Notice of Opportunity for Hearing on Compliance of Alabama State Plan Provisions Concerning Provision of Terminating Coverage and Denying Reenrollment to Otherwise Eligible Individuals Based on a Determination of Fraud or Abuse With Titles XI and XIX (Medicaid) of the Social Security Act, 11034-11037 [2017-03292]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 82, Number 32 (Friday, February 17, 2017)]
[Notices]
[Pages 11034-11037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-03292]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services


Notice of Opportunity for Hearing on Compliance of Alabama State 
Plan Provisions Concerning Provision of Terminating Coverage and 
Denying Reenrollment to Otherwise Eligible Individuals Based on a 
Determination of Fraud or Abuse With Titles XI and XIX (Medicaid) of 
the Social Security Act

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice of opportunity for a hearing; compliance of Alabama 
Medicaid State Plan--provision of providing medicaid to all individuals 
who meet eligibility criteria, and requirements for handling of 
suspected fraud and abuse by providers, applicants, and beneficiaries.

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CLOSING DATE:  Requests to participate in the hearing as a party must 
be received by the presiding officer by March 20, 2017.

FOR FURTHER INFORMATION CONTACT: Benjamin R. Cohen, Hearing Officer, 
Centers for Medicare & Medicaid Services, 2520 Lord Baltimore Drive, 
Suite L, Baltimore, MD 21244.

SUPPLEMENTARY INFORMATION: This notice announces the opportunity, 
pursuant to section 1904 of the Social Security Act (the Act), for an 
administrative hearing concerning the finding of the Administrator of 
the Centers for Medicare & Medicaid Services (CMS) that the State of 
Alabama is significantly out of compliance with the requirements of 
section 1902 of the Act in administering its state plan because Alabama 
fails to promptly enroll and extend coverage to eligible individuals 
who were subject to an agency determination that they previously 
engaged in fraud or program abuse, but were never convicted of any act 
of fraud. This finding will be the basis for withholding federal 
financial participation (FFP) of one percent of the Alabama Medicaid 
agency's quarterly claim for administrative expenditures, an amount 
that was developed based on the proportion of total state Medicaid 
expenditures that are used for expenditures for eligibility 
determinations. The withholding percentage will increase by one 
percentage point for every quarter in which the Alabama Medicaid agency 
remains out of compliance. The withholding will end when the Alabama 
Medicaid agency fully and satisfactorily implements a corrective action 
plan to bring its procedures for processing eligibility determinations 
under its Medicaid program into compliance with the federal 
requirements.
    The CMS supports state efforts to appropriately address fraud and 
abuse, and federal law and regulations provide mechanisms to do so. 
Specifically, federal law and regulations allow states to impose 
penalties--including suspension, fines and imprisonment--on individuals 
who are convicted of concealing or failing to disclose information. 
Federal regulations also require that states investigate instances of 
beneficiary abuse of program rules and, if confirmed, take appropriate 
action authorized under the state plan. These federal provisions both 
provide the state with a mechanism to address fraud and abuse and take 
precedence over state law and policies.
    The CMS has found that Alabama's policies and practices violate 
sections 1902(a)(8) and 1902(a)(10) of the Act requiring states to 
provide Medicaid to all individuals who meet the eligibility criteria 
required under the state plan, consistent with title XIX of the Act and 
federal regulations. Specifically, re-enrollment in Alabama's Medicaid 
program is denied to otherwise-eligible individuals who were terminated 
based on an agency determination that they previously engaged in fraud 
or abuse for at least one year or until restitution is made, whichever 
is later. Alabama's practice of recouping funds or otherwise imposing 
financial penalties or barring otherwise eligible individuals from 
Medicaid coverage, absent a criminal conviction, also is not consistent 
with or authorized by section 1128B(a) of the

[[Page 11035]]

Act, regulations at 42 CFR 455.15 and 455.16 or Alabama's Medicaid 
state plan.
    Alabama's practices were not identified in Alabama's approved state 
plan, or otherwise submitted to CMS for review. CMS has raised this 
issue previously with the state, as we discuss below, but has been 
unable to resolve the state's non-compliance.
    Alabama will have an opportunity for a hearing on these findings. 
Alabama will have 30 days to request such a hearing. If a request for 
hearing is timely submitted, the hearing will be convened by the 
designated hearing officer below, no later than 60 days after the date 
of this Federal Register notice, or a later date by agreement of the 
parties and the Hearing Officer, at the CMS Regional Office in Atlanta, 
Georgia, in accordance with the procedures set forth in federal 
regulations at 42 CFR part 430, subpart D. The Hearing Officer also 
should be notified if the Alabama Medicaid agency requests a hearing 
but cannot meet the timeframe expressed in this notice. The Hearing 
Officer designated for this matter is: Benjamin R. Cohen, Hearing 
Officer, Centers for Medicare & Medicaid Services, 2520 Lord Baltimore 
Drive, Suite L, Baltimore, MD 21244.
    After a final determination that the Alabama Medicaid agency has 
failed to comply substantially with these requirements in the 
administration of its state Medicaid plan, made after a hearing or 
absent a hearing request, consistent with the provisions of section 
1904 of the Act, CMS will begin withholding federal funds as specified 
above. Such withholding will continue until the Alabama Medicaid agency 
comes into compliance with the requirements described in sections 
1902(a)(8) and 1902(a)(10) of the Act, requiring states to provide 
Medicaid to all individuals who meet eligibility criteria required 
under the state plan, and with section 1128B(a) of the Act and 
regulations at 42 CFR 455.15 and 455.16, requiring that the agency 
refer cases of suspected fraud to appropriate law enforcement, conduct 
a full investigation of suspected abuse and limit sanctions to those 
permitted under the regulations or specified in its approved state 
plan.
    Details about the facts relating to Alabama's practices are set 
forth in the letter notifying Alabama of the Administrator's finding. 
The following issues will be considered at any requested hearing:
    1. Whether the penalties set forth in Section 22-6-8 of the Alabama 
Code are consistent with the requirements of sections 1902(a)(8) and 
1902(a)(10) of the Act.
    2. If so, whether an administrative finding of the type described 
in section 22-6-8 of the Alabama Code, without a conviction in a court 
of law, is a sufficient basis to impose such penalties consistent with 
the requirements of sections 1902(a)(8) and 1902(a)(10) of the Act, and 
the remedies set forth in sections 1128 and 1128B of the Act, 
regulations at 42 CFR 455.15 and 455.16 and the Alabama Medicaid state 
plan.
    Beginning in early February 2016, CMS notified Alabama that the 
state's actions are inconsistent with federal statutory and regulatory 
requirements. CMS has communicated with the state both in writing and 
by phone on several occasions since that time, including a July 6, 
2016, notice of non-compliance in which CMS advised the Alabama 
Medicaid agency that if it did not submit a corrective action plan 
(CAP) to come into compliance with federal policy and the approved 
state plan within 30 days of the notice, formal compliance proceedings 
would be initiated. Alabama has consistently defended its policy, 
including in an August 1, 2016, letter responding to the notice of non-
compliance in which the Alabama Medicaid agency requested 
reconsideration of CMS' determination and a stay of the 30 day deadline 
for submission of the CAP. CMS reviewed the Alabama Medicaid agency's 
response and, for the reasons stated above, has determined the Alabama 
Medicaid agency is not in compliance with the federal statute and 
regulations or Alabama's Medicaid state plan.
    The letter notifying Alabama of the details concerning this 
compliance issue, the proposed withholding of FFP, opportunity for a 
hearing, and possibility of postponing and ultimately avoiding 
withholding by coming into compliance, reads as follows:

Ms. Stephanie Azar
Commissioner
Alabama Medicaid Agency
501 Dexter Avenue
Montgomery, AL 36116

Dear Ms. Azar:

    This letter provides notice and an opportunity for a hearing on 
a finding by the Centers for Medicare & Medicaid Services (CMS) of 
significant noncompliance with applicable statutory and regulatory 
requirements in the operation of the Alabama Medicaid program, 
because the Alabama Medicaid agency inappropriately denies coverage 
to otherwise eligible individuals who were terminated based on an 
agency determination that they previously engaged in fraud or abuse.
    The CMS supports state efforts to appropriately address fraud 
and abuse, and federal law and regulations provide mechanisms to do 
so. As described further in this letter, federal law and regulation 
allow states to impose penalties--including suspension, fines and 
imprisonment--for individuals who are convicted of concealing or 
failing to disclose information. Federal regulations also require 
that states conduct a full investigation into instances of 
beneficiary abuse of program rules and, if confirmed, take 
appropriate action authorized under the state plan. Except in such 
conditions, states are required by federal statute to promptly 
enroll and provide medical assistance to all eligible individuals. 
These federal provisions, discussed in more detail below, take 
precedence over state law and policies.
    The CMS has learned in discussions with state agency staff that 
Alabama's policies and practices are not consistent with the federal 
statutory framework governing instances of alleged beneficiary fraud 
or abuse. Specifically, Alabama denies enrollment in Alabama's 
Medicaid program to otherwise-eligible individuals who were never 
convicted of wrong-doing, but were the subject of an agency 
determination that they previously engaged in fraud or abuse, for at 
least one year or until restitution is made, whichever is later. 
This practice is in violation of sections 1902(a)(8) and 1902(a)(10) 
of the Social Security Act (the Act) requiring states to provide 
Medicaid to all individuals who meet the eligibility criteria 
required under the state plan, consistent with title XIX of the Act 
and federal regulations. Furthermore, Alabama's practice of 
recouping funds or otherwise imposing financial penalties or barring 
otherwise eligible individuals from Medicaid coverage, absent a 
criminal conviction, is not consistent with or authorized by section 
1128B(a) of the Act, regulations at 42 CFR 455.15 and 455.16 or 
Alabama's Medicaid state plan.
    Alabama's practices were not identified in Alabama's approved 
state plan, or otherwise submitted to CMS for review. CMS has raised 
this issue previously with the state, as we discuss below, but has 
been unable to resolve the state's non-compliance.
    Pursuant to section 1904 of the Act and 42 CFR 430.35, CMS is 
providing the Alabama Medicaid agency with an opportunity for a 
hearing on this finding of noncompliance with statutory and 
regulatory requirements. If the finding is upheld or unchallenged 
following this opportunity for a hearing, a portion of the federal 
financial participation (FFP) of the administrative costs associated 
with the operation of the Alabama Medicaid program, as specified in 
more detail below, will be withheld until the state ceases this 
impermissible practice and CMS makes a finding that the state has 
come into compliance with the statute and regulations.
    The factual details of the finding, the proposed withholding, 
how the Alabama Medicaid agency can request a hearing on the 
finding, and the steps Alabama can take to avoid sanctions by coming 
into compliance are described below.

Factual Findings

    Section 22-6-8 of the Alabama Code provides that ``Upon 
determination by a utilization review committee or the designated 
state medicaid agency that a

[[Page 11036]]

medicaid recipient has abused, defrauded, or misused the benefits of 
the program said recipient shall immediately become ineligible for 
Medicaid benefits.'' Section 22-6-8 of the Code further provides 
that ``Medicaid recipients whose eligibility has been revoked due to 
abuse, fraud or other deliberate misuse of the program shall not be 
deemed eligible for future Medicaid services for a period of not 
less than one year, and until full restitution has been made to the 
designated State Medicaid Agency.''
    In implementing section 22-6-8 of the Alabama Code, state agency 
staff explained that if a beneficiary does not report a change in 
circumstances which the agency determines would have resulted in 
termination of eligibility, any payments for services provided to 
the beneficiary after the change in circumstances may be considered 
to be an ``overpayment.'' State agency staff further explained that 
when the Alabama Medicaid agency has made such an overpayment to 
providers that exceeds $300, the beneficiary's case record is 
referred to the agency's Payment Review Unit for evaluation. If the 
Payment Review Unit determines an overpayment has been made, it 
forwards the case to the agency's Utilization Review Committee (URC) 
with a recommendation for suspension of eligibility. If the URC 
votes to suspend, the individual is suspended from Medicaid 
eligibility for a minimum of one year or until the overpayment to 
the Medicaid providers during the period of eligibility is paid in 
full by the beneficiary to the Alabama Medicaid agency, whichever is 
later.

Applicable Statutory and Regulatory Provisions

    In general, the Medicaid statute at section 1902(a)(10) of the 
Act sets out the groups of Medicaid-eligible individuals, and the 
conditions under which they are eligible. Some groups are mandatory 
for states to cover under the state plan, and other groups are 
covered under the state plan at state option. Section 1902(a)(8) of 
the Act requires states to provide medical assistance to eligible 
individuals with ``reasonable promptness.'' The applicable federal 
statutory and regulatory provisions do not authorize states to 
impose additional conditions on eligibility, including exclusion of 
individuals who meet the conditions of eligibility but are suspected 
by the state agency of fraud or abuse, and only permit recovery of 
overpayments from providers, not beneficiaries.
    Federal law and regulations do provide for state Medicaid 
agencies to address instances of beneficiary fraud or abuse. 
Specifically, 42 CFR 455.15 and 455.16 require that state Medicaid 
agencies refer cases of suspected fraud to an appropriate law 
enforcement agency. If an individual is convicted of concealing or 
failing to disclose information ``with an intent fraudulently to 
secure [Medicaid benefits],'' a fine of up to $25,000 or 
imprisonment up to 5 years or both may be imposed under section 
1128B of the Act. Further, per section 1128B(a) of the Act, the 
agency may limit, restrict or suspend, for up to one year, coverage 
of an otherwise-eligible individual convicted of fraud. Absent 
conviction, however, there is no authority either to impose 
sanctions or deny eligibility under the statute or regulations based 
on fraud.
    Unlike suspected fraud, suspected abuse does not require 
referral to law enforcement or criminal proceedings. Rather, if the 
agency believes an individual is abusing the benefits of the 
Medicaid program, 42 CFR 455.15(c) directs the agency to conduct a 
full investigation. Per 42 CFR 455.16, the agency's investigation 
must continue until appropriate legal action has been initiated, the 
case has been dropped because of insufficient supporting evidence, 
or the case has been otherwise resolved. Per 42 CFR 455.16(c), if, 
after a full investigation, the agency finds that an applicant or 
beneficiary has abused the program, the agency may issue a warning 
letter or impose ``other sanctions provided under the State plan.''
    Under 42 CFR 455.16(c), resolution of an investigation into 
allegations of abuse may include suspension of and/or recovery of 
overpayments from providers. However, these regulations do not 
authorize recovery of overpayments from beneficiaries. Further, 
while section 1903(d)(2)(C) of the Act and 42 CFR part 433 Subpart F 
provide for recovery of overpayments from providers, there is 
nothing in the statute or regulations that permits states to recoup 
payments to providers directly from beneficiaries.
    Alabama's Medicaid State plan does not authorize suspension of 
eligibility from the program merely based on a determination by the 
Payment Unit or URC that an overpayment has been made or on an 
agency finding that an applicant or beneficiary otherwise has abused 
the program; nor does it authorize restitution or recovery of 
overpayments as a condition of coverage. Instead, Page 36 of Section 
4.5 of Alabama's approved Medicaid state plan calls for the agency 
to establish and maintain methods, criteria and procedures that meet 
all requirements of 42 CFR 455.13 through 455.23 for prevention and 
control of program fraud and abuse.
    Federal regulations provide for appropriate measures that states 
must take whenever the agency obtains information indicating a 
beneficiary is no longer eligible for Medicaid. Specifically, 
regulations at 42 CFR 435.916(d) provide for a redetermination of 
eligibility in such circumstances, and regulations in 42 CFR part 
431 Subpart E provide for advance notice and due process protections 
for beneficiaries determined no longer eligible. While beneficiaries 
are expected to report changes in their circumstances per 42 CFR 
435.916(c), failure to do so does not necessarily constitute fraud 
or abuse. Some states have instituted periodic data matching with 
available data sources in order to proactively detect changes in 
beneficiary circumstances. If a change that may impact eligibility 
is detected, the Medicaid agency must follow up, in accordance with 
42 CFR 435.916(d), to give the beneficiary an opportunity to dispute 
the change, and provide documentation of ongoing eligibility if 
necessary. Before terminating, the agency must consider whether 
there other potential bases for continued eligibility and, for 
individuals determined ineligible for Medicaid, the agency must 
determine potential eligibility for other insurance affordability 
programs in accordance with 42 CFR 435.916(f). We encourage the 
Alabama Medicaid agency to consider adopting periodic data matching 
with available sources if it believes that failure on beneficiaries 
part to report changes in their circumstances poses a program 
integrity risk.
    Although the Alabama Medicaid agency reported that beneficiaries 
terminated per section 22-6-8 of the Alabama Code are given advance 
notice prior to being terminated and may appeal their termination, 
requiring that an individual pay the agency back for the cost of 
services furnished prior to his or her termination from coverage 
effectively represents a retroactive termination of eligibility 
which renders meaningless the 10-day advance notice of termination 
required under 42 CFR 431.211 and is not permitted under the 
regulations.\1\ If the agency believes that a beneficiary's failure 
to report a change in circumstances rises to the level of fraud or 
abuse of the program, referral to law enforcement for investigation 
of fraud, or institution of a full investigation into abuse by the 
agency, are the only appropriate next steps under the statute and 
federal regulations.
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    \1\ The advance notice of termination required is reduced to a 
minimum 5 days per 42 CFR 431.214 in a case involving probable 
fraud; such fraud must be verified if possible through secondary 
sources.
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Discussions With the State Medicaid Agency

    Beginning in early February 2016, CMS notified Alabama that the 
state's actions are inconsistent with federal statutory and 
regulatory requirements. CMS has communicated with the state both in 
writing and by phone on several occasions since that time, including 
a July 6, 2016, notice of non-compliance in which CMS advised the 
Alabama Medicaid agency that if it did not submit a corrective 
action plan (CAP) to come into compliance with federal policy and 
the approved state plan within 30 days of the notice, formal 
compliance proceedings would be initiated. Alabama has consistently 
defended its policy, including in an August 1, 2016, letter 
responding to the notice of non-compliance in which the Alabama 
Medicaid agency requested reconsideration of CMS' determination and 
a stay of the 30 day deadline for submission of the CAP. CMS 
reviewed the Alabama Medicaid agency's response and, for the reasons 
stated above, has determined the Alabama Medicaid agency is not in 
compliance with the federal statute and regulations or Alabama's 
Medicaid state plan.
    In a phone call on November 3, 2016, the Alabama Medicaid agency 
suggested that CMS' enforcement of the federal statutory and 
regulatory provisions at issue would prevent it from taking action 
against applicants who intentionally misrepresent information or 
beneficiaries who fail to report changes in circumstances. CMS 
explained that several tools are available to enable states to 
effectively address such situations, including robust verification 
procedures, such as instituting periodic data matching with 
available data sources in order to proactively detect changes in 
beneficiary

[[Page 11037]]

circumstances. CMS also explained the steps which the agency can and 
must follow under regulations at 42 CFR 435.916(d) and 42 CFR part 
435 subpart E in the event that the agency later discovers 
information that suggests someone was not at application, or is no 
longer, eligible for coverage. Again, if the agency believes that an 
applicant intentionally provided false information on his or her 
application, referral to law enforcement for investigation of fraud, 
or institution of a full investigation by the agency into potential 
abuse, are the only appropriate next steps under the statute and 
regulations.
    The Alabama Medicaid agency's submission of its quarterly 
expenditure reports through the CMS-64 includes a certification that 
the Alabama Medicaid agency is operating under the authority of its 
approved Medicaid state plan. However, at this time, CMS has not 
received information from the agency providing evidence of 
compliance with its approved state plan, sections 1902(a)(8), 
1902(a)(10) and 1128B(a) of the Act or regulations at 42 CFR 455.15 
and 455.16.

Determination of Non-Compliance and FFP Withholding

    The CMS has concluded that the Alabama Medicaid agency is 
operating its program in substantial noncompliance with federal 
requirements described in sections 1902(a)(8) and 1902(a)(10) of the 
Act, requiring states to provide Medicaid to all individuals who 
meet eligibility criteria required under the state plan, and with 
section 1128B(a) of the Act and regulations at 42 CFR 455.15 and 
455.16, requiring that the agency refer cases of suspected fraud to 
appropriate law enforcement, conduct a full investigation of 
suspected abuse, and limit sanctions to those permitted under the 
regulations or specified in its approved state plan. Subject to the 
state's opportunity for a hearing, CMS will withhold a portion of 
federal financial participation (FFP) from the Alabama Medicaid 
agency's quarterly claim of expenditures for administrative costs 
until such time as the Alabama Medicaid agency is, and continues to 
be, in compliance with the federal requirements.
    The withholding will initially be one percent of the federal 
share of the Alabama Medicaid agency's quarterly claim for 
administrative expenditures, an amount that was developed based on 
the proportion of total state Medicaid expenditures that are used 
for expenditures for eligibility determinations, as reported on Form 
CMS-64.10 Line 50. The withholding percentage will increase by one 
percentage point for every quarter in which the Alabama Medicaid 
agency remains out of compliance. The withholding will end when the 
Alabama Medicaid agency fully and satisfactorily implements a 
corrective action plan to bring its eligibility policies and 
procedures under its Medicaid program into compliance with the 
federal requirements.

Opportunity To Request a Hearing

    The state has 30 days from the date of this letter to request a 
hearing. If a request for hearing is submitted timely, the hearing 
will be convened by the designated hearing officer below, no later 
than 60 days after the date of the Federal Register notice, or a 
later date by agreement of the parties and the Hearing Officer, at 
the CMS Regional Office in Atlanta, Georgia, in accordance with the 
procedures set forth in federal regulations at 42 CFR part 430, 
subpart D. The Hearing Officer also should be notified if the 
Alabama Medicaid agency requests a hearing but cannot meet the 
timeframe expressed in this notice. The Hearing Officer designated 
for this matter is:

Benjamin R. Cohen, Hearing Officer
Centers for Medicare & Medicaid Services
2520 Lord Baltimore Drive, Suite L
Baltimore, MD 21244

    At issue in any such hearing will be:
    1. Whether the penalties set forth in Section 22-6-8 of the 
Alabama Code are consistent with the requirements of sections 
1902(a)(8) and 1902(a)(10) of the Act.
    2. If so, whether an administrative finding of the type 
described in section 22-6-8 of the Alabama Code, without a 
conviction in a court of law, is a sufficient basis to impose such 
penalties consistent with the requirements of sections 1902(a)(8) 
and 1902(a)(10) of the Act, and the remedies set forth in sections 
1128 and 1128B of the Act, regulations at 42 CFR 455.15 and 455.16 
and the Alabama Medicaid state plan.
    If the Alabama Medicaid agency plans to come into compliance 
with the approved state plan, the Alabama Medicaid agency should 
submit, within 30 days of the date of this letter, an explanation of 
how the Alabama Medicaid agency plans to come into compliance with 
federal requirements and the timeframe for doing so. If that 
explanation is satisfactory, CMS may consider postponing any 
requested hearing, which could also delay the imposition of the 
withholding of funds as described above. Our goal is to have the 
Alabama Medicaid agency come into compliance, and CMS continues to 
be available to provide technical assistance to the Alabama Medicaid 
agency in achieving this outcome. However, if CMS does not find the 
Alabama Medicaid agency's plan or explanation satisfactory, CMS will 
not postpone any requested hearing.
    Should you not request a hearing within 30 days, a notice of 
withholding will be sent to you and the withholding of federal funds 
will begin as described above.
    If you have any questions or wish to discuss this determination 
further, please contact:

Jackie Glaze
Associate Regional Administrator
Division of Medicaid and Children's Health Operations
CMS Atlanta Regional Office, 61 Forsyth Street, Suite 4T20
Atlanta, Georgia 30303
404-562-7417

Sincerely,

Patrick H. Conway
Acting Administrator

(Catalog of Federal Domestic Assistance Program No. 13.714, Medicaid 
Assistance Program.)

    Dated: February 14, 2017.
Patrick H. Conway,
Acting Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 2017-03292 Filed 2-16-17; 8:45 am]
 BILLING CODE 4120-01-P