Note 20. Contingencies Topics on This Page
Contingent Liabilities:The HHS is a party in various administrative proceedings, legal actions, and tort claims which may ultimately result in settlements or decisions adverse to the Federal Government. Management, in consultation with legal counsel, has determined that it is reasonably possible that certain claims may result in an adverse outcome to the Department. The HHS has accrued contingent liabilities where a loss is determined to be probable and the amount can be estimated. Other contingencies exist where losses are reasonably possible, and an estimate can be determined or an estimate of the range of possible liability has been determined. The Medicaid amount for $1,702 million consists of Medicaid audit and program disallowances of $463 million and $1,239 million, respectively, for reimbursement of State plan amendments. Contingent liabilities have been established as a result of Medicaid audit and program disallowances that are currently being appealed by the States. In all cases, the funds have been returned to CMS. The CMS will be required to pay these amounts if the appeals are decided in the favor of the States. In addition, certain amounts for payment have been deferred under the Medicaid program when there is a reasonable doubt as to the legitimacy of expenditures claimed by a State. There are also outstanding reviews of the State expenditures in which a final determination has not been made. Examples of these reviews are the Office of Inspector General Audits, Focused Financial Management Reviews, and Quarterly Medicaid Statement of Expenditures Report (Form CMS-64) reviews. The appropriate Center for Medicaid & State Operations (CMSO) Regional Office is responsible for reviewing the findings and recommendations. The monetary effect of these reviews is not known until a final decision is determined and rendered by the CMSO Director. The outcome of these reviews is that CMS could be owed funds. As of September 30, 2007, CMS recorded $1,742 million for a contingent liability for asserted and unasserted claims that could be owed to States arising from the payment of claims by State Medicaid Programs for beneficiaries who allegedly were eligible for Medicare. In FY 2006, CMS believed this contingent liability to be reasonably possible and disclosed it in the footnotes. On September 24, 2007, one state asserted a claim in a civil action brought in federal district court. The agency intends to defend against this claim. Because appropriation law requires Congress to authorize the transfer of funds out of the Medicare trust funds into an appropriation account, the Medicare trust funds cannot reimburse the Health Program accounts in the general fund of the Treasury absent Congressional authorization. The CMS does not intend to seek such Congressional authorization and there will be no transactions recorded between the trust funds and the Health Programs’ accounts in the general fund. The CMS has accrued $667 million as of September 30, 2007, for a contingent liability to providers for previous years’ disputed cost report adjustments for disproportionate share hospitals. Vaccine Injury Compensation Program (VICP):The VICP is administered by HRSA and provides compensation for vaccine-related injury or death. The $221 million VICP liability represents the estimated future payment value of injury claims outstanding for VICP as of September 30, 2007. Appeals at the Provider Reimbursement Review Board:Other liabilities do not include all provider cost reports under appeal at the Provider Reimbursement Review Board (PRRB). The monetary effect of those appeals is generally not known until a decision is rendered. As of September 30, 2006, there were 5,886 PRRB cases (5,737 in FY 2005) under appeal. A total of 2,901 new cases(2,422 in FY 2006) were filed in FY 2007. The PRRB rendered decisions on 119cases(85 in FY 2006) in FY 2007 and 2,024 additional cases(2,188 in FY 2006) were dismissed, withdrawn or settled prior to an appeal hearing. The PRRB gets no information on the value of these cases that are settled prior to an appeal hearing. Since data is available for only the 119cases that were decided in FY 2007, a reasonable liability estimate cannot be projected for the value of the 6,644 cases(5,886 in FY 2006) remaining on appeal as of September 30, 2007. As cases are decided, the settlement value paid is considered in the development of the actuarial liability estimate. Obligations Related to Cancelled Appropriations:Payments may be required of up to one percent of current year appropriations for valid obligations incurred against prior year appropriations that have been cancelled pursuant to the National Defense Authorization Act of FY 1991 (Public Law 101-150). The total payments related to cancelled appropriations are estimated at $1,358million and $1,009 million as of September 30, 2007 and 2006, respectively. Report Date: November 15, 2007
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