GAB Decision 490
Docket No. 83-76
December 30, 1983
Washington Department of Social and Health Services;
Ford, Cecilia; Garrett, Donald Settle, Norval
The Washington Department of Social and Health Services appealed a
determination by the Health Care Financing Administration disallowing
$1,520,968 in federal financial participation (FFP) claimed by the State
under Title XIX (Medicaid) of the Social Security Act (Act). The claims
disallowed were for the per diem rates paid to institutions for mental
diseases (IMDs) for inpatient psychiatric services provided to
individuals aged 22 to 64. Services to individuals in this age group in
IMDs are generally excluded from the definition of "medical assistance"
in which federal Medicaid funding is available. Section 1905(a) of the
Act. The State contended nonetheless that FFP was available for these
services because they were provided during the month the individual
receiving the services was admitted to or discharged from the IMD, or
during the month after the month of admission. An Agency regulation
stated that "FFP is available in expenditures for services furnished to
eligible individuals during the month in which they become . . .
patients in an institution for . . . mental diseases." 42 CFR
435.1008(b). This regulation reflects a policy of permitting states to
consider a person eligible for Medicaid for a full month if tht person
is eligible during any part of the month, as a matter of administrative
convenience. The State contended that the Agency's longstanding
interpretation of this regulation was to permit FFP in the claims here.
The Agency determined that this regulation could not be read to overcome
restrictions in the State Medicaid plan concerning what services were
covered. Therefore, the Agency concluded, there was no FFP in that
portion of the per diem rates which represented "institutional services"
provided by IMDs to this age group because these services were not
covered in the State plan.
The issues raised by this appeal are primarily those addressed by the
Board in Joint Consideration: IMD Admission/Discharge Issue, Decision
No. 436, May 31, 1983. There, the Board upheld disallowances taken
against five States, concluding that the Agency's interpretation that
the IMD exclusion limits covered services was supported by the statutory
scheme as a whole and by the Agency's regulatory scheme. The Board
further concluded that the Agency had no (2) longstanding interpretation
permitting the States to ignore these limitations during partial months
in IMDs and that the States had not shown otherwise that the Agency
should be precluded from taking the disallowance. Here, Washington
argued that Decision No. 436 was incorrectly decided and was not
controlling here and that the Agency should be estopped from taking this
disallowance. For the reasons stated below, we conclude that our
analysis in Decision No. 436 was correct and should be applied here and
that the State has not shown that it reasonably relied to its detriment
on any Agency action in incurring or claiming these costs. Accordingly,
we uphold the disalloance.
Our decision is based on the parties' written submissions and on the
tape of a telephone conference call held on December 13, 1983. Below,
we first summarize our conclusions from Decision No. 436. We then
address the State's arguments about why that decision was wrong and
should not control here. Finally, we address the State's equitable
estoppel argument.
I. Summary of Decision No. 436
In the cases leading to Decision No. 436, the States argued that the
effect of the statutory exclusion of services to individuals aged 22 to
64 in IMDs was solely to render those individuals ineligible for
Medicaid. Therefore, the States reasoned, the partial month eligibility
provision as applied to IMDs in 42 CFR 435.1008(b) overcame the
exclusion by rendering the individual eligible during the full month in
which the individual became a patient in an IMD (or left the IMD). The
made FFP available in any services provided during this time period,
including inpatient psychiatric services claimed at a per diem rate, the
States concluded.
The Board examined the relevant statutory provisions and concluded
that the statutory scheme as a whole supports the Agency interpretation
that the exclusion results not only in rendering patients between the
ages of 22 and 64 in IMDs ineligible for Medicaid, but also results in
the absence of any provision covering inpatient services in an IMD when
provided to those individuals. Decision No. 436, pp. 5-11. In
particular, the Board found the following to be relevant:
* When the definition of "medical assistance" in section 1905(a)
of
the Act lists as covered services inpatient services in hospitals,
skilled nursing facilities, and intermediate care facilities (optional
coverage), each service description is modified by the parenthetical
limitation "other than services in an institution for . . . mental
diseases." Paragraphs 1905(a)(1), (4), and (15).
(3) * While a state may cover some inpatient services in IMD under
paragraphs 1905(a)(14) and (16), these services are defined in terms of
the age groups to whom they may be provided: age 65 and over or under
age 21. Moreover, even for persons in these age groups, IMD services
are covered only if they meet certain conditions. This shows that the
exclusion resulted in part from a concern with the nature of services
provided by such institutions.
* The general IMD exclusion is not placed with the provisions of
section 1905(a) which relate to categorical and financial eligibility
for Medicaid. Instead, it appears as a general limitation on what can
be included in the term "medical assistance." This is consistent with
the view that the exclusion relates not only to what persons are
eligible for Medicaid but also to what services can be covered.
The Board found that, since 1966, the Agency had consistently
interpreted the IMD exclusion to be a limit on what services could be
covered and that this interpretation was embodied in Agency regulations.
These regulations made it sufficiently clear that the Agency considered
the IMD exclusion to be a limit on covered services as well as on
individual eligibility. Moreover, wheher optional IMD services may be
covered, they are specifically defined in terms of the age groups to
whom they may be provided and must meet certain other conditions as
well. The States did not deny that these limitations also appear in
their State plan descriptions of what services are covered under their
Medicaid programs. Decision No. 436, pp. 11-16.
The Board examined a series of documents submitted by the States in
support of their proposition that the Agency had a longstanding policy
of partial month coverage of inpatients psychiatric services to
individuals aged 22 to 64 in IMDs. The Bord grouped the documents into
the following categories: formal policy issuances; internal Agency
memoranda; correspondence from regional Medicaid officials; and
miscellaneous. In summary, the Board determined the following:
* The formal policy issuances concerned inmates in public
institutions, rather than patients in medical institutions or
intermediate care facilities qualified under Medicaid to provide
inpatient psychiatric services to the aged or children. They simply do
not address the question of the allowability of FFP in inpatient
psychiatric services for individuals aged 22 to 64 during a partial
month of institutionalization. Decision No. 436, p. 17.
* The internal memoranda were not intended as an official
interpretation of the statutory IMD exclusion and how it (4) affected
covered services, and, in any event, the States could not reasonably
have relied on them since they evidenced an internal disagreement over
whether inpatient psychiatric services were covered during partial
months. Indeed, since the States did not show when they became aware of
the internal memoranda, there is a substantial question of whether the
States relied on them at all. Decision No. 436, pp. 18-21.
* While statements in correspondence from Region II officials may
have suggested, for a brief period, that the claims were allowable, the
States should have known from the context in which the statements were
made that payment was uncertain. Correspondence from Region V may have
suggested concurrence with Ohio's proposed interpretation that FFP was
available for "institutional services" provided by an IMD during the
month of admission, but also conditioned any concurrence on submission
of a State plan amendment. /1/ In Region III, there was no
correspondence submitted indicating approval of the State's claims, and,
in Region I, a memorandum was issued which indicated to the contrary
that FFP would not be available in the expenditures. Decision No. 436,
pp. 21-25.
* Other miscellaneous documents submitted by the States supported the
Agency's position, rather than the States', and some of the documents
indicated that some of the States may have known that the claims
potentially conflicted with regulatory provisions limiting services
coverage. Decision No. 436, pp. 25-27.
In light of these conclusions about the documents the States had
submitted, and the facts presented in the record, the Board concluded
that the States had not shown that they reasonably relied on Agency
action to their detriment. The Board held that the Agency was not
precluded from taking the (5) disallowances based on any of the theories
advanced by the States, including the doctrine of equitable estoppel.
/2/
II. Whether the Agency had an official interpretation permitting FFP in
these claims.
In addition to documents submitted in the cases leading to Decision
No. 436, the State here submitted a memorandum issued by the Regional
Medicaid Director, Region X, on September 30, 1977 (No. FY77-28M).
State's Appeal File, Exhibit 3. The State argued that these documents
showed that, from at least September 1977 until April 1982, Region X of
the Agency interpreted 42 CFR 435.1008(b) (and the more general partial
month eligibility provision at 42 CFR 435.914(b)) to permit FFP for
partial months of institutionalization. State's brief, p. 3. The
Agency did not deny, however, that it had interpreted the partial month
eligibility provisions to provide for FFP during partial months of
institutionalization, so lons as the claim was for services covered in a
state plan. In the cases leading to Decision No. 436, the Agency
acknowledged that FFP was available under the partial month provisions
in whatever part of the per diem rate represents the allowable costs of
services which are separately covered in a state plan and which were
provided during the month of admission to or discharge from an IMD. Our
decision recognized this.
The critical question is whether the Agency had a longstanding
interpretation permitting the States to ignore during partial months in
IMDs the limits on covered services (as opposed to eligible individuals)
resulting from the IMD exclusion. Like the formal policy issuances
examined by the Board in Decision No. 436 (in particular, certain
Program Interpretation Questions--PIQs), the Region X Memorandum deals
solely with the question of whether FFP is available in medical care and
services for thos who become inmates of a public institution. See
Decision No. 436, p. 17. The issue of whether inpatient psychiatric
services are covered is simply not mentioned in these issuances. We
explained that this was not surprising since a medical institution or
intermediate care facility is not a public institution under applicable
Agency regulations.
(6) Washington argued, however, that its State psychiatric hospitals
providing the services claimed here were "public institutions" within
the meaning of 42 CFR 435.1009. That reguation specifies:
"Public institution" means an institution that is the responsibility
of a governmental unit or over which a governmental unit exercises
administrative control. The term "public institution" does not include
a medical institution as defined in this section, an intermediate care
facility. . . .
The State explained why its paychiatric hospitals met the first part
of this definition, but did not explain why they should not be
considered "medical institutions," as defined in 42 CFR 435.1009,
or
intermediate care facilities. Indeed, if these institutions were
qualified to provide inpatient psychiatric services to the aged under
section 1905(a)(14) of the Act, they would have to meet standards that
would make them medical institutions, or intermediate care facilities,
and, therefore, exclude them from being considered "public institutions"
under 42 CFR 432.1009. See, e.g., 42 CFR 440.140, 405.1035, and
405.1036. /3/
Even if we were to conclude that the State hospitals here were
"public institutions" referred to in the PIQs and other issuances,
however, this would not alter our basic conclusion that these issuances
do not show that the Agency had a longstanding official interpretation
that FFP was available for inpatient psychiatric services to individuals
aged 22 to 64 during partial months in IMDs. As noted above, they
simply do not address that question.
Contrary to what the State argued here, the Board in Decision No.
436 did not base its conclusions regarding the PIQs (and a similar
Medical Assistance Manual provision) on a finding that they were not
official Agency policy. We discussed them as formal policy issuances,
and, if they had contained the interpretation the States said they did,
we would have applied them as such. Thus, there is no merit to the
State's (7) argument that Decision No. 436 is inconsistent with the
Board's analysis in Pennsylvania Department of Public Welfare, Decision
No. 277, March 31, 1982, applying a PIQ as an official policy
interpretation. Nor is Decision No. 436 in conflict with court cases
giving precedence to official Agency interpretations over informal
advice in legal memoranda. See cases cited in State's brief, pp. 7-10.
Thus, we conclude that the Agency did not have a longstanding
official interpretation that permitted FFP in the full per diem rates
claimed here. /4/
III. Whether Decision No. 436 should control this appeal.
The State argued that Decision No. 436 should not control the
decision in this appeal since the Board had not adopted a system
containing the elements necessary to support the precedential
application of its decisions. State's Brief, pp. 11-12. According to
the State, Board decisions are not reasonably accessible to parties, and
the Board did not treat one of its previous decisions (Decision No.
277, discussed above) as binding unless overruled.
The cases cited by the State merely support the proposition that,
where an administrative agency publishes its opinions using a system of
precedents, itmust follow its own precedents or explain any deviations
from them. Atchison, T. & S.F.R. Co. v. Wichita Board of Trade, 412 U.
S. 800, 808 (1973); Greyhound Corp. v. ICC, 554 F.2d 414, 416 (D.C.
Cir. 1977).
(8) We see nothing in these cases which precludes the Board from
adopting an analysis from a prior decision, to the extent the issues are
the same and the appellant is provided an opportunity to show why the
prior decision is wrong. The Board is not applying its prior decision
as a rule governing the behavior of the appellant, so that notice would
be required. Instead, the Board is merely concluding that the reasons
why the prior decision was reached are relevant here as well. /5/
In this case, the appellant has had ample opportunity to brief the
issues. To the extent the issues are the same as those in Decision No.
436, we incorporate our reasoning there into this decision by reference;
to the extent the issues are different, we address them here.
IV. Whether equitable estoppel should be applied against the Agency
here.
The State argued that the Agency should be precluded by the doctrine
of equitable estoppel "from asserting in this disallowance an
interpretation of 42 CFR 435.1008(b) different from that applied in PIQs
MMB-77-6 and 78-7." State's brief, pp. 12-13. The State discussed the
required elements of estoppel, acknowledging that the Supreme Court
indicated in Schweiker v. Hansen, 450 U.S. 785 (1981), that a showing of
"affirmative misconduct" might be required in order to apply estoppel
to
the federal government. State's brief, pp. 12-14. The State asserted
that 1) the Agency knew the facts; 2) the Agency intended that the
State rely upon its conduct, the State's reliance was reasonable under
the circumstances and the Agency conduct amounted to "affirmative
misconduct"; 3) that the State was ignorant of the true facts; and
that the State relied to its detriment upon the Agency's conduct.
We discuss each of these elements below, and conclude that the State
has not met its burden of showing that estoppel should apply.
As a context for our discussion, we note that the disallowed claims
were submitted by the State on expenditure reports for the quarters
ended March 31, 1982 (submitted to the Agency on April 30, 1982) and
September 30, 1982, with retroactive adjustments for expenditures from
the period January 1, 1980 to June 30, 1982. Thus, although the State
alleged that the (9) Agency had an interpretation that the costs were
allowable dating back to 1977, the State did not actually submit any
claims for the costs until almost five years later.
A. Whether the Agency knew the facts.
The State asserted that the Agency knew it was interpreting the
partial month eligibility provision "to permit FFP for the month when a
Medicaid-eligible individual entered an IMD" and this is "amply shown
by
the FIQs, the intra-office memorandumand the payments made to New York
on a similar claim." State's brief, p. 15.
As we indicated above and in Decision 436, the PIQs do not address
the question of whether the partial month eligibility provision
overcomes the restrictions on covered services resulting from the IMD
exclusion (i.e., the absence of any provision covering inpatient
hospital, SNF, and ICF services in an IMD for individuals aged 22 to
64). As discussed more fully below, the inter-office memoranda cited by
the State also do not directly address the question, and, even if they
did, nothing in them indicates they were official interpretations.
Finally, given the payment system under Title XIX of the Act, mere
payment of a claim cannot be construed as implying that the claim is
allowable. See, e.g., New York State Department of Social Services,
Decision No. 449, July 29, 1983, p. 26.
B. Whether the State reasonably relied on Agency conduct constituting
affirmative misconduct
The State said that it had a right to think that the Agency intended
for the States to follow the Agency's advice and instruction in the PIQs
and Medical Assistance Manual. We agree, but this is irrelevant since
those documents do not address the issue here.
With respect to its affirmative misconduct argument, the State
claimed that issuance of the PIQs to all regions, and of the Regional
Medicaid Director's Memorandum No. FY77-28M to Region X, was affirmative
action. This also proves nothing since these documents did not address
the issue here. The State also referred to internal memoranda by the
Agency's Director of the Bureau of Program Policy, alleging that these
memoranda, entitled "Policy Information for all Regions," were within
the scope of his authority. For a discussion of these memoranda, see
Decision No. 436, pp. 18-21.
In Decision No. 436, we concluded regarding these memoranda that 1)
they did not clearly address the interpretation of how the partial month
eligibility provision affects covered services; 2) they were informal
Agency documents; and 3) even if they might have suggested for a short
period of time that (10) the States claims were allowable, in context,
the States should have known that the issue was a disputed one.
Consequently, the Board concluded that reliance on the memoranda was
unreasonable. This analysis applies here as well. Moreover, like the
other States, Washington did not provide any evidence that it was aware
of these documents at the time it incurred the costs claimed here, and,
in fact, relied on them in incurring the costs.
Thus, we find no conduct here which the Agency intended as a basis
for permitting FFP in the claims hre and whicn constitutes affirmative
misconduct.
C. Whether the State was ignorant of the true facts.
The State said that it did not know about the Agency's
"post-September 1981" interpretation that the costs were unallowable
until it was officially advised by letter dated April 16, 1982. The
State concluded from this that it was ignorant of the true facts.
As we concluded in Decision No. 436, the Agency regulations on the
IMD exclusion were sufficiently clear to give notice that the Agency
interpreted the IMD exclusion to be a limitation on covered services as
well as a limitation on individual eligibility. Moreover, even if we
agreed with the State that it could rely on the documents cited here,
estoppel could not apply to that part of the costs here covering periods
after the April 16, 1982 letter informed the State that the costs were
unallowable. /6/
D. Whether the State relied to its detriment upon the Agency's conduct.
The State did not allege that it relied on Agency conduct in actually
incurring the costs claimed here. As we noted in Decision No. 436,
these IMD services costs would have been incurred and paid for by the
States even if the partial month eligibility provision did not exist.
Indeed, one of the reasons for Congress enacting the IMD exclusion was
that (11) these types of costs had traditionally been recognized as the
responsibility of the states. S. REP. 404, Pt. 1, 89th Cong., 1st Sess.
144 (1965).
The State alleged merely that the State "expended both staff time and
forwent legislative funds based on the Agency's pre-September 21, 1981
interpretation." States' brief, p. 18. The State estimated that it
spent $2,700 worth of staff time in preparation of its claim and
requested less money from the State legislature "based on its belief of
the pre-September 21, 1981 interpretation." State's brief, p. 18.
The memorandum which the State submitted in support of its argument
that it incurred preparation costs in reliance on an Agency
interpretation shows that most of the State's preparation costs were
incurred after the State received the April 16, 1982 official notice
that the costs were unallowable. State's Appeal File, Ex. 16. The
affidavit submitted to show that the State requested less money from its
legislature states only that the State reduced its 1981 budget request
by $131,250 "based on the belief that the Department of Health and Human
Services would allow full-month federal financial participation for
services rendered during the last and first partial month of an
individual's stay in a state mental hospital." State's Appeal File, Ex.
17. This affidavit does not state that the belief was based on Agency
conduct as opposed to the State's own interpretation. In any event,
these types of alleged injury are, at the most, administrative or remote
consequential effects of the disallowances, and are insufficient to
justify awarding the State over a million dollars to cover costs it
would have incurred anyway.
(12) In summary, we conclude that the State has not met its burden of
showing that the Agency should be precluded from taking the disallowance
here.
Conclusion
For the reasons stated above and for the reasons stated in Decision
No. 436, we conclude that the disallowance should be upheld, subject to
reduction under the conditions stated in Decision No. 436. /1/ Ohio
contended that it had submitted amendments covering inpatient
psychiatric services in IMDs during the month of admission, but the
Board found that the provision the State relied on did not provide such
coverage. The provision appeared in agreements between two state
agencies and merely said that one agency would "(include) in the state
plan provision to allow Medicaid payment for services rendered during
the month of admission to a certified" IMD. The Board concluded that
Agency approval of these agreements could not be considered approval of
extending the State plan to cover inpatient psychiatric services to
individuals aged 22 to 64. Decision No. 436, pp. 27-28; see also, Ohio
Department of Public Welfare, Decision No. 486, December 13, 1983.
/2/ The Board also addressed in Decision No. 436 the allowability of
costs incurred during the month after the month of admission to an IMD,
concluding that there was no basis for such claims. The State presented
no reasons here why that analysis was wrong. /3/ We agree with
the State that the definitions of a public institution and institution
for mental diseases would not be mutually exclusive. A State-owned IMD
that did not qualify as a hospital, skilled nursing facility, or
intermediate care facility would be a public institution. However,
there is no provision under Medicaid for FFP in services in this type of
custodial care institution, even for the aged or children, so this
factor simply does not help the State here. /4/ The State also
tried to distinguish its situation from that of the States involved in
Decision No. 436 by arguing that Washington covers inpatient services
when provided in psychiatric wards of general, private hospitals to
individuals aged 22 to 64. Thus, the State said, the Agency was
incorrect in saying that interpreting the partial month eligibility
provision to cover IMD services to these individuals would render them
eligible during partial months for services they would not be eligible
for outside the institutions. According to the State, psychiatric
services in private, general hospitals are identical to the IMD services
involved here. We disagree. Although the nature of the psychiatric
services in a general hospital and an IMD might be the same for some
purposes, Congress distinguished in section 1905(a) of the Act between
services in IMDs and services in other institutions. For purposes of
Medicaid coverage, therefore, the services are not identical.
/5/ We wish to note that the Board has taken steps to make its decisions
reasonably accessible, and, as discussed above, Decision No. 277 did not
need to be overruled in Decision No. 436 because the two decisions are
consistent. /6/ The Agency submitted documentary evidence that
the State, in fact, knew as early as October, 1981 about the Agency's
Assistant General Counsel's memorandum of September 1981, specifically
advising that the costs were unallowable. The State acknowledged that
it had received a copy of the memorandum prior to October 26, 1981 but
objected to the admissability of the documentary evidence on the grounds
that it consisted of internal State memoranda protected by the
attorney/client privilege. Conference call of December 13, 1983. In
ruling that the documents were admissible, the Presiding Board Member
noted that the objection was not made in a discovery context, where the
privilege might be asserted to prevent disclosure of the documents;
these documents were already known to the Agency, which submitted them.
The documents were apparently obtained from State files by an Agency
auditor although the record is not clear exactly how they were obtained.
Conference call of December 13, 1983. Even if the State did not waive
the privilege, however, there is some question whether the State should
be permitted to assert it under the circumstances here, where the State
has placed at issue the source of its belief that the claims were
allowable. See, Tera Advanced Services Corporation, GSBCA No. 6713-NRC,
November 8, 1983. In any event, we do not need to reach the issue here
of how to treat these internal State memoranda since reliance on the
documents is not necessary to our decision.
NOVEMBER 14, 1984