Medicaid and Children’s Health Insurance Programs; Disallowance of Claims for FFP and Technical Corrections

SUMMARY: This final rule reflects the Centers for Medicare & Medicaid Services' commitment to the general principles of the President's Executive Order 13563 released January 18, 2011, entitled "Improving Regulation and Regulatory Review." This rule will: implement a new reconsideration process for administrative determinations to disallow claims for Federal financial participation (FFP) under title XIX of the Act (Medicaid); lengthen the time States have to credit the Federal government for identified but uncollected Medicaid provider overpayments and provide that interest will be due on amounts not credited within that time period; make conforming changes to the Medicaid and Children's Health Insurance Program (CHIP) disallowance process to allow States the option to retain disputed Federal funds through the new administrative reconsideration process; revise installment repayment standards and schedules for States that owe significant amounts; and provide that interest charges may accrue during the new administrative reconsideration process if a State chooses to retain the funds during that period. This final rule will also make a technical correction to reporting requirements for disproportionate share hospital payments, revise internal delegations of authority to reflect the term "Administrator or current Designee," remove obsolete language, and correct other technical errors.

EFFECTIVE DATE: Effective Date: These regulations are effective on June 28, 2012.

FOR FURTHER INFORMATION CONTACT:

Robert Lane, (410) 786-2015, or Lisa Carroll, (410) 786-2696, for general information.

Edgar Davies, (410) 786-3280, for Overpayments.

Claudia Simonson, (312) 353-2115, for Overpayments resulting from Fraud.

Rory Howe, (410) 786-4878, for Upper Payment Limit and Disproportionate Share Hospital.

SUPPLEMENTARY INFORMATION:

I. Background

Title XIX of the Social Security Act (the Act) authorizes Federal grants to States to jointly fund programs that provide medical assistance to low-income families, the elderly, and persons with disabilities. This Federal-State partnership is administered by each State in accordance with an approved State plan. States have considerable flexibility in designing their programs, but must comply with Federal requirements specified in Medicaid statute, regulations, and interpretive agency guidance. Federal financial participation (FFP) is available for State medical assistance expenditures, and administrative expenditures related to operating the State Medicaid program, that are authorized under Federal law and the approved State plan.

For a detailed description of the background of this final rule, please refer to the proposed rule published on August 3, 2011 (76 FR 46685) in the Federal Register .

In addition to the background described in the proposed rule, it is significant that section 6506 of the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010) (the Affordable Care Act) amended section 1903(d)(2) of the Act to extend the period from 60 days to 1 year for which a State may collect an overpayment from providers before having to return the Federal share of the funds. This section of the Affordable Care Act also provides for additional time beyond the 1 year for States to recover debts due to fraud when a final judgment (including a final determination on an appeal) is pending.

II. Summary of the Provisions of the Proposed Rule and Response to Comments

This final rule finalizes provisions set forth in the proposed rule (76 FR 46684). The following is a summary of the provisions and the response to the comments received.

A. Administrative Review of Determinations to Disallow Claims for FFP

Section 204 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Public Law 110-275, entitled Review of Administrative Claim Determinations, amended section 1116 of the Act by striking "title XIX" from section 1116(d) of the Act, which describes a reconsideration process for disallowances of claimed Federal financial participation (FFP), and added a new section 1116(e) of the Act which provides for a new process for administrative review of Medicaid disallowances. Under the new process, a State may request a reconsideration of a Medicaid disallowance from the Secretary of the Department of Health and Human Services (Secretary) during the 60-day period following receipt of notice of the disallowance. Alternatively, or in addition, States may obtain review by the Department of Health and Human Services' (HHS) Departmental Appeals Board (Board) of either the initial agency decision or the reconsidered decision. Therefore, we proposed to revise SEC 430.42 to set forth new procedures to review administrative determinations to disallow claims for FFP. These new procedures will provide for the availability of an informal agency reconsideration and a formal adjudication by the HHS Board.

Specifically, we proposed to amend SEC 430.42(b) to provide States the option to request administrative reconsideration of an initial determination of a Medicaid disallowance.

In SEC 430.42(c), we proposed the procedures for such a reconsideration, in SEC 430.42(d) we described the option for a State to withdraw a reconsideration request, and in SEC 430.42(e) we described the procedures for issuing reconsideration decisions and implementing such decisions.

In SEC 430.42(f), we proposed that States would have the option of appeal to the Board of either an initial determination of a Medicaid disallowance, or the reconsideration of such a determination under SEC 430.42(b). The procedures for such an appeal are set forth in SEC 430.42(g).

In SEC 430.42(h), we proposed the procedure for issuance and implementation of the final decision. For a detailed description of these options, please refer to the proposed rule (76 FR 46685).

The following is a summary of the comments we received regarding the administrative review of determinations to disallow claims for FFP proposal, and our responses to those comments.

Comment: One commenter disagreed with our proposal to create a regulatory framework where lack of timely action by the Administrator to issue a decision on a request for reconsideration affirms the disallowance. The commenter believes that this provision will undermine any advantage derived from creating an administrative reconsideration process and recommends that the provision be revised so that a lack of timely action by CMS results in a decision in the State's favor.

Response: We do not believe that the implementation of this provision will undermine the advantage that may be provided to a State requesting an administrative reconsideration. Section 1116(e) of the Act provides that a State may appeal an unfavorable reconsideration of a disallowance. We believe that the advantage of creating an administrative reconsideration process is to help reduce legal costs, time, and resources for States and the Federal agency. We believe that the most prudent course is preserving the State's ability to proceed in the reconsideration process to the Board without impediment. This rule affords States the option to proceed to the appeals process without delay even in the event the Administrator does not provide a timely response to the reconsideration.

Comment: One commenter requested that CMS revise the rule so that the agency will automatically suspend its disallowance determination during the internal reconsideration period so that a State will not be liable for interest if it elects to retain disallowed FFP. The commenter also stated that CMS proposed to charge interest during the administrative review period at the Current Value of Funds Rate (CVFR).

Response: We work diligently to ensure that we have reviewed every option to resolve a financial issue before proceeding to the disallowance process and believe that to undo the process would be counterintuitive. The law provides for a request for reconsideration as an additional option for States in the disallowance process before proceeding to an appeal by the Board. Additionally, we believe that the language in section 1903 of the Act is clear and that we have no authority to revise current regulations to suspend a disallowance during the administrative reconsideration process.

Regarding the liability of interest during the reconsideration process, we note that States are not required to request reconsideration and have the option to return the funds to us during the disallowance process. If a State is afforded the option to, and elects to, retain disallowed FFP during the administrative review period, the State will be charged interest based on the average of the bond equivalent of the weekly 90-day treasury bill auction rates from the date of the disallowance to the date of a final determination, in accordance with section 1903(d)(5) of the Act.

Therefore, we are finalizing without change our proposed revisions to SEC 430.42 as stated in the proposed rule.

B. State Option to Retain Federal Funds Pending Administrative Review and Interest Charges on Properly Disallowed Funds Retained by the State

We proposed to revise SEC 433.38 to clarify the application of interest when the State opts to retain Federal funds. In SEC 433.38, we proposed to add language clarifying that interest will accrue on disallowed claims of FFP during both the reconsideration process and the Board appeal process. We also proposed to clarify that, if a State chooses to retain the FFP when a claim is disallowed and appeals the disallowance, the interest will continue to accrue through the reconsideration and the Board decision. If the disallowance is upheld, we proposed that the interest would continue to accrue on outstanding balances during any installment repayment period, until the total amount is repaid.

--This is a summary of a Federal Register article originally published on the page number listed below--

Final rule.

CFR Part: "42 CFR Parts 430, 433, 447, and 457"

RIN Number: "RIN 0938-AQ32"

Citation: "77 FR 31499"

Document Number: "CMS-2292-F"

Federal Register Page Number: "31499"

"Rules and Regulations"