GAB Decision 193
June 30, 1981 Missouri Department of Social Services; Docket No.
79-230-MO-HC Settle, Norval; Teitz, Alexander Garrett, Donald
The Missouri Department of Social Services (Missouri, State)
requested reconsideration of a disallowance by the Health Care Financing
Administration (HCFA, Agency) of $204,095 in amounts claimed for Federal
financial participation (FFP) in the cost of services to persons alleged
by the State to be eligible, pursuant to a court order, for Medicaid
under Title XIX of the Social Security Act. The request for
reconsideration covers claims submitted in reports for the quarters
ended March 31, June 30, and September 30, 1978.
Issues
Missouri initially denied Medicaid benefits to certain Supplemental
Security Income (SSI) recipients. After litigating the issue of
Medicaid eligibility in federal court, the State was ordered to pay for
medical services provided to the SSI recipients retroactive to the date
of the July 1975 district court decision, even if that meant making
Medicaid payments directly to the recipients.
The principal issues are whether HCFA may deny FFP:
1) In payments for services during the period between the original
district court decision in July 1975 and the October 1, 1977 effective
date of a State Plan amendment to implement that decision;
2) In payments made directly to recipients; and
3) In payments for services rendered by providers which did not have
provider agreements with the State at the time.
The State concedes that it must document that it made individual
determinations of eligibility and that the payments were for services
authorized under Medicaid.
(2) The Board here decides that FFP is available in payments for
services beginning July 1975 provided individual determinations of
eligibility were made and the payments were only for care and services
authorized under Medicaid. Payments made directly to recipients are
covered but not payments to non-participating providers.
The decision is based on 15 documents listed in an appendix to this
decision.
Background
This case has its origin in court proceedings interpreting federal
legislation intended to ease the potential burden on the states caused
by the enactment of the SSI program. SSI is a federally administered
program for the aged, blind, and disabled under Title XVI of the Social
Security Act.
Subsequent to the commencement of SSI on January 1, 1974, states
wishing to qualify for FFP under the Medicaid program were required to
include in their state Medicaid plan, as categorically needy, recipients
of SSI benefits. /1/ This potentially increased the number of Medicaid
eligibles since the SSI program used broader eligibility requirements
than some state plan programs SSI replaced. Recognizing that the states
would bear a part of any increased cost, Congress provided in section
1902(f) of the Social Security Act (42 U.S.C. 1396a(f)):
(No) State . . . shall be required to provide medical assistance to
any aged, blind, or disabled individual (within the meaning of Title
XVI) . . . unless such State would be (or would have been) required to
provide medical assistance to such individual . . . had its plan for
medical assistance approved under this title and in effect on January 1,
1972, been in effect in such month. . .
(3) Under Missouri law as of January 1, 1972, any person receiving
State General Relief (GR) benefits also was given State-funded medical
assistance as part of those benefits. Sec. 208.151, Revised Statutes of
Missouri (R.S. No.). In 1973 the State amended this provision to
require that a person eligible for GR benefits had to first apply for
SSI benefits. If the person were found eligible for SSI, he or she
could not receive GR benefits. Secs. 208.015, 208.030, R.S. Mo.
Mrs. Hariece Lewis applied to the State for medical assistance in
February 1974. She was at that time receiving SSI benefits based on a
disability. The State determined that Mrs. Lewis did not meet the
standards for Medicaid eligibility under OAA, AB, or APTD as in effect
on January 1, 1972, and denied her application.
The State determined Mrs. Lewis did meet the standard for General
Relief benefits, but pursuant to the 1973 State law she was also denied
GR medical assistance because as a recipient of SSI she was ineligible
for GR genefits. RR, pp. 71-72.
Mrs. Lewis then brought suit in federal district court on behalf of
herself and all SSI recipients similarly situated. The plaintiffs
prevailed, /2/ and, pursuant to the district court's orders, in (4) June
1977 Missouri began to accept the SSI determination of disability in
lieu of the APTD definition to establish Medicaid eligibility. However,
the State was found to have otherwise implemented the district court's
orders contrary to that court's intent and on November 30, 1977, the
district court found the Director of the Missouri Division of Family
Services to be in contempt for not providing medical assistance coverage
retroactive to July 1975. /3/ The court ordered the Director to:
(b) Immediately review the records . . . and immediately redetermine
the eligibility of each and every such (plaintiff's) class member not
now receiving Medical Assistance. All class members shall immediately
be granted Medical Assistance coverage. . .
(d) . . . With respect to paid medical bills . . . the defendant
shall immediately provide a direct cash reimbursement to the claimant
for the amounts paid to the vendors by the claimant.
Request for Reconsideration, Exhibit F, pp. 1, 4, 5.
On December 21, 1977 Missouri proposed an amendment to its State plan
removing the APTD definition of disability because the SSI disability
determination was being used. RR, pp. 38-40. /4/ The amendment was
approved January 23, 1978, but was effective October 1, 1977, pursuant
to 45 CFR 205.5(b) (1977) and the State's request.
(5) In a memorandum to its employees dated January 18, 1978, the
State noted its understanding that the court:
has ordered us to reimburse the claimant directly for paid bills and
to pay the vendor (whether a participating vendor or not) for services
whether or not they are covered by Title XIX.
The State also observed that federal regulations prohibited payment
to non-participating vendors or for non-covered services. Although the
State noted it was appealing that part of the contempt order, it urged
its employees to "make every effort to comply" with the order. Exhibit
D, p. 3, Request for Reconsideration. The record does not reflect the
outcome of the appeal.
Discussion
Retroactivity
Missouri argues that the Medicaid eligibility of these SSI recipients
should be retroactive to July 1975, in keeping with the court order and
45 CFR Sec. 205.10(b)(3) (hereinafter referred to as Sec. 205). /5/ HCFA
contends that Sec. 205 does not require FFP for payments to those
recipients prior to October 1, 1977, the effective date of the State
Plan amendment, because the decision of the court was "erroneous."
March
17, 1981 Supplemental Response, p.2. HCFA claims its position is
consistent with this 1973 opinion by the HHS Office of the General
Counsel (in pertinent part):
(It) is to be noted that the provision ($S 205) deals only with
situations where the State has the option all along, under Federal
policy, of including the groups or the assistance in its plan; it does
not extend to payments that could not be included in the plan because
they are not within the scope of the Federal program.
There is no dispute here that the State could have included SSI
recipients in its Medicaid plan as of July 1975, insofar as Federal
policy was concerned. Contrary to HCFA's contention, under the 1973
General Counsel opinion and Sec. 205, the State is entitled to FFP for
payments retroactive to July 1975 because such payments are within the
scope of the program.
We do not overlook that the State Medicaid Plan did not authorize
such payments prior to October 1, 1977, the effective date of the plan
(6) amendment implementing the court order. However, under 45 CFR Sec.
205.5(b), FFP may be available sooner than the effective date of a plan
amendment if other regulations to provide. /6/ We find that 45 CFR Sec.
205.10(b)(3) does provide that if a court order directs that payments be
made as of an earlier date, FFP is available for payments so made.
We reach this result even though neither HCFA nor Missouri agree with
the basis for the court's decision. Indeed, here notwithstanding the
opinion of the parties on the correctness of the district court's
decision, the Supreme Court refused to review the affirmance by the
court of appeals. In any event, the test is not whether the court ir
right or wrong, but whether it ordered the payments and the payments are
otherwise within the scope of the program. That test is met here
insofar as eligibility to July 1975 is concerned. In New York
Department of Social Services, Decision No. 181, May 29, 1981, the Board
applied Sec. 205 to a court order directing the State to continue
Medicaid payments to a nursing home whose provider agreement had been
terminated, pending a hearing requested by patients on the issue of
their transfer to other facilities. Noting that the Supreme Court
subsequently decided that a patient did not have a due process right to
such a hearing, the Board held that Sec. 205 applied nonetheless to the
court order issued prior to the Supreme Court decision.
Payments Made Directly to Recipients
The State initially sought to reimburse individuals who had already
paid bills for care and services by seeking out the providers, but in
the contempt proceeding the court ordered that the State pay recipients
directly in retroactive situations. HCFA contends that FFP is not
available because payments to individuals are not authorized by either
the State Medicaid plan or federal statutory and regulatory provisions.
Missouri does not dispute that under its State Medicaid plan it may
not reimburse Medicaid recipients directly. This state plan requirement
derives from 42 USC Sec. 1396d(a) and 42 CFR Sec. 449.31 and Sec.
449.32. /7/
(7) However, the court ordered the State to pay individuals directly
in lieu of having those individuals be reimbursed by providers.
Applying the analysis that was applied to retroactive payments above, we
find that such court ordered payments are not outside the scope of the
Medicaid program simply because the court bypassed what would have been
a time consuming and burdensome procedure for recipients.
The Agency itself recognized this principle of flexibility in a
regulatory amendment adopted September 29, 1978 (43 Fed. Reg. 45253)
permitting states to make payments "in accordance with a reassignment by
a court order." 42 CFR Sec. 447.10(e). Under Sec. 205, even prior to
September 29, 1978, FFP would be available if a court reassigned a
provider's claim to a recipient. Constructively, that is what occurred
in Lewis and we find that FFP is available for such payments. /8/
Payments to Providers Without Valid Agreements
The State also relies on Sec. 205 and the court order to justify
payments to providers which did not have valid provider agreements with
the State for the retroactive period. HCFA argues that such payments
are prohibited by 42 U.S.C. Sec. 1396a(27) and 42 CFR Sec. 450.21. /9/
The State's reliance on the court order is misplaced. The court did
not specifically direct Missouri to pay providers without provider
agreements. The State might have inferred such a direction from the
tenor of the contempt order, but that is not enough to bind the Agency
to pay FFP under Sec. 205.
The court dealt with the Medicaid eligibility of SSI recipients, not
the qualifications of the provider.Moreover, the court did not even
constructively validate or set up a provider agreement. These
circumstances distinguish this case from Ohio Department of Public
Welfare, Decision No. 173, April 30, 1981, where the Board held that FFP
was available for (8) court ordered payments during an appeal by a
provider from the nonrenewal or termination of its provider agreement.
Discussing the application of Sec. 205, the Board concluded:
"(Within) the scope" was intended to and does set limits . . . (b)ut
these limits are drawn from regulatory requirements which are not the
subject of the court's oder (as opposed to those which may be affected).
. .
See also New York Department of Social Services, Decision No. 181,
May 29, 1981, and 45 Fed. Reg. 24878 (April 11, 1980).
In Ohio and New York the Board found that the courts addressed the
subject of the need for a provider agreement by constructively extending
the prior agreement. Here the court did not deal with the provider
agreement and payments to nonparticipating providers would not be within
the scope of the Medicaid program as required by Sec. 205. /10/
Individual Determinations of Eligibility
Although HCFA relies on other factors as a basis for is disallowance,
the notification of disallowance discusses chiefly the alleged failure
of the State to make individual determinations of eligibility. During
the February 24, 1981 telephone conference, the State conceded that it
had the burden of proving eligibility. HCFA agreed, subject to further
clearance, that the State could meet this burden by showing that a
person's name appeared on the SSI list of eligibles for the period in
question. Confirmation of Telephone Conference dated February 25, 1981.
In a March 17, 1981 Supplemental Response, HCFA did not comment on the
specific means of proof suggested at the telephone conference, but
insisted that the Agency must be able to ascertain that the State paid
claims for "only those individuals who were eligible except for the
disability determination." Page 5. HCFA would do this by a sample of
individual files drawn from lists submitted by Missouri of all
claimants.
(9) Payments for Care and Services Not Covered
The notification of disallowance also listed a finding that the State
made payments without the use of "edit screens" to ensure that the
payments were only for care and services authorized under Medicaid. The
State at first contended that it was entitled to FFP without having to
prove that payments were only for covered services (citing Sec. 205 and
the court order), but in the February 24 telephone conference the State
abandoned this argument. Accordingly, we do not reach this issue. We
note, however, that the court order did not specifically require the
State to use Medicaid funds to pay for services not covered under
Medicaid.
Laches
The State argues in its Request for Reconsideration that HCFA "is
barred by the equitable principle of laches" from making this
disallowance because the Agency declined to participate in Lewis and
failed "to actively object" to the court orders although it agreed
with
Missouri's position in the case. On HCFA's part, the March 1980
response points to Missouri's failure to seek joinder of the Agency as a
party (pp. 8-9).
We find that laches does not supply. Missouri does not cite any
cases in support of its contention, and case law requires a conclusion
to the contrary. A relevant discussion is contained in Concerned About
Trident v. Schlesinger, 400 F. Supp. 454 at 478-479 (D.D.C. 1975).
Noting that "the doctrine of laches . . . is essentially concerned with
a delay by the plaintiff which induces a change in the defendant's
position," the court recounted:
(There are two essential elements of the doctrine of laches: lack of
diligence by the plaintiff and injurious reliance thereon by the
defendants. Lathan v. Volpe, 455 F. 2d 1111, 1122 (9th Cir. 1972). The
crucial issue of the first element, unreasonable delay, is knowledge,
i.e., did the plaintiff knowingly sleep on his rights. Ritter v. Rohm &
Haas Co., 271 F. Supp. 313, 347 (S.D.N.Y. 1967). As to the second
element, injurious reliance by the defendant, there are two kinds of
prejudice which would support a defense of laches: where the
plaintiff's delay has resulted in a loss of evidence or unavailability
of witnesses that would support defendant's position; and where the
defendant has changed his position in a manner which would not have
occurred if the plaintiff had not
10 delayed. Tobacco Workers Int. U. Local 317 v. Lorillard Corp.,
448 F. 2d 949, 958 (4th Cir. 1971). See Powell v. Zucker, (366 F. 2d
634 (D.C. Cir. 1966)) supra . . . at 638.
The State contends in its January 15, 1981 submission that if it had
known that FFP would not be available, it might not have appealed the
Lewis case. Page 6. Presumably, by enrolling SSI recipients in
Medicaid in 1975 the State would have avoided the problems with payments
that generated the disallowance and this appeal. We do not agree that
this meets the test of injurious reliance, nor does it otherwise excuse
the State from having to meet Medicaid requirements.
Similarly, the State has not shown a lack of diligence by the Agency.
HCFA could not have known in 1975 that the court would order the State
to make payments contrary to federal regulations. Moreover, the State
has an obligation of its own to know and observe the Medicaid rules.
Conclusion
We have held in this case that FFP is available:
(1) For services to persons who would have been eligible on July 1,
1975 and thereafter had the State Plan read as it did with the amendment
effective October 1, 1977; and
(2) Where the State has made the required individual determinations
of eligibility.
We have also held that FFP is available even where retroactive
payments for services to the class of persons made eligible by the
October 1977 amendment to the State Plan were made directly to those
persons, provided:
(1) The care and services were rendered by a provider with a valid
agreement; and
(2) Were authorized under the Medicaid program.
FFP is not available for payments to providers which did not have a
valid agreement in effect with the State at the time the services were
rendered.
(11) Thus the disallowance is sustained in part and reversed in part.
HCFA will have to calculate the effect on the amount disallowed after
the State has had an opportunity to show what payments are entitled to
FFP in accordance with the above. /1/ Prior to 1974, states qualified
for FFP under the Medicaid program as long as a state made
eligible as categorically needy those persons meeting the standards for
the Old Age Assistance (OAA), Aid to Families with Dependent Children
(AFDC), Aid to the Blind (AB), Aid to the Permanently and Totally
Disabled (APTD), and Aid to the Aged, Blind, or Disabled (AABD)
programs. FFP was also available if a state made eligible as "medically
needy" persons who met the physical standards for those programs and had
insufficient income and resources to pay specified medical expenses
although financially too well off to qualify as categorically needy.
/2/ In its July 9, 1975 decision, the district court held that on
January 1, 1972 Missouri's "approved medical assistance plan" required
it to provide medical assistance to all recipients of OAA, AFDC, AB,
APTD, and General Relief. On July 22, 1975, the court ordered the State
to pay the medical assistance claims of persons who were found to meet
the standards of eligibility for SSI and who also met the standards of
the General Relief program under Missouri law. RR, pp. 68-69, 74. The
State appealed, but in April 1976 the court of appeals affirmed. The
State petitioned the Supreme Court for a writ of certiorari but the
Court did not take the case. At the invitation of the Supreme Court, the
Department of Justice had filed a memorandum as amicus curiae. The
Department had taken the position that the lower courts were in error
but had opposed certiorari on the ground that the situation was unique
to Missouri. Earlier, Missouri had urged the (then) Department of
Health, Education, and Welfare (HEW) to participate as amicus curiae in
the court of appeals, but HEW chose not to do so. The case is cited as
Lewis v. Shulimson, 400 F. Supp. 807 (E.D. Mo. 1975), affirmed 534 F.
2d 794 (8th Cir. 1976), cert. denied sub nom Gourley v. Lewis, 430 U.S.
940 (1977). /3/ Among other actions, the State had made coverage
under the court order depend on the return of a notification form by
medical assistance claimants. For bills which claimants had already
paid, they were required to seek reimbursement from the provider, on the
condition that it was a participant in the Missouri Vendor Program.
Request for Reconsideration, Exhibit C. /4/ The definition
removed read: Permanent and total disability is established by medical
examination. "Permanent and total disability means that the individual
has some physical or mental impairment, disease, or loss from which
recovery or substantial improvement cannot be expected, and which
substantially precludes him from engaging in any occupation within his
competence, such as holding a job." /5/ 45 CFR Sec. 205.10(b)(3)
makes FFP available for: Payments of assistance within the scope of
Federally aided public assistance programs made in accordance with a
court order. /6/ 45 CFR Sec. 205.5(b): Except where otherwise
provided, Federal financial participation is available in the additional
expenditures resulting from an amended provision of the State plan as of
the first day of the calendar quarter in which an approvable amendment
is submitted or the date on which the amended provision becomes
effective in the State, whichever is later. /7/ These and other
CFR citations are to the 1977 edition of the Code of Federal
Regulations. The parties in briefing sometimes cited later editions
with different codifications. /8/ This conclusion is strengthened by
Agency remarks in the September 30, 1968 Handbook Transmittal
No. 47 that an identically worded regulatory predecessor to Sec. 205
makes FFP available: where a court orders payments that would not
otherwise be made under the State plan, but which are within the scope
of the Federal statute. . . State Response January 15, 1981, Exhibit A.
/9/ HCFA actually cited 42 CFR Sec. 431.107(b) (1978), an identical
provision. /10/ The State points out that HCFA's notification of
disallowance was based solely on the State's alleged failure to make
individual determinations of eligibility and argues that the
disallowance cannot be sustained on any other basis. The other issues
raised by HCFA in this appeal were referred to in the notification and
Missouri has had ample opportunity to brief them during the appeal.
Under such circumstances, we believe that these issues are properly
before the Board.
OCTOBER 22, 1983