Louisiana Department of Health and Hospitals, DAB No. 1176 (1990)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: Louisiana Department of

DATE: July 13, 1990
Health and Hospitals Docket Nos. 89-223, 90-29, and 90-81
Decision No. 1176

DECISION

The Louisiana Department of Health and Hospitals (State) appealed three
determinations by the Health Care Financing Administration (HCFA) that
disallowed a total of $456,249 in federal financial participation (FFP)
claimed by the State under Title XIX (Medicaid) of the Social Security
Act (Act). 1/ These disallowances all represented amounts claimed as
FFP for payments made by the State for State sales taxes on
pharmaceutical drug items and durable medical equipment provided to
Medicaid recipients.

Summary of Decision

Section 1903(a)(1) of the Act authorizes payment of FFP as a percentage
of the "amount expended . . . as medical assistance." We have held that
payments of sales taxes by Louisiana on behalf of Medicaid recipients do
not constitute expenditures for medical assistance. Louisiana Dept. of
Health and Hospitals, DAB No. 1109 (1989). Since we have decided the
primary issue raised here in our prior decision, and since none of the
State's arguments here justify modifying our holding in Decision 1109,
we uphold the disallowances before us.

Background

In 1986, the Board first considered whether state tax payments should be
treated as expenditures for medical assistance under section 1903(a)(1)
of the Act in two cases, Hawaii Dept. of Social Services and Housing,
DAB No. 779, and New Mexico Human Services Dept., DAB No. 787. In those
cases, we ruled that the states were entitled to notice of HCFA's policy
before FFP was disallowed for state taxes. Neither of those cases dealt
with sales taxes on items purchased for Medicaid recipients. 2/ Hawaii
involved excise taxes incurred by providers in rendering medical
services; New Mexico also involved taxes incurred by providers as a cost
of doing business.

HCFA responded to the Board decisions in August 1987, by issuing to
state Medicaid agencies Transmittal 51, containing section 2493 of the
State Medicaid Manual. 3/ This section provides that "where the tax
would be paid for by the Medicaid recipient, e.g., sales taxes paid by
the patient, FFP will not be available." However, FFP would be
available for taxes of general applicability paid by providers, such as
those involved in Hawaii and New Mexico.

After promulgating this policy, HCFA disallowed claims made by Louisiana
for FFP in payments of sales taxes on purchases of medical and
pharmaceutical goods for Medicaid recipients. The State appealed those
disallowances to the Board. Both parties were afforded ample
opportunity for briefing and a full hearing was held. We rejected those
appeals in Decision 1109 on grounds discussed there and summarized
below.

Here the State appealed three more disallowances of claims for FFP for
payment of State sales taxes for the succeeding three quarters. 4/ The
State also sought reconsideration of Decision 1109. Reconsideration was
denied on March 15, 1990, since the State did not act promptly and did
not allege any clear error of fact or law.

We turn first to the effect of our prior decision on the issues that the
State raised here. We then consider whether the State presented new
issues which would lead to a different result here. Finally, we deal
with the effect, if any, of the extension of a congressional moratorium,
the one new development that has occurred since the earlier case was
decided.

Analysis

The effect of our prior decision

We note at the outset that the Board has a long history of applying
informally a practice much like collateral estoppel, in that we
frequently charge a party with the burden to show cause why a summary
decision should not issue when an earlier decision controls a similar
case arising later. This practice arises from a character- istic of
many HHS assistance programs: they typically involve an on-going
relationship producing quarterly claims (and disallowances), so issues
may arise again and again. Because our process is designed to be
relatively fast and informal, because we must be concerned about economy
of public resources, and because of the utility of promoting finality of
what is, after all, an administrative process, it is appropriate for us
to avoid reopening these issues. Thus, generally, we will not do so
notwithstanding that there might be new facets or additional arguments,
or better presentations by more sophisticated counsel. There is all the
more reason for applying this approach where, as here, the parties in
the later case are the same as in the earlier one, the issues are the
same, and the facts are the same (except that the disallowance is for a
later period in a different amount). Of course, common sense, and the
fact that we are dealing with programs involving legislative mandates
and substantial public interests and sums, dictate that our general
policy be subject to an exception to allow us to reopen issues where our
earlier determination represents, or was based upon, a clear,
substantial error of fact or law.

HCFA asked the Board to dismiss this appeal based on collateral
estoppel, i.e., that having had an opportunity to litigate an issue in a
prior case, the State should be barred from raising the same issue in a
new appeal. See Montana v. United States, 440 U.S. 147, 153 (1979) (A
party may not relitigate any issue "actually and necessarily determined
by a court of competent jurisdiction.") The case law supports enforcing
finality as to issues that the parties have previously litigated before
us. Thus, the Supreme Court stated in United States v. Utah
Construction and Mining Co., 384 U.S. 394, 422 (1966), that "[w]hen an
administrative agency is acting in a judicial capacity and resolves
disputed issues of fact properly before it which the parties have had an
adequate opportunity to litigate, the courts have not hesitated to apply
res judicata to enforce repose . . . ." See also University of
Tennessee v. Elliott, 478 U.S. 788, 797 (1986); K.C. Davis,
Administrative Law, section 21:2, "Res Judicata Applies to
Administrative Adjudication," and Restatement (Second) of Judgments,
section 83 (1982).

In the past, based on case law, we have considered the following
criteria in deciding questions of issue preclusion: (1) the issue to be
precluded was the same one involved in the prior litigation; (2) that
issue was actually litigated; (3) it was determined by a final judgment;
and (4) that determination was essential to the prior judgment. Virgin
Islands Dept. of Human Services, DAB No. 980 at 5 (1988), citing Haize
v. Hanover Insurance Co., 536 F.2d 576, 579 (3d Cir. 1976); see also
New York State Dept. of Social Services, DAB No. 828 at 3 (1987).

Applying these criteria to the case before us, we therefore consider
next what issues before us have already been actually litigated and
necessarily determined in our prior decision, as to which we would
normally issue a summary decision. 5/The issues previously litigated

We note first that the State itself considered the issues in 88-135 and
89-223 to be identical. The notice of appeal in 89-223 stated that
"[t]his disallowance concerns the same issues currently before the Board
in . . . 88-135 . . . " Notice of Appeal, DAB Docket No. 89-223
(emphasis added). 6/

Further, all of the disallowances in both cases were identical. After
quoting from section 1903(a)(1) of the Act, HCFA stated the reason for
each disallowance as:

Payment of a State sales tax is not an actual amount expended by
the State since the State collects the tax. Since no actual State
expenditure has occurred, HCFA is precluded by Section 1903(a)(1)
from reimbursing such taxes.

All the disallowances also cite section 2493 of the State Medicaid
Manual for support.

The central issue in both 88-135 and 89-223 was whether payment of the
State sales taxes by the State Medicaid agency constituted actual
expenditures for medical assistance under section 1903(a)(1) of the Act.
This was the primary issue posed by all the disallowances and all the
notices of appeal.

In addressing this issue in Decision 1109, the Board discussed arguments
advanced and litigated by the parties in 88-135. Among those questions
discussed were:

(1) whether payment of a sales tax by the State Medicaid agency
constituted an actual expenditure at all;

(2) whether FFP was available for such sales tax payments as
"medical assistance" expenses under section 1903(a)(1), and HCFA's
interpretation in section 2493 of the State Medicaid Manual;

(3) whether notice and comment rulemaking provisions of the
Administrative Procedure Act (APA) should have been followed in
issuing section 2493;

(4) whether a Congressional moratorium prohibited HCFA from issuing
section 2493;

(5) whether FFP should be available for these payments despite
section 2493, because of either

(a) program income regulations at 45 C.F.R. 74.41 or

(b) Office of Management and Budget (OMB) Circular A-87,
paragraph B.25 on the allowability of state sales taxes.

We concluded that payment by the State of sales tax on Medicaid
purchases is not an actual expenditure for medical assistance under
Medicaid and that HCFA acted reasonably in interpreting the statute in
section 2493 to preclude FFP for such payments. We stated that notice
was adequate and formal rulemaking was not required because the rule was
interpretative. We found that the Congressional moratorium, the program
income regulations, and the OMB Circular did not support the State's
challenge to section 2493. See Decision 1109.

Nevertheless, the State sought here to reargue precisely these points,
despite its assertion that "this appeal is based on an entirely
different premise than that advanced in the prior proceedings." State's
br. at 10. In so doing, the State failed to respond to our direction to
focus on differences from the prior case.

For example, although the State devoted ten pages of its brief here to
the question of notice and comment requirements, that issue was fully
litigated and settled before. We held that "the provisions of section
2493 . . . were definitely interpretative rules." Decision 1109 at 12.
7/

Even if we considered the State's renewed attacks on section 2493, we
would find nothing in the State's arguments which persuades us our
analysis was incorrect. HCFA was not obliged to use formal rulemaking
procedures under the APA, 5 U.S.C. 553, in order to inform the states of
its interpretation of a term in the statute. 8/

Interpretative rules, issued "to advise the public of the agency's
construction of the statutes . . . it administers," are exempt from the
formal rulemaking requirements of the APA, under 5 U.S.C. 553(b)(A).
United States v. Picciotto, 875 F.2d 345 (D.C.Cir. 1989); Gibson Wine
Co. v. Snyder, 194 F.2d 329 (D.C.Cir. 1952); Maryland Dept. of Human
Resources v. Sullivan, Civ. Action No. 89-1607 (D.D.C., May 23, 1990);
see also Attorney General's Manual on the APA, U.S. Dept. of Justice, at
30, n.3 (1947).

The State here argued that section 2493 could not be interpretative
because it addresses an important matter and takes an approach different
from earlier positions taken by HCFA. These arguments lack merit. Even
if a rule has a significant impact on a party, prevailing case law
rejects the concept that this alone requires the rule to be treated as
legislative. "Interpretative and substantive rules may both vitally
affect private interests, thus, the substantial impact test has no
utility in distinguishing between the two." Cabais v. Egger, 690 F.2d
234, 237-238 (D.D.C. 1982) (footnote omitted); see also, e.g., Alcaraz
v. Block, 746 F.2d 593, 613 (9th Cir. 1984); Rivera v. Becerra, 714 F.2d
887, 890 (9th Cir. 1983), cert. denied, 465 U.S. 1099 (1984).

More important, the State's argument assumes that the issuance of
section 2493 represented a change in HCFA policy on sales taxes. The
State pointed to nothing in previous HCFA policy specifically
authorizing FFP in payments of state sales taxes on behalf of recipients
and, as we discuss below, long-standing HCFA regulations evidence a
policy consistent with the section as issued. Apparently, the State was
relying on our decisions in Hawaii and New Mexico to demonstrate a
policy to allow FFP in state sales taxes. These cases, however,
addressed provider-paid taxes as opposed to recipient- paid taxes; we
found merely that HCFA policy regarding those taxes was ambiguous.

We suggested in Hawaii that HCFA could provide prospective notice of its
understanding of expenditures by means of an action transmittal. Hawaii
at 12. HCFA did so. We found that notice adequate. Decision 1109 at
12. Nothing further was required of HCFA procedurally.

The State again sought support from the program income regulations and
the OMB Circular, yet offered no explanation as to why they would apply
here when they did not apply in 88-135. State's br. at 36-37. As we
have stated, the program income regulations merely provide that
government grantees need not consider the receipt of generally
applicable taxes to be program income, but do not concern the
availability of FFP for payment of such taxes by the State. Decision
1109 at 14. We also pointed out that the OMB Circular provision that
taxes for which a government grantee is liable are allowable is subject
to the requirement that it be "net of all applicable credits." Id. at
16. Further, we have held elsewhere that "OMB Circular A-87 does not .
. . set FFP rates or govern an Agency's implementation of its statutory
authorities." New York State Dept. of Social Services, DAB No. 1023 at
8, n.5 (1989).

The bulk of the State's brief seemed to be directed at attacking section
2493 as arbitrary or unreasonable for various reasons. The issue of
reasonableness was squarely addressed in Decision 1109, which held "such
an interpretation of the statute to be reasonable . . . ." Id. at 16.
9/ Our finding of reasonableness was in accord with our reasoning in
Hawaii that "a reasonable interpretation of the term 'expenditure' would
be 'net expenditure,' and that, in determining the 'total amounts
expended' by the State, certain income or credits to the State should be
offset or netted against amounts paid out . . . ." Hawaii at 4.

Furthermore, we reject the State's argument that no reasonable basis
exists for distinguishing between provider-paid taxes and recipient-paid
taxes. While a state receives income from both types of taxes, the key
difference is that the provider-paid tax is a cost to the provider
incurred in providing the service or item covered as "medical
assistance" under a state plan. Historically, states have been permitted
to use methods of determining provider reimbursement rates based on
reasonable provider costs, including such taxes. 10/ Contrary to what
the State's argument implies, the payment of the tax by the provider is
not treated as a state expenditure for FFP purposes; rather, the
expenditure in which HCFA will participate is payment of the applicable
rate to the provider (which may coincidentally reflect tax costs the
provider incurs in providing the service). A recipient-paid tax,
however, is not an amount expended as payment to the provider for a
covered service or item, but is instead an amount added on to the
allowable reimbursement rate.

The State's characterization of section 2493 as "favoring" reimbursement
of provider expenses over recipient expenses, contrary to Medicaid's
purpose of benefitting needy recipients, is incorrect. State's br. at
12-14. Providing FFP in state expenditures for sales taxes benefits
neither provider nor recipient but only the state.

The State also argued that section 2493 treats similarly situated states
differently. Id., at 18. The State claimed that FFP would be available
to a state in which the provider had primary liability for sales taxes
as a business cost, but then collected it from the consumer. While we do
not agree with the State's premise, provider- paid sales taxes are not
before us here, since the State conceded that the Louisiana tax
liability falls on the recipient. 11/ We decline to rule on a matter
not raised here.

The State's argument that "sales tax is a legitimate component of a
medical purchase, recognized by HCFA for . . . Medicare recipients,"
(State's br. at 20) is irrelevant to the issues here. Medicare is in
the nature of an insurance program that reimburses beneficiaries for
various out of pocket costs which they must pay for medical care,
including sales taxes. However, Medicaid recipients do not pay for
either prescriptions or for the sales tax on them. All that is denied
here is FFP for a tax which the State in effect paid to itself.

Despite the fact that the sales tax money goes from the State Medicaid
agency into the State's general treasury, the State also argued that the
taxes are a cost to the State Medicaid agency. State's br. at 28-29.
HCFA's position that the State must be viewed as a unit is supported not
only by the use of the term "State" in the statutory provision at issue
here, but also by the definition of "grantee" at 45 C.F.R. 74.3, which
makes it clear that, in HHS grant programs, the state as a whole is
considered the entity responsible for accounting for grant funds. The
State attempted to analogize FFP for State-paid sales tax with state
payments to providers that reflect the provider's costs for federal
Social Security taxes. However, the analogy fails because, again, FFP
is available for provider charges that reflect state taxes that, like
Social Security, are a cost of doing business.

The State further asserted that this sales tax was not "a ploy" to
obtain greater FFP, but simply a routine payment also made by other
state agencies that purchase drugs without federal involvement. State's
br. at 32-34. However, HCFA's position in section 2493 is not that
payment of sales tax by a state is fraudulent, but rather that it is not
a net expenditure for a state and is not a cost of a service but an
addition to the cost.

Furthermore, all of the State's arguments on the reasonableness of
section 2493 are premised on the theory that, in the absence of that
provision, FFP would be available in these expenditures. The State
points to nothing in the Act or HCFA regulations authorizing FFP for
such tax expenditures, however. In our view, HCFA's regulations make
clear that FFP is available only for payments made by the State to
providers of service (or, in limited instances, to the recipients) using
rates established under the State plan. See 42 C.F.R. Part 447. 12/

Moreover, in the case of drugs, the payments are limited to the
ingredient cost of the drug, plus a dispensing fee. See 42 C.F.R.
447.331. Thus, even without section 2493, FFP would not be available in
any taxes added on to the amounts properly paid to a provider using
state plan reimbursement methods.

We conclude that HCFA's interpretation of expenditures for medical
assistance reflected in section 2493, previously litigated, is neither
arbitrary nor irrational. We will therefore defer to HCFA and apply its
interpretation, unless it is barred by congressional action. We
consider this question next.

The Congressional Moratorium

We turn next to whether a congressional moratorium pertaining to donated
funds and provider-paid taxes would preclude HCFA from disallowing the
amounts at issue here. The issue was not fully litigated in 88-135. In
fact, the first reference to the moratorium was by the Presiding Board
Member in the form of a question at the hearing. The State, in its
post-hearing brief, made a casual reference to it, but the issue can
hardly be said to have been "litigated." In addition, the moratorium
relied on by the State is an extension of the one in effect at the time
of the hearing, with new legislative history. Fairness requires that
the merits of the State's arguments on this issue be fully addressed.

The State contended that Congress has acted to prohibit these
disallowances by enacting the Omnibus Reconcili- ation Act of 1989, Pub.
L. No. 101-239 (1990). A provision in that law extended through
December of 1990 an existing moratorium on certain regulations. Id.,
Section 6411(b). Since the new enactment merely substituted a new
termination date, the substance of the moratorium remains unchanged. 13/
In its earlier decision, the Board ruled that the moratorium "clearly
did not prohibit the Agency from issuing Transmittal 51 and section 2493
of the State Medicaid Manual." Decision 1109 at 12. The Board declined
to speculate about congressional intent, since the moratorium did not
address the action which HCFA had taken and was enacted after HCFA's
issuance of the transmittal involved. Id. at 12-13.

Nevertheless, the State argued here that the legislative history of the
extension sheds light on the congressional intent, requiring a different
conclusion. Since we find that the issue was not fully litigated in the
first case, we consider the effect of both the initial moratorium and
its extension. We conclude that neither moratorium applies to bar the
interpretation applied by HCFA in the disallowances at issue.

We note that a long-standing rule of statutory construction is that the
plain meaning of a law should be given effect, so that the pursuit of
intent in the legislative history is unnecessary absent ambiguity in the
language. "[T]he meaning of the statute must, in the first instance, be
sought in the language in which the act is framed, and if that is plain,
. . . the sole function of the courts is to enforce it according to its
terms." Caminetti v. United States, 242 U.S. 470 (1917); see also INS
v. Phinpathya, 464 U.S. 183, 189 (1984); Sutherland, Statutory
Construction, Sect. 46.01 through 46.04, and cases cited therein.

On its face, the moratorium has nothing whatsoever to say about whether
the Secretary may issue an interpretation of expenditures eligible for
federal matching funds that excludes state payments of state sales
taxes. The language refers only to "voluntary contributions or
provider-paid taxes," and nowhere speaks to state-paid or recipient-paid
taxes. The State itself stressed that providers do not pay sales tax in
Louisiana, although they may collect it from a purchaser. 14/ In its
brief the State "accepts the Board's determination that the Medicaid
recipient is liable for the sales tax." State's br. at 10. See note 11
supra. The plain meaning of "provider-paid taxes" does not include
taxes paid by a recipient or a state agency on behalf of a recipient.

Even if it were appropriate to consider the legislative history of this
provision, it does not support the State's contention. The
congressional record addresses the concern that states not be prevented
from seeking sources of funding for the state share of Medicaid through
such devices as "voluntary donations of funds by hospitals . . . [and]
dedicated taxes imposed on hospital revenues." 135 Cong. Rec. H9469
(Nov. 21, 1989). Congress acted in response to a statement of
regulatory initiatives that was supplied by HCFA, at the request of the
House Subcommittee on Health and the Environment, in a letter
incorporated in the record of the Subcommittee's hearing of June 8,
1989. The letter indicated HCFA's intent to issue a regulation to
"limit the use of donations and provider-specific taxes as the State
share of Medicaid." Thus, the proposal presented to Congress did not
address state-paid sales taxes.

Nor is it reasonable to presume that congressional action on the use of
assessments on providers, either voluntary or mandatory (through taxes),
must have been meant to extend to other forms of taxation, since they
involve quite different considerations (a fact often obscured by joining
them in discussion). The provider assessments have been used by some
states to generate funds used to attract federal matching funds which
are then in turn paid to providers through various mechanisms. HCFA has
indicated its desire to control these mechanisms and Congress has twice
acted to forestall HCFA's regulatory efforts, largely on the basis that
these devices may be necessary creative responses to states' budgetary
constraints.

However, the direct payment of state sales taxes by the State, on behalf
of a recipient, far from increasing the base of State funds allocated to
Medicaid in pursuit of a corresponding larger federal contribution,
actually diverts State funds (and the corresponding federal share) away
from services to beneficiaries and into the State's general revenues.
No question arises of HCFA dictating tax mechanisms for Medicaid funding
to the State when HCFA declines to contribute directly to the State's
general revenue funds.

The only reference to sales taxes in the legislative history, and a
reference on which the State relied, is in the House report, which
simply includes sales taxes in the list of general revenue sources on
which many states draw traditionally for Medicaid funding without
challenge. H.R. Rep. No. 101-247, 101st Cong., 1st Sess. 480 (1989).
This case does not address the revenue sources on which a state may rely
for its share of Medicaid costs, but rather which state payments qualify
for FFP. The report suggests that states should be able to go beyond
these traditional revenue sources to use provider-specific taxes to
generate additional revenue for program expansions. While the report
indicates that the bill would prevent the Secretary from denying payment
for expenditures "attributable to taxes, whether or not of general
applicability, imposed with respect to the provision of items or
services," the next sentence defines "taxes" for this purpose as
directed at mandatory assessments imposed by a State "on health care
providers." Once again, this case involves no tax imposed on any
provider. Plainly, neither the original moratorium, nor its extension,
has any effect on HCFA's actions here, since the payment of sales tax by
a state was not addressed or considered by Congress. 15/Conclusion

We see no reason to change our conclusions in Decision 1109. HCFA
reasonably determined that FFP is not available for State agency
payments of State sales taxes on drugs and equipment for Medicaid
recipients. We therefore uphold the disallowances in full.

_____________________________ Judith A.
Ballard

_____________________________ Norval D. (John)
Settle

_____________________________ Alexander G.
Teitz Presiding Board Member

1. The disallowances involved here are:

Board Docket Quarter Ended Amount

89-223 June 30, 1989 $138,334 90-29
September 30, 1989 $140,937 90-81 December 31,1989
$176,978 Total: $456,249

2. Another case, California Dept. of Health Services, DAB No. 786
(1986), dealt with the treatment of state sales taxes as administrative
costs under a different provision of the Act.

3. The entire text of the transmittal is set out in Decision 1109 at
4-5.

4. For convenience, we refer to the three consolidated appeals by the
docket number of the first one, 89-223. We similarly refer to the five
earlier appeals from disallowances which were consolidated and resulted
in Decision 1109 by the number of the first appeal, 88-135.

5. The Board originally proposed handling this matter by summary
decision, noting that it "concerns the same issues" as 88-135.
Acknowledgment of Notice of Appeal, Board Docket No. 89-223 (October 27,
1989). At the State's request, we permitted briefing rather than
issuing a summary decision, but specifically directed the State to focus
on any differences between the cases rather than rearguing Decision
1109. Letter of Board, Board Docket No. 89-223 (January 19, 1990).

6. The State requested that the appeal in 89-223 be consolidated with
the five disallowances joined in our first case. This request was
denied because Decision 1109 had already been issued, although the State
had not received it before sending its request.

7. Even the State acknowledged that this issue was "arguably raised in
the prior case." Docket No. 89-223, State's reply br. at 23. In fact,
it was raised throughout the State's briefing in 88-135. See, e.g.,
Docket No. 88-135, State's reply br. at 6; State's supp. br. at 3;
State's post-hearing br. at 4.

8. The Board has held that "actual notice of an agency's reasonable
policy interpretation is sufficient to bind a state to its terms." New
York State Dept. of Social Services, DAB No. 1023 at 9 (1989). Actual
notice is not contested here.

9. It was also litigated by the parties, having been the first
argument raised in the State's brief. State's br. at 5 et seq., Docket
No. 88-135.

10. To determine precisely what part of the rate which a state pays to
a provider reflects provider-paid taxes could involve extremely complex
calculations. Moreover, in states which use prospective rate-setting
systems for institutional services (generally, multiplying costs in a
base year by projected inflation factors), the part of the rate
reflecting provider-paid taxes would not necessarily be the same as the
actual tax income to the state in the rate year.

11. Actually the Board found in Decision 1109 that Medicaid recipients
would be liable for the sales tax if they were not on Medicaid, not that
they were liable for the tax as Medicaid recipients.

12. Thus, in Decision 1109 we said that:

[t]he term "medical assistance" is defined in section
1905(a) of the Act as "payment of part of or all of
the cost" of listed services. Payment of the sales
tax is not payment for the cost of a service
provided, but is an add-on to the cost, solely for
the State's benefit. It is entirely different from a
tax of general applicability that a provider incurs
as a cost of doing business.

Decision 1109 at 12.

13. The moratorium was contained originally in the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, Section 8431
(1988). The text of the provision was as follows:

The Secretary of Health and Human Services shall not
issue any final regulation prior to May 1, 1989,
changing the treatment of voluntary contributions or
provider-paid taxes utilized by States to receive
Federal matching funds under title XIX of the Social
Security Act.

14. Under the system used in Louisiana for Medicaid purchases, as we
have noted, providers do not even collect the tax, as the State Medicaid
agency has an arrangement to remit sales tax payments directly to the
revenue department, in order to reduce handling costs. However, the
mechanism of payment would not alter this analysis.

15. In addition, as we noted in Decision 1109, the thrust of the
moratorium is to preserve the status quo ante, since what the Secretary
is forbidden to do is to change the treatment of voluntary contributions
or provider-paid taxes. The treatment of those funding sources existing
at the time of the first moratorium is set forth in section 2493, which
was issued by Transmittal 51 in August of 1987, the year before the
first moratorium. Furthermore, this interpretation had been in effect
for over two years before the extension was enacted, and had been upheld
in our decision over two months before. Had Congress been dissatisfied
with the agency interpretation, it could have acted to mandate, rather
than preclude, a change. A failure by Congress to repeal an
administrative interpretation is evidence that the interpretation is not
erroneous. Young v. Community Nutrition Institute, 476 U.S. 974, 983
(1986). It is clear that Congress is concerned about the conflicting
interests implicated in the use of various provider assessment devices,
but the extent of Congressional action to date is simply to freeze
matters as they