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Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Appellate Division |
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DATE: June 29, 2005 |
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Docket No. A-05-1
Decision No. 1982 |
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DECISION The Connecticut Department of Social Services (Connecticut) appealed a September 2, 2004 determination by the Centers for Medicare & Medicaid Services (CMS) to disallow $14,245,191 in federal financial participation (FFP). (1) Connecticut requested these funds in March 2003 as reimbursement for certain expenditures made by its Medicaid managed care program between 1995 and 1999. Connecticut had already (prior to 2003) obtained reimbursement for 50 percent of its 1995-1999 managed care expenditures. Connecticut later determined that some of those expenditures were for family planning services, which qualify for a higher level - 90 percent - of reimbursement. Consequently, in March 2003, Connecticut requested $14,245,191 in additional FFP for its managed care expenditures on family planning services between 1995 and 1999. This amount is equal to the difference between the FFP Connecticut received for those expenditures at the 50 percent rate, and the FFP it would otherwise have received at the 90 percent rate. CMS issued the disallowance because it found that Connecticut's request for additional FFP was untimely, having not been filed within two years after the quarter in which the expenditures were made, as required by section 1132(a) of the Social Security Act (Act), 42 U.S.C. � 1320b-2(a). Connecticut contends that the disallowance should be overturned because it is based on a policy letter, State Medicaid Director Letter (SMDL) #01-020, that CMS issued without complying with the notice-and-comment procedures of the Administrative Procedure Act (APA), 5 U.S.C. � 551 et seq., or the notice procedures of the Freedom of Information Act (FOIA), 5 U.S.C. � 552. Connecticut also argues that its request for additional FFP is not a "claim" subject to the two-year filing requirement in section 1132(a). For the reasons discussed below, we find no merit in Connecticut's arguments and uphold the disallowance. In addition, we decline to rule on the merits of Connecticut's request for a "good cause" waiver of the two-year filing requirement because Connecticut has not submitted its request to CMS and received a decision by the Secretary on that request, as required by the regulations. Legal Background A state that administers a Medicaid program pursuant to an approved plan is entitled to FFP for a percentage of the expenditures it makes in operating the program. 42 U.S.C. � 1396b. For most Medicaid expenditures, the federal government provides FFP at a rate known as the "federal medical assistance percentage" (FMAP). 42 U.S.C. �� 1396b(a)(1), 1396d(b). The FMAP for Connecticut during the relevant period was 50 percent. CT Ex. 1. For certain categories of expenditures, the Act authorizes FFP at a rate greater than the FMAP. Relevant here, section 1903(a)(5) of the Act authorizes FFP at the rate of 90 percent for expenditures "attributable to the offering, arranging, and furnishing . . . of family planning services and supplies[.]" 42 U.S.C. � 1396b(a)(5). Section 1132(a) of the Act, which applies to several Social Security Act programs (including Medicaid), provides a two-year window for filing FFP claims with certain exceptions. This provision states:
42 U.S.C. � 1320b-2(a) (emphasis added). As the text of this provision indicates, the two-year rule does not apply to certain categories of expenditures -- namely, court-ordered retroactive payments and expenditures associated with "audit exceptions" and "adjustments to prior year costs." Id. In addition, section 1132(a) states that its provisions are subject to section 1132(b), which authorizes the Secretary to waive the two-year filing rule if he finds that the state had "good cause" for not filing the claim within two years. 42 U.S.C. � 1320b-2(b).The Secretary's regulations in 45 C.F.R. Part 95, subpart A implement the two-year filing requirement established by section 1132(a). Section 95.7 states that CMS "will pay a State for a State agency expenditure made after September 30, 1979, only if the State files a claim with us for that expenditure within 2 years after the calendar quarter in which the State agency made the expenditure" (emphasis added). 45 C.F.R. � 95.7. A "claim" is defined as a "request for Federal financial participation in the manner and format required by our program regulations, and instructions or directives issued thereunder." 45 C.F.R. � 95.4 (emphasis added). The "manner and format" for filing FFP claims is the submission of a Quarterly Medicaid Statement of Expenditures (QSE). See 42 C.F.R. �� 430.30(a)(2), 430.30(c); State Medicaid Manual (SMM) �� 2500(A)(1), 2500(B), and 2500.2 (CMS Exs. 14 and 16). Case Background In 1995, Connecticut instituted a managed care system to serve a segment of its Medicaid population. Voghel Aff. � 4; CT Brief at 2. Under this system, Medicaid recipients receive their health care from private managed care organizations (MCOs) that contract with Connecticut to serve those recipients. Ciarcia Aff. � 4. For each Medicaid resident served, Connecticut makes a monthly risk-based capitation payment to the MCO -- that is, a fixed amount that compensates the MCO for any health services that it delivers to the resident during the month. Id.; Voghel Aff. � 5. It appears that for Medicaid recipients who are not under the managed care system, Connecticut pays medical providers for each health care service (or bundle of related services) delivered to a particular patient. See Voghel Aff. � 6; CT Brief at 2-5 (discussing the type of expenditure data available under the managed care and pre-managed care payment systems). In contrast, payments to managed care providers (i.e., capitation payments) are not linked to delivery of particular medical services. Instead, those payments represent advance or prepaid compensation for any and all services that the MCO is contractually obligated to provide to the Medicaid recipient during a given period, without regard to the services actually delivered during that period. Voghel Aff. � 6; Ciarcia Aff. � 5. For each quarter between July 1, 1995 and December 31, 1999, Connecticut submitted, within two years after the end of the quarter, a QSE requesting FFP for all of its managed care expenditures (capitation payments) during the quarter. CT Ex. 1; CT Brief at 1; Voghel Aff. �� 5, 10-11. On each occasion, the claimed federal share was calculated by applying the FMAP rate to the "total computable" managed care expenditures for the quarter; no portion of the federal share was calculated by applying the 90 percent rate for family planning services. (2) CT Ex. 1. In short, Connecticut's initial claims for its 1995-1999 Medicaid managed care expenditures (which CMS evidently paid) sought FFP at the FMAP rate. Although some of those expenditures were undoubtedly used by MCOs to help cover the cost of providing family planning services, Connecticut asserts that it did not have (when it filed its initial claims) the type of data required by CMS to support a claim for FFP at the 90 percent rate. Voghel Aff. � 7. In 2001 or 2002, Connecticut developed a method, which CMS approved, to determine the portion of its capitation payments that were allocable or attributable to the provision of family planning services. Voghel Aff. � 8; CT Ex. 3. This method yielded a "family planning ratio," which Connecticut used to calculate the amount of managed care expenditures to be claimed at the 90 percent rate. CT Exs. 2-3. CMS's approval letter (dated March 1, 2002) informed Connecticut that claims for enhanced rate FFP based on the use of this methodology were subject to the two-year filing limit at 45 C.F.R. � 95.7. CT Ex. 3. In March 2003, Connecticut filed the QSE that triggered the disputed disallowance. CT Ex. 5. In addition to reporting expenditures made in the quarter ending December 31, 2002, the March 2003 QSE contained "adjustments" (3) to FFP amounts previously claimed by Connecticut for its 1995-1999 managed care expenditures. CT Exs. 4-6. Using the family planning ratio, Connecticut determined that a portion of these "prior period" expenditures were reimbursable at the 90 percent rate. CT Ex. 6. To obtain the higher level of reimbursement for these expenditures, Connecticut made two adjustments in the March 2003 QSE for each prior quarter (4): the first adjustment increased the amount previously reported to be the federal share of managed care expenditures eligible for FFP at the 90 percent rate (as explained, this previously reported amount was zero); the second adjustment reduced the federal share previously claimed for those expenditures at the FMAP rate. (5) CT Ex. 5-6. The net result of the adjustments was an increase in the amount that Connecticut reported as the federal share of its 1995-1999 managed care expenditures. This amount -- $14,245,191 -- is equal to the difference between the FFP paid to Connecticut for its managed care expenditures on family planning services between 1995 and 1999, and the amount it would have received for those expenditures at the 90 percent rate. CT Ex. 6. In a September 4, 2004 letter, CMS notified Connecticut that it was disallowing $14,245,191 in additional FFP for 1995-1999 because the claims for those funds were untimely. CMS indicated that the disallowance was "in accordance with" 45 C.F.R. � 95.7 and State Medicaid Director Letter (SMDL) #01-020, dated July 3, 2001. Id. SMDL #01-020 states in relevant part:
Id.; CT Ex. 19. SMDL #01-020 was not published in the Federal Register, and public comments were not solicited before it was issued. SMDL #01-020 states that it is "applicable to all claims filed on or after" July 3, 2001. CT Ex. 19. The Board's New Jersey decision, which SMDL #01-020 cites, presented facts similar to those here. The New Jersey Division of Family Development (NJDFD) had obtained FFP at the 66 percent rate for certain computer expenditures under its child support enforcement (title IV-D) program. NJDFD later determined that these expenditures were eligible for 90 percent FFP. Consequently, NJDFD submitted a revised quarterly expenditure report (QER), seeking reimbursement at the higher rate. The revised QER was filed more than two years after the quarter in which the expenditures were made, and the federal agency issued a disallowance on that ground. NJDFD argued to the Board that its request for additional FFP based on the higher rate was not a separate "claim" but merely "corrected" the FFP rate for expenditures that had already been timely claimed. Applying the regulatory definition of the term "claim" -- a "request for [FFP] in the manner and format required" by the applicable regulations and program instructions -- the Board found that NJDFD's request to adjust the FFP rate was indeed a claim subject to the two-year filing requirement. The Board emphasized that NJDFD had requested the rate adjustment using a standard form (the QER) that required a state to identify separately the expenditures for which FFP was being sought at the 66 percent rate, and the expenditures for which FFP was being sought at the 90 percent rate. Noting that the initial QER had explicitly identified the expenditures in question as eligible for reimbursement at the regular rate, the Board found that the revised QER "represented the first filing" in which New Jersey had requested payment at the 90 percent rate "in the manner prescribed by the Secretary's instructions," and that this filing constituted a request for FFP "in addition to the amounts previously sought and paid" for the expenditures in question. The Board concluded that there was "no basis in the governing definition of the term 'claim' and the QER instructions to justify considering the [revised QER] as anything other than a new, separate claim" subject to the two-year filing requirement. The Parties' Contentions on Appeal (6) Connecticut contends that the disallowance must be overturned because it was based on an agency rule -- SMDL #01-020 -- that should have been issued in conformance with APA notice-and- comment procedures. CT Brief at 16-20. Connecticut contends that APA procedures should have been followed because, in its view, SMDL #01-020 reversed an authoritative and longstanding CMS policy - a policy reflected in the State Medicaid Manual (SMM) and in other places -- of not applying the two-year filing requirement to a requested increase in the level of reimbursement for expenditures previously claimed at the FMAP (or some lower) rate. Id. Connecticut further contends that CMS's reliance on SMDL #01-020 violates the notice requirements in 5 U.S.C. � 552(a)(1) and our decisions applying those requirements. Id. at 20-21. It also argues that SMDL #01-020 is substantively invalid because CMS's regulations and program instructions indicate that a request to increase the rate of FFP for previously claimed expenditures is not a "new claim" but instead "relates back" to the initial claim. Id. at 21-24. Connecticut maintains that it satisfied the two-year requirement, as set forth in 45 C.F.R. � 95.7, because no additional managed care expenditures were reported in the March 2003 QSE for the prior periods, and because timely claims had been made for those expenditures at the FMAP rate. Id. at 9, 21. Finally, Connecticut asks that we waive any application of the two-year filing requirement (in the event we find it applicable) because it had "good cause" for not filing its request for additional FFP in the 1995-1999 managed care expenditures within two years. Id. at 24-25. CMS argues that Connecticut's APA arguments are without merit because the disallowance was based on, and authorized by, the plain language of section 1132(a). (7) Response Brief at 2-6. CMS also asserts that program instructions in the SMM say nothing that could be reasonably construed as allowing states to request FFP at the enhanced rate outside the prescribed two-year window, and that those instructions may not, in any event, override the statute and regulations. Id. at 10-11, 13-14. In addition, CMS asserts that the Board decision cited by SMDL #01-020 (New Jersey) constitutes HHS's "definitive" position on what constitutes a "new claim" for purposes of the two-year filing requirement, and that SMDL #01-020 "simply recognized that there was such an interpretation of an HHS regulation external to CMS and that the regulation was applicable by its terms to the Medicaid program." Id. at 12-13. Discussion
Connecticut's attention in this appeal is focused largely on SMDL #01-020, but that letter does not have the significance attributed to it. Although the disallowance is based in part on that letter, CMS relied more importantly on the plain language of the regulations which, in turn, implement the controlling statute, section 1132(a). We are, of course, bound by the statute and regulations. 45 C.F.R. � 16.14. Where, as here, a disputed issue is addressed by the plain or ordinary meaning of statutory or regulatory language, our role is to enforce the statute and regulations according to that meaning. Inspector General v. The Hanlester Network, DAB No. 1275 (1991); Louisiana Dept. of Health and Hospitals, DAB No. 1176 (1990); see also Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 842-843 (1984) ("First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress"). There is no dispute that Connecticut made its request for a higher level of FFP in its 1995-1999 family planning expenditures more than two years after the quarters in which those expenditures occurred. Connecticut asserts, however, that this request should not be treated as a "claim" subject to the two-year filing requirement because those expenditures had been previously and timely claimed, albeit at the lower FMAP rate. We rejected this same argument in New Jersey, relying on the plain language of the regulations. We find that the statute and regulations dictate the same result here. Section 1132(a) states that "any claim by a State for payment with respect to an expenditure" must be filed within the prescribed two-year period, unless it falls under one of the specified exceptions. 42 U.S.C. � 1320b-2(a). A claim is defined in section 95.4 as a "request for Federal financial participation in the manner and format required by [the federal agency's] program regulations, and instructions or directives issued thereunder." 45 C.F.R. � 95.4 (emphasis added). "Federal financial participation" is defined as the "federal government's share of an expenditure made by a State agency" under a Social Security Act program. Id. Thus, a claim is a request for payment of the federal government's share of an expenditure in the manner and format required by the federal program. In other words, identifying the expenditure is not sufficient to constitute a claim. The claim is the request for payment of federal funds with respect to the expenditure. As explained above, for each quarter between July 1, 1995 and December 31, 1999, Connecticut filed, within two years after the quarter, a QSE showing that it had calculated the total federal share of its managed care expenditures for the quarter by applying the FMAP rate. In no instance did the total federal share reported in the QSE include amounts derived from an application of the 90 percent rate. In March 2003, Connecticut adjusted the FFP amounts previously claimed by Connecticut for its 1995-1999 managed care expenditures. The result of the adjustments, had CMS allowed them, would have been the federal government's paying a greater share of Connecticut's 1995-1999 family planning expenditures. By submitting a QSE with adjustments intended to trigger payment of additional Medicaid matching funds, Connecticut made a "claim" - that is, a "request for Federal financial participation in the manner and format required" by CMS's regulations and program instructions. 45 C.F.R. � 95.4. The fact that Connecticut had already been reimbursed for the expenditures at the FMAP rate does not change what Connecticut did in March 2003, which was to request payment of the federal government's share -- more accurately, an augmented share, but nevertheless a share -- of those expenditures. Connecticut contends that New Jersey established the principle that the meaning of the term "claim" varies "depending upon the cost reporting regulations and program instructions that are applicable to each of the various specific programs," and thus CMS could not validly issue the disallowance (or adopt SMDL #01-020) without considering the Medicaid program's cost reporting regulations and instructions. CT Brief at 11. Connecticut therefore asks that we "follow the principles" established in New Jersey and evaluate the "program specific" regulations, guidelines, and instructions to determine "whether a request for an enhancement in federal reimbursement on previously submitted costs" is a "new claim." Reply Brief at 11. We disagree that New Jersey stands for the principle that the term "claim" has a variable meaning. A claim is defined in section 95.4 as a request for FFP "in the manner and format" required by applicable program regulations. This definition applies to all Social Security Act programs specified in 45 C.F.R. � 95.1, including Medicaid. In New Jersey, the Board simply examined the documentary evidence, including the state agency's "quarterly expenditure report" (the title IV-D program's analog to the QSE), in order to determine whether the state agency's request to increase the level of reimbursement was, in fact, a claim within the meaning of section 95.4. We do not, however, disagree with Connecticut's assertion about New Jersey's relevance. Indeed, we find that Connecticut's circumstances are not materially different from the ones we found to be dispositive in New Jersey. As indicated, the Board found in that case that a claim had been made because the state agency had filed a quarterly expenditure report (QER) that identified certain previously claimed expenditures as qualifying for reimbursement at a higher rate. Like the state agency in New Jersey, Connecticut submitted its request to increase the level of reimbursement for prior period expenditures on a form, the QSE, that required it to separately identify the federal share of expenditures claimed at the FMAP, and the federal share claimed at the 90 percent rate. Like the revised QER filed by New Jersey, Connecticut's March 2003 QSE "represented the first filing" in which Connecticut requested reimbursement for certain expenditures at the enhanced rate in the manner prescribed by the Secretary's instructions. New Jersey at 6. And like the adjustments made by New Jersey in its revised QER, the adjustments made by Connecticut in its March 2003 QSE resulted in a request for FFP "in addition to the amounts previously sought and paid" for the expenditures in question. Id.; see also Maryland Dept. of Health and Mental Hygiene, DAB No. 1909 (2004) (upholding CMS's disallowance of additional claims for FFP at the enhanced rate for family planning services that were filed more than two years after the expenditures for the services were incurred). (8) Given these similarities, we cannot agree with Connecticut that New Jersey supports its position in this appeal. In light of our conclusion that a "claim," within the meaning of 45 C.F.R. � 95.4, includes a request for enhanced FFP for the same previously claimed expenditures, we also cannot agree with Connecticut's suggestion that the language of 45 C.F.R. � 95.7 can be read as permitting a state to request enhanced rate FFP in any expenditure at any time (that is without regard to the two-year filing rule) as long as some claim for that expenditure was made at a lower rate (the FMAP rate) within two years after the quarter in which the expenditure was made. Section 95.7 states that the federal government "will pay a State for a State agency expenditure . . . only if the State files a claim with us for that expenditure within 2 years after the calendar quarter in which the State agency made the expenditure." "Claim" in section 95.7 has the same meaning it has in section 95.4. Thus, under section 95.7, a request for FFP at an enhanced rate must be filed within two years of the expenditures just as a claim for FFP at the FMAP rate must be filed within two years of those same expenditures. The fact that "some claim" was filed within two years is irrelevant. All claims for FFP at whatever rate must be filed within the same two years, unless one of the statutory and regulatory exceptions applies. Our conclusion is consistent with the statute and its purpose. As indicated, section 1132(a) makes the two-year rule applicable to "any claim by a State for payment with respect to an expenditure made during any calendar quarter by the State," unless the claim falls under one of the specified exceptions. (9) 42 C.F.R. � 1320b-2(a) (emphasis added). Given that Congress specified exceptions to the two-year rule in section 1132's text, (10) the only logical meaning of the phrase "any claim" is "all claims" or "every claim" (other than those, of course, for which statute makes an exception). See The American Heritage Dictionary of the English Language (4th ed. 2000) (defining "any" to mean "one, some, every, or all without specification"). (11) Although the term "claim" is defined in the regulations, it has a plain meaning in the context of the statute. There, it is coupled with the words "for payment." As such, the word claim in section 1132 is clearly a synonym for "request" or "demand." Id. Moreover, the term payment is used in the Social Security Act (for example, in section 1903) to refer to the amount of federal funds to be paid to states, which is determined not only by the allowable expenditures incurred by the state, but also by the rate to be applied to those expenditures. 42 U.S.C. � 1396b. This statutory language clearly supports the application of the two-year filing rule to Connecticut's request for payment of FFP at the enhanced rate. When a state requests federal matching funds at an enhanced rate (or, for that matter, at any rate), it is making a "claim for payment with respect to an expenditure" that must be filed within two years unless it falls within one of the statutory exceptions. We can think of no reason why Congress would take the trouble to specify these exceptions in the statute if it also intended to give states additional (non-specified) avenues of avoiding the two-year rule. To accept Connecticut's assertion that section 95.7 exempts claims based on FFP rate increases, we would have to ignore not only the plain meaning of the words "any claim," but Congress's clearly expressed intent to create only limited exceptions to the general rule. We cannot, of course, interpret a regulation in a way that would render statutory language irrelevant or superfluous. Connecticut argues that its interpretation of section 95.7 is consistent with the overall purpose of CMS regulations (42 C.F.R. � 430.30) and program instructions (SMM � 2500) that govern the submission of Medicaid FFP claims. These provisions, Connecticut asserts, are "solely concerned with the timely reporting of costs" and "expressly distinguish between additional, previously unreported costs (which are subject to the timely filing limit) and requested adjustments to the rate of federal reimbursement on previously reported costs (which are not subject to the time limit)." Reply Brief at 11. These arguments have no merit because they require us to ignore the plain language of section 1132(a) and its corresponding regulations. In any event, we can find nothing in the cited regulations or program instructions that could be interpreted as making the applicability of the two-year filing rule contingent on whether the FFP request is based on old (previously reported) or new (previously unreported) expenditures. (12) Cf. California Department of Health Services, DAB No. 1472 (1994) (noting that section 1132 does not distinguish "new" from "old" claims but simply imposes a two-year deadline with limited exceptions). In addition, this proposed contingency conflicts with the legislature's purpose in enacting section 1132(a). (13) Congress enacted this provision to enable the Department of Health and Human Services (HHS) to know the total amounts of its obligations for each fiscal year within a reasonable time after the end of the year. 46 Fed. Reg. 3527 (Jan. 15, 1981) ("Time Limits for States to File Claims"); Virginia Dept. of Medical Assistance Services, DAB No. 1838 (2002) (In enacting the two-year filing requirement, Congress addressed the need of the Department of Health and Human Services to plan and administer its budget effectively by controlling the ability of states to make delayed claims); Connecticut v. Schweicker, 684 F.2d 979, 990-994 (D.C. Cir. 1994) (citing and discussing the legislative history of section 1132). HHS cannot know its obligations for a given period unless it knows the magnitude of the claim being made on its budget. Accordingly, CMS's program instructions require a state to report in timely fashion not merely the total amount of its Medicaid expenditures for a given period, but the amount or percentage of those total expenditures being claimed as the federal share. SMM � 2500(B.); SMM � 2500.2(D.) (requiring states to identify - in columns (b) through (e) of form CMS 64.9 -- the amounts claimed for each service at the different levels of federal sharing). In short, we find that the adjustments contained in Connecticut's March 2003 QSE constituted an untimely claim for FFP within the meaning of section 1132(a), 45 C.F.R. � 95.4, and 45 C.F.R. � 95.7.
As indicated, Connecticut argues that the disallowance should be overturned because it is based on what it contends is a procedurally invalid agency rule - namely, SMDL #01-020. Connecticut contends that prior to issuing SMDL #01-020 in July 2001, CMS interpreted the regulations that implement the two-year timely filing requirement as being inapplicable to requests to increase the FFP rate for expenditures previously claimed at some lower rate. According to Connecticut, such requests were treated as part of, or as relating back to, the claim in which the expenditures were first reported, rather than as a "new claim" subject to the two-year filing rule. Connecticut contends that by reversing this prior agency interpretation, SMDL #01-020 effectively amended the regulations that implement section 1132(a) and required notice and comment rule making. CT Brief at 16-20. Connecticut relies on Alaska Professional Hunters Assoc. v. Federal Aviation Admin., 177 F.3d 1030 (D.C. Cir. 1999) and other cases holding that when an agency has given a legislative rule an "authoritative" or "definitive" interpretation, then later "significantly revises" that interpretation, the agency has effectively amended that legislative rule, something it may not do without following APA notice-and-comment procedures. Alaska Professional Hunters, 177 F.3d at 1033-1034. We find no merit in Connecticut's APA argument. The argument is based on the factual premise that SMDL #01-020 announces a new interpretation of HHS's regulations in 45 C.F.R. Part 95, subpart A, but we do not accept that premise. SMDL #01-020 does not purport to clarify, amplify, or explain the meaning of section 95.7 or any other regulation. It merely informs state Medicaid agencies that CMS will follow the Board's decision in New Jersey by applying the two-year filing requirement to requests that seek a higher level of FFP in expenditures previously claimed at the FMAP (or some other lower) rate. New Jersey itself did not adopt or affirm a particular interpretation of regulatory language. In that case the Board simply determined that a state agency's request for FFP met the definition of a "claim" in 45 C.F.R. � 95.4 and was therefore subject to the time limit in 45 C.F.R. � 95.7. But even if SMDL #01-020 could be considered an interpretative rule, it would not be invalid under the APA. Interpretative (as opposed to substantive) rules that do not adopt a position inconsistent with any of the Secretary's existing regulations may be issued without complying with APA notice-and-comment procedures. Shalala v. Guernsey Memorial Hospital, 514 U.S. 87, 99-100 (1995) (quoting (quoting Chrysler Corp. v. Brown, 441 U.S. 281, 302, n.31 (1979)). SMDL #01-020 does not adopt a position inconsistent with the Secretary's regulations. In fact, the position that CMS says it will follow in that letter is, for all the reasons discussed in the prior section, consistent with the plain language of the applicable statute and regulations. Therefore, to the extent that SMDL #01-020 could be an interpretative rule, it is exempt from notice-and-comment procedures. In support of its assertion that SMDL #01-020 reverses or significantly alters a prior agency interpretation or policy, Connecticut points to a number of things. First, it points to an alleged "admission" made by CMS in another Board proceeding. (14) CT Brief at 12. The "admission" consists of CMS's negative response ("no") to an interrogatory that asked "Whether CMS disputes that claims for enhanced FFP were not treated as new claims prior to July 3, 2001." CT Ex. 20. In our view, CMS's negative response merely shows that CMS declined to dispute the proposed statement; this is not necessarily the same thing as admitting to the truth of the statement. More importantly, we find no basis for construing an isolated, out-of-context statement made during discovery in one particular case as a definitive statement of agency policy for all cases and purposes. This is particularly true since the purported "admission" does not state that CMS actually had a policy of exempting claims for enhanced FFP from the two-year time limit. At most the terse response cited speaks only to how CMS might have treated such claims, and, even then, does not state that such treatment was routine, common, or consistent. Connecticut also cites the statement in SMDL #01-020 that it is "applicable to all claims filed on or after the date of this letter" as evidence of a prior policy. CT Brief at 12. Connecticut suggests that no purpose would be served by this statement if CMS did not have a prior inconsistent policy. However, this statement might be nothing more than an assurance that CMS would not reopen any previous claim involving rate adjustments. Even if CMS made decisions to allow such claims before July 2001 - and there is no evidence that it actually did so - there is no basis in the record to conclude that such decisions were the product of definitive or authoritative agency interpretation or policy. Connecticut next points to the instructions for preparing the QSE "summary sheet" in section 2500.1 of the State Medicaid Manual (SMM). Connecticut notes that the language "(See � 2560, Medicaid Funding Limitations Policy)" appears at the end of the instructions for line 7, the line for reporting prior quarter increasing adjustments that were not reported on a prior QSE. This language does not appear in the instructions for line 8, the line for reporting FMAP rate changes. Section 2560 refers to the time limits for filing claims established by section 1132 of the Act and 45 C.F.R. Part 95 and states that CMS "will pay to a State the Federal share of expenditures incurred, under an approved plan . . . if claims for these expenditures are filed" within two years after the calendar quarter in which the expenditures are made. SMM � 2560.2 (CT Ex. 17). Connecticut concludes from the omission of the citation to � 2560 in the instructions for line 8 that prior to July 2001, CMS interpreted the two-year time limit on filing claims for FFP as being inapplicable to FMAP rate changes. This conclusion is highly speculative and ultimately immaterial. Connecticut relies for its conclusion on the rule of statutory construction that Congress is presumed to have acted intentionally or purposefully when it includes particular language in one section of a statute but omits it in another. However, we know of no authority, and Connecticut cites none, that would require us to apply rules of statutory or regulatory construction to the SMM. The SMM is not itself a statute or regulation. Nor does it have the legal authority of a statute or regulation. New York State Dept. of Social Services, DAB No. 1134 (1990) (finding that the State Medicaid Manual's prohibition on the use of statistical sampling to develop Medicaid claims did not have the force or effect of law). Furthermore, Connecticut's conclusion as to the meaning of the omission is not the only possible conclusion. The omission may have no meaning at all or various possible meanings. For example, we note that the last line of the instructions for line 8 states, "Enter the amounts on Line 8 from the Form HCFA-64.9p and/or HCFA-64.10p in the same manner as for Line 7" and does not repeat the entry instructions that appear for line 8. This reference back to the entry instructions for line 7 could be read as incorporating for purposes of line 8 the reference to SMM 2560 that appears at the end of the instructions for line 7. (15) In the final analysis, it is immaterial what CMS meant by the omission of the citation in the instructions for line 8 because the statute and regulations control, not the instructions. The "Foreword" to the SMM states that its "instructions are official interpretations of the law and regulations, and, as such, are binding on Medicaid State agencies." CT Ex. 12. However, since the SMM does not have the legal authority of the statute and regulations, the SMM instructions must give way to the statute and regulations to the extent of any conflict. As discussed in the prior section, the conclusion that Connecticut draws from the SMM instructions, and attributes to CMS, conflicts with the plain language of section 1132 of the Act and 45 C.F.R. � 95.7, and, therefore, cannot be a legally effective official interpretation. See, e.g., Chief Probation Officers of California v. Shalala, 118 F.3d 1327, 1333 n.6 (9th Cir. 1997) ("a rule that an agency claims is an interpretation of a statute or regulation may be held invalid as being in conflict with the statute or regulation, if challenged on that basis"). In short, we find that SMDL #01-020 did not reverse or substantially alter a prior, valid interpretation of the regulations in 45 C.F.R. Part 95, subpart A. Consequently, Alaska Professional Hunters and the other APA rulemaking cases cited by Connecticut do not apply. (16) Finally, we find APA notice-and-comment procedures inapplicable because SMDL #01-020 communicates an interpretation of the statute and regulations and, in fact, arose from an agency "adjudication" - the Board decision in New Jersey (17) -- that is not itself subject to APA rulemaking procedures. As CMS noted in its brief, APA notice-and-comment procedures do not apply to agency adjudication, and agencies have broad discretion to formulate interpretative rules of general applicability through the process of adjudication rather than rulemaking. NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974)) (an agency is "not precluded from announcing new principles in an adjudicative proceeding and . . . the choice between rulemaking and adjudication lies in the first instance within the [agency's] discretion); accord Shalala v. Guernsey Memorial Hospital, 514 U.S. at 96; Cheshire Hospital v. New Hampshire-Vermont Hospitalization Service, Inc., 689 F.2d 1112, 1122-1123 (1st Cir. 1982).
Connecticut contends that the disallowance should be overturned because CMS failed to publish SMDL #01-020 in accordance with the notice requirements in 5 U.S.C. � 552(a)(1). Section 552(a)(1), a provision of the Freedom of Information Act (FOIA), requires agencies to publish all "statements of general policy" or "interpretations of general applicability" in the Federal Register, and further provides that a person may not be adversely affected by any matter required to be published in the Federal Register and not so published, "except to the extent that [the] person receives actual and timely notice" of the policy or interpretation. 5 U.S.C. � 552(a)(1). To obtain relief under section 552(a)(1), a person must show that he "'was adversely affected by a lack of publication or that he would have been able to pursue an alternative course of conduct' had the information been published." Alliance for Cannabis Therapeutics v. Drug Enforcement Admin., 15 F.3d 1131, 1136 (D.C. Cir. 1994) (quoting Zaharakis v. Heckler, 744 F.2d 711, 714 (9th Cir. 1984)). The factual premise of Connecticut's FOIA argument is essentially the same as the one supporting its APA argument, that SMDL #01-020 was an exercise in regulatory reinterpretation that effectively reversed a longstanding CMS policy that allowed FFP rate adjustments to be made more than two years after the quarter in which the state made the relevant expenditures. As discussed, however, Connecticut did not establish that CMS ever had a policy or practice of not applying the two-year rule in these circumstances. Nor did Connecticut demonstrate that it actually relied on such a policy or practice. Not only is there no evidence that SMDL #01-020 represents a change in agency policy, the challenged disallowance was authorized by -- and based on -- the plain language of the governing statute and regulations. That language afforded Connecticut adequate notice of the legal standards or requirements for submission of the FFP requests at issue. For these reasons, we conclude that Connecticut was not adversely affected by CMS's failure to publish SMDL #01-020 in the Federal Register. Cf. Malkan FM Associates v. Federal Communications Comm., 935 F.2d 1313, 1318 (D.C. Cir. 1991) (citing cases holding that Federal Register publication is unnecessary when the agency's action is based on a direct application of the plain language of a governing statute or regulation); Kaspar Wire Works, Inc. v. Secretary of Labor, 268 F.3d 1123, 1132 (D.C. Cir. 2001) (finding Federal Register publication unnecessary when the Secretary's authorization was clear from statutory language); Knutzen v. Eben Ezer Lutheran Housing Center, 815 F.2d 1343, 1351 (10th Cir. 1987) (noting that courts generally require agency publication of policy statements "only if they constitute a change from existing law, policy or practice"). Accordingly, we decline to overturn the disallowance based on section 552(a)(1).
Connecticut asks that we grant a "good cause" waiver pursuant to section 1132(b) of the Act if we find that its March 2003 request for FFP at the 90 percent rate is a claim subject to the two-year filing requirement. CT Brief at 6 n.7, 24-25. The problem with this request is that the statute and regulations invest the Secretary, not the Board, with the authority to grant such a waiver. Section 1132(b) provides that the "Secretary" shall waive the two-year filing requirement if he finds good cause for the State's failure to file a claim within the two-year period described in section 1132(a). The regulations at 45 C.F.R. �� 95.22-95.34 establish the process for securing a section 1132(b) waiver from the Secretary. Section 95.25 provides that the state "should request a waiver in writing as soon as the State recognizes that it will be unable to submit a claim within the appropriate time limit." Section 95.31(a) states that a waiver request affecting only one HHS agency "should be sent to the appropriate HHS agency." Section 95.34 states that the "Secretary will make a decision after reviewing the State's request for waiver." In view of these regulations and the underlying statute, the Board has consistently held that it lacks authority to grant a section 1132(b) waiver request in the first instance. Montana Dept. of Social and Rehabilitation Services, DAB No. 1471 (1994); California Dept. of Health Services, DAB No. 1472 (1994). Connecticut insists that CMS's regulations do not preclude the Board from ruling on its waiver request, pointing in particular to section 95.31, which states that waiver requests "should be sent" to the appropriate HHS agency. Connecticut contends that the word "should" makes this regulation precatory (non-mandatory), and therefore we should not read it as giving exclusive authority to the Secretary to make section 1132(b) waiver determinations. Reply Brief at 14. We find no merit to this argument. Section 95.31 does not address the issue of what person or entity has the authority to make waiver determinations. Section 95.31 simply tells the state where to send its waiver request. In this case, Connecticut's waiver request should have been sent to CMS, which is "the appropriate HHS agency." 45 C.F.R. � 95.31(a). Section 95.34 is the regulation that specifies who can rule on a waiver request. Section 95.34 states that the "Secretary will make a decision after reviewing the state's request for waiver." 45 C.F.R. � 95.34 (emphasis added). The Secretary of Health and Human Services has not delegated to the Board his authority to grant good cause waivers in the first instance. Connecticut contends that the Board has the requisite authority because it is the "administrative arm of the Secretary responsible for issuing final decision[s] on behalf of the Secretary regarding grant disputes." Reply Brief at 14-15. However, the Board's jurisdiction is limited. In disputes involving mandatory grant programs such as Medicaid, the Board is confined, by regulation, to a review of CMS's "disallowance" determination. 42 C.F.R. � 430.42(b); 45 C.F.R. Part 16, Appendix A, � B(a)(1). Whether denial of a section 1132(b) waiver can be appealed to the Board along with a related disallowance is an issue we need not decide because Connecticut did not request, and CMS did not deny, a good cause waiver prior to or in conjunction with the disallowance. See California Dept. of Public Service at 9 n.3 (noting that it is an open question whether the Board can review an agency's denial of a section 1132(b) waiver request). In short, Connecticut has filed its waiver request in the wrong forum. We cannot and will not consider the merits of that request. (18) Conclusion For the reasons above, we find that Connecticut's March 2003 request for $14,245,191 in FFP for its 1995-1999 managed care expenditures was a "claim" within the meaning of section 1132(a) of the Act and the implementing regulations and was not filed within two years after the quarters in which those expenditures were made, as required by section 1132(a). Because the claim was untimely, and because the claim does not fall under any exceptions to the two-year filing rule, we affirm CMS's disallowance of $14,245,191 in FFP. |
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Judith A. Ballard Donald F. Garrett Sheila Ann Hegy |
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1. "Federal financial participation" means the "Federal government's share of an expenditure made by a State agency" under various Social Security Act programs. 45 C.F.R. � 95.4. 2.
One component of the QSE is form CMS-64.9, which lists a state's
Medicaid expenditures by type of service. See
CT Brief at 4, n. 4; CT Ex. 1; SMM � 2500.2 (CT Ex. 16). Payments to MCOs
are included on this form as a type of service. For each service type,
the state reports "total computable" expenditures in the first column
of form 64.9. This amount is equal to the total expenditures reported
by the state for the period before
application of a federal matching rate. In the succeeding columns, the
state indicates the amount of FFP being sought for the service at each
of the relevant matching rates - e.g.,
the FMAP, 100 percent for Indian Health Service facilities, and 90 percent
for family planning services. The amounts in each of these matching rate
columns are summed, with the total placed in the column designated for
the "total federal share." 3. In CMS's program instructions, the term "adjustment" refers generically to increases or decreases in amounts previously claimed by a state for a "prior period" (that is, a period prior to the quarter for which the QSE was filed). See CT Exs. 14 and 16. The Act recognizes one particular type of adjustment -- an "adjustment to prior year costs," defined in the regulations as an "adjustment in the amount of a particular cost item that was previously claimed under an interim rate concept" -- as an exception to the two-year filing requirement. 42 U.S.C. � 1320b-2(a). To the extent that we use the term adjustment in this decision, we do so in the generic sense, unless otherwise indicated. Connecticut does not contend that the adjustments in its March 2003 QSE are "adjustments to prior year costs." 4. For reporting purposes, Connecticut aggregated the quarters by fiscal year. CT Ex. 5. 5. To illustrate, for fiscal year 1996, family planning service expenditures were determined to be $5,247,776. CT Ex. 6 (line for "Total FFY 96" and column 5). In its initial, timely QSE for this fiscal year, Connecticut claimed 50 percent (the FMAP) -- or $2,623,888 -- of these expenditures as the federal share. In the March 2003 QSE, this amount, $2,623,888, was reported on line 18A, column B of form CMS-64.9P as a reduction in the amount of managed care expenditures previously claimed at the FMAP rate for 1996; this adjustment was transferred to line 10B of the QSE's "summary sheet." CT Ex. 5; see also SMM � 2500.2(A) (CT Ex. 16). A corresponding upward adjustment of $4,722,998 -- or 90 percent of the $5,247,776 reported as total family planning expenditures for 1996 -- was made on line 18A, column D (the column showing the federal share of family planning expenditures at the 90 percent rate) and transferred to line 7 of the summary sheet. Id. The additional amount of FFP claimed as a result of these two adjustments is $2,099,110 ($4,722,998 minus $2,623,888). 6. After briefing was completed, CMS filed a motion to supplement its appeal file with a HHS Office of Inspector General (OIG) report entitled "Review of Missouri's Retroactive Family Planning Claim" (April 2005, No. A-07-04-01012). We now grant CMS's motion. The Board previously allowed Connecticut to supplement its appeal file with an OIG report entitled "Managed Care Family Planning Claimed by Missouri" (January 2005, No. A-07-04-01004). Neither party has expressly indicated how or why the reports bolster their respective positions or what significance, if any, we should accord them. We find nothing relevant to our decision in the report submitted by Connecticut. An objective of the OIG report submitted by CMS was to determine whether claims seeking FFP for the difference between the FMAP rate previously claimed for expenditures on services that included family planning services and the enhanced 90 percent rate available for family planning services were subject to the two-year filing requirement in section 1132(a). Based on its review of the facts and legal authorities, including the Board's New Jersey decision, the OIG concluded that the claims for enhanced rate FFP were subject to the two-year filing requirement and recommended that CMS seek a refund of the portion of the claims that did not meet that requirement. The OIG report is not binding on HHS officials, even with respect to Missouri's claims. Nonetheless, it is worth noting that the report's conclusion is consistent with our decision here. 7. CMS states that "[f]rom the inception of the two-year limit, there has not been a rule or interpretation creating an exception [to the two-year filing limitation] on the grounds of a claim for enhanced rate funding." Response Brief at 11. CMS later notes that the pre-July 2001 program instructions in the State Medicaid Manual are simply silent as to the effect of the two-year filing limit on enhanced FFP rates, and that "[s]uch silence could have resulted in varying practices or lack of appropriate awareness of the issue." Id. at 12. CMS asserts that this "gap" or silence was filled by the Board's New Jersey decision. Id. 8. Our decision in Maryland was based on our rejection of Maryland's argument that the additional claims fell under the exception for adjustments to prior period costs, an argument not advanced by Connecticut. However, we find our Maryland decision instructive here just as we found our New Jersey decision "instructive" in the Maryland case. Maryland Dept. of Health and Mental Hygiene at 9. Each of these cases involves a state's attempt to claim additional FFP by moving previously claimed costs from one reimbursement category to another outside the two-year time limit, even though the actual costs for the services provided have not changed. The statute and regulations do not allow this. 9. The state agency in New Jersey unsuccessfully argued that its second claim merely adjusted or "corrected" the rate applied to expenditures reported in a previous claim. The only "adjustment" identified in the statute as exempt from the two-year filing requirement is an "adjustment to prior year costs." Connecticut does not assert that its request for additional FFP falls under that exception. 10. Three of the exceptions (court-ordered retroactive payments, audit exceptions, and adjustments to prior year costs) are identified by name in section 1132(a). 42 U.S.C. � 1320b-2(a). The fourth (for situations in which there was "good cause" for the late filing) is identified in section 1132(a) by a reference to section 1132(b). Id. (indicating that the two-year rule would apply "subject to" section 1132(b)). 11. See also United States v. Gonzales, 520 U.S. 1, 5 (1997) ("Read naturally, the word 'any' has an expansive meaning, that is, 'one or some indiscriminately of whatever kind.' Webster's Third New International Dictionary 97 (1976). Congress did not add any language limiting the breadth of that word, and so we must read � 924(c) as referring to all 'term[s] of imprisonment,' including those imposed by state courts.") 12. We likewise reject the implication that section 95.7 merely requires a timely reporting or identification of expenditures. Section 95.7 requires the filing of timely "claims," and a claim is, as discussed, more than simply the identification of an expenditure on the QSE. Rather, it is a request for "payment" -- a request for FFP in the required manner and format -- with respect to that expenditure. 13. Connecticut has offered no explanation about how or why its proposed regulatory interpretation is consistent with Congress's purpose in enacting section 1132(a). 14. The case was Pennsylvania Dept. of Public Welfare, Appellate Docket No. A-02-05. 15. CMS does not give a definitive explanation for the omission in its brief but refers to the omission as a "gap" or "silence" that "could have resulted in varying practices or lack of appropriate awareness of the issue" that was filled by the New Jersey decision. Response Brief at 11-12. 16. The principal case relied upon by Connecticut, Alaska Professional Hunters, is also factually distinguishable. In that case, the FAA did not deny that the "Notice to Operators" at issue announced a new interpretation of the agency's regulations, and the new interpretation was inconsistent with those regulations as previously construed in a Civil Aeronautics Board decision that was consistently followed in official advice. 17. The APA defines an "adjudication" as "an agency process for the formulation of an order," and defines "order" as "the whole or part of a final disposition . . . of an agency in a matter other than rule making but including licensing." 5 U.S.C. � 551(6), (7). The procedures for formal adjudication under the APA are set out in 5 U.S.C. � 554. The Board's adjudication of Medicaid disallowance appeals is informal because there is no express or implied statutory requirement for a "hearing on the record" in such appeals. See 5 U.S.C. � 554; Commonwealth of Pennsylvania, 80 F.3d 796, 806-807 (3d Cir. 1996). 18. Our decision does not preclude Connecticut's submitting a waiver request to CMS pursuant to the regulations in 45 C.F.R. Part 95. | |