DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State
DATE: March 29, 1990
Department of Social Services Docket No. 90-59
Decision No. 1144
DECISION
The New York State Department of Social Services (State) appealed the
disallowance by the Health Care Financing Administration (HCFA) of
$211,304 in federal financial participation claimed under title XIX
(Medicaid) of the Social Security Act (Act). The $211,304 was claimed
on the State's quarterly statement of expenditures for the quarter ended
September 30, 1989. HCFA determined that the State had earned interest
in this amount on federal Medicaid funds which the State either 1)
withheld or collected from providers whose activities resulted in fraud
and abuse; 2) collected from providers who had recouped them from third
party health insurers; or 3) recouped through windfall activities. HCFA
found that the interest earned by the State was an applicable credit
under Office of Management and Budget Circular A-87, Attachment A,
Section C.1.g (which is made applicable to the Medicaid program by 45
C.F.R. 74.141). Since the State did not reduce its claim by the amount
of the interest, HCFA concluded, there was an overpayment pursuant to
section 1903(d)(2) of the Act.
The Board sustained similar disallowances in New York State Dept. of
Social Services, DAB No. 588 (1984) and in New York State Dept. of
Social Services, DAB No. 721 (1986), finding that the interest did in
fact represent an applicable credit, and that the failure to credit the
amount to HCFA gave rise to an overpayment which was properly
disallowed. In addition, the Board concluded that the Medicaid funds on
which interest was earned were not held "pending disbursement," so
that
the exception in the Intergovernmental Cooperation Act allowing states
to retain interest on federal funds "pending disbursement" did not
apply. In DAB No. 721, the Board also distinguished a federal district
court opinion which the State argued required reversal of DAB No. 588.
In Perales v. United States, 598 F. Supp. 19 (S.D. N.Y. 1984), aff'd,
751 F.2d 95 (2d Cir. 1984), the court found that the Department of
Agriculture's Food and Nutrition Services (FNS) had no authority to
impose interest on a debt for improperly issued food stamps owed to FNS
by the State agency administering the Food Stamp Program. The Board
stated that the question in DAB No. 721 was not whether the federal
agency could assess interest on a debt owed by the State, as in Perales,
but whether the State owed a debt in the amount of the interest because
the State did not reduce its reported expenditures to account for the
interest as an applicable credit.
In its notice of appeal here, the State asserted that "[t]here are no
material issues of fact or law which can distinguish the instant case
from those presented in [DAB Decision Nos. 588 and 721]." Letter from
Demers to Kaufman dated March 8, 1990, p. 2. The State therefore
requested a summary decision upholding the disallowance based on these
decisions. HCFA did not object to the issuance of such a summary
decision.
Conclusion
Accordingly, based on the analysis in DAB Nos. 588 and 721, which we
incorporate by reference, we sustain the disallowance here in the amount
of $211,304.
__________________________ Donald F.
Garrett
__________________________ Alexander G.
Teitz
__________________________ Judith A.
Ballard Presiding Board