GAB Decision 274
March 31, 1982 New York State Department of Social Services; Docket No.
81-136-NY-HC Teitz,Alexander; Garrett,Donald Settle, Norval
The New York State Department of Social Services (State) appealed a
decision of the Health Care Financing Administration's Bureau of Program
Operations (HCFA or Agency), disallowing a claim for $8,553 which the
State sought to retain, on behalf of a county Medicaid agency, from
third party liability collections in that county. The dispute basically
concerns the reasonableness of the Agency's interpretation of sections
1903 (p)(1) and 1912 of the Social Security Act: specifically, that the
State's medical assistance plan had to specify the assignment and
cooperative arrangement provisions in section 1912 related to
enforcement of third party liability for medical payments, before the
State could retain a portion of amounts collected. /1/
The record before the Board consists of the materials and arguments
set forth in the State's notice of appeal, the State's appeal file and
accompanying brief, the Agency's response, and the State's reply brief.
Based on our analysis of the record and our review of the statutory
provisions, we uphold the Agency's disallowance.
The statutory provisions.
Since 1967, section 1902(a)(25) of the Act has required a State plan
for medical assistance to provide that an administering agency will take
all reasonable measures to determine the liability of third parties for
medical costs. The administering agency must treat this liability as a
resource based on which the agency will seek reimbursement from the
liable third party. There is no dispute that the State has adequately
implemented section 1902(a)(25).
(2) In 1977, Congress added two new provisions related to third party
liability. The provisions are separated in the Social Security Act, but
appeared together as two paragraphs of section 11 of the amending
statute (Pub. L. 95-142). Secion 11(a) added section 1903(p) to the
Social Security Act, and 11(b) added section 1912.
Section 1912 states in pertinent part:
(a) for the purpose of assisting in the collection of medical support
payments and other payments for medical care owed to recipients of
medical assistance under the State plan approved under this title, a
State plan for medical assistance may --
(1) provide that, as a condition of eligibility for medical
assistance under the State plan to an individual . . . the individual is
required --
(A) to assign the State any rights . . . to support . . . for the
purpose of medical care . . . and to payment for medical care from any
third party; and
(B) to cooperate with the State . . . (in establishing and enforcing
parternity support); and
(2) provide for entering into cooperative arrangements . . . to
assist the agency or agencies administering the State plan with respect
to (enforcement, collection and other matters). (emphasis added).
Section 1912(b) specifies the right of the State to reimbursement
from sums collected for medical expenditures on behalf of the assignor,
"with appropriate reimbursement" of the Agency, and the right of the
assignor to any remaining funds.
The portion of section 1903(p) relevant here states as follows:
(1) When a political subdivision of a State makes . . . the
enforcement and collection of rights of support or payment assigned
under section 1912, pursuant to a cooperative arrangement under such
section . . . there shall be paid to such political subdivision . . .
from amounts which would otherwise represent the Federal share of
payments for medical assistance . . . an amount equal to 15 percent of
any amount collected which is attributable to such rights of support or
payment. (emphasis added).
(3) Section 11(c) of Pub. L. 95-142 made the quoted provision
applicable to medical assistance provided under State plans approved on
and after January 1, 1978.
In short, a county Medicaid agency generally is entitled to keep
(from sums that otherwise would go back to HCFA) 15 percent of sums
collected pursuant to assignments and cooperative arrangements
established under section 1912.
The Agency did not publish final regulations implementing sections
1903(p) and 1912 until February 11, 1980 (45 FR 8984), and these
regulations are not applicable here. /2/
The circumstances which gave rise to the dispute.
In February, 1980, the State submitted a statement of expenditures
for the October-December 1979 period which included an incentive payment
reduction under section 1903(p) of $8,553. This amount represented a
portion of collections by the Albany County Department of Social
Services. The State did not contest the Agency's asertion that the
State plan contained no provisions specifically implementing sections
1912 and 1903(p) before April, 1980.
Discussion.
The Agency's position basically was that the State plan must
specifically implement section 1912 as a precondition to eligibility
(4) for incentive funds under 1903(p). "Clearly (1903(p))
supplements Section 1912 of the Act." Agency response, p. 3. The Agency
buttressed this position by arguing that it notified States in February,
1978 and on subsequent occasions of an opportunity to amend plans by
adopting preprinted State plan amendments which implemented section
1912. Id.
The Agency's interpretation of the statute is a reasonable, and even
compelling, one. Section 1912 quite specifically authorizes the State
plan to provide for assignments and cooperative arrangements and section
1903(p) equally clearly provides incentive payments only in relation to
assignments pursuant to a cooperative arrangement under section 1912.
The State argued, rather conclusorily, that there was no linkage between
1903(p) and 1912 sufficient to preclude incentive funding in the absence
of a State plan provision, and pointed out that provisions concerning
the State plan are set forth in section 1902 of the Act, whereas section
1903 deals with payments.But the clear words of the statute rebut the
State's interpretation, and section 1912 specifically references the
State plan even though it is not under section 1902. It is true, as the
State argues, that section 1903(p) is "an encouragement to localities to
make recoveries", but it does not necessarily follow that the failure in
this case to make 1903(p) payments "would thwart the clear intent of
Congress" (State's brief, p. 2), for that intent also includes specific
reference to State plan requirements.
The State's other arguments, and our analysis, are as follows.
The State argued, essentially, that its practices and its
implementation of section 1902(a)(25) substantially met the new
requirements of Pub. L. 95-142, and that the State was doing the things
for which Congress offered incentive payments. The Agency did not
specifically dispute this. The Agency's response simply was that the
Act requires specific State plan implementation of section 1912 before
1903(p) incentives are available, and the State's plan did not do this.
As we stated above, this interpretation of the statute is reasonable.
Furthermore, we consider it reasonable for the Agency to want to
exercise control over implementation of section 1912 through the
mechanism of the State plan; and inclusion of the procedures in the
plan assures concerted collection effort. Regulations in effect during
the period in question here contained extensive provisions for
development, amendment and approval of State plans, obviously designed
to provide the Agency and others affected with a means of reviewing how
the State would implement provisions of the Medicaid statute. 45 CFR
Part 201, Subpart A; and 45 CFR 205.5 (1979).
The State also argued that the disallowance was beyond the scope of
the original deferral action (see footnote 1 above). This appears to be
true. However, the disallowance stands on its own (5) foundation, and
the State has had ample opprtunity (in a notice of appeal and two
briefs, and one telephone conference) to respond to the Agency's
disallowance action.
The State also argued that HCFA did not promulgate any regulations
implementing 1903(p) until 1980, "and therefore did not specify any
particular means of compliance prior to that date." State's notice of
appeal, p. 2. However, under the Agency's interpretation, the statute
itself specified one basic element of compliance: inclusion in the
State plan of provisions implementing section 1912. There is nothing in
the record which indicates that the Agency objected to any other aspect
of how the State handled third party liability, nor does the record
indicate any attempt by the Agency to apply its regulations
retroactively. The State simply did not meet the statutory requirement.
The State was not relieved of its specific statutory obligation by any
Agency delay in publishing regulations. Furthermore, the Agency points
out (and the State does not deny) that in February, 1978 it sent
material to the states containing preprinted State plan amendments
relating to implementation of section 1912. Agency brief, p. 3, and
Appendix 1. It is true that this material referred only to section
1912, and not to section 1903(p); but that in no way supports the
proposition that the State was somehow relieved from implementing
section 1912 as a precondition to payments under section 1903(p).
The State also made two further arguments concerning the preprinted
plan material. First, it argued that the preprint procedure did not
allow the State to offer any plan not proposed by the Agency. However,
this argument is not relevant since the State did not argue that it had
atempted some alternative means of implementing section 1912. The State
apparently did nothing at all to implement section 1912. Second, the
State argued (as part of its argument concerning the Agency's delay in
promulgating regulations) that the preprint material, submitted to the
States prior to promulgation of the regulations, was unauthorized. This
argument suffers the same flaw as the State's first one: it is not
relevant to the issue whether the State implemented section 1912 as
required by the statute itself as a condition of eligibility for 1903(
p) funding.
The State also argued that "if a 'state plan' (written or unwritten,
submitted or unsubmitted) accords with the statutory intent of the
Social Security Act, the receipt of federal financial participation
(FFP) is not prohibited." State's reply brief, p. 2. However, the State
has offered no evidence or argument that it had specifically implemented
section 1912 in its plan, so that we need not reach the issue. In any
event, regulations required the State to amend its plan". . . to reflect
new or revised Federal statutes . . ." 45 CFR 205.5 (1979); and, the
regulations appeared to require review and approval of such State plan
amendments. 45 CFR 201.3 (1979).
(6) While the clear wording of the statute compels us to uphold the
Agency's action, we note that the State and County here appear to have
done precisely what Congress offered an incentive for: they
aggressively pursued third party liability. But for the absence of
necessary State plan provisions, the record does not indicate that the
Agency would have refused the incentive. We urge the Agency to consider
whether it has authority to provide some retroactive relief.
Conclusion.
The Agency's disallowance in the amount of $8,553 is upheld. /1/
Prior to the disallowance, the Agency had deferred payment of
the claim because, it said, it was unable to determine the methodology
used in calculating the claim. The disalllowance itself, however, was
based on the lack of plan provisions implementing sections 1903(p)(1)
and 1912, not on a calculation problem. /2/ However, the
regulations do indicate that the Agency's argument on appeal is
consistent with the Agency's implementation in 1980 of the two statutory
sections in regulations. The regulations are found in 42 CFR Part 433,
Subpart D (1980). Section 433.137, entitled "State plan requirements
and options," states -- (b) A plan may provide for assignment of rights
to benefits and, if it does, for cooperative agreements and incentive
payments for collection of benefits. See Secs.433.146-433.154 for plan
requirements if a State elects these options. Section 433.151 states --
If a plan provides for cooperative agreements, it must provide that the
specific agreement requirements in Sec.433.152, and the incentive
payment requirements in Secs.433.153 and 433.154 are met. See also
section 433.145, which provides that a state plan may require
assignments and that if it does, it must provide for a number of
requirements set forth in Secs.433.146-433.149.
OCTOBER 22, 1983