New York State Department of Social Services, DAB No. 919 (1987)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT:  New York State Department of  Social Services

Docket No. 87-185
Decision No. 919

DATE:  November 20, 1987

DECISION

The New York State Department of Social Services (State) appealed the
disallowance by the Health Care Financing Administration (HCFA) of
$181,405 in federal financial participation claimed under title XIX
(Medicaid) of the Social Security Act (Act).  The $181,405 was claimed
on the State's quarterly statement of expenditures for the quarter ended
March 1987.  HCFA determined that the State had earned interest in this
amount on federal Medicaid funds which the State either withheld from
providers or collected from providers, third party health insurers and
windfall activities.  HCFA found that the interest earned by the State
was an applicable credit under OMB Circular A-87, Attachment A,
(C)(1)(g) (which is made applicable to the Medicaid program by 45 CFR
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, DGAB No. 588 (1984) and in New York State Dept. of
Social Services, DGAB 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 DGAB No. 721, the Board also distinguished a federal district
court opinion which the State argued required reversal of DGAB No. 588.
In Perales v. U.S., 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 Service (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 DGAB 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 . . . DGAB Decision Nos. 588 and 721."  (Letter
from Emil to Kaufman dated October 20, 1987, 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 DGAB Nos. 588 and 721, which we
incorporate by reference, we sustain the disallowance here in the amount
of $181,405.

 

                            ________________________________ Judith A.
                            Ballard

 

                            ________________________________ Alexander
                            G. Teitz

 

                            ________________________________ Donald F.
                            Garrett Presiding Board Member