GAB Decision 457
Docket No. 83-36
July 29, 1983
Illinois Department of Public Aid;
Settle, Norval; Ford, Cecilia Garrett, Donald
The Illinois Department of Public Aid (IDPA or Appellant) asked the
Board to review part of a decision by the Acting Regional Administrator,
Region V (Agency) which disallowed $49,843,403 claimed by IDPA under
Title XX of the Social Security Act. Of the nine elements of the
Agency's disallowance, IDPA sought Board review of only two, totaling
$9,678,302. One element involved costs associated with IDPA's operation
of three residential schools for handicapped children. The Agency
disallowed costs of educational services ($6,311,908) and certain room
and board expenses ($2,792,804) at the schools. The other element
involved certain hospitalization costs included in IDPA's claim for
costs of foster care social services ($573,590).
Based on the analysis below, we uphold the disallowances for
educational services and room and board, and we sever the issue of the
hospitalization costs for further development of the record.
THE DISPUTE OVER PAYMENT FOR EDUCATIONAL SERVICES.
Background.
The Agency disallowed costs of special educational services for
handicapped children at three state-run schools because the costs,
according to the Agency, were not reimbursable under section 2002(a)(
10) of the Act (quoted below). Under the general authority of section
2002, the Agency reimbursed states for many kinds of child care and
other services directed at goals such as encouraging self-sufficiency of
handicapped persons. The exception cited by the Agency is as follows:
No payment may be made under this section with respect to any
expenditure for the provision of any educational service which the State
makes generally available to its residents without cost and without
regard to their income. 42. U.S.C. 2002(a)(10). /1/ (Emphasis added)
(2) In its disallowance, the Agency stated that local school
districts were encouraged to use the state schools' special education
programs, and that the state effectively provided these programs free to
the residents of the school districts. There is no dispute here that
the activities in question were "educational;" /2/ rather, IDPA argued
that the Agency was incorrect in finding that the services were
"generally available" to state residents within the meaning of the
Act.
Agency regulations essentially repeated the brief statutory
provision, but with the following change:
FFP is not available for any educational service made generally
available through any state or local educational agency to residents of
the State without cost and without regard to their income . . . . 45 CFR
228.43 (1976) (emphasis added)
In addition, the Agency distributed more detailed supplementary
guidance in 1975 and 1980 (discussed below), which both IDPA and the
Agency cited in support of their positions.
The three schools in question were operated by the Illinois
Department of Children and Family Services (DCFS). The manner in which
IDPA eventually succeeded DCFS was not made clear in the record, but in
any event it was not disputed that DCFS was a State agency.
Admission criteria for the three schools were described in Illinois
regulations (see IDPA brief, exhibit 8). The schools were the Illinois
Children's Hospital School, the Illinois School for the Deaf, and the
Illinois Braille and Sight Saving School (certain later name changes
occurred which are not material here). The admission criteria included
substantially the following, using the Hospital School as an example
(the criteria were quite similar for all three schools, except for
differences related to the types of handicap involved):
The Superintendent (of DCFS) may admit to the Illinois Children's
Hospital School any child with a severe orthopedic handicap between the
ages of five and 21 who resides in Illinois provided that:
1. The child has been examined by a qualified physician and is
reported to be so severely handicapped by cerebral palsy, muscular
dystrophy, spina bifida, or other orthopedic handicap that he requires
special education and/or medical services, and
(3) 2. . . . it has been found that the child can benefit from the
programs offered, and
3. The responsible local education authority has recommended the
child for admission because:
a. No local education resources are available, or
b. Local education resources are available but are unable to meet
the special needs of the child, or
c. The welfare of the child is jeopardized if he remains at home .
. . .
Discussion.
IDPA's position basically was that the services provided by DCFS were
not "generally available" under section 2002(a)(10) because the services
were not provided by a State or local educational agency per se; that
is, DCFS was not "affiliated with the State's traditional educational
network" and the services were "not generally available through the
State or local educational agencies." Notice of appeal, p. 2; see
also, IDPA brief, p. 4, reply brief, p. 2. IDPA's arguments in support
of this proposition are essentially collateral, relying on IDPA's
interpretation of Agency issuances (discussed below) rather than any
inherent logic of the proposition. IDPA did not deny that the services
involved clearly were available to all children in Illinois who met its
broad criteria, as its own regulations specified. At the outset, we
conclude that merely because most educational services in a state are
regularly provided through certain state and local agencies does not
necessarily mean that educational services provided by some other state
agency can escape section 2002(a)(10) of the Act. Such an approach
values organizational form over substance, without any support in the
statute or, as far as we know, its legislative history. Section
2002(a)(10) applies to any educational service which the state makes
"generally available," whether through a social services agency or
some
other state agency whose function may or may not be primarily education.
It is true that the regulation says "State or local educational agency,"
but we do not read that provision to constrain the scope of section
2002(a)(10). In the context of the statute, it is not unreasonable to
read the word "State" and the phrase "local educational"
as both
modifying the word "agency," rather than to read the regulation as
restricted to State education agencies and local education agencies; in
any event, the regulation reasonably can be read to cover state agencies
that perform significant education functions, regardless of whether they
perform such functions exclusively or whether the title of the agency
incorporates the term "education." When the regulation was published,
the explanatory preamble indicated that the Agency was merely adding
local education agencies, because "many States (4) provide education
through and at the discretion of local agencies." 40 Fed. Reg. 27353
(June 27, 1975). Thus, while the regulation might have been crafted
more artfully, the clear command of section 2002(a)(10) is adequately
reflected in it.
IDPA's other specific arguments, and our responses, follow:
IDPA argued that the statute and implementing regulation made it
clear that states "are not precluded from providing edcuation services,
provided the test for 'general availability' is met." IDPA brief, p. 5.
We agree. IDPA also argued that the regulation implementing section
2002(a)(10) was meant to prohibit use of Title XX funds for existing
elementary and secondary education programs, not to "prohibit States
from providing special education services that are not generally
provided to designated target groups that are Title XX elgible." Id.
This, too, appears correct as far as it goes. While the record does not
contain any definitive legislative history explaining section 2002(
a)(10), on its face it appears to include the meaning IDPA said it has.
However, this merely begs the question whether or not the services were
"generally available." Apparently, IDPA meant these points to provide
a
context for its argument that to hold against the State would mean that
"no educational service under title XX would be available under any
circumstance" and that the State would "by definition, be prohibited
from providing any educational services under Title XX." Id., p. 6.
This is clearly incorrect. Nothing in the statute or the implementing
regulation, nor in the position HCFA urges here, prohibits IDPA from
providing educational services, provided that the services are not
"generally available" in the State. Congress itself established the
broad limitation on "generally available" services. Furthermore, the
Agency pointed out examples of instances in which it would pay for
specific educational services funded by IDPA (i.e., training for the
handicapped at a day care center). See, Agency brief, p. 11; IDPA
brief, exhibit 4, p. 3.D.34. While there may be a gray area where it
would be difficult to determine whether something was "generally
available" or not, we do not find that to be the case here; here, the
record indicates that the educational services were freely available to
all children in Illinois who could meet the broad criteria. While we
agree with IDPA that Congress could not have intended to cut off social
services agencies from providing necessary educational services in their
own unique context, it also is clear that Congress did not intend to
subsidize general education of the handicapped through Title XX of the
Act. And it is clear that IDPA was doing the latter, not only the
former.
(5) IDPA also argued that the Agency failed to adequately apply
certain "tests" in an Agency Program Regulation Guide. IDPA brief,
p.
5; reply brief, p. 3. The guide contained guidance for making the
determination "whether an expenditure for an educational service
provided by the State or local education agency meets the requirements .
. . under title XX." /3/ Apparently, the Agency did not use the tests at
all, relying on its determination that the services were "generally
available" on the face of the State law and the regulations. All three
tests (quoted in the footnote below) concern services provided "in"
a
school district or other area to 75% or more of total population, target
population, or school districts. Illinois did not argue that having the
services available to all was different than "providing" the services
(which we likely would find to be an attenuated semantic exercise in any
event and inconsistent with subsequent Agency guidance relied on by
IDPA); and it is clear that the services involved here were available
to all children in the state. Thus, we do not find that the Agency
misused the guide. Furthermore, the fact that this and subsequent (6)
guidance discussed the restriction on educational services primarily in
terms of educational agencies per se is not dispositive: this was the
context in which most questions likely would arise as a practical
matter, and so would be where guidance was directed; but the broader
reach of the statute itself is clear.
IDPA also relied on a later formal guidance document (the Agency's
"guide to FFP" dated June 10, 1980; see IDPA brief, exhibit 4). Among
other things, this Guide provides that there has to be a determination
that the educational services are not "in fact" available, "regardless
of any Federal/State/local requirements on the public educational agency
to provide or make the service(s) available." Id., p. 3.D.33. IDPA
cited an Agency response to a Tennessee inquiry dealing with this point.
Tennessee had asked whether Title XX funds could be used for education
of handicapped children required by state law to be provided as part of
free public education. The Agency replied that Title XX funds could be
used for educational services "not in fact, 'generally available', even
if a law or court order requires them to available." IDPA brief, exhibit
6, p. 1; see also, IDPA brief, p. 7, reply brief, p. 3, Agency brief,
p. 11. IDPA also noted an Agency Information Memorandum which reached
essentially the same conclusion concerning the federal Education For All
Handicapped Children Act, Pub. L. 94-142. IDPA brief, exhibit 7. The
point IDPA would have the Board note from these documents is not
entirely clear (since it is clear that the services here were "in fact"
available), but appears to be that since each of them discussed the
principle in terms of services provided by state or local education
agencies, the Agency must have meant that educational services provided
by other than educational agencies escape the preclusion of section
2002(a)(10). See, e.g., reply brief, p. 5. We are unpersuaded by this
argument, because the issue under the Act is whether the services are
"generally available," not whether the services are provided by
educational agencies or other agencies. /4/ Merely because the cited
guidance documents discussed the issue in terms of services provided by
educational agencies (where the issue apparently was frequently
encountered) is insubstantial support for the idea that the Agency must
have intended (or, indeed, legally could have implemented) an exception
for educational services just because they were provided by a state
agency other than the state educational (7) agency. Here, there is no
dispute that the educational services were "in fact" available, nor
that
the Illinois statutory provisions requiring the services involved here
were being implemented by the state.
A further IDPA argument was that the admission requirements for the
three schools (see IDPA's exhibit 8, discussed above) showed that the
services were not "generally available" because children were not
admitted to the schools unless the regular educational agency
recommended them based on lack of availability of the services. IDPA
brief, pp. 8-9; reply brief, p. 4. However, as already stated,
generally availability is not determined by whether the services are
provided by a state or local educational agency, nor by whether all
students must have the services; rather, it is determined by whether
the state - regardless of the agency involved - makes an educational
service generally available to residents who need it. Merely because an
educational agency cannot provide the service does not answer the
question whether the state is generally providing the service through
some other facility.
IDPA's final argument on educational costs, made in its reply brief,
related to statements of an Agency employee in an internal document
which were, in part, sympathetic to IDPA. IDPA argued, "program staff
and not the auditors are in a better position to determine the
allowability of this claim." Reply brief, p. 5; see, also, pp. 2, 4.
The document was a "site visit" report prepared in July, 1982,
apparently as part of the Agency's dialogue with IDPA about the proposed
findings which led to the disallowance in issue here. Reply brief,
exhibit A. The report stated some of IDPA's arguments in response to
the proposed determination (arguments which IDPA repeated here) and
included some sympathetic, albeit conclusory, comments; with one
exception, noted below, exhibit A contains nothing not more fully argued
by the State, and the employee's sympathetic restatement of these
arguments is at least as unsupported by the Act and implementing
regulation as the IDPA positions discussed above. The only additional
point concerns the State's Comprehensive Annual Services Program Plans
(CASPs). IDPA seemed to argue that the letter reflected Agency approval
of the expenditures in question here by approval of the CASPs. Reply
brief, p. 4. There is no dispute that the Agency approved the CASPs.
However, the CASP excerpts provided by IDPA (see exhibit 9) do no more
than indicate that educational services would be provided if "not
provided in the public school because of the severity of the child's
disability" (pp. 1,2) and if "not generally available in the common
school system." (pp. 3,4) Exhibit A does not provide much either: it
says emrely that the CASPs "contained Services to Handicapped Children,
including room and board, medical services, social services and
education." Exhibit A, p. 5. That does not say that the CASPs described
how the services would be provided, nor that FFP would be provided (8)
for such services even if so specified, nor does it deal with the issue
of the legality of such an approach even if the CASPs had done so. The
CASPs simply do not provide an answer to the question of general
availability. Exhibit A also says that the Agency sent a letter to IDPA
stating that a CASP met "the requirements of 45 CFR 228 Subpart C."
Id.
Subpart C governed the content and approval of the CASPs, but the
provision in question here, section 228.43, was not in subpart C; it
was in subpart D, which contained a number of limitations on what would
be paid. Thus, the employee's advice to his superiors that "we cannot
support the audit finding" (id.) was, on the record before us,
incorrect. In any event, his advice was disregarded by his superior,
the Acting Regional Administrator, who issued the disallowance
determination which, for the reasons stated above, we have found to be
reasonable and in accordance with the Act. /5/
THE DISPUTE OVER PAYMENT FOR ROOM AND BOARD
Background.
Section 2002(a)(7)(E) of the Act prohibits payments for "the
provision of room or board . . . other than room or board provided for a
period of not more than six consecutive months as an integral but
subordinate part of a service described in (section 2002(a)(1))." The
Agency first implemented this provision in a regulation which allowed
payment for room and board only --
when provided to an individual who is receiving a service of which
room or board is an integral but subordinate part and then only for a
period of not more than six consecutive months in any 12-month period
and for not more than one 6-month period for any one episode or
placement. 45 CFR 228.41(a)(1976).
Thereafter the regulation was changed to allow payment for room and
board only --
as an integral but subordinate part of another service and then only
for a period of not more than six consecutive months for any one
placement. 45 CFR 228.41(a)(1978).
(9) The new section 228.41(d) stated:
placement means an uninterrupted period of time during which an
indiviudal takes up, or is placed in, residence in a facility other than
his usual place of residence, for the purpose of undergoing a specific
regimen of services or treatment according to a prescribed plan.
The Agency disallowed $2,792,804 based on its determination that IDPA
had claimed the funds for room and board for certain persons
continuously, without renewed justifications of consecutive
"placements." Disallowance letter, p. 5. The Agency found, and IDPA
did
not contest, that many children in the three state schools in question
had been enrolled year after year; for example, 81% of those in
attendence during the school year 1978-79 had been in attendance during
the school year 1977-78. IDPA brief, pp. 10-11; Agency brief, p. 14.
Discussion.
The basic problem here is this: IDPA maintained that each school
year effectively represented a separate "placement" justifying FFP
for
six months of each year, while the Agency maintained that there really
was no more than one "placement" (when the child began attending the
special school).
In analyzing this issue, it is important to bear in mind the
underlying statutory context. In section 2002(a)(7)(E), Congress stated
a general prohibition on payment of room and board expenses under Title
XX, with an exception which would allow a brief period of room and board
in restricted circumstances. While one might argue that the provision
could be interpreted narrowly to allow only one six-month period of room
and board per individual, the Agency interpreted the exception
generously, if somewhat ambiguously, to allow more than one such period.
Nevertheless, from the face of the statute, it is clear that Congress
intended that payment for room and board would be an exceptional event,
and one must not lose sight of the nature of the statutory restriction
when analyzing the Agency's regulations (which, because of the nature of
administrative rule-making, focus more on the exception than the rule).
IDPA's approach would make payment the rule, not the exception.
IDPA's main argument essentially was that one should not look at the
placement issue solely in terms of the sequence of months of service,
but that one must focus also on the "specific regimen of service or
treatment" and relate that to the time associated with the placement.
IDPA brief, p. 11. We agree. However, even under the State's approach,
there is insufficient support in the record for the proposition that
IDPA's actions here qualify under the exception in section
2002(a)(7)(E).
(10) IDPA presented portions of its CASPs for several years to show
compliance with 45 CFR 228.41. IDPA brief, p. 12; exhibit 9. Each
document constitutes a general description of the state-wide program of
services to the handicapped, including brief statements of funding
sources (in which, incidently, Title XX does not appear to be listed).
Each contains a similar "definition" of about 200 words of services
to
the handicapped including brief "examples" of medical or remedial
care.
Each also repeats, without more, the spare wording of the statutory
restriction on room and board expenditures. The first CASP document
states, room and board costs do not exceed 40% of the total cost of the
service" (a provision later deleted without explanation; see page 5 of
the exhibit).
We find that exhibit 9 is far from being any substantial support for
the proposition that the costs in issue here fell within the exception
in section 2002(a)(7)(E) of the Act, or that the Agency regulations
contemplated payment of the costs here. There simply is no nexus, and
the general statements in the exhibit clearly meet neither the standards
of the regulations nor the import of the statutory exception. /6/
IDPA also noted that the Agency's FFP Guide (Agency brief, exhibit 3)
contains a provision to the effect that FFP is available for room and
board costs if the individual was discharged from the prior placement
and did not re-enter the facility in order to begin another 6-month
period of room and board. IDPA brief, p. 12. Agency exhibit 3 contains
several examples of circumstances in which the Agency allows FFP for two
separate placements. See Agency exhibit 3, pp. 3.D.13 - 3. D.15. The
general provision applicable to all the examples, which IDPA cites, is
more restrictive than indicated by IDPA's paraphrased version. /7/
(11) If one placement ends and another placement begins for the same
service or the same type of service, FFP is available for the cost of
room or board during a second placement only if the individual was
discharged from the prior placement because further treatment was not
needed, not feasible, or not available and not for purposes of
reentering the facility in order to begin another 6-month period of room
or board. A new placement would begin, for example, if a person
successfully completes a course of treatment, is discharged, or manages
well in the community for a period of time until he or she has a relapse
which necessitates a second placement. Agency exhibit 3, p. 3. D.13.
This guideline is compatible with the underlying statutory concept
that room and board was to be provided only on an exceptional,
short-term basis, and does not provide much support for IDPA's position.
Further evidence is found in another general provision of the Guide:
A placement that is ending is typically marked by indications that
the recipient has successfully completed the prescribed course of
treatment or services, or that an evaluation of the individual shows
that he or she is now able to function outside the facility, or that the
person is discharged without the intention of reentering the service
facility (or a similar type of service facility) for further treatment.
Evidence of termination of placement may be, for example, a doctor's
certificate or other professional person's written evaluation in the
permanent record of the facility or in the recipient's case record
discharging him/her from the fcility. Agency exhibit 3, pp. 3. D.9 -
3.D.10.
The Agency's auditors also had found that services at the schools
were planned on a long-term basis, and IDPA stated its disagreement,
citing as evidence certain individual education programs (IEPs) (IDPA
brief, exhibit 10) and certain details of how the schools functioned
(exhibits 11, 12 and 13). IDPA brief, pp. 13-18.
The impressions one gets from these State documents is that the three
schools are well-managed with much individualized attention given to the
students' needs and performance. Based on the documents, IDPA's brief
contains some lengthy descriptions of how the process works. An
example:
(12) The I.E.P. is the foundation of the individualized service/
treatment plan. The I.E.P. contains a comprehensive listing of goals
and objectives that each child is expected to complete during the
semester or year. (Tab 10).
In addition to the I.E.P., each facility utilizes a variety of tools
to supplement the child's I.E.P. The Illinois School for the Deaf (ISD)
employees (use) aptitude testing to identify individual needs and
achievements. Children are grouped on the class list according to
individual ability. A child may change classes, or programs, one or
more times during a school year if it is determined that a change would
improve learning and emotional development. Children are also rated on
psychological factors including social adequacy and communication
skills. Parent involvement is sought on a regular basis. Report cards
and progress reports are sent to all parents at the end of each nine
week term. Parents receive an end-of-year report which aids in
determining whether another placement is needed. Parent conferences are
scheduled throughout the year to obtain input regarding placement,
goals, objectives, and curriculum (Tab 11). A recommendation on each
child is submitted to the superintendent at the end of the school year
when the treatment plan is concluded. Each child's case record contains
routine psychological, audiology and medical reports, dormitory staff
reports, correspondence with parents, achievement scores from testing,
and school progress reports which are completed every nine weeks.
Course outlines vary each year as the child's needs change. Every facet
of the school's system is directed toward providing a child with
sufficient skills to facilitate the return to local special educational
programs that are available. IDPA brief, pp. 14-15.
We find that the foregoing, and the documents, evidence much of a
continuing, cyclical, arguably even routine, nature. The process
appears to be a laudable one, but it nevertheless is much more akin to
an on-going evaluation/training process than to anything like the
time-constrained exceptional effort for which section 2002(a)(7)(E)
allows collateral payment. IDPA cannot change this merely by such
superficial things as labeling IEPs "treatment plans." The IEPs bear
a
strong resemblence to periodic education plans one may observe in use in
any typical public education program. Furthermore, the IEPs themselves
contain a number of statements strongly implying that there is an
on-going continuity of process; the Agency quoted these provisions at
length in its brief (see pp. 15-16) and we will not repeat them here.
IDPA did not explain these provisions in its reply. (13) What IDPA did
do in its reply brief was to refer again to the objections of the Agency
employee who was sympathetic to the State's position. Indeed, IDPA's
reply brief is largely a reiteration of the disaffected employee's
observations. Briefly, the arguments, and our analyses, are as follows:
IDPA notes that 45 CFR 228.41(a)(1976) allowed payment for services
for a period of "not more than six consecutive months in any 12-month
period and for not more than one 6-month period for any one episode or
placement." The explicit argument is that IDPA merely asked for FFP for
one six-month period, or "episode," in each twelve months. The implicit
argument is that the regulation authorized sequential six-month periods
of room and board as a matter of routine. We disagree. The provision
in the regulation, by its own "not more than" language, was an outside
parameter, not a baseline authorization, and must be read in the context
of the exceptional nature of the room and board authorization generally.
The underlying statute, the rest of the regulation, and the Agency's
guidance all make it clear that on balance, the interpretation urged by
IDPA is an unreasonable one.
IDPA also argued essentially that even if the later version of the
regulation was viewed as constraining, FFP still should be available for
the period the old regulation was applicable, because the old regulation
referred more ambiguously to an "episode or placement" and not to
the
more narrowly defined "placement" of the later regulation. We disagree.
First of all, the statute did not change, and as explained above, the
statute clearly restricts the availability of room and board (and the
earlier regulation is not in conflict). Secondly, and in that context,
we observe no reasonable basis for reading "episode" to be substantially
more permissive than "placement." In our view, the later regulation
merely provided more detail to clarify ambiguity; it did not
specifically either limit or expand the permissible scope of FFP under
the statute.
IDPA argued that approval of the CASP meant that the Agency approved
FFP for room and board. But, as we have noted, the CASP provisions
submitted by IDPA contain virtually nothing more than a brief
reiteration of section 2002(a)(7)(E), and that certainly is no basis for
finding that the Agency approved the particular expenditures in issue
here. Furthermore, notwithstanding approval of a CASP under 45 CFR Part
228, subpart C, the Agency's regulations provided that costs still had
to meet the specific limitations under part 228, subpart D. See, 45 CFR
228.39 (which did not change when other provisions of the regulations
changed).
(14) Again, we reiterate that the internal advice of the Agency staff
person on which IDPA relies here was rejected by the Regional
Administrator. Our separate review of that advice leads us to conclude
that while it was articulate and reasonable, it was based on a
fundamental misunderstanding of the exceptional nature of the room and
board authorization. On the whole, the Agency was reasonable in
determining in the facts of this case that the claim for room and board
did not come within the exception. /8/
THE DISPUTE OVER PAYMENT OF HOSPITALIZATION COSTS.
Background.
Unlike the previous two issues, this one did not involve the state
schools. It involved foster care children. According to the Agency,
IDPA claimed $573,590 FFP for "major hospitalization" of these children
over and above minor medical care costs. Agency brief, p. 17. The
Agency found that the State made direct payments to vendors for medical
services and other needs of the foster care children which were not
covered by the State's contractual arrangement with the foster care
providers. Id. The Agency's concern was triggered by payments for
relatively major medical costs like surgery and psychiatric hospital
stays; the Agency argued that the statute and regulations contemplated
payment only for "minor medical costs" like immunizations and routine
physical and dental examinations. Id., pp. 17-19. The Agency also
argued that the services were not specified in the State's CASP.
Section 2002(a)(7)(A) prohibited payment for --
medical or any other remedial care . . . unless it is an integral but
subordinate part of a service (under 2002(a)(1)) and Federal financial
participation with respect to the expenditure is not available under the
plan of the State approved under title XIX . . . .
The Agency's early regulation, 45 CFR 228.40 (1976), entitled "minor
medical and remedial care," basically repeated the statutory provision,
adding a preclusion for payment of costs eligible under title XVIII.
That regulation also stated:
(15) (b) Medical or remedial care is an integral but subordinate part
of a service only when:
(1) The particular service cannot be provided effectively without the
essential medical or remedial care component; and
(2) Recipients of the service usually receive the medical or remedial
care component; and
(3) The medical and remedial care does not exceed 25% of the total
cost of providing the service of which it is a part . . . (and)
(4) The medical or remedial care is explicitly included in the
definition of the service which is a part of the (CASP).
Later, the following was subsituted for the provisions quoted above
(still under the heading "minor medical and remedial care"):
(b) Medical and remedial care are deemed to be integral but
subordinate components of a service if:
(1) They are necessary to achieve the objective of that service and
not merely to correct a medical condition; and
(2) The specific medical and remedial care are (sic) described and
included in the (CASP) along with the description of the service of
which they are an integral but subordinate part. For example, in
describing child day care services, a State could describe (itemize)
medical examinations, dental screening, and immunizations as integral
but subordinate parts of the child day care service. 45 CFR 228.40(b)
(1977).
The Agency's June, 1980 FFP Guide supplemented the regulations.
Agency Exhibit 3, pp. 3.D.4 - 3.D.6.
(16) Discussion.
The HHS auditors found that the CASPs for the years involved either
included nothing on medical services, or only a brief statement to the
effect that medical and remedial care might be included as an integral
but subordiate part of the social service involved. Agency exhibit 2,
p. 25. However, the State submitted, without much explanation, material
which appeared to be CASP excerpts (or supporting materials) for the
years involved specifying that "psychological and psychiatric
assessment, testing, and treatment may be included as an integral but
subordinate part of the (foster care for children) service." State
exhibit 14, 6th through 11th unnumbered pages. The record does not
indicate which portion of the medical services were psychological
services, but the State's representative said during a conference that
psychological services were a predominant part. On the face of it,
there is merit to the State's argument that psychological assessment and
treatment may be an integral but subordinate part of foster care
services, and the Agency's representative did not foreclose that
possibility during the conference. On the other hand, the auditors
noted an example of a payment of $16,710 for 58 days of hospitalization
for treatment of neurotic depression. Agency exhibit 2, p. 26. This
would appear to fall outside the ambit of eligible Title XX services
under any reasonable reading of the regulations and guidelines. The
Auditors also found that DFCS "automatically" included as costs to
be
claimed under Title XX, costs not paid under Title XIX, without
screening. Id., p. 26. While the State's representative suggested
during the conference that the State did some screening, the current
record contains no information on the matter.
The difficulty here is that resolution of this issue requires a much
closer look at the individual cost items than the record currently
allows. The evidence that the CASPs specified psychological testing and
treatment calls into question one of the auditors' premises. On the
other hand, there is no substantial indication of whether, and to what
extent, any of the costs (other than the auditors' example) were or were
not "minor" costs, and it is unclear how screening of ineligible Title
XIX costs was performed. In short, Both parties have presented this
issue to the Board at a level of generality which makes it impossible
for the Board to fairly decide the issue. Therefore, the Board severs
this issue, and will separately take action to further develop the
record concerning this matter.
(17) Conclusion.
For the reasons stated above, we uphold the disallowance of costs
associated with educational services and room and board, and we sever
the issue of the validity of the disallowance of hospitalization costs
for further development. A separate letter will contain details
concerning the hospitalization costs issue. /1/ This provision, along
with the rest of Title XX, was added to the Social Security Act
by the Social Services Amendments of 1974, Pub. L. 93-647 (January 4,
1975). /2/ Whether particular services were habilitative or
educational was disputed in two recent cases under Title XIX. See,
Massachusetts Department of Public Works, Decision No. 438, May 31,
1983; Oklahoma Department of Human Services, Decision No. 367, December
17, 1982. /3/ IDPA brief, exhibit 3, p. 1. This version of the
guide is undated, but the Agency described it as being dated October 1,
1975. Agency brief, p. 8. In pertinent part, the guide stated: To
determine whether an expenditure for an educational service provided by
the State or local education agency meets the requirements for FFP under
Title XX, it must be determined that the service is not "generally
available" . . . In making this determination, each State is allowed to
choose among three alternative methods . . . the three methods . . . are
as follows: 1. Total Population Test - an educational service is
generally available if it is provided in school districts or other
designated areas that have populations which total 75% or more of the
total population of the area being tested (geographic area or entire
State). 2. Target Population Test - an edcuational service is generally
available if it is provided in school districts or other designated
areas to 75% or more of the target population for whom the service is
intended in the area being tested (geographic area or entire State). 3.
School District Test Without Regard to Population - an educational
service is generally available if it is provided in 75% or more of the
school districts in the area being tested (geographic area or entire
state). /4/ In its reply brief, IDPA also argued essentially
that Agency auditors had improperly refused to accept the principle
stated by the Agency in guidance that a service could be treated as not
generally available even if mandated by law. Reply brief, pp. 2-3.
Since we determined that the principle is not dispositive of the case
before us, we express no opinion on whether the principle is right or
wrong. /5/ The subsequent Regional Administrator, who sent the
report to IDPA, remarked in the cover letter to exhibit A: Please note
that the site visit report, and the comments contained therein, is not
the formal and final position of this office. Rather, it represents
only the informal and internal comments of one of our staff which were
considered when the formalized and finalized our position . . . Our
formal and final position is that which has been articulated in both the
audit report . . . and in our Determination Letter . . . ." /6/
Indeed, the Agency apparently did not intend the CASP to do more than
this. The Agency's FFP Guide said, "the State agency does not need to
provide a specific description of the room or board in the services plan
(as it must with respect to medical or remedial care . . .) The plan may
simply include the statement that room or board is a part of the service
of which it is an integral but subordinate part." Agency exhibit 3, p.
3.D.10. It is obvious that the CASP could not, and was never intended
to, provide definitive constraints on allowability or unallowability of
room and board costs. /7/ The Agency's FFP Guide is dated June
10, 1980, and thus was not specifically applicable earlier. However,
IDPA argued from the Guide in its main brief without any distinction as
to time periods of applicability. In its reply brief, IDPA did make
some related distinctions, discussed below. /8/ Furthermore, since we
have upheld the disallowance of the educational services, it
would appear that there is a substantial question whether the room and
board, even if we had found it otherwise met the tests in section
2002(a)(7)(E), could be treated as an "integral but subordinate part"
of
a disallowed cost. The issue was not briefed, and we do not decide it
here. Note IDPA reply brief, exhibit A, p. 2.
NOVEMBER 14, 1984