The opinion of the court was delivered by: REVERCOMB
GEORGE H. REVERCOMB, UNITED STATES DISTRICT JUDGE
Plaintiff, the Louisiana Department of Health and Hospitals, administers the State's Medical Assistance Program under the federal Medicaid Program, which is administered by the defendant United States Department of Health and Human Services (HHS). The Medicaid Program requires participating states to submit State Plans setting forth the types of medical assistance for which they will receive federal financial participation (FFP). Louisiana's State Plan, which was approved by HHS, includes pharmaceutical drugs and durable medical equipment as costs of medical assistance eligible for FFP.
Until 1986, purchases of prescription drugs and durable medical equipment in Louisiana were exempt from the State's sales tax. However, in 1986 the Louisiana legislature lifted the exemption for these items, and the State began to collect the tax on all purchases of prescription drugs and durable medical equipment, including those eligible for FFP under the Medicaid Program.
In applying for the FFP in relation to this medical assistance, the State included the amount of the sales tax applied to the items in the amount of reimbursement it sought. For the period from September 1987 through March 1989, the amount claimed which reflected sales tax paid on such medical assistance totalled $ 1,619,239.00. The defendant Health Care Financing Administration (HCFA), which implements the Medicaid Program, disallowed the State's claim, stating that the Louisiana sales tax was not an expenditure for medical assistance under the Medicaid Act.
The State of Louisiana unsuccessfully challenged the disallowances before the Departmental Appeals Board before filing this suit. The Court now considers this case on cross motions for summary judgment. Because the parties are in general agreement as to the material facts underlying this case, the case is appropriate for summary disposition.
The Medicaid Act broadly describes its reimbursement program in Section 1903(a)(1):
the Secretary . . . shall pay to each State which has a plan approved under this subchapter . . . an amount equal to the Federal medical assistance percentage . . . of the total amount expended . . . as medical assistance under the State plan.
42 U.S.C. § 1396b (emphasis added). The Act defines "medical assistance" as including "payment of part or all of the cost of . . . prescribed drugs, dentures, and prosthetic devices. . . ." Section 1905(a), 42 U.S.C. § 1396d(a)(12).
In Louisiana, the sales tax burden falls on the purchaser. A tax is added to each individual purchase, collected by the seller or provider of the taxable good, and then forwarded to the state. In this situation, the seller is a conduit through which the consumer-paid tax is collected by the state. In the Medicaid context, the consumer-tax would fall on the Medicaid recipient. However, in only a few cases does the Medicaid Act permit cost-sharing or other charges to be imposed upon Medicaid recipients by states. Section 1916, 42 U.S.C. § 1396o. The parties seem to agree that Louisiana cannot collect its sales tax from Medicaid recipients. Accordingly, the amounts claimed for reimbursement by Louisiana as a result of its sales tax were actually paid by the State into its own treasury on behalf of the Medicaid recipients.
Other states impose a sales tax on the providers of goods and services. This tax generally takes the form of a tax on gross receipts and is paid directly by the provider to the state. Although the burden of provider-paid taxes might ultimately be passed onto purchasers -- i.e., in the form of higher prices -- the providers are the parties legally responsible for paying the actual tax. If such taxes were not ...