DAB Decision 78
January 31, 1980 Michigan Department of Social Services; Docket Nos.
78-27-MI-HC, 78-116-MI-HC, 79-45-MI-HC, 79-46-MI-HC; Decision No. 78
Kelly, Bernard e.; Malone, Thomas Mason, Malcolm S.
SUMMARY
(The following summary is prepared on the responsibility of the
Executive Secretary of the Board as a convenience to the interested
public. It is not an official part of the decision and has not been
reviewed by the Panel. Similar official summaries of earlier cases
appear in 45 CFR Part 16, Appendix.)
This decision and our Decision Nos. 76 and 77 involve parallel issues -
whether non-expendable personal property must first be capitalized and
depreciated before it is subject to the appropriate rate of FFP. For
the reasons stated fully in Decision No. 76, the Board affirmed the
disallowances.
The question whether the Board lacks the jurisdiction or authority to
determine whether a formally promulgated regulation of HEW contradicts
the Social Security Act was not reached.
DECISION
These are cases that are being considered jointly because they emanate
from the same HEW agency and involve the same issue - whether the State
may receive Federal financial participation (FFP) at the rate of 50% of
the full value of non-expendable personal property which is purchased as
part of an indirect cost pool and allocated in part to the Health Care
Financing Administration (HCFA) or whether the value of the property
must first be capitalized and depreciated. The principal issue in these
cases is parallel to that discussed in our decisions in 78-70-MI-CS,
79-159-Ml-CS (Decision No. 76), and 78-158-MI-SS (Decision No. 77).
Procedural Background
By letters dated April 19, 1978 (78-27-Ml-HC), August 14, 1978
(78-116-MI-HC), February 8, 1979 (79-45-MI-HC), and February 12, 1979
(79-46-MI-HC), Samuel E. Martz, HCFA, (78-27-MI-HC, 78-116-MI-HC), and
Richard W. Heim, Director, Medicaid Bureau (79-45-MI-HC, 79-46-MI-HC)
notified the Michigan Department of Social Services (DSS) of
disallowances of $9,792 (78-27-MI-HC), $5,762 (78-116-MI-HC), $13,027
(79-45-MI-HC), and $2,512 (79-46-Ml-HC) for the cost of equipment and
furnishings in excess of $300 per unit purchased under Title XIX of the
Social Security Act for the quarters ended December 31, 1977
(78-27-MI-HC), March 31, 1978 (78-116-MI-HC), June 30, 1978
(79-45-Ml-HC), and September 30, 1978 (79-46-MI-HC). The DSS filed
applications for review on May 16, 1978 (78-27-MI-HC), September 18,
1978 (78-116-Ml-HC), and March 8, 1979 (79-45-MI-HC, 79-46-Ml-HC).
Since there had not been requests for reconsideration before March 6,
1978, the disallowances having been made after that date, the appeals
proceeded under 45 CFR Part 16 (1978).
An Order to Show Cause was issued on September 26, 1979 in all four
cases, and the responses to the Orders for 78-70-MI-CS and 78-158-MI-SS
were incorporated into the files for these four cases, without
objections from the parties.
Relevant Statutory and Regulatory Provisions
Title XIX of the Social Security Act (Section 1901 et seq.) (Medicaid)
established a Federal-state effort to provide "medical assistance"
to
families with dependent children and to aged, blind, or disabled
individuals whose income and resources are insufficient to meet the cost
of necessary medical services. Section 1903(a) states:
'(Page 02 - 78 - 01/31/80)'
From the sums appropriated therefor, the Secretary... shall pay to
each State which has a plan approved under this title, for each
quarter... (7) an amount equal to 50 per centun of the remainder
of the amounts expended during such quarter as found necessary by
the Secretary for the proper and efficient administration of the
State plan.
The general implementing regulations for the Medicaid program can be
found at 45 CFR 201 et seq. (October 1, 1977). Section 205.160
addresses the treatment of non-expendable personal property.
45 CFR 205.160(a)(1) states that items of non-expendable personal
property costing less than $5000 per unit may be subject to FFP in full
at the option of the Title XIX agency in the State. This is subject to
an exception in Section 205.160(a)(3) which concerns the treatment of
property acquired by organizational elements treated as indirect cost
centers or pools in an SRS cost allocation plan. In these situations,
non-expendable personal property costing over $300 must first be
capitalized and depreciated (or be subject to a use allowance). The
grantee receives FFP at a rate equal to 50% of the depreciation expense.
45 CFR 74.132 defines non-expendable personal property as:
"tangible personal property having a useful life of more than one
year and an acquisition cost of $300 or more per unit..."
45 CFR 201.5(e) states that 45 CFR Part 74, except for Subparts G
(Matching and Cost Sharing) and I (Financial Reporting), is applicable
to all Title XIX grants.
Both the statutory and regulatory provisions relevant in these cases
enunciate the same basic principles as those provisions relevant to our
Decision Nos. 76 and 77.
Issues Raised by the Parties
The arguments raised by the State are the same as those raised in
Decision Nos. 76 and 77.
In response to the State's argument that 45 CFR 205.160(a)(3)
contradicts Section 1903(a) of the Social Security Act and is therefore
invalid, the Agency has argued that the Board lacks "jurisdiction or
authority to alter, amend or revoke any formally promulgated policies"
of HCFA. A determination on this question is unnecessary under the
circumstances of these appeals since we conclude that 45 CFR 205.160(
a)(3) is a reasonable interpretation of the statute.
'(Page 03 - 78 - 01/31/80)'
Conclusion
It is our opinion, for the reasons stated fully in Decision Nos. 76 and
77, that 45 CFR 205.160(a) (3) does not contradict the wording of
Section 1903(a) of the Social Security Act and that the regulation
imposes a commonsense method for payment of the appropriate federal
share of costs for non-expendable personal property.
Accordingly, we deny the appeals and affirm the disallowances of $9,792,
$5,762, $13,027, and $2,512. This decision constitutes the final
administrative action on these matters. D11 June 5, 1992