Ellenbecker v. Centers for Medicare and Medicaid Services, No. CIV. 02-3042.

• Decision Date: 30 September 2003
• Docket Number: No. CIV. 02-3042.
• Citation: 335 F.Supp.2d 999
• Parties: James W. ELLENBECKER, Secretary, South Dakota Department of Social Services, State of South Dakota Department of Social Services, Plaintiffs, v. CENTERS FOR MEDICARE AND MEDICAID SERVICES, Thomas A. Scully in his official capacity as Administrator of the Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, and Tommy G. Thompson in his official capacity as Secretary of the U.S. Department of Health and Human Services, Defendants.
• Court: U.S. District Court — District of South Dakota

Page 999

335 F.Supp.2d 999

James W. ELLENBECKER, Secretary, South Dakota Department of Social Services, State of South Dakota Department of Social Services, Plaintiffs, v. CENTERS FOR MEDICARE AND MEDICAID SERVICES, Thomas A. Scully in his official capacity as Administrator of the Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, and Tommy G. Thompson in his official capacity as Secretary of the U.S. Department of Health and Human Services, Defendants.

No. CIV. 02-3042.

United States District Court, D. South Dakota, Central Division.

September 30, 2003.

Fran Kuperman, U.S. Dept Health & Human Svc, Office of General Counsel, Baltimore, MD, Bonnie P. Ulrich, U.S. Attorney's Office, Sioux Falls, for Tommy G. Thompson, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, Thomas A. Scully, Defendants.

Charles A. Miller, Covington & Burling, Washington, DC, Anthony Moises Sanchez, Department of Social Services, Pierre, SD, for State of South Dakota Department of Social Services, James W. Ellenbecker, Plaintiffs.

ORDER

KORNMANN, District Judge.

INTRODUCTION

This is an administrative appeal from the final agency decision by the Departmental Appeals Board ("DAB") of the United States Department of Health and Human Services ("DHHS"), upholding the Centers for Medicare and Medicaid Services ("CMS") disallowance of certain claims for reimbursement made by the South Dakota Department of Social Services ("DSS") and requiring South Dakota to refund by way of offsets almost $2,700,000. Also in dispute are South Dakota claims of $1,299,690 not allowed by the defendants. Plaintiffs filed a motion for summary judgment prior to the filing of an answer or the administrative record.¹ Defendants did not timely file a responsive brief, despite an extension of time to do so. Defendants subsequently filed a motion for summary judgment but failed to concurrently file a brief in support thereof, as required by DSD L.R. 7.2. Defendants' untimely attempt to file a brief in support of their motion (which brief is also a belated attempt to respond to the plaintiffs' motion for summary judgment) was denied. Defendants' untimely response to the plaintiffs' statement of facts as well as defendants' statement of facts in support of defendants' motion for summary judgment, and the plaintiffs' response thereto, have been accepted and considered. I reject both the plaintiffs' and defendants' pleas to allow the defendants to circumvent the Federal Rules of Civil Procedure and the Local Rules of the District of South Dakota and now file briefs in support of and in resistance to the pending motions for summary judgment. Contrary to plaintiffs' concerns, the defendants will not be prejudiced as I have reviewed the entire file, including the administrative record, and have conducted my own independent research in order to rule upon the cross motions for summary judgment. All the arguments advanced by defendants are also contained in the administrative record.

BACKGROUND

The "material" facts are not in dispute. Medicaid is a medical welfare program established in 1965 pursuant to Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. The program is funded and administered jointly by the federal and state governments. Under Title XIX, each state must designate one state agency to administer a "plan for medical assistance" which plan must be approved by the Secretary as being consistent with Title XIX and the Secretary's regulations. 42 U.S.C. § 1396a. In South Dakota, that agency is DSS.

Medicaid acts, in essence, as an insurer for low income or disabled individuals. When a qualified South Dakota Medicaid recipient receives medical care, the health care provider bills DSS. DSS directly reimburses the health care provider for the allowable cost of covered services and then submits quarterly claims to DHHS for federal reimbursement. DHHS reimburses South Dakota for a percentage of the state's Medicaid costs, referred to as the federal medical assistance percentage ("FMAP"). 42 U.S.C. § 1396b(a). The rate of reimbursement, which is calculated yearly for each state based upon per capita income, varies from 50% to 83%. 42 U.S.C. § 1396d(b) (section 1905(b) of the Social Security Act). The rate for South Dakota over the past several years has ranged from 64% to 68%. Pursuant to § 1396b(d), federal payments are made to each state via quarterly advances based upon the state's estimated expenditures, with adjustments made to reflect overpayments or underpayments.

Federally, the Medicaid program is administered by the Centers for Medicare and Medicaid Services ("CMS"), an agency within the DHHS. Prior to July 31, 2001, CMS was called the Health Care Financing Administration ("HCFA"). The names are used interchangeably throughout the record. For the sake of consistency (and considering the plethora of abbreviations used herein) all references shall be to CMS even when a particular document or communication was issued by CMS' predecessor.

In 1976, Congress enacted the Indian Health Care Improvement Act ("IHCIA"), PL 94-437, declaring "that it is the policy of this Nation, in fulfillment of its special responsibilities and legal obligation to the American Indian People, to meet the national goal of providing the highest possible health status to Indians and to provide existing Indian health services with all resources necessary to effect that policy." 25 U.S.C. § 1602(a).

The IHCIA added, inter alia, 42 U.S.C. § 1396j:

A facility of the Indian Health Service (including a hospital, intermediate care facility, or skilled nursing facility), whether operated by such Service or by an Indian tribe or tribal organization (as those terms are defined in section 4 of the Indian Health Care Improvement Act), shall be eligible for reimbursement for medical assistance provided under a State plan if and for so long as it meets all of the conditions and requirements which are applicable generally to such facilities under this title ... The Secretary is authorized to enter into agreements with the appropriate State agency for the purpose of reimbursing such agency for health care and services provided in Service facilities to Indians who are eligible for medical assistance under title XIX of the Social Security Act, 42 U.S.C. 1396, as amended.

P.L. 94-437, Title IV, Sec. 402 (emphasis supplied). The IHCIA also amended Section 1905(b) of the Social Security Act, 42 U.S.C. § 1396d(b) (which, as set forth above, defines the FMAP) by adding the following:

Notwithstanding the first sentence of this section, the Federal medical assistance percentage shall be 100 per centum with respect to amounts expended as medical assistance for services which are received through an Indian Health Service facility whether operated by the Indian Health Service or by an Indian tribe or tribal organization (as defined in section 4 of the Indian Health Care Improvement Act).

The phrase "services which are received through an Indian Health Service [`IHS'] facility" is at the heart of the dispute between DSS and DHHS. DSS asserts that it is entitled to the 100% enhanced reimbursement rate for Medicaid costs incurred and paid by the State for eligible Indians who received services provided pursuant to a contractual arrangement, at non-IHS facilities pursuant to a "referral" from an IHS facility. DHHS asserts that the regular reimbursement rate (approximately 66%) applies to costs incurred for IHS referred services.

In 1994, Congress adopted the Indian Self-Determination Contract Reform Act of 1994, PL 103-413, Title I, Sec. 101. That Act, in part, amended 25 U.S.C. § 450j(1) to provide:

Upon the request of an Indian tribe or tribal organization, the Secretary shall enter into a lease with the Indian tribe or tribal organization that holds title to, a leasehold interest in, or a trust interest in, a facility used by an Indian tribe or tribal organization for the administration and delivery of services under this Act.

P.L. 103-413, Title I, Sec. 102.

In response to the above amendment, on December 19, 1996, IHS and CMS entered into a Memorandum of Agreement ("MOA") which provides, in part:

The purpose of this memorandum of agreement (MOA) is to establish the roles and responsibilities of the [CMS] and the Indian Health Service (IHS) in implementing a change in payment policy for Medicaid services provided on or after July 11, 1996, to American Indian and Alaska Native (AI/AN) individuals through health care facilities owned and operated by AI/AN tribes and tribal organizations with funding authorized by Title I or III of the Indian Self-Determination and Education Assistance Act (Public Law 93-638, as amended), hereafter "638."

The United States Government has a historical and unique legal relationship with, and resulting responsibility to, AI/AN people ... The health care delivery system for AI/AN tribes with this unique government-to-government relationship consists of IHS-owned and operated health care facilities, IHS-owned facilities that are operated by AI/AN tribes or tribal organizations under 638 agreements (contracts, grants, or compacts), and facilities owned and operated by tribes or tribal organizations under such agreements.

AI/AN individuals are entitled to equal access to state, local, and Federal programs to which other citizens are entitled. Under the provision of its approved medical assistance plan, the state Medicaid agency is responsible for meeting the cost of services provided therein for all individuals, regardless of race or national origin, who apply and are found eligible. Many IHS and tribally owned health care facilities provide such Medicaid services to AI/AN individuals, and states reimburse the facilities accordingly.

Prior to July 11, 1996, if such services were provided by a health care facility operated by the IHS or by a tribe or tribal organization under a 638...