Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Mississippi Division of Medicaid
DATE: February 24, 1992
Docket No. 91-154
Decision No. 1305
DECISION
The Mississippi Division of Medicaid (State) appealed a determination
of
the Health Care Financing Administration (HCFA) disallowing
$1,045,236
of federal financial participation (FFP) claimed for
non-emergency
transportation costs during thirteen quarters in fiscal years
1988,
1989, and 1990. The disallowance resulted from a financial
management
review by HCFA of the State's non-emergency transportation
program.
HCFA found that transportation was provided by two other State
agencies,
rather than a private vendor, and under the applicable
regulations
should have been claimed at the administrative rate (50%) rather
than
the medical assistance rate (approximately 80%). HCFA disallowed
the
difference in FFP between the two rates, and further disallowed
the
balance of amounts which were in excess of actual costs ($4,778)
and
amounts which were undocumented ($218).
The State did not contest the substantive bases of the disallowance
and
has agreed to claim prospectively in compliance with
HCFA's
instructions, but argued that the quarterly expenditure reports
(QERs)
submitted by the State had been reviewed and approved by HCFA
auditors.
State Brief (Br.) at 3-4. The State asserted that it relied
on these
approvals and did not realize that it was claiming at an
inappropriate
rate. Id. The State characterized the disallowance
as allowing "HCFA
to change practices that were reviewed and agreed [to] by
prior HCFA
staff persons." State Br. at 3.
We find that the State's arguments have no merit. Therefore, we
uphold
the disallowance in full, for the reasons explained further below.
Background
Title XIX of the Social Security Act (Act) provides for grants to
states
for medical assistance programs (Medicaid). Section 1903 of the
Act
permits federal participation in amounts expended as medical
assistance
at a rate set for each state by a formula at section 1905(b)
(nearly 80%
for Mississippi). The Act provides that medical assistance
means
payment of the costs of certain listed services, as well as "any
other
medical care . . . specified by the Secretary." Section
1905(a)(22).
The Secretary has specified by regulation that transportation
(when
necessary to secure medical care) may be treated as medical
assistance
only when furnished "by a provider to whom a direct vendor payment
can
appropriately be made by the agency. If other arrangements are made
to
assure transportation . . . FFP is available as an administrative
cost."
42 C.F.R. . 440.170(a)(2) (1991) (unchanged in relevant
years).
Administrative costs are reimbursed at a 50% rate under
section
1903(a)(7) of the Act.
Payments to the states are made on the basis of estimates, and
later
adjusted to actual expenditures based on QERs. A QER is simply
an
accounting statement summarizing expenditures according to
various
categories.
Analysis
Under the uncontested facts here, the State made arrangements
for
transportation through other State agencies, the State Department
of
Health (DOH) and the State Department of Human Services (DHS). DOH
and
DHS do not purport to be providers to whom direct vendor payments can
be
made. The State conceded that FFP should have been claimed at
the
administrative rate rather than the medical assistance rate,
but
asserted that it "did not realize that the rate was being reported at
an
incorrect rate." State Reply Br. at 2. The State charged that
this
disallowance violated "[a]ll principles of fairness and equity,"
since
the QERs were "reviewed and approved by [HCFA regional employees] on
a
continuous basis." Id.
A QER "does not lend itself to immediate examination of individual
items
included in the gross claims made each quarter. . . . Indeed, the
Agency
would not necessarily be able to determine whether costs are
allowable
in individual instances until an audit or review has been
performed."
New Jersey Dept. of Human Services, DAB No. 608 (1984) at 8
(rejecting
argument that HCFA be estopped from disallowing Medicaid
claims
erroneously based on Medicare per diem rate, because HCFA made
payments
without questioning the state's practice). The State did not
allege
that the HCFA employees reviewing the QERs had reviewed the
State's
underlying documentation or were otherwise aware that the
transportation
was being provided by state agencies. The QERs submitted
by the State
do not contain that information. State Exhibits (Exs.)
1-13.
HCFA is not precluded from taking this disallowance even though
its
auditors did not question the costs on the QERs. Review of a QER is
not
the same as an audit of the underlying costs. The regulations
made
clear that the State's claims are subject to adjustment not only
based
on the QER but also based on HCFA financial reviews or audits by
the
Office of the Inspector General. 42 C.F.R. Part 430, Subpart
C.
Moreover, even if the reviews here did constitute audits, we have
held
that an "audit provides a basis for disallowing unallowable
costs
identified by the auditors, but does not preclude disallowances taken
on
the basis of information obtained in another manner, such as the
inquiry
by program officials in this case." Kentucky Cabinet for
Human
Resources, DAB No. 957 at 4 (1988) (rejecting argument that the
Social
Security Administration should be precluded from disallowing
unallowable
costs after the audits were closed out). Hence, HCFA was
reasonable in
basing a disallowance on information obtained in the
financial
management review.
HCFA treated the State's equity claim as an argument for estoppel,
and
argued that estoppel was not available here to prevent HCFA from
taking
a disallowance even though prior auditors had not disallowed
the
charges. HCFA Br. at 3. The doctrine of estoppel
traditionally applies
when a party changes its position in a way detrimental
to it because it
reasonably relied on a misrepresentation made by the
opposing party.
Thus, the elements which must all be present to establish a
claim to
estoppel are (1) detrimental change, (2) reasonable reliance, and
(3)
misrepresentation. The State did not show any of these
elements.
First, the State did not allege that it would have done
anything
differently if the disallowance had been taken earlier.
Second, on the
issue of reasonable reliance, the State is charged with being
aware of
the governing law and regulations in operating its Medicaid program.
1/
The Supreme Court concluded in rejecting an estoppel claim against
the
government that:
[p]rotection of the public fisc requires that those who
seek
public funds act with scrupulous regard for the requirements
of
law . . . . [T]hose who deal with the Government are
expected
to know the law and may not rely on the conduct of
Government
agents contrary to law.
Heckler v. Community Health Services of Crawford County, 467 U.S. 51,
63
(1984). Third, the State did not identify any representation, much
less
misrepresentation, by HCFA on which it claimed to have relied. At
most,
the State read into an omission of HCFA, i.e., its failure to take
a
disallowance at the earliest opportunity, a representation that all
the
expenditures in the QERs were acceptable as charged. "Total silence
is
not equivalent to a definite misrepresentation." Tennessee Dept.
of
Health and Environment, DAB No. 1082 at 8 (1989).
Furthermore, estoppel is not available against the government on the
same
terms as against private parties, because different considerations
come into
play. 2/ Even if the State had proven all the traditional
elements of
estoppel, it could not prevail against the government, at
least absent a
showing of some affirmative misconduct by the government.
Schweiker v.
Hansen, 450 U.S. 785 (1981); Acadia-Vermillion Community
Action Program,
Inc., DAB No. 1201 at 8 (1990). The State made no
allegation whatsoever
that could amount to affirmative misconduct.
A government agent cannot obligate the government to pay funds
in
violation of statutory authority.
Whether there are extreme circumstances that might
support
estoppel in a case not involving payments from the Treasury is
a
matter we need not address. As for monetary claims, it
is
enough to say that this Court has never upheld an assertion
of
estoppel against the Government by a claimant seeking
public
funds. In this context there can be no estoppel . . .
.
Office of Personnel Management v. Richmond, 110 S.Ct. 2465, 2476
(1990)
(emphasis added). 3/ We find that HCFA is not estopped from
taking the
disallowance at issue.
We find no basis in law or equity to preclude the disallowances
here.
Since the State admitted the factual and legal underpinnings
supporting
the determination, we find that the disallowance was properly
taken.
Conclusion
For the reasons explained above, we uphold the disallowance in full.
___________________________
Donald
F.
Garrett
____________________________
Norval
D. (John)
Settle
___________________________
Judith
A.
Ballard
Presiding
Board
Member
1. Furthermore, the State was specifically informed by HCFA in
its
instructions to the State in preparing QERs that transportation
costs
should be reported as medical assistance costs only if the provider
can
appropriately be paid by direct vendor payment. State Medicaid
Manual,
. 2500.2. (This provision was applicable at least as early as
April
1986 and was continued in succeeding revisions throughout the
relevant
period.)
2. While insisting that "there is no �hard and fast� rule"
that
estoppel will never lie against the government, the State conceded
that
"the vast majority of case law does suggest that it is very difficult
to
prove a case of estoppel against the Government." State Reply Br. at
2.
3. The State cited three Supreme Court cases in which efforts to
estop
the government were rejected, summarily in two cases, but which
reserved
the question of whether estoppel could ever lie against the
government.
The Court later deplored the numerous lower court cases
applying
estoppel against the government. Office of Personnel
Management, 110
S.Ct. at 2469-71. The Court concluded that estoppel
could never lie
against the government in cases involving "claims for money
from the
Public Treasury contrary to a statutory appropriation." Id.
at