the average it might have been roughly fair. In
some cases, this approach might have led to a smaller disallowance than
if the State's error rate had been determined based on an unbiased
sample with results projected to the universe of all Medicaid payments
and only payments in excess of an empirically based tolerance level had
been disallowed. In other cases, it might have led to a larger
disallowance.
As already noted, California's error rate for payments made in March
1974 for MediCal services rendered in January 1974 was roughly
three-tenths of one percent. The error rate for all remaining payments
made that year for Medi-Cal services would have had to be drastically
higher in order for the State to have reached an overall error rate of
even three percent, the rate which the court in Maryland v. Mathews
found was not supported as a tolerance level for AFDC payments for
ineligibles. The error rate for the remaining payments would most
likely have had to be higher still to exceed the standard set for
Medicaid by the recently promulgated regulation. Thus, it seems as
though California is possibly being penalized in this instance for a
performance enormously better than the Department or the court has ever
deemed it reasonable to expect.
It must be recognized, however, that there has been no showing that
California performed as well with respect to the remaining payments made
in 1974, or that a sampling of payments made in March 1974 for services
rendered in January 1974 can be used to accurately estimate the error
rate for the remaining payments. The State's own audit report, on which
the disallowance was based, stated that, "(c)onsidered as a whole, the
data on service provided and eligibility are not indicative of good
program control." (Reconsideration record, Tab I, p. 76.) HCFA,
although it initially took the position that there was no authority to
apply a tolerance level in the absence of a regulation providing for one
(Pre-Conference Memorandum, dated 12/28/78, p. 2; Transcript, pp. 56,
61; Post-Conference Memorandum, dated 2/16/79, p. 5), later stated that
if the State "had established an error rate so low as to approach
perfection, Respondent would probably not have taken a disallowance,
although it would not have been precluded from doing so." (Respondent's
Response to the Request for Corrections of the Transcript and for
Additional Information, dated 3/14/79, p. 2.) HCFA argued, however, that
the sample of 994 claims was taken only to determine eligibility within
the initial no-record population and was not designed to determine the
State's error rate for a larger number of claims. (Transcript, pp.
57-58, 64-67; Post-Conference Memorandum, pp. 4-5; and Respondent's
Response to the Request for Corrections of the Transcript and for
Additional Information, p. 2.) It may be that the harsh treatment
accorded to California in this instance balances other instances in
which SRS procedures resulted in exceptionally soft results for
California. I have, however, no information one way or the other as to
the overall fairness of the results of the approach SRS took.
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It is clear that SRS had an important and difficult administrative task
to perform to ascertain whether federal funds were being properly used.
During the period in question, there was no Medicaid quality control
program through which the States' error rates could be reliably
ascertained as a basis for setting tolerance levels. Thus, it may not
have been unreasonable for SRS to disallow all those payments for
services to ineligibles which were actually identified in one way or
another, without estimating an overall error rate.
It should be noted that, while the State made a de minimis argument with
respect to its error rate, that argument extends as well to the State's
cost. (Transcript, pp. 41-42.) That the case has, in context, relatively
little dollar importance cuts both ways, however. On the one hand, it
would not be a significant burden for the State to absorb the cost of
this case. On the other hand, since this is a problem which involves a
small amount of funds and which will not recur for periods after the new
regulations were promulgated, it would seem that a decision not to
disallow would not have significantly damaged HCFA' s ultimate goal of
encouraging good performance.
Insofar as the issue turns not on the Administrator's correctness in
determination of fact or in interpretation of the statute, but on the
wisdom of the practice adopted, there is some presumption in favor of
the agency's determination in that area and an appropriate reluctance on
my part sitting as successor to the Administrator, SRS, to overrule, in
the absence of a clear and strong showing, an administrative practice
that appears to be permissible. The State in this case has neither
made, nor presented any persuasive argument that it could make, a
showing that its overall error rate was significantly below the
tolerance level invalidated in Maryland v. Mathews, and on these facts,
I rule in favor of the agency on this issue. It does not necessarily
follow from this decision that the same presumption in favor of the
agency's action will be applied in all other cases since a case may turn
on issues of fact, law, or policy, or mixed issues, as to which
different standards of review may well be appropriate.
C. The parties agree that any disallowance should reflect an adjustment
for paid claims for services rendered to medically indigent adults.
(Transcript, pp. 13-14, 41.) Persons in that category were eligible for
MediCal, but the State was not entitled to and did not claim FFP in its
payments involving such persons. Since the audit on which the
disallowance was based was conducted for the State's own purposes,
however, claims for services rendered to medically indigent adults were
included in the roughly 85,000 claims not initially shown to be
eligible. Therefore, before a disallowance can be calculated, the
amount of claims pertaining to medically indigent adults must be
deducted from the value of the 85,000 claims.
The State indicated that 8 percent of its Medi-Cal service costs were
for services rendered to persons in that category. Rather than deduct
from the value of the 85,000 claims 8 percent of that amount, however,
the State took
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8 percent of the value of the 85,000 claims and deducted it from 50
percent (the rate of FFP) of the value of 85,000 claims.
(Reconsideration record, Tab 6; Letter to Executive Secretary,
Departmental Grant Appeals Board, dated 1/23/79, p. 2; Transcript, pp.
13, 41.) In order for the adjustment indicated by the State to be
warranted, payments to medically indigent adults would have had to be 16
percent of all Medi-Cal service costs, not 8 percent as claimed by the
State.
HCFA pointed out the State s error in its post-conference memorandum
(Respondent's Post-Conference Memorandum, dated 2/16/79, p. I). The
State did not contend in either of two submissions filed significantly
after the date of service on it of HCFA's post-conference memorandum
that an error had not been made.
HCFA in its post-conference memorandum also intimated that the 8 percent
figure itself might not be correct, and requested that the case be
remanded to it for an accounting of the proper adjustment once the
disallowance was sustained. The case has had a long history and there
has been ample opportunity to challenge the accuracy of the 8 percent
adjustment. HCFA did not, however, indicate on what ground the 8
percent figure might be subject to question and, in view of that fact, I
am not inclined to question the accuracy of that figure.
The file indicates that at one time there was a proposal for a
settlement of final State liability in this case at $32,000.
(Reconsideration record, Tab 16.) Both parties are agreed that that
attempted settlement was not binding and has no present effect.
(Transcript, pp. 40-41.)
IV. Conclusion.
I therefore conclude that the 45 no-record cases in the sample of 994
cases examined were properly regarded by HCFA as cases of ineligible
beneficiaries, making a total of 63 ineligibles out of 994. This ratio
may properly be projected to the 84,537 claims initially not shown to be
eligible. The projection is made on the basis of number of claims
rather than dollar amount of claims, as agreed by both parties
(Transcript, pp. 19-20), and is applied to the entire dollar value of
the 84,537 claims, less an 8 percent adjustment for claims pertaining to
medically indigent adults. This results in a disallowance of 50% (rate
of FFP) x 63/994 x ($2,352,300 (value of the 84,537 claims) - $188,184
(8 percent of the value of the 84,537 claims)), or $68,169.
This decision constitutes the final administrative action on this
matter. D11 May 15, 1992