GAB Decision 586
Docket No. 83-248
October 30, 1984
Massachusetts Department of Public Welfare;
Garrett, Donald; Settle, Norval Ballard, Judith
The Massachusetts Department of Public Welfare appealed a decision by
the Health Care Financing Administration (HCFA) disallowing $13,648,026
in federal financial participation (FFP) claimed by the State under
Title XIX (Medicaid) of the Social Security Act. The claims were for
per diem rates for inpatient psychiatric services rendered to
individuals aged 22 to 64 in institutions for mental diseases (IMDs)
during the period July 1969 through March 1981. The claims were
submitted under 42 CFR 435.1008(b), which permits FFP "in expenditures
for services furnished to eligible individuals during the month in which
they become . . . patients" in an IMD.This regulation provides an
exception, based on administrative convenience, to a provision generally
excluding from the definition of reimbursable "medical assistance"
any
care or services to individuals aged 22 to 64 in IMDs.
A threshold issue concerning the timeliness of part of the State's
claim was resolved in the State's favor in this Board's decision in
Joint Consideration -- Timely Filing of Claims, Decision No. 576,
October 5, 1984. /1/
The remaining issues in this appeal are primarily those addressed by
the Board in Joint Consideration: IMD Admission/Discharge Issue, (2)
Decision No. 436, May 31, 1983. /2/ There, the Board held that the
partial month eligibility regulation did not permit the States to ignore
limitations on covered services resulting from the IMD exclusion and
that, therefore, the full per diem rates were not allowable. The
States, however, were permitted to show what parts of their per diem
rates were for services separately covered in the State plans, provided
during the months of admission to or discharge from an IMD. /3/
Massachusetts did not argue that this case was distinguishable from
the appeals decided in Decision No. 436, but said it disagreed with the
Board's conclusion and analysis in that decision. Massachusetts asked
us to reconsider our decision there based on the reasons stated in the
Massachusetts brief. Briefly, the State argued --
* That the disallowance is invalid because it conflicts with Medicaid
regulations and longstanding Medicaid policy;
* That the disallowance is invalid because it is based on an internal
legal memorandum that effectively revokes Medicaid regulations and
policies without following the requirements of the Administrative
Procedure Act;
* That the disallowance is invalid because it is based on a
retroactive change in policy that can only be applied prospectively; and
(3) * That the disallowance for services provided during the first
full calendar month of institutionalization is invalid because it is
inconsistent with Medicaid regulations and guidelines.
The State also incorporated by reference the arguments made by other
States regarding similar disallowances.
The State's arguments here were based on the same unsubstantiated
premises about what Agency policy was as the arguments we addressed
previously. Nothing the State presented shows that our analysis of
Agency policy in Decision No. 436 and subsequent decisions was
incorrect. Massachusetts provided no evidence to show that it, in fact,
relied on and was harmed by Agency action or to distinguish its
situation from that of the other States with similar disallowances. As
we noted in Decision No. 436, the States have traditionally been
responsible for providing the services claimed here, so would have
incurred the costs regardless of federal policy. Accordingly, we uphold
the disallowance here, subject to reduction to the extent the State can
show what part of the per diem rates were for covered services provided
during the months of admission or discharge. Below, we first describe
what we see as the key issue here and in Decision No. 436. We then
state why the State's arguments set out in the State's brief do not have
merit.
The key issue here.
Before analyzing the arguments the State made here, we note that the
critical issue is whether the partial month eligibility provision
permits the State to ignore the limitations on service coverage in IMDs.
The question arises in the context of the State's claim for the full per
diem rates because those rates include costs for services such as room
and board which are not covered under applicable statutory and
regulatory provisions except when part of the aggregate of services
provided by an institution which is a hospital, skilled nursing facility
(SNF), intermediate care facility (ICF), or inpatient psychiatric
facility. The Agency did not deny that the partial month eligibility
provision allowed FFP in services which are separately covered in a
state plan. /4/ In (4) Decision No. 436, the Board concluded that the
partial month eligibility provision at 42 CFR 435.1008 could not be
reasonably read as providing FFP in services not covered in a state
plan. The Board further concluded that the IMD exclusion resulted in
service descriptions being written so that there was an absence of any
provision covering hospital, SNF, ICF, or inpatient psychiatric facility
services in IMDs except for IMD services provided to the aged or
inpatient psychiatric facility services provided to children. General
descriptions of hospital, SNF, and ICF services are limited by the
phrase "other than in an IMD," and provisions covering these services
in
IMDs under certain conditions are limited to individuals aged 65 or over
or under age 22. (For a discussion of the relevant statutory and
regulatory provisions, see Decision No. 436, pp. 5-16.)
The State acknowledged here that the same limits as those in the
statute and regulations appear in its State plan. State's brief, p.
17; Appeal file, Ex. 28. Thus, to prevail here the State must
establish that the claims for poer diem rates are allowable in spite of
the fact that the State plan did not specifically cover inpatient
services to individuals aged 22-64 in IMDs, that is, that the Agency is
precluded, by its own policy or actions, from applying the coverage
limits in the State plan.
This context is important because the State confuses in its arguments
the Agency policy to permit FFP in covered services during partial
months (a policy embodied in 42 CFR 435.1008(b), to which the Agency
adhered) with a purported policy to permit FFP in the per diem rates
claimed here in spoite of the fact that the category of services
represented by the rates is not specifically covered in the State plan.
We concluded in Decision No. 436 that the IMD exclusion not only
resulted in individuals being ineligible for Medicaid due to
institutional status, but also affected the way service coverage
provisions were written. We further found that the Agency regulations
and documents on which the States said they relied did not show that the
Agency had an established policy permitting the States to ignore during
partial months the coverage limits in their State plans.
With this context in mind, we discuss below why we do not think the
State's arguments provide a basis for overturning the disallowances.
(5) ANALYSIS
1. Whether the disallowance conflicts with Medicaid regulations and
policy.
The Medicaid regulations
The State argued that the disallowance is invalid because it
conflicts with Medicaid regulations and longstanding Medicaid policy.
The State pointed to the regulation at 42 CFR 435.1008(b), and other
more general provisions on partial month eligibility. /5/ The State
said, "By their express terms, these regulations authorize FFP for
medical services provided by IMDs during the partial months of admission
and discharge, even though expenditures for IMD services are generally
not allowable under the Medicaid Program." State's brief, p. 6
(citation omitted).
We agree that these regulations authorize FFP for some medical
services during partial months, and the Agency has also agreed with this
interpretation. But, as we noted above, the question is whether the
regulation permits FFP in services that are not covered in the State
plan. The Agency has said that the regulation permits FFP only in
covered services. As we concluded in Decision No. 436, this is the only
reasonable reading of the regulation. (See our discussion on pages
13-14 of Decision No. 436.) Thus, we do not believe the disallowance
conflicts with the partial month provisions; they simply do not address
the question of what services provided during the partial months are
covered. /6/
(6) Agency documents
The State also pointed to what it called "HCFA's policy
pronouncements," stating that HCFA had interpreted its regulations "to
authorize FFP for services provided during the partial months of
admission and discharge." State's brief, pp. 6-10. /7/ Again, we agree
with the general statement, but disagree that it resolves the issue
here.
All but one of the documents submitted by the State here were
addressed in Decision No. 436. There, the Board grouped the documents
into the following categories: formal policy issuances; internal
Agency memoranda; correspondence from regional Medicaid officials; and
miscellaneous. In summary, the Board determined the following:
* The formal policy issuances concerned inmates in public
institutions, rather than patients in medical institutions or
intermediate care facilities qualified under Medicaid to provide
inpatient psychiatric services to the aged or children. They simply do
not address the question of the allowability of FFP in per diem rates
for inpatient psychiatric services for individuals aged 22 to 64 during
a partial month of institutionalization. Decision No. 436, p. 17.
* The internal memoranda were not intended as an official
interpretation of the statutory IMD exclusion and how it affected
covered services, and, in any event, the States could not reasonably
have relied on them since they evidenced an internal disagreement over
whether inpatient psychiatric services were covered during partial
months. Indeed, since the States did not show when they became aware of
the internal memoranda, there is a substantial question of whether the
States relied on them at all. Decision No. 436, pp. 18-21.
* When considered out of context, statement in correspondence from
Region II officials may have suggested, for a brief period, that the
claims were allowable. But the States should have known from the
context that (7) payment was uncertain. Correspondence from Region V
may have suggested concurrence with Ohio's proposed interpretation that
FFP was available for "institutional services" provided by an IMD
during
the month of admission, but also conditioned any concurrence on
submission of a State plan amendment. /8/ In Region III, there was no
correspondence submitted indicating approval of the State's claims, and,
in Region I, a memorandum was issued which indicated to the contrary
that FFP would not be available in the expenditures. Decision No. 436,
pp. 21-25.
* Other miscellaneous documents submitted by the States supported the
Agency's position, rather than the States', and some of the documents
indicated that some of the States may have known that the claims
potentially conflicted with regulatory provisions limiting services
coverage. Decision No. 436, pp. 25-27.
Office of the General Counsel memoranda
We also noted in Decision No. 436 that we did not think that the
States could rely on memoranda from the Office of General Counsel (OGC)
to Agency officials, and that the States themselves had appeared to
recognize the considerations against allowing states to rely on internal
legal advice. Decision No. 436, p. 21, n.9. Although Massachusetts
submitted several OGC memoranda, Massachusetts did not state why these
internal memoranda should be considered Agency "policy pronouncements."
Moreover, although a June 15, 1979 OGC memorandum states that FFP is
available for "institutional services" during partial months, it does
not define (8) that term, nor address the issue of how service coverage
provisions interact with the partial month eligibility provisions.Appeal
file, Ex. 7. A June 17, 1981 memorandum also does not address the issue
of what services are covered, and a June 29, 1981 memorandum clarifies
that "an individual between 21 and 65 who is not otherwise eligible for
inpatient psychiatric hospital services does not suddenly become
eligible for such services . . . by virtue of going into a facility
furnishing those services." Appeal file, Ex. 20 and 23. Thus, we
reaffirm our position that these legal memoranda do not provide a basis
for finding that the Agency had a longstanding interpretation to permit
FFP in the per diem rates claimed here.
Region I correspondence
The one additional document submitted by the State seems, at first
blush, to say that FFP is available in per diem rates during partial
months. This document is a memorandum dated December 4, 1980, from the
Regional Medicaid Director, Region I (which includes Massachusetts), to
"ALL STATE PUBLIC WELFARE ADMINISTRATORS" (presumably, this means
all
states in Region I). Appeal file, Ex. 2. Although not issued by the
HCFA central office as part of the Agency's system of formal guidance to
the states, it has an issuance number, 80-54. The memorandum states
that its purpose is to inform of a change in federal policy. After
clarifying that an individual may apply for medical assistance during
the first month of institutionalization in an IMD, the memorandum
states:
States may claim FFP for reimbursement to IMD/TBs for per diem
psychiatric care for Medicaid eligible individuals between 22-64 for the
remainder of the first month of institutionalization when three
conditions exist:
1) the individual is otherwise eligible for Medicaid outside the
institution during the partial month;
2) the State provides full month coverage to all individuals who are
eligible in that month; and
3) the State provides coverage to all otherwise eligible individuals
in both public and private IMD/TBs.
Federal Financial Participation is available for the Medicaid per
diem rate to an otherwise eligible individual for the month of discharge
from an IMD/TB. The three conditions stated above are applicable in
making the determination of eligibility.
(9) Parts of this memorandum do refer explicitly to the per diem
rate. When the memorandum is considered as a whole, and in the context
of the statutory and regulatory provisions on covered services, however,
we do not think that the State could reasonably rely on it as a basis
for obtaining FFP in the full per diem rate in spite of the absence of
any provision in the State plan specifically covering inpatient
psychiatric or IMD services to individuals between 22 and 64. We find
the following factors to be significant:
* The stated subject and focus of the memorandum is the requirement
for individual eligibility rather than the question of whether the State
plan covers the services. Like the other documents from this time
period we discussed in Decision No. 436, this memorandum does not
directly address the issue of how the partial month eligibility
provision interacts with the statutory and regulatory provisions on
covered services. Nothing in the memorandum indicates that the Agency
intended it as an interpretation that the states could ignore the age
limits in the service coverage provisions during partial months.
* The third stated condition in the memorandum raises the question of
whether the State provides coverage to all otherwise eligible
individuals in IMDs. The Massachusetts State plan provisions covering
services in IMDs do not emcompass individuals between 22 and 64.
* In an earlier All State memorandum, 79-4, issued August 15, 1979,
the Regional Medicaid Director had stated with respect to the partial
month eligibility provision that "the particular services for which FFP
is sought would have to be included in the State plan as a covered
expenditure." Appeal file, Ex. 21. Nothing in the later memorandum
indicates that this policy had changed.
* Since the memorandum is general in nature, it does not address the
question of whether any particular State plan meets the stated
conditions for FFP.
* The State has provided no evidence that it relied on this
memorandum or that it was harmed by such reliance. As we noted in
Decision No. 436, the states have traditionally been responsible for IMD
services to individuals in this age group and would have incurred these
costs in any event.
(10) When we consider together all of the documents various States
have submitted in these cases, it is evident that what happened was
that, in the course of clarifying the circumstances under which
individuals in this age group could be considered eligible during
partial months in IMDs, various HCFA officials made some ambiguous
statements about "psychiatric care and services," "institutional
services," or "per diem rates." Although these statements arguably
conflicted with coverage provisions in the statute and regulations, the
States, understandably, saw an opportunity to retroactively obtain FFP
in costs they had incurred over the years. But these Agency statements,
taken in context, simply cannot be read as establishing Agency policy on
covered services during partial months and, contrary to what the State
argued here, do not constitute a longstanding, official interpretation
binding on the Agency.
In summary, we conclude that the disallowance does not conflict with
HCFA regulations or policy.
2. Whether HCFA violated the Administrative Procedure Act.
The State based its second argument on the view that the OGC
memorandum of June 29, 1981, referred to above, was the basis of the
disallowance and that this memorandum effectively revoked 42 CFR
435.1008(b). The State said that, since the requirements of the
Administrative Procedure Act (APA) for repealing regulations were not
followed, the disallowance is invalid. State's brief, pp. 10-13.
Stated simply, the problem with this argument is that it is based on
an incorrect premise. The interpretation in the OGC memorandum and in
this disallowance does not conflict with 42 CFR 435.1008(b). The Agency
has given effect to that provision by stating that FFP is available
under that regulation for covered services provided in partial months.
The OGC memorandum merely clarifies an earlier OGC memorandum implying
that FFP was available for "institutional services" in an IMD; the
clarification made (that an individual does not become eligible for a
broader range of services by virtue of institutionalization than he
would have received absent the institutionalization) is consistent with
42 CFR 435.1008(b) and other HCFA regulations.
3. Whether HCFA improperly applied a policy retroactively.
The State argued that, if the OGC memorandum of June 29, 1981
provides the legal basis for the disallowance, HCFA was retroactively
applying that opinion to the expenditures here, made during the period
July 1969 through March 1981.
(11) Like the State's previous arguments, this one is contingent on a
view which is unsupported. The basis for the disallowance here is the
fact that the State plan does not cover inpatient services in IMDs,
except when certain conditions (including limits on age) are met. The
State has not established that the Agency had a policy permitting it to
ignore those limits. Thus, the OGC memorandum does not represent a
change in policy.
4. Whether FFP is available in services provided during the first full
calendar month of institutionalization.
As noted above, the State's claim here included per diem rates for
services provided in the month after the month of admission, or what the
State referred to as the first full calendar month of
institutionalization. A table attached to the disallowance letter
indicates that $5,691,880 of the State's claim is for such services.
The State based its claim for services provided during first full
calendar months on a provision of the Medical Assistance Manual, Part 4,
p. 6, P G. That provision states that a person "shall not be considered
an inmate of a public facility until he has resided therein for a full
calendar month." The State argued essentially that, since 42 CFR
435.1008(b) states that FFP is available for services to eligible
individuals "during the month in which they become inmates of a public
institution or patients in an institution for . . . mental diseases," an
individual who is institutionalized does not lose Medicaid coverage
until the full calendar month has passed.
The State's argument ignores the fact that the regulation says
inmates or patients. The individuals here were patients in IMDs, rather
than inmates in public institutions. See 42 CFR 435.1009. Moreover, as
we explained in Decision No. 436, the Medical Assistance Manual
provision addresses inmates of public institutions rather than patients
in IMDs which are qualified medical institutions or intermediate care
facilities. See, also, Decision No. 490, p. 6.
Thus, we affirm our conclusion in Decision No. 436 that no FFP is
available in any services provided to individuals aged 22 to 64 in IMDs
except for covered services provided during the partial months of
admission or discharge.
5. Whether our analysis in Decision No. 436 was correct.
Although the State asked us to reconsider our conclusion in Decision
No. 436 based on the reasons the State presented in support of the
arguments we have addressed above, the State (12) did not point to any
flaw in our analysis in Decision No. 436. Nothing the State did present
persuades us that we reached the wrong conclusion there, or in our
subsequent decisions. Accordingly, we reaffirm our analysis and
conclusions stated in our previous decisions on this issue.
Conclusion
For the reasons stated above, we uphold the disallowance, subject to
reduction to the extent the State can show that it incurred costs for
services which are separately covered in its State plan and were
provided to an otherwise eligible individual during the partial month of
admission to or discharge from an IMD. /1/ HCFA had contended that
certain appropriation act provisions amended the filing limits
established by section 306 of Public Law 96-272 for public assistance
claims, so as to permanently bar payment for any expenditure incurred
prior to October 1, 1978 and not claimed within one year after the
fiscal year in which the expenditure occurred. HCFA said that
$8,704,323 of this claim was for such expenditures. The Board concluded
in Decision No. 576 that the provisions in question had no effect other
than to bar payment out of specific appropriations. Given the Board's
holding, the relevant filing deadline under section 306 for pre-fiscal
year 1980 claims is May 15, 1981. The State's claim here was filed on
that date. /2/ In Decision No. 436, the Board decided appeals from five
States. Since Decision No. 436, the Board has issued decisions on
appeals by those same States from disallowances of similar claims for
later quarters, and in addition has upheld disallowances against three
other States, raising new factual issues. See Washington Department of
Social and Health Services, Decision No. 490, December 30, 1983;
Illinois Department of Public Aid, Decision No. 517, February 29, 1984;
and Oregon Department of Human Resources, Decision No. 536, May 16,
1984. /3/ Below, we use the term "partial month eligibility" to
reflect the fact that under 42 CFR 435.1008(b) an individual is
considered eligible for covered services during the full month in which
the individual was admitted to or discharged from an IMD, even though
the individual did not, in fact, meet the eligibility requirements
during the part of the month the individual was institutionalized. We
note that the Agency has acknowledged that the month of discharge is to
be treated the same as the month of admission even though the regulation
does not specifically address that situation. As we discuss below,
however, we held in Decision No. 436 that there was no basis for
permitting payment for any services provided during the month after the
month the patient was admitted to an IMD. /4/ During
negotiations with several of the States following the issuance of
Decision No. 436, the Agency took the position that only the costs of
non-psychiatric services were allowable during partial months. The
Board examined this question in Decision No. 535, May 9, 1984, and
concluded that the relevant inquiry in determining what costs were
allowable was whether the costs were for covered services, and that the
Agency's distinction between psychiatric and non-psychiatric services
was unsupportable. /5/ Specifically, the State cited 42 CFR
435.914 and 435.1002(b). These regulations do not directly address
eligibility of patients in IMDs, but provide generally that a State may
determine Medicaid eligibility on a monthly basis. As we discussed in
Decision No. 436, these provisons are based on legislative history of
the Medicaid statute indicating that Congress intended to permit states
to cover services provided at any time during the month an individual
became eligible, to avoid the administrative inconvenience of
segregating bills by the day of the month on which the services were
provided. /6/ The record shows that, although Massachusetts'
claim covered the period July 1969 through March 1981, it was not
submitted until May 15, 1981. The partial month eligibility provisions
have been in effect since the inception of the Medicaid program in 1965.
See citations in State's brief, p. 5, n.1, 2, and 3, and p. 6. Although
Massachusetts said these provisions clearly authorized FFP in the per
diem rates during partial months, it did not contend that it had claimed
per diem rates on an ongoing basis during the period in question.
/7/ Although Massachusetts submitted many documents which it said showed
that HCFA's policy conflicted with the disallowance, Massachusetts
provided no evidence about when it became aware of those documents or
whether it, in fact, relied on them. /8/ Ohio contended that it had
submitted amendments covering inpatient psychiatric services in
IMDs during the month of admission, but the Board found that the
provision the State relied on did not provide such coverage. The
provision appeared in agreements between two state agencies and merely
said that one agency would "(i)nclude in the state plan provision to
allow Medicaid payment for services rendered during the month of
admission to a certified" IMD. The Board concluded that Agency approval
of these agreements could not be considered approval of extending the
State plan to cover inpatient psychiatric services to individuals aged
22 to 64. Decision No. 436, pp. 27-28; see also, Ohio Department of
Public Welfare, Decision No. 486, December 31, 1983.
MARCH 19, 1985