42 C.F.R. Subpart B—General Administration—Reviews and Audits; Withholding for Failure to Comply; Deferral and Disallowance of Claims; Reduction of Federal Medical Payments
Title 42 - Public Health
(a) Review of State and local administration of the SCHIP plan. 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 of the SCHIP plan through analysis of the State's policies and procedures, on-site reviews of selected aspects of agency operation, and examination of samples of individual case records. (b) Action on review findings. If Federal or State reviews reveal serious problems with respect to compliance with any Federal or State plan 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 §457.212.) (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. (a) Request for reconsideration. Any State dissatisfied with the Administrator's action on State plan material under §457.150 may, within 60 days after receipt of the notice of final determination provided under §457.160(a), request that the Administrator reconsider whether the State plan or plan amendment conforms with the requirements for approval. (b) Notice of hearing. Within 30 days after receipt of the request, the Administrator notifies the State of the time and place of a hearing to be held for the purpose of reconsideration. (c) Hearing procedures. The hearing procedures set forth in part 430, subpart D of this chapter govern a hearing requested under this section. (d) Effect of hearing decision. CMS does not delay the denial of Federal funds, if required by the Administrator's original determination, pending a hearing decision. If the Administrator determines that his or her original decision was incorrect, CMS will pay the State a lump sum equal to any funds incorrectly denied. [66 FR 2674, Jan. 11, 2001] (a) Basis for withholding. CMS withholds payments to the State, in whole or in part, only if, after giving the State notice, a reasonable opportunity for correction, and an opportunity for a hearing, the Administrator finds— (1) That the plan is in substantial noncompliance with the requirements of title XXI of the Act; or (2) That the State is conducting its program in substantial noncompliance with either the State plan or the requirements of title XXI of the Act. (Hearings are generally not called until a reasonable effort has been made to resolve the issues through conferences and discussions. These efforts 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, reasonable opportunity for correction, and implementation of withholding. If the Administrator makes a finding of noncompliance under paragraph (a) of this section, the following steps apply: (1) Preliminary notice. The Administrator provides a preliminary notice to the State— (i) Of the findings of noncompliance; (ii) The proposed enforcement actions to withhold payments; and (iii) If enforcement action is proposed, that the State has a reasonable opportunity for correction, described in paragraph (d)(2) of this section, before the Administrator takes final action. (2) Opportunity for corrective action. If enforcement actions are proposed, the State must submit evidence of corrective action related to the findings of noncompliance to the Administrator within 30 days from the date of the preliminary notification. Corrective action is action to ensure that the plan is, and will be, administered consistent with applicable law and regulations, to ameliorate past deficiencies in plan administration, or to ensure that enrollees will be treated equitably. (3) Final notice. Taking into account any evidence submitted by the State under paragraph (d)(2) of this section, the Administrator makes a final determination related to the findings of noncompliance, and provides a final notice to the State— (i) Of the final determination on the findings of noncompliance; (ii) If enforcement action is appropriate— (A) No further payments will be made to the State (or that payments will be made only for those portions or aspects of the programs that are not affected by the noncompliance); and (B) 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. (4) Hearing. An opportunity for a hearing will be provided to the State prior to withholding under paragraph (d)(5) of this section. (5) Withholding. CMS withholds payments, in whole or in part, until the Administrator is satisfied regarding the State's compliance. [65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001] Three distinct types of determinations are subject to Departmental reconsideration upon request by a State. (a) Compliance with Federal requirements. A determination that a State's plan or proposed plan amendments, or its practice under the plan do not meet (or continue to meet) Federal requirements are subject to the hearing provisions of 42 CFR part 430, subpart D of this chapter. (b) FFP in State SCHIP expenditures. Disallowances of FFP in State SCHIP expenditures (mandatory grants) are subject to Departmental reconsideration by the Departmental Appeals Board (the Board) in accordance with procedures set forth in 45 CFR part 16. (c) Discretionary grants disputes. Determinations listed in 45 CFR part 16, appendix A, pertaining to discretionary grants, such as grants for special demonstration projects under Section 1115 of the Act, that may be awarded to an SCHIP agency, are subject to reconsideration by the Departmental Grant Appeals Board. (a) Right to judicial review. Any State dissatisfied with the Administrator's final determination on approvability of plan material (§457.203) or compliance with Federal requirements (§457.204) 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) After the clerk of the court files a copy of the petition with the Administrator, the Administrator files 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 certifies 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. [65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001] (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 CMS regional office 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 CMS regional office, in readily reviewable form, all requested documents and materials except any that it identifies as not being available. (2) CMS regional office staff 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) that 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 XXI. (2) A State may request reconsideration with a request to the Chair, Departmental Appeals Board, within 30 days after receipt of the disallowance letter, which must 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. (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. (a) Purpose. This section provides rules to ensure that States refund the Federal portion of uncashed or canceled (voided) checks under title XXI. (b) Definitions. As used in this section— Canceled (voided) check means an SCHIP check issued by a State or fiscal agent that prior to its being cashed is canceled (voided) by the State or fiscal agent, thus preventing disbursement of funds. Fiscal agent means an entity that processes or pays vendor claims for the SCHIP agency. Uncashed check means an SCHIP check issued by a State or fiscal agent that has not been cashed by the payee. Warrant means an order by which the SCHIP agency or local agency without the authority to issue checks recognizes a claim. Presentation of a warrant by the payee to a State officer with authority to issue checks will result in release of funds due. (c) Refund of Federal financial participation (FFP) for uncashed checks—(1) General provisions. If a check remains uncashed beyond a period of 180 days from the date it was issued; that is, the date of the check, it is no longer regarded as an allowable program expenditure. If the State has claimed and received FFP for the amount of the uncashed check, it must refund the amount of FFP received. (2) Report of refund. At the end of each calendar quarter, the State agency must identify those checks that remain uncashed beyond a period of 180 days after issuance. The SCHIP agency must refund all FFP that it received for uncashed checks by adjusting the Quarterly Statement of Expenditures for that quarter. If an uncashed check is cashed after the refund is made, the State may file a claim. The claim will be considered to be an adjustment to the costs for the quarter in which the check was originally claimed. This claim will be paid if otherwise allowed by the Act and the regulations issued in accordance with the Act. (3) If the State does not refund the appropriate amount as specified in paragraph (c)(2) of this section, the amount will be disallowed. (d) Refund of FFP for canceled (voided) checks—(1) General provisions. If the State has claimed and received FFP for the amount of a canceled (voided) check, it must refund the amount of FFP received. (2) Report of refund. At the end of each calendar quarter, the SCHIP agency must identify those checks that were canceled (voided). The State must refund all FFP that it received for canceled (voided) checks by adjusting the Quarterly Statement of Expenditures for that quarter. (3) If the State does not refund the appropriate amount as specified in paragraph (d)(2) of this section, the amount will be disallowed. (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 State SCHIP program is ongoing, CMS uses the annual estimated State share of State SCHIP 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–21B form. (2) If the State SCHIP 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 Quarterly 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 State SCHIP 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 SCHIP: (4) Extended schedule. The repayment schedule may be extended beyond 12 quarterly installments if the total repayment amount exceeds 100 percent of the estimated State share of annual expenditures. In these circumstances, the repayment schedule in 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 necessary. (6) Offsetting of retroactive claims. (i) The amount of a retroactive claim to be paid a State is offset against any amounts to be, or already being, repaid by the State in installments. Under this provision, the State may choose to: (A) Suspend payments until the retroactive claim due the State has, in fact, been offset; or (B) 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. (ii) 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. [65 FR 33622, May 24, 2000; 65 FR 38027, June 19, 2000; 65 FR 52042, Aug. 28, 2000] (a) Public funds may be considered as the State's share in claiming FFP if they meet the conditions specified in paragraphs (b) and (c) of this section. (b) The public funds are appropriated directly to the State or local SCHIP agency, or transferred from other public agencies (including Indian tribes) to the State or local agency and under its administrative control, or certified by the contributing public agency as representing expenditures eligible for FFP under this section. (c) The public funds are not Federal funds, or are Federal funds authorized by the Federal law to be used to match other Federal funds. Claims for Federal financial participation in the cost of equipment under SCHIP are determined in accordance with subpart G of 45 CFR part 95. Requirements concerning the management and disposition of equipment under SCHIP are also prescribed in subpart G of 45 CFR part 95. (a) No FFP is available for the following amounts, even when related to services or benefit coverage which is or could be provided under a State SCHIP program— (1) Any cost sharing amounts that beneficiaries should have paid as enrollment fees, premiums, deductibles, coinsurance, copayments, or similar charges. (2) Any amounts paid by the agency for health benefits coverage or services furnished to individuals who would not be eligible for that coverage or those services under the approved State child health plan, whether or not the individual paid any required premium or enrollment fee. (b) The amount of expenditures under the State child health plan must be reduced by the amount of any premiums and other cost-sharing received by the State. A State plan must provide that the SCHIP agency and, where applicable, local agencies administering the plan will— (a) Maintain an accounting system and supporting fiscal records to assure that claims for Federal funds are in accord with applicable Federal requirements; (b) Retain records for 3 years from date of submission of a final expenditure report; (c) Retain records beyond the 3-year period if audit findings have not been resolved; and (d) Retain records for nonexpendable property acquired under a Federal grant for 3 years from the date of final disposition of that property. A State plan must provide that the single or appropriate SCHIP Agency will have an approved cost allocation plan on file with the Department in accordance with the requirements contained in subpart E of 45 CFR part 95. Subpart E also sets forth the effect on FFP if the requirements contained in that subpart are not met. FFP is available for State ADP expenditures for the design, development, or installation of mechanized claims processing and information retrieval systems and for the operation of certain systems. Additional HHS regulations and CMS procedures regarding the availability of FFP for ADP expenditures are in 45 CFR part 74, 45 CFR part 95, subpart F, and part 11, State Medicaid Manual. (a) Quarterly Federal payments to the States under title XXI (SCHIP) of the Act are to be reduced or increased to make adjustment for prior overpayments or underpayments that the Secretary determines have been made. (b) The Secretary will consider the pro rata Federal share of the net amount recovered by a State during any quarter to be an overpayment. (c) Allegations or indications of waste fraud and abuse with respect to the SCHIP program shall be referred promptly to the Office of Inspector General. The SCHIP agency must assure appropriate audit of records on costs of provider services. The SCHIP agency must maintain documentation of payment rates and make it available to HHS upon request.
Title 42: Public Health
PART 457—ALLOTMENTS AND GRANTS TO STATES
Subpart B—General Administration—Reviews and Audits; Withholding for Failure to Comply; Deferral and Disallowance of Claims; Reduction of Federal Medical Payments
§ 457.200 Program reviews.
§ 457.202 Audits.
§ 457.203 Administrative and judicial review of action on State plan material.
§ 457.204 Withholding of payment for failure to comply with Federal requirements.
§ 457.206 Administrative appeals under SCHIP.
§ 457.208 Judicial review.
§ 457.210 Deferral of claims for FFP.
§ 457.212 Disallowance of claims for FFP.
§ 457.216 Treatment of uncashed or canceled (voided) SCHIP checks.
§ 457.218 Repayment of Federal funds by installments.
------------------------------------------------------------------------ Number of Total repayment amount as percentage of State share of quarters to annual expenditures for State SCHIP 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------------------------------------------------------------------------
§ 457.220 Public funds as the State share of financial participation.
§ 457.222 FFP for equipment.
§ 457.224 FFP: Conditions relating to cost sharing.
§ 457.226 Fiscal policies and accountability.
§ 457.228 Cost allocation.
§ 457.230 FFP for State ADP expenditures.
§ 457.232 Refunding of Federal Share of SCHIP overpayments to providers and referral of allegations of waste, fraud or abuse to the Office of Inspector General.
§ 457.236 Audits.
§ 457.238 Documentation of payment rates.
