Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Nebraska Department of Social Services
DATE: September 11, 1992
Docket No. 91-075
Decision No. 1354
DECISION
The Nebraska Department of Social Services (Nebraska) appealed
a
disallowance by the Health Care Financing Administration (HCFA)
under
Title XIX (Medicaid) of the Social Security Act (Act). HCFA
disallowed
$456,846 of Nebraska's claim for federal funding for costs
incurred
under its home and community-based services (HCBS) waiver for the
period
July 1, 1988 through June 30, 1989. The parties settled the
issue of
claimed therapy costs; therefore, the only remaining issue is
whether 10
percent of direct residential staff costs (totalling $410,220)
must be
excluded from Nebraska's claim under the waiver.
For the reasons explained below, we uphold the disallowance as revised.
We
find that under the terms of Nebraska's approved HCBS waiver, 10
percent of
direct residential staff costs were expressly considered to
be
non-reimbursable "room and board" costs and were not to be included
in the
providers' reimbursement rates. HCFA properly found that
Nebraska was
bound by the terms of the approved waiver request. We
further find that
even if Nebraska were not bound by its approved waiver
request, it has not
demonstrated why it would be entitled to attribute
no residential staff costs
to "room and board" activities in the
assisted living context.
BACKGROUND
Medicaid offers federal funds to states providing medical assistance
to
needy individuals under an approved state plan. Section 1905(a) of
the
Act defines the care and services which may qualify for reimbursement
as
"medical assistance." Section 1915(c) authorizes states by means of
a
"waiver" to provide certain services, not usually considered
medical
assistance, as a less costly alternative to long-term care services
in
an institutional setting. Thus, section 1915(c) authorizes
the
Secretary "by waiver" to permit a state plan to include as
medical
assistance "part or all of the cost of home or community-based
services
(other than room and board) approved by the Secretary which are
provided
pursuant to a written plan of care to individuals" who would
otherwise
need institutional care. Section 1915(c)(1) of the Act
(emphasis
added). The Secretary implemented the waiver authority in
Subpart G of
42 C.F.R. Part 441. Section 441.310 specifies that federal
funding
under an HCBS waiver is not available for "[t]he cost of room and
board"
of the Medicaid recipient except for one limited instance
involving
respite care which does not apply in this case. Section
441.310 defines
"board" for purposes of that section as generally "three
meals a day or
any other full nutritional regimen."
Services which can be included in an HCBS waiver include
habilitation
services and case-management services. See section
1915(c)(4)(B) of the
Act; 42 C.F.R. .440.180. The term habilitation
services "means services
designed to assist individuals in acquiring,
retaining, and improving
the self-help, socialization, and adaptive skills
necessary to reside
successfully in home and community-based settings . . . .
" See section
1915(c)(5)(A) of the Act.
On August 19, 1987, HCFA approved Nebraska's HCBS waiver request.
The
waiver was approved for a three-year period beginning October 1,
1987
and was designed to provide habilitation and case management services
to
eligible Medicaid recipients who would otherwise be placed in
an
intermediate care facility for the mentally retarded (ICF-MR).
The Nebraska Department of Social Services (DSS) is the state
Medicaid
agency, and is responsible for administering ICF-MR care. The
Office of
Mental Retardation of the Nebraska Department of Public
Institutions
(DPI) develops programs and services for the mentally
retarded. On
November 6, 1987, these two Nebraska agencies entered into
an
inter-agency agreement to jointly administer the HCBS services. The
DPI
also entered into agreements with health care providers for delivery
of
these services.
Nebraska's waiver application specified how the "rates" paid to
providers
of home and community-based services would be determined.
It
stated:
The rates paid to providers of home and community based
services
are determined using an estimate of the cost of providing
case
management, transportation, residential services, day
treatment,
and pre-vocational training. (See Appendix J) .
. . Costs for
room and board . . . are
not
included . . . .
Nebraska Exhibit (Ex.) 1(A), p. 15, Section X (emphasis added).
The
rates paid were to be derived from an estimated base for
habilitation
and case management "inflated by the State employees salary
increase at
[an] . . . annual rate, . . . which [was] projected to
equal the cost
increase incurred by providers." Id.
The cross-referenced Appendix J provided the methodology to be used
to
determine the waiver rates. It provided as follows:
The rates are determined for habilitation and case
management.
Each provider has a specific rate based on the estimated
cost of
the service. Habilitation service has a rate for each
need
level . . . for each provider. . . .
The rates are determined in the following way:
The total cost of care was arrived at by using a cost model
that
is based on the staffing required for various services.
The
cost model arrives at a cost per person per year. The
component
costs were determined so that therapies and room and board
could
be eliminated, and the rate for case management could
be
separately determined. This breakout was done by grouping
staff
into the different services and allocating administration
to
it. All of the non-staff operating costs and 10% of the
direct
residential staff were included under room and board . . .
.
Because the costs and, therefore, the rates, are per
person,
non-covered clients will not be included because we will not
be
paying for ineligible clients. Different client types such
as
non-residential, have been excluded. . . . The total cost,
minus
the therapies, room and board and case management,
represented
the cost of "habilitation."
Nebraska Ex. 1(B), Appendix J (emphasis added).
Nebraska attached a cost-breakdown for each region which included
the
total annual staff cost per region for one adult minus the cost
for
therapies, room and board, and case management.
When Nebraska ultimately submitted its claim for federal funding
for
habilitation and case management costs incurred during the
disallowance
period, it failed to reduce total residential staff costs by 10
percent.
HCFA then informed Nebraska that it was disallowing that portion of
its
claim representing 10 percent of total residential staff costs
because
those costs were non-reimbursable room and board costs. HCFA
contended
that Nebraska's claim violated section 1915(c)(1) of the Social
Security
Act and 42 C.F.R. .441.310, which provide that federal funding under
an
HCBS waiver is not available for room and board costs.
On appeal, Nebraska made essentially four different arguments
contesting
the need for a 10-percent deduction from residential staff
costs.
First, Nebraska argued that the staff in assisted residential
living
centers did not perform any room and board services and consequently
no
staff costs should be deducted from waiver claims as
non-reimbursable
room and board. Second, Nebraska asserted that
reimbursement of all of
the residential staff costs would be consistent with
the recommendations
HCFA made in a June 28, 1989 Financial Management Report
(FMR). Third,
Nebraska argued that the waiver's 10-percent
deduction provision had
been modified as a result of an October 27, 1989
meeting between
Nebraska and HCFA officials, where aspects of the cost
calculation
methodology under the HCBS waiver were discussed. Nebraska
asserted that
HCFA was estopped from denying these modifications.
Finally, Nebraska
contended that all room and board costs for the residential
living
centers were covered by the waiver client's SSI payments, and
these
payments were insufficient to cover the adjustment HCFA demanded.
ANALYSIS
Section 1915(c)(1) of the Act and 42 C.F.R. .441.310(a)(3)
expressly
provide that the cost of "room and board" may not be reimbursed
pursuant
to an HCBS waiver. Both the statutory and regulatory exclusion
for the
cost of "room and board" could clearly encompass room and board
services
performed by staff members of assisted residential living
centers. The
sole reference to the exclusion in the legislative history
for section
1915(c) refers specifically to "room and board services."
H.R. Rep. No.
208, 97th Cong., 1st Sess. at 967 (1981). The waiver
application which
Nebraska submitted and HCFA approved expressly required
that a
10-percent deduction be made from residential staff costs
as
non-reimbursable room and board. That percentage deduction
presumably
was intended to provide a shorthand method of identifying the
amount of
non-reimbursable room and board services performed by the
staff. HCFA
argued that Nebraska should be bound by this provision in
its waiver
application and under the circumstances we do not see any reason
why it
should not be. See Florida Department of Health and
Rehabilitative
Services, DAB No. 1100 (1989) at 11, where we held that a
state is
generally bound by the provisions of its waiver request. An
approved
waiver sets the parameters for a state's administration of home
and
community-based services under its state plan and in this sense
operates
as the equivalent of the state plan itself. Thus, we conclude
that
HCFA's reliance on the approved waiver request was
altogether
appropriate here. Moreover, as we discuss below, even if
reliance on
the approved waiver request was not appropriate, none of
Nebraska's
arguments persuade us that the 10-percent allocation should
be
disregarded.
Nebraska first argued that none of the services performed by
the
residential staff were for room and board because the staff had to
be
available to assist the residents on a 24-hour basis and because
the
staff had the responsibility of training residents to become
more
self-sufficient in tasks of everyday living. However, as HCFA
argued,
Nebraska never even provided the Board with a specific breakdown of
the
responsibilities of the residential staff and never demonstrated
that
those responsibilities did not involve any room and board
services.
Indeed, Nebraska was aware of the responsibilities of the staff at
the
time that it included the 10-percent deduction for room and board in
its
waiver application. It did not contend or demonstrate that
these
responsibilities had in any way changed over time. It strikes us
as
reasonable to assume that residential staff in assisted
residential
living centers for the mentally retarded might perform services
relating
to the provision of meals or the maintenance of the centers.
Any number
of tasks could conceivably be performed: shopping for food,
food
planning and preparation, kitchen cleanup, housekeeping chores,
building
maintenance, etc.
Moreover, we see no reason to conclude that no room and board
services
were performed simply because the residential staff had to be on
duty
24-hours a day or because the staff trained residents to be
more
self-sufficient. The 10-percent allocation of costs is a
relatively
small proportion of total costs and might reasonably include room
and
board services that do not involve any element of training
or
supervision. A small allocation might be appropriate even if room
and
board services are provided as an integral part of client training or
as
part of the overall 24-hour supervision of the residences.
Nebraska
never argued that the residential staff were not in any way involved
in
the preparation of meals or the maintenance and cleaning of
the
residences. Thus, we conclude that Nebraska failed to demonstrate
that
none of the services performed by the residential staff
were
attributable to room and board. This is particularly true in light
of
the approved provision in its waiver providing for a
10-percent
allocation.
Nebraska's second argument involves recommendations in a June 28,
1989
Financial Management Report (FMR) issued by HCFA. The FMR
concerned a
period that preceded the disallowance period at issue. It
reported that
Nebraska's claim for reimbursement for this earlier period
exceeded
allowable costs. As a result, it directed Nebraska to take
certain
measures to avoid such discrepancies in the future. The FMR
made
recommendations on how Nebraska could reconcile ". . . actual
allowable
costs to the State's claims for that period, [so that] only
allowable
expenditures are claimed in accordance with the Federal
regulations."
FMR, p. 1 (Nebraska Ex. 6). Nebraska interpreted this
directive to mean
that the 10-percent deduction was no longer
necessary. It concluded
that HCFA's advice to use "actual allowable
costs" meant ignoring the 10
percent room and board allocation for staff time
attributable to room
and board services. This was a misinterpretation
for two reasons.
First, the purpose of the FMR was to advise Nebraska to take greater
care
in ensuring that its estimates of actual costs were accurate.
It
obviously was never intended to be a directive for Nebraska to
eliminate
the 10-percent room and board deduction. HCFA's
recommendations in the
FMR were made in response to inaccurate billing by
Nebraska for services
provided during a period which preceded the
disallowance period.
Nebraska had not properly accounted for applicable
credits in
calculating its request for federal funding, and as a result its
actual
costs were far from the estimate it had given. Thus, it was
HCFA's
concern for accuracy, and clearly not a desire to change the terms
of
the waiver, which prompted its recommendation for "corrective
actions."
Second, Nebraska improperly confused the 10-percent allocation for
room
and board services with the cost estimates that were the subject
of
concern in the FMR recommendations. As we just mentioned, HCFA
was
concerned that Nebraska had used inaccurate estimates in computing
its
costs. HCFA wanted Nebraska to change its method for computing
costs so
that its claims would be more accurate in the future and would
reflect
only actual allowable costs. However, the room and board
deduction in
the waiver differs in nature from the estimates that caused
HCFA's
concern. The deduction allocates the percentage of total
residential
staff costs that should be attributed to staff time spent
performing
non-reimbursable room and board services. Thus, the
deduction is not
the type of estimate referred to in the FMR (which did not
provide
accurate computations of actual costs) and in any event, HCFA
never
advised Nebraska to change the waiver deduction in the FMR or
elsewhere.
In a related argument, Nebraska suggested that when it removed the
costs
of supported residential living centers, in computing its claims
for
assisted residential living centers (as part of its implementation
of
the FMR), it effectively complied with the 10-percent waiver
deduction.
We fail to see how Nebraska's removal of these costs has any
bearing on
the 10-percent deduction issue for the assisted centers.
Supported
residential living costs are not funded by the HCBS waiver and
therefore
were properly disregarded in the methodology for computing claims
under
the waiver. In fact, it is not clear to us why costs for
supported
residences had been included in the computation for waiver claims
to
begin with. The removal of these costs should not have any bearing
on
residential staff costs for assisted residential living centers and
does
not serve as a means of implementing the 10-percent deduction of
these
costs. 1/ Nebraska's third argument concerned an alleged modification
of
the waiver during a meeting between state and federal officials
on
October 27, 1989. Nebraska alleged that HCFA officials agreed
to
disregard the room and board deduction at the Kansas City
meeting
between HCFA representatives and representatives of the
Nebraska
Department of Public Institutions. According to Nebraska, it
relied
upon this modification of the waiver, and HCFA was estopped from
denying
the requested claim.
The evidence presented as to what transpired at the meeting between
the
two parties is conflicting, and does not demonstrate a clear intent
by
HCFA to modify the waiver requirements. Nebraska asserted that
its
representatives told HCFA officials that "all allowed staff costs
for
assisted residential living would be included in the [claim], but
these
calculations would not include any deduction for room and board
costs."
Nebraska Ex. 9. According to Nebraska, HCFA's representatives
acted on
HCFA's behalf and agreed to Nebraska's new proposed
methodology. HCFA
contended that their officials only agreed that
assisted and supported
residential staff costs should be separated because
the supported
residential staff costs did not fall under the waiver.
HCFA asserted
that it "did not agree that staff costs related to recipient
room and
board should not be deducted from assisted residential living costs
. .
. ." HCFA Br., p. 6-7. It contended that Nebraska's
representatives
merely stated that only actual allowable costs for assisted
residential
living would be included under the claim. HCFA Response to
Nebraska
Reply Br., p. 11. This statement alone would mean that
Nebraska had
still intended to make the operative deduction. Because
the affidavits
submitted on both sides presented two very different accounts
of what
occurred at this meeting, we cannot find a definitive and
binding
agreement to modify the original HCBS waiver. 2/ Clearly, where
the
original waiver request and its approval must both be made in
written
form by the appropriate officials, any approved modification must
also
be in writing. There was absolutely no evidence in the record of
an
authorized written approval for a modification for the
disallowance
period at issue.
As for Nebraska's estoppel argument, it must fail at the outset
since
there is insufficient evidence that HCFA officials authorized
Nebraska
to modify or disregard the 10-percent staff cost deduction required
by
the waiver. Furthermore, even if Nebraska had demonstrated that it
could
meet all three of the traditional elements necessary to establish
a
claim for estoppel (which it clearly did not), it could not
have
prevailed against the federal government without at least a showing
of
some affirmative misconduct by the government. Office of
Personnel
Management v. Richmond, 496 U.S. 414 (1990); Heckler v. Community
Health
Services of Crawford County, Inc., 467 U.S. 51, 59-61 (1984);
Schweiker
v. Hansen, 450 U.S. 785 (1981). Nebraska made no allegation
whatsoever
that could amount to affirmative misconduct. Indeed, in the
absence of
any persuasive evidence from Nebraska to demonstrate that no
staff
services qualified as room and board, HCFA arguably would have
violated
the statute and the regulations if it had approved the
alleged
modification.
Finally, Nebraska argued that all room and board costs for the
residential
living centers are supposed to be covered by the waiver
clients' Supplemental
Security Income (SSI) payments, and that these
payments were insufficient to
cover the adjustment HCFA had demanded.
This argument is irrelevant to the
central issue raised here. That
issue is whether room and board costs
were completely deducted from the
waiver claims, and not how these costs were
ultimately funded. The
federal government may not pay for room and
board costs through a
Medicaid waiver, and it is irrelevant to this appeal
whether or how
Nebraska ultimately receives its reimbursement for these
costs. 3/ In
any event Nebraska did not here allege or demonstrate that
all of the
waiver clients were even eligible for SSI.
Conclusion
On the basis of the foregoing analysis, we uphold the disallowance
as
revised.
________________________ M. Terry Johnson
________________________ Norval D.
(John)
Settle
________________________ Donald
F.
Garrett Presiding
Board Member
1. Nebraska asserted that it removed 11 percent of "staff" costs
when
it removed all costs associated with the supported residential
living
centers. Nebraska Supp. Br., p. 4. Nebraska did not
substantiate,
however, that it had removed any of the 10 percent of
residential staff
costs incurred in assisted residential living centers as
required by the
waiver.
2. Nebraska submitted affidavits from four different state
participants
who asserted that HCFA agreed to modify the waiver. Five
HCFA
participants alleged in affidavits that HCFA did not agree that
Nebraska
could "ignore . . . the necessary deduction for room and board . . .
."
HCFA Ex. 2, p.2.
3. Nebraska also contended that if room and board costs had
been
included in its cost calculation those costs would have represented
22
percent of total costs. Nebraska Supp. Br., p. 5. Again,
however, we
question the relevance of Nebraska's argument. The statute
and
regulations prohibit reimbursement for room and board costs
regardless
of how high the percentage of those costs to total costs
may