Washington State Health Care Authority, Kansas Department of Health and Environment, North Carolina Department of Health and Human Services, Idaho Department of Health and Welfare, Alaska Department of Health and Social Services, Colorado Department of Health Care Policy and Financing, New Mexico Human Services Department, DAB No. 3037 (2021)

DECISION AND REMAND FOR FURTHER AGENCY ACTION

The appellant state agencies (States) appeal decisions by the Centers for Medicare & Medicaid Services (CMS) that they received unallowable performance bonus payments (bonus payments) under section 2105(a)(3) of the Social Security Act (Act), enacted under the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).  Pub. L. No. 111–3, 123 Stat. 8-111 (Feb. 4, 2009).  Congress appropriated funds for the bonus payment program to incentivize states to take certain steps to increase the enrollment of eligible children in CHIP and Medicaid.  The statute directed the Secretary of the Department of Health and Human Services (HHS) to award annual bonus payments to states that:  (1) implemented at least five of eight specified enrollment and retention measures; and (2) increased the enrollment of “qualifying children” in their Medicaid programs above calculated baseline levels in federal fiscal years (FYs) 2009 through 2013.  CMS, on behalf of the Secretary, determined whether a state qualified to receive a bonus payment and the amount of each payment.  CMS’s overpayment determinations arose from audits conducted by the HHS Office of Inspector General (OIG), which concluded that the States received millions of dollars in unallowable bonus payments based on inflated enrollment data that they submitted to CMS.1

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After the parties filed their briefs and exhibits, the Board proposed to consolidate these appeals for decision in the interest of efficient and orderly adjudication because the cases have common histories and involve overlapping factual and legal issues.  The Board proposed to address any State-specific issue that might require consideration to fully resolve the State’s appeal in a separate section of the decision.  No party objected to the proposed consolidation.  Accordingly, the Board proceeded to decide the cases and issues this joint decision.

Below, we first summarize our decision.  We next set out more detailed background information, describing the applicable legal authorities, relevant data systems and CMS’s bonus payment guidance to the states.  We then briefly discuss the OIG audit reports’ conclusions and CMS’s overpayment decisions.  Our analysis of the issues and the parties’ arguments follows under six sections:  (1) The parties’ burdens on appeal are defined by Board precedent; (2) CMS carried its initial burden; (3) CMS’s interpretation of section 2105(a)(3)(F) of the Act, defining “qualifying children,” conflicts with the clear language of the statute; (4) The States have demonstrated that certain children assigned CMS “basis of eligibility” (BOE) codes other than 4, 6, or 8 are “qualifying children” under section 2105(a)(3)(F) of the Act; (5) The States have not established that the disputed bonus payments are necessarily allowable, however; and (6) CMS may recoup unauthorized bonus payments but must consider additional data which we permit the States to submit on remand.  

Following the analysis is the Board’s order remanding the cases to CMS to give the States the opportunity to provide additional, verifiable enrollment information to CMS.  We order CMS to recalculate the bonus payments, ensuring that the same categories of eligible “qualifying children” captured in each State’s monthly average unduplicated number of “qualifying children” enrolled during a bonus payment year are reflected in the State’s baseline enrollment.

Summary of Decision

The goal of CHIPRA’s bonus payment program was to incentivize states to take certain steps to increase the enrollment of eligible children in their CHIP and Medicaid programs in FYs 2009 through 2013.  Act § 2105(a)(3), (4) (providing for bonus payments “to offset additional Medicaid and CHIP child enrollment costs resulting from enrollment and retention efforts”).  A state qualified to receive a bonus payment for a given year if:  (1) it implemented at least five of eight specified program features to streamline and retain enrollment; and (2) the “monthly average unduplicated number of qualifying children” enrolled in the state’s Medicaid program exceeded its “baseline number of child enrollees” for that year.  Id.  The greater the number of “qualifying children” exceeding the “baseline number of child enrollees,” the greater the bonus payment.  Act § 2105(a)(3).  Under formulae set out in the statute, a state’s “baseline number of child enrollees” for each year of the bonus payment program was based, in part, on the

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“monthly average unduplicated number of qualifying children” enrolled in the state’s Medicaid program in FY 2007.  Act § 2105(a)(3)(C)(iii). 

Thus, the statute required the Secretary to properly interpret and consistently apply the term “qualifying children” to develop and accurately compare a state’s annual “baseline number of child enrollees” (baseline enrollment) with the number of “qualifying children” enrolled during a given bonus payment year (current enrollment) to determine:  (1) whether the state was entitled to a bonus payment; and, if so (2) the payment amount.

Section 2105(a)(3)(F)(i) defines the term “qualifying children” to mean, in general –

. . . children who meet the eligibility criteria (including income, categorical eligibility, age, and immigration status criteria) in effect as of July 1, 2008, for enrollment under title XIX, taking into account criteria applied as of such date under title XIX pursuant to a waiver under section 1115.

CMS used the Medicaid and Chip Statistical Information System (MSIS) to determine the number of “qualifying children” enrolled in each state’s Medicaid program in FY 2007 to develop each state’s baseline enrollments.  The MSIS was a database of person-specific eligibility and claims information with a BOE code for each enrollee.  CMS defined the BOE codes and they were not otherwise used by the States in their data systems.  States submitted enrollment and claim information to the MSIS on a quarterly basis.  CMS identified the “qualifying children” enrolled in each state’s Medicaid program in FY 2007 using only those BOE codes that included the descriptor “child” and applied only to children:

•   BOE code 4 – Child (not Child of Unemployed Adult, not Foster Care Child)
•   BOE code 6 – Child of Unemployed Adult (optional)
•   BOE code 8 – Foster Care Child

CMS concluded that the enrollment data for each bonus payment year would not be available from the MSIS in time to calculate and award the bonus payments by CHIPRA’s annual December 31^st payment deadline, however.  Therefore, CMS determined that it needed to obtain the current enrollment information directly from the states.  CMS issued sub-regulatory guidance to the states with instructions for counting the “qualifying children” enrolled in their Medicaid programs during each year for which a state requested a bonus payment.

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Based on the audits of the bonus payments received by the States here, the OIG determined that the States made errors in counting the “qualifying children” enrolled in their Medicaid programs.2   According to the OIG, CMS’s guidance instructed the states to count only individuals with BOE codes of 4, 6, or 8 as currently enrolled “qualifying children.”  The OIG found that the States failed to follow CMS’s guidance because they included individuals assigned other BOE codes, such as BOE code 2 – Blind/Disabled Individual, in their bonus payment year current enrollments of “qualifying children.”  Consequently, the OIG determined, the numbers of “qualifying children” exceeding the State baseline enrollments were inflated, resulting in millions of dollars of bonus overpayments.  CMS subsequently adopted the OIG’s findings and conclusions and issued demand letters to the States seeking to recover the alleged overpayments. 

These appeals followed.

Applying the parties’ respective burdens in these appeals, we first conclude that CMS met its initial burden.  We explain that CMS’s demand letters, the OIG audit reports, and the records developed before the Board establish that CMS articulated the basis for its overpayment determinations with enough detail for the appellants to understand the issues and respond. 

We next determine that the States have demonstrated that CMS’s overpayment determinations are based on a legal error.  Specifically, we conclude that CMS’s interpretation of section 2105(a)(3)(F) of the Act defining “qualifying children” to mean only children assigned BOE codes 4, 6, or 8 conflicts with the clear language of the statute.  The guidance on which CMS relies to support its determinations, we further explain, may not be used to cure an impermissible construction of the statute and, in any case, was far from clear or consistent.  We also describe why operational challenges faced by CMS at the outset of the bonus payment program do not justify its failure to comply with the statute.      

In the succeeding sections, we explain that the States have shown that certain children assigned BOE codes other than 4, 6, or 8, most significantly, blind or disabled children assigned BOE code 2 under CMS’s MSIS File Specifications and Data Dictionary, were “qualifying children” under the unambiguous text of the statute.  We conclude that the States have not borne their ultimate burden to document the allowability of all the disputed payments, however.  Because the baseline enrollments developed by CMS did not capture all of the groups of eligible “qualifying children” included in the States’ bonus payment year current enrollments, the numbers of “qualifying children”

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exceeding the States’ baseline enrollments were likely overstated, resulting in the States’ receiving excess, unauthorized bonus payments.  To put it in simple terms, CMS counted “apples” for baseline enrollments while the States counted “oranges” for bonus payment year enrollments.  Although we determine that the statute required counting “oranges,” we cannot simply require CMS to make bonus payments based on the differences between apples and oranges.  Comparing baseline enrollments with the bonus payment year counts using different groups of qualifying child enrollees would be misleading as to the magnitude of any real increase in enrollment of qualifying children and thus defeat the entire purpose of the bonus payment statute.  In order to compare “oranges” to “oranges,” it would be necessary to redetermine the baseline enrollments using the same groups as the States used in their bonus payment year current enrollment counts.  We determine that the States should be given an opportunity to produce verifiable documentation of the monthly average unduplicated numbers of “qualifying children” not assigned BOE codes 4, 6, or 8 who were enrolled in their Medicaid programs during FY 2007 and each year for which they received a bonus payment; and CMS should use the data to recalculate the bonus payments and correctly identify the amount of any overpayment.   

In the last section of our analysis, we discuss CMS’s authority to recover unallowable bonus payments.  We address the States’ arguments that CMS should not be permitted to recoup any of the awarded bonus payments because the States complied with the plain language of the Act in counting and reporting the “qualifying children” enrolled in their Medicaid programs; they worked cooperatively and in good faith with CMS in developing their current enrollments; and they reasonably believed that CMS approved their methodologies and verified their enrollment data.  The Board is bound by the controlling statute and has no authority to permit the States to keep unauthorized bonus payments based on fairness principles.  In addition, we conclude that CMS is authorized to recover unallowable bonus payments under section 2105(e) of the Act.  We conclude that CMS may recoup excess payments but not those that were allowable using FY 2007 data to develop the baseline enrollments calculated in accordance with the statutory requirements.

Following our analysis is the Board order remanding the cases to CMS to:  (1) give each State the opportunity to produce verifiable documentation of the monthly average unduplicated numbers of children assigned a BOE code other than 4, 6, or 8 who, consistent with this decision, were “qualifying children” under section 2105(a)(3)(F) of the Act and enrolled in the State’s Medicaid program in FY 2007 and each fiscal year for which the State was awarded a bonus payment; (2) use the data to recalculate the States’ bonus payments, ensuring that the same eligibility groups included in each State’s bonus payment year current enrollment of “qualifying children” are reflected in the State’s baseline enrollment; and (3) determine the amount of any remaining overpayment.  We additionally order CMS to provide the States the population growth factors and other data elements used in the bonus payment calculations so that each State may verify CMS’s

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revised calculations.  If a State disputes the resulting CMS recalculations of its bonus payments, it may return to the Board for resolution of that dispute, but not to relitigate the issues resolved by this decision.

Applicable Legal Authorities

1.    Medicaid and CHIP

The Medicaid program, established under title XIX of the Act, is jointly financed by the federal government and states to provide medical assistance to individuals who meet certain eligibility categories under the statute and regulations.  Act §§ 1901, 1902, 1903; 42 C.F.R. § 430.0.  Each state administers its own Medicaid program under broad federal requirements and the terms of its “plan for medical assistance,” which must be approved by CMS.  Act § 1902; 42 C.F.R. Part 430, subpart B.  A state plan must provide certain benefits to individuals in mandatory eligibility groups, which are defined by statute and regulations.  States have options to provide additional benefits and to cover other groups of individuals under approved state plans.

Section 1115 of the Act authorizes the Secretary to approve an experimental, pilot, or demonstration project that is likely to assist in promoting the objectives of the Medicaid program and to waive compliance with certain specific requirements.  A demonstration project may, for example, “expand coverage to individuals not eligible for Medicaid, provide services not typically covered by Medicaid, or use innovative service delivery systems to improve care, increase efficiency, or reduce costs.”  N.J. Dep’t. of Hum. Servs., DAB No. 2780, at 3 (2017).  CMS approves demonstration projects subject to specific terms and conditions.

Congress created CHIP in 1997 under title XXI of the Act to expand health care coverage to uninsured children in families whose income was too high to qualify for Medicaid.  Act § 2101, et seq.  States have flexibility to use CHIP funds to cover CHIP-eligible children through their Medicaid programs, to create standalone CHIP programs, or to implement combinations of both.  Act § 2101(a)(1), (2).  States are given flexibility to design their CHIP programs so long as they comply with broad federal requirements.  Act §§ 2101(b), 2102, 2103.

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2.    CHIPRA

Enacted in 2009, CHIPRA offered new funding, program options, and incentives for states to expand health care coverage of eligible children under CHIP and Medicaid.3   The incentives included bonus payments to reward states for taking specific steps to simplify and renew the enrollment of eligible children in Medicaid and CHIP in FYs 2009 through 2013.  Pub. L. No. 111-3, § 104, 123 Stat. 17-23 (codified at Act § 2105(a)(3), (4)).  A state qualified to receive a bonus payment if it:  (1) implemented at least five of eight specified program features to simplify and retain enrollment4 and (2) its enrollment of “qualifying children” in a given bonus payment year exceeded its calculated baseline enrollment for that year.  Id. 

CHIPRA established two tiers of bonus payments with different payment rates.  A first tier bonus payment was to be awarded to a state that exceeded its baseline number of child enrollees by 10 percent or less.  Act § 2105(a)(3)(B)(i), (C)(i).  Under the statute, a first tier payment was an “amount equal to the number of first tier above baseline child enrollees” under title XIX for the state and fiscal year, “multiplied by 15 percent of the projected per capita State Medicaid expenditures” for the state and fiscal year under title XIX.  Act § 2105(a)(3)(B)(i).  A State exceeding its baseline number of child enrollees by more than 10 percent was entitled to an additional, second tier bonus payment.  Act § 2105(a)(3)(B)(ii), (C)(ii).  A second tier payment was an “amount equal to the number of second tier above baseline child enrollees” under title XIX for the state and fiscal year, “multiplied by 62.5 percent of the projected per capita State Medicaid expenditures” for the state and fiscal year under title XIX.  Act § 2105(a)(3)(B)(ii).

The statute provided that the “baseline number of child enrollees” for a state for FY 2009, the first year of the bonus payment program, was:

equal to the monthly average unduplicated number of qualifying children enrolled in the State plan under title XIX during fiscal year 2007 increased by the population growth for children in that State from 2007 to 2008 (as estimated by the Bureau of the Census) plus 4 percentage points, and further increased by the population growth for children in that State from 2008 to 2009 (as estimated by the Bureau of the Census) plus 4 percentage points;

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Act § 2105(a)(3)(C)(iii)(I).

For FYs 2010, 2011, and 2012, the statute provided that the “baseline number of child enrollees” was:

equal to the baseline number of child enrollees for the State for the previous fiscal year under title XIX, increased by the population growth for children in that State from the calendar year in which the respective fiscal year begins to the succeeding calendar year (as estimated by the Bureau of the Census) plus 3.5 percentage points;

Act § 2105(a)(3)(C)(iii)(II).

For FY 2013, the statute provided that the “baseline number of child enrollees was:

equal to the baseline number of child enrollees for the State for the previous fiscal year under title XIX, increased by the population growth for children in that State from the calendar year in which the respective fiscal year begins to the succeeding calendar year (as estimated by the Bureau of the Census) plus 3 percentage points;

Critical to the present dispute, section 2105(a)(3)(F) defined “qualifying children” to mean —

   (i) In general.—For purposes of this subsection, subject to clauses (ii) and (iii), the term “qualifying children” means children who meet the eligibility criteria (including income, categorical eligibility, age, and immigration status criteria) in effect as of July 1, 2008, for enrollment under title XIX, taking into account criteria applied as of such date under title XIX pursuant to a waiver under section 1115.
   (ii) Limitation.—A child described in clause (i) who is provided medical assistance during a presumptive eligibility period under section 1920A shall be considered to be a “qualifying child” only if the child is determined to be eligible for medical assistance under title XIX.
   (iii) Exclusion.—Such term does not include any children for whom the State has made an election to provide medical assistance under paragraph (4) of section 1903(v) or any children enrolled on or after October 1, 2013.

(Emphasis added.)  The statute directed the Secretary to calculate and award annual bonus payments “as a single payment not later than the last day of the first calendar quarter of the following fiscal year.”  Act § 2105(a)(3)(A).  For the first year of the bonus payment program, FY 2009 (October 1, 2008 through September 30, 2009), payments were due no later than December 31, 2009.

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Relevant Data Systems

CMS operates data systems for various functions, and states must submit data to CMS according to predefined formats.  The Medicaid and Chip Statistical Information System (MSIS) was a database of person-specific eligibility and claims information.5   State Medicaid Manual (SMM) (CMS Pub. 45) §§ 2700, 2700.1, 2700.26 ; CMS Ex. 11.7   States were required to file, on a quarterly basis, demographic and eligibility data for each individual enrolled in Medicaid or CHIP through MSIS.  CMS established MSIS File Specifications and a Data Dictionary that included, among other things, definitions of terms and data formatting requirements.  CMS Ex. 11.  Based on the specifications, states submitted a file for each person eligible for Medicaid or CHIP that included: age, race, sex, days of eligibility, maintenance assistance status (MAS),8 BOE, and plan enrollment.  Id. at 8-10.  The BOE codes defined by CMS for the MSIS were:

(0) Individual was not eligible for Medicaid (or Medicaid expansion CHIP (M-CHIP)) at any time during the month, or Individual WAS eligible for stand-alone CHIP (S-CHIP).
(1) Aged Individual 
(2) Blind/Disabled Individual
(3) Not Used
(4) Child (not Child of Unemployed Adult, not Foster Care Child)
(5) Adult (not based on unemployed status)
(6) Child of Unemployed Adult (optional)
(7) Unemployed Adult (optional)
(8) Foster Care Child
(A) Individual covered under the Breast and Cervical Cancer Prevention and Treatment Act of 2000
(9) Eligibility status Unknown (counts against error tolerance).

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Id. at 10.  CMS established a “Comprehensive Eligibility Crosswalk” to instruct states how to assign MAS and BOE codes to enrollees, with cross-references to the sections of the Act and regulations establishing the eligibility for each group of enrollees.  Id. at 13-24. 

It is important to note that BOE codes 4, 6, and 8 were the only codes assigned exclusively to children.  BOE code 2 “Blind/Disabled Individual” was assigned to both disabled adults and children.  CMS Ex. 10, at 15-18, 20-21, 23-24; SMM § 2700.2, App. A (directing states to “use the definitions established by the Supplemental Security Income (SSI) program to determine whether an individual is aged, or blind and disabled” and noting “that disabled children are also included in this basis of eligibility”).

Each state that participates in Medicaid must have a CMS-approved mechanized claims processing and information retrieval system, referred to as a Medicaid Management Information System (MMIS).  Act §§ 1903(a)(3), 1903(r).  Most fields in the CMS MSIS record represented “direct extracts from eligibility and claims records that exist[ed] in the State’s MMIS (and supplemental systems).”  SMM § 2700.2.  At least some of the States here assert that their data systems did not contain BOE codes.  For example, Colorado says, “It is extremely important to note that states themselves do not use BOE codes.”  Dkt. No. A-19-101, Colo. Br. at 7; see also Dkt. No. A-19-94, N.C. Br. at 4; N.C. Ex. 1; N.C. Ex. 4, at 3 (stating that North Carolina did not use BOE codes in its program, the system it used “to pull eligibility data … did not contain” BOE codes, and “BOE was alternatively mapped by CMS guidance description to NC Program Aid Category”).

CMS Guidance

1.   October 30, 2009 e-mail and attachment

On October 30, 2009, CMS sent an e-mail to state agencies announcing a November 2, 2009 “All State call” to discuss CHIPRA bonus payments.  CMS Ex. 2.  CMS attached to the e-mail a document meant to clarify the process and data that CMS intended to use to calculate the FY 2009 bonus payments.  Id. at 2.  “The calculation of the Bonus Payment,” CMS said, “requires establishing for each State a monthly average unduplicated number of qualifying children enrolled in [Medicaid] for FY 2007.”9   Id.   (emphasis in original).  CMS stated that it had “developed the baseline enrollment for each State using all of the ‘MSIS Coding Categories’ for which States report individuals under the ‘Basis-Of-Eligibility’ (BOE) of Child in their Medicaid programs.”  Id. (emphasis in original).  “The MSIS BOE codes associated with ‘Child,’” CMS said, were 4, 6, and 8.  Id.  CMS further stated that it “recognize[d] that the FY 2007 baseline

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enrollment data obtained from MSIS may not represent an exact one-to-one mapping for each of the … statutory eligibility categories.”  Id. at 4.  “However,” CMS continued, “the baseline enrollment data represents all individuals identified and reported by each State with a BOE of ‘child’” and “this approach appropriately addresses the intent of the statute in a way that is operationally feasible.”  Id.

CMS additionally stated that, to identify the FY 2009 current enrollments of qualifying children, it had asked each state to provide FY 2009 enrollment data because that data was not yet available under the MSIS.  CMS Ex. 2, at 3.  CMS added, the “calculation of the Bonus Payment for each State is intended to include all child enrollees in each [State’s] Medicaid program that meet the definition of Qualifying Children.”  Id.  CMS listed “citations in the Medicaid statute which were intended to reflect the eligibility categories for which children might be covered.”  Id.  After quoting the language of section 2105(a)(3)(F), CMS directed the states to report the enrollment of “individuals who are considered … eligible as ‘children’ under” specified Medicaid statute eligibility groups and to provide a description of the data sources and methodologies used to identify individuals with a BOE of “child.”  Id. at 4-5.

2.   State Health Official Letter #09-015

On December 16, 2009, CMS issued State Health Official letter #09-015 (SHO #09-015) to provide states “initial guidance” on the CHIPRA bonus payment provisions in sections 2105(a)(3) and (4) of the Act.10  CMS Ex. 3, at 1.  At the outset, the letter stated that CMS’s “goal is to encourage and assist States in reaching and enrolling more uninsured children who are eligible for Medicaid.”  Id.  CMS continued, the “children that count towards the Bonus Payment are children enrolled in Medicaid who meet eligibility criteria in effect on July 1, 2008.”  Id. 

SHO #09-015 advised the states that CMS would review and evaluate their bonus payment requests and would “identify, obtain, and validate the data elements needed to calculate the Bonus Payment for each qualifying State.”  Id. at 3.  CMS also announced that it would “provide additional guidance on” the process for determining bonus payments “in forthcoming regulations.”  Id. at 4. 

Appendix II to SHO #09-015 described the “data elements, processes, and methodologies … for calculating the” bonus payments.  CMS Ex. 3, at 9.  Under a section titled “Baseline Enrollment of ‘Qualifying Children,’” CMS stated that “Baseline Enrollment refers to the monthly average unduplicated number of ‘qualifying children’

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enrolled” in Medicaid.  Id. at 9 (emphasis in original).  For FY 2009, CMS continued, “the Baseline Enrollment must be established using such data for FY 2007.”  Id. (emphasis in original).  After quoting the definition of “qualifying children” in section 2105(a)(3)(F) of the Act, CMS stated that it had obtained FY 2007 data from the MSIS, “using all of the ‘MSIS Coding Categories’ for which States report individuals under the ‘Basis-Of-Eligibility’ (BOE) of child in their Medicaid programs.” Id. (emphasis in original).  “The purpose and intention,” CMS explained, “was to capture every individual considered and reported by each State to be eligible as a ‘child’ under the unique provisions of its Medicaid … program.”  Id. at 9.  CMS identified the “MSIS ‘BOE codes’ associated with ‘Child’” as:

• “4 Child (not Child of Unemployed Adult, not Foster Care Child)”
• “6 Child of Unemployed Adult (optional)”
• “8 Foster Care Child”

Id. at 10.  CMS further stated that the FY 2007 MSIS baseline enrollment data “may not represent an exact one-to-one mapping for each of the … statutory eligibility categories.”  Id.  Nevertheless, CMS continued, “this approach appropriately addresses the intent of the statute in a way that is operationally feasible.”  Id.

Under a section of Appendix II titled “Current Enrollment of Qualifying Children,” CMS stated:  “This data element is the ‘monthly average unduplicated number of qualifying children’ for a State for the current fiscal year . . . for which the Bonus Payment is being determined.”  CMS Ex. 3, at 10.  According to CMS, current enrollment data would not be available in the MSIS in time for CMS to calculate and make the annual bonus payments by the December 31^st annual statutory deadline.  Therefore, CMS directed the states to submit their current enrollment information with their annual bonus payment requests.  Id. at 2, 10.  CMS instructed the states to “use the same State institutional data sources that are used for reporting under MSIS and for child enrollment reporting by States (that is, the Statistical Enrollment Data System, including the States’ Medicaid Management Information Systems and other State data sources[)].”  Id. at 10. 

In a section titled “Qualifying children,” CMS stated that, with certain exceptions (not relevant here), “qualifying children include all children enrolled in Medicaid who meet State eligibility criteria in effect on July 1, 2008, including children covered through CHIP-funded Medicaid expansions and children covered under section 1115 demonstrations.”  CMS Ex. 3, at 12.  CMS also provided a list of Medicaid eligibility groups with corresponding statutory citations, stating that “qualified children are defined as those enrolled in one of the [listed] eligibility groups as well as children enrolled under a title XIX demonstration.”  Id. at 12-13.   

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CMS additionally advised the states that it would establish a process for adjusting bonus payments after the annual December 31^st payment deadline because current enrollment data may not be finalized or validated by the deadline date.  CMS Ex. 3, at 13.  CMS also explained, “because of the potential for determinations of retroactive eligibility of children for FY 2009, the FY 2009 data used” to calculate the 2009 bonus payments “may not include all children whose eligibility would ultimately be attributed to the fiscal year.”  Id.  CMS added: “The Bonus Payment adjustment process, to be established, is intended to ensure that the appropriate data are used for calculating the fiscal year Bonus Payment.”  Id.  

3.   CMS December 12, 2011 e-mails

On December 12, 2011, during the processing period for FY 2011 bonus payment requests, a CMS senior financial advisor sent e-mails to the States “to reiterate the aspects of [SHO #09-015] as relates to the average monthly enrollment for children metric for FY 2011, as provided by your State, in order to ensure that the metric was developed appropriately.”  E.g., Dkt. No. A-19-85, Wash. Ex. 7, at 1-2; Dkt. No. A-19-102, CMS Ex. 10, at 28-29; see also Dkt. No. A-19-96, CMS Ex. 1 ¶ 5 (Declaration of CMS Financial Management Specialist Jennifer Clark, stating that CMS sent the December 12, 2011 e-mails to 22 “States that were to receive a fiscal year 2011 bonus payment.”).  The e-mails continued:  “As discussed” in SHO #09-015, “the calculation of the bonus payment baseline enrollment is based on the monthly average unduplicated number of ‘qualifying children’ for FY 2007” reflected in using data submitted by the states through MSIS and using the BOE codes for children:  “4 Child (not child of unemployed Adult, not foster care child)”; “6 Child of Unemployed adult”; and “8 Foster care child.”  Id.

CMS attached worksheets to the e-mails with state enrollment data for FY 2007, to illustrate “the logic and basis for developing the baseline average monthly enrollment for FY 2007 for your State.”  E.g., Dkt. No. A-19-85, Wash. Ex. 7, at 2; Dkt. No. A-19-102, CMS Ex. 10, at 29 (emphasis in e-mails).  The e-mails continued: “The same logic and basis that was used for developing the FY 2007 baseline should be used by each State for submitting the average monthly enrollment for children for the current fiscal year for which the bonus payment is being determined.”  Id. (emphasis in e-mails).  The e-mails directed the states to review the “metric for FY 2011 as submitted by your State, in order to ensure that the correct logic and basis was used.”  Id.

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OIG Audits and CMS Final Decisions

From August 2013 through January 2019, the OIG issued a series of audit reports concluding that 12 States received in total more than $277 million in unallowable CHIPRA bonus payments.11   E.g., Dkt. No. A-19-85, Wash. Ex. 8 (Washington Received Millions in Unallowable Bonus Payments (Sept. 2014)); Dkt. No. A-19-102, N.M. Ex. D (New Mexico Received Millions in Unallowable Bonus Payments (Nov. 2015)); Dkt. No. A-19-101, CMS Ex. 13 (Summary Report, CMS Paid Over $277 Million in Unallowable CHIPRA Bonus Payments Based on Incorrect Enrollment Data (Sept. 2019)). 

The OIG determined that the seven States here received unallowable bonus payments because they did not follow CMS’s guidance in SHO #09-015, the October 2009 bonus payment calculation clarification document, and the December 2011 e-mails instructing them to count only individuals with a BOE of “child,” that is, with a BOE code of 4, 6, or 8, as currently enrolled “qualifying children.”  Id. 12   The OIG found that the States incorrectly included individuals assigned other BOE codes, such as BOE code 2 (“Blind/Disabled Individual”), in their current enrollments.  Id.  The inclusion of individuals assigned BOE codes other than codes 4, 6, and 8, the OIG determined, inflated the current enrollment figures used by CMS to calculate the bonus payments, resulting in millions of dollars of the States’ bonus payments being unallowable.  Id.

In April 2019, CMS issued demand letters to the States setting out CMS’s final decisions to recover the alleged unallowable bonus payments.  E.g., Dkt. No. A-19-85, Originating Case Decision (CMS Demand Letter Control No. WA/2019/001/PBP (Apr. 26, 2019)); Dkt. No. A-19-102, Originating Case Decision (CMS Demand Letter Control No. NM/2019/001/PBP (Apr. 30, 2019)).  CMS adopted the OIG’s findings and conclusions that the States received unallowable bonus payments and explained that it had recalculated the bonus payments based on revised enrollment data obtained from the OIG audits.  CMS additionally asserted that it was authorized to recoup the alleged overpayments pursuant to section 2105(e) of the Act.  Each demand letter notified the State that it could appeal CMS’s final decision by filing a timely notice of appeal with the Departmental Appeals Board.

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Analysis

1.   The parties’ burdens on appeal are defined by Board precedent.

In an appeal of a federal party’s final written decision, the federal party has the initial burden to articulate clearly the basis of its determination and to provide enough detail for the nonfederal party to understand the issues and respond.  E.g., Ariz. Health Care Cost Containment Sys., DAB No. 2824, at 2, 8 (2017), aff’d, Ariz. Health Care Cost Containment Sys. v. Ctrs. for Medicare & Medicaid Servs., No. CV-17-04462, 2020 WL 805235 (D. Ariz. Feb. 18, 2020), appeal docketed, No. 20-15598 (9th Cir. Apr. 6, 2020).  When an appellant contends that a final decision fails to sufficiently articulate the basis for the determination, “the salient issue on appeal is whether that decision, together with any ‘additional development of the record during [the] appeal,’ has provided the grantee ‘with a fair opportunity for review.’”  Navajo Nation, DAB No. 2952, at 12 (2019) (quoting Delta Health Alliance, Inc., DAB No. 2624, at 5 (2015), appeal dismissed pursuant to stipulation, No. 4:15-cv-00058 (N.D. Miss. Aug. 16, 2017)).

If the federal party satisfies its initial burden, which the Board has called “minimal,” the nonfederal party must demonstrate that any disputed payments are allowable under all applicable authorities.  Mass. Exec. Off. of Health & Hum. Servs., DAB No. 2218, at 11 (2008), aff’d, Massachusetts v. Sebelius, 701 F. Supp. 2d 182 (D. Mass. 2010).  The responsibility for documenting the allowability of disputed funds lies first with a grantee.  Pa. Dep’t of Hum. Servs., DAB No. 2883, at 8-9 (2018) (citing cases).  Furthermore, when a federal agency determination is based on audit findings, the non-federal party typically has the burden to show that those findings are legally or factually unjustified.  DAB No. 2218, at 11 (citing cases).  

2.   CMS carried its initial burden.

Applying the parties’ respective burdens here, we look first to CMS’s final written decisions in the bonus payment demand letters that CMS sent to the States.  In each case, CMS’s letter refers to the OIG’s audit of the State’s bonus payments as the basis for CMS’s overpayment determination.  E.g., Dkt. No. A-19-94, Originating Case Decision (CMS Demand Letter Control No. NC/2019/001/PBP (Apr. 30, 2019)); Dkt. No. A-19-102, Originating Case Decision (CMS Demand Letter Control No. NM/2019/001/PBP (Apr. 30, 2019)).  Each decision also cites SHO #09-015 to support CMS’s conclusion that the State was required to count only children assigned a BOE “child” code of 4, 6, or 8 as currently enrolled “qualifying children.”  Id.  The inclusion of individuals associated with other BOE codes, such as BOE code 2 (“Blind and Disabled”), the letters assert, inflated the current enrollment counts used to calculate the bonus payments and resulted in a portion of the bonus payments being unallowable.  CMS also explains that the identified overpayments represent the differences between the bonus payments awarded to the States and the revised bonus payment amounts, which CMS calculated using

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enrollment data obtained from the OIG audits.  CMS cites section 2105(e) of the Act as authority for it to recover the alleged overpayments.  Id.   

North Carolina and New Mexico argue that the OIG audit reports are not sufficiently detailed for the States to respond.  North Carolina asserts that the lack of information in the audit report prevents it “from responding to an exact, specific reason for the disallowance, or contesting how the disallowance amount was calculated.”  Dkt. A-19-94, N.C. Br. at 11.  “Cryptically,” North Carolina says, “the only extraneous code” specifically mentioned in the OIG audit report is BOE code 2; the OIG did not identify the other codes or “allege that North Carolina incorrectly included blind and disabled adults.”  Id. at 12 (emphasis by North Carolina).  If that “was the case,” North Carolina asserts, the OIG should have said so.  Id.  New Mexico asserts that the OIG report is vague and incomplete.  While the OIG found New Mexico had incorrectly included individuals assigned BOE code 2 and other codes in its reported enrollments, New Mexico contends that the OIG did not identify the other codes, list the numbers of individuals enrolled under those codes, or make a finding whether the individuals included under BOE code 2 and the other codes were children.  Dkt. No. A-19-102, N.M. Br. at 16; N.M. Reply at 5.  Without this information, New Mexico says, it cannot “verify or adequately respond to the allegations” against it.  N.M. Br. at 14.

Documents in the record of North Carolina’s appeal show that the State knew the specific reason for CMS’s overpayment determination and the other “extraneous codes” that it had included in its current enrollments of “qualifying children.”  An October 28, 2014 North Carolina memorandum discussing the OIG’s preliminary audit findings states that the OIG found North Carolina’s “eligibility counts were overstated for all FFY [federal fiscal year] bonus submissions due to the inclusion of BOEs other than 4, 6, or 8, the CMS categories used to define ‘child’ for purposes of the bonus.”  Dkt. No. A-19-94, N.C. Ex. 4, at 4.  Specifically, North Carolina had “inadvertently included BOEs of 1, 2, 5, and 0A in its eligibles count data if eligibles were less than 21 years of age based upon its interpretation of ‘qualifying child.’”  Id.  In its written response to the OIG’s draft audit report, North Carolina stated that “it inadvertently included children in the enrollment submissions who did not fall under BOE codes 4, 6, or 8.”  CMS Ex. 13, at 20.  Before the Board, North Carolina acknowledges that it made this statement in its “initial response” to the OIG audit.  Dkt. No. A-19-94, N.C. Br. at 17.  “However,” North Carolina says, “a closer examination of this issue reveals North Carolina was aware CHIPRA required it to capture ALL children, not just those identified by CMS as BOE codes 4, 6, and 8.”  Id. (emphasis by North Carolina).  “The result,” North Carolina says, is that it “included BOE Code 2 in its calculations.”  Id.  In response to North Carolina’s appeal and discussed below, CMS acknowledges that “some ‘disabled children’ may have been reported under BOE code 2,” but asserts that it appropriately excluded all BOE code 2 individuals from the bonus payment calculations for operational reasons and based on its interpretation of the statute.  Dkt. No. A-19-94, CMS Br. at 24-27.

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Furthermore, the OIG audit report and CMS’s final determination describe how CMS calculated the alleged overpayment to North Carolina.  The OIG stated that it “recalculated the bonus payments using the correct CHIPRA current enrollments,” which it obtained “by having the State agency run a query on its MMIS data and extracting only those individuals whom the State would identify and report as a BOE of ‘child’ (i.e., BOE codes 4, 6, and 8) when reporting MSIS enrollment.”  Dkt. No. A-19-94, CMS Ex. 13, at 10, 14.  The OIG also “verified supporting documentation for all [other] data elements used in North Carolina’s bonus payment calculations, including baseline enrollment and projected per capita State Medicaid expenditures.”  Id. at 14.  The total alleged overpayment, the OIG and CMS explained, represented the difference between the original and revised bonus payment amounts.  Id. at 10; Dkt. No. A-19-94, Originating Case Decision.   

In New Mexico’s case, the OIG audit report similarly describes how the OIG obtained the State’s revised current enrollments, by “having the State agency run a query on its MMIS data and extracting only those individuals whom the State would identify and report as a BOE of ‘child’ (i.e., BOE codes 4, 6, or 8) when reporting MSIS enrollment.”  Dkt. No. A-19-102, CMS Ex. 10, at 17.  The OIG’s method for obtaining the revised current enrollments presumably would not have yielded the codes of the excluded individuals, the numbers of individuals enrolled under each code, or the ages of those individuals.  Nor was that information necessary to understand and respond to the basis for the OIG’s conclusion and CMS’s determination.  Under CMS’s rationale, clarified in response to New Mexico’s and the other States’ appeals, a child enrolled in Medicaid and assigned any code other than 4, 6, or 8, could not be counted as a “qualifying child” under CMS’s guidance.  According to CMS, this approach was consistent with the statute.  As the discussion below shows, this was sufficient information for the States to make their arguments to the Board that CMS’s method violated the controlling statute’s clear language and that the other children they included in their current enrollment numbers met the statutory definition of “qualifying children.”  

Accordingly, we conclude that CMS met its initial burden to articulate clearly the grounds for its overpayment determinations and provided enough detail for the appellants to understand the issues and respond.  The burden thus shifts to North Carolina, New Mexico and the other States to establish that CMS’s final decisions are legally or factually unsupported and that the disputed bonus payments are allowable.

3.   CMS’s interpretation of section 2105(a)(3)(F) the Act, defining “qualifying children,” conflicts with the clear language of the statute.

The States’ central argument on appeal is that CMS’s use of BOE codes 4, 6, and 8 alone to count all of the “qualifying children” enrolled in their Medicaid programs violated the unambiguous language of section 2105(a)(3)(F).  See, e.g., Dkt. No. A-19-85, Wash. Br. at 2, 8-10; Dkt. No. A-19-96, Idaho Br. at 9-10; Dkt. No. A-19-90, Kan. Br. at 22, 36-37;

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Dkt. No. A-19-101, Colo. Br. at 1, 12-19.  According to the States, the wording of section 2105(a)(3)(F)(i) is clear, defining “qualifying children” as “children who meet the eligibility criteria . . . in effect as of July 1, 2008, for enrollment under title XIX, taking into account criteria applied as of such date under title XIX pursuant to a waiver under section 1115.”  Only the two groups of children described in subsections 2105(a)(3)(F)(ii) and (iii) are excepted from the general definition, the States argue.  The States further contend that children assigned BOE codes other than 4, 6, or 8, most significantly, blind or disabled children assigned BOE code 2,13 were eligible for and enrolled in their Medicaid programs.  Consequently, the States argue, they correctly included these children in their current enrollments of “qualifying children” during the years for which they received bonus payments and CMS’s attempt to recoup the bonus payments is legally unsupported.

a.   Standard of review for a federal agency’s interpretation of a statute

On review of a federal agency’s final written decision, the Board is “bound by all applicable laws and regulations.”  45 C.F.R. § 16.14.  When the language of a controlling statute or regulation is clear, the Board applies it by its terms.  N.J. Dep’t of Hum. Servs., DAB No 2780, at 5.  When the language of a controlling statute or regulation is ambiguous, the Board generally will defer to the federal agency’s interpretation, so long as it is reasonable and the nonfederal party had adequate notice of that interpretation or, in the absence of actual and timely notice, did not rely to its detriment on another reasonable interpretation.  La. Dep’t of Health & Hosps., DAB No. 1772, at 4-5 (2001) (citating cases); see also, Alaska Dep’t of Health & Soc. Servs., DAB No. 1919, at 14 (2004). 

b.   CMS interprets “qualifying children” to mean individuals who are eligible for Medicaid based on their “child” status, or age.

CMS’s characterizations of the statute’s clarity have notably shifted in these appeals.  In the Washington, Kansas, North Carolina, and Idaho appeals, CMS does not explicitly state whether the language of section 2105(a)(3)(F) is clear or ambiguous; CMS suggests the latter, however, arguing that it reasonably relied on BOE codes 4, 6, and 8 to determine the States’ baseline child enrollments and measure enrollment increases, given the operational challenges of implementing the bonus payment legislation.  Dkt. No. A-19-85, CMS Br. at 23-28, 32-34; Dkt. No. A-19-90, CMS Br. at 25-30; Dkt. No. A-19-94, CMS Br. at 23-28, 32-37; Dkt. No. A-19-96, CMS Br. at 21-29, 33.  In the Alaska and Colorado cases, CMS says that the “CHIPRA Statute Unambiguously Provided for

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Bonus Payments Related to The Expanded Enrollment of ‘Qualifying Children,’ a Term Requiring Eligibility for Health Assistance or Medical Assistance on the Basis of Age.”  Dkt. No. A-19-100, CMS Br. at 21-26; Dkt. No. A-19-101, at 22.  In the case of New Mexico, CMS “agrees with New Mexico that the statute is ‘clear and unambiguous,’ but not in the manner that New Mexico asserts.”  Dkt. No. A-19-102, CMS Br. at 26.  “To the extent the Board finds the statutory language to be ambiguous,” CMS continues, its “interpretation of the definition was a reasonable one. . . .”  Id.

Throughout its briefs, however, CMS contends that it correctly reads the definition of “qualifying children” in section 2105(a)(3)(F) to mean individuals who are eligible for Medicaid based on their “child” status, or age.  For example, CMS asserts in Idaho’s appeal that “the CHIPRA statute on its face targeted individuals who qualified for Medicaid on the basis of being a ‘child’ (i.e., on the basis of age), and not on any other basis.”  Dkt. No. A-19-96, CMS Br. at 22.  To support its claim, CMS points to the focus of the enrollment and retention features in section 2105(a)(4) of the Act, which “expressly referred to ‘children’ or ‘child.’”  Id.  CMS similarly contends in North Carolina’s case that “CHIPRA targets its enrollment and retention provisions (i.e. program features) only to individuals under a certain age.”  Dkt. No. A-19-94, CMS Br. at 33.  Moreover, CMS claims in Alaska’s, Colorado’s and New Mexico’s cases that the bonus payments “take root in title XXI” of the Act, which is fundamentally concerned with extending health coverage to uninsured, low-income children and under which “the term ‘child’ … describes an individual’s pathway to health assistance on the basis of age.”  Dkt. No. A-19-100, CMS Br. at 21-22; Dkt. No. A-19-101, CMS Br. at 23; Dkt. No. A-19-102, CMS Br. at 23-24.  CMS also alleges that the “eligibility framework” and references to “children” and “child” in the Medicaid and CHIP statutes “indicate[] a Congressional intent” that the bonus payments “would apply to an enrollment expansion of children who qualified for Medicaid and CHIP on the basis of their ages, and not on any other basis.”  Dkt. No. A-19-100, CMS Br. at 21; Dkt. No. A-19-102, CMS Br. at 23.

CMS acknowledges that the BOE code 2 individuals included in the States’ current enrollments of “qualifying children” may have been children.  CMS argues, however, that children assigned BOE code 2 are eligible for Medicaid on the basis of being blind or having a disability, not age.14  The “the term ‘disability’ is nowhere to be found within CHIPRA’s criteria of eligibility,” CMS says.  Dkt. No. A-19-96, CMS Br. at 22; see also, Dkt. No. A-19-101, CMS Br. at 24 (stating “notably absent from the definition of ‘qualifying children’ in CHIPRA are the words ‘blind’ or ‘disabled’”).  CMS also argues

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that the eligibility groups associated with BOE code 2 “cover populations that substantially comprise adults,” and it was not “readily feasible for CMS to parse out ‘children’ who may have been included in BOE code 2.”  E.g., Dkt. No. A-19-90, CMS Br. at 27, 29.  Furthermore, CMS explains, the largest eligibility group within BOE code 2 is SSI recipients, and data from the Social Security Administration show that most SSI recipients in the States during the years for which they received bonus payments were adults.  E.g., Dkt. No. A-19-90, CMS Br. at 28, CMS Ex. 14 (Kansas SSI Recipients by State and County, 2009-2013); Dkt. No. A-19-101, CMS Br. at 31, CMS Ex. 14 (SSI Data for Colorado for 2010-2013).

CMS additionally argues that the language of the statute supports the exclusion of SSI recipients from the definition of “qualifying children.”  Section 2105(a)(3)(F)(i) limits the term “qualifying children” to children who “meet the eligibility criteria” that include “age” but not “SSI,” CMS says.  E.g., Dkt. No. A-19-94, CMS Br. at 33.  The only express reference to SSI recipients in the bonus payment statute is in the language of section 2105(a)(3)(D), which excepts expenditures for “children eligible for assistance by virtue of the receipt of benefits under title XVI,” i.e., child recipients of SSI, from the definition of “projected per capita State Medicaid expenditures.”  According to CMS, this exception supports the exclusion of SSI recipients from CHIPRA’s definition of “qualifying children” as well.  E.g., Dkt. No. A-19-94, CMS Br. at 34; Dkt. No. A-19-96, CMS Br. at 22.  Applying the bonus payment program features to SSI recipients, CMS additionally alleges, would have conflicted with CHIPRA’s focus on expanding the enrollment of children eligible for Medicaid based on age and contravened the comparability provisions in section 1902(a)(17) of the Act, which require that all individuals served within a particular Medicaid eligibility group have their eligibility determined under the same methodology.  E.g., Dkt. No. A-19-85, CMS Br. at 32-33; Dkt. No. A-19-102, CMS Br. at 30. 

c.   CMS’s arguments are unavailing

CMS’s arguments are strained at best.  The text of subsection 2105(a)(3)(F)(i) sets out an unambiguous, broad general definition for the term “qualifying children” to mean “children who meet the eligibility criteria (including income, categorical eligibility, age, and immigration status criteria) in effect as of July 1, 2008, for enrollment under title XIX,” that is, eligibility criteria under the Medicaid Act.  Significantly, the language nowhere hints at limiting “qualifying children” to mean only children eligible for Medicaid based on criteria corresponding to the BOE “child” categories: (4) Child (not Child of Unemployed Adult, not Foster Care Child); (6) Child of Unemployed Adult (optional); and (8) Foster Care Child. 

Nor does the text restrict “qualifying children” to mean only children eligible for Medicaid based on their “child” status or age, not disability.  To the contrary, the various types of eligibility criteria listed in parentheses in section 2105(a)(3)(F)(i) show that the

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term “qualifying children” means children eligible for Medicaid based not only on “age” criteria but also on “income, categorical eligibility,” and “immigration status criteria.”  If Congress intended “qualifying children” to mean only children eligible for enrollment in Medicaid based on age alone, it would not have specified “age” among the list of other eligibility criteria categories set out in parentheses in section 2105(a)(3)(F)(i).  Furthermore, the use of the word “including” to introduce that list shows that Congress intended the identified categories to serve as examples, not a finite group.  See 2A Sutherland Statutory Construction § 47:7 (7th ed.) (stating that the word “includes” in a statutory definition is usually a term of enlargement and not of limitation, indicating that there are other items includable, though not specifically enumerated).

CMS’s arguments that the statute supports the exclusion of child recipients of SSI and other children with disabilities from the statutory definition of “qualifying children” are equally meritless.  Subsections 2105(a)(3)(F)(ii) and (iii) demonstrate that Congress could be and was explicit when it chose to exclude from CHIPRA’s enrollment calculations certain categories of children who would otherwise be counted as “qualifying children.”  “When Congress provides exceptions in a statute,” as it did in subsections 2105(a)(3)(F)(ii) and (iii) of the Act, the “proper inference . . . is that Congress considered the issue of exceptions and, in the end, limited the statute to the ones set forth.”  United States v. Johnson, 529 U.S. 53, 58 (2000); see also 2A Sutherland Statutory Construction § 47:23 (7th ed.) (discussing statutory construction principle, expressio unius est exclusio alterius (the expression of one thing is the exclusion of another)). 

Based on the same principle of statutory construction, CMS also errs in relying on the definition of “projected per capita State Medicaid expenditures” in section 2105(a)(3)(D) of the Act to support excluding child recipients of SSI from the definition of “qualifying children.”  Where “Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.”  Russello v. United States, 464 U.S. 16, 23 (1983) (quoting United States v. Wong Kim Bo, 472 F.2d 720, 722 (5^th Cir. 1972)); see also 2A Sutherland Statutory Construction § 47:23 (7th ed.).  Accordingly, because Congress explicitly excluded expenditures for child recipients of SSI from the definition of projected per capita Medicaid expenditures in section 2105(a)(3)(D), it is only reasonable to infer that it would have expressly excluded the same group from the definition of “qualifying children” in section 2105(a)(3)(F) if it had intended those children not to be counted for the purpose of measuring enrollment increases under CHIPRA. 

Moreover, we reject CMS’s claim that counting child recipients of SSI as “qualifying children” for purposes of determining increased enrollment of children in state Medicaid programs is in any way inconsistent with the fundamental purpose of the bonus payment program.  As CMS stated in SHO #09-015, the goal of the CHIPRA bonus payment

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program was “to encourage and assist States in reaching and enrolling more uninsured children who are eligible for Medicaid,” and the “children that count towards the Bonus Payment are children enrolled in Medicaid who meet eligibility criteria in effect on July 1, 2008.”  CMS Ex. 3, at 1.  Furthermore, while the bonus payment provisions are codified under title XXI of the Act, Congress did not define the term “qualifying children” to mean children eligible for CHIP assistance or children within the meaning of the “eligibility framework” of titles XIX and XXI as CMS suggests.  Rather, the specific, controlling and clear language of section 2105(a)(3)(F)(i) defines “qualifying children” to mean children who meet eligibility criteria for enrollment under title XIX, Medicaid.

CMS additionally argues in several cases that excluding child recipients of SSI from the definition of “qualifying children” was appropriate because some of the States had “Section 1634” agreements with the Social Security Administration (SSA), under which SSA determines eligibility for medical assistance and an SSI application also serves as a Medicaid application.  E.g., Dkt. No. A-19-94, CMS Br. at 36; Dkt. No. A-19-102, CMS Br. at 31.15   According to CMS, those States “did not incur additional child enrollment costs related to enrollment of blind or disabled children receiving SSI, and therefore, should not receive a ‘performance bonus’ for such increase in enrollment, however small.”  Dkt. No. A-19-102, CMS Br. at 31.  This argument is illogical as support for CMS’s statutory interpretation because not every state that received a bonus payment had such an agreement with the SSA.  Furthermore, New Mexico points out, while SSA makes medical assistance eligibility determinations in states that have section 1634 agreements, the states themselves “bear[] the expenses of enrollment – adding the individuals to the system, putting them into the database, generating member cards, etc.”  Dkt. No. A-19-102, N.M. Reply at 8.  

Accordingly, we conclude that excluding child recipients of SSI and other children with disabilities from the general definition of “qualifying children” in section 2105(a)(3)(F)(i) creates an exception to the term that Congress did not intend or authorize.

d.   CMS guidance cannot cure an interpretation that conflicts with the statute; in any case, CMS’s bonus payment guidance was far from clear or consistent.

The OIG’s conclusions, CMS’s final determinations, and CMS’s arguments on appeal chiefly rely on the States’ alleged failure to follow CMS’s bonus payment guidance to support CMS’s overpayment determinations.  In response to the States’ appeals, CMS argues that the Board should uphold its final decisions because the States claimed the disputed bonus payments “without regard” to CMS’s guidance.  E.g., Dkt. No. A-19-90,

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CMS Br. at 30; Dkt. No. A-19-102; CMS Br. at 33.  According to CMS, it clearly and consistently instructed the states to use BOE codes 4, 6, and 8 alone to identify all currently enrolled “qualifying children.”  Because the States included other individuals in their counts, CMS alleges, their current enrollments were overstated and resulted in unallowable bonus payments.  To support its argument, CMS relies on the document attached to its October 30, 2009 e-mails to the states; SHO #09-015; the December 2011 e-mails sent to the states; and CMS’s FY 2011 template for states to review and/or update the number of currently enrolled qualifying children. 

As stated above, when unambiguous statutory language addresses the precise question at issue, the Board must apply the statute by its clear terms.  45 C.F.R. § 16.14; Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-843 (1984) (Where “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.”).  Only when the wording of a statute is ambiguous or does not directly address the question at issue will the Board defer to a federal agency’s reasonable interpretation, and then, only so long as the state had notice of that interpretation or did not rely to its detriment on another reasonable interpretation.  E.g., N.J. Dep’t of Hum. Servs., DAB No 2780, at 5 (citing N.J. Dep’t of Hum. Servs., DAB No. 1773, at 5-6 (2001); La. Dep’t of Health & Hosps., DAB No. 1772, at 4-5).  For the reasons discussed above, we conclude that CMS’s determinations, which limit “qualifying children” to mean only children assigned a BOE code of 4, 6, or 8, are based on an “interpretation” of section 2105(a)(3)(F) that conflicts with the statute’s unambiguous text.  CMS’s guidance, even if clear and consistent, may not be used to cure an impermissible interpretation of a statute.

In any case, CMS’s bonus payment guidance to the states was far from clear or consistent.  Notably, the first page of SHO #09-015 stated with respect to the bonus payment provisions:  “The children that count towards the Bonus Payment are children enrolled in Medicaid who meet eligibility criteria in effect on July 1, 2008.”  CMS Ex. 3, at 1.  SHO #09-015 and CMS’s earlier, October 30, 2009 bonus payment clarification document advised the states that CMS had developed the baseline enrollments using “the ‘MSIS Coding Categories’ for which States report individuals” with the BOE “of child in their Medicaid programs,” even though that data “may not represent an exact one-to-one mapping for each of the … statutory eligibility categories.”  CMS Ex. 2, at 2-3; CMS Ex. 3, at 9-10.  The MSIS BOE codes “associated with ‘Child,’” CMS said, were codes 4, 6, and 8.  Id. 

In contrast with the discussion of how CMS determined baseline child enrollments, SHO #09-015’s instructions to the states for counting their currently enrolled “qualifying children” did not mention BOE codes.  Instead, CMS directed the states to “use the same State institutional data sources that are used for reporting under MSIS and for child enrollment reporting by States (that is, the Statistical Enrollment Data System, including the States’ [MMIS] and other State data sources[)].”  CMS Ex. 3, at 10.  In the October

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2009 guidance document, CMS stated, the “calculation of the Bonus Payment for each State is intended to include all child enrollees in each States’ Medicaid program that meet the definition of Qualifying Children.”  CMS Ex. 2, at 3 (emphasis added).  Accordingly, the guidance indicated that the states should use nothing other than the statutory definition to identify their “current enrollments” of “qualifying children” during the bonus payment program years.

Moreover, the section of SHO #09-015 titled “Qualifying children” advised the states that, with exceptions not relevant here, “qualifying children include all children enrolled in Medicaid who meet State eligibility criteria in effect on July 1, 2008, including children covered through CHIP-funded Medicaid expansions and children covered under section 1115 demonstrations.”  CMS Ex. 3, at 12.  Further still, CMS stated in the letter that it would “work with States to obtain the current enrollment level of qualifying children for each State, consistent with the statutory definition, the reporting mechanisms, and the validation process for such data ….”  Id. at 11 (emphasis added).  In sum, the key guidance document on which CMS relies to support its determinations is ambiguous and internally inconsistent. 

In addition, the December 2011 e-mails sent to the states and CMS’s FY 2011 revision of the form for states to report their adjusted current enrollments cannot reasonably be considered clear notice of CMS’s approach.  The December 2011 e-mails asked the states to confirm that their FY 2011 average monthly enrollment bonus payment data were “developed in accordance with” SHO #09-015.  E.g., Dkt. No. A-19-102, CMS Ex. 10, at 28-29.  Because the SHO letter directed the states to count all “qualifying children” within the meaning of the statute in their current enrollments, a state that had included all such children in its FY 2011 current enrollment could logically infer that it was in compliance with CMS guidance.  Furthermore, the December 2011 e-mails used vague language, instructing the states to use the “same logic and basis that was used for developing the FY 2007 baseline,” but nowhere clearly stated that some qualifying children should be excluded from the current enrollments because they were assigned a BOE code other than 4, 6, or 8.  Id.  Moreover, while the FY 2011 revised enrollment adjustment form referenced BOE codes 4, 6, and 8, the instructions that CMS provided with the form contained no reference to BOE codes.  Instead, CMS instructed each state to “review and, if appropriate, update the data entered in this column representing FY 2011 monthly average unduplicated number of Qualifying Children enrollment as defined in section 210[5](a)(3)(F) of the Act.”  E.g., Dkt. No. A-19-101, Colo. Ex. L; Dkt. No. A-19-102, CMS Ex. 7, at 4-5.  As with the earlier guidance, the December 2011 e-mails, revised form and instructions cannot reasonably be described as clear or consistent.

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e.   Operational challenges do not justify CMS’s failure to comply with the plain meaning of the statute.

In response to the States’ appeals, CMS also points to operational challenges to justify its exclusive reliance on the MSIS BOE “child” codes to identify all “qualifying children.”  CMS maintains that its approach was driven by the vast size of the Medicaid and CHIP programs and the “nine short months” it had to implement the bonus payment program and make the first annual bonus payments.  E.g., Dkt. No. A-19-85, CMS Br. at 23; Dkt. No. A-19-101, CMS Br. at 27-28.  The MSIS, CMS says, “was the most accurate and efficient data source that was readily available to CMS” and it “[r]easonably and [a]ppropriately relied on BOE codes 4, 6, and 8” to measure increased enrollment.  E.g., Dkt. No. A-19-90, CMS Br. at 25-26; Dkt. No. A-19-102, CMS Br. at 27.  CMS further asserts that it applied a “facially appropriate” “methodology consistently and equally to every State” and met the intent of the statute to “equally reward” states that increased the enrollment of low income, uninsured children.  Dkt. No. A-19-90, CMS Br. at 29-30; Dkt. No. A-19-100, CMS Br. at 33.  Quoting a 2009 Board decision, CMS contends that it was “not obligated to justify its allocation [of bonus payments] with mathematical precision or certainty,” and “absent complete or perfect information, an allocation need only have some reasonable basis.”  E.g., Dkt. No. A-19-90, CMS Br. at 30; Dkt. No. A-19-100, CMS Br. at 33 (quoting W. Va. Dep’t of Health & Hum. Res., DAB No. 2250, at 12 (2009), aff’d, W. Va. Dep’t of Health & Hum. Res. v. Sebelius, 709 F. Supp. 2d 487 (S.D. W. Va. 2010), aff’d, 649 F.3d 217 (4th Cir. 2011) (bracketed text added by CMS)). 

A federal agency may “exercise discretion only in the interstices created by statutory silence or ambiguity; [it] must always “ ‘give effect to the unambiguously expressed intent of Congress.’ ””  Util. Air Regul. Grp. v. Env’t Prot. Agency, 573 U.S. 302, 326 (2014) (quoting Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 665 (2007) (quoting Chevron, 467 U.S. at 843)).  Here, as we have explained above, the clear language of section 2105(a)(3)(F) unambiguously defines “qualifying children” to mean children eligible for enrollment in Medicaid based on multiple types of eligibility criteria, including but not limited to age.  CMS, therefore, was not free to disregard the statute’s mandate and elect instead to use the most “efficient data source that was readily available” to it.

Furthermore, we reject CMS’s reliance on the Board’s decision in DAB No. 2250 to support its claim that it need only have used a “facially appropriate” methodology to identify all “qualifying children.”  That decision did not involve the language of the CHIPRA bonus payment statute, which unambiguously directed CMS to determine baseline and current child enrollment in Medicaid by counting all “qualifying children” with the exception of the groups identified in subsections 2105(a)(3)(F)(ii) and (iii).  Rather, DAB No. 2250 addressed whether CMS’s methodology for determining the federal government’s share of proceeds from the settlement of a lawsuit complied with federal cost allocation regulations.  Cost allocation regulations are used to ensure that

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“costs that benefit more than one public assistance program” are generally “allocated to each program in proportion to the benefits that each derives from the activity that generated the costs.”  Pa. Dep’t of Hum. Servs., DAB No. 2835, at 3 (2017) (citing cases), appeal dismissed, No. 1:18-cv-00182 (M.D. Pa. Nov. 28, 2018).  They do not apply here.  The Board recognized that determining proportional benefit for allocating costs may at times not be possible with mathematical precision.  Nothing in that decision implies that the agency need only comply with statutory mandates to the degree it finds reasonable or convenient.

We recognize that, at the outset of the bonus payment program, CMS may reasonably have used the MSIS and three BOE “child” codes (BOE codes 4, 6 and 8) to develop initially the state baseline enrollments because that was the most “operationally feasible” method for quickly counting “qualifying children” enrolled in FY 2007.  CMS has not shown, however, that it could not have later adjusted the baseline calculations with data that complied with the statute’s mandate and made corresponding adjustments to the bonus payments.  Indeed, the adjustment process that CMS established to validate the state’s current enrollment data and account for retroactive eligibility determinations shows that providing an adjustment process to ensure that appropriate data were used to determine baseline enrollments was certainly possible. 

As noted above, CMS also contends that operational challenges justified its exclusion of blind and disabled children assigned BOE code 2 from the enrollment calculations.   Even though some individuals reported under BOE code 2 “might also be eligible for Medicaid on the basis of their age,” CMS says in Idaho’s case, “it was not readily feasible for CMS to parse this subset within a subset within BOE Code 2 for the baseline enrollment for each State, especially given optional programs, age variants, and other variances across the States.”  Dkt. No. A-19-96, CMS Br. at 27.  Similarly, CMS says in Colorado’s case that, even if it “used an age sort to cull children reported within BOE code 2, CMS still would not have readily known either the qualifying age of a ‘child’ per variances in each of the State plan requirements (i.e., under the ages of 18, 19, 20, or 21 per the Act § 1905(a)(i)) or the qualifying basis of that individual’s Medicaid eligibility (i.e., disability alone, or disability and age).”  Dkt. No. A-19-101, CMS Br. at 31 (emphasis by CMS).

Several States challenge CMS’s contentions that identifying BOE code 2 children enrolled in their Medicaid programs in FY 2007 was not readily feasible.  The States say that data they provide to CMS include the birth dates of the individuals enrolled in their Medicaid programs and CMS has indicated in guidance unrelated to CHIPRA that it is possible to sort BOE code 2 populations by age.  E.g., Dkt. No. A-19-90, Kan. Br. at 23, 27-28, Kan. Reply at 10-11; Dkt. No. A-19-100, Alaska Br. at 18-19, Reply at 10.  Colorado asserts that, while each state “defines the option for the age of children in that state ending between 18 and 21, . . . the choice of age is documented in the state plan.”  Dkt. No. A-19-101, Colo. Reply at 9.  Therefore, calculating which recipients within a

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state’s BOE code 2 population were children only required CMS to subtract the date of birth from the benefit month and year (to yield age) and then compare the calculated age to the age cutoff for “child” in that state.  Colorado asserts that making such a calculation “would be marginally more complicated than excluding all BOE 2s, but it is in no way operationally infeasible.”  Id.

Some of the States suggest that they could have provided CMS the numbers of children enrolled in their Medicaid programs and assigned BOE code 2 in FY 2007 for CMS to develop the state baseline enrollments, particularly since CMS was relying on the states to provide their current enrollment data for each bonus payment year.  See, e.g., Dkt. No. A-19-101, Colo. Reply at 12-13; Dkt. No. A-19-100, Alaska Br. at 19, Alaska Reply at 10.  Indeed, in North Carolina’s case, CMS expressly recognized that the State’s system “allow[ed] it to pull only children in BOE code 2.”  Dkt. No. A-19-94, CMS Br. at 27.  Thus, while it may have been operationally challenging at the inception of the bonus payment program for CMS to quickly develop the CHIPRA baseline enrollments for all of the states in accordance with the statute’s requirements, those challenges do not excuse CMS from ultimately meeting its obligation to comply with the statute’s clear requirements. 

4.   The States have demonstrated that certain children assigned BOE codes other than 4, 6, or 8 are “qualifying children” under section 2105(a)(3)(F) of the Act.

We further conclude that the States have demonstrated that child recipients of SSI, as well as other blind or disabled children who were assigned BOE code 2 according to CMS’s MSIS File Specifications and Data Dictionary, were “qualifying children” under the clear language of section 2105(a)(3)(F).16  As Alaska asserts, “It is without question that blind and disabled children are eligible under” title XIX of the Act under multiple eligibility provisions, including sections 1902(a)(10)(A)(i)(I), (II); 1902(a)(10)(A)(ii)(I), (IV), (V), (VI); and 1902(e)(3) of the Act.  Dkt. No. A-19-100, Alaska Br. at 14.  Colorado observes that the State Medicaid Manual and MSIS Data Dictionary eligibility cross-walk show that children who are blind or have disabilities “belong in BOE code 2.”  Dkt. No. A-19-101, Colo. Br. at 15-17 (citing SMM § 2700.2, App. A at 2-156, App. B at 2-157; MSIS File Specifications and Data Dictionary).  Indeed, the Data Dictionary’s

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eligibility crosswalk shows BOE code 2 applies to recipients of SSI as well as other eligibility groups including two composed exclusively of children:  “Certain disabled children, 18 or under, who live at home, but who, if in a medical institution, would be eligible for SSI or a State supplemental payment” (eligible under section 1902(e)(3) of the Act); and “Continuation of Medicaid eligibility for disabled children who lose SSI benefits because of changes in the definition of disability” (eligible under section 1902(a)(10)(A)(ii) of the Act).  CMS Ex. 11, at 15-18, 20-21, 23-24.  Furthermore, the eligibility crosswalk provides that children eligible for Medicaid under sections 1902(a)(10)(A)(i)(I) and 1931 of the Act may be sometimes reported under BOE codes 4 or 6 instead of code 2.  Id. at 15-16, 18, 20-21.

Kansas additionally argues that it correctly counted children over age 18 but under age 19 who were assigned BOE code 5 as “qualifying children” enrolled in its Medicaid program during the years for which it received bonus payments.  Under both Medicaid and CHIP, “Kansas’ basic definition of ‘child’ is up to a person’s 19^th birthday.”  Dkt. No. A-19-90, Kan. Reply at 2 n.5; see also Kan. Ex. E ¶ 7.a. (Declaration of Christiane Swartz).  Kansas argues that, following CMS’s guidance, it correctly included under BOE code 5 (Adults) individuals over age 18 but under age 19 who were enrolled as children under its programs.  Dkt. No. A-19-90, Kan. Br. at 13-14, 30; see also Kan. Ex. J at 3 (Kansas response to OIG draft audit report) (stating Kansas “include[d] children in the BOE category of Adult (5) meeting the CMS guidance for those under age 19, and those under age 19 in the [Temporary Assistance for Needy Families] population”). 

The Act and CMS’s guidance support Kansas’ argument.  Under section 2105(a)(3)(C), the “qualifying children” to be counted each year of CHIPRA’s bonus payment program were those “enrolled during the fiscal year under the State plan under title XIX.”  Act § 2105(a)(3)(C)(i)(I), (ii)(I) (emphasis added).  As noted above, states may elect to define the cutoff age for children at 19, 20, or 21 in their state Medicaid plans.  In guidance unrelated to CHIPRA, CMS explained that there are “differences in state approaches for classifying children into BOE groups,” and in some states the “BOE of child or adult is based on an individual’s position in the family unit applying for Medicaid.”  Kan. Br. at 27-28 (quoting CMS answer to MAX FAQ 2431, “To what extent are Medicaid Analytical eXtract (MAX) data elements for age group (including ages 65 and over) and eligibility group (including aged) different?”).17   While this “generally means that children are reported in the child BOE and parents and caretaker relatives are reported in the adult BOE,” CMS stated, “[w]ith this approach, teenage parents will be reported in the adult BOE, not in the child BOE.”  Id. (emphasis added).  Accordingly, a state such as Kansas, which defines “child” for Medicaid eligibility purposes as an individual under age 19, could assign the BOE 5 “adult” code to teenage parents who were “children”

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under the state’s Medicaid plan.  Therefore, Kansas correctly counted these individuals as “qualifying children” during the bonus payment program period.

5.   The States have not established that the disputed bonus payments are necessarily allowable.

The Board has long held that the ultimate burden of documenting the allowability of disputed federal funds rests with the non-federal party.  Pa. Dep’t of Hum. Servs., DAB No. 2883, at 8-9 (citing cases); Mo. Dep’t of Soc. Servs., DAB No. 395, at 6 (1983).  Once the federal agency has met its initial burden, the Board recently said, “the appellant must carry the burden to prove that federal funds were claimed only in accordance with applicable authorities.”  Mo. Dep’t of Soc. Servs., DAB No. 2994, at 6 (2020) (citing Ohio Dep’t of Job & Fam. Servs., DAB No. 2643, at 31 (2015)). 

We cannot conclude that the States have met their burden based on the records compiled here.  While the States have shown that CMS’s use of BOE codes 4, 6, and 8 alone to identify all “qualifying children” violated section 2105(a)(3)(F) of the Act and that other groups of children included in the States’ current enrollments were “qualifying children” under the statute, it does not follow that the bonus payments they received were fully allowable.  As discussed above, section 2105(a)(3) of the Act requires the Secretary to determine state baseline enrollments and current enrollments of “qualifying children” using a consistent, permissible interpretation of the term in order to accurately determine the number of “qualifying children” exceeding a state’s baseline enrollment in a given bonus payment year, and, in turn, to accurately calculate the amount of any authorized bonus payment.  Because the baseline enrollments used to calculate the bonus payments awarded to the States captured only a subset of the Medicaid eligibility groups of “qualifying children” captured in the States’ bonus payment year current enrollments, the numbers of “qualifying children” exceeding the States’ baseline enrollments were likely overstated, resulting in bonus payments that were not calculated in accordance with the controlling statute.  Consequently, we cannot conclude that the disputed bonus payments were necessarily allowable in full. 

The States’ responsibility to document the allowability of the disputed bonus payments does not license CMS to ignore documentation and data that were available to it, however.  In light of the States’ claims that they and CMS had documentation and data available to count all of the qualifying children enrolled in the States’ Medicaid programs during FY 2007 and the years for which bonus payments were awarded, we conclude that the States should be given an opportunity to produce verifiable documentation of their enrollments to CMS, and CMS should recalculate the bonus payments in compliance with the statute’s requirements in order to determine the authorized bonus payment amounts and any overpayment which must be returned. 

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6.   CMS may recoup unauthorized bonus payments.

The States argue that they should not be required to return any of the disputed bonus payments because they complied with the statute in accurately counting the “qualifying children” enrolled in their Medicaid programs during the years for which they received bonus payments.  They additionally state that they responded to CMS’s guidance in good faith, consulted with CMS to determine their current enrollments of qualifying children, and reasonably believed that CMS approved their methodologies and verified their data.  E.g., Dkt. No. A-19-90, Kan. Br. at 34-35; Dkt. No. A-19-96, Idaho Br. at 10-11, Idaho Reply at 4; Dkt. No. A-19-102, N.M. Br. at 5-6, 13-14, N.M. Reply at 4-5; Dkt. No. A-19-94, N.C. Br. at 4, 15-16, 19.  Moreover, CMS’s guidance was inadequate, the States assert, and CMS never promulgated regulations implementing the bonus payment statute, despite recognizing that such regulations were necessary.  E.g., Dkt. No. A-19-96, Idaho Br. at 12; Dkt. No. A-19-94, N.C. Br. at 15.  Under the circumstances, the States say that they should not be penalized for CMS’s failures.  “Equity demands that CMS bear the brunt of its error,” argues North Carolina.  Dkt. No. A-19-94, N.C. Br. at 18.

The Board has repeatedly held, in accordance with 45 C.F.R. § 16.14, that it “lacks the power to grant equitable relief because it is bound by all applicable laws and regulations.”  Kansas Dep’t of Admin., DAB No. 2845, at 12 (2018) (and cases cited therein), appeal dismissed, No. 6:18-cv-01104 (D. Kan. Oct. 17, 2018); see also, Camden Cnty. Council on Econ. Opportunity, DAB No. 881, at 7-8 (1987) (“The Board is bound by all applicable laws and cannot invent equitable remedies without a basis in law.”); River E. Econ. Revitalization Corp., DAB No. 2087, at 12 (2007) (“general claim of ‘equity’ . . . is not available as a basis for dispensing federal funds”).  For the reasons discussed above, an accurate count of the number of “qualifying children” enrolled in a state’s Medicaid program during a bonus payment year is not alone sufficient under section 2105(a)(3) of the Act to determine whether the state qualified for a bonus payment and, if so, in what amount – that count must be measured against a comparable accurate count of the baseline number of child enrollees, developed on the basis of the “qualifying children” enrolled in FY 2007.  The Board is bound by the statute’s plain language and prescribed methodology for determining whether the disputed payments were allowable and cannot grant relief to the states based on fairness principles.

Washington additionally contends that the “statute contains no provision for retroactive adjustment and does not contemplate that CMS can pull back millions of dollars years later because of CMS’s own decision to take an ‘operationally feasible’ approach that resulted in undercounting the baseline enrollment.”  Dkt. No. A-19-85, Wash. Br. at 11.  Washington notes that CMS’s demand letter relied on section 2105(e) of the Act as the authority for the Secretary to recoup the disputed bonus payments.  Section 2105(e) provides that the “Secretary may make payments under this section for each quarter on the basis of advance estimates of expenditures submitted by the State . . . and may reduce or increase the payments as necessary to adjust for any overpayment or underpayment for

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prior quarters.”  Washington says that a “decision to recalculate a bonus [payment] does not fit within any of the definitions of ‘overpayment’ in SSA [section] 1903(d).”  Dkt. No. A-19-85, Wash. Br. at 11-12.

We conclude that CMS is authorized under section 2105(e) of the Act to adjust bonus payments made to a state based on erroneous data, though the payments were made annually on review of the state’s bonus payment requests rather than through quarterly payments based on advanced estimates of expenditures.  Moreover, we would find no basis for precluding CMS from recouping bonus payments if they were shown to have been made in error given that CMS has provided the states access to this appeal process to test that.  Furthermore, Washington’s claim that a bonus payment overpayment does not fit into any of the types of overpayments addressed in section 1903(d)(2) omits reference to section 1903(d)(2)(a).  That section of the Act refers to the Secretary’s authority to reduce or increase payments to a state “to the extent of any overpayment or underpayment which the Secretary determines was made under this section to such State for any prior quarter and with respect to which adjustment has not already been made under this subsection.”  Discussing this provision long ago, the Board stated, “the Agency has consistently interpreted the term ‘overpayment’ in section 1903(d)(2) to include any payments made to a state and later determined by the Secretary to be unallowable, that is, not in accordance with federal program requirements.”  N.Y. State Dep’t of Soc. Servs., DAB No. 302, at 3 (1982).  Here, the bonus payments made to the States, later determined by CMS to be unallowable under section 2105(a)(3) and overpayments, fall squarely within this interpretation of the term.   

Accordingly, if, upon remand, the revised calculations of the States’ bonus payments show that any amounts received by the States are unallowable, CMS may recoup the unauthorized amounts.

Remand Order

Based on the foregoing analysis and conclusions, the Board remands these cases to CMS to take the following steps:

(1) CMS shall give each State the opportunity to produce verifiable documentation of the monthly average unduplicated numbers of children assigned a BOE code other than 4, 6, or 8 who, consistent with this decision, were “qualifying children” under section 2105(a)(3)(F) of the Act and (i) enrolled in the State’s Medicaid program in FY 2007 and (ii) enrolled during each fiscal year for which the State applied for and received a bonus payment;

(2) CMS shall use the documentation to recalculate the State’s bonus payments, ensuring that the same eligibility groups included in each State’s bonus payment year enrollment of “qualifying children” are reflected in the State’s baseline enrollment;

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(3) CMS shall determine the amount of any overpayment;

(4) CMS shall provide the States the population growth factors and other data elements used in the bonus payment calculations so that each State may verify CMS’s revised calculations; and

(5) CMS may recoup any revised overpayment amount.

If a State disputes the resulting CMS recalculations of its bonus payments, it may return to the Board for resolution of that dispute, but not to relitigate the issues resolved by this decision.

1. CMS determined that the appellants received the following overpayments:  Washington - $19,484,644; Kansas – $17,796,598; North Carolina - $34,813,442; Idaho - $3,103,167; Alaska - $8,899,581; Colorado - $38,373,386; New Mexico - $15,965,758.  See Originating Case Decisions, Dkt. Nos. A-19-85, A-19-90, A-19-94, A-19-96, A-19-100, A-19-101, A-19-102.
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2. The OIG audit report for each state is included in the corresponding case record.  In addition, the OIG issued a summary report in September 2019, “CMS Paid Over $277 Million in Unallowable CHIPRA Bonus Payments Based on Incorrect Enrollment Data.”  Dkt. No. A-19-101, CMS Ex. 13.
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3. See CMS summary of CHIPRA incentives at https://www.medicaid.gov/chip/chipra/index.html (last visited March 29, 2021).
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4. The program features were:  (i) Continuous Eligibility; (ii) Liberalization of Asset Requirements; (iii) Elimination of In-Person Interview Requirement; (iv) Use of Joint Application for Medicaid and CHIP; (v) Automatic Renewal; (vi) Presumptive Eligibility for Children; (vii) Express Lane; and (viii) Premium Assistance Subsidies.  Act § 2105(a)(4).
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5. CMS has replaced the MSIS with the Transformed Medicaid Statistical Information System (T-MSIS). See CMS descriptions of Medicaid data systems at https://www.medicaid.gov/medicaid/data-systems/medicaid-and-chip-business-information-solution/index.html, (last visited March 29, 2021).
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6. The State Medicaid Manual is available at https://www.cms.gov/regulations-and-guidance/guidance/manuals/paper-based-manuals-items/cms021927, (last visited March 29, 2021).
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7. Unless noted otherwise, the CMS exhibit numbers referenced in this decision correspond to the numbered exhibits filed by CMS in Dkt. No. A-19-102, N.M. Hum. Servs. Dep’t.  The same CMS guidance documents were submitted into the record of each appeal; however, the exhibit numbers vary from case-to-case.
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8. The MAS groups are:  (0) Individuals Covered Under Separate Children’s Health Insurance Programs; (1) Individuals Receiving Cash Assistance or Eligible Under § 1931 of the Act; (2) Medically Needy; (3) Poverty-Related Eligibles; (4) Other Eligibles; and (5) Section 1115 – Demonstration expansion eligibles.  CMS Ex. 11, at 12.
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9. We have removed underlining and substituted italics in several quotations throughout this decision.
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10. “State Health Official” letters are a form of sub-regulatory guidance used by CMS to clarify and communicate policies relating to both Medicaid and CHIP.  CMS describes its various forms of sub-regulatory guidance at https://www.medicaid.gov/federal-policy-guidance/index.html (last visited March 29, 2021).
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11. The OIG did not address whether the States successfully implemented five of the eight specified program features, nor did CMS challenge that, so that issue is not before the Board.
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12. The OIG audit reports for Washington, Idaho, and Alaska cited CMS’s guidance in SHO #09-015 and the October 2009 bonus payment calculation clarification document.  Dkt. No. A-19-85, Wash. Ex. 8, at 11 n.2; Dkt. No. A-19-96, Idaho Ex. B, audit report page 3 n.2; Dkt. No. A-19-100, Alaska Ex. 6, at 8 n.2.  In the reports on the other four States, the OIG cited SHO #09-015 and CMS’s e-mails to the States in December 2011.  Dkt. No. A-19-90, CMS Ex. 6, at 7 n.2; Dkt. No. A-19-94, CMS Ex. 13, at 3 n.2; Dkt. No. A-19-101, Colo. Ex. F, audit report page 3 n.2; Dkt. No. A-19-102, CMS Ex. 10, at 10 n.2.
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13. As discussed below, Kansas also contends that children under the age of 19 who met Kansas’ Medicaid program’s definition of “child” but who were assigned BOE code 5 (based on their family relationships or other reasons) also were “qualifying children” within the meaning of section 2105(a)(3)(F).
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14. CMS nevertheless acknowledges that some children assigned BOE code 2 could have fit under BOE code 4 or 6.  Dkt. No. A-19-85, CMS Br. at 32 n.22 (stating the MSIS Data Dictionary “enumerates” individuals eligible for Medicaid under sections 1902(a)(10)(A)(i)(I) and 1931 of the Act “under multiple codes” including BOE codes 2, 4, and 6; therefore, a state could report a child in this group under BOE code 2, 4, or 6).
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15. See https://secure.ssa.gov/poms.nsf/lnx/0501715010 (last visited March 29, 2021) (stating that section 1634 agreements are named for the authorizing provision in the Act and describing SSA and state responsibilities under such agreements).
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16. We note that Colorado additionally contends that, in recalculating the bonus payments, the OIG made factual errors by excluding more children as BOE code 2 than was appropriate even based on CMS’s treatment of BOE code 2.  The OIG allegedly required Colorado to include only children without a disability as “qualifying children,” regardless of individual children’s actual eligibility category.  According to Colorado, the OIG should have categorized many of the excluded children under BOE codes 4, 6, or 8.  See Dkt. No. A-19-101, Colo. Br. at 9-10, 27-31.  We need not address the alleged reclassification errors in this decision in light of our conclusion that blind or disabled children who met Medicaid eligibility criteria in effect on July 1, 2008, are “qualifying children” within the meaning of the statute, regardless whether assigned BOE code 2, 4, 6, or 8, and our order remanding Colorado’s case to CMS to recalculate Colorado’s bonus payments.
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17. Available at https://www.cms.gov/files/document/frequently-asked-questions-9 (last visited March 29, 2021.)
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