GAB Decision 123
October 2, 1980
California Department of Health Services;
Docket No. 80-61-CA-HC Minow, Nell; Przybylinski, Donald Settle, Norval
This is an appeal of a disallowance of $420,100 claimed by the State
of California as Federal financial participation (FFP) under Title XIX
of the Social Security Act (Medicaid) for non-therapeutic sterilization
procedures paid for between February 21 and May 12, 1975. The
disallowance was originally made August 5, 1976, by the Regional
Commissioner, Region IX, of the Social and Rehabilitation Service (SRS)
and reconsidered under 45 CFR 201.14 (SRS Docket No. ME-CA7601). The
disallowance was affirmed by the Administrator of the Health Care
Financing Administration (HCFA) on April 2, 1980. The State requested
Board review on May 12, 1980.
This decision is based on the Administrator's disallowance letter;
the State's request for review; the reconsideration file in ME-CA7601;
an Order to Show Cause issued by the Board on July 2, 1980; and the
parties' responses to the Order.
General Background
Congress has provided in Title XIX that a State is entitled to FFP in
the costs of family planning services meeting certain requirements.
Additional requirements may be imposed by the Secretary, consistent with
the Secretary's authority under the Social Security Act to provide for
the efficient administration of the Act. Sec. 1102.
The Secretary has interpreted the family planning section of Title
XIX to include sterilization services. There were initially no specific
rules or regulations governing Federal funding of sterilizations
although Congress had provided that all family planning should be on a
voluntary basis. See, e.g., Sec. 1905(a)(4)(C). After national
attention was drawn to the problem of improper coercion of needy persons
to submit to sterilization upon threat of loss of welfare benefits, the
then Department of Health, Education, and Welfare (HEW) published a
notice on August 3, 1973, 38 FR 20930, that it was adopting guidelines
for issuance, by HEW agencies, of regulations to insure informed consent
and voluntariness in Federally funded sterilizations. The guidelines
themselves were in the form of a memorandum to agency heads and were
termed "General Guidelines Limiting Federal Financial Assistance for
Sterilization of Minors and Other Legally Incompetent Individuals"
(Guidelines). Accompanying the Guidelines was a direction to heads of
affected HEW agencies to withhold FFP in sterilization of individuals
"under the age of 21" or legally incapable of giving consent, pending
publication of final regulations. This provision came to be known by
agency officials as a "moratorium."
Following the publication of the Guidelines, the SRS, then
administering the Medicaid program, published a notice of proposed
rulemaking, paralleling the Guidelines, providing that FFP was available
for sterilization of individuals under age 21, so long as there was
committee review and compliance with other informed consent
requirements. 38 FR 26459, September 21, 1973. A final regulation was
published on February 6, 1974. This regulation required that state
plans under Title XIX provide that there be no FFP in nontherapeutic
sterilizations performed "on an individual who is under the age of
eighteen or who is legally incapable of giving informed consent" unless
certain procedures had been followed. 39 FR 4733. For purposes of this
rule, the term "legally incapable of giving informed consent" was
defined to include any person who "(under) State law is a minor whose
consent to the sterilization would not be legally effective." 39 FR
4734. A basis and purpose statement in the preamble to the February 6
regulation explained in response to comments why the age limit for
committee review was set at 18 and stated that "absolute denial of
sterilizations to persons under eighteen regardless of the circumstances
is unacceptable to the Department." 39 FR at 4731.
The effective date of the February 6 regulations was delayed pending
the outcome of several cases filed in Federal district court challenging
the rules. 39 FR 5315, February 12, 1974; 39 FR 9178, March 8, 1974.
These district court actions were consolidated for purposes of a
decision issued on March 15, 1974, in Relf v. Weinberger, 372 F. Supp.
1196 (D.D.C 1974). The District Court permanently enjoined the use of
Federal funds "for the sterilization of any person who . . . is in fact
legally incompetent under the applicable state laws to give informed and
binding consent to the performance of such an operation because of age
or mental capacity. . . ." 372 F. Supp. at 1204.
The February 6, 1974 rules were also found to be arbitrary and
unreasonable in that they did not require that legally competent persons
be properly advised that their Federal benefits could not be terminated
by reason of a decision not to be sterilized. The District Court
declared in its Order that the regulations were defective since they
authorized the provision of Federal funds without requiring such advice
prior to obtaining consent and "without further requiring that such
advice also appear prominently at the top of the consent document. . .
." 372 F. Supp. at 1205.
New regulations were published on April 18, 1974, to "replace" the
February 6 regulations struck down in Relf. 39 FR 13872, 13887. These
regulations contained the following provision at Sec. 205.35 of 45 CFR
with respect to FFP under Titles XIX, IV-A and VI of the Social Security
Act:
No nonemergency sterilization may be performed unless legally
effective informed consent is obtained from the individual on whom the
sterilization is to be performed. 45 CFR 205.35(a)(1)(ii).
This regulation, using a "legally effective" consent test and not
specifying a minimum age, was in effect during the time period relevant
to this appeal.
The preamble statement to the April 18, 1974 regulation (incorporated
by reference from the preamble statement to 42 CFR Part 50, Subpart B,
pubished on the same date) referred to the 1973 Notice of Guidlines,
stating that it --
provides that pending the effective date of the final regulations
Federal financial participation should be withheld from any
sterilization procedure performed on an individual who is under the age
of 21 or who is himself legally incapable of consenting to the
sterilization.
The preamble further stated:
The purpose of this document is to adopt regulations in accordance
with the Court Order (in Relf) with respect to persons legally capable
of consenting to a sterilization while continuing in effect the
moratorium set forth in the previous notice of the Department with
respect to sterilization of individuals under the age of 21 or legally
incapable of consenting to the sterilization. 39 FR 13873.
In addition to the requirement for "legally effective" informed
consent, the new Sec. 205.35 listed basic elements of informed consent
and required that these be detailed in a written consent document
provided to the individual to be sterilized. Paragraph 205.35(a)(2)(
i)(F)(3) specified:
Each consent document shall display the following legend printed
prominently at the top:
NOTICE: Your decision at any time not to be sterilized will not
result in the withdrawal or withholding of any benefits provided by
programs or projects.
The effective date of the new regulation was stated to be April 18,
1974. 39 FR 13887. On the same date, the Acting Commissioner of the
SRS issued Program Instruction MSA-PI-74-14 instructing states to
complete an attached preprinted state plan amendment and to submit it by
July 2, 1974. The amendment basically certified compliance with Sec.
205.35.
Case Background
The State of California provides for family planning services under
Title XIX through its State plan for a program of medical assistance,
called Medi-Cal. California apparently did not submit the plan
amendment relating to Sec. 205.35 until March 28, 1975, but, as approved
by the regional office,the plan amendment carried an effective date of
February 21, 1975.
The regional office subseqently performed a sample review of claims
for sterilization procedures paid under Medi-Cal between February 21 and
May 12, 1975. Apparently, a sample of 369 claims was drawn randomly
from the universe of 4,427 claims. According to HCFA, of the claims
sampled: "20 (5.4% of the sample) were not acceptable because the
patient was under 21 years of age, 267 (72.4%) did not have consent
forms containing the notice that no benefits provided by programs or
projects receiving Federal funds may be withdrawn or withheld by reason
of the person's decision not to be sterilized, and another 45 claims
(12.2%) were unacceptable because the consent forms did not conform to
other requirements of 45 CFR 205.35." (Administrator's Decision, p. 1.)
Based on this review, the Regional Commissioner made, and the
Administrator upheld, a disallowance of $420,100 of the total $472,576
in FFP related to the 4,427 claims.
The Notice Provision
A substantial portion of the disallowance was based on the reviewers'
finding that 72.4% of the claims sampled did not have consent forms
containing the notice that no benefits could be withdrawn or withheld by
reason of an individual's decision not to be sterilized.
The State argued that a reasonable period of time was necessary for
implementation of its State plan amendment (not effective until February
21, 1975), since a regulation which contemplates the use of specific
printed forms is not self-executing. According to the State, "HCFA has
traditionally recognized that 'lead time' in complying with new federal
requirements is necessary, the only question being what is reasonable."
(Letter of May 12, 1980, p. 3.) During prior reconsideration the State
argued that a longer lead time was necessary here because of the
emotionally charged nature of the requirements. (Reconsideration file,
Tab 20, p. 6.)
The State's argument does not have merit. The regulation in question
was published April 18, 1974.The program instruction issued the same
date instructed the State to submit the appropriate plan amendment by
July 2, 1974. By not submitting the amendment until 1975, the State
gave itself lead time in which to prepare to meet the requirements.
While some of the other provisions of Sec. 205.35 might be more
difficult to put into effect, implementation of the notice requirement
could be accomplished merely by including in any consent form the
language set forth in Paragraph 205.35(a)(2)(i)(F)(3) in prominent print
at the top of the form. The State has not shown that this requirement
was controversial, or that it was not feasible for the State to meet the
requirement.
Furthermore, even though in some cases HCFA may have permitted longer
"lead time," there is no requirement that HCFA permit such "lead
time"
for every regulation. With respect to this particular provision,
moreover, it is questionable whether HCFA could have permitted such lead
time. While the Administrator did not rely on the decision in Relf, the
District Court's opinion, quoted above, indicates that the Court
considered the notice to be a prerequisite to consent being "voluntary"
within the meaning of the family planning statutes. Thus, the notice
requirement is distinguishable from those regulatory requirements which
are merely administrative in nature.
In response to the analysis of this issue set forth in the Board's
Order to Show Cause, the State presented no further argument.
Accordingly, the disallowance is upheld with respect to costs of
sterilizations performed without the proper notice.
Unspecified Regulatory Requirements
The State challenged as "contrary to due process and basic fairness"
the part of the disallowance related to the reviewers' finding that
12.2% of the sampled claims were "unacceptable because the consent forms
did not conform to other requirements of 45 CFR 205.35." (Letter of May
12, 1980, p. 5.) The State claims that no report of the reviewers'
findings was given to the State and that it has received no response to
requests for clarification of what "other requirements" are referred
to
as a basis for the disallowance. The reconsideration file supports the
State's position that it requested more specific information on this
point. (Reconsideration File, Tab 6, pp. 2, 3; Tab 9.)
While the burden of documenting the allowability of costs falls,
generally, on the State, the Agency must articulate a basis for a
disallowance determination. Under the 201.14 procedures, "findings of
fact" were required, Sec. 201.14(b)(2)(v), and, under Part 16, a
notification of disallowance must "set forth the reasons for the
disallowance in sufficient detail to enable the grantee to respond . .
. ," Sec. 16.91(a).
To respond to the vague charge that "other requirements" were not
met, the State would have to prove that, for each claim, all of the
requirements of Sec. 205.35 were in fact met. In light of the diverse
nature of the Sec. 205.35 requirements (including provision for a
72-hour waiting period, counseling as to appropriate alternative
procedures, and documentation requirements) this burden should not be
placed on the State where the Agency presumably had in its possession a
report detailing the specific defects for each claim in the sample.
HCFA now admits, in response to the Board's Order, that it cannot locate
the documents on which this part of the disallowance was based.
Accordingly, the disallowance is reversed with respect to costs
allegedly not meeting "other requirements" of Sec. 205.35.
Sterilization of Individuals under Age 21
In California, the age of majority is 18 years. The State claims
that FFP should be available in costs for sterilizations of individuals
between 18 and 21 because these individuals were capable of giving
"legally effective" informed consent within the meaning of Sec. 205.35.
The State argues that it was reasonable, under the circumstances, to
interpret the Department's references to persons under age 21 as
references to minors. We agree. The 1973 Guidelines refer to
sterilization of minors and the February 6, 1974 regulations and
preamble discuss an age limit in terms of age of majority. The preamble
statement to the April 18, 1974 regulations describes the purpose of
continuing the moratorium in terms of compliance with the court order in
Relf, which measured age of consent by state law. HCFA has presented no
evidence or argument to show that the State had actual notice that the
Department would interpret the moratorium as a prohibition on FFP of all
sterilizations of individuals under age 21, regardless of effectiveness
of consent under State law.
If the moratorium were a rule standing alone, perhaps the ambiguities
associated with it would place an obligation on the State to seek
clarification. Here, however, the preamble statement accompanied a
formal regulation which used a test of legal effectiveness of consent.
While we do not find it necessary to reach the issue here, it is also
arguable that, to the extent the preamble is inconsistent with the
formal regulation, the formal regulation would control. As the State
also points out, the preprinted state plan amendment transmitted with
Program Instruction MSA-PI-74-14 refers only to "legally effective"
consent.
There is a reference in MSA-PI-74-14 to the moratorium as a
"prohibition" of FFP, unlike the preamble which continues the moratorium
in effect without describing what that effect is. On the other hand,
MSA-PI-74-14 has the same defect as the preamble statement. That is,
under the circumstances, it was more reasonable to interpret it as
applying only to minors, than to read it as establishing a uniform
minimum age for Federal funding purposes.
HFCA argues that the Federal courts have held that the moratorium was
binding on the states, relying primarily on Voe v. Califano, 434 F.
Supp. 1058 (D.Conn. 1977). The issue decided in Voe, however, was very
limited, and is not dispositive here. In that case, the Court
explicitly stated that the sole issue before it was the validity of
applying a certain age requirement under the Constitution. Apparently,
the parties had stipulated that there was a minimum age requirement for
the program; at least, the Court did not address that question.
Furthermore, in Voe the state program itself limited funds for
sterilizations to individuals 21 years of age or older, giving the Court
an independent basis for applying that limitation.
We do not contest the assumption in Voe that the Department may
impose such limits; we find only that this was not done here. When the
Department chooses to limit FFP to a particular category for some good
reason such as uniform administration of a program, it should state the
limitation so that the grantee understands it.
Accordingly, we reverse the disallowance of FFP in costs of
sterilizations of individuals between 18 and 21 years of age.
Conclusion
For the reasons stated above, we uphold the disallowance of costs
associated with sterilizations for which the consent forms did not
contain the required notice and reverse the disallowance of costs of
sterilizations of individuals under age 21 and of sterilizations
allegedly not meeting unspecified requirements of Sec. 205.35.
In its Order, the Board requested the parties to identify how the
total $420,100 disallowed should be broken down as it relates to the
three separate bases for disallowance. The parties' calculations
differed. HCFA did not articulate the basis for its calculations but
submitted specific figures. The State's approach was based on an
average Federal share per claim. HCFA has identified $77,665 ($23,544 +
$54,121) as the amount related to the two issues on which we find for
the State. Accordingly, the disallowance should be reversed in at least
that amount. Under the State's method, an additional $4,583.88 would
relate to these two issues. Thus, HCFA should examine its records and,
if it can not substantiate its figures, consider a withdrawal of
$4,583.88 of the remaining disallowance.
OCTOBER 04, 1983