DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Florida Department DATE: September 18, 1989 of Health and
Rehabilitative Services Docket No. 88-130 Decision No.
1100
DECISION
The Florida Department of Health and Rehabilitative Services (Florida,
State) appealed the disallowance of $1,475,929 in federal financial
participation (FFP) claimed under Title XIX (Medicaid) of the Social
Security Act (Act) for the period May 15, 1985 through December 31,
1986. The disallowance was based on a determination by the Health Care
Financing Administration (HCFA, Agency) that Florida had improperly
claimed FFP in expenditures for services for developmentally disabled
individuals age 18 or under as part of its Medicaid program waiver
permitting coverage of home and community-based care (HCBC) services.
A state is able to provide services under an HCBC waiver that are not
otherwise covered under Medicaid and that are provided in a client's
home or in a community setting in lieu of institutional services. The
HCBC waiver program is intended to provide the states with a less costly
alternative to institutional services. HCFA found that Florida had
specifically excluded developmentally disabled individuals age 18 or
under who are living at home from its waiver program for the period at
issue. HCFA's determination was based on language in Florida's 1985
request to renew its existing waiver.
As explained further below, we find that the language on which HCFA
relied was included in the waiver extension request in error and that
the request as a whole supports the State's position that it did not
intend to make an actual change in its ongoing program. In fact,
Florida operated its waiver program consistently to include these
clients both before, during, and after the time period at issue here.
Moreover, in approving the waiver for the time period encompassing the
disallowance, the Agency had no specific knowledge of the disputed
language in the waiver extension request and the continued approval of
the waiver was in no way conditioned on such language. In light of the
substantial independence accorded the states by Congress and the Agency
in the operation of a program under a waiver, we determine that
Florida's approved waiver program continued to include developmentally
disabled clients age 18 or under. Accordingly, we reverse the
disallowance.
Background
I. The Home and Community-Based Care Waiver Program
Title XIX of the Act provides federal funding for "medical assistance"
provided to needy individuals under an approved state plan. Section
1903(a)(1) of the Act. The term "medical assistance" as defined in
section 1905(a) of the Act generally includes long-term care services
provided in institutions, but provides little coverage of long-term care
services in non-institutional settings.
In 1981, Congress added section 1915(c) to the Act, which authorized 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
. . . to individuals with respect to whom there has been a determination
that but for the provision of such services the individuals would
require the level of care provided in a [nursing facility] . . . ."
Section 2176 of the Omnibus Budget Reconciliation Act of 1981, Pub.L.
97-35. In 1986, Congress amended this language to cover individuals who
would otherwise require the level of care provided in a hospital as well
as in a nursing facility. Pub.L. 99-509, section 9411(a)(1)(A).
Examples of services which could be included in a HCBC waiver include:
case management services, homemaker services, home health aide services,
personal care services, adult day health services, habilitation
services, and respite care. Section 1915(c)(4)(B) of the Act.
The object of the waiver is to provide a less costly alternative to
institutional services. HCFA has interpreted its waiver authority to
permit it to place a ceiling on the number of individuals who may be
included in a waiver program, based on the estimated number of
individuals for whom HCBC services would be cost effective and for whom
institutional alternatives exist.
An HCBC waiver permits a state to operate its program at variance with
what would otherwise be required under its state plan. A waiver may
include exceptions to the requirements of 1902(a)(1) (statewideness),
1902(a)(10)(B) (comparability of services), and certain income and
resource rules for determining Medicaid eligibility. Section
1915(c)(3). Here, the parties agreed that the nature of the waiver was
to "grant exceptions to parts of the State Medicaid Plan." Parties'
Stipulations, No. 22. Florida had the ability under its waiver program
to provide services not otherwise provided for in its state plan to a
targeted group of those eligible for Medicaid, so long as such services
represented a less costly alternative to institutional services.
The preamble to the interim final regulations for the waiver program
stated an intent to give the states the maximum opportunity for
innovation with a minimum of federal regulation. In general, the
regulations do not mandate how a state must establish or implement a
community care program. 46 Fed. Reg. 48533 (1981). The regulations
themselves, both initially and as subsequently amended, provide little
specific direction. The regulations deal primarily with the process of
requesting a waiver, the supporting information for such a request, and
applicable program limitations. 42 C.F.R. 441.300 et seq. (1981) and
(1985).
II. Facts
On April 1, 1982, Florida first implemented an HCBC program for both its
aged and disabled and developmentally disabled clients. During November
1984, Florida submitted a request to HCFA for a three-year extension of
its waiver program to be effective April 1, 1985. This waiver request
did not restrict developmentally disabled clients to those over the age
of 18. HCFA subsequently notified Florida that its waiver extension
request for developmentally disabled clients did not meet all statutory
and regulatory requirements (unrelated to what is at issue here).
Florida then withdrew and later resubmitted that portion of its request.
Continuation of Florida's waiver program for aged and disabled clients
was approved in March 1985.
Florida resubmitted its request for a renewed waiver for its
developmentally disabled clients on May 10, 1985. The section of the
request describing those eligible for services under the waiver contains
this sentence: "The State does not cover children 18 or under, who are
living at home." HCFA first granted a 45-day extension, from April 1,
1985 to May 15, 1985, for the developmentally disabled program component
and later, on June 14, 1985, approved a continued waiver program for
three more years, effective on May 15, 1985. Florida had initially
proposed to include the following numbers (unduplicated) of
developmentally disabled clients in each of the additional waiver years:
1985-1986--7403; 1986-1987--7824; and 1987-1988--8270. The approved
waiver, however, was contingent on a reduced and limited client
population and permitted Florida to serve 7003 unduplicated clients
during the first additional waiver year and 2571 unduplicated clients
thereafter. HCFA imposed this limit based on Florida's actual
capability to provide institutional services to developmentally disabled
clients. HCFA did not specify how Florida was to go about reducing its
client population.
On September 29, 1986, Florida submitted a request to amend its program
to add 60 clients who were being deinstitutionalized. That amendment
request also revised some sections of the approved waiver document (not
relevant here) and deleted, without any specific explanation, the
language quoted above with respect to coverage of children. The
amendment was approved for the 60 additional clients on December 18,
1986 and for the deletion of the age limit on January 8, 1987. Both
approvals were effective on January 1, 1987.
During October 1986, HCFA's Division of Program Operations (DPO)
conducted an eligibility review of Florida's waiver program for the
developmentally disabled. That review found that Florida was including
individuals age 18 or under among its waiver clients. DPO questioned
the eligibility status of these clients in light of the description of
those eligible contained in the approved Florida waiver request. DPO
requested that the Division of Financial Operations (DFO) conduct a
review to determine the costs claimed for waiver services to clients age
18 or under.
Subsequently, DFO conducted a financial management review to identify
vendor payments and the costs of district case workers for Florida's
developmentally disabled clients age 18 or under. Financial Management
Review IV-26-87-FL, September 28, 1987, State Exhibit (Ex.) 1. (Vendor
payments were made to qualified providers for purchased waiver services.
District case worker costs were calculated using a sampling methodology
based on the time spent providing social or direct services to waiver
clients.) This review was premised on a conclusion that services to
clients age 18 or under were expressly precluded under the waiver during
the time at issue.
The review report stated Florida's view that waiver services were
provided to children age 18 or under and that the waiver request
language excluding them was a clerical error and should have been
deleted. The report stated on page 5:
According to State officials, the clerical error occurred in
1985 when Florida was required to separate its waiver services
for aged/disabled and developmentally disabled clients. They
reported that due to the intense work effort required to have
the waiver resubmitted in a timely manner, a significant
typographical omission was made in the final submission to HCFA.
That is, the exclusion of the last part of the sentence
referring to clients under age 18 living at home. The phrase
"and who are not otherwise categorically eligible" was
inadvertently dropped from typing; thereby erroneously
indicating that "the State does not cover disabled children age
18 or under." In its entirety, this sentence should have read:
"The State does not cover disabled children age 18 or under who
are living at home, and who are not otherwise categorically
eligible." DHRS [Florida] officials stated that this sentence
was intended to exclude the "Katie Beckett" cases from the
waiver and at no time was their intent to exclude
developmentally disabled clients age 18 and under. . . . The
report concluded that Florida had paid claims for recipients not
eligible under the terms of the approved waiver. The report
listed unallowable costs claimed under Medicaid of $1,392,005
FFP in vendor payments and $83,924 FFP for district case worker
costs ($1,475,929 FFP found unallowable).
Analysis
The question presented is whether Florida is bound by the language,
stating that children age 18 or under living at home were not covered,
contained in the request for approval to continue the waiver program for
the developmentally disabled. Below, we first examine the circumstances
of the alleged error. We then discuss why we conclude that the language
at issue did not effect a substantive change in Florida's waiver program
for the developmentally disabled.
The Deputy Assistant Secretary for Medicaid for Florida submitted a
declaration in which he explained the circumstances surrounding the
alleged error in the State's request to continue its waiver program for
developmentally disabled clients. Declaration of May 2, 1989. This
declaration stated that Florida's application contained a "purely
clerical error" in the description of the eligible population. It
further stated that the error was made in the preparation of the request
in the context of the receipt on May 7, 1985 of a HCFA transmittal
containing new regulations applicable to this request. The object of
the disputed provision was to state a continued exclusion of "Katie
Beckett" type cases from the program in Florida. The declaration
references confusion at that time concerning coverage of those cases in
general. The declaration further stated that Florida did not exclude in
general clients age 18 or under from its waiver program. The factors
stated as evidence of continued coverage of this group were: (1) the
supporting cost data for the waiver request included this population;
(2) the request included on pages 14 and 15 discussion of services for
children; (3) the State's Master Eligibility File contained the names of
individuals under the age of 18; (4) such individuals made up 28 percent
of Florida's developmentally disabled caseload; and (5) Florida
submitted quarterly reports during the disputed time which included data
on this age group.
While the Agency did not accept Florida's characterization of the
inclusion of the disputed language as a purely clerical error, there is
no basis in this record to conclude that Florida actually sought to
exclude all those 18 or under from its waiver target group. As the
Agency itself found, the State continued to serve this group after the
continuation of its waiver was approved. Moreover, the Agency offered
no credible reason why the State would want to make such an exclusion.
It was undisputed in the context of this case that Florida's waiver
program could cover children age 18 or under and that Florida actually
did so during the time periods before and after the time period at
issue. Moreover, it was entirely Florida's decision as to which
eligible groups it would cover under its program. Tr., p. 48.
The record shows that the Agency had not really examined the
description of the eligible groups in Florida's request and that this
was not a factor in approving the request. Tr., pp. 25-30. Moreover,
the only requirement was that the State target those groups that it was
permitted to--HCFA exercised no veto over groups selected for coverage.
The regulations required only that the State describe the groups of
individuals to receive waiver services. 42 C.F.R. 441.301.
Although we agree with HCFA that the State's characterization of this
matter as a "purely clerical error" is fraught with some infirmity
since
the record contains little detail as to how such an error actually
occurred, we are persuaded ultimately that the State had no intention to
eliminate the clients that were the subject of this disallowance and
that HCFA did not understand this to be the case at the time either.
Logically, had Florida actually intended to exclude such a significant
client group, (1) this would have been brought to HCFA's attention, (2)
the waiver extension request would not have used supporting data
including this group, (3) the discussion of services would have changed,
and (4) the State would have taken some steps to eliminate this group
from those receiving services. However, there is no evidence that
Florida's actions were consistent with an intent to exclude this group.
Thus, there is simply no reason to conclude that Florida has somehow
fabricated the explanation presented here to avoid a disallowance.
Moreover, the factors advanced by Florida show that its waiver program
and extension request as a whole encompassed these clients. Although
all of the factors advanced by Florida as supporting the inclusion of
the approximately 900 clients age 18 or under would not necessarily have
been known to HCFA just by reviewing the waiver request itself, this
does not undercut the State's reliance on these factors in this case.
Tr., p. 69, and see HCFA Brief, pp. 8-12. These factors do serve to
demonstrate the context in which the State was operating its program and
help show why there was no intent to exclude this group. Also, there
was no requirement that the State include detailed identifying
information about the actual clients in the target groups in its waiver
extension request.
Accordingly, we conclude that Florida did not knowingly request or HCFA
knowingly approve a waiver excluding all developmentally disabled
individuals age 18 or under.
HCFA argued, however, that regardless of what had actually occurred,
Florida was bound by the four corners of its waiver request. HCFA
asserted here that the approved waiver request, although not part of the
state plan, was analogous to a state plan amendment. HCFA argued that
the request "comprises an agreement with HCFA to provide certain
services in accordance with the terms set forth and approved." HCFA
Brief, p. 7. HCFA argued that the State in the operation of its waiver
was bound by the language in the extension request. Both parties relied
on general principles of contract law as support for their respective
positions--the Agency for the proposition that the State as the drafter
must bear the consequences of the logical application of the disputed
language, and the State for the proposition that it could somehow avoid
the application of the erroneous description of the target population.
We do not need to resolve all the parties' disagreements in this regard,
however. This case ultimately turns on the question of the legal effect
to be accorded the disputed language. As we explain below, we conclude
that it is unreasonable to construe the State's waiver request as
deleting those age 18 or under from the approved waiver program.
This Board has consistently held that states are bound by the provisions
of their approved state plans in the operation of a Medicaid program
under Title XIX. See Arkansas Dept. of Human Services, DAB No. 357
(1982), and Louisiana Dept. of Health and Human Resources, DAB No. 804
(1986). The Board has not permitted either the states or the Agency to
avoid the logical consequences of a provision of the approved state
plan. See Hawaii Dept. of Social Services and Housing, DAB No. 779
(1986); Florida Dept. of Health and Rehabilitation Services, DAB No. 884
(1987); and Tennessee Dept. of Health and Environment, DAB No. 950
(1988). Nevertheless, we do not agree with the Agency that these
authorities apply and support its action here. This case is
distinguishable from the cases relied on by the Agency since neither
party here understood that the State was making such a change in its
target population and the waiver language itself was mistakenly included
in the context of a program and a request which otherwise reflected the
inclusion of this group. For example, in DAB No. 950, the state sought
to avoid application of a state plan amendment changing the inflation
factor it used in the calculation of certain facility rates on the basis
that its undisputed failure to pay these facilities in accord with the
provisions of its plan was harmless error. In contrast, this case
involves the application of language included by mistake, not the
application, whether foreseen or not, of language purposefully included
and approved as part of an overall document.
Moreover, the nature of the waiver request itself may provide some basis
to distinguish this case from those directly involving state plan
material. The waiver request is intended simply to provide sufficient
information, based on adequate supporting data and the assurances
required by regulation, to permit the Agency to grant exceptions to
certain program requirements otherwise required by statute and
regulation. See Parties' Stipulations, No. 22, and 42 C.F.R. 441.300
et seq. Nevertheless, since the terms of an approved waiver do have a
direct effect on the operation of a state's program under its state
plan, we would agree that a state is bound to follow the provisions of
an approved waiver request. Here, however, the issue is whether the
waiver request must be read to exclude a group of individuals the State
intended to include.
There are no principles of interpretation or construction which apply
directly to guide our consideration of the waiver request. We are
dealing neither with a statute nor with a contract. Our object is,
however, somewhat analogous in that we are seeking to determine the
legal effect of a provision in a written document, consistent with the
parties' intentions and expectations. See generally, Corbin on
Contracts, sections 532 through 542A (1960), and Sutherland Stat.
Const., sections 45.01-45.08 and 45.12-45.14 and Legal Commentary for
Part V Statutory Interpretation, at pp. 655 and 681 (4th Ed.). Although
in isolation, this disputed language was not per se unclear, in context
it created an internal inconsistency in the waiver document as a whole,
which encompassed these clients in other respects. We found no legal
principle that would require us to find that the State's approved waiver
program could be substantively altered by the literal terms of language
inserted in error which the Agency did not knowingly approve. Below, we
examine the factors that cause us to conclude that the language at issue
was not effective as a change to the State's waiver program.
The states are given substantial independence in the operation of a
program under a waiver. The programs are approved in the context of the
operation of a state's overall Medicaid program under an approved state
plan. The waiver regulation establishes a process for obtaining a
waiver without setting detailed program requirements. Both parties
emphasized that it was the State's choice as to those clients to be
included in the target group. The State provided persuasive evidence of
its continued intent to include children age 18 or under in the waiver
population. Moreover, the State's reading of the waiver request as a
whole as continuing to include these children is not contrary to any
federal requirement. The State had a consistent administrative practice
of providing services to this group, in accordance with its
interpretation of its objectives for services to the developmentally
disabled under State law. State Brief, p. 11. Here, there is no
prejudice or harm to the Agency in permitting the State to go beyond the
four corners of the waiver extension request to show that it had in
fact continued to serve these clients as a part of an approved waiver
program. It is undisputed that the State could properly include such
clients and that the Agency would have readily approved this. HCFA
Brief, p. 13.
Accordingly, we conclude that Florida's approved waiver program must be
construed to continue to include certain developmentally disabled
clients age 18 or under after the extension was approved and that
Florida may claim FFP in services to these clients.
Conclusion
For the reason stated above, we reverse the disallowance.
_____________________________ Judith A. Ballard
_____________________________ Alexander G. Teitz
_____________________________ Cecilia Sparks Ford Presiding
Board