CMS Proposes a Rule that Resricts the Administrative Appeals Process

Legal Brief: January 18, 2008

Proposed Rule Regarding the Administrative Appeals Process

On December 28, 2007, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule that significantly modifies the current Medicaid administrative appeals process available to state Medicaid agencies and providers to resolve disputes with CMS. These restrictions may deter appeals and/or result in costly and time-consuming court actions to obtain an impartial review of disputed matters.

Currently, state Medicaid agencies and Medicaid providers may appeal CMS’s final decisions, such as disallowances of Medicaid reimbursement and denials of state plan amendments, to the U.S. Department of Health and Human Services (DHHS) Departmental Appeals Board (DAB). The authority to review such appeals was delegated to the DAB by the DHHS Secretary many years ago.

Over the years, based on its interpretations of Medicaid laws and regulations and CMS’s guidelines, the DAB has overturned some CMS final decisions that were adverse to state Medicaid agencies and providers. In some cases, the DAB determined that CMS’s guidelines, as applied by CMS, were inconsistent with federal law. An example of this is DAB Decision No. 1924 regarding the free care rule where the DAB determined that CMS’s application of the rule to school districts was unenforceable because it had no basis in federal Medicaid law. Such DAB decisions are final and legally binding upon CMS unless reconsidered and reversed by the DAB or overturned by an appropriate federal court.

Under the proposed new rule, the DAB will no longer have the authority to make final decisions such as Decision No. 1924. Instead, the proposed rule requires the DAB to adhere to and enforce CMS’s guidelines published in manuals, State Medicaid Director Letters and postings on the CMS website. Most federal school-based Medicaid billing guidelines are published in this manner. The proposed rule would require the DAB to enforce such CMS guidelines to the same extent that the DAB would enforce federal Medicaid statutes and regulations.

Under the proposed rule, the Secretary may review and reverse a DAB decision that does not reflect CMS’s guidelines. As an alternative to reversing the DAB decision, the Secretary may remand the decision back to the DAB with instructions on the “proper application” of statutes, regulations and CMS’s “interpretive policy”. The DAB must then issue a new decision that reflects the Secretary’s instructions. Once the Secretary or the DAB issues a final decision, the next available level of appeal is in federal court.

The Secretary may delegate his/her authority under the proposed rule to a DHHS “relevant component”, such as CMS. This means that CMS could be delegated the authority to conduct the final review and adjudication of an appeal to challenge a CMS final action, such as a disallowance of Medicaid reimbursement. CMS states in the Preamble that the rule will not affect previous DAB decisions.

CMS will accept comments on the proposed rule until 5:00 p.m. on January 28, 2008. Comments may be submitted by email to Randolph.pate@hhs.gov.

Updates on Other CMS Rulemaking

Final rule 2287-F eliminates Medicaid reimbursement for school-based administrative and transportation services effective February 26, 2008. However, Congress has passed legislation that precludes CMS from implementing the rule prior to July 1, 2008, allowing continued Medicaid payments for services provided, at least until that date. Interim final rule 2237-IFC defines case management and targeted case management services and will become effective on March 3, 2008 in the absence of Congressional or other intervention. Interested parties have until February 4, 2008 to submit comments on 2237-IFC.

Although CMS states that 2237-IFC does not apply to school-based case management and targeted case management services, the rule contains language that precludes Medicaid reimbursement for services that are “purely IDEA functions”. CMS lists examples of “purely IDEA functions” that include activities that are currently reimbursed by Medicaid.

Interim final rule 2237-IFC also specifically precludes Medicaid reimbursement for school-based case management or targeted case management services provided to students protected by Section 504 of the Rehabilitation Act of 1973. Current federal Medicaid law, as reflected in DAB Decision No. 1924, allows school districts to receive reimbursement for these services when provided to Medicaid-eligible students.

Proposed rule 2261-P redefines optional rehabilitative services and the public comment period closed on October 12, 2007. 2261-P contains several provisions that could be interpreted to eliminate or restrict Medicaid reimbursement for school-based rehabilitative services such as occupational, physical and speech therapy and the Medicaid administrative activities related to these services. The rule would also eliminate school-based transportation services included under the rehabilitative services option of a state plan for Medicaid. CMS finalization of 2261-P, with or without changes, is pending. However, Congress has passed legislation that precludes CMS
from implementing 2261-P prior to July 1, 2008

Update on School District and Advocacy in Response to CMS Rulemaking

School districts and advocacy organizations are working with Congressional representatives to facilitate Congressional review of rule 2287-F and other CMS rulemaking that restricts school-based Medicaid billing. Key members of Congress may be willing to sponsor legislation to expand and extend the moratorium on CMS’s rules or to take other legislative action to protect  schoolbased Medicaid billing. School districts and other interested parties wishing to support this effort may contact appropriate staff of the Council of Great City Schools at http://www.cgcs.org/ for additional information.

School districts and other interested parties may directly contact Congressional representatives, including members of the Senate Committee on Finance to express concerns regarding CMS’s rulemaking activities. Members of the Senate Committee on Finance may be contacted through http://finance.senate.gov/. Interested parties may also consider addressing concerns with the Office the Speaker of the House of Representatives through http://speaker.house.gov/ and clicking on “contact us”.

For further information please contact your local Public Consulting Group representative or:

Patsy Crawford,
Director of Legal Services
Education Services Practice Area
Phone: (312) 425-0550
Email: pcrawford@pcgus.com

* Note: This document is not intended as legal advice and is for informational purposes only.