42 C.F.R. Subpart C—Grants; Reviews and Audits; Withholding for Failure To Comply; Deferral and Disallowance of Claims; Reduction of Federal Medicaid Payments
Title 42 - Public Health
(a) General provisions. (1) Once CMS has approved a State plan, it makes quarterly grant awards to the State to cover the Federal share of expenditures for services, training, and administration. (2) The amount of the quarterly grant is determined on the basis of information submitted by the State agency (in quarterly estimate and quarterly expenditure reports) and other pertinent documents. (b) Quarterly estimates. The Medicaid agency must submit Form CMS–25 (Medicaid Program Budget Report; Quarterly Distribution of Funding Requirements) to the central office (with a copy to the regional office) 45 days before the beginning of each quarter. (c) Expenditure reports. (1) The State must submit Form CMS–64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office (with a copy to the regional office) not later than 30 days after the end of each quarter. (2) This report is the State's accounting of actual recorded expenditures. The disposition of Federal funds may not be reported on the basis of estimates. (d) Grant award—(1) Computation by CMS. Regional office staff analyzes the State's estimates and sends a recommendation to the central office. Central office staff considers the State's estimates, the regional office recommendations and any other relevant information, including any adjustments to be made under paragraph (d)(2) of this section, and computes the grant. (2) Content of award. The grant award computation form shows the estimate of expenditures for the ensuring quarter, and the amounts by which that estimate is increased or decreased because of an underestimate or overestimate for prior quarters, or for any of the following reasons: (i) Penalty reductions imposed by law. (ii) Accounting adjustments. (iii) Deferrals or disallowances. (iv) Interest assessments. (v) Mandated adjustments such as those required by section 1914 of the Act. (3) Effect of award. The grant award authorizes the State to draw Federal funds as needed to pay the Federal share of disbursements. (4) Drawing procedure. The draw is through a commercial bank and the Federal Reserve system against a continuing letter of credit certified to the Secretary of the Treasury in favor of the State payee. (The letter of credit payment system was established in accordance with Treasury Department regulations—Circular No. 1075.) (e) General administrative requirements. With the following exceptions, the provisions of 45 CFR part 74, which establish uniform administrative requirements and cost principles, apply to all grants made to States under this subpart:
45 CFR part 74 Subpart G—Matching and Cost Sharing Subpart I—Financial Report Requirements (a) Review of State and local administration. In order to determine whether the State is complying with the Federal requirements and the provisions of its plan, CMS reviews State and local administration through analysis of the State's policies and procedures, on-site review of selected aspects of agency operation, and examination of samples of individual case records. (b) Quality control program. The State itself is required to carry out a continuing quality control program as set forth in part 431, subpart P, of this chapter. (c) Action on review findings. If Federal or State reviews reveal serious problems with respect to compliance with any Federal requirement, the State must correct its practice accordingly. (a) Purpose. The Department's Office of Inspector General (OIG) periodically audits State operations in order to determine whether— (1) The program is being operated in a cost-efficient manner; and (2) Funds are being properly expended for the purposes for which they were appropriated under Federal and State law and regulations. (b) Reports. (1) The OIG releases audit reports simultaneously to State officials and the Department's program officials. (2) The reports set forth OIG opinion and recommendations regarding the practices it reviewed, and the allowability of the costs it audited. (3) Cognizant officials of the Department make final determinations on all audit findings. (c) Action on audit exceptions—(1) Concurrence or clearance. The State agency has the opportunity of concurring in the exceptions or submitting additional facts that support clearance of the exceptions. (2) Appeal. Any exceptions that are not disposed of under paragraph (c)(1) of this section are included in a disallowance letter that constitutes the Department's final decision unless the State requests reconsideration by the Appeals Board. (Specific rules are set forth in §430.42.) (3) Adjustment. If the decision by the Board requires an adjustment of FFP, either upward or downward, a subsequent grant award promptly reflects the amount of increase or decrease. [53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991] (a) Basis for withholding. CMS withholds payments to the State, in whole or in part, only if, after giving the agency reasonable notice and opportunity for a hearing in accordance with subpart D of this part, the Administrator finds— (1) That the plan no longer complies with the provisions of section 1902 of the Act; or (2) That in the administration of the plan there is failure to comply substantially with any of those provisions. (Hearings under subpart D are generally not called until a reasonable effort has been made to resolve the issues through conferences and discussions. These may be continued even if a date and place have been set for the hearing.) (b) Noncompliance of the plan. A question of noncompliance of a State plan may arise from an unapprovable change in the approved State plan or the failure of the State to change its approved plan to conform to a new Federal requirement for approval of State plans. (c) Noncompliance in practice. A question of noncompliance in practice may arise from the State's failure to actually comply with a Federal requirement, regardless of whether the plan itself complies with that requirement. (d) Notice and implementation of withholding. If the Administrator makes a finding of noncompliance under paragraph (a) of this section, the following rules apply: (1) The Administrator notifies the State: (i) That no further payments will be made to the State (or that payments will be made only for those portions or aspects of the program that are not affected by the noncompliance); and (ii) That the total or partial withholding will continue until the Administrator is satisfied that the State's plan and practice are, and will continue to be, in compliance with Federal requirements. (2) CMS withholds payments, in whole or in part, until the Administrator is satisfied regarding the State's compliance. (a) Right to judicial review. Any State dissatisfied with the Administrator's final determination on approvability of plan material (§430.18) or compliance with Federal requirements (§430.35) has a right to judicial review. (b) Petition for review. (1) The State must file a petition for review with the U.S. Court of Appeals for the circuit in which the State is located, within 60 days after it is notified of the determination. (2) The clerk of the court will file a copy of the petition with the Administrator and the Administrator will file in the court the record of the proceedings on which the determination was based. (c) Court action. (1) The court is bound by the Administrator's findings of fact if they are supported by substantial evidence. (2) The court has jurisdiction to affirm the Administrator's decision, to set it aside in whole or in part, or, for good cause, to remand the case for additional evidence. (d) Response to remand. (1) If the court remands the case, the Administrator may make new or modified findings of fact and may modify his or her previous determination. (2) The Administrator will certify to the court the transcript and record of the further proceedings. (e) Review by the Supreme Court. The judgment of the appeals court is subject to review by the U.S. Supreme Court upon certiorari or certification, as provided in 28 U.S.C. 1254. (a) Requirements for deferral. Payment of a claim or any portion of a claim for FFP is deferred only if— (1) The Regional Administrator or the Administrator questions its allowability and needs additional information in order to resolve the question; and (2) CMS takes action to defer the claim (by excluding the claimed amount from the grant award) within 60 days after the receipt of a Quarterly Statement of Expenditures (prepared in accordance with CMS instructions) that includes that claim. (b) Notice of deferral and State's responsibility. (1) Within 15 days of the action described in paragraph (a)(2) of this section, the Regional Administrator sends the State a written notice of deferral that— (i) Identifies the type and amount of the deferred claim and specifies the reason for deferral; and (ii) Requests the State to make available all the documents and materials the regional office then believes are necessary to determine the allowability of the claim. (2) It is the responsibility of the State to establish the allowability of a deferred claim. (c) Handling of documents and materials. (1) Within 60 days (or within 120 days if the State requests an extension) after receipt of the notice of deferral, the State must make available to the regional office, in readily reviewable form, all requested documents and materials except any that it identifies as not being available. (2) Regional office staff usually initiates review within 30 days after receipt of the documents and materials. (3) If the Regional Administrator finds that the materials are not in readily reviewable form or that additional information is needed, he or she promptly notifies the State that it has 15 days to submit the readily reviewable or additional materials. (4) If the State does not provide the necessary materials within 15 days, the Regional Administrator disallows the claim. (5) The Regional Administrator has 90 days, after all documentation is available in readily reviewable form, to determine the allowability of the claim. (6) If the Regional Administrator cannot complete review of the material within 90 days, CMS pays the claim, subject to a later determination of allowability. (d) Effect of decision to pay a deferred claim. Payment of a deferred claim under paragraph (c)(6) of this section does not preclude a subsequent disallowance based on the results of an audit or financial review. (If there is a subsequent disallowance, the State may request reconsideration as provided in paragraph (e)(2) of this section.) (e) Notice and effect of decision on allowability. (1) The Regional Administrator or the Administrator gives the State written notice of his or her decision to pay or disallow a deferred claim. (2) If the decision is to disallow, the notice informs the State of its right to reconsideration in accordance with 45 CFR part 16. (a) Notice of disallowance and of right to reconsideration. When the Regional Administrator or the Administrator determines that a claim or portion of claim is not allowable, he or she promptly sends the State a disallowance letter that includes the following, as appropriate: (1) The date or dates on which the State's claim for FFP was made. (2) The time period during which the expenditures in question were made or claimed to have been made. (3) The date and amount of any payment or notice of deferral. (4) A statement of the amount of FFP claimed, allowed, and disallowed and the manner in which these amounts were computed. (5) Findings of fact on which the disallowance determination is based or a reference to other documents previously furnished to the State or included with the notice (such as a report of a financial review or audit) which contain the findings of fact on which the disallowance determination is based. (6) Pertinent citations to the law, regulations, guides and instructions supporting the action taken. (7) A request that the State make appropriate adjustment in a subsequent expenditure report. (8) Notice of the State's right to request reconsideration of the disallowance and the time allowed to make the request. (9) A statement indicating that the disallowance letter is the Department's final decision unless the State requests reconsideration under paragraph (b)(2) of this section. (b) Reconsideration of FFP disallowance. (1) The Departmental Appeals Board reviews disallowances of FFP under title XIX. (2) A State that wishes to request reconsideration must submit the request to the Chair, Departmental Appeals Board, within 30 days after receipt of the disallowance letter, and include— (i) A copy of the disallowance letter; (ii) A statement of the amount in dispute; and (iii) A brief statement of why the disallowance is wrong. (c) Reconsideration procedures. The reconsideration procedures are those set forth in 45 CFR part 16 for Medicaid and for many other programs administered by the Department. (d) Implementation of decisions. If the reconsideration decision requires an adjustment of FFP, either upward or downward, a subsequent grant award promptly reflects the amount of increase or decrease. [53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991] (a) Methods of reduction. CMS may reduce Medicaid payments to a State as required under the Act by reducing— (1) The Federal Medical Assistance Percentage; (2) The amount of State expenditures subject to FFP; (3) The rates of FFP; or (4) The amount otherwise payable to the State. (b) Right to reconsideration. A state that receives written final notice of a reduction under paragraph (a) of this section has a right to reconsideration. The provisions of §430.42 (b) and (c) apply. (c) Other applicable rules. Other rules regarding reduction of Medicaid payments are set forth in parts 433 and 447 of this chapter. (a) Basic conditions. When Federal payments have been made for claims that are later found to be unallowable, the State may repay the Federal Funds by installments if the following conditions are met: (1) The amount to be repaid exceeds 2 (2) The State has given the Regional Administrator written notice, before total repayment was due, of its intent to repay by installments. (b) Annual State share determination. CMS determines whether the amount to be repaid exceeds 2 (1) If the Medicaid program is ongoing, CMS uses the annual estimated State share of Medicaid expenditures. This is the sum of the estimated State shares for four consecutive quarters, beginning with the quarter in which the first installment is to be paid, as shown on the State's latest CMS–25 form. (2) If the Medicaid program has been terminated by Federal law or by the State, CMS uses the actual State share. The actual State share is that shown on the State's Statement of Expenditures reports for the last four quarters before the program was terminated. (c) Repayment amounts, schedules, and procedures—(1) Repayment amount. The repayment amount may not include any amount previously approved for installment repayment. (2) Repayment schedule. The number of quarters allowed for repayment is determined on the basis of the ratio of the repayment amount to the annual State share of Medicaid expenditures. The higher the ratio of the total repayment amount is to the annual State share, the greater the number of quarters allowed, as follows: (3) Quarterly repayment amounts. The quarterly repayment amounts for each of the quarters in the repayment schedule may not be less than the following percentages of the estimated State share of the annual expenditures for Medicaid: (4) Extended schedule. The repayment schedule may be extended beyond 12 quarterly installments if the total repayment amount exceeds 100% of the estimated State share of annual expenditures. In these circumstances, paragraph (c)(2) of this section is followed for repayment of the amount equal to 100 percent of the annual State share. The remaining amount of the repayment is in quarterly amounts equal to not less than 17.5 percent of the estimated State share of annual expenditures. (5) Repayment process. Repayment is accomplished through adjustment in the quarterly grants over the period covered by the repayment schedule. If the State chooses to repay amounts representing higher percentages during the early quarters, any corresponding reduction in required minimum percentages is applied first to the last scheduled payment, then to the next to the last payment, and so forth as neccessary. (6) Offsetting of retroactive claims. The amount of a retroactive claim to be paid a State will be offset against any amounts to be, or already being, repaid by the State in installments. Under this provision, the State may choose to: (i) Suspend payments until the retroactive claim due the State has, in fact, been offset; or (ii) Continue payments until the reduced amount of its debt (remaining after the offset), has been paid in full. This second option would result in a shorter payment period. A retroactive claim for the purpose of this regulation is a claim applicable to any period ending 12 months or more before the beginning of the quarter in which CMS would pay that claim.
Title 42: Public Health
PART 430—GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
Subpart C—Grants; Reviews and Audits; Withholding for Failure To Comply; Deferral and Disallowance of Claims; Reduction of Federal Medicaid Payments
§ 430.30 Grants procedures.
§ 430.32 Program reviews.
§ 430.33 Audits.
§ 430.35 Withholding of payment for failure to comply with Federal requirements.
§ 430.38 Judicial review.
§ 430.40 Deferral of claims for FFP.
§ 430.42 Disallowance of claims for FFP.
§ 430.45 Reduction of Federal Medicaid payments.
§ 430.48 Repayment of Federal funds by installments.
------------------------------------------------------------------------ Number of Total repayment amount as percentage of State share of quarters annual expenditures for Medicaid to make repayment------------------------------------------------------------------------2.5 pct. or less............................................ 1Greater than 2.5, but not greater than 5.................... 2Greater than 5, but not greater than 7.5.................... 3Greater than 7.5, but not greater than 10................... 4Greater than 10, but not greater than 15.................... 5Greater than 15, but not greater than 20.................... 6Greater than 20, but not greater than 25.................... 7Greater than 25, but not greater than 30.................... 8Greater than 30, but not greater than 47.5.................. 9Greater than 47.5, but not greater than 65.................. 10Greater than 65, but not greater than 82.5.................. 11Greater than 82.5, but not greater than 100................. 12------------------------------------------------------------------------
------------------------------------------------------------------------ Repayment installment may not be For each of the following quarters less than these percentages------------------------------------------------------------------------1 to 4..................................................... 2.55 to 8..................................................... 5.09 to 12.................................................... 17.5------------------------------------------------------------------------
